A Political Casualty: Majority Voting

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Call it a political casualty. With the release of the Dodd-Frank Wall Street Reform and Consumer Protection Act earlier this week, we finally are face-to-face with the long debated and discussed “governance reform” that has been a topic of boardroom banter for the past two years.

A “Gimme”

Interestingly enough, the requirement for majority voting was dropped from the long list of governance provisions and is not part of the final bill. In basketball terms, majority voting was a lay-up; for you golfers out there, a “gimme.”

According to our surveys, 47 percent of companies have already adopted some form of majority voting on their own, without the need for course-correcting legislation. Both sides can debate the need for much of what is included in the reform bill, but the governance provisions included in the original draft have remained relatively consistent throughout the years of debate.

Rumor Has It…

The bill started with rumors and predictions, but the political machine quickly took over. The rumors turned into proposed legislation, which quickly morphed into campaign promises, which then turned into multiple pieces of proposed legislation, debate, new proposed legislation, House passage, more debate, lobbying by all sides, last minute changes suggested by the White House, deals struck, and finally we have a bill. The House passed it on June 30, and it will go to the Senate and then on to President Obama following the Fourth of July Recess.

For those of us positioned firmly inside the Beltway, this bill has been a loooong time coming—not because we were hoping for some magical one-size-fits all legislation on board governance, but because of the non-stop media coverage and the fact that it seemed to be going around and around Capitol Hill like some sort of rollercoaster car on a legislative track.

What We Don’t Know

The major provisions of the bill related to financial reform dwarf the governance reforms included under the investor protections section of the 2,300 page bill. However, there are still a lot of unknowns out there.

The bill gave the SEC the authority to implement proxy access, but we don’t know how that will happen yet. We also don’t know how many of the enhanced disclosure provisions will be implemented and whether they will achieve their intended result. The “clawback” of executive compensation sounds pretty ominous, but we’ve had clawbacks under Sarbanes-Oxley, and I can’t recall many, if any, actually being executed.

So, with all the contentious governance provisions in the bill, why did our legislators drop the generally accepted majority voting provision? I don’t have an answer, but I’m guessing it was deemed a “gimme” by a Senator who was willing to trade it up on a piece of the financial reform that was more hotly contested as both sides wrestled with the legislation. A political casualty indeed.

Where you stand, and where (and how) you sit

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Two initial disclaimers:

  1. I know almost nothing about “feng shui”, the ancient Chinese system intended to ensure that buildings and objects are properly placed and oriented.
  2. I can barely understand the full name of the newly-published scientific article, “Incidental Haptic Sensations Influence Social Judgments and Decisions”, on which this comment is based (but it sure got me thinking about how to get the best results from the vast amounts of time Directors and others spend in meetings).

Three researchers (one each from Harvard, MIT and Yale) found that our sense of “touch” or “feel” clearly influences our decisions, even when those decisions have absolutely nothing to do with touching or feeling. While you can find the entire article on the website of the American Association for the Advancement of Science, the gist of it includes such findings that people sitting in hard chairs were less willing to negotiate than people in more comfortable chairs.

So while this is not intended to serve as a call to check the comfort of the  seating in the meeting room, it is a great reminder just how much our opinions and our points of view can be affected by our comfort level, our perspective, or the lack thereof on decisions that may have great importance to our organizations.

There is a full raft of questions related to this that may be worth considering, some of which come straight from the experts on running great meetings:

  1. Where do you actually hold your meetings? Same place ‘most every time?
  2. How is the meeting room configured?  Big, imposing mahogany board table? A place or thing to share ideas?  Even a flip chart?
  3. Who sits where? Does that ever shift?
  4. How long do the meetings last?

Now, let’s be honest with ourselves.  Some of these are things we would rather not change.  We like our chairs, our views, our patterns.  We find them comforting.  But changing things up now and then helps to ensure that we really do have a full set of perspectives, much of which we simply cannot gather by sitting in the same seats, or relying on the same set of inputs.

The young songwriter, Merrily James, tells us to “Get up, go out, change your views”. In the somewhat less musical terms of the first of the NACD Key Agreed Principles, “governance structures and practices should be designed by the board to position the board to fulfill its duties effectively and efficiently.” In either case, the challenge is the same: making sure you stand up and take in the view, regardless of where or how you sit.

How do you ensure that in your meetings?  Let us know.

Staying Connected to Your Companies

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In the past few weeks, I have spent time with individual directors and entire boards in a particularly wide range of companies. The companies they serve represent the entire spectrum of publicly traded entities, from high-tech entities with $100 million market caps to multi-billion dollar multi-national spectaculars.

Maybe because we’ve been lucky or maybe because the corporate directors who choose to interact with NACD are among the more conscientious of the category, our impression is that, for the most part, the people in these roles are diligent in their efforts to serve the stakeholders they represent.

While most corporate directors seem to be actively engaged with the basics of the company’s performance and how shareowners and the public view the company– reading press releases, checking out earnings reports and perusing company web sites – there may still be a disconnect in understanding what is going on at a ground level.

Here are a few starting points corporate directors can use to gain a deeper understanding:

  1. Set up a Google Alert for news about the company and read what’s being written.
  2. Troll the job websites to see what people are saying about what it’s like to work there. LinkedIn, particularly, is revealing of corporate culture and diversity. Search for your company (and check out NACD’s LinkedIn group!).
  3. Read relevant consumer and industry blogs, and/or go on Facebook.com to see how the company shows up in the eyes of others.
  4. Regularly have an inexpensive lunch or have coffee or meet in other informal settings with company employees other than the CEO and the executive team.
  5. Listen in on earnings/analyst calls.
  6. Sit quietly at employee “town meetings.”
  7. Sit through new-employee orientations.
  8. Purchase company products or interact with the company in the exact same way as the general public does, with no special treatment (or even awareness) on the part of company employees.

How else do you keep your finger on the pulse? Share your practices and ideas below.