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June 2, 2016 - Issue 2.22 - 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.
Interesting behavior abounds. There are calls for Paypal founder and Facebook director Peter Thiel to resign from the board of the social media giant; Facebook is becoming a powerful media player and is a business partner of Gawker Media, the gossip site Thiel is purportedly trying to sue out of existence. The Viacom board is fighting against the presumed wishes of its largest shareholder and former chief, Sumner Redstone, in an intensifying battle for control of the media empire. The former chief of Valeant Pharmaceuticals, who stepped down amid a massive scandal that cost the company billions, gets a $9 million severance package, while the Theranos founder whose company is under federal investigation for various alleged infractions sees her presumed wealth in the company plummet to zero. And Uber offers up a board seat to its newest investor: a Saudi fund that has made the largest-ever investment by a single investor in a private company: $3.5 billion! For all the news and some fascinating stories on corruption-promoting cultures, CEO pay, and women directors, read on!

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The Hot Seat

 

Should Facebook Board Ask for Thiel’s Resignation?

“By now, the Facebook board should have asked PayPal co-founder Peter Thiel to resign from the social media giant’s board. Thiel has been feeling some heat amid revelations that he secretly funded lawsuits against media outlet Gawker… But when Thiel decided to fund the lawsuits, as morally challenged as many believe those actions to be, he had a duty to inform Facebook’s board that he had a conflict and would need to step down.” FORTUNE
 

"No," Says Sheryl Sandberg

"Speaking at Recode's Code Conference in Los Angeles, Sandberg responded to questions from tech journalist Kara Swisher and a member of the audience, saying that her fellow Facebook director, billionaire Peter Thiel, will remain on the board... 'I know this has been actively discussed here and it should be actively discussed, because issues of independence and the media are key to democracy and key to all of us,' she said. 'Peter did what he did on his own, not as a Facebook board member. We didn't know about it.'" WASHINGTON POST

Across the Board

Curated news and insights from the world's boardrooms.

 

Power Struggle for Viacom Continues…

“Viacom’s directors vowed on Monday to fight any potential moves by the ailing media mogul Sumner M. Redstone and his daughter, Shari Redstone, to eject them from the company’s board. As a power struggle looms over the future of Mr. Redstone’s $40 billion empire, Viacom’s lead independent director said in a letter that an attempt to remove Viacom directors from the board ‘would be completely inconsistent with Sumner’s lifetime commitment to an independent board and professional management for Viacom after his incapacity or death.’ The letter underscores how the board of directors has sided with Philippe P. Dauman, Viacom’s embattled chief executive, in the fight that has erupted over Mr. Redstone’s companies.” NEW YORK TIMES
 

… And Another Redstone Jumps In

“A granddaughter of Sumner Redstone is vowing to take legal action to support Viacom’s board of directors in the escalating fight between the mogul’s daughter and Viacom’s incumbent management for control of the company. Keryn Redstone, a niece of Shari Redstone, has accused her aunt of executing a plan ‘to totally isolate and effectively kidnap, brainwash, and take advantage of my grandfather due to his debilitated state of mind and frail health.’... Keryn Redstone said she would soon take legal steps to ‘join with the Viacom directors in our common cause to liberate my grandfather from Shari’s clutches and protect my fellow trust beneficiaries and myself from her machinations.’" VARIETY
 

Case Study on Corruption: Culture Matters, A Lot

“Four years after receiving more bailout dollars than any other U.S. bank during the financial crisis, Citi defrauded the Federal Housing Administration. Citi admitted to breaking FHA rules, certifying thousands of unqualified mortgages for FHA insurance, and paid a $158.3 million settlement after CitiMortgage whistle-blower Sherry Hunt filed a false claims suit.… How could Citi have prevented this chain of events? Multiple factors [may have] contributed to a culture where unethical behavior could thrive: disorganization, misaligned incentives, physical distance between leaders and employees—and perhaps especially, an unwillingness to seriously engage with dissent.” KELLOGG INSIGHT
 

Women Directors and Higher CEO Pay...

"As reported on Sunday in this NYT column by Gretchen Morgenson, recent data shows that boards with more gender diversity pay higher compensation to their CEOs.  An Equilar analysis of CEO pay at 100 large companies 'found that companies with greater gender diversity on their boards paid their chief executives about 15 percent more than the compensation dispensed by companies with less diverse boards. In dollars, this translated to approximately $2 million more in median pay last year among these companies.' While that doesn’t prove causation of course, as Morgenson explains, '[f]or some reason, I had expected women directors to stand tougher on pay issues.' PUBCO@COOLEY


Fitbit Names First Women Directors

"Fitbit Inc. on Wednesday named its first women to its board, part of a recent movement by tech companies to hire more women as top decision makers. The San Francisco-based maker of fitness trackers, which are popular with women, chose [Williams Sonoma CEO] Laura Alber and [Whole Foods Markets CFO] Glenda Flanagan as directors.... Other tech firms, such as Facebook Inc. and Twitter Inc., added women to their boards of directors following public criticism of their all-white, all-male boards.... More recently, tech firms including image-discovery site Pinterest Inc. have proactively named female board members." WALL STREET JOURNAL
 

For CEO Pay: Shares or Stock Options?

“Executive compensation packages have long been known to influence CEO behavior. Many have studied, for example, how different forms of compensation affect business outcomes from increased risk-taking and innovation to greater acquisitions and divestitures. However, these outcomes are not always positive. Compensation has also been linked to drastically harmful events….I recently conducted research on one part of this question: whether CEOs behave differently when they are given stock options (which have only upside) versus actual shares (which have an upside and a downside).” HARVARD BUSINESS REVIEW
 

$9 Million in Severance for Former Valeant CEO

“Michael Pearson, the former chief executive officer of Valeant Pharmaceuticals International will receive a $9 million severance payment and agreed to a consulting agreement worth hundreds of thousands of dollars, according to a document filed with regulators. Pearson, who left Valeant on May 2 after a year in which it had drawn scrutiny for its sharp drug price increases, financial relationship with a specialty pharmacy and accounting practices, is also eligible for a pro-rated performance bonus for 2016, the separation agreement document said.” REUTERS
 

Theranos Founder Watches Wealth Evaporate

“Last year, Elizabeth Holmes topped the Forbes list of America’s Richest Self-Made Women with a net worth of $4.5 billion. Today,  Forbes is lowering our estimate of her net worth  to nothing. Theranos had no comment.” FORBES
 

$3.5 Billion Investment in Uber Comes with a Board Seat

“Uber said on Wednesday that it had raised $3.5 billion from Saudi Arabia’s Public Investment Fund, the kingdom’s main investment fund. The money was part of the ride-hailing giant’s most recent financing round and continued to value the company at $62.5 billion…. As part of the investment, a managing director at the Public Investment Fund, Yasir Al Rumayyan, will take a seat on Uber’s board, joining Uber’s chief executive, Travis Kalanick, and other directors, including Arianna Huffington.” NEW YORK TIMES
 

Priceline Board Responds To Call For Diversity

“[New York] State Comptroller Tom DiNapoli announced Tuesday that The Priceline Group — which operates travel websites priceline. com, KAYAK and others — has agreed to formally include gender and racial diversity among the qualities it looks for in its board members. The [$178 billion] state Common Retirement Fund, which DiNapoli oversees, had previously submitted a shareholder proposal requesting that the company commit to board diversity. In January, the company added a second female director to the 11-person board, and in April it included in its policies required reporting on steps taken and planned steps to be taken to promote diversity on the board.” ALBANY TIMES UNION

From the Boardspan Archives

Top 10 Signs of  a Dysfunctional Board

"A dysfunctional board of directors has the ability to cause multiple headaches for your business or organization. Not only will a dysfunctional board of directors often fail to make decisions that are in the best interest of the organization, its dysfunction has the potential to move outside the confines of the boardroom, causing negative publicity. Knowing the signs of a dysfunctional board of directors will help you fix the board before larger problems occur." HOUSTON CHRONICLE via BOARDSPAN
A Seat at the Table

★ John Chambers, executive chairman and former CEO of Cisco joins the board of Open Gov, a provider of web-based services to help customers gain insights into government financial and performance data to support decision-making and budgeting and planning processes. ★ David K. Holland, former SVP and treasurer at Cisco, joins the board of enterprise software and networking company Console. ★ Procter & Gamble appoints David S. Taylor, the company’s president and CEO, to the role of chairman, following the retirement of current executive chairman and former CEO A.G. Lafley. ★ Bio-pharmaceutical company Alkermes welcomes to its board Nancy Snyderman, M.D., an otolaryngologist-head and neck surgeon and former chief medical editor at NBC News. ★ Paul Boris, head of manufacturing industries for GE Digital, joins the board of Vuzix, maker of video eyewear and smart glasses.★
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