December 1, 2016 - Issue 2.47 - Your weekly news on all things board.
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Director's Domain: News & views for today's boardroom. Brought to you by Boardspan.
Chief among a board's responsibilities, some say, is the hiring—and potential firing—of the CEO. We know there's a lot more to governance than that! But there's no doubt that having the right person in the top job is important. Harvard Business Review makes the case this week that there is a much a board can do to help a new CEO get up to speed and be effective in her role; after all, great coaching can turn a decent player into a stand out. And John Graham, a professor at Duke University's Fuqua School of Business, argues in the Wall Street Journal that even the stand-out players should be evaluated periodically; you need to know when they would benefit from more coaching or need to be cut from the team. And we've included a story from the archives about how to hire the right CEO when you need to. Our takeway? Yes, the board needs to be highly attuned not only to who is sitting in the CEO's seat, but whether and/or how it can help improve the quality of the CEO's performance. Sounds like a great topic to consider as you begin to size up the new year. Contact us if we can help:

The Hot Seat

How the Board Shapes & Helps the CEO

“There is no such thing as a perfect person. But ask yourself: What are the real skills and talents of this person, and how does this fit with the job requirements at the moment?  Then, ask what’s preventing this person from succeeding. Once you know the answer to that, there are a number of ways to work at the problem. The most effective way is to have one of the CEO’s direct reports compensate for areas of weakness. Keep in mind that this person has to be a very trusted person, whose ambition is not to create instability for the CEO. A second option is to find a board director who is sincere, who has the right expertise, whose ego is contained, and who knows he’s not running the company, who can become a sounding board. And sometimes, you need to find a trustworthy third party who can be an unbiased sounding board.” HARVARD BUSINESS REVIEW  

Why CEO Evaluations Are Essential

“Superior performance early on by some CEOs had completely reverted to the mean within about 10 years. So any superior performance, at least on average, was gone after 10 years. That suggests 7 to 10 years might be a time frame that even initially successful CEOs maybe should be evaluated carefully by the board.”— John Graham, professor of finance, Fuqua School of Business, Duke University VIDEO from WALL STREET JOURNAL

Across the Board

Curated news and insights from the world's boardrooms.

Are More Women Joining Tech Boards?

“A new report by real estate startup Redfin is a reminder that, unfortunately … among the last 100 technology companies to file for an IPO, 80% of the 381 board appointments were male. Since 2013, things have been looking up, according to Redfin. Three years ago, roughly one woman was appointed to a board for every six men. Now, the ratio is one woman for every two men.” FORTUNE

How Much Are Private Company Directors Paid?

“Private companies continue to struggle with the question ‘How much should we pay our directors?’ There are many variables that determine director compensation: number of yearly meetings, industry, business size, business structure and more. The challenge private companies’ face is that there are few data points against which private companies can benchmark their Board compensation plans. Median total compensation was $36,000 in 2016…” FORBES

U.K. Considers American-Style Governance Reforms

“The U.K. government on Tuesday published a consultative report chock-full of potential corporate governance reforms that could align the country more with executive compensation practices in the U.S. The 59-page long document, called the ‘green paper,’ consists of a number of proposals on improving transparency around executive pay, enhancing the role of compensation committees and ‘strengthening the employee, customer and supplier voice.’ It calls for disclosing the pay ratio between chief executives and company employees, giving employees more influence on company boards and equipping shareholders with more voting power.” WALL STREET JOURNAL

Good Reasons to Listen to Activist Investors

“Activist investors who expect to raise returns by influencing strategic decisions are having a meaningful impact on many industries from consumer-packaged goods to aerospace and defense. And the odds that your company, or industry, may find itself targeted by an activist are going up. Activists launched 159 campaigns in 2015 focused on shareholder value maximization, nearly double the 88 that were launched the year before. If you are a senior executive in a company concerned about activists, you have two potential paths: take the defensive (and perhaps expected) posture of defending your current strategy, or embrace the challenge and reassess your company’s path to value creation.” HARVARD BUSINESS REVIEW

3 Must-Dos to Ensure Cyber Security

“#1. Elevate the Privacy/Cybersecurity Function: Corporate boards should invest the necessary resources and assume oversight of senior management to ensure that appropriate steps are in place to address privacy and cybersecurity risks. The most effective way to accomplish this goal is the creation of a dedicated, board-level cybersecurity risk management committee...” CORPORATE COUNSEL

Chipotle Looks to Sidestep Boardroom Battle

"Hedge funder Bill Ackman may have something to do with the way your next Chipotle burrito is made. According to people familiar with the matter, Ackman and Chipotle Mexican Grill are nearing a settlement that could give the hedge fund manager a seat on the troubled restaurant chain’s board of directors… The settlement would help the two parties bypass a potentially messy and public boardroom battle, since Ackman, who is the founder and CEO of Pershing Square Capital Management, disclosed a 9.9% stake in the beaten down chain in early September." FORTUNE

Fidelity CEO Takes Up Chair, Too

“Abigail Johnson will succeed her father as chairman of Fidelity Investments early next month, solidifying her control of the Boston money manager. The move caps Ms. Johnson’s ascent to the top of a firm founded by her grandfather and led for decades by her father…. Ms. Johnson, like her father, is a private billionaire. Unlike some of its publicly-traded rivals, Fidelity itself is a closely-held company in which the Johnson family controls 49% and employees own 51%. Edward ‘Ned’ Johnson, who is 86 and referred to internally by many Fidelity staff members as ‘the chairman,’ is retiring and becoming chairman emeritus, according to an internal memo seen by The Wall Street Journal. He has been chairman of Fidelity since 1977, the same year he became chief executive.” WALL STREET JOURNAL

From the Boardspan Archives

Hiring for a Cultural Fit at the Top

"Bringing a new C-level executive on board is always fraught with risk: Any misstep can be expensive and embarrassing. As a result, companies may play it safe by looking for someone with just the right CV or perhaps a recent stint at a high-flying competitor. Who does the board like? What will the analysts think? The challenge has become even more daunting as an increasing number of companies use their culture as a point of differentiation and strategic advantage." STRATEGY+BUSINESS via BOARDSPAN

A Seat at the Table

  • Deborah Chase Hopkins, retiring CEO of Citi Ventures, the bank’s investment arm, as well as Citi's chief innovation officer, is joining the board of railroad company Union Pacific Corporation
  • Paxos, a provider of blockchain solutions to the financial industry, appoints to its board Duncan L. Niederauer, former CEO of the New York Stock Exchange
  • Mortgage firm Fannie Mae appoints to its board hedge fund manager George Haywood
  • Off-price retailer TJX Companies elects to its board Jackwyn Nemerov, former president and CEO of Ralph Lauren Corporation
  • Matt Bradley, VP of corporate development at cloud infrastructure company Rackspace, joins the board of Jungle Disk, a data security suite for small business
  • Tesoro Corp, the oil refining company, expands its board to include William Schumann III, formerly of oilfield equipment company FMC Technologies
  • Elaine Chao, a director at News Corp and Wells Fargo, was named President-elect Donald Trump’s choice for Transportation Secretary
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