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October 20, 2016 - Issue 2.42 - 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.
Boards under scrutiny: Even as former Wells Fargo CEO John Stumpf vacated his board seats at Target and Chevron in the wake of the “cross-selling” scandal that cost him his job, the California Department of Justice yesterday announced it is conducting a criminal investigation of Wells Fargo, seeking evidence of identity theft when the bank opened millions of accounts without customer’s permission. Critics suggest that 1) the board should have noticed the evidence of wrongdoing earlier; 2) it should have split the CEO and chair roles—pairing Stumpf with a strong overseer; and 3) at a minimum, it should have sent strong signals that it valued propriety above profits. Congresswoman Maxine Waters is now questioning whether the Wells Fargo board, even today, is supportive of real structural and cultural change since it appointed as its new CEO Tim Sloane, a 29-year Wells Fargo veteran. Meanwhile at Facebook, CEO and chair Mark Zuckerberg apparently received enough negative feedback that he felt obliged to defend much-maligned board member Peter Thiel after Thiel’s $1.25 million donation to the Trump campaign. Any board facing criticism might consider what it needs to do to ensure the public’s trust—one thing that no successful business can be without. Read on to learn the basics for building, or rebuilding, trust.

The Hot Seat
 

California Opens Criminal Investigation Into Wells Fargo accounts

“The California Department of Justice is investigating Wells Fargo & Co. on allegations of criminal identity theft over its creation of millions of unauthorized accounts, according to a search warrant sent to the bank’s San Francisco headquarters this month.” LOS ANGELES TIMES
 

Boards of Chevron and Target Bid Adieu to John Stumpf

"John Stumpf, who resigned last week as CEO of Wells Fargo amid a widening banking scandal, Tuesday has given up two other lucrative boardroom positions. Stumpf resigned from the board of directors of both energy giant Chevron and retailer Target effective immediately, according to regulatory filings…. USA TODAY reported last week that Stumpf had collected a combined $648,258 from sitting on the boards of directors at the two companies in 2015, in addition to what he was making as an executive at Wells Fargo. Despite retiring from Wells Fargo, he still departed from the bank with Wells Fargo stock valued at $134.1 million….” USA TODAY
 

Questions Arise About Wells Fargo Board's Choice of New CEO

“If Wells Fargo’s board had hoped John G. Stumpf’s resignation on Wednesday and the appointment of Timothy J. Sloan as the new top executive would instantly quell the bank’s numerous critics, they were mistaken. Within hours of the announcement, a member of Congress and other critics were already dismissing Mr. Sloan as the wrong man to make the big changes the bank needs to move past its current predicament over the creation of as many as two million phony accounts.” NEW YORK TIMES

Across the Board

Curated news and insights from the world's boardrooms.


Zuckerberg Defends His Trump-Backing Board Member...

"Mark Zuckerberg defended Facebook board member Peter Thiel's $1.25 million donation to Donald Trump's presidential campaign in an internal Facebook post to employees of the giant social network. ‘We can't create a culture that says it cares about diversity and then excludes almost half the country because they back a political candidate,’ Zuckerberg wrote. ‘There are many reasons a person might support Trump that do not involve racism, sexism, xenophobia, or accepting sexual assault.’” USA TODAY


... But Others in Silicon Valley Would Not

“One of Silicon Valley's most prominent venture capitalists said he would ‘absolutely’ kick a major Donald Trump campaign donor off his board, taking aim at Peter Thiel. ‘Absolutely,’ Chamath Palihapitiya [founder and CEO of venture capital firm Social Capital] said. ‘But that's a personal choice. I would.” [Plus opinions from Y Combinator president Sam Altman, Project Include co-founder Ellen Pao, Mary Meeker of Kleiner Perkins Caufield & Byers, and Box co-founder and CEO Aaron Levie.] CNBC


When The Time Comes to Rebuild Trust

“For a variety of reasons — including the incentives they have been given by their boards of directors, the demands of shareholders, and the general pressure of day-to-day expedience — leaders are swayed by the allure of short-term gains over the pursuit of long-term success. It’s no wonder that, over the past several years, companies have had disconcertingly low levels of employee and consumer engagement.... Many employees and customers have adopted mistrust as a way of life, assuming that every big mainstream business will sooner or later fail to live up to their expectations…. How, then, do you go about building a high-trust, self-governing enterprise? It’s tempting to think that you can do this by taking immediate action: dashing off a memo that espouses the benefits of shared values, deep purpose, and accountability, and then putting in place the necessary incentives. But the most effective way to start is to pause.” STRATEGY+BUSINESS
 

Visa CEO Steps Down...

"Visa Inc. said Chief Executive Officer Charles Scharf is resigning after advising the board that he can no longer spend enough time in San Francisco ‘to do the job effectively.’ The San Francisco-based payments network said Mr. Scharf will be succeeded by Alfred Kelly, 58 years old, a member of Visa’s board and a former president at American Express Co. In an interview, Mr. Scharf said he needs be closer to his family in New York.” WALL STREET JOURNAL  
 

... Creating an Opening for Al Kelly, Once a Rising Star at AmEx

“One of the questions leaders need to ask when they are losing an employee is how they will feel if he or she goes to work for a competitor. If the employee isn’t good enough for their own organization, they should be pleased if a competitor is stupid enough to hire that person. This does not seem to be the case with American Express and Al Kelly. Kelly was a rising star at American Express for over two decades. He left in 2010 reportedly because he did not see a path to CEO at American Express. Since then he’s done some interesting things in and around New York, sports, wifi and the like. But CEO of Visa is exactly what Kelly must have had in mind when he left American Express.” FORBES
 

Diversity Takes Precedence, Thanks to Some Activist Investors

“Although it manages only about $2 billion, Boston-based Trillium is one of a handful of activist investors that punch way above their weight when it comes to pushing diversity. These activists have prodded some of the largest public companies in the world to add women and minorities to their boards, to disclose data about the race and gender of their workforces, and to protect LGBTQ employees. This year, these David-size firms zeroed in on some tech Goliaths to get them to close the gap between what men and women make… As they begin working on their agenda for the 2017 proxy season this fall, these crusaders for diversity say pay equity remains a main focus as it gains national attention.” BLOOMBERG
 

SEC to Make It Simpler to Vote for Investors' Board Candidates

“The Securities and Exchange Commission is expected as early as next week to propose rules that would make it easier for shareholders to vote on board candidates nominated by investors, in competition with those pushed by the company’s management, according to people familiar with the matter. The new rules focus on what is known as a ‘universal ballot,’ a single voting form in contested corporate elections. Currently, voters in contested elections receive two sets of ballots, each featuring a rival slate of board candidates.” WALL STREET JOURNAL
 

Caterpillar Splits Chair and CEO Roles

“Jim Umpleby will be the first Caterpillar Inc. chief executive in a quarter-century to run the equipment-making giant without control over the board as well, a big shift that mirrors U.S. trends in corporate governance.Caterpillar’s next chairman will be Dave Calhoun, 59 years old, a former chief executive of Nielsen Co. BV and current executive at private-equity firm Blackstone Group L.P... A Caterpillar spokeswoman wouldn’t say why the Peoria, Ill.-based maker of construction and mining equipment decided to split the roles for the first time since 1990. Some shareholders have pressed the board to do so.” WALL STREET JOURNAL

 
Activist Firm Has Its Way with Stewart Information Services

“Stewart Information Services Corp. is reshaping its board by adding three independent directors and its chief executive officer to the panel as part of a settlement with its biggest shareholder, activist investor Starboard Value LP. Stewart CEO Matthew Morris and Clifford Press -- a former Morgan Stanley banker who founded his own investment companies -- will join the property-title insurer’s board immediately, the company said in a statement Tuesday. They replace Malcolm Morris and Stewart Morris, who agreed to resign. Stewart is searching for two additional independent directors to replace Laurie Moore-Moore and Frank Keating, who will step down once replacements are found. The changes mean eight of Stewart’s nine directors will be independent.” BLOOMBERG
 

Investor Seeks Board Seats at Pier 1 Imports

“A New York hedge fund that owns a big stake in Pier 1 Imports wants seats on the company’s board of directors and is threatening to ask shareholders to force changes, according to a letter sent to the Fort Worth-based retailer’s board. The letter from Alden Global Capital requests that the nine-member board add its president, Heath Freeman, to help in its search for a new CEO and then add other directors. If the board refuses, Alden said it might pursue a consent solicitation seeking to replace current board members.” STAR-TELEGRAM

From the Archives

Cultivating Trust Is Critical—and Surprisingly Complex

“A long history of research demonstrates that trust can be broken down into three components: competence, honesty, and benevolence. To trust someone’s competence is simply to believe that the person or entity you deal with has the ability to do the job—to provide you with Internet service, for example. Honesty—or integrity—refers to your sense that your Internet service provider keeps its promises and is not telling lies about your connection speed or hiding fees. Benevolence is the belief that your Internet provider has your best interests at heart and cares about you as a customer…. Leaders, companies, and brands have a lot to gain from developing a systematic understanding of the components of trust and determining how they can score better on each. 'One thing we’ve found is that you can build trust on one of these three dimensions and still be weak on others. A leader may not realize that he or she is trusted in one dimension but not across all dimensions,' Grayson says. 'The same holds true for companies and brands.' KELLOGG INSIGHT via BOARDSPAN

A Seat at the Table

  • Amy L. Chang, CEO and founder of relationship intelligence platform Accompany and former head of product at Google, joins the board of networking giant Cisco
  • Electrical weapons and bodycam maker TASER International appoints to its board Matthew R. McBrady, former CIO for BlackRock's flagship Multi-Strategy hedge fund
  • Robert Bradway, CEO of biotechnology firm Amgen, is elected to the Boeing Co.’s board of directors
  • Grubhub, the online food-ordering platform, elects two new directors to its board: Linda Johnson Rice, chairman of Johnson Publishing Company and chairman emeritus of EBONY Media Holdings; and David Habiger, a successful entrepreneur, former public company CEO and experienced corporate director
  • The Ad Council, a non-profit organization and the largest U.S. producer of national public service campaigns, elects a dozen new members to its board, which is led by chair Margo Georgiadis, president of Americas for Google, including: Elizabeth Weil, managing partner at 137 Ventures; Ed Erhardt, president, global sales & marketing at ESPN; Tim Castelli, president, national sales at iHearMedia; Tamara Ingram, CEO of J. Walter Thompson; Ty Shay, CMO of LifeLock; Scott L. Kauffman, chairman & CEO of MDC Partners; Steven Wolfe Pereira, chief marketing and communications officer, Neustar; Seth Rogin, president & CEO, Nucleus Marketing Solutions; Cory Treffiletti, VP, marketing and partner solutions at Oracle; Jon Kaplan, head of global sales at Pinterest; Konrad Feldman, CEO and co-founder of Quantcast; and Diego Scotti, CMO of Verizon
  • The board of directors of Brand USA, the public-private partnership that markets the United States as a travel destination, elects as its board chair, Tom Klein, president and CEO of Sabre, the flight booking tech company; Klein succeeds former chair Arne Sorenson, president and CEO of the Marriott International hotel group
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