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April 28, 2016 - Issue 2.17 - 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.

Shape shifting. It’s nothing new to find hedge funds using their investment muscle to reshape boards and thereby companies, but Starboard Value is really showing us how it’s done: just yesterday the fund picked up four seats on the Yahoo board and more at chipmaker Marvell Technologies. Meanwhile, the $300 billion pension fund CalPERS is using its substantial might to ensure that corporations are taking climate change seriously by requiring companies it invests in to appoint directors with expertise in climate change risk management strategies. Though public scrutiny has already shifted the board structure of beleaguered blood-testing company Theranos, onlookers are now trying to dissect just how the $9 billion company, and its board, got into such hot water. And in an effort to up its EQ, ride-sharing unicorn Uber welcomes the first woman to its board: online media powerhouse Arianna Huffington. All this and much more in this week’s Director’s Domain.

The Hot Seat


Theranos Critics Ask: Where Was the Board?

“Theranos—a privately held company valued at $9 billion—has advertised its proprietary medical technology as being 'transformative,' enabling laboratories to run scores of medical tests with merely a finger-prick of blood. The fast-growing startup is now under civil and criminal investigations by the U.S. Securities and Exchange Commission, the Department of Justice and federal health regulators…. Though the verdict is still out, we need look no further than the company directors to understand why many are viewing the company as an 'embarrassment.' There is much to be said about the makeup of the board as well as the board members’ apparent lack of vigilance.... At the end of the day, the difference between an effective board and a failing board boils down to whether or not there is a social system of respect, trust and candor among members of management.”  FORBES
 

More Theranos: Don’t Blame Silicon Valley

“It is tempting to see Theranos as another example of Silicon Valley hype — a company based on a wisp of an unproven idea becomes a multibillion-dollar phenomenon with the backing of pump-and-dump venture capitalists. In fact, however, Silicon Valley’s most experienced investors in start-ups saw red flags at Theranos before anyone else. The Theranos saga shows just how well Silicon Valley does its homework, especially when considering medical technology, in which the risks of doing real harm to people are higher than those posed by the next photo-sharing app.” NEW YORK TIMES

Across the Board

Curated news and insights from the world's boardrooms.

 

Uber Picks Up Arianna Huffington

“Arianna Huffington, the co-founder and editor in chief of the Huffington Post (and an Uber investor already), has joined Uber’s board of directors, company CEO Travis Kalanick announced today…. Huffington brings an ‘emotional intelligence’ the company is lacking to the table, Kalanick wrote in a blog post. Indeed, Huffington’s involvement in the company may help Uber in its quest to soften its image.” [Huffington is the first woman to join the eight-person board.] RECODE
 

Yahoo Board Bends, But Doesn't Break

"Yahoo on Wednesday announced a deal that should end a nearly year-long tussle with a New York hedge fund that had threatened to unseat its entire board. Starboard Value has been a vocal critic of the tech giant, which has struggled to profit from its massive online audience. Last month, Starboard called for Yahoo's entire board of directors--including Marissa Mayer, Yahoo's chief executive, and H. Lee Scott, the former president of Wal-Mart--to be replaced. The hedge fund submitted a slate of hand-picked board members to stand for election on during Yahoo's next shareholder meeting. Instead, Yahoo said Wednesday it will add four board members chosen by Starboard, including the hedge fund's founder, Jeff Smith. They will join the board immediately." WASHINGTON POST
 

Starboard Value Flexing Activist Muscles

“Starboard Value is an activist investor on a roll. Starboard, a New York hedge fund, claimed two victories on Wednesday alone: settlements in its long-contentious battle with the Internet giant Yahoo and in a short-lived campaign at the chip maker Marvell Technologies. Starboard’s newly won board seats are the latest achievements for a hedge fund that has become one of the most prominent practitioners of shareholder activism, in which investors prod company management to change corporate strategies.” NEW YORK TIMES
 

Wanted: Climate Change Experts

"In an effort to highlight the potential impacts of global warming, the nation’s largest public pension fund is asking corporations to include climate change experts on their governing boards. On Monday, the investment committee for California Public Employees' Retirement System (CalPERS) voted to start requiring the corporations it invests in to include people on their boards who have expertise in climate change risk management strategies. It is the first U.S. pension system to establish such a requirement, which comes months after California experienced the largest gas leak in U.S. history and the state's largest oil spill in decades." GOVERNING
 

Valeant Chooses Former Rival for CEO, Chair

Valeant Pharmaceuticals Inc. tapped a drug-industry veteran to be its next chairman and chief executive as it seeks to rebuild tattered investor confidence. Valeant hired Joseph Papa, 60 years old, from Dublin-based rival Perrigo Co. after weeks of talks. The discussions ended Monday morning after Perrigo alerted Valeant that it wouldn’t seek to enforce Mr. Papa’s employment contract which restricts him from working for a competitor….Perrigo said its president, John Hendrickson, will replace Mr. Papa as CEO. [And Laurie Brlas has been named chairman of the Perrigo board of directors.] WALL STREET JOURNAL


British Boards Still Mostly Male

“Britain has fallen behind other European countries in efforts to get more women on to company boards, with research showing women occupy less than a quarter of all UK board positions. With women in 23.2% of board seats last year, Britain falls short of the European average of 25%. That compares with 38.7% in Norway, which has a 40% mandatory target and still tops the table, according to research by European Women on Boards (EWoB), a network which includes Britain’s Institute of Directors.” THE GUARDIAN


How to Give Women a Better Shot at the C-Suite

“There are more CEOs of large U.S. companies who are named David (4.5%) than there are CEOs who are women (4.1%) — and David isn’t even the most common first name among CEOs. (That would be John, at 5.3%.) Despite the ever-growing business case for diversity, roughly 85% of board members and executives are white men. This doesn’t mean that companies haven’t tried to change. Many have started investing hundreds of millions of dollars on diversity initiatives each year. But the biggest challenge seems to be figuring out how to overcome unconscious biases that get in the way of these well-intentioned programs. We recently conducted research that suggests a potential solution.” HARVARD BUSINESS REVIEW


Primer on Audit Committees: Who, What, Why

“As an IT or cybersecurity professional or even if you are a vendor (sorry I meant solution provider) who is climbing the organizational ladder (or just trying to stay employed), sooner or later you will cross paths with the audit committee – whether appearing in person or helping your boss prepare for a meeting… This can be a great opportunity to showcase your contributions and value to the organization, and can serve as an opening for additional budget and career opportunities. But before you make your play, you should know who you are playing with…” CSO ONLINE


ISS Study on CEO Pay Comes Under Fire

“Institutional Shareholder Services (ISS) published a report in March 2016 arguing that CEO compensation is impacted by companies' board structures. More specifically, ISS argues that CEOs of companies with boards chaired by an ‘insider’ have higher compensation than CEOs of companies with boards chaired by an ‘outsider.’ Given ISS's orientation toward one-size-fits-all corporate governance scorecards—and the fine print found on the last page of the report (warning readers that the information may not be accurate and that anyone who relies on the information does so at his or her own risk), we decided to dig into the report's findings before accepting its conclusion. We think that our caution was warranted….” JONES DAY

From the Archives

How Strategic Is Your Board?

“Many corporate boards lack clarity about their role in strategy. A structured assessment of the board’s strategic responsibilities—and how these should evolve if the company’s competitive context shifts—can change that.” MIT SLOAN MANAGEMENT REVIEW via BOARDSPAN

A Seat at the Table


Ellen Kullman, former CEO and chair of DuPont, joins the board of 3D printing startup Carbon. Concurrent with the closing of a $50 million Series C financing, the online publishing platform Medium welcomes to its board JLabs CEO Judy Estrin and venture capitalist Ben Horowitz, and bids farewell to David Sze, managing director at Greylock Ventures. Self-service data analytics company Alteryx appoints Chuck Cory, former chairman, technology investment banking at Morgan Stanley, and Tim Maudlin, an independent financial services professional, to its board. U.S. Steel welcomes to its board Stephen J. Girsky, president of advisory firm S.J. Girsky & Company, and a General Motors director. Marc Stoll, formerly in executive roles at Anaplan and Apple, joins the board of network services provider EarthLink Holdings Corp. Anaplan, an enterprise planning cloud company, appoints David F. Conte, CFO of Splunk, a software platform for real-time operational intelligence.  Supercomputer maker Cray Inc. welcomes to its board Brian V. Turner, former CFO of Coinstar, Inc.Grocery wholesaler and retailer Supervalu Inc., appoints to its board Mary Winston, former EVP and CFO of Family Dollar Stores. Curtis Feeny, managing director of Voyager Capital, Deb Henretta, former group president of global e-commerce at Procter & Gamble and John Lundgren, chairman and CEO of Stanley Black & Decker, all join the Staples board. ★ Rashmy Chatterjee, CMO for IBM North America, joins the board of Mouse, a national youth development nonprofit that empowers students to use technology as a force for good. Heat Biologics, an immuno-oncology company, appoints to its board John Prendergast, PhD, a co-founder of biopharmaceutical company Palatin Technologies. Catherine A. Kehr takes the chair at Southwestern Energy Co., after serving as independent director for five years.
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