1 REDEFINING the LEAD INDEPENDENT DIRECTOR by Holly J

For 39 years . . . THE THE LEADING JOURNAL OF CORPORATE GOVERNANCE CORPORATE BOARD

1 REDEFINING THE LEAD INDEPENDENT DIRECTOR by Holly J. Gregory How are lead directors using their new powers and responsibilities?

7 BOARD EVALUATION: “FEED-FORWARD” INSTEAD OF “FEEDBACK” by Paul Winum Evaluation focuses too much on past problems, too little on future aspirations.

12 A PRIVATE EQUITY MODEL FOR PUBLIC COMPANY BOARDS by Henry D. Wolfe Top private equity-owned company boards think, act and perform differently.

17 FACING THE NEW TIDE OF SECURITIES LITIGATION by H. Stephen Grace Jr., Ph.D. and Joseph P. Monteleone Today’s lawsuits and enforcement action demand new litigation teams.

22 INFORMATION TECHNOLOGY GOVERNANCE by Bob Zukis After all the cyber and data danger warnings, how do you change your board to respond?

26 IN REVIEW Index to actions, regulations and surveys.

30 SPOKEN & WRITTEN Excerpts of articles and speeches.

31 DIRECTORS’ REGISTER Recent board elections.

32 CONVERSATIONS: HANNAH-BETH JACKSON California mandates board diversity.

NOVEMBER/DECEMBER 2018 VOL. XXXIX NO. 233 THE CORPORATE BOARD THE LEADING JOURNAL OF CORPORATE GOVERNANCE

Copyright: © 2018 by Vanguard Publications. STAFF All rights reserved. THE CORPORATE BOARD (ISSN 0746-8652) is published in January, March, Editor Ralph D. Ward May, July, September and November. Chairman and CEO Irving A. Lesher III Reproduction: No part of this publication may be President and COO Judith A. Scheidt reproduced or transmitted in any form or by any means, electronic or mechanical, including Circulation Ann K. Stocum photocopy, recording, or any information storage and retrieval system, without permission in writing. For information on permission to quote, EDITORIAL OFFICE reprint, or translate editorial content, contact: Vanguard Publications, Inc. The Corporate Board 4440 Hagadorn Rd. 4440 Hagadorn Rd. Okemos, Michigan 48864 Okemos, MI 48864 Email: [email protected] Phone: (517) 336-1700 Subscriptions: Available to corporations at an Fax: (517) 336-1705 annual cost of $3,200. This provides delivery of Email: [email protected] six bimonthly issues to each board member, senior executive officers, and the corporate secretary. Web site: www.corporateboard.com Periodicals postage rates have been paid at Okemos, MI and at additional mailing offices. EDITORIAL ADVISORS POSTMASTER: Send changes and all Thomas J. Goff subscription correspondence with the mailing label to: Customer Service Founding editor, THE CORPORATE BOARD; THE CORPORATE BOARD owner, Goff Consultancy; former executive vice 4440 Hagadorn Rd. president for corporate reputation and crisis Okemos, Michigan 48864 communications, Edelman Public Relations. Please Note: The opinions of the authors are their Dolores Wharton own, and do not necessarily represent the views of Founder and president, Fund for Corporate the publisher, advisors, or editorial staff. Initiatives; member of various boards.

NOVEMBER/DECEMBER 2018 Vol. XXXIX No. 233

Printed on Recycled Paper Redefining The Lead Independent Director by Holly J. Gregory

While the number of U.S. corporations with Large institutional investors and proxy advisors an independent board chair continues to in- generally prefer that boards select an independent crease, the lead independent director position chair and avoid giving the CEO the chair title. has become the boardroom norm at many Shareholder proposals seeking the adoption of an companies. The motivators for creating this independent chair structure remain common, and lead director boardroom leadership structure, pressures to move toward an independent chair may its status and powers continue to vary greatly never fully abate. from board to board. While many shareholders favor an independent chair, many also accept that a well-designed lead director role can provide an effective alternative. As The leadership structure of large U.S. publicly traded companies continue to develop the lead director role, companies has evolved significantly since the turn it is becoming similar to the role of an independent of the century away from the tradition of combined chair. leadership in one individual who holds both the The primary differences are in the title of “chair” CEO and board chair positions. The most prevalent versus “lead director,” and in the power to wield the public company leadership structure is now one in gavel in full board meetings versus in executive ses- which the board has leadership independent from sions of the independent directors. The lead director the CEO, through an independent chair or lead or role is becoming synonymous with leading the efforts presiding director. of the board, as distinguished from the CEO’s role Public companies are not required to have an in- in both leading management and the company for dependent board leader. Nevertheless, boards have most external matters. altered their leadership structures as attention has Boards and their advisors should follow develop- focused on the role that independent directors are ments in this area and ensure that the leadership expected to play in providing objective oversight structure they have adopted is: while holding management accountable. Appropriate for the company’s particular circumstances. Effective in supporting board objectivity in Many shareholders now accept that a well- business judgments and oversight. designed lead director role can provide an Well articulated in company disclosures and effective alternative to a separate chairman. policies. Boards should review their leadership structure Independent leadership is viewed as particularly on a periodic basis to ensure that it is appropriate important with respect to board oversight and deci- for the company. Boards with a lead director should sions regarding corporate strategy, management suc- review the functions of that role on a periodic basis cession, performance and compensation, audit and against emerging practices. Additionally, boards internal controls, board composition and functions, should consider the independent board leadership and accountability to shareholders. Leadership in most S&P 500 companies is now shared between the Holly J. Gregory is a partner and co-chair of the Global CEO and a lead director selected by the independent Corporate Governance and Executive Compensation Practice directors (hereinafter, a lead director). with Sidley Austin LLP. [www.sidley.com]

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 1 Holly J. Gregory structure as a component of both CEO and board a combined role, it is essential that the board have a succession planning. strong lead independent director with clearly defined Pressures for independent leadership. The authorities and responsibilities.” (The Commonsense move away from combining the chair and CEO roles Principles of Corporate Governance, Preamble has been driven by a number of forces. Changes in (2017), available at governanceprinciples.org.) listing rules and SEC disclosure requirements have “The board should be chaired by an independent focused attention on board leadership. Listing rules director. The CEO and chair roles should only be imposed in 2003 (generally associated with the combined in very limited circumstances; in these situ- Sarbanes-Oxley Act) raised expectation that inde- ations, the board … should name a lead independent pendent directors provide objectivity in overseeing director who should have approval over information management. flow to the board, meeting agendas and meeting Mandates of the Dodd-Frank Act, adopted by the schedules to ensure a structure that provides an ap- SEC in 2009, require disclosure of the board’s ratio- propriate balance between the powers of the CEO nale for combining or splitting the chair and CEO and those of the independent directors.” (Council roles. At companies where the chair and CEO roles of Institutional Investors, Corporate Governance are combined, disclosure of whether the company has Policies (Sep. 15, 2017), available at cii.org.) a lead director and the specific role the lead director Shareholder proposals. Shareholder proposals plays is required. seeking an independent chair continue to be prevalent. Proponents appear to target companies that they perceive to have board oversight or performance is- “Every board needs a strong leader who is sues, with little regard to whether the company has independent of management. The board’s inde- adopted independent board leadership. pendent directors usually are in the best posi- According to Proxy Monitor, at Fortune 250 com- tion to evaluate whether the roles of chairman panies in 2017, proposals regarding an independent and CEO should be separate or combined.” chair were the most frequent governance-related shareholder proposal, and the third most frequent Shareholders and proxy advisors have fueled this shareholder proposal overall. change. Shareholder proposals and proxy voting poli- Although none of these proposals received major- cies generally support proposals for an independent ity support in 2017 or 2016, it is likely that they will chair unless the company maintains a strong lead continue to be submitted and the issue of independent director role. Many institutional investors also favor board leadership will continue to be debated. independent board leadership through their proxy In 2017, 43 independent chair proposals went to a voting and governance policies, including BlackRock, vote. These proposals are commonly supported by State Street, CalPERS, CalSTRS, the New York City the two primary proxy advisors, Institutional Share- Pension Funds, and TIAA. holder Services Inc. and Glass, Lewis & Co., and Independent board leadership is also supported by they tend to receive significant shareholder support, governance effectiveness guidance that expresses a albeit short of passing rates. “best practice” consensus that boards should have On average, independent chair proposals received some form of independent leadership. Examples support of approximately 30 percent of the votes include: cast in 2017, with nine proposals receiving support “Every board needs a strong leader who is in- of 40 percent or more. Generally, average support dependent of management. The board’s independent for these proposals has decreased since 2012, when directors usually are in the best position to evaluate the 50 proposals that went to a vote received support whether the roles of chairman and CEO should be on average of more than 35 percent of the votes cast. separate or combined; and if the board decides on Twenty-one proposals received support of 40 percent

2 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD LEAD INDEPENDENT DIRECTOR or more, and four received majority support. CEOs were immediately named chair (down from Proxy advisor policies. ISS has historically fa- 9.5 percent in 2013). Additionally, the 2017 Spencer vored shareholder proposals calling for independent Stuart U.S. Board Index indicates that, for the first chairs. In 2017, ISS recommended in favor of 30 of time, the majority of S&P 500 CEOs do not also the 43 (70 percent) proposals that went to a vote, serve as the chair. According to Spencer Stuart: compared to 34 of the 46 (74 percent) proposals in 51 percent of S&P 500 companies have separated 2016 and 36 of the 50 (72 percent) in 2012. the chair and CEO roles, up from 46 percent a decade ISS bases its vote recommendation on a “holistic ago. review” of the company’s board leadership structure, Approximately 28 percent of S&P 500 companies governance practices, and performance. Factors it have boards with an independent chair (compared to will consider negatively include: 13 percent in 2007), an increase of approximately 1.4 The presence of an executive or non-independent percent per year over the past ten years. chair in addition to the CEO. 84 percent of S&P 500 companies have either A recent recombination of the role of chair and a lead or presiding director, although two percent CEO. of these boards rotate the role among independent A departure from a structure with an independent directors or committee chairs. chair. Of the companies that designate a lead or pre- ISS will also consider “any recent transitions in siding director, 74 percent use the title lead director, board leadership and the effect such transitions may while 26 percent use the title presiding director or have on independent board leadership as well as the specify they have a director who presides over execu- designation of a lead director role.” For companies tive sessions. that have a lead director, ISS will assess whether Terms and tenure. Most boards do not set an the role is robust. Generally this requires that the express term limit for the lead director. According to lead director: the Spencer Stuart Study, of the companies that do Is elected by and from the independent members set a term limit, a one-year renewable term was the of the board. most common. This study indicates that the average Serves for a term of at least one year (rotating tenure of lead directors is approximately four years. the role, for example, among committee chairs For independent chairs, average tenure is just over on a quarterly basis, is not considered sufficient). four years. Has “clearly delineated and comprehensive” Board leader compensation. According to the duties. These include: serving as liaison be- Spencer Stuart Study, independent chairs of S&P 500 tween the chair and the independent directors; companies are more likely to be paid additional fees approving information sent to the board; approv- for their service than are lead or presiding directors. ing meeting agendas for the board; approving Specifically, 96 percent of independent chairs earn meeting schedules; authority to call meetings additional compensation, versus 66 percent of lead of the independent directors; and availability directors. for consultation and direct communication with The additional fees paid to independent chairs major shareholders. are on average significantly higher than those paid Glass Lewis generally supports shareholder pro- to lead directors, and lead directors are paid more posals seeking an independent chair unless, among than presiding directors. The average additional fee other things, the company has indicated it intends for an independent chair of an S&P 500 company in to separate the roles and has a clearly defined lead 2017 was $162,751. In contrast, the average additional director role. fee for a lead director in 2017 was $36,868 (up 10 Current data. According to Heidrick & percent since 2016) and for a presiding director was Struggles, in 2016 only 6.4 percent of newly named $26,840 (down 16 percent since 2016).

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 3 Holly J. Gregory

contrast, it is typical for an independent chair or a The Lead Director’s Jobmmmmmn lead director to be involved in identifying issues for Common Tasks At Top Company Boards the board’s agenda and information to be provided to the board in preparation for board meetings. A review by Sidley Austin LLP of the companies that Independent board leaders, regardless of title, are comprise the Dow Jones Industrial Average (Dow 30) likely to take a leadership role in chairing meetings identified 23 companies with a lead director, and two of independent directors. They serve as a communi- companies with a presiding director. The most common responsibilities of these independent board leaders include: cation point for delivering sensitive messages from the independent directors to the CEO. Serving as a liaison between the chair and the independent directors (25 companies). Many view the role of a lead director as a viable alternative to an independent chair if the position is Approving information sent to the board (19 companies). defined with real power and authority. A 2011 report Approving meeting agendas for the board (22 compa- by the NACD compared the roles of a typical inde- nies). pendent chair to a lead director and found that the Approving board meeting schedules (20 companies). primary differences relate to: Calling executive sessions or meetings of the independent The power to call a board meeting. Unlike the directors (25 companies). independent chair, the lead director generally does Being available for consultation and direct communica- not have convening power for full meetings of the tion with major shareholders (22 companies). board, but does have the power to convene sessions Chairing executive sessions of independent or nonman- of the independent and nonmanagement directors. agement directors (25 companies). Control of the board agenda and board information. Unlike the independent chair, the lead director Having authority to call board meetings (nine companies). collaborates with the chair/CEO and other directors on these issues. Advising on, recommending, or approving the retention

of outside advisors and consultants who report to the The authority to represent the board in share- board (seven companies). holder and stakeholder communications. Typically the chair/CEO represents the board in communicat- Presiding at board meetings in the chair’s absence (22 companies). ing with shareholders and external stakeholders. The lead director plays a role only if specifically asked Guiding, leading, or assisting with: by the chair/CEO or the board directly. The board and director self-assessment process (13 companies). These are key distinctions and they build on other The board’s annual performance evaluation of the subtle differences in the roles and authority of the CEO (12 companies). independent chair and the lead director. These The CEO succession planning process (five compa- include the board’s role in management oversight, nies). CEO succession, strategic development, board and The board’s consideration of CEO compensation director assessment, board relations with the CEO (three companies). and C-suite executives, board diversity and succession, and board risk oversight. A CEO, whether or not the CEO has the title of chair, Board leadership roles and responsibilities. is usually the public spokesperson for the company Whether the independent board leader is an indepen- and communicates with investors and the public. The dent chair or lead director, there are certain roles and CEO also must play a critical role in developing the responsibilities that are common. However, presiding board agenda, ensuring the quality and timeliness directors often have more circumscribed roles, typi- of the information provided, and keeping the board cally focused on presiding at executive sessions. In informed between meetings.

4 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD LEAD INDEPENDENT DIRECTOR

Decisions about board leadership should be Independent Board Leadership governed by practical realities, rather than by best-practice theory. What Is Desired?

Making board leadership decisions. The board An independent board leader should typically be: is responsible for its own structure and processes, and Independent from management (no personal or business should apply its business judgment to decisions on relationships) and independent minded. the appropriate board leadership structure. Given the Free from any economic or egotistical need for the role. importance of board culture and group dynamics to Able to commit the necessary time and energy to the board effectiveness, decisions about board leadership role. should be governed by practical realities, rather than Capable of facilitating consensus and bringing out the by best-practice theory. It is becoming more com- best in the board. mon for board leadership decisions to be made by Respected by the directors and CEO for leadership the independent directors, in consultation with the capacity and business judgment. CEO.

The optimal board leadership structure is context Respectful of the skills, contributions, and diverse viewpoints of individual directors. dependent, and may change with the circumstances of the company and the board. Factors to consider Respectful of the distinction between the board and management role, and of the CEO and management include: team. Board culture and practice. Supportive of the CEO as the leader of the company Business circumstances. internally and externally. Characteristics, capabilities, and leadership

styles of potential board leaders. Capable of building and maintaining strong cooperative relationships. Expectations of key talent. Even those who prefer the independent chair struc- Excellent at communicating, including sensitive messages from the board to the CEO and to fellow directors. ture concede that the time to consider a change is during a CEO succession event. Stripping a chair Able to lead in a crisis. title from a sitting CEO is likely to be viewed as an indication of a lack of board confidence in the CEO. and supporting clear and consistent messages. The concern most often expressed about the Leadership by the person most knowledgeable combined chair/CEO role is that it may hamper the about the day-to-day operations of the company. ability of the board to provide effective oversight. Ability to develop business relationships in The chair/CEO has control of the agenda and infor- certain foreign jurisdictions where the chair title mation, and has inherent conflicts. An independent provides a higher level of stature than the CEO title. leadership structure is viewed as a counterweight, An independent chair is unlikely to be involved in but should be designed with an understanding of the these relationships. challenges that shared leadership may present. These The challenges of shared leadership require atten- can include: competing centers of power; confusion tion, but are manageable through a combination of: about leadership roles; and misperceptions about a effective communication; thoughtful, well-articulated lack of board confidence in the CEO. apportionment of roles and responsibilities among As a practical matter, having one person serve as board leaders and management, and prudent selec- both chair and CEO may benefit the company and tion of the people in leadership roles. the board. These benefits include: The relationship between the independent board A unity of command that avoids confusion about leader and the CEO requires ongoing care to ensure leadership roles by designating clear lines of authority that the chemistry is appropriate. The relationship of

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 5 Holly J. Gregory the independent board leader to the board members an independent board leader (such as when a board also requires attention to ensure that the board’s role has had significant turnover). is supported by the leader. Many directors describe Involving the CEO to an appropriate degree, the ideal style of an independent board leader as given the importance of the relationship that must one focused on facilitation of the group’s endeavor, develop between the independent leader and the CEO. rather than a more directorial or autocratic style of While the board should not delegate this decision to leadership. the CEO, the CEO and the board leader must be able Selecting an independent board leader. Consid- to work closely together, and therefore the CEO’s erations in identifying a potential independent board views should be considered. leader include whether the candidate understands Evaluating the strengths of potential candidates, the nuances of leading the board without usurping but avoiding a contest. board authority, and ability to establish an effective Carefully considering whether it is appropriate relationship with the CEO. While boards vary in for the independent board leader to also chair the the methods they use to select an independent board governance committee. leader, the process often includes: Calling for a formal discussion and vote of the Defining the independent board leadership role independent directors. and determining the criteria desired in the board Carefully considering term and tenure. The leader. annual selection of the independent board leader is Identifying potential candidates. In most cir- in line with the annual election of most directors, cumstances, boards choose an independent board and provides an opportunity for assessment of the leader from among the current directors. Incumbent independent board leader’s performance. However, directors are already familiar with the board’s cul- this is not a position that should rotate or change on ture and the company’s business, and their ability to an annual basis given the skills and relationships work toward consensus and communicate with other needed. The board should also consider whether directors, as well as other strengths and weaknesses, there should be limits on tenure to support board are already known. However, there are times when leadership succession. it may be beneficial or necessary to look outside for

6 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD Board Evaluation: “Feed-Forward” Instead Of “Feedback” by Paul Winum

Corporate board evaluation, now mandated the boardroom, and inject caution and distrust into in most economies, has proven contentious directors’ relationships with each other. and flawed for many companies. Among the However, most directors who serve on boards are problems—evaluation measures the past highly responsible, conscientious business leaders performance of a board and its members, but who genuinely want to contribute value, and would offers too little intelligence on future improve- want to know if they are not performing as ex- ments. What if board evaluation focused less pected. In fact, over 90 percent of the 620 directors on “feedback” and more on “feed forward”? who responded to a joint RHR International/NYSE Governance Services survey indicated that they would like feedback about their performance as a director. Since 2009, the New York Stock Exchange has So, the question is, how can important information required the boards of listed companies to conduct be delivered to directors in a constructive manner? annual board performance evaluations. The corporate governance codes in Europe all stipulate that annual board evaluations be conducted. In the UK, A focus on what can be done differently going the prescription is to use an outside facilitator for the forward to maximize value is much more use- process at least every third year. ful than a review of past performance. In the first years of the NYSE requirement, many boards responded to the mandate with a rather cursory One answer is feed-forward, not feedback. This “check the box” process. This was motivated more by distinction is more than semantic. The overarching the compliance imperative than a desire to improve intention of board and director evaluation is to con- the board’s effectiveness. Often, it involved simply tinually enhance contributions in the future. Thus, a distributing a brief survey to all board members. focus on what can be done differently going forward The results were tabulated, and the boxes checked. to maximize value is much more useful than a review Best practices in governance today require a much of past performance. more rigorous approach. In addition to a thorough While referencing former behavior may be help- evaluation of full board and committee effective- ful to highlight themes, the majority of boards and ness, individual director feedback should be part of directors will benefit most from candid suggestions a robust board assessment. However, a 2016 survey about how they can improve their contributions in of 187 board directors conducted jointly by Stanford the future. Drawing upon RHR’s experience in this University’s Rock Center and The Miles Group field, here are a few recommendations for providing revealed that only slightly more than half of boards feed-forward. actually delivered peer feedback. About one-third Be clear about the expected value proposition for of the boards that did reported that those reviews the board and each director. Directors come into their were ineffective. board service with a variety of implicit assumptions One of the chief reasons many boards forego in- about how they think they should contribute. Some, dividual director evaluations is that gathering and motivated by the desire to be helpful, can cross the line delivering feedback about director and board performance is a very sensitive process. Poorly done, Paul Winum, Ph.D., is co-head of board and CEO services it can damage the important collegial culture inside at RHR International LLP. [www.rhrinternational.com]

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 7 Paul Winum

This is especially important in light of the fact Evaluating Your ProcessM that the RHR/NYSE study noted found that compa- How Effective Was Your Latest nies need different things from their boards as the Board Evaluation? operating landscape and company strategy evolve. Evaluations should focus on what governance needs will be in the coming year(s), and how directors can 8% not contribute to that future. Also, keep in mind that the effective best input is actionable, and any changing expectations should be clearly defined. Supplement the evaluation with ongoing input from the board chair or lead director. An annual evaluation is an effective way for a board to gauge

36% 56% how it is functioning, and how it can improve its very effective somewhat effective effectiveness going forward. In addition, regular, immediate input provides the best opportunity for behavior reinforcement or modification. Board chairs and lead directors should give feedback and suggestions for improvement to each director in an ongoing fashion throughout the year. This is a great way to follow up on recommendations from the annual evaluation. In many cases, it may involve simply calling out Source: NYSE Boardroom Summit, October 2015 what a director is doing well that adds value. In other cases, individual directors may benefit from timely from governance oversight into management. Others, course corrections about how they conduct themselves wanting to provide a rigorous check on management, and how they can contribute more effectively in the can adopt an adversarial posture. The board chair future. This aspect of the role of chair and lead di- and/or lead director need to be explicit about the rector is critically important, and takes a high level expected value proposition of the full board and of of interpersonal skill. each director in the initial selection and onboarding With the recommendations above in place, here is process, as well as in director evaluations. a suggested 10-step sequence for conducting a best Set up the board and director evaluations with practice board evaluation: a future orientation. Whether the evaluations are Step 1: Design the evaluation process. The conducted internally or via an outside facilitator, board chair, lead director or chair of the nominating the board surveys and interviews (the best-practice and governance committee (the board evaluation combination) should focus on how the board, com- sponsor) designs the evaluation process. This may mittees, and individual directors can function more or may not involve an external advisor. The evalua- effectively in the future rather than how they have tion process should ideally include input from both functioned in the past. directors and selected members of the management team who interface with the board. Also, the process should include a method for gathering input from Board chairs and lead directors should give each director about how each fellow director can feedback and suggestions for improvement to maximize their contribution in the coming year. each director in an ongoing fashion through- Step 2: Communicate the process. The board out the year. evaluation sponsor communicates the process and

8 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD FEED-FORWARD EVALUATION timing of the board evaluation in person at a board individual directors can enhance their contribution meeting. Communication of the process should em- going forward can also be gathered from the selected phasize the importance of full candor and convey the members of the management team who work with safeguards that will protect anonymity for all who directors in committee. Three simple questions to provide input. Every director needs to be clear about ask each person interviewed are: how the results of the evaluation will be delivered. How has this director added value in the past Step 3: Written survey. A written survey with year? customized items about how the board is functioning What should this director continue, do more and how it can operate more effectively in the future of, less of, or differently in the coming year to is developed and distributed. This survey allows data maximize his/her value contribution? to be generated and the board to be compared to other Are there any other comments or suggestions you boards on various dimensions of effectiveness. The can offer about how this director can contribute survey should address the following areas: going forward? The board’s value proposition. (What is the Step 6: Compile survey results. After all inter- specific value that the company needs the board views are completed, a summary of survey results and to deliver in the coming year?) findings from the interviews can be compiled. Also, Overall board effectiveness in delivering on that a brief report for each director should be composed value proposition. summarizing the input gathered in response to the How the board is contributing to the company’s three questions above. growth strategy. Step 7: Discuss the results. Prior to the first Composition. (Does the board have the expertise, board meeting after the evaluation, the results from perspectives and capabilities needed to deliver the full board evaluation should be distributed to the value proposition?) each board member. Then, at the board meeting, Committee functioning. the results should be discussed, along with ideas for Oversight of risk. any changes to how the board needs to operate going Leadership of the full board and each commit- forward. Recommendations and a board development tee. action plan can be finalized over subsequent board Partnership between the board and CEO. and committee meetings. Board renewal. (Address both continuing educa- Step 8: Meet with each director. After the full tion of the board and director succession plan- board results are presented and discussed, meetings ning.) with each director are scheduled. These are conducted Step 4: Interviews. After the surveys have been by the either the board chair, lead director, chair of completed, individual, confidential interviews are nominating and governance, or independent facilita- conducted with each director and the members of tor if one was used. No attributions of who said what the management team who interface with the board. should be conveyed to individual directors—just a The interviews can be conducted by the board chair, summary of the themes and suggestions for the future. lead director, chair of the nominating and governance Step 9: Debrief the evaluation process. Follow- committee or by an experienced outside facilitator. ing the individual director meetings, a debrief of the Topics for discussion should mirror the topics in the whole board evaluation process should be done by survey. the board sponsor or at the next full board meeting. Step 5: Peer reviews. In addition to getting input Any suggestions to improve the process should be on how the board and its committees are functioning recorded and incorporated into the following year’s and can evolve, during the individual, confidential evaluation process. interviews, each director should be asked to provide Step 10: Implement and track recommen- input about every other director. Input about how dations. Most importantly, the recommendations

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 9 Paul Winum from the board development action plan should with each director on how they think their fellow be implemented and tracked at subsequent board directors could add more value to the board and meetings. Responsibility for implementation of indi- then provide direct, unfiltered feed-forward to the vidual director development should reside with each director. The third-party interviews almost always director. The board chair, lead director and chair of lead to more candid insights than a committee dis- nominating and governance receives a copy of the cussion, and typically is taken more seriously than development themes for each director, and provide collegial feedback from a fellow director. on-going reinforcement throughout the year. While often discussions and interviews about individual directors bring up past performance—good and bad—the focus should be on how the director Evaluation with “third-party interviews almost can modify his/her behavior to add more value to always lead to more candid insights than a the board going forward.” committee discussion, and typically is taken This feed-forward approach is also valuable to pro- more seriously.” vide guidance to the board chair, committee chairs and lead director. These are very critical roles that Randall Larrimore serves as the chair of the nomi- shape the culture and dialogue in the boardroom, and nating and governance committee on the boards of require highly developed group facilitation skills. both Campbell Soup Company and Olin Corporation. Beginning in 2015, the senior partners at RHR He offers the following perspective about giving interviewed directors who collectively served on directors feed-forward input as part of evaluation: more than 100 boards to discover the ingredients “On both boards on which I currently serve I have that contribute to a highly effective board of direc- led the effort to use director education, both com- tors. One factor that was consistently cited was great mittee and board evaluations, as well as individual board leadership. Summarizing the interview data, director evaluations to do this. Quite frankly, the we identified eight essential roles that board leaders most valuable tool has been individual director (chairs, lead directors and committee chairs) must evaluations where we try to identify how a director play for maximum board value. Those eight roles are: might use their skill sets to contribute more to board The Orchestra Conductor. The chair is the lead discussions. facilitator. They need not have all the answers, but Annually the governance committee, with input they certainly ask the right questions and draw out from the CEO, meets and discusses each director the best thinking. They bring focus to the right issues and how they could enhance their performance. at the right time with the right degree of intensity. Many times, the discussions revolve around being They know where to poke and when to stop. more outspoken and sharing their views. Sometimes The Galvanizer. Board leadership attracts great it leads to suggestions that a director take less airtime talent and enlists them in a common pursuit of spe- so that others can speak. cial goals and achievements. They make sure people A few times it has led to the conclusion that the are engaged and inspired. They make sure they are skills the director has are no longer applicable to aligned on key priorities and know where they want the company’s strategy. In all cases, either the lead to go. They broker consensus amidst dissension. director or non-executive chair of the board provides The Culture Steward. Great leadership creates the confidential input to the individual director with an environment where all directors are fully engaged subsequent follow-up as appropriate, often with as- and involved. Every director gets “under the tent.” sistance from the chair of the governance committee. These leaders create a culture that promotes open To maximize the value of this process, it is impor- discussion, the ability for everyone to be heard, ser- tant to involve a third party on a periodic basis (say vice, and role clarity. They have genuine respect for every third year) to conduct confidential interviews people with different opinions.

10 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD FEED-FORWARD EVALUATION

The Visionary. Great board leaders always In conducting board evaluations, we have found have their eyes and aspirations on the future, a future that directors often have very concrete suggestions they set or a future they must react to. They set the about how board leaders are managing each of these framework within which other directors are going leadership roles. Gathering and delivering that input to develop strategy and direction for the business. about how the board leaders can enhance their impact The Operator. Great leaders ensure the day- and influence has been welcomed and appreciated. to-day matters are handled. They put in behind-the- Just as a CEO may often get limited or highly scenes work to make sure directors are prepared for filtered feedback from subordinates, a board leader meetings. They set the agenda for board meetings. may be deprived of performance input from his/her They have proper information flow and make sure board colleagues. An outside facilitator can provide a people are properly educated on issues. safe, objective way for the board chair, lead director The Talent Manager. Great board leaders know and committee chairs to get go-forward suggestions. the skills, experiences, and perspectives needed from Operating a board of directors is an expensive other board members as well as from the senior team. proposition. If you combine the fees for director pay, They encourage growth on the part of the board travel expenses for board and committee meetings members and get them to stretch their minds. They along with the time expended by management teams are engaged in evaluation and provide feed-forward to prepare for and participate in board meetings, (both individually and collectively). the cost runs into the millions of dollars each year. The Advisor. Great board leaders are effective However, when you consider the combined experi- coaches; they listen, shape, and guide the CEO in ence, perspective, expertise and networks that a very personal ways. These are personal relationships well-composed, aligned and high-functioning board that must work for a board to be great. This person provides, the return on investment can be invaluable. is a close partner and sounding board for CEOs and Directors who commit to board service want to their team. They have the CEO’s trust and respect. be part of a group that is respected, effective and The Ambassador. Great board leaders have appreciated by the range of stakeholders on whose strong connections in the external world, including behalf they work. A robust evaluation process that customers, competitors, suppliers, regulators, politi- incorporates a feed-forward approach can be a pow- cians, and other key stakeholders. They can access erful tool to help maximize the value that a board resources from outside. delivers to the company it is charged with governing.

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 11 A Private Equity Model For Public Company Boards by Henry D. Wolfe

Many efforts have been made to improve the is broken and that there is much to be learned—and failings of public company corporate gover- gained—from studying the best practices of private nance (short-term focus, weak board oversight, equity investors, particularly in the sphere of gover- reactive boards, executive capture). What if the nance. public company governance model itself is the Private equity firms typically own multiple com- problem, with too many built-in failings and panies at any given time, each with an average hold disincentives? The author notes that companies period of around five years. The best private equity owned by private equity firms consistently firms (that is, those with the best returns to their in- outperform public companies—and that their vestors over longer periods of time) have a board of governance model may be the reason why. directors at each portfolio company that drives the creation of significant value at the company being governed. In effect, today’s successful private equity firms exploit what might be called ‘governance arbitrage.’ The boards of top private equity firm compa- — McKinsey & Company nies bring a singular and unceasing drive for maximum performance to the board roles, I am a proponent of blowing up the existing public and hold management strictly accountable. company governance model and replacing it with one that emulates the governance model used by the most There is a much higher level of commitment on the successful private equity firms’ portfolio companies. part of the top private equity firms to maximizing Why is the private equity model the best alterna- their investments than is found at public companies. tive? According to a report by McKinsey, the top 25 A deep-dive due diligence process is executed during percent of private equity firms not only outperform acquisition of a portfolio company. Thus, the private the stock market, they do so by a significant margin, equity executives who will serve on the company’s and consistently. More importantly, the underlying board develop an independent view of the value operating and financial performance of their portfolio creation potential of the company and the levers companies outperform their publicly traded peers that can be pulled for this value to be realized. This over multi-year periods. investment thesis does not stop once the acquisition The best private equity firms are so successful is completed. Instead, it continues apace for the early because they are able to extract maximum value days of ownership to ensure that the value maximiza- from the companies in which they invest, and they do tion plans are as robust as possible. this in large part by imposing a robust and effective The private equity dealmakers and operating governance model on the companies in their portfo- partners who will serve on the board come more lio. In my experience, the private equity governance model results in a board that is more “value creation competent,” engaged, knowledgeable, accountable Henry D. Wolfe is chairman of De La Vega Occidental & Oriental Holdings L.L.C. This article is excerpted from his and effective; and a company that is more profitable book to be released April 2019, Governance Arbitrage: Blow- and successful. ing Up the Public Company Governance Model to Maximize It is time to admit that the public company model Long-Term Shareholder Value (Milner and Associates).

12 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD PRIVATE EQUITY MODEL than prepared to govern for maximum value. In ad- Private Equity Boards dition, any outside directors recruited will not only That Create Valuemml have access to all of the information compiled by the private equity firm but will be expected to also com- Double The Growth Of mit significant time to understanding the company, Public Companies its industry and its value creation potential. In short, the boards of the portfolio companies 24% of the top private equity firms are a small group of highly sophisticated and competent individuals who 12% are likely to be as knowledgeable, at least in regard to the value creation levers of the company, as its 12% management. They bring a singular and unceasing drive for maximum performance to the board roles, and hold management strictly accountable for Enterprise Value Creation achieving results. 2007 Exits

Public Company Growth Most directors on private equity boards have an investor’s perspective much more so than Private Equity Outperformance an operator’s. Their singular purpose is driving the company to its full long-term potential. The private equity companies studied were compared to their Following is a more detailed look at the char- publicly-traded peers, i.e. same industry, size and geography. acteristics and components of the private equity Source: Ernst & Young, How Do Private Equity Investors Create Value? 2007 Exits. governance model. Mindset is one the most critical attributes of board members in private equity portfolio companies. First, private equity directors must have a relentless above but also, in most cases, years of experience focus on performance in order to maximize the com- and engagement in creating value over a wide range pany’s value over the holding period. This mindset is of different companies in different industries. They innate—one does not learn this in business school. bring the skill of value creation. Second, most of the directors on private equity Other board members, whether operating partners boards have an investor’s perspective much more so of the private equity firm or outside directors, are than an operator’s. As such, they bring a view that selected based solely on their experience, abilities and is more analytical and slanted toward maximum track record in areas that are directly relevant. These returns than is found on public boards in general. independent directors will not be chosen simply for Private equity portfolio company directors come to the sake of their independence, but for the specific the board with the singular purpose of driving the and relevant competencies and perspective they can company to its full long-term potential. bring to the company. Generally, private equity firms Director selection. Typically, most board mem- are particularly careful to ensure that outside directors bers for portfolio companies are members of the have demonstrated the ability to drive performance private equity firm. All of these individuals bring increases and value in the areas of their expertise. unique ability and experience to the value maxi- Knowledge. In-depth knowledge of the industry mization process, which is invaluable at the board and the business is essential to any board function- level. They not only bring the crucial mindset noted ing under the private equity model. This level of

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 13 Henry D. Wolfe understanding is derived primarily from the deep- Information flow to the board is very timely, fre- dive due diligence that private equity firms conduct quent and well-designed. The information received when evaluating and pricing a deal. by directors of private equity portfolio companies As Michael C. Jensen of Harvard stated, “The qual- is almost exclusively prepared in the context of the ity of those discussions [in private equity portfolio company’s value maximization plan. While this company board meetings] is just much higher than information will include historical information (fi- what takes place with most public company boards. nancials and other relevant reports), it also covers In fact, my sense is that the due diligence process that forward-looking metrics that have yet to be reflected the buyout firms go through in vetting and pricing in financials. a deal causes those principals and their managers For example, there may be a plan to install robots to learn more about the business than probably has in a certain number of the company’s manufacturing ever been known since it was a public company, or plants. Once accomplished, it is projected that there a division of a public company.” will be a specific increase in EBITDA resulting in a This information is turned into an investment thesis specifically targeted rate of return. The time horizon for the business, which then provides the context for for completion of this plan is one year. In the early the identification of key initiatives and the develop- months, there are limited results that will be reflected ment of a value maximization plan. in the company’s financials. Still, the board will want Focused agenda. A focus on the performance to receive a regular report, say monthly, on this plan. of the business versus plan includes clear agreement It would include: with management about what is important, and what The number of installations for the month and are the targeted results. Superfluous issues that plague year to date compared to plan. public company boards are not a factor. The latest The total cost of each installation compared to governance hot topics do not distract boards of private budget for the month and year to date. equity companies from their objective of maximizing Detailed explanations for any shortfalls in num- the performance and value of the business. ber of installations or cost variances, plans to correct shortfalls and individuals accountable for correction. Aggressive results orientation. There is re- Private equity boards probe management at lentless search for the highest returns possible. Past a deep level of detail that traditional boards performance levels typically provide no basis for would view as overstepping the line. future plans. In other words, the view of private equity portfolio companies is not limited by past Quick action when needed. There is prepared- assumptions or accomplishments. ness to act and to do so quickly. This is due to the Plans are not simply extensions of the past. They knowledge of the business on the part of the board, are intentionally forward-looking to drive aggressive their detailed monitoring of the value maximization improvements in company value and performance, plan and their high-performance mindset. rather than maintain the status quo or make mere Private equity boards probe management at a deep incremental enhancements. This may include, but level of detail. Traditional boards would view this as not be limited to, a zero-based budgeting approach. overstepping the line, but it is a hallmark of the best Much of the board’s time is spent on continually private equity portfolio company boards. Getting to seeking new ways to drive value. the essence of issues is critical to ensure maximum performance and management accountability. These boards show willingness to ask hard, detailed Directors develop their own viewpoint as to questions about performance variances, and push how the company can create value, and do not until concrete answers are provided. depend solely on management.

14 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD PRIVATE EQUITY MODEL

A Track Record Of Outperformance EBITDA Growth, Exits In North America

18.8% % 11.9% 12.9 10.0% 5.6%

– 10.3%

2006 – 2007 2008 – 2009 2010 – 2013

Public Company Growth Private Equity Outperformance

The private equity companies studied were compared to their publicly-traded peers, i.e. same industry, size and geography. Source: Ernst & Young, How Do Private Equity Investors Create Value? 2013 North American Exits

Intense engagement. Directors of the best pri- and performance increases to maximize value at exit. vate equity firms’ portfolio companies (typically, the The obsessive focus on quarterly results at public private equity partners themselves) spend approxi- companies is obliterated in the private equity gover- mately 50 percent of their time at the company for the nance model, which takes a much longer view. This, first three months after closing the deal. They learn however, does not imply that there is no focus on everything they can about the business firsthand that short-term results. There is, but this focus is in the was not uncovered during the due diligence process, context of the longer-term value maximization plan. and further confirm the diligence findings. A series of short-term objectives leads to attainment Directors develop their own viewpoint as to how of longer-term objectives and targets and, therefore, the company can create value. They do not depend must receive close attention from the board. solely on management to understand the levers that Skin in the game. Private equity firm person- can be pulled to increase performance and value. nel who are portfolio company board members have There is robust debate at board meetings, and a high significant personal capital invested in each company level of contestability on key points. Board members where they are a director. This is a long-term invest- frequently visit operations, communicate with staff ment that cannot be sold until the private equity firm and meet with customers. exits. If that exit takes the form of an IPO, then the Long-term horizon and sustainability beyond private equity firm personnel still may not be able ownership period. Private equity firms typically to exit until sometime after the IPO. This results hold their portfolio companies for three to five years. in a powerful motivation to ensure the company’s Some firms have established long-term funds that performance and value during the holding period. may have holding periods as long as 10 years. In addition, private equity firm personnel are further The value maximization plans cover the entire incentivized via their share of the carried interest that holding period. However, these plans actually extend is realized upon exit of the deal. However, there are beyond the holding period timeframe, as portfolio investment thresholds that must first be met before companies have to be positioned for continued growth any carried interest is realized.

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 15 Henry D. Wolfe

Outside directors are also typically required to make five was world-class), private equity boards averaged a meaningful investment in the company. In many 4.6 and public boards averaged 3.5. cases, they are given restricted stock that only vests The intensity of the performance-management at exit, and only if certain stringent cash-on-cash or culture of private equity boards was the single-largest internal rate of return investment hurdles are cleared. variance between the two types of boards. There is no gaming of the payoff to the members Public boards focus much less on fundamental of the board in the private equity world. If the private value creation and more on quarterly profit targets equity firm’s limited partner investors do not win, then and market expectations. neither does the private equity firm nor the members Public boards seek to follow precedent and avoid of a portfolio company board. The alignment between conflict rather than exploring what could maximize the board members and the investors is total. value. They are more focused on risk avoidance than According to a McKinsey study done with 20 value creation. chairmen or CEOs who had served on the boards of While certainly short of exhaustive, this study both public and private equity companies: clearly demonstrates, based on the experience of 20 “Advocates of the private equity model have long top business leaders, that the private equity gover- argued that the better private equity firms perform nance model is superior to the public company model better than public companies do. The advantage, these in regard to company performance and value creation. advocates say, stems not only from financial engineer- At the best-performing private equity firms, the ing but also from stronger operational performance. governance model is one of highly engaged directors Directors who have served on the boards of both with competencies directly related to maximization public and private equity companies agree, and add of the company’s performance and value, a relentless that the behavior of the board is one key element in focus on the realization of the value maximization driving superior operational performance. Among plan and with results that outperform their publicly the 20 chairmen or CEOs we recently interviewed as traded peers across multiple performance and value a part of a study in the United Kingdom, most said creation metrics. that private equity boards were significantly more The asset value of the board is not something that is effective than those of their public counterparts.” commonly recognized at public companies but is an More specifically, the results of this study showed: essential component of the private equity governance Fifteen of the 20 chairmen surveyed said that model. It is clear that, in regard to capital allocation, private equity boards added more value; none said company performance and value creation, the private that the public counterparts were better. equity governance model is superior to the public On a five-point scale (where one was poor and company model.

16 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD Facing The New Tide Of Securities Litigation by H. Stephen Grace Jr., Ph.D. and Joseph P. Monteleone

After a decade of relatively lighter litigation Shareholder derivative actions. These are suits activity, the past several years have seen a typically brought by shareholders in the name of the growing boom in lawsuits against corpora- corporation against one or more members of execu- t i o n s a n d t h e i r o f fi c e r s . W h i l e t h e r e a r e s eve ral tive management or the board. The focus of these drivers for this trend, the scope and number suits is upon mismanagement, contrasted with the of lawsuits demands rethinking of company securities fraud actions which typically focus upon defense strategies. Your traditional litigation disclosure issues. teams may no longer be enough. Creditor claims. Typically brought in the aftermath of a bankruptcy filing. Similar to shareholder derivative actions with respect to the basis for the Virtually all credible chroniclers of litigation case claim. Typically brought by or on behalf of secured filings agree that we are seeing a marked increase or unsecured creditors of the company. in the number of “securities cases” filed. Sources In the face of current trends, it is important to may differ on the precise number of cases each year focus on how companies, their insurers and counsel because they employ differing definitions of what should respond to litigation claims. Among the many constitutes a securities case. Virtually all agree, risk and governance issues to be addressed, once however, that 2017 was a record year for new filings litigation has commenced there are two overriding with a large increase over 2016, and a year much strategic actions that can have major impacts on the higher in new filings compared with averages over outcome of a case. the past twenty years. After three quarters of 2018 under our belt, indications point to a continuation of this growth in 2018. Certain large insurers will have in place a Today more than ever, corporate officers and direc- “panel” of pre-approved defense counsel firms tors need to be properly informed and prepared for the from which the insureds must make their possibility of litigation involving their responsibilities selection. and decisions in the entities in which they serve. Securities litigation includes: Putting in place the defense team. A first order Securities fraud class actions. These large expo- of business is making decisions about your defense sure cases see damages often exceeding $1 billion, team. dependent upon the length of the class period and D&O policies issued to public companies give the overall drop in market cap of the company. insurer no right to impose its selection of counsel on Securities fraud actions filed by individuals or the company. That being said, certain large insurers entities. The typical plaintiff is a public employee typically have in place a “panel” of pre-approved pension fund, but there can be suits by individual defense counsel firms from which the insureds must shareholders and other private entities. make their selection. It is not unusual for the insurer Securities fraud actions brought by government regulators. These are usually brought by the Securi- H. Stephen Grace Jr., Ph.D. is president of litigation consult- ties and Exchange Commission, but there have been ing firm H.S. Grace & Co.Joseph P. Monteleone is a partner a number of recent actions brought by certain state with the law firm Weber Gallagher Simpson Stapleton Fires attorneys general, who have been active in this area. & Newby LLP. [www.hsgraceco.com] [www.wglaw.com]

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 17 H. S. Grace Jr., Ph.D. and J. P. Monteleone

A Damaging Trendmmmmmmmmmms Yearly Average Of New Litigation Case Filings

450

400

350

300

250

200

150

100

0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Cornerstone Research: Securities Class Action Filings: 2017 Year in Review and 2018 Midyear Assessments. Both reports were published in 2018. to have negotiated beforehand an agreed hourly rate There are many fine firms that are not listed on structure and other litigation management guidelines such panels. Insureds can frequently negotiate to with these defense firms. have their chosen securities litigation firm added to Do not be misled into believing these insurers have an insurer’s panel on a one-time basis. secured bargain-basement rates from unqualified Regardless of how defense counsel are chosen, it counsel. The eminently qualified counsel on these is critical for the primary insurer (and ideally, the panels have senior level partner rates generally rang- excess insurers as well) to meet early with defense ing from $750 to $1,000 per hour per prior agree- counsel and discuss the strategy for defending the ment. One is apt to encounter the lower end of the case. However, excess insurers are not often involved range outside the litigation hotbeds of the Southern at these early litigation stages. That is a mistake which District of New York and the Northern District of in many cases ultimately works to their detriment, California. Outside of these panels, prevailing rates as well as to the interests of their insureds. of senior lawyers have approached $1,250 per hour. The coverage provided by excess insurers is a sig-

18 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD SECURITIES LITIGATION nificant motivator for a vigorous defense throughout a are simply too high. A loss for the defense could re- case. A “meeting” of all parties does not necessarily sult in a judgment far in excess of insurance policy have to be in person. Initial and periodic teleconfer- limits, perhaps even in the billions of dollars. On the ences among the primary and excess insurers and other hand, a loss for the plaintiffs can result in no defense counsel are an optimal way to ensure a good recovery after having incurred millions of dollars in working relationship. Your “team” of insurers, de- fees and expenses to take a case through trial. fense counsel and others should be in place from the A very large percentage (up to 40 percent) of outset, and continue to work cooperatively through these cases are won by defendants upon a Motion the entire life of the litigation, including resolution of to Dismiss or Motion for Summary Judgment. A any defense strategy, insurance coverage and other Motion to Dismiss can be granted without prejudice issues that may arise. to refile, and may only provide a temporary reprieve If the insured corporation has an in-house counsel, until plaintiffs craft a complaint that can withstand it is important to have her or him become involved judicial scrutiny. A dismissal with prejudice, how- in the process as a member of the team. Differences ever, leaves the plaintiff with the only recourse of of opinion may develop between defense counsel an appeal, and reversals on appeal are not readily and insurers over litigation strategy and costs of the obtained. defense. General counsel can be very effective in The D&O insurers will work with defense counsel resolving these differences and instructing defense to agree on a mediator, but the pool of well-qualified, counsel on these issues. General counsel, however, available mediators is unfortunately quite small. For may not necessarily hold any sway over counsel for this reason, we see the same mediators over and again independent directors or any counsel other than the in securities fraud class actions. Of course, the pool firm representing the corporate policyholder and of well-qualified plaintiff firms, defense counsel, members of management. and D&O insurers and their counsel are also limited. Insurance brokers can also be helpful intermediaries Thus, in many mediations there is an array of parties in assuring a smooth working relationship between all well known to each other. This is actually positive the insurers and defense counsel, notwithstanding in the facilitation of a settlement. any coverage issues that may have been raised by way of reservation of rights letters. The ideal litigation expert is a credible management consultant with hands-on experience in Very few securities fraud class actions ever corporate governance and business practices. proceed to trial on the merits. The reason for this is that the stakes for both sides are A sometimes overlooked player in the defense team simply too high. is the consulting expert. This is someone who brings specialized knowledge and highly relevant business Settlement considerations. This second issue expertise to the litigated matter. A consulting expert involves decisions on possible settlement. There are can be a valuable addition to the defense team in two salient facts to note in this regard: nearly all situations. Very few securities fraud class actions ever Types of consulting experts differ, as do the services proceed to trial on the merits. Many commentators and products they provide. Damages analysts such suggest that no more than 20 cases out of the more as Cornerstone, NERA and others are frequently than 4,000 filed since the Private Securities Litiga- engaged to assess the extent of “plaintiff style dam- tion Reform Act was enacted at the end of 1995 have ages” and opine on target settlement values. Their gone to trial. That is about 0.5 percent. analyses are usually statistical in nature, based on The reason for this is that the stakes for both sides historical settlements tempered by the specific events

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 19 H. S. Grace Jr., Ph.D. and J. P. Monteleone in the case at hand. As a rough guide, class actions owned a local bank which served as the indenture often settle for an amount at five percent or less of trustee of an investment made by the state retirement the plaintiff-style damages. This is where another system from a special purpose development fund. The type of expert can be invaluable, if engaged as a investee firm failed and the retirement system sued team member. the bank in its role as trustee. The local bank’s trust The ideal expert is a credible management consul- department procedures were poor. It did not monitor tant with hands-on experience in corporate gover- documents required from the investee company nor nance and business practices. In particular, such an exercise a potential default which could have led to expert needs to be knowledgeable about the ways in the recovery of the investment. which executive management and the board reason- The bank retained a consulting expert that under- ably come to business decisions. stood pension plan/retirement systems, as well as This is especially critical in claims brought on be- the roles of indenture trustees. The expert confirmed half of creditors in the aftermath of insolvency, where weaknesses in the local bank’s procedures, but de- allegations are made that faulty decisions and actions termined there was not a basis for declaring a default of management and directors contributed to financial in the circumstance cited. difficulties. However, a specialized management and Further, the expert determined the retirement sys- business practices consultant should be considered tem’s special purpose development fund had lost 90 at any time when management decisions are at issue percent of its entire value. The chair of the retirement in securities fraud litigation. system’s board of trustees also had multiple conflicts Often, securities fraud cases require the same expert of interest, and the retirement system had not been testimony that is required in shareholder derivative able to hire the personnel qualified to manage the and creditor actions. This is where the consulting investments undertaken. expert may also serve as a testifying expert. The expert firm reviewed these points in mediation The questions the expert seeks to answer are two- and in connection with the deposition of the retired fold. First, did the alleged acts or omissions of the executive director of the retirement system. Shortly directors and officers actually cause the loss sustained, thereafter, the retirement system dismissed its claims or were other market factors at play that would have against the bank, while collecting over $100 million made the loss inevitable? from all of the other defendants. Second, in the case of a derivative action, did the Case #2. A second case shows the persuasive ef- directors and officers breach any fiduciary duties fect of such an expert in the well-known Walt Disney owed to the company? This is where the powerful shareholder litigation involving the hiring and sub- defense of the Business Judgment Rule can pose an sequent termination of Michael Ovitz. A consulting insurmountable hurdle for plaintiffs. That rule of expert was retained by the primary D&O insurer and evidence affords the board considerable deference in its outside counsel to review the record and advise exercising its business judgment (other than where on corporate governance issues with a view toward the board is grossly negligent). reducing the potential settlement value of the case. The answers to these questions are developed by The work of the expert in Disney helped the primary drilling into the business issues and contributing fac- insurer to convince the defendants that they could tors involved in a case, and examining the business reasonably argue that Disney had a well-accepted merits of the plaintiff’s allegations. Following are compensation culture that was adhered to in its hir- three actual case scenarios that illustrate the value ing of Ovitz. The negotiating team had consisted of a knowledgeable consulting or testifying expert can the chair of Disney’s compensation committee and a bring to the table. second committee member, both of whom were quite Case #1. In the first scenario, a global bank had knowledgeable on Disney’s pay culture. Further, over acquired a large regional bank. This bank, in turn, 50 percent of Ovitz’s termination pay arose from the

20 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD SECURITIES LITIGATION

25 percent increase in Disney’s stock price during the insured parties acquiesced when the insurers said Ovitz’s 15-month tenure. they would withhold consent to any settlement based The litigation ultimately proceeded to a trial on solely on the demands of the plaintiff lawyers and the merits and the Court entered judgment in favor the views of the restructuring officer. of Disney on all claims. The judge pointed out that The fact that there was a potential expert ready, will- “what” they did was sufficient to carry the day, ing and able to tell an alternative tale of management although “how” and “why” left much to be desired. decision-making was instrumental in convincing the Case #3. Finally, in a third case involving a bank- plaintiff and defense counsel, and getting the ultimate ruptcy, the insureds’ defense counsel were anxious settlement value reduced by about 40 percent. to conclude a settlement with the creditors funded In conclusion, the defense of securities litigation entirely with insurance proceeds. The claim, however, cases becomes more effective if changes are made was in its very early stages, and no formal complaint in how defense teams are assembled, and how the had even been filed. The creditors and the insureds cases are then carried out as the process continues. simply proceeded directly into mediation with only First, it is important that excess insurers become a draft complaint from the creditors. more active in the process from the very beginning, The creditors’ claims were supported by the poten- in order to support and promote a vigorous defense. tial testimony of a restructuring company retained by This should not create any undue burdens on these the creditors shortly before the bankruptcy. The chief insurers or on defense counsel and the insured par- restructuring officer was now running the company ties. Simply include the excess insurer in any com- in bankruptcy, and his testimony would largely sup- munications, teleconferences and meetings intended port his own recommendation. for the primary insurer. Second, greater consideration needs to be given to the engagement of an expert who can opine on both The fact that a litigation expert could tell loss causation and business practices, as well as on an alternative tale of management decision- corporate governance and management decisions making helped reduce the settlement value directly related to the dispute. Such an expert can first by about 40 percent. be engaged on a consulting basis solely to provide information to insureds and defense counsel. Later, The insureds’ counsel balked at retaining an expert decisions can be made as to whether the expert may to counter the views of the restructuring officer. (In the also become a testifying expert. Such experts are interest of full disclosure, this case involved each of invaluable in assessing the overall exposure in the the co-authors with one leading the effort.) Ultimately, case and supporting the defense team.

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 21 Information Technology Governance by Bob Zukis

Corporate boards have been receiving regular “Add to this the fact that there is a skills and compe- warnings on cybersecurity and digital disrup- tency shortage of talent who knows how to transform tion for years now. Yet a follow-up question both IT and the business through these new digital remains unanswered: What should they do capabilities. Plus, the very real and expanding risk about it? How should boards reshape their of cyber disruption creates an environment where membership, structure and processes to prop- companies have to continually transform alongside erly oversee their new digital reality? protecting what they have, while always being focused on being more efficient and effective. “From a governance perspective, it creates a volatile From Yahoo to Target to Equifax, and now Facebook, risk situation that extends throughout the business the data breaches that have occurred over the last with huge implications.” several years have significantly raised cybersecurity So now what? Directors are also starting to become risk awareness at the corporate board level. The Global aware of the disruptive impact that Amazon, and Data Protection Regulation (GDPR) in Europe has other digital natives have when they set their sights also highlighted a growing regulatory landscape that on a new industry. What do boards, and individual is waking up public interest on data issues. directors need to do next to make sure that digital SEC Commissioner Robert E. Jackson Jr. has called transformation and cybersecurity risk oversight is a the rising cyber threat “...the most pressing issue in meaningful part of their contributions? corporate governance today.” Boards are also wrestling with the dynamic nature of technology driven disruptors that are altering Digital governance is not a mature competency the competitive landscape and changing industry or practice in the U.S. corporate boardroom. dynamics. A Protiviti 2018 survey of global direc- Not one of the companies in the DJIA has a tors concerns summarizes their top risk issues as: dedicated board level cybersecurity committee. “The rapid speed of disruptive innovations and new technologies within the industry may outpace the Awareness is a necessary first step, but has largely organization’s ability to compete or manage risk happened passively (except for the companies and appropriately.” boards that have unfortunately found themselves in Often referred to as “The Amazon Effect,” the crisis management mode as the result of a breach). seismic ability for digital transformation to disrupt Governing these issues is a new undertaking for and alter foundational competitive and economic most boards. The challenges include having the skills drivers is becoming a high priority boardroom issue. within the boardroom to understand these issues, or- Frank Modruson, former Accenture CIO who cur- ganizing the board to manage its resources and time rently serves on two public company boards explains together, and executing a digital governance agenda it this way: for an unstable digital/cyber landscape. “This rapid evolution of digital capabilities puts Digital governance is not a mature competency enormous pressure on businesses to keep up with or practice in the U.S. corporate boardroom. This is new capabilities and to replace outdated ones. IT is reflected in research conducted by public company also one of the largest G&A [general and administra- tive] budget line items for any business, and one that Bob Zukis is chief executive officer of Digital Directors Net- is often poorly understood by business leadership work and a professor at the USC Marshall School of Business. outside of IT. [www.digitaldirectors.network]

22 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD IT GOVERNANCE

Few And Far Betweenmmmmmmmmmme How Common Are Tech And Cyber Committees?

180 171

160 Technology Committee

140 Cybersecurity Committee

120

100

60 56

20 14 5 4 0 0 DOW 30 S&P 500 R3000

Source: MyLogIQ intelligence firm MyLogIQ. They analyzed whether a A remarkable 35 percent of the S&P500 make boardroom technology or a cybersecurity committee no mention of cybersecurity oversight in their exists for U.S. public companies as a starting point. disclosure documents. Based upon their data, this is currently an uncom- mon practice. Of the thirty companies in the DJIA, These findings do not mean cybersecurity or tech- only five have dedicated technology committees, nology oversight is an issue that corporate boards are and not one has a focused cybersecurity committee. ignoring. Rather, it identifies how they have organized The practice does not materially improve across themselves to govern these issues. According the the S&P 500 or Russell 3000, indicating that there is MyLogIQ research, 42 percent of the S&P500 task little distinction in digital governance maturity level their audit committees with cybersecurity oversight. regardless of company size. However, some compa- Notably, Facebook tasks its audit committee with nies have adopted the practice. The five companies in cybersecurity oversight. Still, a remarkable 35 percent the DJIA with technology committees are American of the S&P500 make no mention of cybersecurity Express, J&J, Pfizer, P&G and Wal-Mart. oversight in their disclosure documents.

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 23 Bob Zukis

Tasking an audit committee with cybersecurity While committees play a significant role in the ef- oversight, which may not have the necessary skills fectiveness of overall board oversight, they also play or time to focus on this complex issue, may limit the an important role to the companies and management effectiveness of the cybersecurity oversight approach, teams they oversee. Chen and Wu note that commit- as well as take time, focus and resources away from tees are generally empowered to “...directly set firm the significant responsibilities of an audit committee. policy, inform the board via informal knowledge Robert Dixon is an Anthem and Build-A-Bear sharing or formal reports, and propose actions to be director, and former PepsiCo CIO and P&G execu- executed by the full board.” Moreover, committees tive. He was an early champion of boardroom digital work closely with firm management, thereby directly diversity, and recalls: influencing the firm. “When I joined Anthem’s board, they were looking American boardroom committee structures gained for a qualified business-savvy, technology executive a significant amount of standardization with the pass- who could provide thought leadership on the board’s ing of Sarbanes-Oxley (SOX) in July 2002. After governance agenda and management’s technology SOX, the audit committee, compensation committee agenda. Those skills normally come with significant and nominating and governance committee became experience leading large-scale enterprise-wide trans- the de facto baseline committee structure for U.S. formations, innovation programs and an appreciation listed companies. Beyond these three, however, for all of the related cultural and change management structure varies greatly. sensitivities. SOX also required boards to have an independent “While growing in importance, critical factors and qualified financial expert on their audit commit- for increasing digital diversity, either through more tee. This requirement was a first, and offers a lesson representation or a Tech Committee, include the role on qualified technology experts in the boardroom. A of technology for your business. Does technology decade from now, most boards will have such deep define your brand’s value proposition? Is technol- digital and cybersecurity governance skills, and fully ogy at the core of your customer’s experience? Is disclose this qualified expertise. it a strategic, ‘where to play’ plank in the broader It took regulation to force qualified financial exper- enterprise strategy?” tise into the U.S. boardrooms 16 years ago. Are we Board committees play a vital role in how boards now at a similar point with the issue of digital over- perform their duties. Research conducted in 2016 sight, and the need for qualified technology experts by University of Pennsylvania and Harvard Profes- in the boardroom? Will regulators force this issue? sors Kevin Chu and Andy Wu shows that commit- The proposed Cybersecurity Disclosure Act of tees convey several specific benefits. These include 2017 (S. 536) would require U.S. public companies to knowledge specialization, greater task efficiency and disclose cybersecurity skills on their board. Despite greater accountability of the board to the firm. They languishing in Congress, it does signal regulatory note that most of the work that a board accomplishes attention on this issue. Former SEC Commissioner is done at the committee level, and a secondary benefit Luis Aguilar has cautioned, “[B]oards that choose to is that they signal commitment and focus around an ignore or minimize the importance of cybersecurity issue to all stakeholders, internal and external. oversight responsibility, do so at their own peril.” However, committees do come with a cost, primar- An SEC interpretive release on cybersecurity dis- ily the cost of information segregation. This can be closure in February 2018 leads off with: “Cybersecu- mitigated, though. A director who sits on multiple rity risks pose grave threats to investors, our capital committees, such as an audit committee and a tech- markets and country.” The unmistakable regulatory nology committee, allows knowledge and information trend is to assure transparency and corporate account- to more easily be shared and distributed across the ability on cybersecurity risk. This issue is squarely entire oversight agenda. seen as in the public interest, which almost ensures

24 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD IT GOVERNANCE the inevitability of boardroom digital oversight. Policy and conflicts that can exist between CIO and CISO will come, with or without corporate involvement. reporting lines. Digital transformation and cybersecurity risk are two sides of the same coin. Both need to be repre- “Whether or not you have a tech expert or a sented in the corporate boardroom for a board to be technology committee on the board, under- sufficiently digitally diverse. Boardroom research standing the ramifications of technology is a indicates that the most important boardroom topics full board responsibility.” of the future are technology, cybersecurity and digital disruption—all ahead of strategy as a boardroom Sheila Stamps, board member at Atlas Air World- priority. wide Holdings, Inc. and CIT Group Inc., observes: Survey data also indicates that information technol- “Of late, there has been a significant emphasis placed ogy expertise is the most underrepresented boardroom on cybersecurity risk; and this is important. However, skill. This gap almost ensures that cyber breaches will we must be both defensive and progressive. We must continue, and the benefits of technology innovation build defenses against cyber incursion while putting will go underrealized. in place innovations to better serve end users. The scope of corporate digital governance oversight “There is also an opportunity cost (or risk) that covers a very broad range of issues for any company. should not be overlooked. How information tech- These include: nology creates and shapes sustainable competitive Alignment of business strategy and IT with advantage, its impact on industry dynamics and its enterprise architecture. role in profitability and growth are all emerging Business continuity and disaster recovery. boardroom issues.” Cybersecurity risk, insurance and D&O obliga- “Whether or not you have a tech expert or a tech- tions. nology committee on the board, understanding the Cyberthreat intelligence. ramifications of technology on your business is a full Data privacy and information lifecycle manage- board responsibility,” Stamps adds. ment. Effective digital governance starts with getting the Device management. right skills and competencies into the boardroom. IT investment and strategy. From here, how boards organize themselves around IT service delivery. technology and cybersecurity oversight and what IT project prioritization, implementation and they spend their time on drives the effectiveness of portfolio management. their oversight. Boards will naturally evolve their IT skills and capability management and orga- approach as they gain a greater understanding of nizational structure. these issues—or it will be forced upon them through IT hardware/software lifecycle management. regulation. New and emerging technologies. One suggested model is the creation of a dedicated Regulatory policy advocacy and management. board committee that addresses both technology and Social media monitoring and engagement. cybersecurity risk oversight. This would place a tech- Third-party IT vendor and service risk manage- nology and cybersecurity committee alongside audit, ment including business continuity. compensation and nominating/governance commit- The strategic and operational risks presented by the tees in the standing U.S. public company committee rapidly evolving IT environment create a daunting structure. One committee focused on both technology oversight environment. Corporate boards can and transformation and cybersecurity risk can minimize should address these issues themselves or regulators information segregation costs as well as effectively will force this issue if boards fail to do so. govern the management and organizational issues

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 25 In Review Recent Notes & Events Study, conducted in collaboration with are clearly taking more privilege with the the Construction Industry Round Table SEC’s somewhat flexible definition of a (CIRT). The purpose of this study was “perk” for reporting purposes. Audit to explore industry-specific practices In one incident, the SEC penalized around governance processes and the Dow Chemical for its inadequate perk Auditors earn solid confidence ratings degree to which these resulted in board disclosure from 2013 to 2016. In this from U.S. investors. efficacy. Researchers investigated an ar- case, the SEC did an audit and found that Eighty-one percent of American inves- ray of factors, including leadership and the company failed to report around $3 tors say they have confidence that public demographic composition of corporate million in value associated with: company auditors are effective in their boards, director training and develop- The CEO’s personal use of aircraft investor protection roles, according to ment methods, and focus areas of engi- Travel to outside board meetings the Center for Audit Quality’s 2018 Main neering and construction (E&C) boards. Sporting events Street Investor Survey. The annual sur- Highlights of the study include: Club memberships vey polls investors with at least $10,000 52 percent of board chairs are also Use of personal assistant time invested in the capital markets through CEOs at the same company. This reality Membership fees to sit on charitable retirement plans or direct holdings. presents unique challenges because the organization boards. The survey’s top findings include: role of board chair is distinctly different In response, the SEC ordered the com- 74 percent of U.S. investors have than the role of the CEO. pany to pay a fine for breach of securi- confidence in U.S. capital markets Board diversity is an issue in the ties disclosure rules of $1.75 million. It broadly, down 11 percent from 2017. E&C industry—71 percent of firms also criticized the company not only for 78 percent have confidence in U.S. do not have a single minority member, failing to disclose, but for not training companies that are publicly traded, down and 50 percent of firms have no gender employees (including those drafting the 5 percent from 2017. diversity on their boards. CD&A and those keeping track of perks). 75 percent have confidence in Just 34 percent of E&C firms on- Finally, the SEC ordered the company audited financial statements, down 3 board their new directors, according to to retain an independent consultant for percent from 2017. survey respondents. Compared to other one year to review the company’s policies 56 percent have confidence in capital business sectors, boards in the E&C and controls on expense reimbursements markets outside the U.S., up 2 percent space are onboarding at an alarmingly and other payments as perks, and to from 2017. low rate. adopt recommendations made by the “Investor confidence is a pillar of Even though directors want train- consultant to ensure future compliance. healthy capital markets,” said a CAQ ing, just 11 percent of boards surveyed Dow did not admit or deny the charges, spokesman. offer any type of formal training to their and no one person was deemed to be Among investors expressing confi- members. at fault. dence in U.S. markets, the top reasons Less than one-third of boards Dow seemed to incorrectly apply a selected were the strength of the U.S. conduct regular evaluations—neither position that a business purpose (even economy, the performance of the stock individual director evaluations nor full if tangentially) related to the executive’s market, confidence in the Trump admin- board evaluations. job was sufficient to determine that a istration, and belief in the free-market Study respondents say they spend benefit is not a reportable perquisite. The system. more time reflecting on past performance SEC found that the perquisites described For those showing a lack of confidence, than planning for future results. Spe- conferred a benefit on the executive and the most prevalent factors selected were cifically, almost 40 percent of a board’s were not “integrally and directly” related lack of leadership in the Trump adminis- time is spent on financial results and to the job, so they should have been dis- tration, fear of trade wars or uncertainty regulatory matters, and just 25 percent closed. The SEC rejected the argument around free-trade agreements, and lack is spent on the organization’s strategy. that some of these perks may have had of leadership in the U.S. Congress. some ancillary benefit to the business, and did not need to be reported. Compensation & Recruitment In the second reported incident, the Boardroom Practice failure to disclose perks was even more Disclosure dangers with executive egregious. According to the SEC’s Engineering and construction firms perquisites. complaint, Energy XXI CEO John D. have untapped potential for corporate According to a blog by Deb Lifshey of Schiller Jr. maintained an extravagant governance reform. executive compensation consultant Pearl lifestyle by using a highly leveraged FMI Corporation has released its Meyer, while U.S. rules on executive margin account secured by his Energy 2018 FMI/CIRT Corporate Governance perquisites have not changed, companies XXI stock. The complaint alleges that in

26 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD IN REVIEW

2014, when faced with significant margin as well as assistance for financial, physi- ceiling. Furthermore, limits continue to calls, Schiller extracted more than $7.5 cal, and emotional well-being, compa- go beyond covering only annual stock million in undisclosed personal loans nies can advance employees’ careers in grants—32 percent of annual limits now from company vendors in exchange for meaningful ways, offer a greater sense of cover both stock and cash, compared business contracts with Energy XXI. The purpose, and provide a more compelling with 29 percent in 2016. complaint also alleges Schiller received work experience overall. Other findings from the analysis undisclosed pay and perks in the form include: of lavish social events, first-class travel, Compensation for outside corporate Board leadership. Almost half of a shopping spree, donations to Schiller- directors increased three percent in companies (49 percent) separated the preferred charities, legal expenses for 2017. positions of board chair and chief execu- personal matters, and an office bar Total pay for outside directors at the tive officer in 2017, up from 47 percent stocked with high-end liquor and cigars. nation’s largest corporations increased in 2016. Conversely, the prevalence of As a result, the SEC found that Energy by a modest three percent in 2017, driven companies identifying a lead or presid- XXI failed to report at least $1 million by increases in cash and stock compensa- ing director decreased from 73 percent in excess compensation in its disclosures tion, according to an analysis by Willis to 70 percent. Lead directors received over a five-year period. Towers Watson. The study also revealed an additional $30,000 in pay last year. more companies are implementing an- Stock ownership and retention Companies are holding the line on nual limits on director pay in the wake guidelines. Companies continue to em- salary increases. of shareholder lawsuits alleging that pay brace stock ownership guidelines and According to Mercer’s 2018/2019 for board members is excessive. retention requirements for directors. U.S. Compensation Planning Survey, The analysis of Fortune 500 compa- Ninety-four percent of Fortune 500 com- salary increase budgets for 2018 are nies found median total direct compensa- panies now have one or both mandates 2.8 percent—no change from 2017— tion for directors climbed three percent in place. The vast majority of ownership and projected to be only 2.9 percent in last year to $267,500, up from $259,750 in guidelines (84 percent) are based on a 2019. A majority of firms are expressing 2016. Total direct compensation includes multiple of the annual retainer, while concerns about attraction and retention. cash pay, and annual or recurring stock just over half of retention requirements Fair and competitive pay is cited as the awards. The median value of annual (55 percent) require a holding period that number one priority for employees. Even cash pay increased four percent in 2017, lasts until the stock ownership guidelines so, this study shows companies are not to $107,500, bolstered by a five percent are met. budging on budgets. increase in the annual cash retainer to Compensation review. Nearly half “Unemployment is falling. Job open- $100,000. Variable cash pay for board of companies (49 percent) review their ings are increasing. Employees are and committee meetings remained vir- director pay programs at least annually gaining confidence in the labor market. tually unchanged. The median value of while three in 10 (29 percent) review Yet, companies are still not investing in annual stock compensation rose three their programs “periodically” or “from base salary, even though it’s the reward percent to just over $150,000. The aver- time to time.” employees value the most,” said a Mercer age mix of pay remained constant at 57 spokesman. percent in equity, 43 percent in cash. According to the survey, even the Notes a Willis Towers Watson spokes- Corporate Responsibility windfall of newly available investment man, “director pay continues to be a hot dollars from December’s Tax Cuts and topic for boards in light of continued Large asset managers are failing to Jobs Act (TCJA) is not enhancing pay. attention brought on by shareholder press companies on climate change. Mercer’s survey finds that only four lawsuits over alleged excessive stock A report analyzing the world’s thirteen percent of firms have redirected some grants made to directors. As a result, largest asset managers’ U.S. proxy voting of their anticipated tax savings to their boards are looking for ways, such as in carbon-intensive industries finds them salary increase budgets. Moreover, just adding limits specific to directors, to exerting limited and uneven influence more than half of this small group (53 mitigate exposure to lawsuits.” over management, despite calls from percent) plans to increase their budget by Indeed, according to the analysis, the shareholders to de-carbonize corporate less than one percent of payroll. percentage of companies that imple- business models. With budget increases flat, programs mented an annual limit jumped from Overall, the asset managers demon- beyond contractual rewards can help 55 percent in 2016 to 61 percent last strated a high degree of alignment with enhance the employee experience. These year. Fixed value limits (78 percent) company management. Moreover, the programs are becoming another way to are more prevalent than those based on largest asset managers show the least effectively compete for talent. By sup- a fixed number of shares (22 percent) support for shareholder climate propos- porting career development and training as they offer a more clearly defined pay als. BlackRock and Vanguard supported

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 27 IN REVIEW only 23 percent and 33 percent, respec- Certain asset managers, including was the new administration in the U.S., tively, of proposals related to addressing BlackRock, refuse to vote in favor of which drove additional changes in gov- climate change. shareholder proposals if the companies ernment regulations (especially in areas The study, 2018 Asset Manager Cli- concerned are engaging with the asset including employment, data privacy and mate Scorecard, is authored by Kimberly manager, but they do not disclose to in- immigration). Gladman with the 50/50 Climate Project. vestors the results of those engagements. The report highlighted the measures “Despite investor calls to address the The asset manager universe in the legal departments are implementing in climate crisis, the largest asset managers study includes the 13 largest global asset order to operate more efficiently. are not putting pressure on the manage- managers reporting mutual fund votes, While most operational activities are ment of carbon-intensive companies,” each with more than $1 trillion in assets still handled by general counsel and at- Gladman said. “Investor votes speak for the year ending December 2017. torneys, GCs are increasingly relying on louder than their words—and their vot- legal department operations managers to ing signals a lack of concern and fails find creative ways to use resources, as to incentivize progress when it comes to Liability & Litigation well as track spending and time. de-carbonizing.” According to 41 percent of respon- BlackRock, the world’s largest asset Cybersecurity and regulatory de- dents, the top benefit of being more manager, stresses its climate-related en- mands are stretching corporate legal efficient is the ability to focus on stra- gagement in various reports, but its proxy departments. tegic work. voting is inconsistent. The scorecard in- Legal departments are capping head- The report found that beyond evalu- dicates that the company supported only count and driving efficiencies, even ating how they engage outside counsel, 23 percent of climate-related shareholder while demands on their time increase, legal departments are improving pro- resolutions, and opposed 100 percent of according to a Thomson Reuters report. ductivity by deploying new technolo- shareholder political influence propos- The firm surveyed 462 attorneys and gies, including billing software, and by als. Similarly, Vanguard supported only decision makers working in corporate shifting work from lawyers to paralegals 33 percent of climate-related shareholder legal departments nationwide to identify and other staff, among other measures. proposals and opposed every political trends in managing resources and adapt- influence proposal. ing to business needs. The SEC withdraws two no-action Both BlackRock and Vanguard One trend shaping legal departments letters on the use of proxy advisors. showed a high degree of overall align- is how general counsel are increasingly On September 13, 2018, the SEC Divi- ment with management. Each voted in expected to serve as business advisers in sion of Investment Management issued line with management recommendations addition to providing legal advice. Gen- an Information Update in which it an- 98 percent of the time—voting in favor eral counsel are becoming more involved nounced the withdrawal of two no-action of 98 percent of executive compensation across their organizations, particularly in letters concerning the circumstances proposals and 99 percent of manage- terms of advising the board of directors under which a third-party proxy advisory ment-nominated directors. and business leadership. firm may be considered independent However, PIMCO and Legal & The report stressed how corporate under Rule 206(4)-6 under the Advisers General stood out as climate leaders. legal departments, already stretched Act. A Ropes & Gray client update notes Both firms also supported 100 percent by limited resources, are confronting that the rule was adopted by the SEC in of shareholder proposals on political new, as well as traditional, challenges. 2003 to ensure that investment advisers influence disclosure. Respondents noted that data security vote proxies in the best interest of their The report’s findings include: and ethics and compliance remain key clients and provide clients with informa- There is a trend of increasing sup- priorities, but cybersecurity ranked tion about how their proxies are voted. port for shareholder proposals on climate higher in importance in 2018. Among the In the Rule 206(4)-6 adopting release, change and political influence disclosure. factors heightening this concern was the the SEC stated that an investment ad- There is a clear pattern of leaders and May 2018 deadline to comply with the viser could demonstrate that its vote of laggards, with the largest asset managers European Union’s General Data Protec- its clients’ proxies was not a product showing the least support on key climate tion Regulation (GDPR). This imposed of a conflict of interest if the adviser and political disclosures votes. new rules for how companies manage voted the proxies in accordance with Lack of support from the largest the personal data of those in the EU a pre-determined policy based on the asset managers resulted in lost opportu- and significant fines for noncompliance. recommendations of an “independent” nities to signal strong investor concern Respondents are spending more time proxy advisory firm. The two withdrawn with climate at companies because asset handling regulatory matters relative to no-action letters concerned whether a managers with large ownership stakes a year earlier. Beyond the new EU re- proxy advisory firm would be consid- voted with management. quirement, another driver of the increase ered independent if the proxy advisory

28 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD IN REVIEW firm receives compensation from an Shareholders & Investors parative stipend. Like college athletes, issuer for providing advice on corporate corporate directors are at the focal point governance issues (or otherwise had a Prospects for the “hybrid” annual of high pressures and big money, yet are potential conflict of interest that could meeting. expected to maintain their own modest make the proxy advisory firm incapable The Institute of Chartered Secretaries amateur status. of making impartial recommendations). and Administrators (ICSA) has released — Ralph D. Ward, The September update referred to, but its inaugural project, titled “21st Century The Corporate Board Special Report: did not withdraw, the staff legal bulletin. Annual General Meeting.” With input Board Leadership, Therefore, it should not have any practi- from Computershare, ICSA has pro- November/December 2008 cal effect at this time on investment ad- duced a paper and a video encouraging visers that rely on proxy advisory firms. companies to consider adopting hybrid In a July, 2018 statement, SEC Chair- meetings for their annual general meet- Books Received man Jay Clayton announced that the SEC ings (AGMs), that is, to add an online staff will be hosting a “Roundtable on platform to a physical AGM. Imagine It Forward: Courage, the Proxy Process” in the fall of 2018. Attendance at AGMs for some ju- Creativity, and the Power of Change. Among the potential topics to be dis- risdictions is dropping, institutional By Beth Comstock with Tahl Raz. Cur- cussed at the roundtable is the role of investors rarely come to the meetings, rency. $30. How do you bring innovation proxy advisory firms. Areas that may and retail investors know that voting is and transformation to big established warrant particular attention include: often decided before the meeting is held. companies? Comstock tells how she Whether various factors, includ- Also, those attending do not appear to shook up General Electric in her career ing legal requirements, have resulted in represent the makeup of the broader retail as the giant’s vice chair of marketing investment advisers relying on proxy shareholder population. “Shareholders and innovation. advisory firms for information aggrega- collectively are owners of the company,” Growth IQ: Master the 10 Paths to tion and voting recommendations to a said Edith Shih, international president Grow Your Business. By Tiffani Bova. greater extent than they should. of ICSA. “We believe that companies Portfolio. $28. There are ten distinct Whether there is sufficient trans- should consider hybrid AGMs to better paths companies can follow to achieve parency about a proxy advisory firm’s engage with shareholders.” growth and take on competitors, says the voting policies and procedures so that While there is not one size that fits all, author. She details each, with examples companies, investors, and other market ICSA believes that hybrid meetings will from top successful companies. participants can understand how the firm bring value by improving shareholder reached its voting recommendations. engagement when shaping strategy, pro- Whether there are conflicts of inter- moting long-term shareholder retention est related consulting services provided and streamlining administration. by proxy advisory firms, and, if so, whether those conflicts are adequately disclosed and mitigated. Retrospectives Whether prior staff guidance about investment advisers’ responsibilities in 20 years ago in The Corporate Board. voting client proxies and retaining proxy The easy part of pay for performance advisory firms should be modified, re- is high pay for high performance. But the scinded, or supplemented. hard part is low pay for low performance. On the same day that the division Then the CEOs come to the board and issued the update, Chairman Clayton is- shareholders and wash their hands of sued a public statement in which he reiter- the problems, like Pilate did in the bible. ated the SEC’s “longstanding position . . . — Graef Crystal, that all staff statements are nonbinding Conversations, and create no enforceable legal rights or November/December 1998 obligations of the Commission or other parties.” He also stated that “Several 10 years ago in The Corporate Board. weeks ago, I instructed the directors Suppose we view what the board does of the Division of Enforcement and the as combining the outsider expertise of Office of Compliance Inspections and consultants with the insider knowledge Examinations to further emphasize this and responsibility of top executives. In distinction to their staff.” that case, directors are earning a com-

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 29 Spoken & Written Articles & Speeches

Make sure there’s a “home” for ESG to the new gender diversity regulation. board can’t just tuck it away anymore. [environmental, social and governance] Corporations carefully review and select When [VCs] wake up to the fact that oversight, whether it’s with the chairman, where they will incorporate based on the they’ll have to expect the same things, lead director, governance committee, protections and regulatory framework a you’ll see a big shift. ESG committee, or somewhere else in particular state offers. Delaware has long — Melinda Gates, the board structure. Effective oversight been the most business-friendly corpo- Pivotal Ventures hinges on having the right people in rate framework and is widely embraced. the boardroom, supported with qual- Diversity also needs to reflect ethnic, ESG is an approach that leads to a more ity information to enable appropriate global, digital and technology diversity, complete investment analysis of a com- oversight. not just gender. Corporate boards are pany because it includes considerations — Dennis T. Whalen, strongest when there is a range of per- that might otherwise be overlooked. But KPMG LLP spectives, experiences and viewpoints. ESG’s impact on performance depends — Betsy Atkins, on how it is being used and how well Congress has taken away some of the Baja Corporation executed the strategy is. On the whole, most important tools we used to avoid most empirical studies show that com- catastrophe. Importantly, we have a new I take issue with the term nonfinancial, panies with higher ESG ratings have rule for dealing with a failing financial because ESG factors aren’t nonfinancial better performance in both accounting firm but the congressional intent is that if they are material. It was radical 75 and market terms. Materiality matters. no government money will be used. It years ago for a company to report rev- — John Hale, remains to be seen how this will work enue. That was competitive information! Morningstar, Inc. because it takes government money to It was radical at one time to think about stop a severe panic. the composition of a board of directors or Given the prominence that technol- — Henry Paulson, corporate energy use. Now it is practical ogy has assumed in our world, I think Former U.S. Secretary of the Treasury to do all those things. At Cornerstone, it can be a force for bad in the hands of we use the expression “racially practi- the wrong people. We’ve seen this with Policy makers need to determine in cal investing.” Eventually, it will just fake news. We’ll have further challenges advance how they will support the finan- be investing. downstream with the rise of artificial in- cial system in a crisis so that stakeholders — Erika Karp, telligence, which is coming at a real clip. can adjust. Just as important, they must Cornerstone Capital Inc. Until the last few years, we probably explain these interventions and build didn’t see ourselves playing as big a role public support for them by making sure A sense of purpose is an understand- in society as we’ve ended up playing. I the benefits reach ordinary Americans ing at every level of the company about remain a technology optimist, but I also directly. One lesson of the crisis a decade its role in the world and in the commu- think we have to acknowledge there are ago is that the loss of such public support nity. Purpose unifies employees, helps unintended consequences that can be is very hard to regain. companies see their customers’ needs equally devastating. — Glenn Hubbard, more clearly, and drives better long-term — John L. Hennessy, Columbia Business School decision-making. This is true whether Alphabet Inc. you’re producing oil, making movies, We have experienced the pain of or helping people plan for retirement. Our society deploys technology faster unintended consequences with the — Larry Fink, than it can manage it. The management Sarbanes-Oxley Act of 2002, which BlackRock, Inc. and maintenance of our technology is resulted in a precipitous decline in initial the root cause of our cybersecurity chal- public offerings because of the expense Real change can occur when the VC lenges. In the rush to get some feature and burden the law puts on companies. community starts to demand that people or functionality online, people don’t pay The biggest risk I see in the California it invests in have diversity, the right attention to the side effects. [board gender diversity] bill, which I values, and the right behavior. It’s like — Corey Thomas, see in blinking neon lights, is that even the pressure that #MeToo has put on Rapid7 California-headquartered companies incorporate boards. When men or women corporated in Delaware would be subject raise a sexual harassment claim, the

30 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD Directors’ Register elected to its board Monte Ford, Olin Corporation has elected to its Recent Board Elections principal partner for the CIO Strategy board Scott M. Sutton, chief operating Exchange and former chairman and chief officer of Celanese Corporation. executive officer of Aptean, Inc. Ball Corporation has elected to its QTS Realty Trust, Inc. has elected board John A. Bryant, former chairman, Kimberly-Clark Corporation has to its board Mazen Rawashdeh, chief president and chief executive officer of elected to its board Sherilyn S. McCoy, infrastructure and architecture officer Kellogg Company. former chief executive officer of Avon of eBay Inc. and former vice president Products. of infrastructure operation engineering Becton, Dickinson and Company at Twitter, Inc. has elected to its board Jeffrey W. Lincoln Electric Holdings, Inc. has Henderson, non-executive chairman of elected to its board Patrick P. Goris, Qualcomm Incorporated has elected Qualcomm Incorporated. senior vice president and chief financial to its board Martin Anstice, chief officer of Rockwell Automation, Inc. executive officer of Lam Research Coherent, Inc. has elected to its Corporation, and Irene Rosenfeld, board Mike McMullen, president Lumber Liquidators Holdings, Inc. former chairman and chief executive and chief executive officer of Agilent has elected to its board Terri Funk officer of Mondelez International. Technologies, Inc. Graham, branding strategy consultant and former chief marketing officer of Republic Services, Inc. has elected Covanta Holding Corporation has RedEnvelope for Provide Commerce, to its board Katharine Weymouth, chief elected to its board Owen Michaelson, Inc. executive officer of dineXpert and former chief executive officer of the Harworth publisher of The Washington Post. Group PLC. McKesson Corporation has elected to its board Dominic Caruso, former Sears Holdings Corporation has Cullen/Frost Bankers, Inc. has executive vice president and chief elected to its board Alan J. Carr, elected to its board Cynthia Comparin, financial officer of Johnson & Johnson. managing member and chief executive founder and former chief executive officer of Drivetrain, LLC. officer of Animato Technologies Corp. Mercantile Bank of Michigan has elected to its board Diane Maher, SM Energy Company has elected to General Motors Company has president and chief operating officer of its board Carla J. Bailo, chief executive elected to its board Jami Miscik, vice DP Fox Ventures and Fox Motor Group, officer for the Center for Automotive chair and chief executive officer of Joseph Jones, president and chief Research, and former senior vice Kissinger Associates, Inc. executive officer of the Urban League of president, R&D Americas for Nissan West Michigan, and Kurt Hassberger, North America, Inc. The Hanover Insurance Group, chairman and president of Rockford Inc. has elected to its board Kathleen Construction Company. U.S. Concrete, Inc. has elected to its S. Lane, former executive vice president board Susan M. Ball, former executive and chief information officer of The TJX Myers Industries, Inc. has elected to vice president, chief financial officer and Companies, Inc. its board Lori Lutey, former executive treasurer of CVR Energy, Inc. vice president and chief financial officer Heritage Commerce Corp has of Schneider National, Inc. United Technologies Corporation elected to its board Jason DiNapoli, has elected to its board Denise L. executive vice president of MidFirst Navistar International Corporation Ramos, chief executive officer of ITT Bank and president and chief executive has elected to its board Kevin M. Inc., and Christopher J. Kearney, former officer of the 1st Century Bank division. Sheehan, former president and chief chairman, president and chief executive executive officer of Scientific Games officer of SPX FLOW, Inc. The Home Depot, Inc. has elected Corporation. to its board Manuel Kadre, chairman Verizon Communications Inc. has and chief executive officer of MBB NextEra Energy, Inc. has elected elected to its board Daniel H. Schulman, Auto Group. to its board Darryl L. Wilson, former president and chief executive officer of senior executive with General Electric PayPal Holdings, Inc. Iron Mountain Incorporated has Company.

THE CORPORATE BOARD NOVEMBER/DECEMBER 2018 31 Conversations Hannah-Beth Jackson: California Mandates Board Diversity

On September 30, 2018, California members, so obviously we wanted to see company headquartered in California Governor Jerry Brown signed legislation some improvement. to have at least one woman on its board that will radically empower the push for by 2019. By 2021, companies with five boardroom gender diversity in America. TCB: What happened in the following directors would have to include at least SB 826 requires California companies five years? two, and those with six or more board (not only corporations chartered there, Jackson: By 2018, research showed that members would need to have three. but those headquartered in the state as any increase was almost nonexistent. We can assume companies will want well) to achieve a minimum number of The women’s share had grown from 15.5 qualified women, and fortunately there women directors on their boards. Every percent to 16 percent—that was it. Since are more than enough qualified women publicly-held company would need at we hadn’t made any progress by being who’d like to be on boards. The main least one woman on its board by the end nice, I introduced this legislation with objections in the legislative process were of 2019, and by 2021 corporate boards the assistance of California NAWBO that we were telling companies what to will have to reach a sliding scale of two and their national group. do, but we’re not. If you have five or more or three women on their boards depend- directors, you don’t need to kick anyone ing on the total number of directors. TCB: Why do you feel this is needed? off, just add a seat for women. We’re not The California legislation has drawn Jackson: Studies done by Credit Suisse throwing men out of the boardroom. nationwide attention, both positive and and at UCLA Davis show women direc- negative. There are concerns about tors add value. The Credit Suisse study TCB: One objection we hear is that the the legality both of government gender looked at 2000 companies worldwide, market is already moving toward more quotas and the bill’s extra-territorial and found women on boards improved women on boards without mandates. reach. Federal litigation on the law’s key metrics such as stock price, profits Jackson: I don’t think the market is applicability seems likely. and productivity. This is just good for moving at a good clip on this if we only Principal sponsor of SB 826 was state business and the economy, and it’s time moved the average from 15.5 to 16 over Senator Hannah-Beth Jackson (D-Santa for California companies to be as com- five years. We certainly hope to draw Barbara). She and Senate President Pro petitive as they can be. Women are 70 more attention to the issue with this Tem Toni Atkins crafted the legislation percent of consumers, yet they’re terribly legislation. We’re saying that we value with the aid of the National Association underrepresented on corporate boards. all kinds of diversity, but women can of Women Business Owners (NAWBO). change company culture and actions. Jackson has long been an advocate TCB: Will the supply of women board on women’s business issues, and was prospects be able to meet demand? TCB: What about the legal objections, a driver in gaining the bill’s final ap- Jackson: There are millions of women such as mandating board diversity proval by the California Senate on a 23 business owners just in California. Stan- for companies chartered outside of to 9 vote. This interview was conducted ford and the Harvard Business School California? just prior to Governor Brown signing have registries of women who are well Jackson: States have a great deal of the bill into law. qualified and eager to participate, and leeway on guidance for companies that there are groups like 2020 Women with aren’t necessarily incorporated in the The Corporate Board: What is the their own registries. jurisdiction. We believe that issue has history on SB 826? been raised by the naysayers, and if com- Hannah-Beth Jackson: In 2013, the TCB: What specific qualities do you panies don’t want to cooperate, we may California chapter of the NAWBO believe a greater number of women see litigation. But we strongly believe brought the underrepresentation of will bring to boards? that this is a compelling state interest. women on state boards to my attention. Jackson: Women on boards tend to be These women are executives them- more risk averse; the data is quite clear TCB: Any messages you’d like to send selves, and were concerned that there on that. Research from MSCI found that to corporate boards on the legislation? wasn’t any progress in getting women companies with three or more women on Jackson: I’d tell directors it’s time to into real leadership positions at larger their boards had an average of 45 percent crack the class ceiling. Once they adjust, companies. That year, I authored a non- higher earnings per share between 2011 they’ll recognize the benefits. The other binding resolution urging California and 2015. day I spoke to a local Rotary group. I public companies to put more women recall when the courts ordered Rotary to on their boards to better represent the TCB: Explain the specifics of the open itself to women. Now, they agree population. In California at that time, legislation. that this made a positive difference. women represented 15.5 percent of board Jackson: The bill requires each public Change is hard, but necessary.

32 NOVEMBER/DECEMBER 2018 THE CORPORATE BOARD Index November/December 2017 – 2018

Artificial Intelligence In The Boardroom Illusion Of Security In Stock Trading Windows by A. Agrawal, J. Gans & A. Goldfarb, Mar/Apr 2018, p. 16–20 by John F. Cannon, Sep/Oct 2018, p. 11–16

Being A Woman On The Board Information Technology Governance by Suzanne Hopgood, Nov/Dec 2017, p. 22–25 by Bob Zukis, Nov/Dec 2018, p. 22–25

Best Practices For Onboarding New Directors Is “Age Diversity” The Next Boardroom Concern? by Alisa Cohn, Nov/Dec 2017, p. 11–16 by P. Loop & C. Bromilow, Jul/Aug 2018, p. 10–14

Board And Director Evaluation Grows Up New Era Of Board Performance by Beverly Behan, Jan/Feb 2018, p. 1–8 by Abby Adlerman, Sep/Oct 2018, p. 16–20

Board Engagement Throughout The Company New Risks In Retirement Plan Oversight by Dr. Dale J. Albrecht, Jan/Feb 2018, p. 22–25 by R. Barker, A. Otto & M. Mathis, Jul/Aug 2018, p. 15–19

Board Evaluation: “Feed-Forward” Instead Of New Tax Reforms: A Board Briefing “Feedback” by W. Tysse & T. French, Mar/Apr 2018, p. 1–5 by Paul Winum, Nov/Dec 2018, p. 7–11 Passing The Board Baton Board Evaluation That Adds Value by K. Bohn & S. Davis, Nov/Dec 2017, p. 1–5 by G. Kiel & J. Beck, Sep/Oct 2018, p. 1–5 Private Equity Model For Public Company Boards Board Oversight Of Joint Ventures by Henry D. Wolfe, Nov/Dec 2018, p. 12–16 by James Bamford, Jan/Feb 2018, p. 9–12 Professional Director Phenomenon Boards Must Prepare For The GDPR by E. Fram & R. Kellman Baxter, May/Jun 2018, p. 23–26 by Greg Reber, Jul/Aug 2018, p. 5–9 Redefining The Lead Independent Director Bringing #MeToo Into The Boardroom by Holly J. Gregory, Nov/Dec 2018, p. 1–6 by J. Kennedy Park & K. Spoerri, May/Jun 2018, p. 1–6 Reputation Management And The Board Building The Board’s Relationship With Compliance by Daniel Diermeier, May/Jun 2018, p. 18–22 by Michael Volkov, Mar/Apr 2018, p. 11–15 SEC Concerns On Cybersecurity Corporate Secretary’s Governance Role by M. Rossi, L. Richman & M. Burke, Sep/Oct 2018, p. 21–24 by Paul Marcela, Jan/Feb 2018, p. 18–21 Ten Board Questions On Anticorruption Compliance Digital Governance: The Price Of Convenience by R. Darmer, H. Klehm & J. Roseman, Jul/Aug 2018, p. 20–25 by Dottie Schindlinger, Nov/Dec 2017, p. 16–21 What CISOs Wish They Could Tell Their Boards Disclosing Your CEO Pay Ratio by Scott Corzine, May/Jun 2018, p. 7–12 by James D. C. Barrall, Mar/Apr 2018, p. 6–10 What Does Your CEO/Median Pay Ratio Really Say? Do CEOs Need A “Chief Of Staff”? by I. Kay & B. Martin, Sep/Oct 2018, p. 6–11 by Madeleine Niebauer, May/Jun 2018, p. 13–17 Women Board Members And Technology Companies Facing The New Tide Of Securities Litigation by Dora Vell, Mar/Apr 2018, p. 21–25 by H.S. Grace Jr., Ph.D. & J. Monteleone, Nov/Dec 2018, p. 17–21 Writing Your Board Diversity Policy General Counsel, The Board, And Corporate Culture by Roel C. Campos, Jul/Aug 2018, p. 1–4 by V. Richardson & M. Blatch, Jan/Feb 2018, p. 13–17

How Proxy Advisors View Your Board by Gary Larkin, Nov/Dec 2017, p. 6–10

Vist our Article Archive online for all THE CORPORATE BOARD articles from 2013 to the present. Copies of past articles can be requested at no charge for subscribers and only $20 per article for non-subscribers. https://www.corporateboard.com/ArtArchive.aspx Presumption is our natural and original malady. — Michel de Montaigne