general counsel corporate governance summit briefing paper Report from the General Counsel Summit on Short-Termism and Public Trust SEPTEMBER 27, 2016 | COLUMBIA UNIVERSITY | NEW YORK, NY © 2017, The Trustees of Columbia University in the City of New York © 2017, The Conference Board, Inc. About the Report This summary report was prepared for participants in the General Counsel Corporate Governance Summit and presents some of the key discussion topics and views of participants at the summit. It is not intended to provide a complete summary or represent a unanimous consensus of the summit’s proceedings. Views or positions presented in this briefing do not necessarily reflect the position of the Millstein Center, the Law School, Columbia University, The Conference Board, or any supporters or particular participants. The Millstein Center and The Conference Board Governance Center are extraordinarily grateful to their sponsors, members, and partners, which provide financial, logistical, and substantive support for work like this. In particular, we would like to thank Donna Dabney and Jonathan Kim who drafted this report and Gary Larkin and Doug Chia of The Conference Board and Marcel Bucsescu of The Millstein Center at Columbia Law School, who served as editors. We would also like to thank the general counsels who participated in the summit and continue to engage actively on the issues raised during the program. Finally, we would like to thank Chief Justice Norman Veasey, Ira Millstein, Bill McCracken, and Bill Ide for their leadership in this important area and for their active participation in the proceedings. About the Millstein Center for Global Markets and Corporate Ownership The Millstein Center’s mission is to drive change in boardrooms, so that directors can resume using their business judgment to address the challenges companies face, through active engagement in strategy, capital allocation, and culture shift for the long- term future. For more information, please visit www.law.columbia.edu/millsteincenter. About The Conference Board Governance Center Founded in 1993, The Conference Board Governance Center draws upon authoritative research from The Conference Board. Its mission is to work in the public interest to provide knowledge and thought leadership on global corporate governance issues for boards and c-suite leaders, investors and other leading organizations. The Governance Center is: • A resource for robust research, analytics and insights on high-priority governance issues. • A platform for private, constructive engagement with corporate board members, executives, investors and other business leaders. • A network for peer-to peer exchanges of governance intelligence, and practice experience. • An investment in promoting “good governance” that supports long-term corporate performance and trust. • “Eyes and ears” on the ground to keep members on top and in front of important governance policy developments. For more information, visit www.conference-board.org/governance. 1 General Counsel Corporate Governance Summit Sara Bosco Marc Kesselman Senior Vice President, Secretary and General Chief Legal Officer, General Counsel and Counsel, Emerson Corporate Secretary Yum! Brands, Inc. Marcel Bucsescu Executive Director, Millstein Center, Jonathan Kim Columbia Law School Practicing Fellow, Millstein Center, Columbia Law School Christian Campbell Director, Yum China Deborah Majoras Chief Legal Officer & Secretary, Kevin Carome Procter & Gamble Company Senior Managing Director and General Counsel, INVESCO Ltd. William McCracken Chair, Millstein Center, Columbia Law School Janet Carrig Senior Vice President Legal, General Counsel and Colleen McIntosh Corporate Secretary, ConocoPhillips Company Senior Vice President, Corporate Secretary & Asst. General Counsel - Corporate Services, CVS Health Douglas Chia Executive Director, Governance Center, Judith McLevey The Conference Board Assistant Director, Governance Center, The Conference Board Steven Cook Senior Vice President, General Counsel and Ira Millstein Secretary, Pulte Group, Inc. Founding Chair, Millstein Center, Columbia Law School Stephen Cutler Senior Partner, Weil, Gotshal & Manges LLP Vice Chairman, JPMorgan Chase & Co. Thomas Moriarty Donna Dabney Executive Vice President, Chief Health Strategy Senior Advisor, Governance Center, Officer, and General Counsel, CVS Health The Conference Board Judy Reinsdorf Peter Gleason Vice President, Secretary and General Counsel, President, NACD Johnson Controls, Inc. Craig Glidden Executive Vice President, Legal and Public Policy Thomas Sabatino Senior Vice President, General Counsel and and General Counsel, General Motors Corporate Secretary, Aetna Inc. Michael Harrington General Counsel & Senior Vice President, Laura Stein Executive Vice President, General Counsel and Eli Lilly and Company Public Affairs, The Clorox Company Andrew Hendry Former Vice Chairman, Bryan Supran Senior Vice President & Deputy General Counsel Colgate-Palmolive Company Pfizer, Inc. R. William Ide Chair, Governance Center Advisory Board, Eric Talley Isidor and Seville Sulzbacher Professor of Law, The Conference Board Columbia Law School Partner, Dentons E. Norman Veasey John Jenkins Former Chief Justice, Delaware Supreme Court; Executive Vice President & General Counsel, Special Counsel, Gordon, Fournaris & TE Connectivity Mammarella, P.A. General Counsel Corporate Governance Summit Genesis of the Summit Sara Bosco Marc Kesselman Senior Vice President, Secretary and General Chief Legal Officer, General Counsel and Ira M. Millstein, Founding Chair, Millstein Center, Columbia Law School; Counsel, Emerson Corporate Secretary Senior Partner, Weil, Gotshal & Manges LLP Yum! Brands, Inc. Marcel Bucsescu R. William Ide, Chair, Advisory Board, The Conference Board Governance Center; Executive Director, Millstein Center, Jonathan Kim Columbia Law School Practicing Fellow, Millstein Center, Partner, Dentons Columbia Law School Christian Campbell “Corporations are the best means we’ve invented to provide value to everyone...Not only do corporations provide such value Director, Yum China Deborah Majoras now, they hold our future welfare in their share capital—the wealth we will rely on to sustain us. It is not hyperbole to say Chief Legal Officer & Secretary, everything is a stake here. I think corporations protect us, so we have to protect them. The mechanism of governance offers the Kevin Carome i Procter & Gamble Company best protection for us all—employees, consumers, investors and government.” Senior Managing Director and General Counsel, INVESCO Ltd. William McCracken The following summary tracks the introductory comments of Messrs. Millstein and Ide and the Chair, Millstein Center, Columbia Law School three sessions that followed. Janet Carrig Senior Vice President Legal, General Counsel and Colleen McIntosh Public corporations have been the engine of growth and profound negative effect on society, impacting gross domestic Corporate Secretary, ConocoPhillips Company Senior Vice President, Corporate Secretary & Asst. prosperity in advanced economies since the beginning of the product (GDP) and public trust in business2. General Counsel - Corporate Services, CVS Health Douglas Chia 20th century, creating innovative products and services and At the public company level, two trends, in particular, are in Executive Director, Governance Center, Judith McLevey leading to unprecedented improvements in the standard of line with the expected impact of short-termism—a reduction The Conference Board Assistant Director, Governance Center, living. The question now is whether changing capital markets in business investment and an increase in payouts to share- The Conference Board and governance practices have caused public companies to holders3. Governance experts, economists, and shareholders Steven Cook limit future growth by becoming overly focused on extract- themselves are raising concerns with these trends, saying many Senior Vice President, General Counsel and Ira Millstein ing value in the near term instead of investing for the creation companies are jeopardizing future prosperity for higher (and Secretary, Pulte Group, Inc. Founding Chair, Millstein Center, of long-term value. There is a growing concern that the forces likely unsustainable) returns today. Columbia Law School Stephen Cutler affecting corporate governance are jeopardizing capitalism as Throughout the history of the corporation as a recognized Vice Chairman, JPMorgan Chase & Co. Senior Partner, Weil, Gotshal & Manges LLP society’s engine of long-term, durable growth and creating entity in society, the board of directors has occupied a unique public mistrust in public companies and the capital markets. and exalted role. Boards of directors are recognized under state Donna Dabney Thomas Moriarty Executive Vice President, Chief Health Strategy Some contend that boards of directors, management and self- law as the fiduciary overseers of the company’s well-being and Senior Advisor, Governance Center, Officer, and General Counsel, CVS Health described long-term shareholders are not adequately respond- their duties have been well-defined by the courts through the The Conference Board ing to the decline in long-term growth, and that their roles and business judgment rule. Shareholders, too, occupy a vital posi- Peter Gleason Judy Reinsdorf responsibilities should be the focus for reform. Others point tion in the capitalist system as the providers of capital and a Vice President, Secretary and General