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November 12, 2015 - Issue 9 - 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.

If you’ve been following the fate of Valeant Pharmaceuticals, you’ll know that the stock continues to plummet (from $263 in August to $86 now) as the company fights allegations of inflating its revenues. With yesterday’s news that the company now faces insider trading charges from the failed Allergan deal, last week’s $100 million margin call on the CEO, and last month’s resignations of two independent directors from one of the company’s long-term investors, we imagine that the board will be in the Hot Seat soon. Also on our watch screen: expected Twitter board changes and a potentially smoother path forward for DuPont. And for all of you directors who worry about corporate hacking, you’ve got reason to do so – and reason to read below. All this and much more in this week’s Directors Domain.

The Hot Seat

 

Was Valeant's Board Star-Struck?

“Michael Pearson’s odd stock sale may make it harder for him to hang on as CEO of Valeant. It also raises fresh concerns about the board’s oversight of the troubled drug company. On Friday morning, Valeant revealed that Pearson was forced to sell 1.3 million shares of the company on Thursday. The sale was related to a [$100 million] margin loan….  Boards are supposed to be keep company management in check. Given what has come out about Valeant in the past month or so, it’s clear Valeant’s board was not doing a great job on this front. That happens with star CEOs, and Pearson, at least to Valeant investors, was one of those. The fact that Valeant’s board allowed Pearson to take out a $100 million margin loan, and then didn’t force him to pay off the loan when they realized it was a bad idea, is another sign that the board allowed him to do whatever he wanted. So while Pearson’s forced stock sale doesn’t really change much for the company, it should make investors even more nervous about what else Valeant may have been up to that has yet to surface.” FORTUNE

Across the Board

Curated news and insights from the world's boardrooms.


#Reshuffle — Coming Soon to a Board Near You?

“Twitter’s board won’t look like Twitter’s board for long. The social communications company ... is planning more changes to its board of directors.... Sources say that some of its long-tenured members plan to leave, and have announced as much internally. Among those who may be most likely to depart … are the three Peters: Benchmark VC Peter Fenton, investor Peter Currie and Peter Chernin, CEO of the Chernin Group. Fenton has been on Twitter’s board since 2009; Currie joined in 2010. As part of the expected board change, CEO Jack Dorsey wants to diversify the board, according to sources, meaning the addition of more women and racially diverse board members.” RECODE
 

To Chew On Before Your Next Risk Management Meeting 

"Nothing in the annals of corporate hacking compares to the portrait U.S. authorities painted Tuesday of a vast, global crime syndicate — a mob for the digital age. As described by federal prosecutors, it was an operation of breathtaking scale, involving more than 100 people in a dozen countries, with illicit proceeds stretching into the hundreds of millions of dollars. At its head is a mysterious Israeli, Gery Shalon.... His group is the thread that runs through many of the biggest cyber-attacks of recent years, including the largest bank breach on record, involving the theft of information relating to 83 million customer accounts from JPMorgan Chase & Co. Along with JPMorgan, Fidelity Investments Ltd., E*Trade Financial Corp., Scottrade Financial Services Inc. and Dow Jones & Co., a unit of News Corp., confirmed they had been among the victims of hackers who worked for the group."  BLOOMBERG BUSINESS
 

Is DuPont Calling Truce with Activists?

"DuPont Co.Co. named Edward Breen as its permanent chairman and chief executive, appointing an outsider who investors expect will bring major changes to the agriculture-and-chemicals conglomerate. The appointment also could signal a truce with activist investor Trian Fund Management LP, whose top executives in a meeting last month with DuPont’s board conveyed support for Mr. Breen taking over, according to people familiar with the matter…. Dennis Carey, a vice chairman at executive-recruiting firm Korn/Ferry International, said Mr. Breen’s appointment is an opportunity for DuPont to reset relations with Trian, if not pursue all of the investment firm’s ideas. 'He will befriend Nelson [Peltz] in a way that’s consistent with good corporate governance,' said Mr. Carey, a longtime acquaintance of Mr. Breen." WALL STREET JOURNAL (paywall)
 

Booked Your Corporate Governance Roadshow Yet?

“From JPMorgan Chase & Co to Microsoft, and Johnson & Johnson to Apache Corp., board directors across North America have increasingly begun serving as a bridge between institutional investors and corporate management teams…. Director engagement with investors is an evolving trend, though it's developed to the point where board members are now embarking on ‘corporate governance roadshows’ in the autumn, to gauge investors' views and to ensure their support at the annual meeting in the spring. ….  JPMorgan's lead independent director, former ExxonMobil CEO Lee Raymond, oversees the board's shareholder engagement initiative, which in 2014 included around 90 calls and meetings on governance and compensation topics with shareholders representing around 40 percent of the company's shares.”  REUTERS
 

Vanguard Flexes Shareholder Muscles

“Index funds, which now control $3 trillion in total assets, are often among the biggest shareholders of companies from Apple to Zions Bancorp. That gives them a lot of votes on shareholder resolutions and a lot of influence at annual shareholder meetings. Vanguard, the largest fund family, is beginning to wield that power more aggressively. It has adopted a new approach to push for improvements to compensation practices, board construction, and other corporate issues, says Glenn Booraem, head of its corporate governance efforts. ‘We've got a team of a dozen analysts for whom corporate governance and engagement is their only job… We'll use all of those data sources to screen for companies that raise a particular concern, say, a company that has high pay and poor performance. We're looking for outliers.’” CHICAGO TRIBUNE
 

Women Find Seats, But No Chairs

“We’ve seen a welcome increase in women on boards; however the number of women securing the top spot remains elusive even in the most progressive countries. Of course, in many countries, the chair is an executive position, but this absence of women among chairs is revealing. For example, Denmark has the sixth-highest number of women on its boards, yet ranks at the bottom—not a single board in Denmark had a women chair in our study.” [From the report:  Women in the Boardroom: A Global Perspective] DELOITTE
 

Executive Pay Sparks Anger in the UK

“Top investors are frustrated by the failure of the FTSE 100’s remuneration committees to take account of mounting public anger over bosses’ pay and don’t trust them, a report out today will warn.… ‘Investors have been frustrated by some remuneration committees’ apparent unwillingness to read the public mood on executive pay.’ It says there is a ‘lack of trust’ on both sides, with many company boards feeling that institutions are ‘more concerned with ticking governance boxes than helping them align pay with company strategy.’” THE INDEPENDENT
 

A Slow Road for the Women of Detroit

“It's well known that the CEO of General Motors is a woman. But few likely realize that Mary Barra is one of five women on GM's 12-member board of directors, an equally rare distinction in an industry whose top ranks have always been dominated by men. That compares with two women out of 15 board members at Ford Motor Co., three women out of 11 at Fiat Chrysler Automobiles and one woman out of seven at Tesla Motors. Among the 50 largest publicly held suppliers operating in North America, 52 of the 537 board members are women — 9.7 percent.... 'It is edging up, but not quickly enough,' said Ruby Sharma, principal at Ernst & Young's Center for Board Matters. Whereas bankruptcy transformed GM's board of directors—before bankruptcy, the board comprised just two women and 11 men — most companies have much less turnover on their boards, which often makes changing their makeup a slow process." AUTOMOTIVE NEWS
 

Is Your Company Actually Ready to Innovate?

"Effective innovation requires constant energy, creative friction, flexible structures, and purposeful discovery. Take this assessment to roughly gauge how well your organization does in each area.  At the end, you’ll see how you stack up against other test takers on HBR.org and receive feedback on what you can do to help your company become more innovative." HARVARD BUSINESS REVIEW 

A Seat at the Table


★ Frank Blake, former chairman and CEO of The Home Depot, joins the Macy’s, Inc. board.★ Barclays welcomes Gerry Grimstone, chairman of Standard Life.★ Veteran TV executive Geraldine Laybourne, part of the team that created Nickelodeon and Nick at Nite and the co-founder and chairman of a kids technology company called Kandu, joins the board of Canadian animation studio 9 Story Media Group. ★ As part of its planned spin-off of GCP Applied Technologies, W. R. Grace & Co. announces the board’s directors, which include three independent members of the current Grace Board: Ronald C. Cambre, retired CEO of Newmont Mining; Marye Anne Fox, Ph.D., Chancellor Emeritus and Distinguished Professor of Chemistry and Biotechnology at the University of California San Diego; and Janice K. Henry, former CFO of Martin Marietta Materials. ★ Family-owned winemaker C. Mondavi & Family energizes its fiduciary board with a new chairman: Scott Thomas, the company’s legal representative, and four new independent directors.
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