Category: Inside NACD

Culture: The Board’s Expanding Frontier

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Peter Gleason

With headlines trumpeting high-level firings for “inappropriate behavior” in a variety of domains, it’s become more obvious than ever that corporate culture matters, and that boards should oversee it. So what exactly is corporate culture, and how can it be overseen? These questions might sound new, but they are as old as the corporate governance movement that began some 40 years ago when NACD was founded. Indeed, for the past four decades, the role of the board in overseeing corporate culture has been growing in breadth and depth, and much can be learned from history.

  • The Foreign Corrupt Practices Act of 1977 made the board a vigilante against foreign bribes. The original law made it illegal to do business abroad “corruptly” and required “internal controls” through oversight of books and records.
  • In 1987, the Committee of Sponsoring Organizations of the Treadway Commission put the board on alert against misdeeds not just in faraway lands but down the hall: its Treadway report required independent audit committees to prevent fraud in general.
  • Another decade later, in 1996, the Delaware Chancery Court’s decision In re Caremark International Inc.said that directors have an affirmative duty to seek reasonable assurance that a corporation has a system for legal compliance. Soon thereafter, NACD published its first handbook on ethics and compliance, authored by NACD pioneer Ronald “Ronnie” Zall, an attorney and educator then active in the NACD Colorado Chapter, which later established the Ronald I. Zall Scholarship in his honor.
  • In late 2007, as global equity markets went into panic mode, NACD forged Key Agreed Principles of Corporate Governance for U.S. Public Companies, highlighting all areas of agreement among management (the BRT), directors (NACD), and shareholders. Our report, published in 2008, stated that boards must ensure corporate “Integrity, Ethics & Responsibility.NACD Southern California Chapter leader Dr. Larry Taylor began writing on “tone at the bottom,” publishing a series of articles and books on the topic over the next several years.
  • And now, in 2017, board oversight of culture has become more important than ever. Our NACD 2017 Blue Ribbon Commission Report on Culture as a Corporate Asset provides useful guidance.

NACD’s 2017 Commission made 10 recommendations, starting with this one:

The board, the CEO, and senior management need to establish clarity on the foundational elements of values and culture—where consistent behavior is expected across the entire organization regardless of geography or operating unit—and develop concrete incentives, policies, and controls to support the desired outcome. The Commission report explains that these foundational elements involve two sets of standards: first, the values and behaviors that help the company excel and that are to be encouraged, and second, the behaviors for which there is zero tolerance.

As I write this blog in December 2017, the business media are continuing to report firings or sabbaticals for executives—some 20 in the past eight weeks alone—over reportedly inappropriate conduct or speech. Many of these pertain to sexual harassment, but the corporate desire to clean house seems to be spreading like wildfire to other domains. One executive was recently fired for making a disparaging remark about regulators in private conversation to a former employee. Could a policy have prevented this? I think so.

Click to enlarge in a new window.

The NACD Commission urges a proactive approach backed by policies and training. The good news is that many companies are taking preventive action.  A Wall Street Journal article titled “Harassment Scandals Prompt Rapid Workplace Changes” cites numerous companies that are instituting training to avoid bad behavior in the workplace. Some like Vox Media and Uber Technologies are responding to scandals. Others like Dell, Facebook, Interpublic Group of Cos., and Rockwell Automation are acting more proactively.

Boards in these companies and others are starting to oversee culture in proactive ways, but they still have a long way to go. Our most recent 2017–2018 NACD Public Company Governance Survey found that oversight of culture is stronger at the top than at lower levels, but that boards are taking steps to correct the imbalance.

The best cultures don’t happen by accident. They are intentional. They happen when a company makes a concerted effort to foster a good culture.

NACD Staff Gives Back

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This past Friday, October 20, National Association of Corporate Directors (NACD) staff packed up and readied itself for a big move. After five years on Pennsylvania Ave., NACD’s national office relocated across the Potomac River to Arlington, Virginia. NACD staff turned what could have been a stressful moving day into an opportunity to give back to the community that it works in through its first Day of Service.

Packaging food for delivery

Serving hot meals from a mobile food kitchen

President and CEO Peter Gleason championed NACD’s Day of Service as a way to involve staff in volunteer activity and to demonstrate that the organization is dedicated to supporting the lives of others. NACD spent time with several  local nonprofit organizations, including:

  • Martha’s Table, an organization that seeks to provide healthy meal and food programs for children and their families. For over 37 years, Martha’s Table has worked to support children, families, and neighbors by making healthy food and quality learning more accessible.
  • DC Central Kitchen, whose mission is to use food as a tool to strengthen bodies, empower minds, and build communities. This organization provides culinary training for jobless adults and then hires them to prepare 3 million meals annually for homeless shelters, schools, and nonprofits.
  • Capital Area Food Bank, an organization working to solver hunger, chronic malnourishment, heart disease, and obesity. It provides 540,000 people in and around the nation’s Capital access to healthy food annually.
  • Arlington Food Assistance Center, which obtains and distributes groceries directly and free of charge to those in Arlington who cannot afford groceries.
  • Food & Friends, whose vision is to provide meal delivery to people with HIV/AIDS, cancer, and other serious illnesses who have limited ability to provide nourishment for themselves. Their simple premise is that anyone can get sick and everyone can help.

Organizing food for a “market day” at an elementary school

One group of NACD volunteers reported back from Martha’s Table with this experience:

“Our crew of four baked about 230 muffins in one afternoon for our Day of Service assignment. Martha’s Table is a charity that has various aims, including introducing healthy eating to those who might not have access to traditional resources, such as those experiencing homelessness. Their mobile soup kitchen, McKenna’s Wagon, provides meals daily at various locations. The muffins we baked and packaged were destined to go on the truck Friday night as dessert for those that McKenna’s Wagon served. We had a lot of fun baking at Martha’s Table. We had a recipe for apple spice muffins and an aggressive timeline to meet! Everyone pitched in, bonded, and encouraged each other. It was a rewarding experience.”

Baking for a mobile soup kitchen

Do you know a deserving organization in the metropolitan Washington, DC area that could use volunteers in the future? Make your suggestion by leaving us a comment.

NACD Remembers Roger W. Raber

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Dr. Roger W. Raber

The National Association of Corporate Directors (NACD) mourns the loss of our past president Dr. Roger W. Raber, who died peacefully at home on the evening of October 10, 2017, after a long and valiant struggle against an illness. No mere summary can express the value he brought NACD, the nation, and the world. The details of his extraordinary life of service can be found in his obituary notice below, and members can read more about his dedication to NACD here.

Peter Gleason

President & CEO, NACD


OBITUARY NOTICE

Dr. Roger W. Raber

November 28, 1942 – October 10, 2017

Dr. Roger W. Raber, whose advocacy work helped to usher in the modern era of corporate governance, died peacefully at his home in Washington, DC, on October 10th. He was 74. The cause was complications from Alzheimer’s disease.

Dr. Raber was born in Jamaica, New York. After attending Saint Anthony College in New Hampshire, he received a BA in Philosophy and an MA in Theology and Religious Education from Manhattan College. He later received an MA and doctorate in Administration in Higher Education from Teachers College at Columbia University.

From an early interest in theology, his career evolved from educational administration to professional education, this latter area focused at first in banking and later in corporate governance.

Dr. Raber served as director of admissions at the City University of New York in the early 1970s, and as Deputy Provost at the College at Old Westbury, State University of New York, later that decade. In 1980, he became director of education for the National Association of Mutual Savings Banks in New York City, and for the next two decades he would apply his educational expertise in the banking field, moving on to become an executive vice president of the National Council of Community Bankers; president and CEO of the Center for Financial Studies in Connecticut; and managing director, member services, at America’s Community Bankers. While living in Connecticut he chaired the Weston School District, elected by the residents to restore the integrity of the school system following several crises. During the 1980s he served as a director of Starpointe Savings Bank, staying on the board while it integrated into Dime Savings of New York.

In 1999, he began his service as president and CEO of the National Association of Corporate Directors, serving for the next seven years in this capacity, where he built an organization that was strong both financially and culturally.

In his role as CEO, he responded at a personal level to NACD members affected by the tragedy of September 11, 2001, strengthened by his faith. His ability to steer through crisis would be tested at the national level soon thereafter following the December 2001 bankruptcy of Enron, when he testified on the nature of good governance to Congress. His remarks were influential in determining the governance standards later set by the major stock exchanges.

During his tenure at NACD, paid membership grew from 1,800 to 10,000. He developed educational partnerships with a variety of organizations, including Dartmouth College, University of Southern California, Rice University, Duke University, and University of Georgia and created relationships with Association of Corporate Counsels, Financial Executives International, National Investor Relations Institute, America’s Community Banks, Executive Leadership Council, World Bank/IFC) and several governance institutes in Asia, Central Europe, and Latin America. He also established strategic alliances with several leading professional Institutional Shareholder Services, the Nasdaq Stock Market, New York Stock Exchange, major D&O insurers, and leading professional service providers.

Dr. Raber had a special love for the nonprofit sector. He formed a Not-for-Profit Council at NACD, and conducted the first surveys of nonprofit governance. And although he presented boardroom education programs to many of the nation’s largest public companies, his most treasured assignment was his work with the board of the American Red Cross.

He practiced what he preached about governance, ensuring that NACD would have an independent and diverse board and strong bench strength. Many of the employees he mentored are still with NACD, including its current leader. Thus the Raber legacy lives on.

During his years at NACD and after retirement, he served in many advisory roles. He was a member of the board of overseers of Malcolm Baldridge National Quality Program at the U.S. Department of Commerce, and an advisory board member at the University of Delaware, Weinberg Center for Corporate Governance. He also served on the board of Washington Campus, a nonprofit facilitating a better understanding of government. His three professional engagements in the NACD years included service as an advisory board member to CFM Partners in Washington, DC (banking education), James F. Reda & Associates in New York and Atlanta, a compensation practice (now part of Arthur J. Gallagher & Co.), and the Project Management Institute.

In 2007, after stepping down from NACD leadership to serve as a senior advisor to the organization, he continued some of his advisory roles. In 2010, he was diagnosed with Alzheimer’s, and faced the disease with all the energy and good cheer he had given his life’s earlier missions. He agreed to participate in two clinical studies at the Memory Disorders Program at Georgetown University Medical Center. During these seven years as he came to terms with the disease, he continued his volunteer work with the West End Library, as well as So Others Might Eat, and Miriam’s Kitchen, two social service programs for the homeless population in Washington, DC. Always a family man, his final years were full of joy as his beloved children themselves became parents. His last gift of many to humanity was the donation of his brain to Georgetown University Medical Center for further research with Alzheimer’s disease.

He is survived by his wife of 45 years, Dr. Marie Raber, Associate Dean of the School of Social Work at Catholic University; their son Commander Roger W. Raber, Jr., U.S.N., his wife Heather, and their two sons, Jack and Elliot; as well as their daughter, Robyn Borgelt, her husband Nate, and their children Anna and William.

A funeral Mass will be held at Holy Trinity Catholic Church in Georgetown on October 21, 2017, at 10:30 A.M.. There will be a one-day wake at De Vol Funeral Home the day before from 2:00 P.M. to 4:00 P.M., and from 6:00 P.M. to 8:00 P.M. All are welcome. In lieu of flowers, the family asks that donations be sent to Georgetown University, Attn: Memory Disorders Program, Bldg. D, Suite 177, 4000 Reservoir Rd., NW, Washington DC, 20057.