Tag: Board leadership

The Pursuit of Gender Parity in the American Boardroom

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. The following post is based on Chair White’s recent Keynote Remarks at the Women’s Forum of New York; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

The Women’s Forum of New York remains the critical, groundbreaking organization for successful women that it was when it held its first meeting in 1974. That was, by coincidence, the year I graduated from Columbia Law School. As one benchmark of progress, that year’s graduating class was only 17 percent women. Today that number is 45 percent and, in some years, it is higher.

We all have indeed come a long way since 1974. Today, women receive more than half of all bachelors’, masters’ and doctorate degrees, and more than a third of MBAs. Women are approximately half of the total workforce and half of all managers. But there remain areas stubbornly resistant to the progress that objectively should have already occurred. One in the legal profession is the percentage of women who are equity partners at law firms—18 percent. That number has only increased two percent since 2006, and we had achieved 12.9 percent back in 1994. Another resistant area is the financial arena—we now account for 29 percent of senior officials in finance and insurance, and no woman has, for example, ever been CEO of one of the 22 largest U.S. investment banks or financial firms. A third critical area that has been a particular priority for the Women’s Forum of New York is the focus of today’s event: gender diversity in U.S. boardrooms.


2015 Corporate Governance & Executive Compensation Survey

Creighton Condon is Senior Partner at Shearman & Sterling LLP. This post is based on the introduction to a Shearman & Sterling Corporate Governance Survey by Bradley SabelDanielle Carbone, David Connolly, Stephen Giove, Doreen Lilienfeld, and Rory O’Halloran. The complete publication is available here.

We are pleased to share Shearman & Sterling’s 2015 Corporate Governance & Executive Compensation Survey of the 100 largest US public companies. This year’s Survey, the 13th in our series, examines some of the most important governance and executive compensation practices facing boards today and identifies best practices and merging trends. Our analysis will provide you with insights into how companies approach governance issues and will allow you to benchmark your company’s corporate governance practices against the best practices we have identified.


The Spotlight on Boards

Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton and Sabastian V. Niles. Mr. Niles is counsel at Wachtell Lipton specializing in rapid response shareholder activism and preparedness, takeover defense, corporate governance, and M&A.

The ever evolving challenges facing corporate boards, and especially this year the statements by BlackRock, State Street and Vanguard of what they expect from boards, prompts an updated snapshot of what is expected from the board of directors of a major public company—not just the legal rules, but also the aspirational “best practices” that have come to have almost as much influence on board and company behavior.

Boards are expected to:


Where Women Are On Board: Perspectives from Gender Diverse Boardrooms

Diane Lerner is a Managing Partner and Christine Oberholzer Skizas is a Partner at Pay Governance LLC. This post is based on a Pay Governance memorandum.

Interest in, and momentum toward, greater diversity in the boardrooms of U.S. publicly traded companies is increasing. We believe this is due to a combination of international developments, workplace trends and investor sentiment.

Although all aspects of diversity are meaningful topics, this post is solely focused on gender diversity. Currently, females represent approximately 15% of outside board member seats in the S&P 1500 and about 18% of the S&P 500 seats. This equates to a median of 1-2 female board members in a group of 9-11 board members.

While the overall statistics for U.S. companies are regularly reported, relatively little has been written about those U.S. public company boards that have moved farther down the path of gender diversity. For the purpose of our review, we define “gender diverse” at 30% female directors or more, using a standard typical in countries who have enacted legislation. Assuming more companies will want to reach a 30%+ level of gender diversity over the next decade, we wanted to study companies that have already achieved this level. We wanted to identify any specific similar characteristics that can be found at these companies and to learn more through selected interviews about the paths to a gender diverse board.


Guiding Principles of Good Governance

Stan Magidson is President and CEO of the Institute of Corporate Directors and Chair of the Global Network of Directors Institutes (GNDI). This post is based on a recent GNDI perspectives paper, available here.

The Global Network of Director Institutes (GNDI), the international network of director institutes, has issued a new perspectives paper to guide boards in looking at governance beyond legislative mandates.

The Guiding Principles of Good Governance were developed by GNDI as part of its commitment to provide leadership on governance issues for directors of all organisations to achieve a positive impact.

Aimed at providing a framework of rules and recommendations, the 13 principles laid out in the guideline cover a broad range of governance-related topics including disclosure of practices, independent leadership and relationship with management, among others.


Dealing with Director Compensation

David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz specializing in the areas of mergers and acquisitions and complex securities transactions. This post is based on an article by Mr. Katz and Laura A. McIntosh that first appeared in the New York Law Journal; the complete publication, including footnotes, is available here. The views expressed are the authors’ and do not necessarily represent the views of the partners of Wachtell, Lipton, Rosen & Katz or the firm as a whole. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Due to a recent Delaware Chancery Court ruling, the topic of director compensation currently is facing an uncharacteristic turn in the spotlight. Though it receives relatively little attention compared to its higher-profile cousin—executive compensation—director compensation can be a difficult issue for boards if not handled thoughtfully. Determining the appropriate form and amount of compensation for non-employee directors is no simple task, and board decisions in this area are subject to careful scrutiny by shareholders and courts.

The core principle of good governance in director compensation remains unchanged: Corporate directors should be paid fair and reasonable compensation, in a mix of cash and equity (as appropriate), to a level that will attract high-quality candidates to the board, but not in such forms or amounts as to impair director independence or raise questions of self-dealing. Further, director compensation should be reviewed annually, and all significant decisions regarding director compensation should be considered and approved by the full board.


Balancing Division of Board Labor with Overall Director Responsibilities

Eric Geringswald is Director of CSC® Publishing at Corporation Service Company. This post is an excerpt from the 2015 Edition of The Directors’ Handbook, by Thomas J. Dougherty of Skadden, Arps.

In this year’s Foreword, Dougherty argues that an increasing complexity of corporate governance and the growing list of action items assigned to directors has led to a division of labor that leaves some directors uninvolved or unaware of important board activities and responsibilities.

The Culture-Structure Interplay

We tend to think of board structure in relation to its stock exchange-mandated board committees, or other standing committees, including Audit, Compensation, Nominating, Governance, Finance and M&A. Much of the Handbook is taken up with discussion of those committees and related director duties. Deservedly so.

But there is a predicate question and, I submit, a related concern that should be addressed, at least annually, regarding board structure. That is the interplay between board structure and board culture, which manifests itself, for good or bad, in many ways. The board’s division of labor across its standing committees facilitates decision-making in our world of audit, compensation and governance complexity. But in the process, there are manifold opportunities for some directors, who are not on one committee or the other, to get “left behind” other directors in their exposure to, and grasp of, key risks, opportunities and even basic operational desiderata. Much of the responsibility to avoid that eventuality rests mutually with the respective committee chairs (whose regular reports to the full board and committee minutes must be robust) and with those directors not on a given committee. The latter should from time to time attend committee meetings or otherwise become sufficiently informed of each committee’s work that they are both comfortable that its work is being well-handled and also educated enough about its process that they can intelligently assess the reporting-out by the committee chair.


New Statistics and Cases of CEO Succession in the S&P 500

Matteo Tonello is Managing Director at The Conference Board, Inc. This post relates to CEO Succession Practices: 2015 Edition, a Conference Board report supported by a research grant from Heidrick & Struggles and authored by Dr. Tonello, Jason D. Schloetzer of Georgetown University, and Melissa Aguilar of The Conference Board. For details regarding how to obtain a copy of the report, contact matteo.tonello@conference-board.org.

CEO Succession Practices, which The Conference Board updates annually, documents CEO turnover events at S&P 500 companies. The 2015 edition contains a historical comparison of 2014 CEO successions with information dating back to 2000. In addition to analyzing the correlation between CEO succession and company performance, the report discusses age, tenure, and the professional qualifications of incoming and departing CEOs. It also describes succession planning practices (including the adoption rate of mandatory CEO retirement policies and the frequency of performance evaluations) and disclosure, based on findings from a survey of general counsel and corporate secretaries at more than 300 U.S. public companies.


NACD Investor Perspectives: Critical Issues for Board Focus in 2015

The following post comes from Peter Gleason, president of the National Association of Corporate Directors (NACD), and is based on an NACD publication; the complete publication, including appendix and additional resources, is available here.

As part of our mission to advance exemplary board leadership, the National Association of Corporate Directors (NACD) engages in ongoing dialogue with major U.S. institutional investors representing approximately $14 trillion in assets under management. [1] This post reflects NACD’s perspectives on recent conversations, including group and individual discussions with eight leading investors and several roundtable meetings between investors and Fortune 500 committee chairs. Several themes emerged regarding important issues for boards to consider in preparation for the upcoming proxy season:


ISS 2015 Independent Chair Policy FAQs

Carol Bowie is Head of Americas Research at Institutional Shareholder Services Inc. (ISS). This post relates to ISS independent chair voting policy guidelines for 2015.

1. How does the new approach differ from the previous approach?

Under the previous approach, ISS generally recommended for independent chair shareholder proposals unless the company satisfied all the criteria listed in the policy. Under the new approach, any single factor that may have previously resulted in a “For” or “Against” recommendation may be mitigated by other positive or negative aspects, respectively. Thus, a holistic review of all of the factors related to company’s board leadership structure, governance practices, and performance will be conducted under the new approach.

For example, under ISS’ previous approach, if the lead director of the company did not meet each one of the duties listed under the policy, ISS would have recommended For, regardless of the company’s board independence, performance, or otherwise good governance practices.

Under the new approach, in the example listed above, the company’s performance and other governance factors could mitigate concerns about the less-than-robust lead director role. Conversely, a robust lead director role may not mitigate concerns raised by other factors.


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