December 8, 2016 - Issue 2.48 - 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.
Transition time. Next year is shaping up to be one of big changes: Starbucks will try an unconventional CEO transition with Howard Schultz handing off the chief role to his number two, but staying on as chairman and in a new operational role. Theranos will remake its board with fewer politicians. Chipotle, too, looks likely to shake up its boardroom. Meanwhile, a new Stanford University survey of corporate boards reveals common issues today’s directors face, plus some suggestions for solving them. And this week’s newsletter is filled with good advice for your new year: How to plan a CEO transition; how to think about governance for subsidiaries of larger firms; and how to be a more effective leader. We hope you find it valuable.

The Hot Seat

Starbucks's Unusual CEO Transition: Will it Work?

“Howard Schultz, who is relinquishing his role as Starbucks Corp.’s chief executive, says he will truly step back from daily decision-making, unlike the last time he gave up the top job 16 years ago. Mr. Schultz, who over the past two decades changed the way Americans drink coffee, said last week that he plans to hand over the CEO title in April to Starbucks President Kevin Johnson, who has served on the company’s board for seven years and has been second in command for nearly two years. Instead of managing the day-to-day business, Mr. Schultz will stay on as chairman and take on a new project to build luxury coffee shops within Starbucks….The transition plan is fairly unusual in corporate America. More typically, a successful exiting CEO remains board chairman for a transition period that lasts no longer than a year.”  WALL STREET JOURNAL

7 Key Factors in Planning a CEO Succession

“Perhaps no single factor has a greater impact on a company’s future — for better or worse — than the selection of a new CEO. Choosing a CEO is a high-stakes proposition, arguably the most important decision a board can make....How can a board go about finding a new CEO who’s equipped to deal with 21st-century challenges? Below we share what we consider the seven defining tenets of a ‘gold standard’ succession process: 1. Align the board on future CEO profiles that are driven by business strategy. 2. Assess candidates against industry benchmarks, valid indicators of executive potential, and the CEO profiles you’ve developed….” HARVARD BUSINESS REVIEW

Across the Board

Curated news and insights from the world's boardrooms.

General Mattis Keeps Seat on Refreshed Theranos Board

“Theranos is making a huge change to its leadership. In 2017, the company said, the board of counselors will be retired. The board of counselors consisted mostly of former directors with strong government connections but little scientific experience, such as Henry Kissinger and George Shultz, and it served as an advisory board to the company's founder, Elizabeth Holmes. James Mattis, a retired Marine general who is President-elect Donald Trump's pick for Secretary of Defense, will stay on the company's board of directors. Theranos also announced that Riley Bechtel, who sat on the board of directors, would also be departing immediately, citing health issues…. Daniel Warmenhoven [a veteran Silicon Valley executive and former CEO of networked storage company NetApp] will be replacing Bechtel.” BUSINESS INSIDER

CEO Pay Is Up, Plus Perks As High As $800K

“Perks such as exit payments and trips on corporate aircraft account for the fastest-growing segment of executive-pay packages at some of the world’s largest companies. According to new data from research firm Equilar, the median compensation—without perks—for C-suite executives at Fortune 100 companies jumped nearly 15% to $7.4 million in fiscal year 2015 from $6.5 million in 2013. Over the same period, perks jumped 21.6% to a median value of $126,550. Investors and critics of corporate extravagance pay close attention to executive pay packages, but perks get somewhat less consideration.” WALL STREET JOURNAL

Today's Boardroom Issues & How to Address Them

“In the summer of 2016, the Rock Center for Corporate Governance at Stanford University along with The Miles Group conducted a nationwide survey of 187 board directors of public and private companies. Key findings include the following: Satisfaction levels with board evaluations are modest…. Trust levels are high, but not high enough…. Directors do not give each other honest feedback… Boardroom dynamics are sub-optimal…. To improve board functioning, the authors recommend the following: 1. Conduct a diagnostic where each director’s input is solicited around a variety of critical topics….” STANFORD UNIVERSITY GRADUATE SCHOOL OF BUSINESS

IMF Director Urges More Women on Boards      

“International Monetary Fund Managing Director Christine Lagarde called for greater attention to protecting the dignity of women, saying everyone has a responsibility to combat misogyny…. Lagarde said Friday that global leaders who claim to be feminists need to take more action to help women enter and stay in the workforce -- from requirements for parental leave to removing discriminatory laws. More participation by women in the labor market boosts growth and reduces inequality, she said. Corporations need to do their part by ensuring gender equality on their boards of directors, Lagarde said.” BLOOMBERG

Chipotle Signals Board Changes Comings Soon

“For months now critics have pointed to Chipotle’s board as emblematic of poor corporate governance: directors have remained on the board for lengthy terms (the median tenure is 17 years); the group is 100% white and has only a single woman out of nine members; and few among them have the heavyweight credentials one would expect of a $4 billion publicly traded company. … Today Chipotle co-CEO Steve Ells sent the strongest signal yet that he is acquiescing to the pressure to shake up the company’s board…. ‘We are taking a very careful look at the people we have, what might be missing, what we can refresh,’ he said.” FORTUNE

What You Need to Know about Governance & Subsidiaries

“Expansion to a new country, risk protection, and large transactions are among the many reasons companies establish subsidiaries. But in today’s economic climate and as business rules become more complex, companies must take a closer look at their subsidiary governance or risk costly financial and reputational damage. FEI Daily spoke with Dan Konigsburg, managing director of Deloitte Global’s Center for Corporate Governance on the topic. FEI Daily: What are the challenges for parent organizations when it comes to their subsidiaries? Dan Konigsburg: Let’s start with complexity and transparency. For an extreme example: you may have a number of banks with hundreds of subsidiaries. If you’re a board member of a parent company or a CFO of a parent company, how do you know that your business controls are adequate throughout all of them?" FINANCIAL EXECUTIVES INTERNATIONAL

4 Strategies for More Effective Leadership

“Instead of constant acceleration, leadership demands periods of restraint and consideration, says Harry Kraemer clinical professor of strategy at the Kellogg School says. Leaders must regularly turn off the noise and ask themselves what they stand for and what kind of an example they want to set…. Know Your Priorities…Minimize Surprise… Build Stronger Teams….” KELLOGG INSIGHT

From the Boardspan Archives

Leapfrog Succession: Trend in Appointing CEOs

"Corporate boards of directors are increasingly reaching down below the second layer of management to name new chief executive officers. By accelerating the promotion of these executives, boards hope that the new CEOs’ ability to understand and act upon signals in today’s unpredictable environment will more than offset their relative inexperience." BCG PERSPECTIVES via BOARDSPAN

A Seat at the Table

  • Kirsten O. Wolberg. VP of talent at PayPal and former CIO of, joins the board of Sallie Mae, the consumer banking company specializing in student loans for college and grad school
  • Photo and personalized consumer goods company Shutterfly welcomes to its board two new directors: Libby Sartain, vice-chair of AARP and former chief people officer at Yahoo; and Tayloe Stansbury, EVP and CTO at Intuit, who oversees all product engineering at the financial software company
  • Communication services company Sprint elects to its board Patrick T. (“Pat”) Doyle, former CFO and EVP of Finance at DirecTV
  • Michelle Jarrard, former global chief HR and talent officer at McKinsey & Company, joins the board of financial advisory and management firm Lazard
  • Tobacco company Philip Morris International elects to its board Massimo Ferragamo, chairman and prior president of Ferragamo USA, the U.S. distributor of the Italian luxury shoe and leather goods company Salvatore Ferragamo
  • Financial services firm BNY Mellon elects two new directors: Linda Z. Cook, managing director of EIG Global Energy Partners and a long-term executive at oil company Royal Dutch Shell; and Jennifer B. Morgan, formerly president of software company SAP North America
  • Gloria R. Boyland, corporate VP of operations and service support at FedEx, joins the board of oil and natural gas company Chesapeake Energy
  •  The Hanover Insurance Group elects to its board of directors
    Jane D. Carlin, a cybersecurity and risk management expert who was formerly managing director at Morgan Stanley and at Credit Suisse, and is an advisor to the chief risk and compliance office at Bloomberg
  • CyberCore Technologies, a cybersecurity services contractor, welcomes to its board two new directors: Stephen Hoffman, chairman of performance learning company Ontuitive and former CEO of  iJET Intelligent Risk Systems; and Kirkland Donald, a 37-year veteran of the U.S. Navy and former deputy administrator of the National Nuclear Security Administration
  • Vote Solar, a national nonprofit solar advocacy organization, welcomes to its board energy industry veteran David Crane, a senior operating executive at Pegasus Capital, a private equity from focused on sustainability investing, and former president and CEO of NRG Energy
  • UGE International, a renewable energy solutions company, appoints to its board Joyce Ferris, founder and managing partner of venture capital firm Blue Hill Partners, which invests in emerging technology companies in the energy efficiency sector
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