Boards Beyond Borders: Global Panels at NACD’s Board Leadership Conference

November 6th, 2014 | By

It’s a mad, mad, mad, mad world—to echo a movie title from a half century ago—but it’s also a good one when nations cooperate. This is the big takeaway from the global track at NACD’s 2014 Board Leadership Conference, where representatives of nine nations convened to create a global village and to host a series of three staged programs.

GLOBAL-VILLAGE_MALAYSIA

The village itself featured colorful, information-rich booths where representatives from the embassies and consulates of Brazil, Canada, China, Germany, Ireland, Malaysia, Mexico, and the Russian Federation greeted trade-minded directors seeking to expand their knowledge.

In addition, the village featured a booth for the Global Network of Director Institutes (GNDI), a network of 12 director institutes (including NACD) and one confederation (ecoDA, in Europe). The GNDI booth offered an opportunity to meet incoming GNDI Chairman Stan Magidson, CEO of the Institute of Corporate Directors (ICD) from Canada; Paul Chan, the acting CEO of the Malaysian Alliance of Corporate Directors; and Simon Arcus, manager, Governance Leadership Center, Institute of Directors, New Zealand. Vicki Jordan, vice president of marketing, ICD, joined me in staffing the booth—a truly appropriate choice, as Canadians/les Canadiens are global by nature. For proof, see this new video produced at Laval University in Quebec (featuring yours truly) created for an exciting new ecoDa educational program also held in October.

The Global Village was home to a series of panels in the Global Track at the Conference. This blog offers takeaways for these dynamic panels.

Global Panel 1: Trade and Business in North America

Moderator: Dean A. Pinkert, vice chairman, U.S. International Trade Commission (USITC). Panelists: Gilles Gauthier, minister, Economic Affairs, Embassy of Canada; Francisco J. Sanchez, chairman, CNS Global; former under secretary at the Department of Commerce.

  1. To grow, consider going global. Eighty-five percent of world economic growth is occurring outside the U.S. The U.S. has bilateral or multilateral free trade agreements with 20 countries. Support for free trade is rising, according to Gallup polls.
  2. Know your trade agreement. A well-known example of a free trade agreement is the North American Free Trade Agreement (NAFTA), now 20 years old, which has been a success for all the economies This is why it is important to support the new and emerging free trade agreements of other regions namely: Transatlantic Trade and Investment Partnership (TTIP), and the Trans Pacific Partnership (TPP).
  3. Give bipartisan support to good trade agreements. Although free trade is often associated with the pro-business Republican party and opposition is often associated with the pro-union Democratic party, good trade agreements such as NAFTA get bipartisan including union support—especially considering that one can always seek a trade remedy to cure imbalances.
  4. Think beyond tariffs. If trade unfairness arises, a variety of trade remedies are available. Tariffs—charging duties on imports—are only one way to correct imbalance. Even more constructive is regulatory cooperation and harmonization of standards.
  5. Tell your company’s story so stakeholders and the public will understand. Reatha Clark King, chair of the NACD board of directors, noted that boards need to do a better job of ensuring that companies are more forthright in disclosing information about their global nature: where they are headquartered, where they employ people, where they source their products, and where they sell their products, among other topics. By revealing their global nature, they will build more informed support for free trade.

Global Panel 2: Translating Corporate Culture Across Borders

Moderator: Dennis Whalen, partner-in-charge and executive director, KPMG’s Audit Committee Institute. Panelists: Orlando Ashford, director, ITT Corp., Executive Leadership Council, and Streetwise Partners; senior partner, Mercer; Michael Marquardt, director, Commonwealth Trust Co., Delaware Theatre Co., American Cancer Society (South Atlantic), and CEO, Global Compass Strategies Inc.

  1. Live “la vida local.” Many companies think locally and act globally, when they must do the opposite. As a company, value your local talent; as an individual, live your local life. Companies acquiring outside their borders used to send in executives from headquarters. Now, they are more likely to hire and promote locals—including expatriates who want to stay longer on an assignment.
  2. Check your culture and mark your calendar. One of the best examples of culture arrogance is when we are oblivious to non-U.S. national holidays. Not all are marked on global calendars. For example, don’t try to schedule a meeting in Berlin on November 9 – when the fall of the Berlin wall is commemorated.
  3. Focus on outcomes. When two companies get combined, focusing solely on process may result in getting buried in protocol. Instead, focus on desirable outcomes—for example an effective workplace. This was the case for Orlando Ashford when he learned that as a matter of policy, a particular non-U.S. division of a U.S. company had collected information on blood type, then run a blood drive for an employee’s relative, and published the results, causing some disharmony at work. He changed the policy.
  4. Insource HR. It may be tempting to ask a local company to hire your talent but it is worth your own time. While professional support can be valuable, human capital is too important to leave entirely to third parties.
  5. Know your agents. Enacted some four decades ago, the Foreign Corrupt Practices Act (FCPA) does hold companies—and, by extension, boards—accountable for certain internal controls. Directors should ask for assurance from management that the people who are involved with selling the company’s products and services act within the boundaries of the law.

Global Panel 3:  The Global Start-Up Revolution

Moderator: Andrea Bonime-Blanc, chair, Epic Theatre Ensemble; audit chair, Counterpart International; CEO and founder, GEC Risk Advisory. Panelists: Andre Averbug, founding partner, Rankpad Consulting, Inc.; Mark Little, CEO and founder, Storyful; Bernard Moon, cofounder and partner, SparkLabs Global Ventures.

  1. Be “hyper-transparent.” In the new economy, “reputations can be lost or improved overnight.” Learn what the market wants to know about you and provide that information as soon as possible.
  2. Look around you. Any place and every place can fuel a start-up revolution. Berlin, Dublin, Nairobi, Seoul, and Tel Aviv are all current examples. Places with a long-established rule of law are ideal for startups, but no place is off limits. In these unexpected places, new ideas are finding the capital they need to become viable businesses—often in areas that do not require a large amount of funds to launch. (Cost of entry in technology-based businesses is generally lower than in traditional industries that require manufacturing plants, for example.)
  3. Respect Silicon Valleyand look beyond it. Silicon Valley is rightly known for the entrepreneurial ecosystem so important in the second phase of growth—a system that includes both financial capital (venture cap, angel investors, banks) and intellectual capital (fellow innovators, universities), not to mention savvy law firms. But such ecosystems are evolving elsewhere as well.
  4. Fail better. Don’t be afraid to start a business that may fail. Panelists noted that in the U.S., bankruptcy laws can be relatively forgiving. In locations where the bankruptcy laws are harsh, changes may be under way, and adaptations are possible. Also, remember that you need not go it alone. In a climate where the new form of research and development is mergers and acquisitions, a possible option may be to sell your start up to a larger company before a lack of funds brings the company to a halt.
  5. Give back. If you develop a successful startup, consider investing at least part of it in other new ventures, the way Google and Facebook founders have done. You can keep the global start-up movement going. Vive la revolution!

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NACD BLC 2014 Breakout Session – Going Beyond: Stories of Pushing Past Personal Limits

October 28th, 2014 | By

It should go without saying that governance in today’s complex business environment is no walk in the park. But are there lessons to be learned from a run in the Sahara? At the recent 2014 NACD Board Leadership Conference, documentary filmmaker Jennifer Steinman aimed to provide the answer to that question in a session titled “Going Beyond: Stories of Pushing Past Personal Limits.”

In the session, Steinman told the story of the creation of her latest film, “Desert Runners,” which follows people who take on the formidable challenge of competing in the 4 Deserts Race Series (4 Deserts). 4 Deserts includes a series of four ultra-marathons: races involving distances greater than the 26.2 miles that compose a typical marathon. The races take place in some of the most inhospitable environments on earth, including the Sahara, Gobi, and Atacama deserts, and Antarctica.

Steinman began the film project with a series of questions, including “what are these perceived limitations that we put on ourselves?” and “are these crazy people?” She arrived at the first race expecting to find a group of elite, superhuman athletes, and was surprised to find that, for the most part, the runners were what you might call “everyday” people; people with day jobs, mortgages, and families. Steinman’s film follows four people who decided to take on this challenge. In the course of the conference session, attendees were introduced—through video clips—to three of them: a student named Samantha, age 25; an American consultant named Ricky, age 33; and Dave, a 56-year-old marketing director and friend of Steinman’s who introduced her to the competition. Dave was one of 13 runners attempting to complete all four grueling races of 4 Deserts in one year, a feat known as the “Grand Slam.”

Steinman shared a series of her favorite clips from the documentary, and as might be imagined, Samantha, Ricky, and Dave confronted a wide variety of physical challenges, including dehydration, illness, exhaustion, and a great deal of pain.

So how did all of that tie into directorship? The challenges and struggles of the runners echoed many of the themes emphasized elsewhere at conference.

An injury suffered by Ricky provides an example. Given the long distances and extreme conditions involved in the races of 4 Deserts, some degree of pain is unavoidable. However, as Steinman pointed out, racers must constantly ask themselves, “is this real pain, pain I need to deal with, pain that can do real damage?” If the answer is “yes” to those questions, as it was in Ricky’s case, a runner needs to recognize this and give it the attention it requires. However, if the answer is “no,” any runner who intends to finish the race must recognize this, and avoid attaching more meaning to the pain than is merited.

As part of risk oversight, directors also receive an overwhelming amount of urgent information from a variety of sources, and must contextualize it on the basis of their own experience so they can ask the right questions of management. The board should ensure that the risk oversight processes in place have the capability to differentiate between a real threat and the intermittent challenges that occur in the normal course of business. When a real threat is detected, a director must not let pride get in the way of taking the appropriate actions, as the consequences could become progressively worse.

Another of Steinman’s film clips showed a series of gruesome injuries suffered by runners. Watching the clips quite naturally might cause one to wonder why anyone would willingly participate in such a competition. Steinman found that part of the answer to that stemmed from the camaraderie of being marooned in the desert with a common goal. While a small contingent of elite runners are in the race to win, the vast majority have the simple goal of finishing. Even a relatively competitive person would likely concede that running consecutive marathons across the Sahara or Antarctica is hardly your typical “participation medal,” and many runners rely on each other at times to accomplish this remarkable feat.

In a particularly poignant clip, a professional runner holds Samantha by the hand and they help each other to the next check point. Though they may be significantly different in kind, corporate directors certainly face their own challenges. The reasons directors take on the responsibilities and liabilities inherent in the role are many, but by concentrating on the reasons they are there, and augmenting their own expertise with the expertise of others around the table, each director, board, and company can reach their goals.

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NACD BLC 2014 Breakout Session – Inside the SEC: Anatomy of an Agency

October 28th, 2014 | By

The Securities and Exchange Commission (SEC) is charged with maintaining fair and efficient markets, facilitating capital formation, and, like directors, protecting investor interests. This regulatory arm of the federal government has a significant impact on businesses, but many may not effectively understand the commission’s inner workings. Providing directors with an insider look at the SEC was a panel comprised of: Mark D. Cahn, former general counsel of the SEC’s Office of the General Counsel, and partner at WilmerHale; Thomas J. Kim, partner at Sidley Austin and former chief counsel and associate director of the SEC’s Division of Corporation Finance; Troy Paredes, senior strategy and policy advisor at PwC and former SEC commissioner; and moderator Kendra Decker, partner in Grant Thornton’s National Professional Standards Group.

The SEC has five commissioners, each of whom is selected by the president of the United States, and no more than three of them can be from the same political party. The president also selects one commissioner to serve as chair. The chair sets the agenda and makes senior hiring decisions; however, this does not create a hierarchy as that professional title might imply. The commissioners are like a board of directors, with each person maintaining their own, independent voice as they vote on the issues set before them.

“No one commissioner has the power to do anything,” Kim said. “They only have power by acting as a commission, just like a board must act as a collective body.” Although the SEC is generally thought of as a rulemaking entity, Cahn pointed out that it’s a relatively infrequent occurrence that commissioners actually cast a vote. The organization’s day-to-day workings are processed at the staff level—and, in turn, the division heads engage with the commissioners.

The panel also drew attention to challenges within the commission. For Cahn, the biggest challenge with regard to rulemaking is the Government in the Sunshine Act of 1976, which requires all commission deliberations to be carried out in public. “You end up with meetings of two commissioners with staff members to discuss issues when they could be much more productive to work out matters as a group.”

In addition, trying to pass a rule through a multi-member commission can turn into a game of chess, with each member making suggestions for changes up until the last minute. If a rule passes with a split vote, those dissenting opinions serve as a roadmap to potential litigants who want to challenge the rule—a factor that emphasizes the importance of unanimity within the commission. “I think it [speaks] well for the agency overall when there’s consensus,” Parades said. “But sometimes you can’t bridge those differences. Another aspect is, from time to time, chairs have had a norm where they wouldn’t go forward unless there was a norm of four. What that does, it forces people to compromise and it doesn’t allow those in the majority to say that ‘this is what we’re going to do, regardless.’”

Despite these complexities, Paredes stressed the critical importance of third-party engagement. “The SEC is able to better evaluate the consequences of their rulemaking if they are able to hear from the people their rules are going to impact,” he said. “If [SEC] folks aren’t hearing that through one mechanism or another, there are going to be serious blind spots.”

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