THE OFFICIAL MAGAZINE OF THE NATIONAL ASSOCIATION OF CORPORATE DIRECTORS NACD Directorship November/December 2015 Vol. 41, No. 6 Boardroom Intelligence November/December 2015 CEO’s Letter 4 The Power of One By Kenneth Daly Chair’s Address 8 A Call for Greater Board Leadership By Reatha Clark King Washington Update 14 A Coming Compliance Crackdown? By Alexandra R. Lajoux Verbatim 18 Staying True to a Mission with Frank NACD DIRECTORSHIP 100 Heemskerk By Ashley Marchand Orme Repartee 22 PwC’s Paula Loop Meets Ronna Romney By Judy Warner Guide to Shareholder Communications 26 Virtual Meeting Usage Grows By Jonathan Foster Sustainability 68 An Inside Story of Inclusion By Bob O’Brien 71 How to Be Climate Competent By Richard C. Ferlauto NACD Directorship 100 Small Talk 92 Taking the Lead, Long These directors and institutions set the gold standard in 2015. Live the Brand, More Plus: NACD’s Corporate Governance Hall of Fame, Director By Jesse Rhodes of the Year, and Lifetime Achievement Award honorees. 32 B:9.25” T:9” S:8” B:11.125” T:10.875” S:10” Can your business afford a breach? A single breach can cause a 22% drop in your company’s net earnings over the next four quarters. Discover the security best practices you need to better protect your business. Download our complimentary report AT&T Cybersecurity Insights: Decoding the Adversary at our AT&T Security Resource Center. securityresourcecenter.att.com © 2015 AT&T Intellectual Property. All rights reserved. All other marks used herein are the property of their respective owners. © 2015 AT&T Intellectual Property. All rights reserved. All other marks used herein are the property of their respective owners. This advertisement was prepared by BBDO New York Filename: P56049_ABS_ENT_V3.indd CLIENT: ATT BUSINESS SOLUTIONS Proof #: 3 Path: Studio:Volumes:Studio:MECHANIC... Created: 10-7-2015 10:59 AM PRODUCT: Resize of Rev Security Tape for NACD Mechanicals:P56049_ABS_ENT_V3.indd Saved: 10-7-2015 1:13 PM Program Guide Operators: Perian, Angelique / Sekulovski, Jovan Printed: 10-7-2015 1:14 PM JOB#: P56049 Print Scale: None SPACE: Full Page 4/C BLEED: 9.25” x 11.125” Fonts Ink Names TRIM: 9” x 10.875” Omnes_ATT II (Regular, Medium, Light) Cyan SAFETY: 8” x 10” Graphic Name Color Space Eff. Res. Magenta GUTTER: None Caution_V9_CMYK.tif (CMYK; 703 ppi), Mobilize_World-Lockups.ai Yellow Black PUBS: NACD Program Guide 2015 ISSUE: None TRAFFIC: Dorothy Gallardo ART BUYER: None ACCOUNT: None RETOUCH: None PRODUCTION: None ART DIRECTOR: None Contents November/December 2015 Features Cover Story 32 NACD Directorship 100 The ninth annual listing of the most influential directors, institutions, and professionals that set the governance gold standard in 2015. 34 Corporate Governance Hall of Fame 36 B. Kenneth West Lifetime Achievement Award 36 Director of the Year 37 Directors 38 Methodology 53 Governance Professionals and Institutions 32 COVER ILLUSTRATION BY BOB KAYGANICH Boardroom Guide to Shareholder Communications 26 Stuart R. Levine on the Complexities of Modern Shareholder Communications NACD Directorship spoke with Stuart R. Levine about how share- holder communications has changed since the 2008 financial crisis. Is the In-Person Meeting a Relic of the Past? The modern director and investor want efficient, virtual shareholder meetings. By Jonathan Foster Sustainability 68 At Forest City, Board Engagement Fosters Diversity and Inclusion One board member sparked a culture of inclusion that still strengthens the company’s results. By Bob O’Brien 71 Establishing a Climate-Competent Board Institutional shareholders are increasing their demands for boardroom leadership on climate matters. By Richard C. Ferlauto www.NACDonline.org 1 Departments CEO’s Letter Postings 4 The Power of One By Kenneth Daly 79 Newly Appointed Directors at AXA Editor’s Note Financial, Verizon, Kellogg, More 6 Best Advice By Judy Warner Small Talk Chair’s Address 92 Out of Gas, Long Live the Brand, 8 A Call for Greater Board Leadership More By Jesse Rhodes By Reatha Clark King Need to Know 10 SEC Nominees, Health Scares, More Director Advisory 8 DENNY HENRY PHOTOGRAPHY Washington Update 82 Compensation 14 Is a ‘Corporate Compliance Crackdown’ Tailoring Executive Compensation Plans By Ed Steinhoff Coming? By Alexandra R. Lajoux 83 Risk Management Delaware Watch Guarding the Corporate Castle 16 Director/Attorney Privilege By Phyllis Deiso By Francis G.X. Pileggi 84 Internal Audit Communication Has Never Been Verbatim More Important 18 Staying True to a Mission By Richard F. Chambers By Ashley Marchand Orme 85 Compensation Repartee Incentive Plans: Goal Setting and Responsible Payout Patterns 18 22 PwC’s Paula D. Loop Meets Director By Melissa Burek COURTESY OF FRANK HEEMSKERK Ronna Romney 86 Geographic Diversity The Challenges of the Global Board Entrepreneurial Governance By Alex Wittenberg 67 Small-Cap Governance’s ‘Aha!’ Moment By Adam J. Epstein 87 Audit Committee Roundup Refining Risk Oversight Readings By Dennis T. Whalen 74 An Updated Classic Provides the 88 Board Composition ‘How’ and ‘Why’ for Independent Adding Critical New Expertise to Directors By Howard Brod Brownstein Boards By Dennis Carey and Robert Hallagan In Practice 89 Cybersecurity 76 Data Analytics in Audit Mitigates Risk 22 When Building a Cyber Defense, ILLUSTRATION BY JT MORROW By Christopher J. Mazzei, Roshan Assume the Worst By Austin Berglas Ramlukan, and Ruby Sharma 90 Litigation and Liability Individual Accountability for Wrongdoing By Joan E. Meyer, Trevor N. McFadden, and Geoff Martin For membership information, please e-mail [email protected] or call 202-775-0509. 91 Compensation For reprint and distribution rights, please e-mail us at [email protected]. Relative TSR Will Not Align Pay and The opinions expressed in NACD Directorship are not necessarily those of the National Association of Corporate Directors, 2001 Pennsylvania Ave., NW, Performance Disclosure Suite 500, Washington, DC 20006. © 2015 National Association of Corporate Directors. All rights reserved. Reproduction in part or in whole, by any means, mechanical, photographic, or electronic, is prohibited without permission of the publisher. Individual and full-board subscriptions are available to NACD By Daniel Rodda members. 2 NACD Directorship November/December 2015 Send the right signals to your shareholders. Depend on Meridian to light the way for effective executive compensation strategies. Meridian Compensation Partners, LLC We are one of the largest, most experienced, independent executive compensation consulting firms in North America. Our resources and expertise are unparalleled in scope. We welcome the opportunity to discuss your needs. For more information, please call Michael Powers, Managing Partner, at 847-235-3600. meridiancp.com Independent Advice. Effective Solutions. CHICAGO – LAKE FOREST, IL | ATLANTA, GA | BOSTON, MA | DALLAS, TX | DETROIT, MI | HOUSTON, TX | NEW YORK, NY | SAN FRANCISCO, CA | TORONTO, CANADA CEO’s Letter The Power of One BOARD OF DIRECTORS CHAIR As I write this letter, the National Association of Corporate Direc- Reatha Clark King tors (NACD) is poised between two major events: our 2015 Global VICE CHAIR Karen N. Horn Board Leaders’ Summit in September and our gala celebration of the NACD Directorship 100, where honorees and invited guests Dennis R. Beresford Sue W. Cole will gather to celebrate the directors and governance leaders who Kenneth Daly have made a critical difference this past year. Busy times. Directors Nicholas Donofrio often ask me which event is more important. Of course, my answer Hon. Cari M. Dominguez is “both.” One is educational, the other celebratory. One enriches Raymond V. Gilmartin Richard H. Koppes the other; both are meaningful. William E. McCracken With that in mind, I’d like to extend an invitation to a third Charles H. Noski Kenneth Daly is CEO of William J. White NACD. event: the act of contemplation. That involves not the power of 1,000, or even the power of 100, but the power of one: you, a unique SENIOR LEADERSHIP contributor to boardroom excellence. Individual directors can make a critical difference in the CEO Kenneth Daly boardroom, and it begins with their mind-set. An excellent director PRESIDENT Peter R. Gleason CHIEF OPERATING thinks deeply about a company’s issues, reflects on financial sound- OFFICER Katherine B. Davis ness in the short and long term, ruminates on social impact, asks CHIEF PROGRAMMING insightful and sometimes catalytic questions, and speaks his or her OFFICER Erin M. Essenmacher mind clearly—and then thinks some more. CHIEF MARKETING Certainly there is a “sameness” to directorship. Much that OFFICER Henry Stoever happens at the board level is collective: directors must deliberate GENERAL COUNSEL AND MANAGING DIRECTOR, together to make a decision, they are updated through the same BOARD ADVISORY information streams, and have identical exposure to liability as SERVICES Steven R. Walker fiduciaries. Meeting minutes rarely single out an individual’s contributions despite the fact that the perspectives and experi- PUBLISHING AND SPONSORSHIPS ences that each person brings to the table advance exemplary PUBLISHER Christopher Y. Clark board leadership. SENIOR ACCOUNT MANAGER Lindsey Baker Our learning events and celebrations of role models ulti- PARTNER RELATIONS mately find true purpose in fortifying one director serving one ASSOCIATE Stephanie Barko company at a time, one meeting at a time, one issue at a time. Consider the ways in which you promote excellence through EDITORIAL board service. Now, think about the most pressing issue facing EDITOR IN CHIEF Judy Warner you today. I’d like to hear about it. Write me at kdaly@NACD- CHIEF KNOWLEDGE OFFICER Alexandra R. Lajoux online.org. NACD wants to help you make positive change happen. ART DIRECTOR Patricia W. Smith RESEARCH MANAGER Ashley M. Marchand ASSOCIATE EDITOR Jesse Rhodes ASSISTANT EDITOR Katie Grills SENIOR RESEARCH ANALYST Ted Sikora PUBLICATIONS EDITOR Mary Tonkinson Ken Daly GRAPHIC DESIGNER Alex Nguyen [email protected] NACDonline.org 4 NACD Directorship November/December 2015 B:9.125” T:8.875” S:8.375” GRANDMA’S HOUSE, NOW WITH Wi-Fi.