Posts Tagged 'boards'

Investors fight for greater say on boards

by Stephen Foley for The Financial Times

A campaign to win shareholders a greater say over who sits on corporate boards has exposed a rift between some of the largest asset managers in the US.

Votes on so-called “proxy access” — the right for long-term shareholders to nominate directors — have passed at two US companies, but gone down to defeat at three others.

Over 100 US companies are facing votes on the proposal in the coming weeks, as proxy access has become the largest corporate governance cause of this year’s season of annual meetings.

Fidelity, one of the largest holders of US company shares through its popular mutual funds, is opposing the push for proxy access, even when a company’s management itself supports the idea.

But BlackRock, the world’s largest asset manager, has said it will support most of the proposals, while T Rowe Price and TIAA-CREF are among its most enthusiastic supporters.

Most of the proposals on the ballot this year have been put forward by large public pension funds, including the New York City retirement system and Calpers, the Californian public employees’ fund.

Vanguard, the $3tn asset manager whose stock market tracker funds hold a piece of most US companies, is voting against the bulk of the proposals, preferring a weaker form of proxy access than is on the ballot at most companies.

The public pension funds are pushing a plan that would allow a shareholder or group of shareholders who have held stock for three years, and who hold 3 per cent of a company between them, to nominate board directors. The Securities and Exchange Commission was originally going to make proxy access compulsory, but a legal challenge prevented it from doing so. Read more here.

 

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5 tips for building a strong corporate board

by Juliet de Baubigny for Fortune

Many companies put off the task of assembling an effective board until they run into trouble.

Behind every great CEO is a great board, and I’ve noticed that startup founders tend to put off the task of building strong boards. Consider successful tech companies like Amazon AMZN -0.11% and Google GOOG 1.07% that built their boards early on. They’re more an exception than the rule, however; more often than not, companies find that there are few, if any, consequences until they run into trouble.

Many boards have gotten into trouble when they think they answer only to the CEO.

After years of advising startups on board management and executive search, I believe that the only true role of the board is to hire and fire the CEO. After all, great boards understand that they are accountable to each other and to company shareholders. Also, great boards are diverse – in thought, background, and perspectives. The statistics bear repeating: Just 10% of Silicon Valley directors are women, and the percentage of VC-backed startups with a female founder or CEO is even lower.

So here are some practical tips for assembling a great board. Read more here.

McDonald’s CEO ouster: A sign of tougher, less patient boards

by Eleanor Bloxham for Fortune

Don Thompson’s resignation comes amid a string of CEO departures that puts on full display the growing power of corporate boards.

On Wednesday, the McDonald’s MCD 5.00% board announced the retirement of its chief executive Don Thompson and the elevation to CEO of chief brand officer Steve Easterbrook, who had led the fast-food giant’s UK and European units.

The news is simply one example in a string of CEO departures since the third quarter of last year that puts on full display the growing power of corporate boards today—and their newfound willingness to exercise that power. Read more here.

 

Boardroom Disputes – How to Manage the Good, Weather the Bad, and Prevent the Ugly

by the Center for Effective Dispute Resolution of the International Finance Corporation (IFC)

A dynamic board seeks to stimulate the flow of ideas, identify key issues, consider alternatives, and make informed decisions. And for that you need deliberation and debate. But these positive processes can sometimes turn into boardroom disagreements that must be dealt with properly and promptly; otherwise, they can devolve into acrimonious disputes that undermine the board’s effectiveness and the company’s performance.
This paper describes key steps that boards can take to mitigate the impact of disputes—and, even better, to minimize the risk of disputes arising in the first place. It deals with the board as a collective body that needs to cultivate its ability to manage disputes effectively—starting by establishing good corporate governance policies and practices.
The paper presents the Corporate Governance Dispute Resolution Self-Assessment and Progression Matrix, which summarizes specific elements of key steps the boards should undertake to effectively prevent and manage disputes:

  1. Clarify the roles of management and the board.
  2. Establish orderly board processes.
  3. Ensure the proper flow of information.
  4. Encourage a board culture that allows for effective discussions, debates, and deliberations.
  5. Step out of the boardroom to gain new perspectives.
  6. Apply dispute resolution skills and techniques.
  7. Incorporate ADR into the company’s culture and practices.

Download Report Here.

JSE companies’ boards to be targeted

by Allan Greenblo for Moneyweb News

Amid the razzmatazz in having provoked the national government on e-tolls, and its earlier stance in having opposed the re-election of President Jacob Zuma at Mangaung, the provincial body of the ANC in Gauteng has offered another input that has so far not received the attention it deserves. Potentially, it’s even more momentous.

It opens for consideration in SA something akin to the successful German model of corporate governance. Discarding the revolutionary clichés of party presentation, this could be the desired outcome.

Almost buried in the sectoral discussion paper, tabled at the annual ANC Gauteng conference in October, is a policy proposal focused on retirement funds; specifically, on overcoming the “inaction” of black members to use their rights as ultimate shareholders in the election of directors to the boards of companies where their funds are invested. Read more here.

Re-examining Board Priorities in an Era of Activism

by Ira M. Millstein for Dealbook, March 8 2013

With the recent increase in activism, some on Wall Street are blaming shareholders for the short-term mentality of corporate boards.

But many of these activists represent a small subset of investors in publicly held companies. As a result, corporate boards around the country should re-examine their priorities and figure out to whom they owe their fiduciary duties.

One of the major problems of this newfound activism is the focus on short-term results. That is not to say that our economy isn’t gripped by a short-term mentality, whether it’s individuals saving less and seeking immediate satisfaction or corporations forgoing long-term sustainable growth and profitability to meet investor demands for quarterly stock market returns.

But as many commentators have pointed out, activist investors are manipulating the system without succeeding in increasing shareholder value or instilling better corporate governance practices. Some activists are using their newfound power to sway and bully management to focus on the short term, meet the quarterly targets and disgorge cash in extra dividends or stock buy backs in lieu of investing in long-term growth. In recent years, companies including Dell, Yahoo and others have faced proxy wars or shareholder proposals to merge, divest, change boards or management or undergo a drastic reorganization.

This focus on catering to activists has resulted in overlooking the importance of reasonable shareholder power. And that is leading to a stasis in corporate governance, rather than innovation and positive change. Continue reading…

Social Media & Corporate Governance

Santiago Chaher & award winning Stephen Davis

At the ICGN Annual Conference 2011 (#ICGN11) in Paris Santiago Chaher from @CorpGovLeaders and Eric Jackson encouraged the audience to discuss the growing influence of Social Media in governance practices and shareholder activism. The following questions were then asked to the audience:

(1) How are social media changing the behavior of institutional investors–both in respect of value creation and in relationships with beneficiaries?

(2) How can corporate boards adapt to risks and opportunities posed by social media?

(3) How are social media affecting the behavior and influence of stakeholders in relation to companies and investors?

The session was live tweeted and you can see the story line here or just look for the hashtag #SMCG.

What are your thoughts? We would like to continue the conversation! Thanks


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