Posts Tagged ‘transparency’

Award Season!

February 3rd, 2011 | By

OK, director-colleagues (and those who are similarly aligned), I am sure you are all following the current season of best-film and best-acting nominations and awards with great interest. Or, maybe not. In either case, it’s time to step away, and to take a brief detour from your desktop, or your laptop, or your iPad, or whatever device on which this appears.

AwardWe’re going to have our own little group of highly unofficial award nominations. Not “Best Director,” not “Best Committee,” not “Best Board.” Those—or their facsimiles—have already been created. Our job here is to identify the awards that we hope our own boards would win for their own work. And my job is just to start the ball rolling, or rather, to get you thinking.

Here are my categories and a few comments on potential nominees. I hope you’ll read them, and then add to the list. After all, if we’re going to turn this into a three-hour event worthy of a network telecast, we’re going to need awards across a whole barrelful of categories. I’ll start, but then you’ll need to chip in.

  1. Most Over-Worked Topic on Board Blogs: And the nominees are: Social Networking, Social Networking, and Social Networking! Oh, yes—and Social Network—259,000 entries on Google. Current Favorite: Hmm…let’s think.
  2. Women in the boardroomTopic That Most Boards Aren’t Sure How to Deal With: Nominees: Social Networking, Political Contributions, Number of Women on the Board. Current Favorite: All of the above. One that won’t go away for a while: Number of women on the board. Our colleagues around the world have begun mandating membership ratios.
  3. Least-Favorite Current Topic among Board Members: Nominees: Social Networking, Proxy Access, Say on Pay, CEO Compensation, Director Compensation. Current Favorite: All of the above.
  4. Most Fruitful “New” Board Practice: Nominees: Instituting and participating in a regularly scheduled, board-management offsite on corporate strategy; reallocating more board time to committee meetings, as opposed to full-board sessions; changing the location of meetings from isolated boardrooms or offsite rooms to onsite, “middle-of-the-action” company locations; changing where people sit at meetings; and putting in a speaking-time limitation or edict to reduce the effect of “air-hogs.” Current favorite: Unclear, but we sure know the LEAST favorite. People HATE changing where they sit. Alas.
  5. Wildest Idea to Improve Board-Member Focus: Nominees: Measurably increase mandatory director shareownership and retention requirements; Take the Undercover Boss reality show concept and apply it to directors by making them go “undercover” as employees; Administer a How Much Do You Know about Your Company?” quiz to members at the board meeting and openly grade it immediately thereafter; Conduct a “Zero-PowerPoint” board meeting; Have board members randomly selected to present on the topic: “What I Learned in the Past Month about Our Company.” Current Favorite: None. In fact, just the mention of any of these could easily induce a lively—if not awkward— conversation about social networking.

Other nominees?  Other categories?  The envelope, please. 

Over to you.

Selecting a Lead Director – Everything Is Subtle

January 19th, 2011 | By

I had the privilege of joining over 30 public company directors this week to discuss lead directors—what they do and how to pick them. Wow, what a lively discussion it was. 

Ted Dysart

Ted Dysart

We were fortunate to have our partners from Heidrick & Struggles there—Ted Dysart and Stephen Miles, who are both vice chairmen for this leading executive recruitment firm. Through a very candid dialogue, we were really able to dig into this topic. At the session, and in many praiseworthy emails following this gathering of esteemed directors, I heard many common suggestions that all boards can put into action. 

Stephen Miles

Stephen Miles

The key takeaways? Everything is subtle; just work through the details, expectations and preferences that fit for your situation.

Beyond the subtleties, three key themes did emerge for me:

  1. Role: Define expectations first. How will the CEO and management team work with the chairman or lead director?  What do we expect him/her to do? 
  2. Criteria: What skill sets and experiences are required, preferred and desired?  Surprisingly, this aspect of the process is really no different from other director hire decisions, but many boards overlook this critical step. 
  3. Process: Have a process and make it transparent. No need to keep your selection process a secret from your fellow board members. They can help you identify key criteria and you want them invested in the success of whomever you select as your next board leader. 

While many other items were discussed, here are a few that rose to the top for me:

  1. Term limits/rotation: No consensus…all over the board: Yes, no, perhaps.  
  2. Time commitment: Ensure this person is willing to make the commitment and has the time available after making that commitment.
  3. Crisis and succession: Ensure this person is willing to take on a key role in times of crisis. You never know what can happen, and the lead director needs to be ready to step up, whether as interim CEO or chair of a search committee.
  4. Experience: This leader should be seasoned and savvy (some felt, ideally, from the company’s industry), and can act as a sounding board for the CEO, management and others on the board.
  5. Trust: This is a “no kidding” area, but many emphasized the need to ensure the lead director check his/her ego at the door and not have a personal agenda.
  6. Collaboration: Near the top of requirements, the lead director needs to be a strong team builder with exceptional listening skills. Is he/she a facilitator? 
  7. Raising the bar. One passionate participant even suggested that all boards separate the chair and CEO roles. Perhaps this director was thinking about asymmetric information risk. No matter; we assured the participants that NACD does not advocate for specific board structure, rather, it’s situation-dependent—
    i.e., it’s subtle! Combined chair/CEO roles make sense for some companies, and separating the roles is appropriate for other companies.

In closing, I wish I had brought copies of page 10 from the Report of the NACD Blue Ribbon Commission on Board Leadership. The chart on page 10 summarizes the relationship of the leader of the independent directors and the CEO and their respective areas of responsibilities. 

 Net net: this topic is hot, and we are exploring the optimal next steps to help directors continue to advance exemplary board leadership.

NACD Insight & Analysis for December 3, 2010

December 6th, 2010 | By

In a New York Times (Nov. 30) article published in Wednesday’s NACD Directors Daily, columnist Stephen M. Davidoff commented on the SEC’s Concept Release on the U.S. Proxy System.

Davidoff highlighted how companies that are generally averse to government regulations are calling for additional rules for proxy advisory firms like Institutional Shareholder Services (ISS). These companies see a conflict of interest for proxy advisory firms that often offer both voting recommendations and advisory services.

In alignment with the NACD Key Agreed Principles of independence and transparency, NACD agrees that proxy advisory firms should be subject to enhanced disclosure regulations. On October 20, we submitted a comment letter to the SEC on the Concept Release, covering proxy advisory firm independence, as well as NOBO/OBO voting (see the Council of Institutional Investors summary of NOBO/OBO here). The comment letter includes recommendations for the separation of businesses that offer both shareholder voting and corporate governance advice.

To read the comment letter, click here.