April 14, 2016 - Issue 2.15 - 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.

Clearly spring, the season of renewal, is upon us. This week, Twitter and McDonald’s took it upon themselves to drive major changes in their boardrooms, while Chipotle, United Continental and Depomed got an earful from activist investors demanding large-scale director turnover. But the big news is at Theranos, which earlier in the week announced an illustrious new medical advisory board, but is now smack in the middle of a crisis that no advisory or governing board can help with: The possible closure of its labs and banning of its founder to work in the field. The Wall Street Journal reports that federal health regulators are threatening to revoke the company’s licenses and ban CEO Elizabeth Holmes from the blood-testing business for two years, after that the company allegedly failed to address major problems in its testing facilities.

The Hot Seat


Will Theranos Survive Regulators' Scrutiny?

“Federal health regulators have proposed banning Theranos Inc. founder Elizabeth Holmes from the blood-testing business for at least two years after concluding that the company failed to fix what regulators have called major problems at its laboratory in California…. Last week, Theranos announced the recruitment of ‘nationally respected laboratory and medical experts’ to its scientific and medical advisory board. The company said the eight-member panel would ‘work alongside Theranos’ leadership and internal teams in various areas, including advising Theranos regarding the full integration of its technology into routine clinical practice, and publication and presentation in scientific journals and at scientific meetings’ … Theranos was valued at $9 billion in a funding round in 2014 and the majority stake of Ms. Holmes at more than half that. During the past six months, though, Theranos has faced questions about the proprietary blood-testing devices it invented, code-named Edison, the accuracy of patient test results and its lab practices.” WALL STREET JOURNAL

Across the Board

Curated news and insights from the world's boardrooms.


Opportunity is Now for Techies on Boards

“Digitally driven change is becoming as critical an issue to most companies as finance [yet] … in 2015, a PwC study of large-company directors found that 85 percent of the respondents were dissatisfied with the way their companies were ‘anticipating the competitive advantages enabled by technology.’ Almost as many, 79 percent, said their boards did not sufficiently understand technology. Board members know that their companies will either embrace technological change or be put out of business….. At the board level, there is a need for knowledgeable, incisive ‘geeks:’ independent directors with experience and perspective in putting technology to use. In the past, many boards have compensated by relying on management or external consultants for strategic advice. But the stakes are now too high to take that approach.” Strategy+Business

Big Move for Mickey D's

“I’m going to say something controversial, so hold onto your Egg McMuffin: The retirement of McDonald’s non-executive chairman Andy McKenna next month is one of the biggest changes the company has made in years. …  McKenna, 86, has reigned over the McDonald’s boardroom for 12 years as non-executive chairman and has been a director for a quarter of a century—a period in which the McDonald’s board became increasingly insular and interwoven. It was hard to imagine that it was totally coincidental that a company with a stagnant board should find itself stagnating, too.” FORTUNE

Twitter Responds to Demand for Diversity

“On Friday, [Twitter CEO Jack] Dorsey took his latest steps to make over Twitter, using new appointments and departures to the board. In a filing, Twitter said two longtime directors, Peter Currie and Peter Chernin, were not considered for re-election this year at their request. They will be succeeded by Hugh Johnston, who is vice chairman and chief financial officer of PepsiCo, and Martha Lane Fox, a British entrepreneur who has run Internet businesses and who has been a prolific user of Twitter. … Twitter has long faced pressure to add more diversity to its board, which has largely been composed of white men. After the criticism, Twitter added Marjorie Scardino, the company’s first female director, a publishing industry executive. Omid Kordestani, a former Google executive who as an Iranian-American brought the perspective of an immigrant and ethnic minority, joined Twitter’s board last year.” NEW YORK TIMES

Chipotle Board Feels the Heat

“An investment group is calling on Chipotle Mexican Grill Inc. to replace two directors, saying the company’s all-white, mostly male board lacks diversity and isn’t equipped to rebuild trust after several foodborne-illness outbreaks. Chipotle also should establish a food-safety and sustainability board committee, recruit new and more diverse directors, and provide more meaningful proxy access to smaller stakeholders, said Dieter Waizenegger, executive director of CtW Investment Group, a firm affiliated with the union-backed group Change to Win. CtW also said shareholders shouldn’t re-elect Patrick Flynn and Darlene Friedman, both long-time directors on the nominating and corporate-governance committee.” BLOOMBERG BUSINESS

Are Boards Responsible for the Widening Pay Gap?

“Ever wonder why we don’t see equal opportunity at work? Part of it has to do with the fact that many corporate boards think very differently about [employee] pay than they do about the CEO’s. Some board members recognize the double standard. Many do not. Chipotle and Macy’s recent filings on 2015 CEO pay offer great examples of this disconnect. The CEOs at Chipotle (there are two of them) and Macy’s had bad years last year. Sales misses at Macy’s and repeated customer health scares at Chipotle put a dent in both these companies’ performance. Yet the three CEOs were still granted the promise of potentially huge future payouts in stock. What’s going on?” FORTUNE

Starboard Value Seeks Another Clean Board Sweep

“Until Thursday, [pharmaceutical company] Depomed probably thought a hoped-for move to Delaware would cure its vulnerability to a hostile takeover. That’s when Starboard Value LP surfaced with almost 10% of Depomed shares and a plan to force a special shareholder meeting to remove and replace the entire board. Depomed’s takeover vulnerability, which Horizon Pharma PLC tried (unsuccessfully) to exploit last year, stems from its incorporation in California.  Holders of 10% of the shares of a California corporation can call a special meeting to replace directors.” WALL STREET JOURNAL

United Board Faces Likely Shuffle 

“A deal between United Continental and two hedge funds seeking to shake up its board looks increasingly likely, sources told CNBC on Monday. An agreement may come within the next week, the sources added. The hedge funds, Altimeter Capital Management and PAR Capital Management, collectively hold a 7.1 percent stake in United. They announced last month that they would nominate six directors to United's board amid concerns about its stock performance.” CNBC

From the Archives

Do CEOs Make the Best Board Members?

““The popular consensus is that CEOs make the best board members because of their current strategic and leadership experience,' says David Larcker, professor at the Stanford Graduate School of Business. In the 2011 Corporate Board of Directors Survey, when asked about potential problems a full 87% of respondents said that active CEOs are too busy with their own companies to be effective directors. A third of the respondents said that active CEOs were 'too bossy/used to having their own way.' ... Despite the fact that sitting CEOs are highly sought-after for board seats, 79% of directors said that, in practice, active CEOs are no better than non-CEO board members.” ROCK CENTER FOR CORPORATE GOVERNANCE via BOARDSPAN

A Seat at the Table

Lisa Krouse, EVP and chief HR officer at FCCI Insurance Group, joins the insurer’s board of directors, the first woman to hold that post in the company’s 57-year history. Malwarebytes, a company that protects customers against malware, appoints to its board Brooke Seawell, a founder, officer, investor and director involved in 10 IPOs including Informatica, NVIDIA, Synopsys and Tableau Software and nine strategic acquisitions.Mary Cranston, a retired senior partner and former chair of international law firm Pillsbury Winthrop Shaw Pittman and current director at Visa, The Chemours Company, and CSAA Insurance, joins the board of MyoKardia, a biopharmaceutical company focused on heritable cardiovascular diseases; (full disclosure and noted with pride: Cranston is an investor in Boardspan). Mobile banking and prepaid debt card provider Green Dot Corp. appoints three new independent directors, J. Chris Brewster, former CFO of Cardtronics; Rajeev V. Date, founder and managing partner of venture firm Fenway Summer; and William I. Jacobs, chairman of Global Payments. Cognizant Technology Solutions Corporation, an IT and consulting provider, welcomes to its board Jonathan Chadwich, former EVP and CFO of VMware, Inc., a virtualization and cloud infrastructure solutions company. The board appoints the company’s general counsel and SVP Mitch Edwards to the role of acting CEO, as company founder Dr. Patrick M. Byrne takes a medical leave.  Dr. Stuart Gabriel, director of the Richard S. Ziman Center for Real Estate at UCLA, and a professor of finance at the UCLA Anderson School of Management joins the board of national homebuilder KB Homes.
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