From Jim Kristie

Back to the Future, Too

What our 1985 authors foresaw for the future of governance.

By Jim Kristie

Last month there was a celebration of “Back to the Future” Day. The popular movie trilogy began with the original in 1985. The date of Oct. 15, 2015, figured prominently in the series as the date the two main characters time travelled to the future. Commentators had fun identifying what technologies predicted 30 years ago came to be: these included drones, computer tablets, hands-free video gaming, and smart clothing.

In the spirit of “Back to the Future” Day, I dipped into the Directors & Boards archives to see what we were predicting in 1985 for the future of corporate governance. Here are three:

Boards would take self-evaluation more seriously. An article titled “The Board Looks At Itself” [Winter 1985] was one of the earliest in the governance literature to present a compelling case for board self-evaluation and to walk the reader through step-by-step how one company did it. The author was Alfred Van Sinderen, then chairman of Southern New England Telephone. It is the rare board today that does not do some form of self-evaluation.

Boards would be made up mostly of independent directors. In the early to mid-1980s company officers still populated many of the seats on major corporate boards. Business legend Royal Little, the founder and former chairman of Textron Inc., foresaw the future composition of boards when he wrote this in his Summer 1985 article, “Who I Would Want On My Board”: “Boards should never have more than two management representatives — the chief executive officer and the chief operating officer. Other management directors are worthless. They do not dare speak when they disagree with the boss, and therefore they contribute nothing. When they do speak out in disagreement, the outside directors wonder whether the boss is really in control.” If anything, Little underestimated the radical overhaul of board composition to come, with the CEO typically becoming the only management representative on many boards.

Directors will be forced to take a greater role in proxy contests. Think of Nelson Peltz’s campaign for board representation at DuPont Co. earlier this year (or even any of the slew of recent activist assaults) when you read the following observation made by proxy experts Douglass Barnes and Roger Kapp in their article, “Strength and Strategy in a Proxy Contest” [Summer 1985]: “With dissident stockholders increasingly seeking to compel radical restructuring of their corporations or the pursuit of merger or disposition opportunities, what is at stake in a proxy contest if often not merely the composition of a corporation’s board of directors but its future existence.”

These and other 1985 authors were certainly in sync with “Back To the Future” main characters Marty McFly and Doc Brown — in truth, the creators of the blockbuster movie series — in divining the future. I like to think our 2015 authors are doing the same today.

As always, I welcome your comments at

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Article of the Month

The Benefits of Gender Diversity on the Board: The Key Research

By Nancy Sheppard

When thinking about boardroom succession planning, nominating committees might want to review the talent acquisition theory developed by the Oakland A’s in 2002 and showcased in the book (and movie) Moneyball to create a winning team. Based upon player statistics that other teams overlooked, A’s Manager Billy Beane, backed by the research of a young Yale-educated economist in his first position in baseball, pursued and drafted a lot of undervalued players that some of the more high-profile teams thought didn’t look the part and wouldn’t amount to much. In many cases, board-ready women today may be the overlooked candidates that Beane would have recruited.

Who is the best candidate for your next board opening?

Thinking of candidates in the context of “board team” needs is essential, so selecting the “most” qualified person may not be a straightforward decision. Many corporate boards — including 36% of the largest companies worldwide that have no women on their board, according to a Thomson Reuters 2014 report — are apparently ignoring the statistics that show gender diverse boards outperform those with limited diversity.

There are more men named John, Robert, James and William than there are total women on corporate boards at U.S. companies, according to a report by EY issued this year.

The Key Research

As part of my organization’s mission, we help boards understand the research and stats about how gender diversity has benefited other companies, and we provide them with board-ready candidates who are women. So, please read on if you’d like to review highlights of the research that shows why diversity in your boardroom should be an essential part of your director recruitment strategy:

• McKinsey & Company’s “Diversity Matters” report issued in 2015 states, “Companies in the top quartile for gender diversity are 15% more likely to have financial returns above their respective national industry medians.” McKinsey has done a number of other studies on the value of gender diversity in leadership in their “Women Matter” series from 2007-2014. 

• Credit Suisse’s “Gender Diversity and Corporate Performance” report in 2013 found that over a six-year study of 2,360 companies globally, those with one or more women on the board delivered higher average ROE, lower gearing, better average growth and higher price/book value multiples. 

• A Catalyst study in 2011 reported the financial performance at Fortune 500 companies with three or more women on their board (in at least four of five years) significantly outperformed those with no representation of women in the same time frame. 

• An analysis of a large sample of acquisitions of S&P 1500 companies between 1997 and 2009, by the University of British Columbia Business School, shows that women on corporate boards help companies strike better M&A deals. The report found that the cost of a successful acquisition is reduced by 15.4% with each female director added on a board. It also revealed that each additional female director reduces the number of a company’s attempted takeover bids by 7.6%. 

Other Big Benefits

Benefits other than financial performance also provide solid reasons for increasing gender diversity:

• Companies that invest in gender diversity at high levels are less likely to fall prey to fraud, corruption, and other scandalous episodes and fewer governance-related controversies, according to a 2015 analysis by MSCI Inc.

• Women and men board members approach some key governance issues differently. Fortune magazine, reporting on a 2014 PwC study of companies with $1 billion-plus in revenues across almost two dozen industries, found that women directors:

— are more likely than their male peers to say that getting rid of directors who aren’t pulling their weight should be easier than it is now;

— would like additional board focus on technology risks (including cyber security);

— expect more thorough briefings from management;

— are more than twice as likely as their male peers to say they’re “dissatisfied” with the explanations they do get;

— want to know more about customer and employee satisfaction;

— want to adopt more of the policies viewed as “leading” by activist shareholders and others, such as having mandatory board retirement policies in place, raising the minimum amount of stock directors must own, and limiting board members’ terms. (See .)

• In 2015, Aaron A. Dhir, an associate professor at York University’s Osgoode Hall Law School wrote “Challenging Boardroom Homogeneity: Corporate Law, Governance and Diversity.” He found a number of positive results of gender-based diversity for boardroom work, including: enhanced dialogue; better decision making (especially around the value of dissent); more effective risk mitigation and crisis management; higher quality monitoring of and guidance to management; positive changes to the boardroom environment and culture; more orderly and systematic board work. 

• According to a 2012 survey done through Harvard Business School, 45% of men on boards believe that the low percentage of women board members is because there aren’t enough qualified, board-ready women candidates. The study also found that women had to be more qualified than men to be considered for directorships. 

Drafting Criteria Need a Rethink

If board members are still looking at the primary qualifications of yesteryear, including the much-in-demand title of CEO, CFO, chair, or current director of a pubic company, perhaps like Billy Beane, they need to re-evaluate their drafting criteria to reflect the more diverse needs of most boards today. I can assure you that in our own database, and those of other pro-diversity board organizations, the quality of women candidates is exceptional.

Why does gender diversity produce a benefit? It is the difference of perspectives, thinking and experience of women and men that helps companies build better teams, better products and more comprehensive view of how customers will view the company and products. Getting more women involved reduces groupthink.

An all-woman board would also be less likely to have the benefit of different viewpoints and thinking as a board with representation of both men and women. Although generalizing about women and men’s approaches can be fraught with stereotyping, research does confirm that women and men’s brains are physiologically different, which does account for a natural tendency for decision making using different approaches. Scientists have discovered approximately 100 gender differences in the brain.

Picking the right player for the team’s needs is critical in board selection. Moneyball was a wonderful example, in my view, of how to take advantage of known statistics to pick players that will truly make a difference. In the case of selection of board candidates, I hope that these research reports will help you in your director recruitment decision-making process with a realization that gender inclusion itself may be your ace in the hole for a more productive board.


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The Most Difficult Question of All in Corporate Governance

By Sir Adrian Cadbury [In Memoriam]

Editor’s Note: Sir Adrian Cadbury, who died in September 2015, played an influential role in the development of higher standards of corporate governance practices. In the early 1990s he chaired a government-instigated inquiry that devised a Code of Best Practice that has been widely adopted by U.K. companies and has had a major influence on the development of corporate governance codes globally. The 1992 Cadbury Report “is still recognised around the world as the starting point on how companies should be managed,” noted The Guardian newspaper in its obituary of the former chairman of Cadbury Schweppes, the confectionary and beverage products company. Directors & Boards published the following set of observations by Sir Adrian that stands the test of time in an article titled “On Coming Up to Code” [Summer 1997].

Why has corporate governance become such a matter of public interest around the world? And why are boards of directors the primary target for this attention?

The straightforward answer is that they are accountable to shareholders for corporate performance. They are also seen more widely as being responsible for the legal and ethical behavior of the companies they direct.

Across the world there are increasing pressures for institutions of every kind to become more transparent in their activities and more responsive to those they serve. These pressures have been accompanied by demands for higher standards of accountability, behavior, and performance.

Public corporations have always been powerful institutions, but their influence is perceived to have grown, partly because that of politicians has declined. In addition, their increasingly international reach is seen as strengthening their influence and as making them less answerable to a single jurisdiction.

A Lack of Confidence

The fundamental reason, however, why boards of directors have become a focus of attention is lack of confidence in their system of accountability.

The most difficult question of all is the relationship between corporate governance and performance.

It is not readily susceptible to research, because of the complexity of the relationship and because measurable aspects of governance, such as the proportion of outside directors or the extent to which directors are shareholders, are of limited relevance.

What matters is the caliber of the directors concerned. This is an important reason for preferring market regulation, where possible, over statutory legislation.

The law has to deal with form, but what counts is substance, on which investors are in a position to make a judgment. The market answer to the question of whether improved governance translates into improved performance is that many investors believe that it does.

Studies by CalPERS and others support that conclusion. A recent U.K. survey showed that close to two-thirds of the 605 analysts and fund managers who took part considered corporate governance standards important when making investment decisions.

It is equally significant that companies which have been successful over the long term generally meet the kind of code recommendations being put forward, while none of the companies involved in recent corporate disasters have done so. It is not surprising that successful companies meet code recommendations, because these are closely based on best practice. The one certainty is that governance structures which do not measure up to accepted standards increase the risk of fraud, corporate failure or both.

Important to Private Companies, Too

Although the published codes are primarily addressed to directors of quoted companies, they are relevant to private companies.

The private companies of today are the public companies of tomorrow. When they wish to raise outside equity capital, or when they face the difficult transition from family control to formal board control (a transition I have experienced), they will need to have in place the kind of governance structures which these codes recommend. Going through the governance checklist is a reassurance to directors of all types of company in an increasingly litigious world.

If I were to make a heroic generalization as to the direction in which power within the corporate governance system worldwide is shifting, it would be along the lines of the events at General Motors. Institutional shareholders are now readier to bring pressure to bear on the boards of companies whose results are failing to meet their expectations. Boards, and particularly their outside directors, are responding to these pressures and are monitoring the management of their enterprises more closely.

In sum, the voice of shareholders is becoming more powerful, outside directors are playing a more forceful role, and boards themselves are taking a tighter grip on the running of their enterprises. The focus on boards remains. 

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Bonus Content

Five Predictors of an Effective Director

By Directors and Boards

[Editor’s note: the following is an excerpt appears in the Third Quarter 2015 issue of Directors & Boards. It is from the article, “How ‘Rising Stars’ Become Boardworthy” by Gail R. Meneley and Hugh A. Shields. The authors are co-founders and principals of Shields Meneley Partners, a firm based in Chicago that provides assessments, performance coaching, and guidance for all forms of leadership and career transition.]

Subscribe to Directors & Boards print edition or e-Briefing for much more content dedicated to the topics of leadership and corporate governance.


There are a wide range of core competencies – in operations, leadership, management, M&A strategy – that nominating committees seek in potential director candidates, as well as a solid background in a particular industry or first-hand knowledge of a given market. But there are also a number of less tangible qualities that are equally important predictors of effectiveness in the boardroom:

1. Commitment
Prospective board members must demonstrate commitment. Board membership requires a commitment of time as well as a commitment to serve the company with a genuine interest and a real passion. Commitment to service translates into a willingness to make hard decisions, even if those decisions run counter to prevailing opinion. It also means being an objective, independent thinker who is committed to doing what is right for the company and its shareholders. Executives develop into real leaders by learning how to work positively and collaboratively during times when there are significant differences of opinion about the right path to take.

2. Integrity

Most executives will say that they have high integrity, but the issue is whether they walk the talk. Most of the choices facing major corporations have few black-and-white answers. Unrelenting pressure from analysts and shareholders to drive financial performance can create gray areas that cloud right from wrong. Directors should be able to see where the ethical edges are being approached and, despite pressure, state their opposition to making exceptions that will bend the rules.

3. Curiosity

Intellectual and cultural curiosity are two ‘must have’ intangible traits. Intellectual curiosity helps feed creative energy and allows someone to evaluate situations using multiple lenses, offering a new perspective to the challenges at hand. Genuine interest in other cultures and in cultural matters is also important, since it broadens understanding and allows executives to see and embrace global opportunities. These traits can be developed by pursuing lifelong learning opportunities, by participating in cultural events – whether they be art, music, dance, or theater – and by embracing opportunities to travel.

4. Self-Confidence

Self-confidence is indispensible. It ensures that a board member will bring his or her expertise to the table. A director must have a strong point of view and the ability to articulate.

5. Point of View

Corporations want – and need – outside directors who have unique perspectives and can bring their own experiences to beat on issues of importance to the company. Diversity – of age, gender, and ethnicity – enhances the points of view represented at the board table. Each person’s unique perspective makes final decisions more complete.

Boards are generally populated with two types of people: those who have already achieved a level of success that is rare, and those who will. If you are in the latter camp, developing a range of skills – both tangible and intangible – will help lead you to a seat at the board table and to a valuable, meaningful, and highly rewarding experience.


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Calendar of Events
Delaware Law Issues Update Conference

November 18 - 19

The Society of Corporate Secretaries & Governance Professionals and the John L. Weinberg Center for Corporate Governance at the University of Delaware, in partnership with the State of Delaware and the ABA Business Law Section Corporate Governance Committee, are pleased to announce the third annual Delaware Law Issues Update Conference. It will be hosted at Hotel du Pont, Wilmington, DE. The program will focus on Delaware corporate law and governance issues essential to corporate secretaries, in-house counsel, outside counsel and gover­nance professionals who advise boards. It will cover recent developments and emerging issues in Delaware law and presenters will give best practice advice on how to avoid litigation or bad outcomes as well as focus on proactive steps that should be taken by those who regularly advise boards of directors. NEW THIS YEAR: This year’s program will include a proxy season update and practical advice on preparing for the 2016 proxy season, as well as a panel on legal ethics in corporate governance.

2015 PLUS Conference

November 11 - 13

The PLUS Conference is a destination event for professional liability insurance pros, and this year's event promises to be among the best yet. The event will take place on Nov. 11-13 at the Hilton Anatole, Dallas, Texas. This year's program features leading-edge panel discussions with thought leaders and industry experts debating and discussing the emerging risks in the professional liability industry.  The PLUS Conference is the place to connect, learn and find solutions, so we are providing longer breaks between sessions to facilitate networking with industry professionals from around the world.  And once again, this premiere industry event will bring high-profile keynote speakers to entertain and enlighten attendees. Click here for more information and registration.

WomenCorporateDirectors: 2015 Americas Institute

November 4 - 5

WCD’s 2015 Americas Institute at the Coca-Cola Headquarters will be a gathering of more than 125 women directors from all over the Americas and around the world. This distinguished conference will consist of a conference on November 4-5, 2015 in Atlanta, Georgia.  This will be a high-powered idea forum exploring compelling issues on the minds of today’s American directors.  This forum will consist of conversations with CEO’s of global companies, panels, roundtable discussion groups, and engagement in a community of trust that brings a diversity of perspectives together.  Welcome from: Muhtar Kent, Chairman of the Board and Chief Executive Officer, Coca-Cola Company.  Keynote Speaker: Tom Farley, Group President at New York Stock Exchange LLC.


For more information, contact

National Directors Institute Executive Exchange

November 3 - 31

National Directors Institute Executive Exchange, a national forum where prominent corporate governance leaders will continue the in-depth, interactive peer group discussion that began with our first NDI in 2002, will take place on Nov. 3, 2015 at the Four Seasons Chicago. There is no cost to attend the NDI Executive Exchange, but pre-registration is required. To participate, please use this link to register

See more events of interest to directors »
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Public Company Boards Increase Time & Resources on Cyber-Security, But Lack Mitigation Strategies:

According to a new surveyby BDO USA, LLP, one of the nation’s leading accounting and consulting organizations, more than two-thirds (69%) of public company board members report that their board is more involved with cybersecurity than it was 12 months ago and a similar percentage (70%) say they have increased company investments to defend against cyber-attacks during the past year, with an average budget expansion of 22%. 

Despite this increase in awareness and resources, just one-third (34%) of corporate directors report that they have documented and developed solutions to protect their business’s critical digital assets.  Moreover, less than half (45%) have a cyber-breach response plan in place and only one-third (35%) of directors say their company has developed cyber-risk requirements for their third-party vendors.

For the full survey report go to 2015 BDO Board Survey.

NYU and Cornerstone Research Debut Database to Track SEC Enforcement Actions:

The NYU Pollack Center for Law & Business and Cornerstone Research recently announced the launch of the Securities Enforcement Empirical Database (SEED), which can be found at

SEED tracks and records information for U.S. Securities and Exchange Commission (SEC) enforcement actions against public companies.

“Access to this data allows users to investigate differences in SEC enforcement actions against public companies, including allegation types and penalties imposed by the Commission,” comments David Marcus, a vice president of Cornerstone Research. “The vast majority of SEC allegations against public companies are related to FCPA and issuer reporting and disclosure.”

Read more in the official press release.



Foley’s National Directors Institute Honors 2015 Directors of the Year:

Foley & Lardner LLP has announced the recipients of its third annual National Directors Institute (NDI) Director of the Year awards:

       - Public Company Director of the Year: Alvin R. “Pete” Carpenter, independent director for Regency Centers Corporation.

       - Private Company Director of the Year: Patricia Diaz Dennis, independent director for Massachusetts Mutual Life Insurance Company (MassMutual).

The recipients will be recognized at Foley’s 14th annual NDI Executive Exchange corporate governance conference on November 3 and 4 in Chicago.

Click here for more information on the event.

More New Independent Directors Added to S&P 500 boards, but Turnover Remains Slow:

S&P 500 boards elected 376 new independent directors during the 2015 proxy year, but despite the increase in the number of new directors, board turnover remains low, averaging about 7% annually, according to recent data from Spencer Stuart.

Findings from the study include:

       • More than half, 53 percent, are employed senior executives and professionals, compared with 47 percent last year.
       • About one-quarter of new directors, 24 percent, are active or retired executives with banking, finance, investment or accounting credentials.
       • Women represented 31 percent of new directors in 2015, up one percentage point from 2014.
       • 20% of new independent directors are active CEOs, chairs, COOs, presidents and vice chairs, compared with 22 percent in 2014, 26 percent in 2010 and 32 percent in 2005. Fifty-seven percent of S&P 500 CEOs today have no outside boards.
       • 26% of independent directors appointed to boards during the 2015 proxy year are serving on a public board for the first time, a decrease from 39 percent in 2014.

Spencer Stuart researches its annual Board Index report by conducting analysis of all proxies from S&P 500 companies and conducting a separate survey, which received 85 responses in the second quarter of 2015.  

Women on Boards: Dispelling the Myths:

There have been recent advances in gender equality on boards in the last few years, however, women continue to be underrepresented.


In the United States, women hold about 19% of the directorships of S&P 500 firms, according to a report by Professor Bettina Buechel of the International Institute for Management and Development (IMD). In Europe, about 17% of directors of the largest public companies are women; in Japan, the proportion is only 1%.


Buechel wrote that aspiring women directors must overcome three incorrect perceptions: that they lack the right leadership style, don’t have the right experience and are hesitant to take risks.She offered three suggestions for women who want to increase their board readiness:


1. Build your network.

2. Understand what it takes to be board ready.

3. Develop your story.


Read the full article here.


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