November 17, 2016 - Issue 2.46 - 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.
When employees share their concerns or whistleblowers make noise, it doesn't hurt to listen. Yesterday, the Wall Street Journal published an intimate look into the experience of the man who apparently went public with his concerns that the company was fudging its research—an employee who landed his job through his connection to Theranos director and former Secretary of State George Shultz, who happens to be the man's grandfather. (It's quite a read.) This week several major shareholders said they are looking for changes to the Wells Fargo board in the wake of the false-accounts scandal that cost the company its CEO—a scandal that some say was first revealed to the board by whistleblowers five years ago. Meanwhile, a new study shows that the quotas some European countries have put in place to ensure gender diversity on boards has resulted not only in more female directors, but an overall positive experience for directors and more professionalism in the recruiting process.

Enjoy this week's issue and ... have a Happy Thanksgiving! We won't publish next week, but will see you back here on December 1.

The Hot Seat

The Whistleblower & His Grandfather, A Theranos Director

“After working at Theranos Inc. for eight months, Tyler Shultz decided he had seen enough. On April 11, 2014, he emailed company founder Elizabeth Holmes to complain that Theranos had doctored research and ignored failed quality-control checks. The reply was withering. Ms. Holmes forwarded the email to Theranos President Sunny Balwani, who belittled Mr. Shultz’s grasp of basic mathematics and his knowledge of laboratory science, and then took a swipe at his relationship with George Shultz, the former secretary of state and a Theranos director. ‘The only reason I have taken so much time away from work to address this personally is because you are Mr. Shultz’s grandson,’ wrote Mr. Balwani to his employee in an email... Mr. Shultz quit the same day. As he was leaving Theranos’s headquarters in Palo Alto, Calif., he says he got a frantic cellphone call from his mother, who told him Ms. Holmes had just called the elder Mr. Shultz to warn that his grandson would ‘lose’ if he launched a vendetta against the blood-testing startup.WALL STREET JOURNAL

Across the Board

Curated news and insights from the world's boardrooms.


Is It Time for a Female Quota for U.S. Boards?

“More than a decade ago, countries in Europe began to take measures to increase the gender diversity of their corporate boards. Norway was the first to adopt a quota for female board members (40%) in 2004. Other nations followed suit – adopting either mandatory quotas (Germany, France, Belgium, Iceland, Italy) or voluntary goals (Austria, Finland, the Netherlands, Spain, Sweden, the UK), with goals for female representation ranging from 25% to 40%. The U.S. is now among the few Western developed economies with neither voluntary nor mandatory targets. Female board representation at the S&P 500 has not increased significantly over the past decade and, at 18.7%, pales in comparison to the figures in most of Europe…. We found that the imposition of quotas and goals has resulted not just in greater gender diversity, but to a more professional and formal approach to board selection.HARVARD BUSINESS REVIEW

Investors: Wells Fargo Board Ready for a Shakeup

“In the wake of its retail-banking scandal, does Wells Fargo & Co. need a stagecoach filled with new directors? That's the view of some investors who believe the bank's board may require an overhaul because it was slow to tackle and disclose the practices that led to more than 2 million accounts being opened without customer consent, according to a Reuters report on Tuesday. They're irked by the board's size, directors' outside commitments and fuzziness around their exact responsibilities, as well as the initial response to the situation, which led to a $185 million fine. Perhaps they view a shakeup as a way to protect against future crises and reputational damage, considering how badly brand sentiment has plummeted.” BLOOMBERG

Qualities Shared by Great CEOs

“CEOs differ meaningfully from the overall executive population across many personality attributes. Two traits in particular stand out: an ability to embrace appropriate risks and a bias toward acting and capitalizing on opportunities. We consider these traits the ‘essence’ of the CEO personality. … In addition, six other traits differentiate the typical CEO from other executives on a statistically significant basis: drive and resilience; original thinking; the ability to visualize the future; team building; being an active communicator; the ability to catalyze others to action.” HARVARD BUSINESS REVIEW

Now What Happens to “Say on Pay” & Other Dodd-Frank Rules?

“Donald Trump, who was elected U.S president last week largely on support from working-class voters, could scrap rules designed to make pay in corporate America more egalitarian if the Republican follows through on a promise to dismantle the Dodd-Frank Act. Crafted in the aftermath of the 2008 financial crisis, the law contains provisions that strengthen investors’ ability to restrain outsized pay packages for company chiefs. The bill requires clawback provisions, advisory votes on executive compensation and mandated disclosure of a CEO-to-worker pay ratio…. Two days after the Nov. 8 vote, Trump published plans to scrap Dodd-Frank and ‘replace it with new policies to encourage economic growth and job creation.’ Overturning it could reduce leverage over corporate boards enjoyed by institutional investors, who serve as stewards for American savers.” BLOOMBERG

Directors Like Their Seats

“Forget the warnings about the deterrent effect of increasing workload, growing risks and uncertainties, burdensome regulations and intensifying scrutiny — all of which, by the way, are true, and have been for at least the past 15 years. Nothing seems to drive directors away from the boardroom once they have had a taste of it. There is, however, one shadow that hangs over board members’ ambitions to stay put: refreshment — the need for companies to bring new and different directors into the boardroom. More than a third of US board directors believe someone on their board should step down, a figure that has stayed steady since PwC started asking the question for its annual survey of US boards in 2012. But while boards assess directors’ skills more than they used to, only half of directors said their company had made any changes to the board after these self-evaluations.” FINANCIAL TIMES

Longtime Goldman-Sachs Adviser Now Chair of Evercore

“Until last year, John S. Weinberg was a top corporate adviser at Goldman Sachs, a high-powered executive at the firm where his family built a banking dynasty. Now, he is moving to a newer Wall Street firm, taking one of its most senior posts. The investment bank Evercore Partners said on Wednesday that it had hired Mr. Weinberg as its executive chairman and chairman of its board. Roger C. Altman, a co-founder of the firm and its current executive chairman, will take the new role of senior chairman, while Ralph L. Schlosstein will remain chief executive.” NEW YORK TIMES

From the Boardspan Archives

Governance Operating Model: A Tool for Oversight

"A governance operating model, which defines the mechanisms and interactions through which governance is put into action, can be an important tool for boards to enhance their oversight capabilities while enabling management to implement governance initiatives. 'A governance operating model supplies the "how" that board members seek and can reveal gaps or shortcomings in board or management committee charters,' says Bob Contri, vice chairman, Deloitte LLP, who leads the U.S. Financial Services industry group and U.S. Banking and Securities sector." DELOITTE via BOARDSPAN

A Seat at the Table

  • Real estate brokerage Redfin appoints two new board members: Robert J. Bass, a former VP at Deloitte, and Julie Bornstein, COO of Stitch Fix and previously CMO at Sephora
  • Online marketplace Etsy welcomes to its board Josh Silverman, former president of consumer products and services at American Express and former CEO at Skype,, and Evite
  • Off-price retailer Burlington Stores appoints to its board Ted English, former president, CEO and director of The TJX Companies and current executive chairman of Bob’s Discount Furniture
  • Darden Restaurants, operator of the Olive Garden chain and others, elects to its board Nana Mensah, chairman and CEO of 'XPORTS and was formerly COO of Church's Chicken and of Long John Silver's Restaurants
  • Hilton Worldwide Holdings introduces the board of Park Hotels & Resorts, its real estate and timeshare businesses due to be spun-off around year end:
    Patricia Bedient, retired EVP and CFO of paper products company Weyerhaeuser, Gordon Bethune, retired chairman and CEO of Continental Airlines, Robert G. Harper, head of U.S. asset management for the Blackstone real estate group, Tyler S. Henritze, senior managing director in the real estate group for The Blackstone Group and co-head of U.S. acquisitions for Blackstone, Christie B. Kelly, EVP and CFO of commercial real estate firm Jones Lang LaSalle, Senator Joseph I. Lieberman, senior counsel with Kasowitz Benson Torres & Friedman and former Democratic senator from Connecticut, Timothy J. Naughton is chairman, CEO and president of AvalonBay Communities, a publicly traded real estate investment trust or REIT, and Stephen I. Sadove, a founding partner of private management and investment firm JW Levin Management Partners
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