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Five for Five

May 9th, 2013 | By Adam Lee

In the past five months, the NACD blog has received more than 15,000 views. Review the five most popular blog posts of the last five months to keep track of what directors find most important.

NACD Directorship 2020: Sustainability, Stakeholders, and Performance Metrics – Capitalism, and the role of the director, is changing–should the focus on “total shareholder return” shift to “total stakeholder return”?

Going Private? – In 2012, just 128 IPOs were made, a decrease from 154 IPOs in 2011. Last May, The Economist observed that this decline was part of a larger trend: the decline in popularity of the public company. Based on NACD surveys, see six key differences in the governance practices of public and private companies.

Discussion Topics for Compensation Committees in 2013 – Although numerous rules mandated by Dodd-Frank affecting the compensation committee have been implemented, directors still brace for those to come. As such, it is expected that compensation committees will maintain their focus on executive compensation in the coming year.

Alphabet Soup: A Director’s Guide to Financial Literacy and the ABCs of Accounting and Auditing – Can you keep track of accounting and auditing (A&A) acronyms? This handy guide provides tips for non-CPAs to achieve A&A literacy.

Investors Recommend Board Oversight of Trading Plans – New oversight responsibilities could be in store for directors. Although 10b5-1 trading plans have existed since 2000, a confluence of events has recently placed these plans in the regulatory spotlight.

Tags: 10b5-1, Alphabet soup, compensation committee, Directorship 2020, Going Private, NACD
Posted in Audit, Compensation, Corporate Governance, Inside NACD, Legislative & Regulatory | No Comments »

Know Your Audience: Understanding the Board’s Expectations

April 29th, 2013 | By Steven R. Walker

Know your audience–it’s often the first lesson in Public Speaking 101, but it’s also an important mantra for senior executives looking to improve the quality of their interaction with the board of directors. An issue my team often identifies when working with boards is a disconnect between the information the board needs and what the management team actually presents. We’ve seen this gap occur at companies of all sizes, industries, and levels of sophistication.

How management provides information to the board makes or breaks directors’ oversight role. Providing directors with the information they need to execute their duties is essential to fostering an environment where directors can succeed and be of most value to the company.

Through all my years of serving as general counsel, I have never received formal training on what directors require for their oversight role. Some questions that may arise are: What are their expectations for management? What perspectives do they bring to the table? What keeps them up at night? How much information is enough?

To help executive teams answer these questions, NACD recently introduced Executive Professionalism: Understanding Board Expectations, an innovative program that allows the executive team to step into the boardroom in order better understand the fiduciary and strategic responsibilities that influence the questions directors ask. Led by seasoned directors, this in-boardroom program is specifically designed to help the senior management team better understand the role of the board, deliver the information directors need, and understand how to best engage with their board to meet and exceed expectations on both sides of the table.

In addition to my team’s direct experience with our clients, the issue of gaps in expectations between the board and management is raised by NACD’s members much more frequently. NACD has developed two tools to help companies address this gap:

Bridging Effectiveness Gaps: A Candid Look at Board Practices addresses the gaps in information flow between management and the board.
C-Suite Expectations: Understanding C-Suite Roles Beyond the Core offers guidance for interacting with non-traditional members of the C-suite such as the chief risk officer and the chief corporate responsibility officer.

Tags: board advisory services, board c-suite relations, Boardroom education, Bridging Effectiveness Gaps, c-suite education, C-suite Expectations, director expectations, Executive Professionalism, information asymmetry, know your audience, oversight
Posted in Board Evaluations, Inside NACD | No Comments »

Recapping Master Class: The Intersection of Strategy and Innovation

March 7th, 2013 | By Kate Iannelli

One theme resounded in each session at NACD’s Master Class held in Scottsdale, Ariz., last week: the nature of directorship is in flux. In the 1990s, boards were subject to considerably fewer regulatory requirements. Sarbanes-Oxley created the “gatekeeper” of compliance, as observed by NACD President and CEO Ken Daly. Fundamentally, if boards fail to meet compliance requirements, little else will work.

But “you can’t comply your way to success,” according to opening speaker Bill Reichert. Today, long-term value creation necessitates innovative and inventive strategic planning—from management and the boardroom. As such, leading directors are shifting their focus not away from, but through, compliance efforts to the “next level.”

This concept of the “next level” was consistently brought up during discussions across the board. In some sessions, this meant critically assessing the skills and actions necessary to make the board a strategic asset to the company. In other sessions, “next level” addressed the information flow between the management and the board: how to fortify directors with the necessary knowledge to enable them to ask the “second layer” of questions that delve deeper into the data presented by management.

Innovation, however, brings risk—a concept Master Class attendees understood all too well. As noted in the 2009 NACD Blue Ribbon Commission Report on Risk Governance, “without risk there is no reward.” Risk is no longer limited to financial statements, though. The list of areas that pose potential threats to the organization has expanded over the last several years to include fields such as cybersecurity, emerging technologies such as e-commerce, and social media. Throughout the event’s sessions attendees discussed various methods that boards can use to assess and oversee these risks without becoming mired in granularity.

NACD’s Master Class in Scottsdale convened panelists with considerable experience in innovation, strategy, and risk oversight to lead attendees in discussions on how to effectively and intelligently ensure their company is ready to meet the challenges posed by the new economic climate. These panels were punctuated with multiple “deep dive” sessions in which participants could focus on specific topics of interest with experts and peers.

The next Master Class will be held in Boston, Mass., June 13-14.

Tags: Bill Reichert, Blue Ribbon Commission on Risk Governance, compliance, cybersecurity, information flow, innovation, Ken Daly, long-term value creation, NACD Master Class, Sarbanes-Oxley, social media, strategy
Posted in Board Composition, Board Evaluations, Corporate Governance, Inside NACD, Risk Management | No Comments »