Tag Archive: Apple

Refocusing Technology Discussions

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Information technology is a fast-paced environment, and most directors are playing a game of catch up. In the past, technology was reserved for providers, such as Apple or Microsoft, or Internet leaders, such as Google or Amazon. Today, every business relies on technology through a constantly evolving list of options, such as increasing operations efficiency or social media. As expected, this increased reliance on technology entails a higher risk profile, evidenced in security breaches or system malfunctions. Despite these increased risks, recent studies have found that many boards need to refocus how they view information technology (IT).

NACD and Oliver Wyman’s Global Risk Center recently conducted a study to address the issue of IT risk oversight titled Taming Information Technology Risk. According to the survey, nearly half (47%) of directors are dissatisfied with their board’s ability to provide IT risk oversight. Almost a third of directors believed failure to properly provide IT risk oversight stemmed from insufficient expertise at the board level.

A substantial number of corporate boards feel they have not yet met the level of oversight the topic requires. A recent report from the Deloitte Center for Corporate Governance found that while directors should examine IT projects with the same level of scrutiny as any other major capital expenditure, this is rarely the case. The same report also recommended that boards add “tech-savvy directors” who can provide the board with expert oversight.

While every board member will not be an expert in IT, all directors should be well-versed on the subject and able to discuss IT risk oversight in relation to their company’s strategic planning. In Taming Information Technology Risk, six questions are provided that should be on every board’s agenda:

  1. How do you determine the strategic importance of IT to the business?
  2. How do you evaluate the evolving IT capabilities of competitors that could threaten our industry position?
  3. How do you allocate dollars across the portfolio of IT investments to ensure an efficient risk return?
  4. What trade-offs are you making in managing the IT portfolio?
  5. How are you effectively executing major IT programs?
  6. How do you ensure that a breadth of best practice capabilities and processes are in place to protect the firm from operational and security risks—both now and in the future?

The above six questions provide a foundation of the questions boards should ask regarding technology-related decisions. Directors should also take into consideration the ways technology touches their specific company when scrutinizing IT projects. Also, just asking the right questions will only get boards halfway to the finish line. Understanding what constitutes as an acceptable answer is just as critical.

Board Succession – by Failing to Plan, You Plan to Fail

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The recent spotlight on Steve Jobs and Apple’s succession planning—or lack thereof—has created new urgency among investors and shareholders to demand that the companies in which they invest have a clear succession plan. Although boards of directors for numerous Fortune 500 companies see the advantage in succession planning, there are few who take the protocol seriously enough. Investors and observers have criticized Apple for lacking transparency in its long-term plans and have become uneasy about what Jobs’ second leave of absence will mean to the company without a succession plan in place. MarketBeat reported that:

Institutional Shareholder Services said all companies should have succession plans in place, and Apple shareholders would benefit by having a report on the company’s succession plans disclosed annually. “Such a report would enable shareholders to judge the board on its readiness and willingness to meet the demands of succession planning based on the circumstances at that time,” ISS said.

While succession planning is often put off by companies, it shouldn’t be put off.

A survey conducted by The Korn/Ferry Institute, a North Carolina business intelligence firm, reports that 98 percent of the 1,318 executives polled in 2010 agree that CEO succession planning is important in the overall corporate governance process, while only 35 percent are actually prepared for either the unexpected or planned departure of their company’s CEO.

The Securities and Exchange Commission in 2009 and in late 2010 issued rule changes that prevent companies from dodging the succession question. As witnessed by Apple’s example, board succession is more than just a human resources issue, as it was in the past. There is a risk management factor in teeing up the next company CEO. Shareholders understand the associated risk that exists when there is no plan in place. As companies become more accountable, succession planning has shifted from being part of “ordinary business,” to an important component of risk management.

In Apple’s case, the company could have avoided shareholder anxiety by making public its outline of criteria for selection and its development plan. It’s annual report time for the company, and shareholder questions related to Mr. Jobs’ successor will undoubtedly be top of mind.