August 11, 2016 - Issue 2.32 - 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.
Establishing appropriate executive pay is a pain point for a lot of boards: What’s the right package? What’s the right process for determining it? Some of the biggest names in tech are now “disrupting” the common practice of linking pay to performance, potentially opening the door to a new era of compensation practices. Meanwhile, a Texas A&M study questions whether boards can be effective monitors of executive performance. And, speaking of effectiveness, you might improve yours by better understanding your leadership style. Read all about it in this week’s issue.

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The Hot Seat

Are Boards Designed to Fail?

"Many businesses believe that once they grow to a certain point, they require a board of directors to oversee operations. But a study by researchers at Texas A&M University determined that boards are not as effective at protecting shareholders from executive mismanagement or malfeasance as they are intended to be….  In a paper entitled 'Are Boards Designed to Fail? The Implausibility of Effective Board Monitoring,' published in the Academy of Management Annals journal, Boivie and his colleagues argued that the size and complexity of the company, the number of directors and their outside obligations, and ‘group-level factors’ preclude the board from effectively monitoring executive behavior." BUSINESS NEWS DAILY

Across the Board

Curated news and insights from the world's boardrooms.

Tech Leaders Adopt New Models for Exec Pay

“ Inc., Alphabet Inc. and Facebook Inc. have upended the establishments in retailing, advertising and media — so it may not come as a surprise that their pay plans are unusual too. The three set themselves apart from other Standard & Poor’s 500 Index companies by paying bosses almost exclusively in stock grants that are free from any links to performance goals.… ‘A pay program that isn’t strictly bound to a formula gives the board more latitude to adjust to situations in real time,’ said Steven Hall Jr., a consultant at executive compensation advisory firm Steven Hall & Partners. ‘And how much detail do you really want to disclose in proxy filings and reveal to competitors?’” BLOOMBERG

Why Boards Still Lack Diversity—and How to Change That

“Many companies are buckling down on their diversity efforts, some with better results than others. But most of those initiatives focus on employee bases, with few businesses giving the same attention to diversity at the board level. That's a problem. Here's why it persists and what it will take to fix it 1. Most New Board Members are CEOs and CFOs... 2. Many New Board Members are Retirees... 3. Many Believe That Only Engineers Really Understand Tech" [Plus, Reasons 4…5…6…] FAST COMPANY

What’s Your Leadership Style? Plus, A Quiz

“Why is it important to gain clarity about the leadership style that fits each of us best? Because the more we understand about ourselves — what we truly care about, how we make decisions, why we do what we do — the more effective we will be at marshaling the support of others for what we hope to achieve. In a time of wrenching disruptions and exhilarating advances, of unrelenting turmoil and unlimited promise, there have never been more roads to success — or more opportunities to fail.” HARVARD BUSINESS REVIEW

Southwest Airlines Board Backs CEO

“Southwest Airlines Co.’s board made no bones about its response to the labor groups that called for the ouster of two top executives: They’re not going anywhere. After the carrier’s four largest unions earlier this week called for Chief Executive Officer Gary Kelly and Chief Operating Officer Mike Van de Ven to step down, directors fired back in a letter Friday saying they have 'no intention' of removing either executive from his position.” BLOOMBERG

Lululemon Director Steps Down

"One of Lululemon Athletica's longest-serving board members, recently the source of online speculation over her identity and background, has stepped down, according to a company filing posted on Tuesday. Rhoda Pitcher, who has been on the yoga clothing maker's board since 2005, stepped down on Aug. 3, the company said in a U.S. Securities and Exchange Commission filing, adding her departure 'is not due to any disagreements with us on any of our operations, policies or practices.'" REUTERS

Troubled Lending Club's New Board Member is Fannie Mae's CEO

“Lending Club may not be involved in mortgage lending, but its newest board member certainly is. The online lender, which is currently in a state of upheaval and under investigation after the sudden departure of its founder and CEO, Renaud Laplanche, in May, announced Monday that it is adding Timothy Mayopoulos, the CEO of Fannie Mae, to its board of directors.” HOUSING WIRE

From the Boardspan 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…. 1. Does the board understand the industry’s dynamics well enough?... 2. Has there been enough board–management debate before a specific strategy is discussed?... 3. Have the board and management discussed all strategic options and wrestled them to the ground?" MCKINSEY & CO via BOARDSPAN

A Seat at the Table

  • Chevron elects two new directors: Dr. Dambisa Moyo, an economist and former CEO of Mildstorm, who previously work ed Goldman Sachs and the World Bank; Dr. Wanda Austin, former CEO of The Aerospace Corp.
  • Dr. Mahi de Silva,  formerly CEO of Opera Mediaworks, of ADMarvel and of Frengo,  joins the board of Nanotech Energy, developer of super-battery and super-capacitor storage devices.
  • Jeffrey S. Stein, managing partner of financial advisory firm Stein Advisors, joins the board of Westmoreland Coal Company.
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