On the list of director responsibilities, there are several that come to mind: monitor CEO succession, oversight of long-term strategic planning, and establish and review executive compensation packages. What does not usually make the short list but has received significant attention lately is being a skeptic. Particularly in the oversight of financial reporting, directors have a critical responsibility to assess audit evidence with a questioning mind.
In the last two weeks, NACD has announced several resources to assist directors, especially those serving the audit committee, on enhancing independence, objectivity and skepticism in overseeing the external auditor. This week, the third episode in our webinar series on skepticism—produced with the Anti-Fraud Coalition of NACD, the CAQ, The IIA, and FEI—was released, titled “Skepticism and the External Auditor.” In this episode, moderator Michele Hooper is joined by Cindy Fornelli, executive director of the CAQ, and Greg Weaver, chairman and CEO of Deloitte and Touche LLP, to discuss leading practices in exercising professional judgment.
Last Thursday, NACD President and CEO Ken Daly attended the PCAOB’s third public meeting on auditor independence and audit firm rotation. At the request of Chairman Jim Doty, Daly voiced the views of the director community with respect to mandatory audit firm rotation. In his remarks, which are available on NACD’s website, he agreed with the PCAOB’s goal for increased auditor independence, objectivity, and skepticism.
However, Daly noted that mandatory audit firm rotation is not an effective way to achieve this goal. Instead, a rigorous evaluation process, used in conjunction with the PCAOB’s recently released Auditing Standard No. 16: Communications With Audit Committees can provide a more effective solution. To this end, an evaluation tool was produced by a collaboration of organizations dedicated to strengthening audit committee performance and transparency. The Audit Committee Evaluation of the External Auditor contains sample questions to gauge the quality of services provided, communications, and interaction. It can also be scaled for use at a wide range of organizations.
“You’ll have to get on your dancing shoes” said Donna as we watched the Dancing with the Stars finale the other night, and I must admit a shudder ran through me.
“What do you mean?” I asked, worried that she was going to suggest a Latin salsa class or sign me up for the square dance squad at church. My toes refuse to twinkle and I am to ballroom dance what hippos are to hip hop.
Hines Ward. He's no Ken Daly
“Well, I see the NACD conference site is open for business” said my wife “and you know how quickly your dance card fills up every October in DC.”
She’s right. Our conference has sold out for the last two years and we’re expecting more than 800 directors at the JW Marriott in Washington, DC from October 2-4 this fall. It’s great to see chapter leaders, members I first met at roundtables or education events, Board Leadership Fellows and our own NACD board, but it sure is hard to find time to take a turn around the floor with everyone—and to break in on all the interesting networking conversations going on left, right and center.
Conference is like a cotillion, and at all hours of the day and night board members from companies big and small, public and private, from all over America and, increasingly, all over the world, are in constant, swirling motion. You’ll definitely need your comfy shoes.
Like everyone else who makes certain to attend, I like to catch as many break outs as possible. There are 24 this year and it takes the speed and stamina of Maksim Chmerkovskiy to run between them. One definitely not to miss: Bonnie Hill from the board of Yum Brands, Jim Brady from the board of Constellation Energy, former Governor Bill Owens from Colorado at the time of Columbine, and communications guru Richard Levick talking about the board’s role in crisis planning and management in the year of the beef taco, Fukushima and political volatility all over the world.
We have a full day of programming on Sunday this year: plan to attend one of five board committee forums or get to know fellow directors by joining our special private tours of the Capitol or the National Archives.
Sir Peter Bonfield
As I write, Sir Peter Bonfield, who has contributed a lifetime to driving international technology innovation and who now sits on the board of Sony Corporation (among others) has agreed to join the opening plenary on Global Governance with Ambassador Roz Ridgway and our board member Michele Hooper (who Sir Peter knows from the board of AstraZeneca) . It’s a small world—although The Honorable Barbara Hackman Franklin and The Honorable Charlene Barshefsky may beg to differ. They’ll be sharing their view from 30,000 feet on one of the rare occasions when they are not in the air flying to China or other far flung hot spots.
Members of our latest Blue Ribbon Commission on Effective Lead Directors will take the stage as will The Honorable Leo Strine from the Delaware Court of Chancery. As usual, you won’t be able to turn around without bumping into a big name from the business world or someone from the Administration or the Hill. As always, thanks to our fantastic line-up of sponsors who make it possible for us to offer you an event of this size and scale.
I am looking forward to meeting Medco director Myrtle Potter who is based on the West Coast and catching up with Chris Kubasik, President and COO of Lockheed Martin and a board member at USO—an organization that I am sure is close to all our hearts. I know you will have your own “dance card” of movers and shakers in the world of governance. Just remember, you can’t be part of the fun if you don’t make it to the ballroom floor. Register now and I look forward to seeing you twirl by in the middle of all the excitement this October in Washington DC.
Thanks to Twitter™, participants at NACD’s Director Professionalism® course in Laguna Beach were able to keep on top of the news from the SEC last week, even though they were 3000 miles away in sunny California.
“We had people down at the SEC of course” said NACD Managing Director and CFO, Peter Gleason, who was one of the facilitators at Director Professionalism. “Their tweets, and those of the major news outlets and the SEC itself kept us up to the minute. The expert directors who were leading our discussions on shareowner value and nomination and governance processes on Wednesday made sure the directors attending (more than 100) didn’t miss a beat.”
“Being able to discuss the SEC decision on proxy access with our attendees in real time was a terrific benefit for my morning session on nominating and governance committees,” said Michele Hooper, a member of the NACD board and of the boards of UnitedHealth Group, Astra Zeneca, PPG Industries and Warner Music Group. “I was leading the nom/gov discussion as corporate governance history was being made in DC. As you might expect, we had a lot of questions about the impact of the new rules, board composition and how best to explain your individual and collective skill sets on the proxy. The NACD’s new proxy disclosure template is a valuable resource and should prove very helpful for boards”
Rich Koppes, director at Valeant Pharmaceuticals, NACD, and a former GC at CalPERS, agrees: “I was facilitating a discussion on adding shareowner value as the news was breaking. A lot of directors are nervous about spending their time on compliance that distracts from the main strategic work of the board, and I am not sure that anyone knows how the latest promulgations around say-on-pay will work out. But there was a lot of energy around new ways of communicating value to shareowners, and that has to be a good thing.”
Participants in NACD’s Director Professionalism® program in Laguna Beach, CA, in August not only left the program better prepared to face the future—they also arrived at the program ready to move from knowing to doing: NACD is now using podcasts to keep directors at its cornerstone program up-to-date on legislative changes and emerging issues. NACD CFO Peter Gleason recorded a briefing on the Dodd-Frank Act, proxy access and proxy plumbing to bring directors up to speed before they travelled to the course, allowing them to make the most of the opportunity to talk through the implications of this sea change in corporate governance with each other. “It’s a quick and easy way to share the information and it stimulates useful discussion,” says Pete, who jokes that he has “a great face for podcasts.”
“If everyone arrives with the same baseline knowledge, we can use our time together to tap the experience in the room to work out how to lead the way in a new environment for directors. Distance learning is great for sharing information, and classroom settings are great for peer exchanges. NACD makes the most of both educational opportunities”
To join the next Director Professionalism course in Tampa, FL, on Dec. 6 and 7, register here. To check out 2011 dates for Director Professionalism and for the more advanced Master Class click here.