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April 7, 2016 - Issue 2.14 - 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.

Best laid plans… Disney’s once-celebrated succession planning comes unraveled this week, as the presumed heir to the executive suite prepares to high-tail it out of the Magic Kingdom. As the board rethinks its approach to CEO Robert Iger's retirement (scheduled for 2018), onlookers are engaging in wild speculation about who might fill the top spot and in some serious reflection on the cost companies pay for failing to adequately plan for succession. Across the pond, British firms find the mandate to put women on boards is creating a new wrinkle: fewer women in operating roles. And Valeant Pharmaceuticals offers an unfortunate lesson in what really happens when you reward CEOs for high share prices. —It's a great week for observing the very real impact boards of directors can have on the organizations they serve.

The Hot Seat

 

Disney's Latest Roller Coaster

"Last February, The Walt Disney Co.'s board was hailed for an orderly succession process, free of the drama that had filled its last CEO transition. But just over a year later, the decision on whom to hand the keys to the Magic Kingdom is suddenly a script without an obvious ending. Disney announced a shocker Monday when it said Thomas Staggs, its chief operating officer who was widely seen as the heir apparent to chief executive Robert Iger, would be leaving his position May 6, though would stay on as an adviser through the fiscal year…. Whatever prompted Staggs' departure, what's clear is that the media giant's board faces a succession planning process that looks to be much thornier than most.” WASHINGTON POST
   

…Anyone for Ms. Sandberg’s Wild Ride?

“In the aftermath of the Staggs announcement, speculation swirled that Facebook COO Sheryl Sandberg, who is already a Disney board member, might be an attractive successor. At 46, she would be a young enough to guide the company for decades, and has the Silicon Valley bona fides to help Disney adapt to the digital era.” VARIETY


... And, Yes, Succession Planning Is Soooo Worth It!

“Botching a succession at the top can be costly. Disney shares fell nearly 2% in after-hours trading on news of Staggs' planned departure. Strategy&, formerly Booz & Co., analyzed 4,498 CEO successions from 2000 to 2014 and found that companies forced to fire their leader lost $1.8 billion in shareholder value compared with companies that orchestrate a replacement.”  LOS ANGELES TIMES

Across the Board

Curated news and insights from the world's boardrooms.

 

Women, Boards & The Unintended Consequences of Quotas

“A push by companies in Britain to recruit more women on to boards has had the unintended consequence of draining companies of female managers and executives. With a proliferation of non-executive roles on offer, a number of senior women are opting out of the stress of active management.  ‘All the focus on women on boards could have an unintended consequence of taking women out of the highest executive roles early,’ said Michelle Pinggera, a partner and international chief of staff at Goldman Sachs.” FINANCIAL TIMES
 

The Perils of Outsize Executive Pay

“There is no shortage of reasons for the spectacular rise and fall of Valeant Pharmaceuticals International…. The compensation of Valeant’s chief executive, J. Michael Pearson, and its senior executives most likely played an important role in driving the company’s behavior. … Paying a chief executive largely or solely on the basis of stock price performance might seem reckless. It would seem to create incentives for the executive to focus on actions that get impressive results for a year or two, rather than longer-term actions that might yield higher and more sustainable profits. But placing a heavy emphasis on the share price is a surprisingly common practice.” NEW YORK TIMES
 

Activist Investor Claims Victory at Darden

“Darden Restaurants Inc. said the activist investor who led the revolt on its board is stepping down as chairman as the operator of Olive Garden and LongHorn Steakhouse posted better-than-expected third-quarter results and boosted its outlook. Chairman Jeffrey Smith, chief executive of Starboard Value LP, the hedge fund firm that won the October 2014 proxy battle resulting in the complete board change, resigned Monday from the board. ‘I am able to move on to other projects at this time because of the outstanding chemistry and capabilities of both the board and management,’ Mr. Smith said in prepared remarks Tuesday. Charles M. Sonsteby, a current independent director, will replace Mr. Smith as chairman.” WALL STREET JOURNAL
 

Be a Better Leader by Being Yourself

“Becoming a leader does not require adopting a new persona; it means amplifying your true self with focus and discipline. The key is to be authentic—to draw from one’s own experiences, values, and strengths. ‘Authenticity is not a license to be excessively focused on the self,’ says Brooke Vuckovic, an adjunct lecturer of leadership coaching at the Kellogg School. ‘It’s about being aligned with your character and values in order to lead effectively. That takes work.’ So how does a new senior leader achieve this alignment? [Brenda Ellington] Booth and Vuckovic offer five tips for how to lead authentically: 1. Know yourself….  2. Learn to connect…. 3. Be discreet….. 4. Play to your strengths…. 5. Keep requesting feedback….” KELLOGG INSIGHT
 

Anyone Have an Old Family Recipe for Good Governance?

“Companies founded, managed and part-owned by successful entrepreneurial families have garnered a reputation for delivering stronger returns than other listed firms in recent years, thanks in part to the perception of a closer alignment of interests with external shareholders. But a report … showed the former were on aggregate more poorly governed than the latter. As a result of low corporate governance scores, the family-run firms were delivering a smaller so-called ‘family premium’ than their better-managed peers.” FISCAL TIMES
 

Ask Before You Act

“When stakes are high, it can be difficult for leaders, especially senior ones new to their roles, to pause before acting. Here’s advice for how to give yourself time to reflect and lead with questions, based on insights from [former Coca-Cola executive Guy] Wollaert’s and [Target CEO Brian] Cornell’s leadership journeys: Create a questioning ecosystem through diverse teams… Stay curious… Challenge the status quo, and when needed, start from scratch ….” HARVARD BUSINESS REVIEW


Is Your Company Data as Safe as You Believe?

“Businesses face a litany of existential threats: Hostile takeovers, talent departures, unpredictable customer behavior and market fluctuations — all deeply familiar risks that leaders have carefully planned for and assessed over decades. Yet these same leaders are often alarmingly unprepared for the most potentially damaging threat — a massive data breach that could mean the loss of everything … all in a matter of seconds…. The problems begin not with the “techies” in a company, but rather at the very top with the board of directors…. [Researchers] found a worrying gap between presumed and actual corporate readiness for data security incidents and a widespread lack of accountability at the top levels of organizations. That means that some of the world’s largest networks, holding some of our most precious data, are more vulnerable than their leaders believe.” RECODE
 

Succession at Spain’s Telefonica

"Cesar Alierta, one of Spain’s most powerful businessmen, will step down as executive chairman of Spanish telco giant Telefonica after almost 16 years at the helm. He will be replaced by Jose Maria Alvarez-Pallete, currently chief operating officer and Alierta’s right hand man…. The succession was proposed by Alierta, 70… One of the crucial challenges facing Alvarez-Pallete  as new exec chairman will be to monetize at a profit the strong investments in film, TV and digital rights the company is now making as it aims to become one of the four biggest audiovisual content operators worldwide." VARIETY
 

From the Archives

Tapping the Strategic Potential of Boards

“Too many boards just review and approve strategy. Three questions can help them—and executives—begin to do better." MCKINSEY & COMPANY via BOARDSPAN

A Seat at the Table


Apple CEO Tim Cook joins the board of the Robert F. Kennedy Center for Justice and Human Rights, which promotes a just and peaceful world by advancing corporate responsibility, teaching social justice, and partnering with human rights leaders. Whitney Bouck, COO of e-signature solutions provider HelloSign, joins the board of Whitepages, provider of contact info and mobile phone protection services. Myron E. (Mike) Ullman, a former chairman of the Federal Reserve Bank of Dallas and former executive at LVMH Louis Vuitton rejoins the board of Taubman Centers, a REIT whose holdings are concentrated in shopping centers; Ullman also sits on the board of Starbucks is J.C. Penney’s executive chairman. The board of Spirit Airlines, a low-cost airline based in Florida, appoints Comcast Corp. SVP and chief information security officer Myrna M. Soto. TESARO, an oncology-focused biopharmaceutical company, appoints to its board Dr. Kavita Patel, a former senior fellow at The Brookings Institution, as well as a practicing physician at Johns Hopkins. Chicago-based lending startup Avant welcomes Sheila Bair, former chairperson of the Federal Deposit Insurance Corporation, to its board. Restaurant operator El Pollo Loco Holdings welcomes two new directors: William R. "Bill" Floyd, former COO of Taco Bell and KFC, and Carol "Lili" Lynton, co-founder and operating partner of The Dinex Group, which operates 17 Daniel Boulud-branded restaurants.
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