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October 13, 2016 - Issue 2.41 - 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.
It’s a woolly week in the board room with Wells Fargo CEO John Stumpf stepping down amid scandal and calls for Stumpf to also step off the Target board, where he is a director. Heeding the criticism of Congress as well as shareholders, the Wells Fargo board takes this opportunity to split the chair and chief executive roles. One wonders if the Wells Fargo and Target boards would benefit from reading the article (from the Boardspan archives) on the board’s role in reputation management. It could be required reading, too, for those boards the Wall Street Journal discovers have "independent" directors who double as paid lobbyists. Meanwhile, the under-representation of women in the boardroom continues to spark fury in some corners, but a new PwC study suggests that a majority of male directors are just fine with the status quo, thank you very much. We link to the full report, which addresses not just gender, but issues like unprepared board members, the role of activist investors and more. Happy reading…

The Hot Seat


Wells Fargo CEO Resigns

“John Stumpf, the embattled CEO of Wells Fargo, unexpectedly retired from the company effective Wednesday. Stumpf's move comes just weeks after he was grilled by two Congressional panels over the way the company handled an alleged scam where upwards of two million accounts were created by employees without the knowledge of customers....The fact Stumpf, the company's top executive, was also the chairman of the board was another point brought up by lawmakers questioning why the bank didn't act sooner to deal with the widening scandal. The roles are split, now. The company's President and Chief Operating Officer Tim Sloan, 55, will replace Stumpf as CEO. Stephen Sanger, a former Yoplait USA president and member of the Wells Fargo board since 2003, was named as the board's non-executive chairman.” USA TODAY


Will He Also Leave the Target Board?

“The CEO of scandal-tarnished Wells Fargo should be ousted from the Target board of directors, a shareholder urged the retail giant’s executives in a Minnesota newspaper ad Thursday. In quarter-page advertisement in the Star Tribune, Aaron Epstein urged Minneapolis-based Target to seek John Stumpf’s immediate resignation ‘to preserve the positive legacy bequeathed to us by our company’s (Target’s) founders.’ Epstein, a North Hollywood resident, has been a Target shareholder since 1967. The demand for Target to distance itself comes among increasing fallout for Wells Fargo, which was hit with $185 million in fines last month for secretly opening millions of unauthorized accounts and funding them with customers’ money.” MERCURY NEWS

Across the Board

Curated news and insights from the world's boardrooms.
 

Tell Us Again, Why Aren’t More Women on Boards?

“While there’s growing belief that U.S. corporate boards are too male, the question remains: How many women is enough? According to a new survey, one in 10 directors still believe that the ‘optimal’ number is somewhere between 20% and, well, zero. Perhaps not surprisingly, 97% of respondents who said that women should hold just a sliver of board seats are male. But it’s not just gender that’s at play here, says Paula Loop, leader of PwC’s Governance Insights Center, which conducted the study. ‘An important thing to remember is that the average board member age is 63—there are some generational things here.” FORTUNE
 

10 Top Boardroom Trends (The PwC Survey)

“Diversity in the boardroom remains a topic of debate in the governance world, and male and female directors have differing opinions about its benefits. Directors are aware of their fellow board members’ performance—but not all are impressed. More than one-third of directors think someone on the board should be replaced. And despite their increasing oversight responsibilities and the many new issues boards have to understand, most directors say their workload is manageable. Investors are also a factor in corporate governance changes. They are pushing for changes to board composition and capital allocation strategy—and are often getting their way.” PwC
 

UK Investment Funds Take Diversity Into Their Own Hands

“Jupiter Asset Management and Old Mutual Global Investors have committed to vote against board appointments in companies that do not have enough women executives. Newton Investment Management, the Environment Agency Pension Fund and Eden Tree Investment Management have also made the same commitment, with other fund managers under pressure to improve the diversity of the companies in which they invest. The 30% Club, which campaigns for greater representation of women in corporate senior management [in the UK], will call on Wednesday for more fund managers to follow suit and vote against board appointments in companies that show no progress.” FINANCIAL TIMES


Cozy Relationships Between CEOs and Lobbyist-Directors?

“The 2010 requirement that only independent directors can set executive pay at most public companies was the latest in a string of efforts by Congress, regulators and stock exchanges to make sure people who hold important roles on corporate boards are free of potential conflicts of interest that could sway their judgment. A Wall Street Journal review of lobbying data and securities filings found that despite such efforts, financial ties persist between some corporate directors and CEOs—ties running through Washington’s lobbying corps. They involve directors whose lobbying fees are paid either by the company where they are a board member or by an industry association where the company’s CEO has influence.” WALL STREET JOURNAL
 

Shareholders & Noble Laureates: Divergent Views on CEO PAY

“What is often missing from conversations surrounding CEO pay is the opinion of the large, sophisticated investors that who own significant holdings of most companies in the country. And they tell a different story from the academics [whose work has had a major impact on pay models].  Executive compensation has, in the eyes [of large shareholders], become increasingly disconnected from the real performance of companies. While academic models suggest aligning management’s interest with those of shareholders through various applications of performance-based equity and options, many of these investors feel that modern pay structures overly favor CEOs and that many are able to garner outsize rewards compared with shareholders.” MARKETWATCH
 

4 Things Great CEOs Do

“The best CEOs focus primarily on four things: communication, communication, communication, and overseeing resource allocation to ensure that the priorities they’re communicating are actually the ones getting funded. The problem with the first three of those tasks: It can be incredibly boring. The same messages must be repeated again and again ad nauseam. But the best CEOs resist the desire to chase the next shiny object. They stick maniacally to their communication role to guarantee that the strategy is baked into frontline routines and behaviors. And just because it’s repetitive doesn’t mean it’s easy…” HARVARD BUSINESS REVIEW
 

Corporate Boards Can't Afford to Stand By Sexist Leaders

“Donald Trump says he wants to run America like a business. But if America were a public company, Trump probably would be ousted as its chief executive officer after his recent vulgar remarks about women caught on tape. While Trump’s supporters may be willing to write off his talk about making unwanted sexual advances as locker-room banter, corporate boards have been much less forgiving to top officials who engaged in arguably less crude behavior that could paint the company in a bad light or put it at legal risk...  As Human Resources tells everyone: Sexist and sexually aggressive speech, let alone sexist and sexually aggressive behavior, can be grounds for dismissal. The threats -- to reputation, worker retention, recruitment and even the bottom line -- are too high to tolerate.BLOOMBERG

 
How Do You Prepare to Chair a Nonprofit Board? (A Survey)

“There is relatively little research that investigates the topic of nonprofit board chair leadership, but this role is pivotal in many organizations. It helps to structure, uphold, and revise the container for dialogue and disciplines for managing conversation, and to establish the atmosphere for deliberation. This takes a measure of sophistication as well as self-awareness regarding the match between one’s own personal leadership characteristics and the needs of the board, the organization, and the community served. But do nonprofits honor this leverage point with the attention it deserves? Maybe not…” NONPROFIT QUARTERLY

 
Apple Now Has a Seat on The Board of The "Uber of China"

"Apple made an unusually large investment of $1 billion into Didi Chuxing, a ride-hailing giant best understood as the "Uber of China," earlier this year. … It turns out Apple got one other thing from the deal: a seat on Didi Chuxing's board. Adrian Perica, Apple's vice president in charge of M&A, has joined Didi Chuxing's board…” BUSINESS INSIDER

From the Archives

A Board's Eye-View of Reputation Management

When bad news surfaces, what is your plan? In the advisory firm EisnerAmper’s 2013 survey of United States corporate boards, directors reported that their most pressing concern was reputational risk. Recent studies show that when it comes to reputational risk, the stakes are tremendously high. Echo Research claims that the combined value of the reputations of all S&P 500 companies is almost $3 trillion, or 22 percent of total market capitalization... Through its oversight of the company at large, the corporate board plays a crucial role in managing reputational risk." KELLOGG INSIGHT via BOARDSPAN

A Seat at the Table

  • Ann Livermore, former EVP of Hewlett-Packard’s Enterprise Business, joins the board of telecommunications company Qualcomm
  • Linda Yaccarino, chairwoman of advertising, sales and client partnerships for NBCUniversal, joins the board of ascena retail group, parent company of Ann Taylor, LOFT, Lou & Grey, Lane Bryant, and more
  • Digimarc, a digital identity company, appoints to its board Gary DeStefano, former president of global operations at Nike, and Andy Walter, former VP of global commercial services for Procter & Gamble
  • Angie's List, a consumer-to-business information provider, elects as chairman of its board Thomas R. Evans, former president and CEO of consumer financial services firm Bankrate
  • Sue Bostrom, previously EVP and CMO at Cisco Systems, and Bill Bock, who has served as a director, president, and CFO at Silicon Labs, join the board of social marketing software maker Spredfast
  • Home improvement retailer The Home Depot appoints to its board Jeff Boyd, interim CEO and president of Priceline
  • Restaurant chain Buffalo Wild Wings appoints three independent directors to its board: Andre Fernandez, president of CBS RADIO, Hal Lawton, SVP of North America at eBay, and Harmit Singh, EVP and CFO of Levi Strauss & Co.
  • Elizabeth Moody, VP for global content & licensing at Pandora, and Rob Harvey, head of North America label relations, at Spotify, join the board of the Music Business Association
  • Independent content studio Critical Content, which creates programming for broadcast, cable and digital platforms, announces the formation of its board of directors, including Frank Biondi, former chairman and CEO of Universal Studios; Chad Gutstein, CEO of Machinima; Mark Itkin, former co-head of television and a director at William Morris Endeavor; John Sykes, president of iHeartMedia Entertainment Enterprises; Lauren Zalaznick, former NBC Universal EVP; Tom Forman, CEO of Critical Content; and, as chair, Al Aguirre, an experienced private and public-company board member
  • Phillips 66, an energy manufacturing and logistics company, elects to its board Denise L. Ramos, CEO of energy solutions firm ITT, and Gary K. Adams, chief advisor of chemicals for IHS
  • Don Springer, co-founder and chairman of strategic advisory firm The Colton Group and a former president of Ford Motor Co., joins the board of consumer product tech innovator e.Digital
  • HMS Holdings, a healthcare benefits coordinator, appoints to its board Alex Michael Azar II,  president of Lilly USA, the largest affiliate of Eli Lilly & Company and a former Deputy Secretary and General Counsel at the U.S. Department of Health & Human Services
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