“I love to go to Washington–if only to be near my money.” –Bob Hope
In compiling this year’s Directorship 100, as the famous comedian opined, NACD found that all things financial lead to Washington, D.C.—at least in good old Twenty-ten. It is no surprise then that this year’s version of The Directorship 100, the list of the most influential people in the boardroom, pointed at least indirectly at those who earned their influence in the voting booth or by advising those who did. The investor has spoken, and it seems she has spoken to her Congressman.
No surprise either that Finance Chairmen Chris Dodd and Barney Frank the eponymous authors of the financial legislation that became law, were re-elected to the list again this year. Nor that supremely activist SEC Chairman Mary L. Schapiro’s appearance on our list was, unlike many SEC decisions, unanimous.
Even among our non-Washingtonian’s there lurks a sense of Beltway déjà vu: Paul O’Neill, a newcomer to the Directorship 100, was Treasury Secretary to former President Bush, and joins our list as an advisor to Steve Schwarzman’s Blackstone Group. Similarly, H. Rodgin (Rodge) Cohen, Edward Herlihy and Anton (Tony) Valukas have earned government chops either defending, advising or otherwise playing a central role in the affaires du gouvernement of the credit crisis. So too our CEOs, among them Warren E. Buffett, Rex W. Tillerson and James L. Dimon. All had their say, sometimes more than they bargained for, at hearings, on and off the record. Investors such as Ralph V. Whitworth, Roger W. Ferguson Jr. and David M. Rubenstein, are no strangers to government as employees, testifiers or investors: Whitworth just turned his attention onto Occidental Petroleum at the same time the government is looking closely at the sector. No list is complete without the media and our list is composed of the absolutely quintessential: The New York Times’ Andrew Ross Sorkin, CNBC’s Becky Quick, Fortune’s Carol J. Loomis, Bloomberg’s Norman Pearlstine and Fox’s recent hire, Charles Gasparino, are all closely followed by administration officials.
To order PDFs or extra hard copy issues of The September 2010 issue with the full Directorship 100 cover story, please contact Keith Pew at kpew@NACDonline.org.
The Hill and the West Wing are of course well represented, starting with the President himself and key members of his administration, including Valerie B. Jarrett, Rahm Emanuel, David Axelrod and Kenneth Feinberg. Not quite czars despite the sobriquet the media likes to place on them, they do exert a profound influence on the shape of the boardroom in these times.
All members of the Directorship 100, regardless of how they arrived here, have power and influence. Some of it is new, some of it is long-standing. Our modest job is to reveal those who exert the kind of influence that will permit the continued, if sometimes shaky, path that our system of capitalism is on, and the importance of corporate governance as a critical guidepost along the route. As the Bard wrote, “Be not afraid of greatness: some are born great, some achieve greatness, and some have greatness thrust upon them.” Whichever is your preferred route, these members of the Directorship 100 are having a profound impact on corporate governance.
Regulators and Rule Makers
The Delaware Courts
Despite the push by the federal government to make corporate governance law, the most important business court in the land, by far, is still the Delaware Court of Chancery, headed by Chancellor William B. Chandler III, and his fellow Chancery judges, Vice Chancellors Leo E. Strine Jr., Donald F. Parsons Jr., John W. Noble, and the court’s newest member, J. Travis Laster. Laster made waves last spring with a surprise ruling on so-called “freeze-out” tender offers. He ruled that in a transaction where the majority shareholder buys minority partners with a tender offer, the controlling shareholders receive “both the affirmative recommendation of a special committee and the approval of a majority of the unaffiliated stockholders.”
Should the ruling be challenged, it would end up in the Delaware Supreme Court, captained by Chief Justice Myron T. Steele. More often than not, Steele has the last word on corporate governance law.
Andrew Cuomo, New York Attorney General
Andrew Cuomo is taking a page right out of the Eliot Spitzer playbook: parlaying a crusade against Wall Street banks like Citigroup, AIG and Goldman Sachs into a run for the governor’s mansion. Let’s hope he doesn’t emulate Spitzer in every way. While many executives complain that Cuomo’s tactics overlap the duties of the SEC, forcing them to walk a delicate line between state and federal securities law, his rebuke of credit ratings agencies was welcome in many corner offices. Like Spitzer, Cuomo was not afraid to make use of the Martin Act, a piece of New York legislation passed in 1921 that gives the attorney general broad powers to pursue financial fraud (certain defense counselors allege it is unconstitutional). And now that the attorney general-to-governor path seems to be well-worn, a host of candidates to replace Cuomo have cropped up, including Nassau County DA Kathleen M. Rice, a Democrat, and Republican Daniel M. Donovan, the DA of Staten Island.
Fresh from passage of the legislation that bears their name, Congressman Barney Frank and Senator Christopher Dodd will forever be associated with financial reform. Still to be determined is if they will be heralded or pilloried for the act they shepherded, as it could take several years to see if it is a playing field leveler or an overwrought burden on businesses. Either way, the act is a curtain call of sorts for Dodd, who announced he will not be seeking reelection in November. Dodd’s departure could open the door for Sen. Charles E. Schumer (D-NY)to play a more active role in sponsoring business legislation. Schumer deserves much of the credit (or blame, depending on your perspective) for many of the governance reforms that were enacted in the financial reform bill. Likewise, Congressman Henry A. Waxman (D-CA) has been a vocal proponent of changes to corporate compensation practices. As chairman of the House Committee on Energy and Commerce, Waxman is also expected to play a lead role in crafting a sweeping energy bill.
Should the Republicans take over the Senate in the midterm elections, Senator Richard Shelby (R-AL) would likely take over as chairman of the Senate Banking Committee. Shelby has been a vociferous opponent of the financial reform bill and an advocate for small business owners. His counterpart on the House Financial Services Committee is ranking member Rep. Spencer T. Bachus. The nine-term Congressman from Alabama, a devout fiscal conservative, faces re-election this fall.
Apart from the financial reform bill, Congress also appointed the Financial Crisis Inquiry Commission to assess the causes of the crisis. The 10-member commission is chaired by Democrat Philip N. Angelides, the former treasurer and candidate for governor of California. Also called the Angelides Commission, its final report is due to Congress in December.
Under Mary L. Schapiro, the Securities and Exchange Commission has undergone drastic changes. With the stigma of being the agency that missed the Bernie Madoff scandal and failed to rein in excesses on Wall Street still lurking, Schapiro has moved aggressively to remake the Commission. Whether it was taking on Goldman Sachs or nearly doubling the number of investigators, there is no doubt that the SEC under Schapiro and her fellow commissioners, Kathleen L. Casey, Elisse B. Walter, Luis A. Aguilar and Troy A. Paredes, has a far more activist agenda than the one under predecessor, Christopher Cox. While the financial reform bill short-circuited the SEC’s efforts on proxy access, Schapiro had an important advisory role on the legislation.
The SEC will no longer provide companies with guidance on dismissing some proxy proposals on substantive grounds. That has led to many more resolutions making their way onto the proxy, including some that many would consider fringe issues. Another seismic change at the SEC was the creation of a Division of Risk, headed by Henry Hu. The division is intended to assess systemic risk in the financial markets. Another new face at the SEC is Richard C. Ferlauto, who was named to the Office of Investor Education and Advocacy. Ferlauto is no stranger to the Directorship 100, however, as he has made the list in past years for his role as head of governance at the American Federation of State County and Municipal Employees. Other recent additions include David M. Becker, who was appointed general counsel last year, and Meredith B. Cross, who was named director of the division of corporate finance. Both Becker and Cross are returning to the Commission. Brian V. Breheny also plays an important role in the SEC’s governance efforts as deputy director for Legal and Regulatory Policy in the Division of Corporation Finance.
Robert H. Herz, Chairman, FASB
Robert H. Herz was appointed chairman of the Financial Accounting Standards Board (FASB) in 2002 and is now in his second term. He has been a long-standing guardian of the nation’s accounting standards and has played an integral role in moving FASB closer to adopting international standards. This year Herz took part in FASB’s joint sessions with the International Accounting Standards Board (IASB) to detail nearly a dozen major accounting changes that will be finalized in 2011. Adopting a timeline set by the Group of Twenty Nations, the boards plan to adopt the new standards by mid-2011. Working at a fast pace, Herz and the FASB are changing standards that are long overdue for improvement. Herz is engaged in balancing convergence with the domestic concerns of U.S. investors and the public: “I am proud to say that so far my fellow board members and our staff, both FASB and IASB, have risen to the occasion.”
Daniel L. Goelzer, Acting Chairman, PCAOB
Daniel L. Goelzer was appointed by the SEC as a founding member of the Public Company Accounting Oversight Board (PCAOB) in 2002 and took over as acting chairman last year after Mark Olson stepped down. The Supreme Court ordered changes to the way PCAOB board members are removed but left the agency, established by the Sarbanes-Oxley Act to oversee the accounting firms that audit public companies, in tact. Prior to joining the PCAOB, Goelzer served as general counsel to the SEC and early in his career worked as an auditor in the Milwaukee office of Deloitte & Touche.
After a roller-coaster trading day on May 6, 2010 that saw the largest intra-day point drop in the history of the Dow Jones—a so-called “flash crash”—leaders at the major exchanges were on high alert. Duncan L. Niederauer, CEO of NYSE Euronext, quickly reassured investors and concluded that the trading glitch was related to the fragmentation of markets and global trading volumes, not technical problems. In fact, he says that circuit breakers, which halted trading while order was restored, helped prevent trading activity from causing greater volatility. Niederauer has help overseeing the exchange from Deputy Chairman Marshall N. Carter. The NYSE is known as having some of the highest corporate governance standards of any exchange in the world. The job of continuing that tradition is partly charged to Scott R. Cutler who is U.S. listings chief.
Across town at the Nasdaq OMX, Robert Greifeld, president and CEO, is also responsible for upholding high standards of governance at the exchange’s 3,700 listed companies.
Bruce Aust, executive vice president of Nasdaq’s Corporate Client Group and leader of the Corporate Services program, has spearheaded Nasdaq’s expansion into corporate governance support services.