September 22, 2016 - Issue 2.38 - 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.
Culture clash. Led by the fiery prosecutorial instincts of Senator Elizabeth Warren (D-Mass), a former Harvard law professor, the Senate Banking Committee took Wells Fargo CEO John Stumpf to task this week for his accountability in the bank’s “cross-selling” strategy, which resulted in some 2 million false accounts being created in the names of Wells Fargo customers. Stumpf, in turn, leaned on his board, stating that it was not up to him as Chairman and CEO, but to the bank’s other directors to decide whether executives who oversaw the tainted division should be fired or financially rewarded for their service. (If you didn’t catch this real-life political drama as it unfolded in the Senate chambers, it’s worth watching.) Criticism of the Wells board is rolling in and it’s not hard to imagine there will be a lot more conversation about the board’s responsibility for protecting consumer and shareholder interests, as well as following through on the company’s stated mission of building a culture of accountability.  For a thoughtful take on the significant role board culture plays in a corporation, be sure to read “The Anatomy of Board Culture” from our archives. And then, consider the news that GM now has as many women on its board as men—and hasn’t even tooted its own horn about this milestone.

The Hot Seat

Wells Fargo Board: Why So Quiet?

“Facing repeated questions about what would happen to Wells Fargo & Co.’s top executives in the wake of its sales-practice scandal, Chief Executive John Stumpf gave much the same answer: It’s up to the bank’s board. But that wasn’t enough for obviously irritated members of the Senate Banking Committee who roasted Mr. Stumpf on Tuesday. They made clear they think the board, which has known about the bank’s ‘cross-selling’ problems since 2013, should have acted more quickly to clean up the mess — especially on deciding whether to claw back compensation from top executives.… Away from the hearing, some investors took a dim view as well. ‘The silence from the board is deafening,’ said Scott Stringer, New York City’s comptroller, who oversees New York public-employee pension funds that own about 10.5 million Wells Fargo shares.” WALL STREET JOURNAL  

The Bank's Corporate Responsibility Committee Comes Under Fire

“The Wells Fargo board members who were tasked with guarding the bank’s reputation and making sure, among other things, that the bank’s aggressive cross-selling goals didn’t lead to mistreatment of customers, met just three times last year, the minimum allowed by board rules… A review of board records in Wells Fargo’s annual proxy filings of the past few years suggests that, even as scrutiny of Wells Fargo’s consumer practices was ramping up outside the bank … officials at the highest levels of the company, who were most responsible, did little—that is, the absolute minimum—to address the bank’s growing problem... None of that, though, or the aftermath, appears to have curtailed the payday of the board members involved. Judith Runstad, the board member who headed the corporate responsibility committee, which, according to Wells Fargo’s proxy had the job of monitoring ‘customer service and complaint matters, … retired from Wells Fargo’s board earlier this year … with more than $7.2 million in stock and options.” FORTUNE

… And Investors Demand a Split of Chair and CEO Roles

“Activist investor Needmor Fund said it filed a shareholder resolution calling on the San Francisco-based bank to split the roles of chairman and chief executive, saying management needs strong oversight from the board ‘in light of the recent scandal.’” REUTERS

Across the Board

Curated news and insights from the world's boardrooms.

GM Board Quietly Ushers In Gender Parity

“In June, when General Motors shareholders elected Jane Mendillo to the board of directors, GM became — without fanfare or indeed much notice — the first major industrial corporation with an even gender split on its board. GM didn’t issue a press release crowing about the milestone, which is perhaps equally significant; after all, it shouldn’t be news that men and women share power. Of course, it is important, not just in the automotive industry, where leadership is overwhelmingly male, but also in less ‘gendered’ industries, where women are historically underrepresented on corporate boards.” FORBES

Should  Executive Comp Plans Be Based On Formulas?

“’Pay for performance’ is a topic du jour in corporate boardrooms. Not that anyone is questioning whether companies should recognize and reward superior performance; rather, the debate is how to do it. Goaded by proxy advisory firms, public companies have adopted formulas for executive compensation that are largely based on financial metrics and total shareholder return. We may now be seeing an emerging trend toward less adherence to a strictly formulaic approach and more room for boards to make discretionary judgments, which used to be more the norm.” WALL STREET JOURNAL

When CEOs Struggle with Succession Planning

“Most organizations are packed with leaders who can’t come to terms with the idea of retirement….We have identified four all-too-common succession scenarios. In each, the personality of the needs-to-retire leader can help illuminate and explain what is happening…. Knowing the particular personality traits that may be driving destructive behavior can help both the departing C-Suite leader and the members of the board to find a happy solution – both for the executive, and the company he or she is leaving.” HARVARD BUSINESS REVIEW

John Boehner Lights Up Tobacco Company Board

“Former House Speaker John Boehner was never shy about lighting up a cigarette during his years in Congress and now he’s joining the board of tobacco giant Reynolds American, the company announced Thursday. Boehner, reportedly such a fan of Camel Ultra Lights that his successor Paul D. Ryan (R-Wis.) had to fumigate the speaker’s office before moving in, resigned in October after serving in Congress for 25 years and as speaker for four.” WASHINGTON POST

Who Will Lead Viacom, As Interim CEO Steps Down?

“Viacom is back on the hunt for a new chief executive. The person for the job could be a member of the extended family: CBS’s chief executive, Leslie Moonves. The interim chief executive, Thomas Dooley, told the board he would not stay past mid-November. He had stepped in to lead Viacom after Philippe P. Dauman left last month when the controlling shareholder, Sumner M. Redstone, decided to shake things up again. A decade ago, he split Viacom and CBS partly because he could not decide on who should run the whole empire…. Finding a new chief will be a challenge. Mr. Redstone’s firm grip on the company, alongside his increasingly involved daughter, Shari, and his fickle tendencies, will scare away many candidates. For years, he heaped praise on Mr. Dauman and paid him huge sums of money to show his appreciation. A spate of lawsuits and bad business fractured the relationship.” NEW YORK TIMES

Warren Buffet Protégé Joins JPMorgan Chase Board

“Todd A. Combs, a protégé of the billionaire investor Warren Buffet, has been named a new board member at JPMorgan Chase…. Mr. Combs, 45, is one of Mr. Buffett’s stock pickers as investment officer at Berkshire Hathway, which he joined in 2010 after being plucked from seeming obscurity.” NEW YORK TIMES

Former EU Commissioner Failed to Report Director Role

“The former European commissioner Neelie Kroes, who is now a paid adviser to Bank of America and Uber, failed to declare her directorship of an offshore firm in the Bahamas while she was the most powerful corporate enforcer in Brussels. A cache of previously unseen documents published on Wednesday reveal that Kroes was recruited by [Mint Holdings Limited] a venture funded by the United Arab Emirates, which intended to snap up the international assets of the energy company Enron in a $7bn deal.” THE GUARDIAN

From the Boardspan Archives

The Anatomy of Board Culture

"Today, culture is a more critical determinant of board effectiveness than during the bygone era of ceremonial board service. Why? Because contemporary boards function as deliberative, working teams rather than simply preside. The cultural ground rules which dictate director attention, behavior, risk appetite, and decision-making processes are simply more critical to a board’s effectiveness because boards are more at work than before. It is a mistake to fail to understand the strength and focus of your board’s culture. Constructive cultures foster constructive working dynamics; dysfunctional cultures are no longer benign annoyances; they are often destructive to shareholder value..." THE CORPORATE BOARD via BOARDSPAN

A Seat at the Table

Boardspan is delighted to recognize Kirk L. Perry, President of Brand Solutions at Google, who recently joined the board of newly minted public company e.l.f. Beauty. We were delighted to advise e.l.f. Beauty on our third board recruitment for the company this year (Sabrina Simmons and Lauren Cooks Levitan joined earlier in 2016) and offer our warm congratulations to them – and to the many others who are assuming new board seats:
  • iRobot, best known for its Roomba robotic vacuum, appoints to its board Andrew Miller, EVP and CFO of PTC, an Internet of Things company
  • Ryan Zanin, president and CEO of the restructuring, strategic ventures, and insurance group at GE Capital, joins the board of mortgage provider Fannie Mae
  • PG&E Corporation (parent company of Pacific Gas and Electric Company) elects to its board Eric Mullins, managing director and co-CEO of the oil-and-gas-focused private equity firm Lime Rock Resources
  • The John S. and James L. Knight Foundation, which invests in journalism while supporting arts, education and civic-engagement programs, welcomes to its board Christine Amer Mayer, an attorney and president of the GAR Foundation, which focuses on education, basic needs and independence
  • Professional services firm Marsh & McLennan Companies elects to its board Anthony K. Anderson, a retired vice chair and Midwest area managing partner for Ernst & Young
  • Peloton Technology, a vehicle tech company focused on safety, efficiency and analytics in the trucking and automotive markets, welcomes to its board Lawrence D. Burns, a former VP of R&D at General Motors
  • Majesco, a provider of software and services for the insurance industry appoints to its board Wes Thompson, former president of the insurer Sun Life Financial U.S.
  • Electrical product distributor WESCO International appoints to its board Matthew J. Espeto, former CEO of Armstrong World Industries, of Ricoh Americas, and of IKON Office Solutions
  • Gray Television, which owns and operates television stations and digital assets throughout the United States, welcomes to its board Richard B. Hare, SVP and CFO of Carmike Cinemas, one of the nation's largest motion picture exhibitors
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