Accept a bank board seat? A verdict from the litigators
Former Deputy Secretary of Defense, Patrick M. Shanahan joins Leidos board of directors
Leidos, a defense, aviation, information technology and biomedical research company, headquartered in Reston, Va., appointed Patrick M. Shanah to it Board. He served as the 33rd United States Deputy Secretary of Defense from 2017 to 2019…
In many respects the banking industry has become the favorite ‘piñata’ of politicians, the media and the public; everyone feels entitled to take a swipe. The recent financial crisis seriously damaged the image of the entire banking industry, including the reputations of both bankers and bank directors.
Is shareholder voting on the election of board members effective, or is it, to quote New York Times reporter James Stewart, “an electoral system unworthy of Soviet-era sham democracies”? Asked another way, do dissenting votes by shareholders have any consequences for directors nominated for elections?
With the SEC’s stepped-up enforcement regarding corporate accounting and financial reporting, many audit committees are sharpening their focus on the quality of the company’s financial reporting and disclosures. Essential to this, of course, is having robust discussions with management and auditors about the numbers and the narrative — critical accounting policies, judgments, and estimates, disclosures (including non-GAAP information), internal controls, key transactions, particular areas of SEC staff focus, and more.
As i head off this fall to my 40th business school reunion I am reminded of the political, social, and environmental campaigns that took place during both my Harvard College years (AB 1972) and my Harvard Business School years (MBA 1972, DBA 1974). A red-fisted “Strike Shirt” came to embody the heightened awareness and student activism swirling around the Vietnam War, the Women’s Movement, and Earth Day.
Over the past 10 years directors have devoted an enormous amount of time and attention to a long list of pressing concerns, from compliance to risk oversight, succession planning, and more. Now, another long-simmering issue has become one of the latest flash points in board governance: director tenure. Insistent questions about length of director service have been pushed to the fore by four trends that have converged to give the issue new momentum.
Activism, as many directors have discovered, comes in many different varieties. For some, aggressive shareholders disrupting annual meetings, pushing inconvenient votes, or requesting sensitive information are at the perigee of owner empowerment. For others, activism in the digital age has taken a different form, with agitators sometimes having no stake whatsoever in the targeted company itself but rather in an ideal or a cause that affects the boardroom and often the company’s reputation.
From a Cleary Gottlieb Alert Memo addressing “Selected Issues for Boards of Directors in 2013”: “We expect that shareholders will be increasingly focused on the issue of board composition, and as a result, in 2013 many boards will need to consider whether the current array of directors is appropriate in light of the evolving business and regulatory environments and the challenges they pose for the corporation.”
If there were a “Top 10” list for best management incentive plans ever, the Nucor plan created in 1966 for the senior officers of this steel company would certainly rank near the top. Over the next 30 years, CEO Ken Iverson and his Nucor team would create one of the legendary stories of American business. Everyone who wrote their story, including Iverson, singled out Nucor’s incentive plan as a cornerstone of their success.