Note From Jim:
To Board Director, CEO, and GC subscribers: About emerging governance issues for 2013, get ahead of the curve. Follow the link below and carefully read a thoughtful piece authored by Cleary Gottlieb Steen & Hamilton LLP, an alert which was subsequently republished by the Conference Board Governance Center Blog. Are you ready to address these issues?
Conference Board Governance Center Blog
http://tcbblogs.org/governance/2013/01/12/selected-issues-for-boards-of-directors-in-2013/
Selected Issues for Boards of Directors in 2013
Excerpts:
1. Board Composition
2. Executive Compensation Design
3. Selling the Company and “Standstill” Agreements
4. Selection of Board Advisors and Conflicts
5. Litigation Against Officers and Directors
6. Dual Fiduciaries
7. Developments of Interest to Audit Committees
Cleary Gottlieb Steen & Hamilton LLP
Access Article And Other Great Content: http://tcbblogs.org/governance/2013/01/12/selected-issues-for-boards-of-directors-in-2013/
Showing posts with label Corporate Governance. Show all posts
Showing posts with label Corporate Governance. Show all posts
Monday, January 14, 2013
Wednesday, August 22, 2012
Directors at Large U.S. Companies Seeing a More Standard Pay Rate - WorldAtWork Newsline
Aug. 14, 2012 — Director pay levels were relatively consistent among top U.S. companies in 2011, regardless of annual revenue, according to results from Hay Group's "2012 Director Compensation & Benefits Survey." For the second year in a row, Hay Group examined compensation and benefits packages for directors at the 300 largest companies that filed proxy statements between May 1, 2011, and April 30, 2012.
Among top U.S. companies both large and small, median total direct compensation varied by just 21% in 2011, despite dramatic differences in companies' annual revenue. According to the survey, in companies with revenue of more than $40 billion, median director pay was $252,500 in 2011, compared to $209,000 for directors of companies with revenue of less than $10 billion.
"As the accountabilities of public company governance have peaked, the price of director talent has been set. There's a minimum price to compensate directors for their increased exposure and complexity in this environment, independent of the size of the company," said WorldatWork author Irv Becker, national practice leader of the U.S. executive compensation practice at Hay Group. "As pay levels become less of a differentiator in attracting top board talent, it's going to become more critical for organizations to create and maintain positive boardroom cultures with strong values."
Compared to 2010, overall director pay levels increased only slightly in 2011. For the largest U.S. public companies, median total direct compensation for directors grew about 6% from $238,100 in 2010 to $252,500 in 2011. Similarly, pay for directors of public companies with revenue of less than $10 billion grew about 5% from $200,000 in 2010 to $209,000 in 2011. Median direct compensation for all companies, regardless of annual revenue, increased from $213,774 in 2010 to $227,250 in 2011.
Long-term incentive practices, on the other hand, saw a pronounced change. Companies granting stock options decreased from 23% in 2010 to 17% in 2011, while companies granting restricted stock and restricted stock units increased only slightly from 71% to 73%.
"Companies are continuing to remove risk and variation from their director pay packages," said David Wise, senior principal in the U.S. executive compensation practice at Hay Group. "Shareholders expect directors to be focused on protecting shareholder value, and we're seeing a significant shift toward fixed compensation that is more likely to promote balanced decision making over the long haul."
Other findings:
Contents © 2012 WorldatWork. For more information, contact the Copyright Department at WorldatWork.
Access Content And Other Great Stuff: http://www.worldatwork.org/waw/adimLink?id=64529&from=ww_editorial_3412
Among top U.S. companies both large and small, median total direct compensation varied by just 21% in 2011, despite dramatic differences in companies' annual revenue. According to the survey, in companies with revenue of more than $40 billion, median director pay was $252,500 in 2011, compared to $209,000 for directors of companies with revenue of less than $10 billion.
"As the accountabilities of public company governance have peaked, the price of director talent has been set. There's a minimum price to compensate directors for their increased exposure and complexity in this environment, independent of the size of the company," said WorldatWork author Irv Becker, national practice leader of the U.S. executive compensation practice at Hay Group. "As pay levels become less of a differentiator in attracting top board talent, it's going to become more critical for organizations to create and maintain positive boardroom cultures with strong values."
Compared to 2010, overall director pay levels increased only slightly in 2011. For the largest U.S. public companies, median total direct compensation for directors grew about 6% from $238,100 in 2010 to $252,500 in 2011. Similarly, pay for directors of public companies with revenue of less than $10 billion grew about 5% from $200,000 in 2010 to $209,000 in 2011. Median direct compensation for all companies, regardless of annual revenue, increased from $213,774 in 2010 to $227,250 in 2011.
Long-term incentive practices, on the other hand, saw a pronounced change. Companies granting stock options decreased from 23% in 2010 to 17% in 2011, while companies granting restricted stock and restricted stock units increased only slightly from 71% to 73%.
"Companies are continuing to remove risk and variation from their director pay packages," said David Wise, senior principal in the U.S. executive compensation practice at Hay Group. "Shareholders expect directors to be focused on protecting shareholder value, and we're seeing a significant shift toward fixed compensation that is more likely to promote balanced decision making over the long haul."
Other findings:
•Companies continued to eliminate board meeting fees. Organizations paying board meeting fees decreased from 35% in 2010 to 31% in 2011, while the median fee remained consistent at $2,000 year over year. Comparably, just 35% of companies paid meeting fees for attending Audit or Compensation Committee meetings. The median fee for the Audit Committee grew slightly to $2,000 in 2011 (vs. $1,500 in 2010), while the fee for Compensation Committee meetings remained at $1,500.Hay Group's "2012 Director Compensation & Benefits Survey" examined compensation and benefits for directors of the 300 largest companies that filed proxy statements between May 1, 2011, and April 30, 2012. Total direct compensation was calculated using the assumption that a director served as a member of the Audit Committee and a member of the Compensation Committee.
•Committee chairpersons more likely to receive an annual retainer fee. Of the companies surveyed, 94% paid Audit Committee chairs a retainer fee for annual service, compared to 39% that paid a retainer fee to Audit Committee members. For those receiving a retainer fee, the median pay for serving as Audit Committee chairperson in 2011 was $20,000 (the same as in 2010), while the median retainer for serving as an Audit Committee member was $10,000 (also the same as in 2010).
•Annual retainer fees for board service slightly increased. The percentage of companies that paid directors an annual retainer for board service in the form of cash and/or equity in 2011 remained flat at about 99%. The median annual retainer grew slightly from $80,000 in 2010 to $85,000 in 2011.
•Majority of directors received deferred compensation or at least one type of benefit. Nearly all of the companies surveyed had some form of deferred compensation arrangement or at least one type of director benefit. Deferred compensation programs were offered by 60% of companies and the most common form of benefits offered to directors were matching gifts (offered by 43% of companies), followed by spouse travel, accident/death insurance, and continuing education programs, which were all offered by 16% of companies.
Contents © 2012 WorldatWork. For more information, contact the Copyright Department at WorldatWork.
Access Content And Other Great Stuff: http://www.worldatwork.org/waw/adimLink?id=64529&from=ww_editorial_3412
Wednesday, July 25, 2012
When Picking a C.E.O. Is More Random Than Wise - NYTimes.com
When Picking a C.E.O. Is More Random Than Wise - NYTimes.com
Deal Professor 7/24/2012
About Board selection of CEO's: James Rodgers at Duke Energy and Marissa Mayer at Yahoo
EXCEPTS:
There is little solid research on what makes an effective chief executive, which makes choosing a candidate the product of a board’s vision and personalities rather than one of careful contemplation.
"I’m reminded of an exercise I once did at an old law firm retreat run by a group of consultants...
This result is in accord with research on small-group dynamics and decision-making. The selection of executives is influenced by directors’ own biases and backgrounds... This is influenced by a group negotiation process that depends on the people and personalities involved. In the end, these boards tend to pick people who reflect themselves and the world they already know — something that psychologists call the confirmation bias.
The decision to pick a chief executive is often steered by flocks of high-level recruitment consultants. Recruiters are paid millions to have a stable of candidates that they feed to boards, steering the process in pursuit of the board’s sometimes ill-defined wishes. This inherently limits the pool of candidates and further pushes boards to confirm their own biases in any selection.
Ms. Mayer and Mr. Rogers may do terrific jobs at their companies. But their appointments do not necessarily mean that they are the best candidates. Rather, their selection is a result of random and nonrandom factors."
Access Article And It's Insights: http://dealbook.nytimes.com/2012/07/24/when-picking-a-c-e-o-is-more-random-than-wise/?smid=pl-share
Deal Professor 7/24/2012
About Board selection of CEO's: James Rodgers at Duke Energy and Marissa Mayer at Yahoo
EXCEPTS:
There is little solid research on what makes an effective chief executive, which makes choosing a candidate the product of a board’s vision and personalities rather than one of careful contemplation.
"I’m reminded of an exercise I once did at an old law firm retreat run by a group of consultants...
This result is in accord with research on small-group dynamics and decision-making. The selection of executives is influenced by directors’ own biases and backgrounds... This is influenced by a group negotiation process that depends on the people and personalities involved. In the end, these boards tend to pick people who reflect themselves and the world they already know — something that psychologists call the confirmation bias.
The decision to pick a chief executive is often steered by flocks of high-level recruitment consultants. Recruiters are paid millions to have a stable of candidates that they feed to boards, steering the process in pursuit of the board’s sometimes ill-defined wishes. This inherently limits the pool of candidates and further pushes boards to confirm their own biases in any selection.
Ms. Mayer and Mr. Rogers may do terrific jobs at their companies. But their appointments do not necessarily mean that they are the best candidates. Rather, their selection is a result of random and nonrandom factors."
Access Article And It's Insights: http://dealbook.nytimes.com/2012/07/24/when-picking-a-c-e-o-is-more-random-than-wise/?smid=pl-share
Thursday, February 2, 2012
Three States to Require Insurers to Disclose Climate-Change Response Plans - New York Times
February 1, 2012
By FELICITY BARRINGER
EXCERPTS:
Insurance commissioners in California, New York and Washington State will require that companies disclose how they intend to respond to the risks their businesses and customers face from increasingly severe storms and wildfires, rising sea levels and other consequences of climate change, California’s commissioner said Wednesday.
“Our goal is to have the most complete, best and accurate information possible for investors, the insurance industry, regulators and the broader public.”
Last year’s level of natural disasters was unprecedented, according to an August report by the A. M. Best Company, which rates the financial strength of insurers. By late June, the estimated $27 billion in losses suffered by the American industry exceeded the 2010 total.
The disclosure survey will be mandatory for companies writing policies worth more than $300 million nationwide. It was created by Ceres, a Boston-based nonprofit group that leads a coalition of investors and environmental groups in gathering information about business responses to climate change, and prods them to do more.
Robert Hartwig, president and economist at the Insurance Information Institute, an industry trade group,.... He added, “If insurers have shown anything over the course of the centuries in which they have oared it is that they are capable of managing changes in the weather on both the micro and the macro scale.”
Roughly 25 percent of the industry’s large property, casualty and life insurance companies participated in an earlier version of the survey sent out by California and five other states last year. A rule change, combined with California’s partnership with New York and Washington, will mean that 300 of the larger insurers will have to comply. Companies that do not complete the survey could face fines, although it is highly unusual for companies to ignore such directives.
The survey’s contents, Mr. Logan said, “are pretty basic. What the regulators are trying to get a sense of is whether companies have thought about the cost implications for their businesses.”
He added: “The big takeaway from the survey last year is that there is a high level of concern among insurers about the impacts of climate change that is not matched by concrete plans to deal with those impacts. There is a real gap between the risk that’s been identified and plans to address it.” Eleven of the 88 companies surveyed last year, he said, reported having formal policies to manage climate change.
Another group that might benefit from such disclosures, said California’s insurance commissioner, Mr. Jones, are investors in the insurance industry.
“If we feel insurance or energy companies are not incorporating climate risk into their analyses and their boards of directors are not recognizing it,” he said, “that failure to do so endangers the value of that investment.” The result, he said, would not be disinvestment but “engagement with those companies,” because “they are not caretaking their business very well.”
Access Article: http://www.nytimes.com/2012/02/02/business/energy-environment/three-states-tell-insurers-to-disclose-responses-to-climate-change.html?_r=1
By FELICITY BARRINGER
EXCERPTS:
Insurance commissioners in California, New York and Washington State will require that companies disclose how they intend to respond to the risks their businesses and customers face from increasingly severe storms and wildfires, rising sea levels and other consequences of climate change, California’s commissioner said Wednesday.
“Our goal is to have the most complete, best and accurate information possible for investors, the insurance industry, regulators and the broader public.”
Last year’s level of natural disasters was unprecedented, according to an August report by the A. M. Best Company, which rates the financial strength of insurers. By late June, the estimated $27 billion in losses suffered by the American industry exceeded the 2010 total.
The disclosure survey will be mandatory for companies writing policies worth more than $300 million nationwide. It was created by Ceres, a Boston-based nonprofit group that leads a coalition of investors and environmental groups in gathering information about business responses to climate change, and prods them to do more.
Robert Hartwig, president and economist at the Insurance Information Institute, an industry trade group,.... He added, “If insurers have shown anything over the course of the centuries in which they have oared it is that they are capable of managing changes in the weather on both the micro and the macro scale.”
Roughly 25 percent of the industry’s large property, casualty and life insurance companies participated in an earlier version of the survey sent out by California and five other states last year. A rule change, combined with California’s partnership with New York and Washington, will mean that 300 of the larger insurers will have to comply. Companies that do not complete the survey could face fines, although it is highly unusual for companies to ignore such directives.
The survey’s contents, Mr. Logan said, “are pretty basic. What the regulators are trying to get a sense of is whether companies have thought about the cost implications for their businesses.”
He added: “The big takeaway from the survey last year is that there is a high level of concern among insurers about the impacts of climate change that is not matched by concrete plans to deal with those impacts. There is a real gap between the risk that’s been identified and plans to address it.” Eleven of the 88 companies surveyed last year, he said, reported having formal policies to manage climate change.
Another group that might benefit from such disclosures, said California’s insurance commissioner, Mr. Jones, are investors in the insurance industry.
“If we feel insurance or energy companies are not incorporating climate risk into their analyses and their boards of directors are not recognizing it,” he said, “that failure to do so endangers the value of that investment.” The result, he said, would not be disinvestment but “engagement with those companies,” because “they are not caretaking their business very well.”
Access Article: http://www.nytimes.com/2012/02/02/business/energy-environment/three-states-tell-insurers-to-disclose-responses-to-climate-change.html?_r=1
Saturday, January 28, 2012
Risk Profile, Appetite, and Tolerance: Fundamental Concepts in Risk Management and Reinsurance Effectiveness GC Capital Ideas
April 30th, 2009
Posted at 1:01 AM ETFinancial Intelligence Team
EXCERPTS
Overview
As the financial crisis continues to unfold — and explanations are offered — it is clear that more robust enterprise-wide risk management will be the result. Many industry participants and observers anticipate that regulatory and rating agency scrutiny will accelerate at an unprecedented rate. Further, insurer and reinsurer shareholders and Boards of Directors are likely to demand that risk be measured and managed as it relates directly to capital on an enterprise-wide basis, particularly as an integral part of the corporate governance process.
Advancing the ERM dialogue can help insurers make value-accretive decisions through the improved deployment of capital. A thorough understanding of the basic concepts of enterprise-wide risk is fundamental to the implementation of ERM disciplines, establishing risk management parameters, and integrating this knowledge into the process of making strategic business decisions. As a result, insurance and reinsurance firms will not only be better prepared to respond to the internal and external questions relating to risk and capital, but (perhaps more importantly), they could benefit by establishing hedging or reinsurance strategies to drive capital efficiencies and maximize stable risk-adjusted returns.
We will address three core aspects of the emerging ERM and capital management dialogue:
1.We will offer a framework for defining common terminology: distinguishing Risk Profile, Risk Appetite, and Risk Tolerance. Currently there are no consistent, overarching definitions of commonly used risk terms. Greater clarity in this area is fundamental to a proper understanding of the concepts involved.
2.We will offer a framework for discussing risk tolerance, including best practices.
3.We will present the results of Guy Carpenter’s initial risk tolerance benchmarking study, which will allow us to advise our clients about their own circumstances and the general context of the markets in which they operate.
Risk Profile, Risk Appetite, and Risk Tolerance
Access Article: http://www.gccapitalideas.com/2012/01/27/weeks-top-stories-january-21-27-2012/
Posted at 1:01 AM ETFinancial Intelligence Team
EXCERPTS
Overview
As the financial crisis continues to unfold — and explanations are offered — it is clear that more robust enterprise-wide risk management will be the result. Many industry participants and observers anticipate that regulatory and rating agency scrutiny will accelerate at an unprecedented rate. Further, insurer and reinsurer shareholders and Boards of Directors are likely to demand that risk be measured and managed as it relates directly to capital on an enterprise-wide basis, particularly as an integral part of the corporate governance process.
Advancing the ERM dialogue can help insurers make value-accretive decisions through the improved deployment of capital. A thorough understanding of the basic concepts of enterprise-wide risk is fundamental to the implementation of ERM disciplines, establishing risk management parameters, and integrating this knowledge into the process of making strategic business decisions. As a result, insurance and reinsurance firms will not only be better prepared to respond to the internal and external questions relating to risk and capital, but (perhaps more importantly), they could benefit by establishing hedging or reinsurance strategies to drive capital efficiencies and maximize stable risk-adjusted returns.
We will address three core aspects of the emerging ERM and capital management dialogue:
1.We will offer a framework for defining common terminology: distinguishing Risk Profile, Risk Appetite, and Risk Tolerance. Currently there are no consistent, overarching definitions of commonly used risk terms. Greater clarity in this area is fundamental to a proper understanding of the concepts involved.
2.We will offer a framework for discussing risk tolerance, including best practices.
3.We will present the results of Guy Carpenter’s initial risk tolerance benchmarking study, which will allow us to advise our clients about their own circumstances and the general context of the markets in which they operate.
Risk Profile, Risk Appetite, and Risk Tolerance
Access Article: http://www.gccapitalideas.com/2012/01/27/weeks-top-stories-january-21-27-2012/
Thursday, January 26, 2012
2012 M&A Activity in 2012 - The Conference Board
Jan 25 2012
2012 M&A Activity in 2012
While we are in a contemplative mood with respect to what may happen in 2012, I turned to the topic of mergers and acquisitions. Cleary Gottlieb Steen & Hamilton LLP recently published an advisory about what boards of directors may face in 2012, and one of the major topics was 2012 mergers and acquisition activity. Below is an excerpt from the advisory.
M&A in 2012 – Significant Opportunities … and Risks
While the first half of 2011 continued 2010’s M&A growth trends, growth stalled in the second half leading to only a very modest uptick for the full year. Spin-offs were the one type of transaction that attracted substantial interest last year, as companies decided (sometimes on their own, but sometimes with prompting from activists or other investors) that their businesses would generate better returns and have better prospects if split into two or more companies.
There is reason to expect growth in deal activity in 2012, despite current market and economic challenges. Prospective acquirers have substantial cash resources and reasonable or even strong stock prices, banks are willing to lend for at least some acquisitions, private equity firms have significant unused investor commitments, and hedge funds are actively seeking positive results. In this environment, directors should be mindful of whether the company’s current condition presents opportunities for it and its stakeholders.
Balance Sheet Management and Vulnerability to Insurgency
The ratio of liquid assets to total assets of non-financial institutions in the United States is the highest in over 50 years. Feeding this fattening of the balance sheets are a historically low level of business investment relative to pre-tax corporate profits and, in some cases, issuances of debt at low cost without any near-term plans for use of proceeds. While the financial crisis of 2008-09 and subsequent economic uncertainties may have led to this situation, directors should now be asking how much longer their companies can justify retaining significant excess capital on the balance sheet. Indeed, directors should be asking how much longer investors will tolerate this trend. A common misconception is that hedge fund insurgents target only underperforming or distressed companies. In fact, one recent study concluded that the boards and managements that are most frequently attacked in activist filings on Schedule 13D are those overseeing companies characterized by steady cash flows and healthy balance sheets.[1] Directors should be carefully considering:
Other M&A Predictions
Other resources regarding M&A activity in 2012 include:
Citing steadier stock and credit markets steadier, cheap financing and the large amounts of cash on corporate balance sheets, Evelyn M. Rusili writing for the NY Times, notes that companies may need to make acquisitions to drive growth in 2012 in the face of a tepid economy. These factors, together with pent-up demand among buyout shops may fuel M&A in 2012. Tempering these forces in 2012 is uncertainty regarding the European financial system and the uncertainty inherent in a U.S. presidential election.
According to Ernst & Young LLP’s Transaction Advisory Services, strong fundamentals, which include robust cash positions, strengthening balance sheets and improved credit markets, combined with a mounting pressure for growth in a low organic growth environment, should generate an uptick in deal flow in 2012.
Financialtimes.com contains a section dedicated to analysis of M&A activity in 2011 and trends in 2012.
--------------------------------------------------------------------------------
1] April Klein & Emanuel Zur, Entrepreneurial Activism: Hedge Funds and Other Private Investors, 64 J. Fin. 187 (2009) (“Klein & Zur”).
[2] See, e.g., Klein & Zur.
- Barbara Blackford
Posted by Barbara Blackford at 10:38 AM
Access Source And Its Great Content: Permalink: M&A Activity in 2012: http://tcbblogs.org/governance/2012/01/25/ma-activity-in-2012/
2012 M&A Activity in 2012
While we are in a contemplative mood with respect to what may happen in 2012, I turned to the topic of mergers and acquisitions. Cleary Gottlieb Steen & Hamilton LLP recently published an advisory about what boards of directors may face in 2012, and one of the major topics was 2012 mergers and acquisition activity. Below is an excerpt from the advisory.
M&A in 2012 – Significant Opportunities … and Risks
While the first half of 2011 continued 2010’s M&A growth trends, growth stalled in the second half leading to only a very modest uptick for the full year. Spin-offs were the one type of transaction that attracted substantial interest last year, as companies decided (sometimes on their own, but sometimes with prompting from activists or other investors) that their businesses would generate better returns and have better prospects if split into two or more companies.
There is reason to expect growth in deal activity in 2012, despite current market and economic challenges. Prospective acquirers have substantial cash resources and reasonable or even strong stock prices, banks are willing to lend for at least some acquisitions, private equity firms have significant unused investor commitments, and hedge funds are actively seeking positive results. In this environment, directors should be mindful of whether the company’s current condition presents opportunities for it and its stakeholders.
Seller’s market. Interest rates remain low, potential strategic partners looking for synergistic mergers may have significant cash reserves, and financial sponsors are eager for deals. All this suggests that advantageous pricing may be achievable for companies considering a sale of control or selected divestitures. Firms considering strategic sell-side transactions must review the current financial state of the firm, markets, likely bidders and antitrust or other regulatory uncertainties. Careful planning for any transaction process in light of legal requirements is also important. Among other things, boards pursuing these transactions should be sensitive to, and take steps to prevent or limit, potential conflicts of interest on the part of their financial advisors. Recent developments also confirm that antitrust considerations are not solely a buy-side concern.
Acquisition risks. For companies considering acquisitions, directors must do their homework to understand the business being acquired; integration challenges and plans, including anticipated positive and negative synergies; antitrust or other regulatory risks, both in the United States and overseas; and financing, litigation and other consummation and post-closing risks. For example, acquiring a company that turns out not to be compliant with the Foreign Corrupt Practices Act or similar foreign statutes or regulations (whether or not it was subject to those provisions prior to being acquired), can result in expenses to investigate and fix the problem, loss in income from possible changes in the target’s business model and the payment of fines. In the aggregate, these costs can dwarf the purchase price of the acquisition.
LBO activity. With financial sponsors on the prowl for opportunities, management teams across a variety of industries may be approached about potential leveraged buyouts. Also on the prowl, however, are plaintiffs’ law firms, which are well aware that a flawed LBO process will create significant legal pitfalls for the target’s board and give rise to potential claims. If a board believes its CEO is likely to be approached by a financial sponsor, the CEO should be instructed to advise the lead independent director immediately of any approach. Appropriate protocols should then be put in place to assure that any process is actively supervised by the independent directors.
Defense review. The past two years have witnessed a modest but meaningful amount of hostile deal activity and shareholder insurgency, as well as negotiated deals disrupted by interlopers. Given this activity, directors of potential targets should consider a review of their defenses to understand vulnerabilities and be prepared to move quickly to fulfill their fiduciary obligations. One difficult decision faced by some boards this year relates to the renewal or non-renewal of a shareholder rights plan scheduled to expire. In reviewing these plans, boards should take into account potential threats to shareholder interests that may justify such defenses, as well as the policy of ISS to recommend “no” or “withhold” on director nominees who have voted to extend a right plan and the policies of other relevant institutions. Some companies have rights plans “on the shelf” that a board can consider adopting quickly if appropriate when faced with actual hostile activity. But the “on the shelf” approach is not entirely satisfactory for many smaller companies or even for some larger companies, given the expanded use of derivatives by some investors to establish a large economic position that can effectively be converted (after regulatory clearance) into a large ownership position. Nevertheless, given the ISS policy and similar positions of some institutions, it is not surprising that almost 80% of companies with rights plans scheduled to expire in 2011 allowed them to expire, and a majority of the extensions were for periods of two to five years rather than the once-standard ten years.
The vision. In any contest for control, a company’s strategic plan will take center stage and may very well prove to be the determinative factor. In order to mount an adequate defense against any unsolicited offer or proxy contest – and for more basic reasons of oversight – the board should ensure that the company’s strategic plan is current, has adequate support in company and market data and reflects the best judgment of management.
Balance Sheet Management and Vulnerability to Insurgency
The ratio of liquid assets to total assets of non-financial institutions in the United States is the highest in over 50 years. Feeding this fattening of the balance sheets are a historically low level of business investment relative to pre-tax corporate profits and, in some cases, issuances of debt at low cost without any near-term plans for use of proceeds. While the financial crisis of 2008-09 and subsequent economic uncertainties may have led to this situation, directors should now be asking how much longer their companies can justify retaining significant excess capital on the balance sheet. Indeed, directors should be asking how much longer investors will tolerate this trend. A common misconception is that hedge fund insurgents target only underperforming or distressed companies. In fact, one recent study concluded that the boards and managements that are most frequently attacked in activist filings on Schedule 13D are those overseeing companies characterized by steady cash flows and healthy balance sheets.[1] Directors should be carefully considering:
Whether to invest more in the business;Studies have shown hedge fund activists to be highly effective at inducing increases in leverage, share buybacks and dividends.[2] The same studies have shown that, despite the frequent adoption by hedge fund insurgents of the moniker “operational activist,” very few of them have proven to be particularly adept at causing improvements to the operating performance of companies. But when a board is perceived to be “standing still” on top of a healthy and growing balance sheet, activists will not hesitate to enter the scene to advocate changes to the board, management and strategic plan. Boards should explore, and push outside advisors and management to help them understand, whether more aggressive uses of excess capital may be appropriate and communicate their conclusions and reasoning to investors. This effort may do more than traditional anti-takeover mechanics to protect a company from interference by an activist who purports to know more than the incumbent directors and management about how to run the business and who, in the face of a seemingly passive board, may generate enough momentum to steer the company in radical directions that are not prudent. Despite the challenges of macroeconomic and industry uncertainties, by focusing appropriately on these issues in advance, boards may be able to reduce the likelihood of activist campaigns or have more credibility with investors if a campaign is launched.
Whether to engage in more strategic acquisitions or similar transactions;
Whether to return more value to shareholders through share buybacks and dividends; and
Whether to incur more leverage to have additional flexibility to do any or all of the above.
Click here to read the full advisory. http://www.cgsh.com/files/News/8fcd6bc3-12bb-48ca-8da0-f949000c6133/Presentation/NewsAttachment/d77f88f2-1e9d-4fc8-bdaa-ff1c8f151d32/CGSH%20Alert%20Memo%20-%20Board%20Focus%202012.pdf
Other M&A Predictions
Other resources regarding M&A activity in 2012 include:
Citing steadier stock and credit markets steadier, cheap financing and the large amounts of cash on corporate balance sheets, Evelyn M. Rusili writing for the NY Times, notes that companies may need to make acquisitions to drive growth in 2012 in the face of a tepid economy. These factors, together with pent-up demand among buyout shops may fuel M&A in 2012. Tempering these forces in 2012 is uncertainty regarding the European financial system and the uncertainty inherent in a U.S. presidential election.
http://dealbook.nytimes.com/2012/01/02/on-wall-street-a-renewed-optimism-for-deals/
According to Ernst & Young LLP’s Transaction Advisory Services, strong fundamentals, which include robust cash positions, strengthening balance sheets and improved credit markets, combined with a mounting pressure for growth in a low organic growth environment, should generate an uptick in deal flow in 2012.
http://www.ey.com/US/en/Newsroom/News-releases/Ernst-and-Young-says-fundamentals-will-finally-prevail-over-uncertainty-to-get-deals-rolling-in-2012
Financialtimes.com contains a section dedicated to analysis of M&A activity in 2011 and trends in 2012.
http://www.ft.com/intl/indepth/m&a
--------------------------------------------------------------------------------
1] April Klein & Emanuel Zur, Entrepreneurial Activism: Hedge Funds and Other Private Investors, 64 J. Fin. 187 (2009) (“Klein & Zur”).
[2] See, e.g., Klein & Zur.
- Barbara Blackford
Posted by Barbara Blackford at 10:38 AM
Access Source And Its Great Content: Permalink: M&A Activity in 2012: http://tcbblogs.org/governance/2012/01/25/ma-activity-in-2012/
Saturday, January 21, 2012
2012 Separation of Chair/CEO Roles - Governance Challenges and Priorities for 2012 - The Conference Board
Governance Center Blog
Governance Challenges and Priorities for 2012 Jan 20
2012 Separation of Chair/CEO Roles
The decision of whether or not to separate the chair and chief executive roles remains a hot governance topic for public companies, boards, and shareholders. While the number of companies separating the roles of board chair and CEO has grown significantly over the past five years, it is not yet a majority practice in the US. According to The Conference Board’s 2011 Director Compensation and Board Practices Report, approximately 50% of nonfinancial services companies in the US separated these roles, with less than 65% of those companies having an independent board chair.
The Chairmen’s Forum, a group of prominent current and former chairs of corporate boards from the United States and Canada, recently issued a model statement regarding the separation of chair and chief executive roles. Under this model, boards are urged to adopt a policy requiring a separation, independent board chair. In its release, the chairman of the Chairman’s Forum, Bill McCracken, noted that “Corporate directors should prepare now for next-generation leadership, which involves building companies through strong and constructive boards led by independent chairs. . . . The Chairmen’s Forum sees succession as the inflection point in moving to a fresh model of board leadership. This policy language offers a clear way for directors to put this fresh model into practice and reflects an emerging standard.”
Shareholder representatives, including AFSCME (American Federation of State, County and Municipal Employees) and New York City Comptroller John Liu, who oversees NYC pension funds, are raising the profile of this issue by submitting shareholder proposals to require separation of the chair and CEO roles at companies like JP Morgan and Goldman Sachs. Despite AFSCME’s failure to garner majority shareholder support for a separation proposal last year at Exxon Mobil, ISS reports that the proposals for independent chairmen last year averaged 33 percent support at Russell 3000 companies, up from 28 percent the year before. AFSCME has announced the filing of 21 such proposals in 2012.
The issue of separation of board chair and CEO will continue to be subject of debate in the US. For more information about the debate and the rationale for separating these roles, check out The Conference Board’s Director Note, August 2011.
- Barbara Blackford
Access Source And Its Great Content: http://tcbblogs.org/governance/2012/01/20/separation-of-chairceo-roles/
Governance Challenges and Priorities for 2012 Jan 20
2012 Separation of Chair/CEO Roles
The decision of whether or not to separate the chair and chief executive roles remains a hot governance topic for public companies, boards, and shareholders. While the number of companies separating the roles of board chair and CEO has grown significantly over the past five years, it is not yet a majority practice in the US. According to The Conference Board’s 2011 Director Compensation and Board Practices Report, approximately 50% of nonfinancial services companies in the US separated these roles, with less than 65% of those companies having an independent board chair.
The Chairmen’s Forum, a group of prominent current and former chairs of corporate boards from the United States and Canada, recently issued a model statement regarding the separation of chair and chief executive roles. Under this model, boards are urged to adopt a policy requiring a separation, independent board chair. In its release, the chairman of the Chairman’s Forum, Bill McCracken, noted that “Corporate directors should prepare now for next-generation leadership, which involves building companies through strong and constructive boards led by independent chairs. . . . The Chairmen’s Forum sees succession as the inflection point in moving to a fresh model of board leadership. This policy language offers a clear way for directors to put this fresh model into practice and reflects an emerging standard.”
Shareholder representatives, including AFSCME (American Federation of State, County and Municipal Employees) and New York City Comptroller John Liu, who oversees NYC pension funds, are raising the profile of this issue by submitting shareholder proposals to require separation of the chair and CEO roles at companies like JP Morgan and Goldman Sachs. Despite AFSCME’s failure to garner majority shareholder support for a separation proposal last year at Exxon Mobil, ISS reports that the proposals for independent chairmen last year averaged 33 percent support at Russell 3000 companies, up from 28 percent the year before. AFSCME has announced the filing of 21 such proposals in 2012.
The issue of separation of board chair and CEO will continue to be subject of debate in the US. For more information about the debate and the rationale for separating these roles, check out The Conference Board’s Director Note, August 2011.
- Barbara Blackford
Access Source And Its Great Content: http://tcbblogs.org/governance/2012/01/20/separation-of-chairceo-roles/
Tuesday, January 17, 2012
Tensions with the Board Not the Norm, Say 98% of CEOs - WorldatWork News Line
Jan. 11, 2012 — Despite the prominence of headline-making Fortune 500 boardroom clashes in 2011, 98% of U.S. CEOs report having good relationships with their boards of directors, and 95% say they believe their board supports them in the majority of decisions they make, according to a just-released survey from RHR International, a global executive talent development firm.
Though these middle-market CEOs represent companies that make up a wide swath of the American economy, their perspectives have seldom been examined. The CEO Snapshot Survey, based on responses from 83 CEOs at public and private companies, delves into their perceptions on board relationships, succession issues, their own leadership effectiveness, and the resources they need to improve their performance.
Key Findings
Boards Provide Positive Support
Boards are a fruitful source of feedback and support for CEOs, with 96% saying they can speak honestly with certain directors about their performance and the impact of their decisions, and 59% citing the board as their most helpful source of feedback. Fifty percent of CEOs say the lead director serves as this key board confidant, indicating the growing importance of finding the right person for this board position.
Succession Planning Causes Breakdowns
From the CEO's perspective, board relationships and communications begin to break down during the succession planning process. Seventy-six percent of CEOs believe they should be more involved in planning their own succession, and many CEOs report that miscommunication with the board about selection decisions and responsibilities is the most difficult part of this process. "Succession planning is full of complex psychological nuances, such as the incumbent CEO's readiness to step down, that can make it a very difficult process," said RHR International Chairman and CEO Dr. Thomas J. Saporito. "Earlier RHR research also shows CEOs need more clarity from and alignment with boards during transitions into and out of the C-Suite."
Complexity of the Job Surprises CEOs
There is a disconnect between CEOs' self-proclaimed preparedness for the job and what they experience when they assume the role. Eighty-seven percent of all CEOs felt prepared for the job, yet of that group, 54% say it was different from what they originally expected. When looking at first-time CEOs only, both percentages rise: 91% felt ready for the job and 72% report it was different from their original expectations. "This is not uncommon," said Dr. Saporito. "Stress, pressure, and loneliness all combine to create a job unlike any other they have previously had."
Isolation Hinders Performance
The intensity of the CEO's job, coupled with the scarcity of peers to confide in, creates potentially dangerous feelings of isolation among chief executives. Fifty percent of all CEOs report experiencing loneliness in the role, and of this group, 61% believe that the isolation hinders their performance. First-time CEOs are particularly susceptible to this isolation, with nearly 70% of those who experience loneliness saying it negatively affects their ability to do their jobs. Nearly half of all CEOs estimate that most other leaders experience similar feelings of loneliness.
Contents © 2012 WorldatWork. For more information, contact the Copyright Department at WorldatWork.
Access Source And Its Great Content: http://www.worldatwork.org/waw/adimComment?id=58100&from=wwnew_editorial_0312
Though these middle-market CEOs represent companies that make up a wide swath of the American economy, their perspectives have seldom been examined. The CEO Snapshot Survey, based on responses from 83 CEOs at public and private companies, delves into their perceptions on board relationships, succession issues, their own leadership effectiveness, and the resources they need to improve their performance.
Key Findings
Boards Provide Positive Support
Boards are a fruitful source of feedback and support for CEOs, with 96% saying they can speak honestly with certain directors about their performance and the impact of their decisions, and 59% citing the board as their most helpful source of feedback. Fifty percent of CEOs say the lead director serves as this key board confidant, indicating the growing importance of finding the right person for this board position.
Succession Planning Causes Breakdowns
From the CEO's perspective, board relationships and communications begin to break down during the succession planning process. Seventy-six percent of CEOs believe they should be more involved in planning their own succession, and many CEOs report that miscommunication with the board about selection decisions and responsibilities is the most difficult part of this process. "Succession planning is full of complex psychological nuances, such as the incumbent CEO's readiness to step down, that can make it a very difficult process," said RHR International Chairman and CEO Dr. Thomas J. Saporito. "Earlier RHR research also shows CEOs need more clarity from and alignment with boards during transitions into and out of the C-Suite."
Complexity of the Job Surprises CEOs
There is a disconnect between CEOs' self-proclaimed preparedness for the job and what they experience when they assume the role. Eighty-seven percent of all CEOs felt prepared for the job, yet of that group, 54% say it was different from what they originally expected. When looking at first-time CEOs only, both percentages rise: 91% felt ready for the job and 72% report it was different from their original expectations. "This is not uncommon," said Dr. Saporito. "Stress, pressure, and loneliness all combine to create a job unlike any other they have previously had."
Isolation Hinders Performance
The intensity of the CEO's job, coupled with the scarcity of peers to confide in, creates potentially dangerous feelings of isolation among chief executives. Fifty percent of all CEOs report experiencing loneliness in the role, and of this group, 61% believe that the isolation hinders their performance. First-time CEOs are particularly susceptible to this isolation, with nearly 70% of those who experience loneliness saying it negatively affects their ability to do their jobs. Nearly half of all CEOs estimate that most other leaders experience similar feelings of loneliness.
Contents © 2012 WorldatWork. For more information, contact the Copyright Department at WorldatWork.
Access Source And Its Great Content: http://www.worldatwork.org/waw/adimComment?id=58100&from=wwnew_editorial_0312
Tuesday, January 10, 2012
SEC Issues Implementation Schedule for Dodd-Frank Act - Best's News Service
Best's News Service - January 09, 2012 04:09 PM
By Jeff Jeffrey, Washington Correspondent
WASHINGTON - The U.S. Securities and Exchange Commission has released its 2012 schedule for the implementation of the Dodd-Frank Act, laying out its six-month goals for developing new rules and public reporting requirements.
During the first six months of the year, the SEC expects to address rules for corporate governance, risk retention requirements for asset-backed securities, derivatives and other issues covered by the law.
On the corporate governance front, the SEC said it would adopt rules dealing with compensation committee independence and rules regarding compensation consultant conflicts; rules for the disclosure of pay-for-performance, pay ratios and hedging by employees and directors; and rules regarding the recovery of executive compensation.
The schedule said the agency plans to report to Congress on standardization within certain elements of the credit rating process.
The SEC said it also expects to develop definitions for a number of derivatives-related terms, including intermediaries and securities-based swaps.
The SEC's full schedule for the implementation of the Dodd-Frank Act can be found on the agency's website.
The insurance industry has been closely watching the implementation of the Dodd-Frank Act, pushing lawmakers and administration officials to avoid lumping insurance companies in with banks. The industry has argued that insurance companies and banks are inherently different businesses, emphasizing the small number of insurance companies that failed during the financial crisis as opposed to the much larger number of banks that suffered (Best's News Service, Oct. 12, 2011).
(By Jeff Jeffrey, Washington Correspondent: jeff.jeffrey@ambest.com)BN-NJ-01-09-2012 1609 ET #
By Jeff Jeffrey, Washington Correspondent
WASHINGTON - The U.S. Securities and Exchange Commission has released its 2012 schedule for the implementation of the Dodd-Frank Act, laying out its six-month goals for developing new rules and public reporting requirements.
During the first six months of the year, the SEC expects to address rules for corporate governance, risk retention requirements for asset-backed securities, derivatives and other issues covered by the law.
On the corporate governance front, the SEC said it would adopt rules dealing with compensation committee independence and rules regarding compensation consultant conflicts; rules for the disclosure of pay-for-performance, pay ratios and hedging by employees and directors; and rules regarding the recovery of executive compensation.
The schedule said the agency plans to report to Congress on standardization within certain elements of the credit rating process.
The SEC said it also expects to develop definitions for a number of derivatives-related terms, including intermediaries and securities-based swaps.
The SEC's full schedule for the implementation of the Dodd-Frank Act can be found on the agency's website.
The insurance industry has been closely watching the implementation of the Dodd-Frank Act, pushing lawmakers and administration officials to avoid lumping insurance companies in with banks. The industry has argued that insurance companies and banks are inherently different businesses, emphasizing the small number of insurance companies that failed during the financial crisis as opposed to the much larger number of banks that suffered (Best's News Service, Oct. 12, 2011).
(By Jeff Jeffrey, Washington Correspondent: jeff.jeffrey@ambest.com)BN-NJ-01-09-2012 1609 ET #
Friday, December 9, 2011
Lloyd’s Risk Index 2011 - #2 Risk - Talent And Skills Shortage
http://www.lloyds.com/News-and-Insight/Risk-Insight/Lloyds-Risk-Index
INDIVIDUAL RISKS 2011
1 Loss of customers/Cancelled orders
2 Talent and skills shortages (including succession risk)
3 Reputational risk
4 Currency fluctuation
5 Changing legislation
6 Cost and availability of credit
7 Price of material inputs
8 Inflation
9 Corporate liability
10 Excessively strict regulation
11 Rapid technological changes
12 Cyber attacks (malicious)
13 High taxation
14 Failed investment
15 Major asset price volatility
16 Theft of assets/Intellectual Property
17 Fraud and corruption
18 Interest rate change
19 Cyber risks (non-malicious)
20 Poor/incomplete regulation
21 Critical infrastructure failure
22 Government spending cuts
23 Supply chain failure
24 Pollution/environmental liability
25 Soverign Debt
26 Increased protectionism
27 Industrial/workplace accident
28 Energy security
29 Insolvency risk
30 Demographic shift (eg ageing population, youth emigration)
31 Strikes and industrial action
32 Climate change
33 Pandemic
34 Piracy
35 Water scarcity
36 Terrorism
37 Urbanisation
38 Population growth
39 Riots and civil commotion
40 Food security
41 Harmful effects of new technology
42 Flooding
43 Expropriation of assets
44 Earthquake (including tsunami)
45 Abrupt regime change
46 Windstorm (eg hurricane, cyclone, typhoon)
47 Drought
48 Threats to biodiversity
49 Impact of space weather (eg solar flares)
50 Volcanic eruption (including ash)
Access Lloyds Risk Index 2011 Report: http://www.lloyds.com/News-and-Insight/Risk-Insight/Lloyds-Risk-Index
INDIVIDUAL RISKS 2011
1 Loss of customers/Cancelled orders
2 Talent and skills shortages (including succession risk)
3 Reputational risk
4 Currency fluctuation
5 Changing legislation
6 Cost and availability of credit
7 Price of material inputs
8 Inflation
9 Corporate liability
10 Excessively strict regulation
11 Rapid technological changes
12 Cyber attacks (malicious)
13 High taxation
14 Failed investment
15 Major asset price volatility
16 Theft of assets/Intellectual Property
17 Fraud and corruption
18 Interest rate change
19 Cyber risks (non-malicious)
20 Poor/incomplete regulation
21 Critical infrastructure failure
22 Government spending cuts
23 Supply chain failure
24 Pollution/environmental liability
25 Soverign Debt
26 Increased protectionism
27 Industrial/workplace accident
28 Energy security
29 Insolvency risk
30 Demographic shift (eg ageing population, youth emigration)
31 Strikes and industrial action
32 Climate change
33 Pandemic
34 Piracy
35 Water scarcity
36 Terrorism
37 Urbanisation
38 Population growth
39 Riots and civil commotion
40 Food security
41 Harmful effects of new technology
42 Flooding
43 Expropriation of assets
44 Earthquake (including tsunami)
45 Abrupt regime change
46 Windstorm (eg hurricane, cyclone, typhoon)
47 Drought
48 Threats to biodiversity
49 Impact of space weather (eg solar flares)
50 Volcanic eruption (including ash)
Access Lloyds Risk Index 2011 Report: http://www.lloyds.com/News-and-Insight/Risk-Insight/Lloyds-Risk-Index
Thursday, December 1, 2011
Risk Assessments Radar Screen 2012 - CFO.com
Risk Management November 29, 2011 CFO.com US
Here’s a top 10 list of risk “hotspots” to worry about in 2012.
Sarah Johnson
Here’s a top 10 list of risk “hotspots” to worry about in 2012.
Sarah Johnson
IT security, global expansion, and excess cash top the list of 10 risks companies should be particularly concerned about in 2012, according to the Corporate Executive Board (CEB).
The research firm comes up with a list of so-called risk hotspots every year, based on discussions with clients, surveys, and observations about what's going on in the corporate world. The CEB offers its tally as a starting point for senior executives to use with their boards and internal-audit teams to discuss how their company should do risk assessments in the coming year.
For the latest list, the first two items make intuitive sense. Companies have been on a long-term track to mitigate the risk of outside sources attacking their technology systems, as the means for carrying out such damage continue to proliferate. "Companies are trying very hard to eliminate vulnerabilities in their systems that may impact financial performance," says Kate Guerra, senior director of research at the CEB.
As for expansion, setting up stakes in emerging markets — an increasingly common practice by U.S. companies — with new employees and new regulations obviously creates potential problematic areas, such as an increased likelihood of fraud prevention and internal controls falling apart between U.S. headquarters and far-flung operations.
But it may be less apparent why the CEB's third item — an excessive cash buildup — is on the list. The risk is making its first appearance since the CEB started putting the list together (for a comparison between 2008 and the current list, see the chart below). An executive trying to grapple with the volatile credit markets of late 2008 would have scoffed at such an idea, since a hefty cash cushion at that time would have been an enviable asset.
Not so much now, however, when many companies don't know what to do with the cash they're sitting on, according to the CEB. Key stakeholders will worry if executives appear blasé about their cash position by not putting much, if any, of it to good use. "Investors can have a hard time differentiating between companies with a sound cash strategy and those with a lazy balance sheet," Guerra says. In other words, many CFOs may need to get defensive when it comes to their cash strategy in 2012, considering that a quarter of them have no plans to deploy cash in the next 12 months, according to the most recent Duke University/CFO Magazine Global Business Outlook Survey.
Other risks on this year's CEB list include corporate culture (which could be hampered by expansion into emerging markets), compliance (as new regulations continue to crop up out of the Dodd-Frank Act and from international governments), strategic change management, third-party relationships, and human resources (for companies that may not have the right talent to meet their goals).
Rounding out the list is a new item, social media, which the CEB views as a tool beyond Twitter and Facebook. Rather, the firm views social media as the use of internal collaborative tools, such as Gmail's Documents feature, for sharing information among employees or clients. While these services can be useful, they also bring risk to a company's ability to protect its data, the CEB notes.
Ranking In 2012
1. Information security
2. International Operations
3. Excess cash
4. Corporate culture
5. Compliance
6. Strategic change management
7. Third-party relationships
8. Cost-reduction pressures
9. HR
10. Social Media
1. Information security
2. International Operations
3. Excess cash
4. Corporate culture
5. Compliance
6. Strategic change management
7. Third-party relationships
8. Cost-reduction pressures
9. HR
10. Social Media
Access Source And Its Great Content: http://www3.cfo.com/article/2011/11/risk-management_risk-assessments-radar-screen-2012-
Wednesday, November 16, 2011
CEOs are Paid for Performance - WorldatWork Newsline
WorldatWork Newsline
Nov. 8, 2011 — As the furor over CEO compensation at U.S. companies remains high, new research shows that the pay of executives is closely aligned with their actual performance. High-performing companies tend to have relatively highly paid leaders while low-performing companies compensate their CEOs at much lower levels, according to a new study by Pay Governance, LLC.
A review of 2011 SEC proxy filings for nearly 400 companies demonstrated strong alignment of a company's stock price performance with realizable CEO pay. Executives at high-performing companies earned more than their counterparts at firms delivering less value to shareholders. These findings do not support charges by critics in the media, public, and among regulators, government officials and some shareholders that CEO pay is generally not proportionate with the company's performance.
"Contrary to claims made by compensation critics, there is a very strong relationship between pay and performance as reflected through realizable pay," said Pay Governance managing partner Ira Kay. "These findings are consistent with other pay-for-performance research we have done on thousands of companies over the past 10 years, as well as industry studies performed for many of our clients."
The Pay Governance study found that over a three-year period, cumulative realizable pay from stock incentives at high-performing companies was $19 million — 55% higher than at comparable low-performing companies. Similar results have been found in other studies conducted by the firm.
The gulf between high- and low-performing companies is consistent with striking differences in total shareholder return (TSR). The high achievers realized a 5.6% TSR over three years compared to -8% for the others. For a typical company with a $10 billion market cap, this disparity translated into a difference of almost $1.4 billion in valuation.
Most critics of CEO pay tend to only look at pay opportunity — target cash compensation and the value of equity incentives on the date of grant — which can create the appearance of high pay compared to performance. Pay Governance conducted its evaluation of CEO compensation using a realizable pay metric — the best representation of an executive's actual pay during a particular time period. This figure is the sum of actual cash compensation earned, the aggregate value of in-the-money stock options, the current value of restricted shares, actual payout from performance share or cash plans, plus the estimated value of outstanding performance share or performance contingent cash.
Nov. 8, 2011 — As the furor over CEO compensation at U.S. companies remains high, new research shows that the pay of executives is closely aligned with their actual performance. High-performing companies tend to have relatively highly paid leaders while low-performing companies compensate their CEOs at much lower levels, according to a new study by Pay Governance, LLC.
A review of 2011 SEC proxy filings for nearly 400 companies demonstrated strong alignment of a company's stock price performance with realizable CEO pay. Executives at high-performing companies earned more than their counterparts at firms delivering less value to shareholders. These findings do not support charges by critics in the media, public, and among regulators, government officials and some shareholders that CEO pay is generally not proportionate with the company's performance.
"Contrary to claims made by compensation critics, there is a very strong relationship between pay and performance as reflected through realizable pay," said Pay Governance managing partner Ira Kay. "These findings are consistent with other pay-for-performance research we have done on thousands of companies over the past 10 years, as well as industry studies performed for many of our clients."
The Pay Governance study found that over a three-year period, cumulative realizable pay from stock incentives at high-performing companies was $19 million — 55% higher than at comparable low-performing companies. Similar results have been found in other studies conducted by the firm.
The gulf between high- and low-performing companies is consistent with striking differences in total shareholder return (TSR). The high achievers realized a 5.6% TSR over three years compared to -8% for the others. For a typical company with a $10 billion market cap, this disparity translated into a difference of almost $1.4 billion in valuation.
Most critics of CEO pay tend to only look at pay opportunity — target cash compensation and the value of equity incentives on the date of grant — which can create the appearance of high pay compared to performance. Pay Governance conducted its evaluation of CEO compensation using a realizable pay metric — the best representation of an executive's actual pay during a particular time period. This figure is the sum of actual cash compensation earned, the aggregate value of in-the-money stock options, the current value of restricted shares, actual payout from performance share or cash plans, plus the estimated value of outstanding performance share or performance contingent cash.
Contents © 2011 WorldatWork. For more information, contact the Copyright Department at WorldatWork.
Access Source And Its Great Content: http://www.worldatwork.org/waw/adimComment?id=56958&from=wwnew_editorial_4611
Friday, November 11, 2011
Cyber Security in the Boardroom | Governance Center Blog
The Conference Board
Nov 10 2011
Cyber security, and the importance of management and board engagement on the issue, has been generating a lot of discussion lately. Indeed, the spate of security breaches has made it clear that no organization is immune and that, as a society, we must develop a level of tolerance for the fact that our information is accessible to those with the determination and resources to go after it.
Even if we resign ourselves to the risk of a breach, however, there are steps that organizations can and should take to reduce the likelihood of a breach and to mitigate the impact and disruption if one does happen. Companies are responding. Strong solutions are emerging from the security industry, but also from business leaders across all industries. Yet there remains one last frontier of corporate cyber security: the boardroom.
With boards rapidly migrating to digital interactions, managers and directors should be doing all they can to manage the security risks that come with the digital realm.
To be clear, the digitization of the boardroom, through the introduction of iPads, boardroom portals, and other technology brings great benefits. Reduced shipping costs (not to mention the related reduction of CO2 emissions), ease of delivery, and increased document retention capability are just a few of the many benefits. And many would argue that enhanced corporate security is another important benefit. After all, do your directors really destroy all of their board books after each meeting?
These points are all well and good, but it isn’t all upside with technology (as I’m sure a director or two would be quick to point out). Ultimately, the security of your boardroom is only as strong as its weakest link. So here are a set of questions that directors should be asking themselves:
1) Do I understand the security protocol for our board documents?
2) Do I, or does my organization, have a process to scrub my mobile device if I lose it?
3) Do I have the appropriate security programs and practices in place on all computers I use for company business?
4) When reviewing board documents, am I aware of my surroundings? (This question is as important for paper documents as for digital ones. Yet when the computer screen is up versus papers lying on the table, documents are more visible.)
5) Do I know who to notify in the event of a departure from company protocol?
Technology demands a balanced approach, one that allows for new ideas and workflows to be introduced to our organizations, but also one that takes the realities of the world around us into account. As the recent U.S. intelligence document, Foreign Spies Stealing US Economic Secrets in Cyberspace, points out, China and Russia have been bankrolling hackers who plunder corporate files. This suggests that the resources of these cyber thieves will not dry up any time soon.
While cyber security has become an issue of increasingly intense focus for management and boards over the past year or so, it is important to pause for a moment and take a good look at the behavior of the board. It could mean the difference between creating a sound cyber security infrastructure and enabling the unintended release of key corporate data.
- Marcel Bucsescu
Access Source And Its Great Content : http://tcbblogs.org/governance/2011/11/10/cyber-security-in-the-boardroom/
Nov 10 2011
Cyber security, and the importance of management and board engagement on the issue, has been generating a lot of discussion lately. Indeed, the spate of security breaches has made it clear that no organization is immune and that, as a society, we must develop a level of tolerance for the fact that our information is accessible to those with the determination and resources to go after it.
Even if we resign ourselves to the risk of a breach, however, there are steps that organizations can and should take to reduce the likelihood of a breach and to mitigate the impact and disruption if one does happen. Companies are responding. Strong solutions are emerging from the security industry, but also from business leaders across all industries. Yet there remains one last frontier of corporate cyber security: the boardroom.
With boards rapidly migrating to digital interactions, managers and directors should be doing all they can to manage the security risks that come with the digital realm.
To be clear, the digitization of the boardroom, through the introduction of iPads, boardroom portals, and other technology brings great benefits. Reduced shipping costs (not to mention the related reduction of CO2 emissions), ease of delivery, and increased document retention capability are just a few of the many benefits. And many would argue that enhanced corporate security is another important benefit. After all, do your directors really destroy all of their board books after each meeting?
These points are all well and good, but it isn’t all upside with technology (as I’m sure a director or two would be quick to point out). Ultimately, the security of your boardroom is only as strong as its weakest link. So here are a set of questions that directors should be asking themselves:
1) Do I understand the security protocol for our board documents?
2) Do I, or does my organization, have a process to scrub my mobile device if I lose it?
3) Do I have the appropriate security programs and practices in place on all computers I use for company business?
4) When reviewing board documents, am I aware of my surroundings? (This question is as important for paper documents as for digital ones. Yet when the computer screen is up versus papers lying on the table, documents are more visible.)
5) Do I know who to notify in the event of a departure from company protocol?
Technology demands a balanced approach, one that allows for new ideas and workflows to be introduced to our organizations, but also one that takes the realities of the world around us into account. As the recent U.S. intelligence document, Foreign Spies Stealing US Economic Secrets in Cyberspace, points out, China and Russia have been bankrolling hackers who plunder corporate files. This suggests that the resources of these cyber thieves will not dry up any time soon.
While cyber security has become an issue of increasingly intense focus for management and boards over the past year or so, it is important to pause for a moment and take a good look at the behavior of the board. It could mean the difference between creating a sound cyber security infrastructure and enabling the unintended release of key corporate data.
- Marcel Bucsescu
Access Source And Its Great Content : http://tcbblogs.org/governance/2011/11/10/cyber-security-in-the-boardroom/
Wednesday, November 9, 2011
Annual Survey Reveals Emergence of New Compensation Practices | Governance Center Blog
The Conference Board
Nov 08, 2011
This week, The Conference Board issued its The 2011 U.S. Director Compensation and Board Practices Report. The report is based on a survey of 334 public companies jointly conducted by The Conference Board, NASDAQ OMX, and NYSE Euronext between April and June 2011. The Harvard Law School Forum on Corporate Governance and Financial Regulation, Stanford University’s Rock Center for Corporate Governance, the National Investor Relations Institute (NIRI) and the Shareholder Forum each endorsed the survey by distributing it to their members and readers. Participants in the survey (corporate secretaries, general counsel, and investor relations officers) were asked to provide information on a wide range of corporate practices, including: board composition and leadership, director election practices, anti-takeover practices, compensation practices, risk oversight practices, CEO succession planning practices, board-shareholder engagement practices, and policies on director performance assessment and retirement. Findings constitute the basis for a benchmarking tool with more than 120 data points searchable by company size (measurable by revenue and asset value) and 20 industrial sectors.
Major findings include:
Director compensation correlates more with company size than with industry. Median total compensation of board members ranges from $46,843 in the smallest companies to $190,000 in the largest. “This finding underscores a likely correlation between the rising director compensation levels observed in the last few years and the expanding array of governance and compliance responsibilities expected of boards,” said Tonello.
Computer services is the sector that most emphasizes equity-based compensation. When it comes to compensation mix, computer services is the industry with the lowest percentage of total director compensation awarded in cash retainer (26.6%); and the sector that placed the greatest emphasis on equity-based compensation (stock awards and stock options), which surpasses 70% of the total.
Boards continue to strengthen their member independence. In approximately one-third of companies in the financial services sector and one-fourth (1/4) of those in manufacturing and nonfinancial services, boards adopt a policy on independence setting standards that are even more stringent than those established by the security exchange on which the company is listed.
Majority voting is the predominant model of director election in the largest revenue group, but it remains rare for a director to fail to receive the required vote. There is a direct correlation between company size (measured both by annual corporate revenue and asset value) and the adoption of majority voting policy for director elections. In the largest revenue group, for example, 80% of companies adopt some form of majority voting; of those, 86% supplement it with a mandatory resignation policy. However, only 3% percent of companies (all in the manufacturing sector, and mostly with annual revenue of less than $500 million) reported having one or more members of their board standing for reelection in the 2010 proxy season who failed to receive the required majority vote.
Reimbursement of proxy solicitation expenses remains uncommon. The reimbursement of proxy solicitation expenses remains a marginal practice. The sector reporting the highest level of adoption of such a policy is the financial services sector, with a meager 7%. The policy tends to be favored by smaller companies.
Board portals are more widely introduced by large financial companies. Less than a majority of corporate boards across industries use a board portal, where directors can securely access board documents and collaborate with other board members electronically. However, this technology is more widespread in the financial services sector, where it has been introduced by almost 73% of companies with asset value of $100 billion or greater.
New compensation practices are emerging. A range of one-fourth to one-third of surveyed companies have an anti-gross ups policy in place, with the percentage of companies adopting the policy increasing with corporate size (as measured both by annual revenue and asset value). Approximately 24% of financial services companies impose a retention period for stock awarded to employees as part of their annual compensation, with a concentration among the largest companies (73% in the group of those with asset value equal to or greater than $100 billion). Despite growing interest in the practice among compensation experts and advisers, bonus banking remains uncommon; even in the financial sector, only 7% of respondents reported having such a policy in place.
Peer-group benchmarking is widely used to determine executive compensation. More than three-quarters of companies reported in their proxy statement the names of individual companies composing the peer group used for compensation benchmarking purposes; the larger the company size, the higher the percentage of companies providing this type of disclosure. The responsibility of determining the peer group is most frequently assigned to the compensation committee; however, 40% of manufacturing companies and 38% of nonfinancial services companies reported that their senior management was also directly involved in the selection process.
Most companies conclude that they are not exposed to a material compensation risk. Across industries and size groups, a large majority of companies, after reviewing their compensation policies and practices, concluded and disclosed that such policies and practices are not reasonably likely to have a material adverse effect on the company.
Compensation consultant fees tend to be lower than the amount for which disclosure is required. Across industry and size groups, a large majority of companies did not disclose the aggregate fee paid during the reportable fiscal year for compensation-related services and for additional consulting services, since the fee amount was lower than the $120,000 threshold for which securities laws mandate disclosure.
Financial companies widely rely on a dedicated chief risk officer. When analyzed by size, nearly all of the financial companies with asset value of $100 billion or greater avail themselves of a dedicated chief risk officer, and in most cases (70%) the CRO reports directly to the CEO.
Smaller companies review their CEO succession plans less frequently. The revenue analysis reveals an inverse correlation between the frequency of the review and the company size, with 32% of companies with annual revenue of $100 million or less indicating that their boards review the CEO succession plan not annually but only when a change in circumstances warrants it (e.g. retirement, sudden death or illness, or other emergencies).
Formal board/shareholder engagement policies begin to emerge. About a quarter of surveyed companies adopt a board/shareholder communication protocol, with the highest percentage found in the financial sector and among the smaller size group.
For more information regarding the report or to download a copy of the report:
https://www.conference-board.org/publications/publicationdetail.cfm?publicationid=2040
- Barbara Blackford
Access Source And Its Great Content: http://tcbblogs.org/governance/2011/11/08/annual-survey-reveals-emergence-of-new-compensation-practices/
Thursday, September 8, 2011
Carol Bartz’s Blunt E-Mail on Firing Raises Issues - NYTimes.com
Excerpts
With those four words, Yahoo’s chief executive, Carol A. Bartz, did something Tuesday afternoon that dismissed managers almost never do: She told the truth.
Ms. Bartz’s blunt statement, sent in an e-mail blast to Yahoo’s 13,400 employees, immediately ignited a debate: Was she a pioneer trying to provide more transparency and authenticity at the top ranks of prominent companies, or was her salvo an unprofessional tirade that was a personal and professional mistake?
Jeffrey Pfeffer, a Stanford professor who is an expert in organizational behavior, is in the first group. “The truth helps you improve,” he said. “When people lose their jobs and there’s no acknowledgement, the potential for learning is lost.” Ms. Bartz’s comments also served her own cause, the professor said. “She’s acting as if this is not her fault. She’s not embarrassed. She’s controlling the story.”
But Jennifer Chatman, a professor and chair of the Haas Management of Organizations Group at the University of California, Berkeley, said Ms. Bartz’s angry words could help sink the struggling search portal. Now the directors who ejected Ms. Bartz are under attack at the moment employees need them to save Yahoo.
“A chief executive who was thinking first about the long-term interests of her company would not have done this,” Ms. Chatman said, adding that there are problems of perception in this case as well: “She’s one of a handful of top female business leaders. It would be easy to attach this to a stereotype of women leaders as not in control of their emotions.”
Whatever the effect on Yahoo, unvarnished comments like Ms. Bartz’s are likely to become more common. Chief executives are increasingly conscious of their personal brand and how it can diverge from the corporate brand.
Authenticity, though, can backfire, and vulnerability is not always something to be desired. Executives who are not on their way out are learning that broadcasting their feelings can have unintended consequences.
------------------------
Access Full Article And Content Source: http://www.nytimes.com/2011/09/08/technology/carol-bartzs-blunt-e-mail-on-firing-raises-issues.html
Wednesday, July 13, 2011
Board Members: Rocket Fuel or Rocks? - Lucy P. Marcus - Harvard Business Review
Board Members: Rocket Fuel or Rocks? - Lucy P. Marcus - Harvard Business Review
A good board can be rocket fuel or it can be rocks in an organization's pockets. Much of success and failure in the boardroom comes down to the way the individuals around the table — be it on a public company board, a small private board, or a non-profit board — do their jobs. So what should an independent director do to contribute to making the boardroom a dynamic, productive place?
Here are five things to start with:
1. Know the boardroom
It is vital to know the issues with which the board is grappling, to know the people around the table, and to come to the room ready to engage. Addressing the first issue is pretty straightforward: read the board papers that are sent in advance of board meetings. All of them.
Get to know the people around the table. Why are they there? What are their skills? What do they bring to the table?
Be engaged & constructive. Boards work best when the people in the room are on both "receive" and "transmit." Listening to one another and sharing their own thoughts, asking questions and genuinely integrating the answers into their own deliberations.
2. Know the people
This focus on people does not stop at the boardroom door. Today's board directors must engage much more broadly and deeply — both inside and outside the organization. Hearing the voices from the organization directly means non-execs can form their own ideas and perspectives on the information they are receiving in board papers and reports, and not simply depend upon secondhand knowledge.
By being approachable and reaching out to people, board members are able to talk with, and to listen to, the organization's senior managers, staff, and investors. They need to genuinely understand and respect their views, and help harness their passion and commitment to the organization. Only then can they help ensure its endurance and robustness.
3. Know the business
People focus, while important, is not all that distinguishes engaged directors. Understanding the nuts and bolts of the business also means, and indeed requires, asking the hard questions in the boardroom. It means not being satisfied with simply asking the questions, but to follow through and do something with the answers. An independent perspective means being sensitive to internal factors that shape the organization's capacity to survive and thrive as it confronts current and future challenges.
4. Know the landscape
The nuts and bolts of the organization are internal, but they don't exist in a vacuum. Non-executive board directors need to keep an eye on the global factors that shape the broader landscape in which their organization operates — from government regulation to customer expectations, and a constantly shifting competitive environment. This outside independent perspective is indeed one of the greatest values non-exec board members can bring to the table.
Keeping on top of these developments in an increasingly networked world is more possible than ever. To proactively seek knowledge I use social media like Twitter, LinkedIn, and Google alerts, and a variety of other sources.
Equally important is doing something with this information — seeking and recognizing opportunities for the organization to shape the environment in which it operates. This has meant great gains and enormous strides in boardrooms around the world, from a better understanding of new forms of communication like social media, to helping the organizations keep up, innovate, and move into issues around corporate social responsibility, sustainability, and other areas that will help future-proof the organization.
Lucy P. Marcus is the founder and CEO of Marcus Venture Consulting and serves as a non-executive independent director on a number of boards.
Access Content Source And Other Great Stuff: http://blogs.hbr.org/cs/2011/07/board_members_rocket_fuel_or_r.html?referral=00563&cm_mmc=email-_-newsletter-_-daily_alert-_-alert_date&utm_source=newsletter_daily_alert&utm_medium=email&utm_campaign=alert_date
Here are five things to start with:
1. Know the boardroom
It is vital to know the issues with which the board is grappling, to know the people around the table, and to come to the room ready to engage. Addressing the first issue is pretty straightforward: read the board papers that are sent in advance of board meetings. All of them.
Get to know the people around the table. Why are they there? What are their skills? What do they bring to the table?
Be engaged & constructive. Boards work best when the people in the room are on both "receive" and "transmit." Listening to one another and sharing their own thoughts, asking questions and genuinely integrating the answers into their own deliberations.
2. Know the people
This focus on people does not stop at the boardroom door. Today's board directors must engage much more broadly and deeply — both inside and outside the organization. Hearing the voices from the organization directly means non-execs can form their own ideas and perspectives on the information they are receiving in board papers and reports, and not simply depend upon secondhand knowledge.
By being approachable and reaching out to people, board members are able to talk with, and to listen to, the organization's senior managers, staff, and investors. They need to genuinely understand and respect their views, and help harness their passion and commitment to the organization. Only then can they help ensure its endurance and robustness.
3. Know the business
People focus, while important, is not all that distinguishes engaged directors. Understanding the nuts and bolts of the business also means, and indeed requires, asking the hard questions in the boardroom. It means not being satisfied with simply asking the questions, but to follow through and do something with the answers. An independent perspective means being sensitive to internal factors that shape the organization's capacity to survive and thrive as it confronts current and future challenges.
4. Know the landscape
The nuts and bolts of the organization are internal, but they don't exist in a vacuum. Non-executive board directors need to keep an eye on the global factors that shape the broader landscape in which their organization operates — from government regulation to customer expectations, and a constantly shifting competitive environment. This outside independent perspective is indeed one of the greatest values non-exec board members can bring to the table.
Keeping on top of these developments in an increasingly networked world is more possible than ever. To proactively seek knowledge I use social media like Twitter, LinkedIn, and Google alerts, and a variety of other sources.
Equally important is doing something with this information — seeking and recognizing opportunities for the organization to shape the environment in which it operates. This has meant great gains and enormous strides in boardrooms around the world, from a better understanding of new forms of communication like social media, to helping the organizations keep up, innovate, and move into issues around corporate social responsibility, sustainability, and other areas that will help future-proof the organization.
5. Know when to go
There is a debate about how long is too long when serving as an independent director on a board. Under the UK's Combined Code, non-executive directors lose their independence after nine years on a company's board. No matter what you think that time limit should be, there is no question that one's usefulness as a truly independent member has a shelf life. Better that you ask the question of yourself than to force someone else to ask it.
There is a debate about how long is too long when serving as an independent director on a board. Under the UK's Combined Code, non-executive directors lose their independence after nine years on a company's board. No matter what you think that time limit should be, there is no question that one's usefulness as a truly independent member has a shelf life. Better that you ask the question of yourself than to force someone else to ask it.
Lucy P. Marcus is the founder and CEO of Marcus Venture Consulting and serves as a non-executive independent director on a number of boards.
Access Content Source And Other Great Stuff: http://blogs.hbr.org/cs/2011/07/board_members_rocket_fuel_or_r.html?referral=00563&cm_mmc=email-_-newsletter-_-daily_alert-_-alert_date&utm_source=newsletter_daily_alert&utm_medium=email&utm_campaign=alert_date
Saturday, July 2, 2011
Who Owns Risk? - Careers - CFO.com
By Sarah Johnson
June 29, 2011
Nearly half of executives in a new study report their company has a chief risk officer (CRO), up from 33% two years ago. The elevated role in the C-suite has resulted in CFOs losing the top spot as the primary owners of risk management.
The survey of nearly 400 executives, conducted by Accenture at the beginning of this year and released today, reports that only 14% of finance chiefs hold the ultimate responsibility for risk management, compared with 34% two years ago.
In addition, more CEOs can claim ownership of risk. Accenture reports that 23% of the survey respondents, who are all C-suite executives, say their CEO owns the responsibility for risk management, compared with just 13% in 2009.
Steve Culp, managing director of Accenture's risk-management consulting line, says the change is partly due to the rise in CROs in general as businesses have expanded globally and risk management has moved beyond a compliance and modeling exercise. "The overall size of the complexity pie has increased," he says.
Moreover, CFOs shouldn't feel they are losing any authority. Rather, just as the finance chief's position has evolved in recent years beyond number crunching, so has the CRO role, Culp says. "When we look at the financial-services sector, we have seen a higher percentage of C-level executives responsible for risk separately," he says.
In contrast, a recent survey of risk managers and executives by Marsh reports CFOs have the primary responsibility for risk. Nearly 30% of the respondents reported their finance chiefs carry that role.
Any shift is most prevalent at financial-services firms, which were forced to thoroughly reevaluate their risk-management programs following the financial crisis and the passage of the Dodd-Frank Act last summer. A recent Deloitte survey of financial institutions reports 86% have a CRO or equivalent, and most of them report to the board of directors, the CEO, or both.
Accenture also sees the rise of the CRO as a sign that risk management has moved up in importance on the overall corporate agenda and is demanding wider attention beyond the finance department. Smart companies are using it to gain competitive advantage by factoring it into their strategic planning, the consultancy claims.
June 29, 2011
Nearly half of executives in a new study report their company has a chief risk officer (CRO), up from 33% two years ago. The elevated role in the C-suite has resulted in CFOs losing the top spot as the primary owners of risk management.
The survey of nearly 400 executives, conducted by Accenture at the beginning of this year and released today, reports that only 14% of finance chiefs hold the ultimate responsibility for risk management, compared with 34% two years ago.
In addition, more CEOs can claim ownership of risk. Accenture reports that 23% of the survey respondents, who are all C-suite executives, say their CEO owns the responsibility for risk management, compared with just 13% in 2009.
Steve Culp, managing director of Accenture's risk-management consulting line, says the change is partly due to the rise in CROs in general as businesses have expanded globally and risk management has moved beyond a compliance and modeling exercise. "The overall size of the complexity pie has increased," he says.
Moreover, CFOs shouldn't feel they are losing any authority. Rather, just as the finance chief's position has evolved in recent years beyond number crunching, so has the CRO role, Culp says. "When we look at the financial-services sector, we have seen a higher percentage of C-level executives responsible for risk separately," he says.
In contrast, a recent survey of risk managers and executives by Marsh reports CFOs have the primary responsibility for risk. Nearly 30% of the respondents reported their finance chiefs carry that role.
Any shift is most prevalent at financial-services firms, which were forced to thoroughly reevaluate their risk-management programs following the financial crisis and the passage of the Dodd-Frank Act last summer. A recent Deloitte survey of financial institutions reports 86% have a CRO or equivalent, and most of them report to the board of directors, the CEO, or both.
Accenture also sees the rise of the CRO as a sign that risk management has moved up in importance on the overall corporate agenda and is demanding wider attention beyond the finance department. Smart companies are using it to gain competitive advantage by factoring it into their strategic planning, the consultancy claims.
Wednesday, May 18, 2011
HR Execs Give Mixed Grades to Leadership Pipelines
HR Execs Give Mixed Grades to Leadership Pipelines
HR Execs Give Mixed Grades to Leadership Pipelines
May 11, 2011 — HR and talent management executives give mixed grades for the quality of their own organizations' leadership pipelines, according to a survey by Right Management.
Right Management surveyed the 1,262 executives via an online poll and found that there are gaps in the leadership cadres at most companies in North America. In fact, only 6% of organizations were reported to have future leaders identified for all critical roles.
Do you have future leaders identified for critical roles in your organization?
********************************************************
http://dreamlearndobecome.blogspot.com This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
WorlatWork
Newsline
HR Execs Give Mixed Grades to Leadership Pipelines
May 11, 2011 — HR and talent management executives give mixed grades for the quality of their own organizations' leadership pipelines, according to a survey by Right Management.
Right Management surveyed the 1,262 executives via an online poll and found that there are gaps in the leadership cadres at most companies in North America. In fact, only 6% of organizations were reported to have future leaders identified for all critical roles.
Do you have future leaders identified for critical roles in your organization?
- Yes, for all critical roles 6%
- Yes, for most but not all critical roles 17%
- Yes, for some critical roles 55%
- No, not for any critical roles 22%
Contents © 2011 WorldatWork. No part of this article may be reproduced, excerpted or redistributed in any form without express written permission from WorldatWork.
Access Content Source And Other Great Stuff: http://www.worldatwork.org/waw/adimComment?id=51357&from=ww_editorial_2011
********************************************************
http://dreamlearndobecome.blogspot.com This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
Thursday, February 10, 2011
Three Ways to Recognize a Talent Magnet - Anthony Tjan - Harvard Business Review
Three Ways to Recognize a Talent Magnet - Anthony Tjan - Harvard Business Review
By Tsun-yan Hsieh with Anthony Tjan
(Tsun-yan Hsieh is working with Anthony Tjan and Richard Harrington on a book about entrepreneurship and building businesses. He is chairman of LinHart Group, a firm specialized in CEO leadership, and is a member of Cue Ball's advisory group, the Cue Ball Collective.)
Talent rules. Changing a business plan is easier than discovering and developing the top talent to make that change happen. Recognizing this, more and more boards and investors are asking the question: How good is our leader in attracting the very best talent out there?
Our most recent blog post discussed the six habits of a talent magnet. In it, we shared what we have learned from watching and talking to the CEOs and entrepreneurs who consistently attract and retain the very best human capital. This time around, we look at how boards, investors, employees, and others can recognize such talent magnets when they see them.
Leaders who are exceptional at attracting talent live by the following three principles:
• They outrecruit their own competence. The best leaders always surround themselves with people who are not just equal to but better than they are. Strong leaders will have the inner confidence in themselves, and their collective team's potential, to not be weighed down by insecurity about being "shown up." As any athlete knows, you don't improve your game and team if you play with or against inferior players. If you are on a board, or if you are an employee, ask yourself: Are the people your leader hires of equal or higher potential than the leader herself? Are they farther along than the leaders were themselves at their own stages of development or tenure? As a venture capital colleague of ours once said, A's attract A's and B's attract C's.
• They seek real diversity of talent. Mediocre executives find comfort in similarity, whether it's a team's social, educational, or philosophical orientation. They end up hiring people in their own image. Superior leaders risk hiring people outside their usual way of seeing, sensing, processing, and solving problems. They go beyond their comfort zone to ensure that the people they attract are not cut from the same mold, and will give them different perspectives. Do the leaders dare to have people who see things very differently than they would and know how to handle the diverse views productively? For a recent deal that our firm, Cue Ball, was reviewing, a partner at one of the top Silicon Valley venture capital firms said, "Listen, we have the interest of every top-branded VC in the Valley for this deal, but what we need is someone that will break us from that group-think, and that feels like you." It showed that the VC recognized that we would have differentiated, valuable, and complementary perspectives that might better help the company at hand — a sign of a talent magnet.
• They maintain a holistic view of where the very best talents are in their fields. The best talent magnets take a very holistic and strategic view of their industry and talent pool. Ask of the CEOs or entrepreneurs you know: Can you list the best one or two people anywhere in the world for the handful of jobs in your organization that are pivotal to its performance? Next, where are these people right now (if they're not already on your team)? Are you in contact with them? In sports, we all know the superstars of all the teams. Why is it that so many business leaders do not know the superstars in their relevant talent landscape? A top-notch leader will know and always have the very best talent stars in her sights. She will get to know them and if they are not with her, work over time to attract them to her team.
Anthony Tjan is CEO, Managing Partner and Founder of the venture capital firm Cue Ball. An entrepreneur, investor, and senior advisor, Tjan has become a recognized business builder.
********************************************************
http://dreamlearndobecome.blogspot.com This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
Harvard Business Review
Three Ways to Recognize a Talent Magnet
By Tsun-yan Hsieh with Anthony Tjan
(Tsun-yan Hsieh is working with Anthony Tjan and Richard Harrington on a book about entrepreneurship and building businesses. He is chairman of LinHart Group, a firm specialized in CEO leadership, and is a member of Cue Ball's advisory group, the Cue Ball Collective.)
Talent rules. Changing a business plan is easier than discovering and developing the top talent to make that change happen. Recognizing this, more and more boards and investors are asking the question: How good is our leader in attracting the very best talent out there?
Our most recent blog post discussed the six habits of a talent magnet. In it, we shared what we have learned from watching and talking to the CEOs and entrepreneurs who consistently attract and retain the very best human capital. This time around, we look at how boards, investors, employees, and others can recognize such talent magnets when they see them.
Leaders who are exceptional at attracting talent live by the following three principles:
• They outrecruit their own competence. The best leaders always surround themselves with people who are not just equal to but better than they are. Strong leaders will have the inner confidence in themselves, and their collective team's potential, to not be weighed down by insecurity about being "shown up." As any athlete knows, you don't improve your game and team if you play with or against inferior players. If you are on a board, or if you are an employee, ask yourself: Are the people your leader hires of equal or higher potential than the leader herself? Are they farther along than the leaders were themselves at their own stages of development or tenure? As a venture capital colleague of ours once said, A's attract A's and B's attract C's.
• They seek real diversity of talent. Mediocre executives find comfort in similarity, whether it's a team's social, educational, or philosophical orientation. They end up hiring people in their own image. Superior leaders risk hiring people outside their usual way of seeing, sensing, processing, and solving problems. They go beyond their comfort zone to ensure that the people they attract are not cut from the same mold, and will give them different perspectives. Do the leaders dare to have people who see things very differently than they would and know how to handle the diverse views productively? For a recent deal that our firm, Cue Ball, was reviewing, a partner at one of the top Silicon Valley venture capital firms said, "Listen, we have the interest of every top-branded VC in the Valley for this deal, but what we need is someone that will break us from that group-think, and that feels like you." It showed that the VC recognized that we would have differentiated, valuable, and complementary perspectives that might better help the company at hand — a sign of a talent magnet.
• They maintain a holistic view of where the very best talents are in their fields. The best talent magnets take a very holistic and strategic view of their industry and talent pool. Ask of the CEOs or entrepreneurs you know: Can you list the best one or two people anywhere in the world for the handful of jobs in your organization that are pivotal to its performance? Next, where are these people right now (if they're not already on your team)? Are you in contact with them? In sports, we all know the superstars of all the teams. Why is it that so many business leaders do not know the superstars in their relevant talent landscape? A top-notch leader will know and always have the very best talent stars in her sights. She will get to know them and if they are not with her, work over time to attract them to her team.
The ability to find and keep talent is perhaps the most valuable of all leadership attributes. And the best talent magnets make clear from their constant actions that their priorities are all about attracting and retaining the best. In business success, it is always all about people.
Anthony Tjan is CEO, Managing Partner and Founder of the venture capital firm Cue Ball. An entrepreneur, investor, and senior advisor, Tjan has become a recognized business builder.
********************************************************
http://dreamlearndobecome.blogspot.com This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
Thursday, January 27, 2011
Trust Barometer 2011
Trust Barometer 2011
********************************************************
http://dreamlearndobecome.blogspot.com This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
2011 Edelman Trust Barometer® Key Findings Presentation
Edelman's 2011 Trust Barometer®, the firm’s 11th annual survey, gauges attitudes about the state of trust in business, government, NGOs and media across 23 countries.
Note From Jim Jacobs: This short slide presentation is fascinating and has significant implications for our businesses. In the 2011 survey, insurance companies fall among the lowest ranked industries when it comes to trust (See presentation page 13).
Access Content Source: http://www.edelman.com/trust/2011/
********************************************************
http://dreamlearndobecome.blogspot.com This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
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