January 19, 2017 - Issue 3.3 - 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.
Ch-ch-ch-ch-changes. On the eve of the presidential inauguration, the news is thick with reports about the new administration: Incoming Transportation Secretary Elaine Chao will apparently continue receiving substantial compensation from Wells Fargo related to her prior role as a director at the bank. General James Mattis has reportedly left his board seat at Theranos to prepare for his new role as Defense Secretary. And President-elect Donald Trump’s lack of board service is examined—would he have a better sense of conflict of interest if he had ever sat on a public company board? Meanwhile, boards across the country are looking at expected changes to the economy, regulations, and more and wondering what’s in store for them. To answer this question and more, we’ve just released Boardspan’s Guide to 2017: 8 Key Issues Boards Face This Year, which we link to below. Please have a read and pass it on to colleagues who would benefit from knowing what to expect in the boardroom. We look forward to keeping you up-to-date and ready for what 2017 holds, all year long.

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The Hot Seat


Boardspan's Guide to 2017
or 8 Key Issues Boards Face This Year

By almost all measures, 2017 is expected to be a year of intense change. How will the dynamics of political, economic, technological, and cultural transitions affect your organization? We don’t have a crystal ball—but years of experience and frequent exposure to the boardroom offer us a vantage point on the issues many of you will be facing. The key to your board’s success this year, and every year, will depend on having the right people and the right information to meet any challenge. What’s “right” has a lot to with the kinds of challenges you might face and the opportunities you shouldn’t miss. That’s where our list of eight hot topics comes in—these are the subjects we believe most boards will spend time on this year. We invite you to consider these themes, strike those that don’t apply and add specific items you think will be crucial for your organization this year. This type of thinking will give you a great jumpstart on your agenda for 2017! BOARDSPAN

Across the Board

Curated news and insights from the world's boardrooms.

Why Trump’s Lack of Board Service May Prove Troubling

“President-elect Donald Trump’s lax approach to managing his conflicts of interests may seem shocking, given the awesome responsibility of running the most powerful nation on Earth. But a cursory look at Trump’s career suggests we shouldn’t be so too surprised. Unlike many corporate leaders today, Trump has never served on a company’s board of directors other than his own. In other words, Trump has only been really responsible for one shareholder: himself. ‘His lack of (outside) experience has made him less sensitive to what it means to be responsible to others,’ said Philip Nichols, professor of legal studies and business ethics at the University of Pennsylvania’s Wharton School. For business leaders, joining a board, especially at a major corporation, offers prestige and a possible big pay day, since companies usually compensate directors with a retainer and restricted stock. But becoming a director also carries legal responsibilities — that you must act in the best interest of shareholders and avoid conflicts of interests.” SAN FRANCISCO CHRONICLE

Wells Fargo Director to Get Payout While Serving Trump Administration

“Elaine Chao, Donald Trump’s nominee to lead the Department of Transportation, is in line to receive a ‘golden parachute’ from Wells Fargo & Company worth between $1 million and $5 million dollars. Chao, who joined Wells Fargo as a board member in 2011, has collected deferred stock options —  a compensation perk generally designed as a long-term retention strategy — that she would not be able to cash out if she left the firm to work for a competitor. Her financial disclosure notes that she will receive a ‘cash payout for my deferred stock compensation’ upon confirmation as Secretary of Transportation. The document discloses that the payments will continue throughout her time in government, if she is confirmed…. ‘This is a golden parachute for government services that the large banks are now increasingly famous for offering. It is not illegal yet, but it does provide the former employee with substantial financial rewards from Wells Fargo, potentially creating a sense of indebtedness from the government official toward the bank,” says Craig Holman, an ethics expert with Public Citizen who reviewed Chao’s disclosure forms and Well Fargo’s executive compensation agreement.” THE INTERCEPT

3 Things Problem-Solving Boards Watch For

"When an organization fails because of executive malfeasance, it generates a lot of attention. But such situations are actually relatively rare. It’s much more common, though less talked about, for organizations to fail because of ungoverned incompetence. That is, someone does the wrong thing while trying to do the right thing, and organizational systems fail to catch it and contain it. This becomes more likely as the organization takes on strategic risk — through innovation, mergers and acquisitions, or because its environment is becoming more volatile. Boards that focus on problem-finding put their organizations on safer footing. Problem-finding boards establish structures and processes that prevent many problems from arising and stifle nascent problems quickly and effectively. Problem-finding boards understand the three drivers of ungoverned incompetence — a collapse of competence, shortcomings in self-governance, and inadequate corporate governance — and why they can be so hard to detect." HARVARD BUSINESS REVIEW

The “Old Girls Network” of Corporate Governance?

“Once a year, a small group of executives who control trillions of dollars in American companies meet for lunch in Manhattan. Among the things they discuss: pushing for greater say in how companies are run. It is an elite gathering, but you will not see a single man in a suit in the room. The event, called the Women in Governance lunch, underscores a rare corner in finance where women dominate. Women hold the top positions in corporate governance at many of the biggest mutual funds and pension funds — deciding which way to vote on the directors of a company board....Those investors oversee $14 trillion in assets…. Some experts say there is tremendous potential for the network of women in corporate governance to make a bigger difference. ‘If there is an old girls’ network so to speak with so much authority in corporate governance, this is an opportunity to create an agenda for greater diversity through a formalized means,’ said Mr. Davis, at the University of Michigan.” NEW YORK TIMES

Snapchat’s New Chairman Hails from Sony

“When the former Sony Pictures Entertainment CEO takes his place next month as chairman of the board at Snapchat’s parent company, alongside CEO Evan Spiegel, the pairing will be a classic Silicon Valley move: an experienced, level-headed operator becomes yang to the yin of the inexperienced but visionary genius at the helm…. While Hollywood was caught by surprise Jan. 13 by Lynton’s defection from Sony, his move to Snap really isn’t all that surprising. He was an early investor in Snapchat, putting in $200,000 in 2012, when the app was just beginning to draw buzz among teenagers. Lynton joined Snapchat’s board in 2013, cementing a bond with Spiegel that insiders say isn’t quite a mentor/protégé dynamic, because Spiegel has been cocksure and headstrong from the moment he exited the womb. But Lynton is as close to a trusted adviser as Spiegel gets; now that he is out of Sony, he is poised to go into full-time consigliere mode.” VARIETY

The Word from Davos

“‘Every CEO needs to look at if they’re paying men and woman the same. That is something that every single CEO can do today,’ said [Salesforce CEO Marc] Benioff. ‘We all have modern human resource management systems, but as a CEO are you willing to step up and say I pay men and women the same?’ His message yesterday came with a sense of urgency. ‘The [World Economic Forum] has said it’s going to take women something like 170 years to get to gender parity with men [at the current rate of change],’ he said. ‘We don’t have time to wait.’” FORTUNE

Theranos Director Resigns to Join Trump Team

“Retired Marine Gen. James N. Mattis has resigned from the board of the beleaguered Silicon Valley blood-testing company Theranos, according to a person with direct knowledge. Mattis stepped down in December in preparation for a confirmation hearing as President-elect Donald Trump's pick for secretary of defense, the person said. Theranos referred questions about Mattis's status on its board to the Trump transition team ‘Should Gen. Mattis be confirmed he will resign his positions with all outside entities, as is standard practice,’ Trump transition team spokeswoman Alleigh Marre said in an email.” WASHINGTON POST

No Fines for Swedish Firms Who Don't Appoint Women Directors

“Sweden’s parliament has rejected plans to introduce legislation that would fine listed companies who fail to appoint women to at least 40% of board seats. The leftwing government announced in September that it was drafting the legislation, but the centre-right opposition and a far-right party, which together hold a majority in parliament, told parliament’s law review committee on Thursday that they would not support the project.” THE GUARDIAN

From the Boardspan Archives

Corporate Governance in the Age of Cyber Risks

"Corporate boardrooms are waking up to the encroaching, systemic threat of cybersecurity risks. But while awareness is growing — more than 80% of boards now discuss cybersecurity at most, if not all, of their meetings — many directors simply are not sure if they have the information and tools at their disposal to provide effective oversight of top management to handle today’s hacking dangers, especially intrusions sponsored by nation-states." KNOWLEDGE@WHARTON via BOARDSPAN

 Seat at the Table

  • PayPal appoints to its board Belinda Johnson, chief business affairs and legal officer at Airbnb
  • Timothy P. Flynn, former Chairman of KPMG International, joins the board of UnitedHealth Group
  • Ann Livermore, former EVP at Hewlett Packard and current director for Hewlett Packard Enterprise, Qualcomm and UPS, is taking a seat on the board of Mesosphere, a distributed computing and hybrid cloud company
  • WebMD Health Corp. appoints to its board Ian G. Banwell, former chief investment officer at Bank of America
  • Consumer robotics company iRobot Corp welcomes to its board Elisha Finney, EVP and CFO at Varian Medical Systems, a publicly traded oncology treatment and software company
  • Judy Marks, president and CEO of manufacturing and electronics company Siemens USA, is named board chair of the Siemens Foundation, which has invested more than $100 million to advance workforce development and education initiatives in science, technology, engineering and math in the US
  • Grocery chain Kroger Co  elects Mark S. Sutton, chairman and CEO of International Paper, to its board of directors
  • Foodservice distributor US Foods Holding Co welcomes to its board Robert “Bob” Dutkowsk, CEO of technology distributor Tech Data Corporation, and Carl Andrew “Andy” Pforzheimer chairman of restaurant group Barteca Holdings
  • Harmonic, a provider of video delivery infrastructure for television and video services appoints to its board Dr. Tom Lookabuagh, a 30-year veteran of the semiconductor and communications industries who was formerly an executive at Cable Television Laboratories
  • Joan M. Lewis, former SVP consumer & market knowledge, media transformation, and brand building reinvention at Procter & Gamble, joins the board of housewares company Oneida Group
  • Defense contractor Raytheon elects to its board James A. "Sandy" Winnefeld Jr., a retired United States Navy admiral
  • Paychex adds a tenth director to its board: Thomas Bonadio, CEO of the Bonadio Group, a large certified public accountant firm in New York state 
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