Donald R. Kimble, a finance executive with more than 25 years of experience in financial services, will join KeyCorp as its CFO, effective June 3, 2013. He will be responsible for Key’s financial and operational strategy, metrics tied to that strategy, and the ongoing development and monitoring of control systems designed to preserve company assets and report accurate financial results.  “Don Kimble is a tremendous addition to Key’s leadership team. He possesses deep financial services experience and strong leadership skills with a proven ability to help businesses drive growth and efficiency. Don brings a unique perspective and a forward focus that make him an incredibly valuable addition to the team,” said Chairman and Chief Executive Officer Beth E. Mooney.

Former U.S. Bancorp Vice Chairman and Head of Consumer and Small Business Banking Richard C. Hartnack joined the Freddie Mac board of directors. Hartnack is also former Union Bank of California vice chairman, director, and head of the community banking group. He previously served as a director at the Federal Reserve Bank of San Francisco, MasterCard International, Union BanCalCorporation, and U.S. Bank. “Rick Hartnack is an outstanding addition to the Freddie Mac board of directors,” said Christopher S. Lynch, Freddie Mac’s nonexecutive chairman. “He is a seasoned industry executive with proven leadership experience and a deep understanding of our industry. Freddie Mac will benefit from Rick’s detailed knowledge of underwriting, servicing, technology and his dedication to operational excellence as our company builds a stronger, more efficient mortgage market for the future.”

Blue Nile added Mindy Meads, former co-CEO of Aeropostale, to the board of directors. Meads is also a member of the Wet Seal and Mela Sciences boards. Previously, she served as CEO of Victoria’s Secret Direct and held executive merchandising positions at Lands’ End, including CEO in her last two years. “We are very excited Mindy is joining our board of directors,” said Harvey Kanter, Blue Nile CEO. “Mindy has played a key role in the success of some of the world’s most well-known retail brands, and her proven leadership and experience will be instrumental as we continue to build our global brand.”

Electronic Arts appointed Denise F. Warren, executive vice president of the Digital Products and Services Group at The New York Times Co., to the board of directors. Warren previously served as general manager and chief advertising officer of the New York Times Media Group. “Denise Warren brings an enormous amount of digital media experience to EA’s board of directors,” said EA Executive Chairman Larry Probst. “We look forward to the leadership and perspective that she will provide to our company.”

Sonepar North America CEO David G. Gabriel joined the KapStone Paper and Packaging Corp. board. Before joining Sonepar, Gabriel was CEO of Hagemeyer North America and general manager of Tenneco Automotive’s North American aftermarket business.

Robert Douglas Lawler

Chesapeake Energy named Robert Douglas Lawler, senior vice president of International and Deepwater Operations at Anadarko Petroleum, CEO and board member effective June 17. Archie W. Dunham will continue as nonexecutive chairman of the board. “Doug is a talented and proven executive with the ideal skill set to lead Chesapeake forward and capitalize fully on our world-class assets. Throughout his 25 years in the upstream E&P industry, Doug has earned a reputation as a highly engaged and knowledgeable leader who delivers superior operational performance and capital efficiency. The Board is confident that Doug’s deep technical upstream and engineering expertise as well as his strategic and financial skills will serve Chesapeake well. We look forward to working with him to create value for Chesapeake shareholders,” Dunham said in a statement.

Christie B. Kelly

Jones Lang LaSalle appointed Christie B. Kelly CFO. Kelly is former CFO of Duke Realty and former senior vice president of the Global Real Estate Group at Lehman Brothers.

AmerisourceBergen elected Lon R. Greenberg, recently retired CEO of UGI Corp., to the board of directors, replacing the retiring Charles H. Cotros. Greenberg remains as UGI’s chairman, and is a director of Aqua America and Ameriprise Financial. “Lon’s extensive business experience, strategic vision and extraordinary commitment and dedication to our community will make Lon a great asset to the AmerisourceBergen board,” said Richard C. Gozon, board chairman.

Sandra Beach Lin

Former Calisolar CEO Sandra Beach Lin joined the PolyOne Corp. board. Lin previously held executive roles at Celanese, Avery Dennison, Alcoa, and Honeywell International. She is also a member of the WESCO International and American Electric Power Co. boards. “We are extremely pleased that Sandy has joined PolyOne’s board of directors and will bring her strategic insights, experience and perspectives to our already strong board,” said Stephen D. Newlin, chairman and CEO. “Her skills and leadership drove growth and success at several leading, public and global companies that were primarily focused in the chemical and specialty materials sectors. Her addition to PolyOne’s board provides even greater depth of knowledge and experience as we aggressively pursue our specialization and growth strategy.”

CACI International appointed Michael A. Daniels, former chairman of Network Solutions, to the board of directors. Daniels has also served as senior vice president at Science Applications International Corp. (SAIC) and as chairman of the Northern Virginia Technology Council, where he remains as a director. He chairs the boards of GlobalLogic, The Logistics Management Institute, and Invincea. According to CACI Executive Chairman and Chairman of the Board Dr. J.P. (Jack) London, “CACI’s board of directors has a long history as a governing body of highly qualified and credentialed professionals, and the board’s selection of Michael Daniels gives us another experienced industry veteran to help us lead CACI into the future. We welcome him and look forward to leveraging his considerable expertise in information solutions and services, along with his solid track record of growing businesses, to enhance our board’s strong focus on governance and continue our unwavering commitment to shareholder value.”

Former Weber-Stephen Products CFO Carrie Teffner is joining PetSmart as CFO, effective June 3. Previously, Teffner served as CFO at The Timberland Co., and served in a number of leadership roles in several Sara Lee Corp. divisions.

Cigna CFO Ralph J. Nicoletti announced he will be stepping down, and the company has promoted current Vice President of Finance Thomas A. McCarthy as his successor. McCarthy served as interim CFO at Cigna from September 2010 to May 2011.

Jeff Richard, former CFO of Safety-Kleen Systems, will succeed the retiring Raymond D. Andrews as CFO of Checkpoint Systems. Richard is former COO and CFO of Pavestone Co., CFO at Jacuzzi Brands, and vice president of financial planning and analysis at Electronic Data Systems.

Former El Paso Corp. Executive Vice President James C. Yardley joined the Sempra Energy board of directors. Yardley also served as El Paso’s pipeline group president, and as CEO and director of El Paso Pipeline GP Co. He serves on the National Forest Foundation board. ”Jim Yardley’s extensive experience and leadership in the natural gas industry enhances our board’s depth in a primary strategic focus area of our company,” said Debra L. Reed, chairman and CEO of Sempra Energy.

Citrix Systems added former Thomson Reuters CFO and Vice Chairman Robert (Bob) D. Daleo to the board. Daleo held the COO of Thomson Newspapers position, and served in a number of financial and operations positions at McGraw-Hill and Automatic Data Processing before joining Thomson. He is a director at Equifax and chairs the Fordham University board of trustees. “Bob brings enormous experience in the governance and management of complex, global scale enterprises,” said Mark Templeton, Citrix CEO. “We are honored to have a new director of Bob’s capabilities and character serve on the Citrix board.”

Steven L. Pepper

Rent-A-Center named former Yum Brands Mexico President Steven L. Pepper to the board. “I am honored that Steven Pepper has chosen to become a member of our Board of Directors,” stated Mark E. Speese, chairman of the board and CEO of the company. “Steven’s extensive knowledge of international multi-unit retail operations and experience in international expansion will provide invaluable insights and perspectives as we continue to build on our strategic growth initiatives.”

Dunkin’ Brands named CEO Nigel Travis to the additional role of board chairman, succeeding the retiring Jon Luther. The board also named Raul Alvarez, former COO of McDonald’s, lead independent director.

Amy Hood

Microsoft appointed Amy Hood, MBD CFO, as successor to Peter Klein’s CFO position. Hood was involved in the strategy development and overall execution of MBD’s acquisitions of Skype and Yammer. She previously worked at Goldman Sachs in banking and capital markets groups roles.

Informatica Corp. named Polycom CEO Andrew M. Miller to the board. Miller joined Polycom in July 2009 as executive vice president of Global Field Operations, and became CEO in May 2010. Previously, he was global president of IPC Information Systems and CEO of Tandberg. He is also on the Bridgepoint Education board. “I am pleased to welcome Andy Miller to the Informatica board of directors. We will gain from Andy’s broad-based experience as we pursue our next phase of growth,” said Sohaib Abbasi, chairman and CEO. “Andy’s perspectives on the evolution of networking and communications infrastructure will be valuable as we continue to expand our product portfolio for our customers to leverage new types of data.”

Todd Penegor

Former Kellogg U.S. Snacks Division President Todd Penegor will join Wendy’s as CFO, succeeding the retiring Steve Hare. Penegor has held a number of senior leadership positions at Kellogg, and previously served for 12 years with Ford Motor Co.

Qualcomm elected Jonathan Rubinstein, former senior vice president of Product Innovation for Hewlett-Packard, to the board of directors. Rubinstein also served as Palm chairman and CEO before it was acquired by HP in 2010, and ran Apple’s iPod division. He is on the Amazon.com board. “We are extremely pleased to welcome Jon as a member of Qualcomm’s Board of Directors,” said Paul E. Jacobs, chairman and CEO of Qualcomm. “His experience in creating revolutionary consumer electronics and mobile products will provide added insight to Qualcomm’s board as we continue to expand the scope and impact of wireless products and technology, improving and enhancing people’s lives around the world.”

Former McDonald’s USA President Janice L. Fields joined the Chico’s FAS board, expanding its membership to nine. Before becoming president, Fields held the executive vice president and COO positions. She is a member of the Monsanto board of directors. Ross E. Roeder, chairman of the board, commented, “We are delighted to welcome Jan to our board of directors. Jan has deep experience with innovation and strategic insights in a world-class company. Jan’s perspectives on growing a large retail organization while maintaining brand-right messaging and personal service will be highly valuable as we chart our path for future growth.”

Edward P. Djerejian

Occidental Petroleum shareholders voted to remove Executive Chairman Ray Irani, with 76 percent of votes cast against the former CEO following accusations that he was attempting to oust current CEO Steve Chazen. The board recently announced Chazen will stay on through 2014 and former company CEOs will not be allowed to serve as chairmen. In addition, the board elected former Ambassador to Syria and Israel Edward P. Djerejian chairman. Djerejian is former chair of the company’s corporate governance, nominating, and social responsibility committee. He is the founding director of the James A. Baker III Institute for Public Policy at Rice University. “Ed’s depth of experience, judgment, and understanding of our business strategy make him the perfect choice to lead our board,” Chazen said in a statement.

Service Corporation International (SCI) CEO Thomas L. Ryan is joining the Chesapeake Energy board of directors and its audit committee following the resignation of Director Louis A. Simpson. Ryan previously served as SCI’s COO, CEO of its European operations, and as a CPA with Coopers & Lybrand. He is a member of the Texas Industries board. “Tom was recommended by our largest shareholder, Southeastern Asset Management, to replace Lou on Chesapeake’s board. With his extensive management experience and financial expertise in running a leading North American public company, Tom will be a great addition to our audit committee and a terrific resource for our board and management team. We are pleased to welcome Tom and are confident that his insight and experience will benefit the company and all of our shareholders,” said Chairman Archie Dunham.

Analog Devices promoted President and Interim CEO Vincent Roche to permanent CEO and board member. Roche joined ADI in 1988, and became interim CEO in March following the unexpected death of former CEO Jerald G. Fishman. “ADI is fortunate to have an executive of Vince’s caliber assume the leadership of our company,” said Ray Stata, ADI co-founder and chairman of the board. “Vince’s long tenure and his deep understanding of our technology, customers, and markets will serve ADI well as we continue to execute on the strategic plan which Vince played a major role in shaping. I’m confident that Vince will continue the record of success in which all ADI employees take great pride.”

DSP Group named Nova Measuring Instruments CEO Gabi Seligsohn to the board of directors. Seligsohn succeeds Yair Shamir, who resigned after he was elected to the Isreali Knesset. Eli Ayalon, chairman of DSP Group, said: “We have been looking for an independent director with no prior relationship with the company but with a deep understanding of the semiconductor industry, who could add to the strategic thinking of our board. Adding Gabi Seligsohn to our board, and gaining the benefit of his talents and ability to contribute to our growth, was suggested to us by Senvest International, one of our largest stockholders, which is also an investor in Nova. We appreciate Senvest’s excellent suggestion and their support of DSP Group.”

ViaSat appointed Robert Bowman, CEO of Major League Baseball Advanced Media, to the board. Previously, Bowman was COO and CFO of ITT Corp. He is a member of the Take-Two Interactive Software board and is president of the Michigan Education Trust. “Bob Bowman is a valuable addition to ViaSat’s board of directors,” said Mark Dankberg, chairman and CEO of ViaSat. “He has been the leading industry visionary in bringing major league sports into the broadband connected world. Plus, Bob’s experience in digital media, finance, and operations is an excellent fit for all our businesses. He brings exceptional expertise and insight to ViaSat as we grow the scale and reach of our broadband networks.”

Brian Krzanich

Intel’s board unanimously chose COO Brian Krzanich to succeed Paul Otellini as CEO as of the company’s annual meeting May 16. Otellini will also step down from the company’s board at thtat time. Krzanich joined Intel in 1982. “Brian is a strong leader with a passion for technology and deep understanding of the business,” Intel Chairman Andy Bryant said. “His track record of execution and strategic leadership, combined with his open-minded approach to problem solving has earned him the respect of employees, customers and partners worldwide. He has the right combination of knowledge, depth and experience to lead the company during this period of rapid technology and industry change.”

Vincent H. Tobkin

Tellabs elected Vincent H. Tobkin chairman of the board, succeeding the retiring Michael J. Birck. Previously, Tobkin was a senior advisor, retired director and global telecom/technology practice leader at Bain & Co. Shareholders also elected Alex Mashinsky, managing director of Governing Dynamics and former CEO of Name.Space., a new member of the board. Mashinsky also serves on the Migo Software board.

Former ConAgra Foods President of Consumer Foods Andre J. Hawaux is joining DICK’s Sporting Goods as CFO. Previously, Hawaux served as ConAgra’s CFO and as CFO of Pepsi-Cola North America. “We are pleased to welcome Andre to DICK’s Sporting Goods and look forward to leveraging his expertise in the years ahead,” said Edward W. Stack, Chairman and CEO.” Andre’s extensive background in finance, operations and global business, along with his exceptional leadership and strategic acumen, will further strengthen our senior management team and will be instrumental as we execute our growth plans.”

L-3 Communications elected Vincent Pagano Jr., a Simpson, Thacher & Bartlett attorney specializing in corporate law and former head of the firm’s capital markets practice, to the board. Pagano serves on the engineering council of Lehigh University and on the board of Cheniere Energy Partners. “Vince’s broad legal expertise in finance, governance and corporate strategy issues, combined with his knowledge of L-3’s business and the defense industry, make him an outstanding addition to our board. I am pleased to welcome him as our newest director,” said Michael T. Strianese, L-3’s chairman and CEO.

QLogic appointed Christine King, former CEO of Standard Microsystems and AMI Semiconductor, to the board of directors. King held a number of management and executive positions at IBM throughout her career, and has served on the boards of Atheros Communications and Analog Devices. She is currently a director at Idaho Power. “I am very pleased to welcome Christine to the QLogic board of directors,” said H.K. Desai, chairman of the board and executive chairman, QLogic. “Christine has extensive senior management and operational experience with a number of technology companies and an in-depth knowledge of the semiconductor industry. I am confident that she will be a valuable contributor to QLogic.”

Symmetricom named Elizabeth A. Fetter CEO, succeeding the departing David G. Cote, while James Chiddix will succeed Robert T. Clarkson as company chairman. Clarkson will remain a member of the board, chairing the compensation committee. Fetter has served as a Symmetricom director since 2002, and is former CEO of QRS Corp. and NorthPoint Communications Group. She is a member of the Quantum Corp. board and recently retired as Alliant International University chairman. Chiddix is former CEO and chairman of OpenTV and former chief technology officer at Time Warner Cable. He is a member of the Virgin Media, The Arris Group, and Magnum Semiconductor boards.

Safeway President Robert L. Edwards will succeed current CEO Steven A. Burd upon his retirement May 14, while current Lead Director T. Gary Rogers will take over Burd’s chairman position. Edwards joined Safeway as CFO in 2004, and previously served as a senior executive at Maxtor Corp., Imation Corp., and Santa Fe Pacific. Rogers is former chairman and CEO of Dreyer’s Grand Ice Cream, and has served as chairman of Levi Strauss and The Federal Reserve Bank of San Francisco.

Time Warner Cable named Arthur T. Minson Jr. CFO, effective May 2. Minson is rejoining the company from AOL, where he served as COO and chief financial and administrative officer. In his previous experience at Time Warner Cable, he served as senior vice president of finance and deputy CFO.

John Standley

SUPERVALU elected Rite Aid Chairman and CEO John Standley and Cerberus Capital Management COO and General Counsel Mark A. Neporent to the board of directors. Standley has previously held the CFO, chief administrative officer and senior executive vice president roles at Rite Aid, and served as CEO and board member at Pathmark Stores. Neporent is serves on the Cerberus investment, valuation, and risk/compliance committees.  “I am very pleased that John and Mark have accepted positions on our Board,” said Bob Miller, SUPERVALU’s nonexecutive chairman. “It is important that we have a strong board of directors with a mix of industry, financial and professional experience to draw upon. John and Mark provide tremendous knowledge and a strong understanding of the guidance and direction this Board should offer SUPERVALU during its rebuilding process.”

Raymond Vara

Raymond Vara, CEO of Hawai’i Pacific Health, will join the Bank of Hawaii board. Vara previously served as CFO, then as CEO, at Los Alamos Medical Center. “On behalf of Bank of Hawaii, I am delighted to welcome Ray Vara to our board,” said Peter Ho, chairman and CEO of Bank of Hawaii. “Ray is a veteran of the health care industry whose extensive accomplishments and expertise will provide valuable insight and perspective. As a highly respected member of the community, Ray’s intimate understanding of the needs and concerns for the future of Hawai‘i make him a great match and significant addition to our board.”

Jay Herratti

Michael P. Monahan

Nutrisystem elected Jay Herratti, former CityGrid Media CEO, to the board of directors and named Michael P. Monahan CFO. Monahan joins Nutrisystem from PetroChoice Holdings, where he also served as CFO. Herratti currently mentors Internet start-up businesses, leading professional groups and providing advisory services. He previously held leadership positions with IAC/InterActive Corp., the Home Shopping Network, Boston Consulting Group, and GE Capital.  “Jay’s track record of launching and leading interactive companies and understanding and capitalizing on trends in the ecommerce space make him a valued addition to the Board,” noted Mike Hagan, chairman of the Nutrisystem board. “From working with and leading consumer brands like Home Shopping Network, Urbanspoon and Citysearch to mentoring Internet start-ups, Jay is savvy when it comes to consumer behavior online and off. We’re delighted to have him on the team as we continue to focus on Nutrisystem’s turnaround.”

Stephen F. Page

Stephen F. Page is joining the AeroVironment board and its audit committee. Page is a retired CEO of the Otis Elevator division of United Technologies, who has served on the Lowe’s Companies, PACCAR, and Liberty Mutual Holding Co. boards of directors. He held the lead director position at Liberty Mutual. “Stephen’s wealth of leadership success in consumer, industrial, and global businesses will provide a unique and valuable perspective across AeroVironment’s increasingly diverse business activities,” said Tim Conver, AeroVironment’s chairman and CEO. “As a technology company that creates and sells products and services to consumers, businesses and government agencies with increasingly international scope, Stephen’s vast expertise across these areas will be invaluable as AeroVironment expands in each of these markets.”

Valspar appointed Shane D. Fleming, Cytec Industries chairman and CEO, as the company’s newest director and compensation committee member. Previously, Fleming served as Cytec’s COO and has held a number of senior leadership roles throughout his 30-year tenure with the company.

Following the resignation of Fred Hassan, Director Doug Conant has been elevated to chairman of the Avon Products board of directors. Conant is former CEO of the Campbell Soup Co. and is founder and CEO of ConantLeadership. CFO Kimberly Ross joined the board on a temporary basis, to meet the minimum number of directors required by the company’s by-laws, while the board seeks a new member.

Russell G. Golden

The Financial Accounting Standards Board (FASB) named Russell G. Golden, former Deloitte & Touche partner, as chairman. Golden succeeds current FASB Chairman Leslie F. Seidman, whose term ends June 30. Golden has served as a FASB member since September 2010, prior to which he served on the FASB staff for six years. His initial term will run through June 30, 2017, at which time he will be eligible to serve an additional three years. “After an extensive search, which involved the evaluation of many highly qualified candidates from a variety of backgrounds, the Trustees determined that Russ Golden is the best qualified person to take on the role of FASB chairman,” said Jeffrey J. Diermeier, chairman of the FAF board of trustees. “I’m very pleased that Russ will be moving into this new role. He will bring to his new position a deep understanding of technical accounting issues informed by a broad appreciation of the larger environment in which the FASB operates, which he developed during his years as both a staff member and as a board member.”

John A. Hayes

Theodore M. Solso

Ball Corp. elected CEO John A. Hayes chairman of the board; current Chairman R. David Hoover will remain on the board as a director. Theodore M. Solso will take on the lead director role. Hayes previously served as Ball’s COO and as president of Ball’s European metal beverage packaging business. Solso joined the board in 2003, and most recently served as CEO of Cummins.

Textron Chairman and CEO Scott C. Donnelly is joining the Medtronic board effective July 1. Before joining Textron, Donnelly held a number of leadership roles at General Electric, including CEO of GE Aviation, senior vice president and director of GE Global Research, and vice president of technology at GE Healthcare.

Judith Huntington

Michael Pappagallo

Signature Bank appointed two new board members: Judith Huntington, president of The College of New Rochelle, and Michael Pappagallo, COO of Kimco Realty. Before Joining CNR, Huntington was audit senior manager at KPMG‘s metro-N.Y. higher education, research and other not-for-profit practice. Pappagallo was previously CFO of Kimco and CFO of GE Capital’s Commercial Real Estate Financing business.

Marita Zuraitis is joining Horace Mann Educators Corp. as CEO-elect, and will succeed CEO Peter H. Heckman following a transition period. Previously, Zuraitis was an executive vice president at The Hanover Insurance Group, where she was a member of the executive leadership team. “Marita Zuraitis has had an exemplary, 30-year career in the insurance industry and is a well-known and highly-respected executive,” said Gabriel Shaheen, chairman of the board.

PNC Financial Services Group promoted William S. Demchak from CFO to CEO, and current CEO James E. Rohr is transitioning to the executive chairman position. Demchak is a director of BlackRock, and has served as PNC senior vice chairman and head of the Corporate & Institutional Banking division. ”Bill is well prepared to lead PNC and to execute the winning strategy he helped develop over the past decade,” Rohr said. “PNC’s customers, shareholders, employees and community will benefit from his vision and commitment to serving their needs.”

Barclays appointed Frits van Paasschen, CEO of Starwood Hotels and Resorts Worldwide, and Michael Ashley, head of quality and risk management at KPMG Europe, to the board of directors. Van Paaschen is former CEO of Coors Brewing Co. and previously served on the Jones Apparel Group and Oakley boards. Ashley is a member of the Institute of Chartered Accountants in England and Wales’ Ethics Standards Committee.

Russell Fradin

Best Buy elected Russell Fradin, CEO of SunGard, to the board of directors. Before joining SunGard, Fradin was chairman and CEO of Aon Hewitt. “We are delighted to have Russ join our board,” said Hatim Tyabji, chairman of the Best Buy board. “His background in operations, streamlining cost structures, executive compensation and strategic consulting will be beneficial to Best Buy as it continues its Renew Blue transformation.” Board Member Ron James will not stand for re-election at this year’s shareholder meeting.

Former Executive Director of the World Bank Moisés Naím joined the AES Corp. board of directors. Naím is now senior associate in the International Economics Program at the Carnegie Endowment for International Peace. He is founder and chairman of the Group of 50 . “Moisés brings invaluable experience to the political and economic aspects of our operations as we seek to manage risk in a complex global environment,” said Charles Rossotti, AES board chairman. “AES will benefit greatly from his depth of experience and strategic insight.”

Craig S. Morford

RPM International appointed Craig S. Morford to the board, succeeding retiring Director William A. Papenbrock. Morford, chief legal and compliance officer at Cardinal Health, will serve on the board’s governance and nominating committee. Previously, he served for 20 years with the U.S. Department of Justice. He is a member of the audit and compliance committee of the Ohio State University board of trustees.

Omega Healthcare Investors appointed Craig R. Callen, Crestview Advisors senior advisor, and Barbara B. Hill, Moelis Capital Partners operating partner, members of the board. Previously, Callen was head of strategic planning and business development, senior vice president, and a member of the executive committee at Aetna. He is also a member of the Symbion board, and previously served on the Sunrise Senior Living and Kinetic Concepts boards. Hill is former CEO of ValueOptions and its parent company FHC Health Systems. She is former chairman and CEO of Woodhaven Health Services.

Jack R. Lazar

Former Senior Vice President of Corporate Development and General Manager of Qualcomm Atheros Jack R. Lazar joined the Silicon Labs board of directors. Lazar previously was CFO of Atheros before its acquisition by Qualcomm in 2011. He also has experience as CFO of NetRatings and Apptitude. “We are pleased to add Jack to our board of directors,” said Tyson Tuttle, CEO of Silicon Labs. “His experience building Atheros’s business will be particularly valuable as we continue to focus on driving high-quality revenue growth and market leadership.”

Bill Barrett Corp. named R. Scot Woodall permanent CEO after having served as CEO on an interim basis since January. Previously, he served as company COO and senior vice president of operations. He is former senior vice president of the Western Region division at Forest Oil Corp. Chairman of the Board Jim Mogg comments, “The board of directors is very pleased that Scot has accepted the role of CEO and president. His leadership qualities as well as his performance as interim CEO over the past several months make him an excellent choice. He has significant industry experience and his commitment to operational excellence should deliver shareholder value as we develop our core positions in the DJ Basin and Uinta Oil Program. The board believes Scot possesses the talent, experience, and leadership qualities we require and he is highly respected by the Bill Barrett team.”

Gregory H. Boyce

Peabody Energy Chairman and CEO Gregory H. Boyce joined the Monsanto board. Before being promoted to chairman and CEO of Peabody Energy, he served as company COO. Previously, Boyce served as CEO of the energy division of Rio Tinto and CEO of Kennecott Energy. He is a member of the Marathon Oil board and chairman of the International Energy Agency’s Coal Industry Advisory Board. “On behalf of Monsanto, I am pleased to welcome Greg Boyce as an independent director to our board,” said Hugh Grant, Monsanto’s chairman of the board and CEO. “As the leader of a global business, he brings valuable experience and expertise that will complement the skills of the members of our board.”

Henry Hagan

Todd Matherne

Foundation Partners Group named Henry Hagan, former audit committee chairman and former chairman and CEO of Monumental Life Insurance, chairman of the board. Hagan is a member of NACD, and serves on the boards of First Command Financial Services, Plastic Revolutions, and UTI International Singapore Private Limited. Todd Matherne joined Foundation Partners Group’s board and was elected chairman of the audit committee. Matherne provides interim management and turnaround consulting services through Todd Matherne Advisors.

Superior Industries International appointed Kerry A. Shiba, CFO of Superior, to the board of directors. Shiba is also a member of the Ramsey Industries board, and is former chief financial and restructuring officer of the original equipment business unit of Remy International.  “Kerry joins our board at a critical juncture, as the company is in a proxy contest and the board thought it prudent to protect shareholder value by appointing him to this seat,” said Steven J. Borick, chairman and CEO. “We welcome the financial guidance and strategic direction that Kerry will provide as a board member as we embark on a major capital project—investing $125 million to $135 million to construct a new manufacturing plant in Mexico—that we believe will help propel the company’s next stage of growth.”

Former United Technologies Fire and Security Division President Scott Buckhout joined CIRCOR International as CEO and director. Wayne Robbins, who served as acting CEO since December 2012, will continue with the company as COO.

Compuware Corp. appointed David Fubini, McKinsey & Co. senior director, and Lee Roberts, former CEO of FileNet, to the board. In addition, Gurminder S. Bedi assumed the chairman of the board position, replacing Co-Founder Peter Karmanos Jr., who retired. Fubini is currently completing his third decade as senior director at McKinsey, and will retire at the end of this year. Roberts has more than 30 years of experience in the technology industry, and oversaw FileNet’s growth and subsequent sale to IBM. He has served on a number of public and private company boards in the last 16 years.

Daniel Schwartz

Burger King Worldwide CFO Daniel Schwartz is moving into the company’s COO position in preparation for taking over the CEO spot upon the exit of Bernardo Hees in July. Hees is leaving the fast food company to join H.J. Heinz after it is acquired by Berkshire Hathaway and 3G Capital. Hees is former CEO of America Latina Logistica. Schwartz is a former 3G Capital partner. Joshua Kobza, formerly senior vice president of Global Finance, will succeed Schwartz as CFO.

Federal Signal Corporation appointed Brian S. Cooper to the CFO position, succeeding Braden Waverley. Cooper is leaving his position as CFO of Westell Technologies, which he has held since 2009. Before joining Westell, Cooper was CFO of Fellowes, Inc. “Brian brings valuable strategic perspective and a strong foundation in finance, reporting and analysis gleaned from his over 20 years of business experience in public and private companies,” commented Dennis Martin, Federal Signal’s CEO. “We are looking forward to adding his expertise and leadership to the Federal Signal team.”

Sonic Automotive promoted Heath R. Byrd from chief information officer to CFO. Previously, Byrd held the COO and CFO positions at HR America, and served on the Big Brothers and Big Sisters of Greater Charlotte board.

F. Nicholas Grasberger

Harsco appointed former Managing Director of the Precision Polymers Division of Fenner Plc, F. Nicholas Grasberger, to CFO. Grasberger also has held the CFO position at Armstrong Holdings and Kennametal.

Shick “Mark” Yoon is taking over the CFO position at Hanmi Financial, having served in the interim CFO, chief strategy officer, deputy CFO, treasurer, and senior planning officer positions at the bank parent company in the past. “Mark has been instrumental in our strategic planning and asset/liability management over the past five years, which helped Hanmi navigate through the financial crisis, and we are very pleased to have him as our permanent CFO in charge of our accounting, treasury, and corporate strategy departments,” said Jay Yoo, CEO of Hanmi.

Language-learning software company Rosetta Stone announced that Theodore J. Leonsis will resign effective at the 2013 annual meeting of stockholders, and Tom P.H. Adams and John E. Lindahl will not seek re-election to the board. Following their departures. Rosetta Stone’s board will be composed of eight directors. President and CEO Stephen M. Swad said, “All three of our departing board members have made significant contributions to the development and evolution of Rosetta Stone and we are grateful for their services, advice and guidance over the years. Tom was obviously instrumental in taking a small language technology start-up and growing it into the world leader we are today, but that would not have been possible without the investment and guidance offered by John and Norwest. Finally, we would not be where we are today without Ted’s energetic and insightful advice on how to transform the company. I am pleased to have worked with them and believe that their impact on the company will be long lasting.”

Former J.C. Penney CEO Myron E. (Mike) Ullman III rejoined the retailer as CEO and director, with current CEO Ron Johnson leaving the company effective immediately. Ullman led the company as chairman and CEO until late 2011, and previously was directeur general of LVMH Moët Hennessy Louis Vuitton and chairman and CEO of DFS Group Limited. He is a member of the Starbucks, Saks Inc., and COFRA Group boards. Thomas Engibous, chairman, said, “We are fortunate to have someone with Mike’s proven experience and leadership abilities to take the reins at the Company at this important time. He is well-positioned to quickly analyze the situation jcpenney faces and take steps to improve the company’s performance.”

William Jellison

William Jellison joined Stryker as company CFO. Jellison most recently served as CFO of Dentsply International. “Bill’s accomplished career in managing the financial activities of growing multinational organizations will complement our leadership team in achieving our strategic goals,” stated Kevin A. Lobo, CEO.

TD Bank Group CEO Ed Clark announced his intention to retire as of Nov. 1, 2014, and the board intends to follow the bank’s succession plan and name Group Head of U.S. Personal and Commercial Banking Bharat Masrani CEO. Masrani will become COO in the interim. “I am delighted that the board has chosen Bharat as my successor. Years ago the board made a commitment to delivering a seamless and well planned CEO transition. Bharat brings a continuity of strategy, culture and values shared by the entire board and senior executive team,” said Clark.

Black Box Corp. elected John Heller and Joel Trammell to the board of directors. Heller held a number of positions of increasing responsibility prior to retiring from Caterpillar in February 2012 as company chief information officer. Trammell is a managing partner of Lone Rock Technology Group, and was founder and CEO of CachelQ until it was acquired by NetApp.

CVS Caremark elected former Johnson & Johnson Chairman and CEO William C. Weldon to the board of directors. Weldon, who also serves on the J.P. Morgan Chase board, served as chairman and CEO at Johnson & Johnson for about ten years until his retirement last year.

Van Honeycutt, former Computer Sciences Corp. chairman and CEO, is joining the Big 5 Sporting Goods board. Previously, Honeycutt served on the Beckman Coulter, Tenet Healthcare, and FHP International boards, as well as the National Security Telecommunications Advisory Committee. “We are very pleased to welcome Van Honeycutt to our board,” said Steven G. Miller, the company’s chairman and CEO. “Van enjoyed a distinguished career in a wide range of leadership roles at Computer Sciences Corp. and we look forward to benefiting from his executive experience and technology background as we build upon our 58-year history and position our business for continued success.”

Semtech named Sylvia Summers and Carmelo Santoro directors. Summers is former CEO of Trident Microsystems and is currently a member of the Headwaters board. Santoro is a business consultant with Santoro Technology Associates and is former CEO of Attensity.

Jacobs Engineering Group named Juan José Suárez Coppel, Mexican economist and former general director of Petróleos Mexicanos (PEMEX), to the board. Suárez previously held the CFO position at PEMEX and was chief of staff of Mexico’s secretary of finance and public credit in 2000 and 2001. In announcing the election, Jacobs Chairman Noel G. Watson said, “We are very pleased to welcome Mr. Suárez to our board. He brings a global understanding of the oil and gas market and sound experience in both the public and private sectors in Mexico. His vast knowledge and expertise is of great value to Jacobs as we continue to expand our capabilities in Central and South America.”

Morton Salt Advisory Board Member Wesley M. Clark is joining the CLARCOR board, succeeding the retiring J. Marc Adam. Previously, Clark served as COO and director of W.W. Grainger. He is nonexecutive chairman of Morrison Supply Company and its parent company Patriot Supply Holdings, and is a board member at ABC Supply Co.

Sonoco Executive Vice President of the Global Consumer Businesses M. Jack Sanders was promoted to CEO, succeeding Harris E. DeLoach Jr., who will remain as chairman. Sanders held a number of leadership positions at the company, including vice president of the Global Industrial Products and Protective Packaging divisions.

Black Box named Michael McAndrew CEO and a member of the board of directors. He succeeds the retiring R. Terry Blakemore, who is retiring but will remain as a director until the company’s next annual shareholder meeting.

Akhil Johri

Pall Corp. appointed Akhil Johri CFO, following his exit from his position as CFO of United Technologies‘ Propulsion & Aerospace Systems group.

Larry Hilsheimer, former CFO of Nationwide Mutual Insurance Co. and COO of Nationwide Direct & Consumer Solutions, is joining Scotts Miracle-Gro as CFO. “To add someone with Larry’s strong financial pedigree and broad business background to our executive leadership team is an enormous win for ScottsMiracle-Gro and its shareholders,” said Jim Hagedorn, chairman and CEO. “His leadership skills will bolster an already strong finance organization and his business insights and experience will make us a stronger and smarter company. I welcome him to the ScottsMiracle-Gro family and look forward to a strong partnership.”

Kathryn Mikells

Xerox named ADT Corp. CFO Kathryn Mikells as the business process and document management company’s CFO. Mikells also previously held financial leadership roles at Nalco and UAL Corp. She is a director onThe Hartford Financial Services Group’s board.

Halliburton named José C. Grubisich, CEO of Eldorado Brasil Celulose and Vallourec director, to the board. Previously, Grubisich served as CEO of ETH Bioenergia. “José brings significant executive leadership experience in Latin America and internationally,” said Dave Lesar, Halliburton Chairman and CEO. “This experience will be valuable as Halliburton continues its focus on growing our global business in the unconventionals, deepwater, and mature fields markets.”

Cadent Energy Partners Executive Advisor Michael McGovern will join the Quicksilver Resources board. Currently, McGovern is also a director at GeoMet, Long Run Exploration, Array Holdings, Sonneborn, and Cactus Wellhead. He is former CEO of Pioneer Companies, where he served as chairman for two years. “We welcome Mike to the board of directors of Quicksilver Resources,” said Toby Darden, chairman of the board. “His experience across multiple disciplines in the energy sector will add depth to our team.”

First American Financial added Mark C. Oman, a retired Wells Fargo senior executive vice president, to the board. Oman most recently was head of Wells Fargo’s Home and Consumer Finance Group.

Standex International appointed Thomas J. Hansen a member of the board, expanding size from eight to nine directors. Hansen is former vice chairman of Illinois Tool Works, where he previously served as executive vice president. He is also a member of the Terex and Mueller Water Products boards. “The automotive and industrial manufacturing insight that Tom has gained during his long and distinguished career at ITW will be of immense value to Standex as the company executes on its focused diversity strategy in the years ahead,” said Edward Trainor, chairman of the board. “Tom’s qualifications – particularly his experience with highly engineered product manufacturing – made him an ideal candidate to serve as an independent director, and we welcome him to the Standex board.”

J. Kevin Willis

Ashland CFO Lamar M. Chambers announced he will retire in July, and the specialty chemical and technology company’s board elected J. Kevin Willis to succeed him and join the company’s executive committee. Willis has served in a number of management positions of increasing responsibility at the company, including treasurer and general auditor.

Genworth Financial elected former North Dakota Senator Kent Conrad to the board of directors. Conrad represented the state from January 1987 through January 2013, and served as chairman of the Senate Budget Committee. Previously, Conrad was the North Dakota tax commissioner. “Kent’s extensive budgetary and public policy experience and perspectives will provide invaluable insights as Genworth continues its focus on rebuilding value for shareholders,” said James S. Riepe, Genworth non-executive chairman of the board.

James “Woody” Woodall

FIS promoted James “Woody” Woodall, chief accounting officer and controller, to CFO. Previously, Woodall was executive director and controller of AT&T’s southeast region. “Woody’s contributions over the past five years have been crucial in helping FIS achieve its financial performance goals and deliver increased value to its shareholders,” said Gary Norcross, FIS COO. “The appointment of Woody to the CFO position brings proven financial leadership to our Executive Management team and ensures that we can continue to deliver on the financial strategies that support our growth goals. We are confident that Woody will help drive FIS’ continued success.”

Viacom elected Cristiana Falcone Sorrell and Deborah Norville to the board, expanding its membership to thirteen directors. Falcone Sorrell is senior adviser to the chairman at the World Economic Forum and is principal consultant for the Office of Outreach and Partnership for the Inter-American Development Bank. Norville is a two-time Emmy award winning television journalist, and an anchor of Inside Edition. She is a director of the Broadcasters Foundation of America.

ANSYS named Barbara V. Scherer as the newest member of the technology company’s board. Scherer is former CFO of Plantronics, where she also served as senior vice president of Finance & Administration. “Barbara’s talent, experience and perspective will be most valuable in helping guide the ANSYS strategic and operational focus,” said Peter J. Smith, executive chairman of ANSYS. In addition, Director Jacqueline C. Morby announced plans to retire at the end of her current term.

Charles (Chuck) Triano is joining the National Investor Relations Institute board of directors. Triano is senior vice president of investor relations at Pfizer, where he also heads the Operations Planning and Analysis department and is a member of the Finance and Business Operations Leadership Team. “I am very pleased to welcome Chuck Triano to the NIRI Board and look forward to his contributions. NIRI is fortunate to have such high caliber, committed volunteer members such as Chuck,” said Jeffrey D. Morgan, CEO of NIRI.

Molly K. Williamson

Noble Energy elected Molly K. Williamson, a Middle East Institute scholar, to the board of directors. Previously, she served in a number of policy and leadership positions in the State Department, where she specialized in Middle East policy and diplomacy. Noble Energy Chairman and CEO Charles D. Davidson, commented: “On behalf of Noble Energy’s board, we are pleased to welcome Ms. Williamson to the Noble Energy team. Molly’s unique international and foreign policy experience and perspectives will be invaluable to our company’s global growth and success.”

Atwood Oceanics appointed Jeffrey A. Miller, Halliburton COO, to the board. Miller is former senior vice president of Global Business Development and Marketing at Halliburton, and previously served with Arthur Andersen. “Jeff brings valuable operational and business development experience to our company,” commented George S. Dotson, Atwood Oceanics board chairman. “Jeff’s extensive career with Halliburton includes various international assignments and a successful track record in building businesses, providing our board with useful perspective and insight.”

Robert Q. Reilly

PNC Financial Services Group named Robert Q. Reilly successor to Richard J. Johnson’s CFO position following his planned exit in the third quarter of this year. Reilly has lead PNC’s Asset Management Group since 2005.

Target Corp. elected Douglas M. Baker Jr. and Henrique De Castro to the board of directors. Baker is chairman and CEO of Ecolab, where he previously held key marketing, sales, and general management roles in both the U.S. and Europe. De Castro is Yahoo! COO, and has held various senior leadership positions at Google, Dell, and McKinsey & Co. “We’re very pleased to welcome Doug and Henrique to our board,” said Gregg Steinhafel, chairman and CEO of Target. “As Target continues to explore and seize profitable new opportunities in a rapidly-changing environment, we expect to benefit greatly from their organizational, operational and strategic insight, their significant global experience and perspective, and their unique leadership and digital expertise.”

John Snow

Former Treasury Secretary John Snow is joining the Lender Processing Services board of directors. Snow has served as president of JWS Associates since October 2006. Before joining the Treasury, Snow was chairman and CEO of CSX Corp. He has served as Business Roundtable chairman and chairman of Cerberus Capital Management. He is a member of the International Consolidated Airlines Group and Marathon Petroleum boards. “We are fortunate to have John as a member of the board,” said Lee A. Kennedy, chairman of the LPS board. “John’s experience in managing large regulated public companies and his expertise in the areas of regulation, public policy and risk management will enhance the board and the value we bring to the organization and its shareholders.”

Molina Healthcare elected Steven James, Dale Wolf, and Daniel Cooperman to the board. James is a retired Ernst & Young audit partner, who also lead the company’s Pacific Southwest Area Health Sciences Practice. Wolf is executive chairman of Correctional Healthcare Companies and former CEO of Coventry Health Care. Cooperman is of cournsel with the Bingham McCutchen law firm, and is former senior vice president, general counsel, and secretary of Apple and Oracle Corp.

Hittite Microwave Corp. Chairman and CEO Stephen G. Daly announced his intention to retire at the end of the month, and the board has appointed Rick D. Hess as the company’s next CEO and Franklin Weigold as chairman, both effective April 1. Hess is former vice president of American Superconductor and former CEO of Konarka Technologies. Weigold has served as the company’s lead director since 2009, and joined the board in 2003. Previously, he served as vice president and general manager of the Micromachined Products Division of Analog Devices.

Philip Morris appointed COO André Calantzopoulos to the CEO position effective as of the company’s annual meeting on May 8, when he will also be up for election to the board. Current CEO Louis Camilleri will remain as board chairman. Previously, Calantzopoulos was CEO of PMI before its spin-off in March 2008, and has served as managing director of PM Poland and president of the Eastern European Region.

Eagle Capital General Partner Meryl Witmer will be the first new Berkshire Hathaway director since 2009, with her appointment expanding the board to 13 members. “The primary job of our directors is to select my successor, either upon my death or disability, or when I begin to lose my marbles,” Buffett said in a shareholder letter published in 2004.

General Electric nominated Mary L. Schapiro, former SEC chair, to the board for approval at the annual meeting on April 24. Schapiro joined the SEC in 2009, overseeing the organization through the financial crisis. Previously, Schapiro was CEO of the Financial Industry Regulatory Authority. “Her understanding of corporate governance and financial regulation will be of great benefit to GE and its shareowners,” said GE CEO Jeff Immelt in a statement.

Hill-Rom Holdings elected William H. Kucheman to the board of directors. Kucheman was most recently interim CEO of Boston Scientific. He has also served as a director of the Global Health Exchange. “Hank brings a wealth of experience in the medical device industry that will deepen the strength of our Board at Hill-Rom,” says Rolf A. Classon, chairman of the Hill-Rom board. “The combination of his strategic knowledge, operational experience and his background in sales and marketing adds valuable and complementary skills.”

Linda J. Hall

University of Minnesota Carlson School of Management Entrepreneur-in-Residence Linda J. Hall joined the Amedisys board. Hall is former CEO of MinuteClinic and former CEO of Accurate Home Care. She is a member of the Investors Real Estate Trust board, and previously was a director at Health Fitness Corp., August Technology, and MTS Systems Corp.

ConocoPhillips elected Gay Huey Evans to its board of directors and its audit and finance committee. Huey Evans is former vice chairman of the International Swaps and Derivatives Association board, and former vice chairman of the Investment Banking and Investment Management division at Barclays Capital. She is also a board member at Aviva, The London Stock Exchange Group, andThe Financial Reporting Council.

Carlos M. Gutierrez

MetLife named Carlos M. Gutierrez, former vice chairman of Citigroup‘s Institutional Client Group, a board member. Previously, Gutierrez also served as the 35th U.S. Secretary of Commerce and chairman and CEO of Kellogg Company. “I am pleased to welcome Carlos to the MetLife board of directors,” said Steven A. Kandarian, chairman and CEO of MetLife. “His significant leadership experience in both the public and private sectors, combined with his strong, global management background, will make him a valuable resource for MetLife and its shareholders.”

ESL Investments President G. Mike Mikan joined the AutoNation board. Mikan previously served as interim CEO of Best Buy, and held a number of executive positions at UnitedHealth Group.

Jim DeLoach

Key Considerations
In a business plan, it is critical to define the inherent soft spots, loss drivers, and incongruities that could dramatically affect performance and adversely impact execution. The budgeting and forecasting processes supporting the business plan also must be effective in managing risks, such as liquidity, which can threaten the organization’s viability during the planning period. With respect to the selected planning horizon, two important risks to consider are ensuring the plan itself can be delivered according to expectations and that the company won’t run out of money as it delivers the plan.

With respect to liquidity risk, there are a number of considerations. For example, there are the normal seasonal fluctuations, the inevitable unexpected developments causing revenue declines and operating cost increases, and the issue of inadequate financing facilities or insufficient working capital and/or cash-flow management processes. Then, there are unexpected events that cause business disruption, exposing the company’s failure to match the debt maturity profile to the ultimate realization of assets that its debts are funding. Finally, we cannot forget the extraordinary circumstances that lead to unplanned capital outlays or breaches of loan covenants. The point is clear: Reliable budgeting and forecasting processes in which management and the board have complete confidence are crucial to the business planning process.

Every business plan should identify the appropriate metrics and measures to monitor. If the strategy-setting process contributes to a better understanding of the risks inherent in the strategy, that understanding provides inputs to the determination of key metrics and targets. At this point, risk management begins to intersect with performance management. In effect, traditional key performance indicators (KPIs) and key risk indicators (KRIs) should converge to create a single family of metrics to drive the business planning process.

While KPIs monitor progress toward the achievement of the strategy and are the primary means for communicating business results across the organization, KRIs provide lead and lag indicators of critical risk scenarios. The result is a more balanced mix of forward-looking indicators to complement the usual KPI metrics around customer and employee satisfaction, quality, innovation, time, and costs. For example, accumulated deferred maintenance in a manufacturing plant or refinery may be a lead indicator of environment, health, and safety risks.

Together, KPIs and KRIs provide direction as to what should be managed in the execution of the business plan. The metrics selected must enable the organization to track progress toward the achievement of business objectives, monitoring and mitigation of risks, and compliance with internal policies and external laws and regulations. Metrics become the foundation for integrated business planning, which in turn provides a comprehensive framework to deploy and execute corporate strategy across an organization in concert with risk mitigation planning, budgeting, forecasting, resource allocation and the reward system. In many organizations, these are separate, individual processes, often championed by different parts of the organization.

To illustrate, one company defines its risk management process using the standard six steps: identify, source, measure, evaluate, manage, and monitor. Once risks are “identified,” they are “sourced” to their drivers or root causes. “Measure” means mapping the risks with regard to their impact, likelihood and other criteria. “Evaluate” means determining the desired risk profile and risk responses needed to achieve that profile. “Manage” and “monitor” both relate to executing the selected risk responses.

The company’s business planning process consists of three phases: environment assessment, plan development, and plan execution. The company integrates the “identify” and “source” steps of its risk management process into the environment assessment phase of the business planning process, the “measure” and “evaluate” steps into the plan development phase, and the “manage” and “monitor” steps into the plan execution phase. In this way, managing risks becomes an integral part of running the business.

In summary, integrated business planning deploys the strategy at the level of greatest achievability and accountability, engages appropriate managers who can access the resources required to get the job done, and incorporates the risk management capabilities needed to address the critical risks inherent in the plan.

Questions for Boards
Following are some suggested questions that boards of directors may consider, based on the risks inherent in the entity’s operations:

• Does the business plan:
  • Decompose the critical steps required to achieve key business objectives into performance plans supported by key metrics and targets that establish accountability for results?
  • Identify the soft spots and potential loss drivers that could dramatically affect performance and adversely impact execution of the plan and delivery of expected financial results?
  • Link the reward system to performance expectations through a balanced compensation structure that is fair to both the near-term interests of employees and the longer-term interests of shareholders?
• Do senior management and the board have confidence in the reliability of the organization’s budgeting and forecasting processes?

Jim DeLoach is a managing director with Protiviti and works closely with companies to improve their board risk oversight, including the communications between management and the board.

E. Thames Fulton

A 2006 research article, Critical Mass on Corporate Boards: Why Three or More Women Enhance Governance, from the Wellesley Centers for Women (WCW) and the University of Western Ontario supports this thesis:  ”The magic number seems to occur when three or more women serve on a board together. Women start being treated as individuals with different personalities, styles and interests. Women bring a collaborative leadership style that benefits boardroom dynamics by increasing the amount of listening, social support and win-win problem solving. Women are more likely than men to ask tough questions and demand direct detailed answers.”

The experience when you have multiple females can help the range of the conversation to be more encompassing—during the business sessions as well as the time between the meetings, the casual time, says experienced director Stephanie Kushner. “In some ways, it was more personal—people connected more on a personal basis. But also, there was a lot of comfort in terms of talking and sharing perspectives. I felt that the board was particularly collegial, collaborative. There was an openness. People expressed their thoughts and opinions more freely.”

Mary Kier

With regard to diversity, women have different experiences and different mindsets from their male counterparts. Men tend to be more individual in their decision making, excelling at taking swift corrective action, according to McKinsey Quarterly’s “Achieving the Promise of Women Executives” from March 2012. Women, on the other hand, tend to be better at collective decision-making and at incorporating the environment and values of the organization. Ultimately, board diversity is about combining alternative and complementary views that lead to more knowledgeable discussions and better board decisions.

Another experienced director, Cindie Jamison, says: “Women on boards leads to good decision-making; you can consider alternate points of view to drive toward the best decision possible. And, when there is critical mass, you can get traction on additional issues—issues that aren’t always discussed or debated and even things no one thought were issues.”

The point here is not to suggest that one way of thinking is better than the other, or that all men and women think and act in narrow gender-defined parameters. Rather, it is to suggest that a diverse blend of thinking improves company performance. Extensive research, including a 2011 Deloitte study, Women in the Boardroom: A Global Perspective, suggests a correlation between the financial bottom line and the proportion of women on boards (or at least in senior management). In fact, the McKinsey study cited earlier shows that companies with three or more women in senior management roles scored higher on criteria related to organizational health and effectiveness.

Perhaps not surprisingly, Fortune 500 companies are doing a better job of including women on their boards than mid-cap companies. The Deloitte study shows 15.7 percent of Fortune 500 board directors are women, while that number falls to just 12.3 percent for a broader sample of nearly 1,800 companies, which of course includes mid-cap companies.

While that might not seem like much of a difference, other studies call attention to the problem for mid-cap companies. A December 2011 report from the InterOrganization Network (ION), an alliance of 14 women’s business organizations in the U.S., says that underrepresentation of women on mid-cap company boards is acute. The report states that “although the Fortune 500 companies in some regions exceed the national benchmark in terms of their percentage of women directors, the comparable percentages on the boards of smaller companies drag down the overall performance.”

The NACD recently published a Blue Ribbon Commission report titled, The Diverse Board: Moving From Interest to Action. Click here to access a copy of the BRC on Diversity.

By their very size and nature, mid-cap companies often fly under the governance spotlight, avoiding the direct pressure to address the issues of gender diversity on boards. While that may be true today and for the short term, regulatory pressures are increasing for all companies. Compounded by the diminishing lack of trust that boards and corporations will “do the right thing,” governance watchdogs and disgruntled investors don’t need much incentive to act.

“Pink” quotas dictating board makeup may only be a reality in Norway, France, Italy, Belgium, Iceland, the Netherlands (where a “comply or explain” policy exists) and Malaysia, but global awareness of this issue is growing. There is similar legislation in the works in Spain and India, and the U.K. and Sweden have embraced voluntary targets. Surely quotas are not out of the realm of possibility in the U.S. if complacency  continues to thwart progress. Why wait to be shamed into doing the right thing?  Boards need not hide behind their generalized “diversity” statements in their proxies, but should lead by example in their board appointments and proactively include more women. What’s more—as if mid-cap companies need another incentive—gender diversity simply is good for business, leading to better decision-making and better organizational dynamics.

Mid-cap companies do face challenges of their own recruiting women to their boards, of course–not the least of which is competing directly for talent with their more prominent counterparts in the Fortune 500. Even so, it is imperative that sitting directors, nominating and governance committee members, and executives of mid-cap companies charge ahead with assertive and coordinated recruiting campaigns to identify talented female executives who will bring diversity of thought to the board.

The decision to include women should start with governance committees,” says experienced director Rita Foley. “Board members should insist on seeing female and diversity candidates on the slate. Think of your daughter; if she were a qualified candidate you would want her to have the same open opportunity. The slate shouldn’t be considered complete if there isn’t diversity on it.”

To accomplish this, mid-cap companies should examine their own proxies as a guide to bolster diversity; most all companies emphasize a commitment to diversity there. Make that commitment serve as more than just empty words:

• Act upon them to bring gender diversity to the board. As an added benefit, including more women on boards can help lead to more women rising up into the ranks of senior management, which in turn expands the pool of potential board candidates over the longer term.
• Be proactive by insisting that women board candidates appear on the slate whenever recruiting board directors. Mid-cap company boards–and their nominating committees–should not consider the slate to be complete unless it has several well-qualified women who align with the company’s strategies and goals. Then, if possible, commit to interview at least one woman for every board vacancy that opens up. Adds Jamison: “In order to draw these female candidates’ strengths out, you need to interview them differently–ask different questions; think about the approach and the situation. The way questions get asked and the way women choose to answer them can be surprising and off-putting. That right there is a gatekeeper. Be open to the way you interview and qualify—take into account the question and the nature of it and how it can be perceived. There are ways to ask things about a woman’s background without being negative that will allow her to demonstrate her expertise and value.”
• Use an executive recruiter to ensure that diversity is a component of every slate of candidates. Partnering with an objective resource like a recruiter helps make the search process run smoothly and efficiently, freeing up senior management to spend their time wisely. It enables the board to embrace a process that introduces candidates at the right time. Recruiters also bring a unique third-party perspective, best-practice experience and a sense of urgency to the search process.
• Encourage radical and creative thinking by casting a wider net to find exceptional female board candidates. Historically, women are scarce among the ranks of sitting CEOs or CFOs. Beyond those top spots, however, consider exploring other functional areas such as legal or human resources, or looking at women who hold important leadership roles in smaller organizations.

Boards often speak about the importance of gender diversity within the organization at the executive and middle management levels; it follows that if such diversity is important at these levels, surely it is important at the board level. At the very least it sets a good example for that rest of the organization and ultimately serves to improve company performance.

E. Thames Fulton is a managing director and head of Board Advisory Services at Cook Associates. Mary Kier is CEO of Cook Associates Executive Search.

Elisse Walter

“I want to express my deep gratitude to Mary Schapiro for her steadfast leadership at the Securities and Exchange Commission,” Obama said in a statement released today by the SEC. “When Mary agreed to serve nearly four years ago, she was fully aware of the difficulties facing the SEC and our economy as a whole. But she accepted the challenge, and today, the SEC is stronger and our financial system is safer and better able to serve the American people—thanks in large part to Mary’s hard work.”

Ann Yerger, executive director of the Council of Institutional Investors (CII), also praised Schapiro’s efforts to revitalize the SEC in a statement issued today. “Mary Schapiro deserves high marks for revitalizing the SEC and protecting investors. In particular, she beefed up the agency’s enforcement muscle, steered the SEC through its busiest rule-making period ever and strengthened shareowner rights. Under her watch in 2010, the SEC eliminated uninstructed broker voting in director elections at U.S. public companies, a practice akin to stuffing the ballot box for management, since broker votes are almost always cast as management wants. Mary also bravely championed giving investors a meaningful voice in corporate board elections in the face of enormous, unrelenting opposition from the business community. And despite daunting rule-making deadlines, she ensured that the SEC implemented many provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act as Congress envisioned.”

Yerger also pledged CII’s support for Walter as SEC chairman: ”The Council of Institutional Investors congratulates Elisse Walter on being designated SEC chair and looks forward to working with her to advance the SEC’s important mission as the ‘investor’s advocate’ and to supporting her efforts to make the financial regulatory system more transparent, accountable and responsive to investors.”

In its coverage, The New York Times described Schapiro’s tenure as “bruising.” She agreed to become chairman at a time when the Commission was being roundly criticized for its lax oversight of brokerage firms such as Lehman Brothers, which failed in 2008 and contributed to the worst economic downturn since the Great Depression, and for missing the massive Ponzi scheme carried out by Bernard L. Madoff. The Wall Street investor confessed the fraud to his sons who contacted regulators and Madoff was arrested just weeks before Schapiro was sworn in as chairman.

The SEC posted a list of Schapiro’s accomplishments, which for corporate officers and directors will have myriad ramifications now and into the future. It was on Schapiro’s watch that the Dodd-Frank Act was passed some 36 months ago. Dodd-Frank required the SEC to promulgate hundreds of new rules, many of which had a direct influence on boards.

In addition to modernizing the agency with technology and making structural changes, Schapiro appointed Jeff Heslop to the Commission’s first Office of the Chief Operating Officer and established a think tank-like division dedicated to risk and economic analysis. She also established a controversial new whistleblower program that awards money for good tips.

Walter is a Democrat who became an SEC commissioner in 2008 and briefly served as the agency’s acting leader a year later. She has been a longtime ally and colleague of Schapiro’s. They overlapped at the Commodity Futures Trading Commission and FINRA, where Walter was a senior regulator and lawyer. The Times described Walter as “often the only reliable vote for Ms. Schapiro’s rule-making efforts and is now expected to carry out a similar agenda as chairwoman.”

Michael Goulding/The Orange County Register/ZUMAPRESS.com

In Mr. Ruehle, You Are a Free Man—A Broadcom Saga, Bill Ruehle tells his own surreal story of a mild-mannered and cerebral Harvard-trained CFO in the fight of his life against a headline-seeking prosecutor.

By 2006, America had digested Enron and the dot-com bust, and was getting back to business. Then along came a Wall Street Journal article on an obscure academic research paper, “On the Timing of CEO Stock Option Awards,” written by Erik Lie, a finance professor at the University of Iowa. Lie’s research showed that certain option grants dated from 1996 to 2005 had the benefit of hindsight, but left open the question of whether the selection of grant dates was due to deception or discretion. The future of hundreds of companies and thousands of executives would hinge on that very point, as would Ruehle’s criminal trial.

In 2010, Lie told New York Times’ Dealbook reporter Peter Lattman, “I never expected my study would lead to anything. At the time we published the paper, it wasn’t clear that regulators would view the activity as illegal.”

Backdating wasn’t limited to poorly governed start-ups. Among the 220 companies that publicly disclosed option accounting issues were such iconic names as Apple, Alcatel, Clorox, Dean Foods, Gap, Home Depot and Microsoft. Although none were charged criminally, some of their executives, like Apple CFO Fred Anderson, were forced to settle with the SEC for sums as large as $3.5 million.

It was not a very good time for executives to be involved in unfair compensation practices, and the country was not amused. In early 2006, even the Republican-appointed SEC Chairman Christopher Cox declared regulatory holy war: “Options backdating…deceives investors and the market as a whole about the financial health of companies that cheat in this way….It is poisonous….The SEC is committed to bringing it to an end nationwide.”

Sen. Jim Bunning (R-KY) added a thoughtful postscript—disregarded by both his Senate Banking Committee colleagues and the SEC—that turned out to be prophetic: “Although Chairman Cox’s remarks are well-taken, many would likely oppose his blanket statements regarding backdating’s ‘poisonous’ nature. Interestingly enough, even Chairman Cox acknowledges that back- dating, in some circumstances, is perfectly legal.”

The opportunity to make headlines would soon spur Capitol Hill’s solons into action, as Senate Banking Committee Chairman Paul Sarbanes, co-author of the Sarbanes-Oxley Act of 2002, made clear in 2006, saying, “It is now official that no issue in the 72 years of the Commission’s history has generated such interest” as stock options backdating.

The ramification among working-level attorneys at the Department of Justice and accountants at the SEC looking to pounce on the new white-collar crime phenomenon was predictable: “Wanted: Backdaters” was like a neon sign flashing in the mind of every DOJ regional attorney across the land.

In fact, regulators were so distracted by the sheer volume of cases, it has been speculated that more obvious targets—such as Bernard Madoff and Allan Stanford—went unnoticed. This was confirmed in 2012 by an NYU Law School report, “Scandal Enforcement at the SEC” (Choi, Pritchard, Wiechman): “As the level of media scrutiny of option backdating increased…the SEC pursued more marginal investigations into backdating as the media frenzy surrounding the practice persisted at the expense of pursuing more egregious accounting issues.”

By the time the uproar subsided late in 2009, as Bingham McCutchen partner (and former assistant attorney general for the DOJ) Nathan J. Hochman posted on Forbes.com, “The government’s stock-option charging decisions became a wheel of misfortune. There was simply no telling which company would be sued or which individual would be prosecuted. Of the over 200 companies and 1,000 individuals with options problems, only 22 individuals have been charged criminally by the Department of Justice.”

Open Season
Ultimately, only five executives received criminal sentences. The vast expenditure of resources resulting in only five criminal convictions seems lopsided, to be sure. But also missing from the sanctimonious hand-wringing about executive greed was a thoughtful debate about whether regulations that were applied differently in an earlier, less litigious time were being applied indiscriminately in 2006 in order to gain convictions. It was an omission of enormous significance to the trial of William Ruehle: “Most accounting experts will admit that different interpretations of option accounting rules existed prior to 2002,” he writes. “But four years later, by 2006, the government’s auditors and lawyers started to interpret the old rule APB 25 in a very strict way and looked back several years to see that paperwork matched the newer, stricter interpretation.”

And that would change everything. Brocade and Comverse were two of the highest-profile California cases in which executives received criminal convictions. Brocade’s CEO, Greg Reyes, was convicted on nine counts of fraud (he served a sentence of 18 months and received a fine of $10 million, according to the San Jose Mercury News). Comverse’s CEO, Jacob “Kobi” Alexander, felt his chances were better as a fugitive and in 2006 he escaped to Namibia, where he resides today (he also ultimately settled civil charges with the SEC for $46 million in 2011). The sensational news of Alexander’s flight from justice sent an urgent signal across the U.S. Attorney network that it was open season.

Assistant U.S. Attorney Andrew Stolper of the Central District of California was barely eight years out of USC’s Gould School of Law and had already racked up an impressive résumé taking down small-time business bad guys (he participated tangentially in the Enron case). But he had no backdating trophies. When Broadcom’s internal option grant investigation revealed errors, Stolper jumped on the case that he apparently thought would crown his budding legal career.

Two remarkable UCLA engineers who saw the promise of broadband communications started Broadcom in 1991. By 2000, the company had grown to over $1 billion in revenues. Ruehle joined the company as CFO in 1997, when the company was still run by CEO and co-founder Henry Nicholas, who exerted nearly hypnotic control over all operations. Nicholas’s grasp of the business was superior, and it was known that if he asked a question, he knew more about the area than you did. And no one argued. In this environment, Nicholas’s entrepreneurial approach extended to options grant practices—and since Nicholas and co-founder Henry Samueli were the board’s entire options committee, this was not very surprising. Prior to the passage of Sarbanes-Oxley, CFOs did not report to the board, nor did they have the kind of independence from the CEO they enjoy today.

These factors account for some the challenges Ruehle describes during this period. “Bottom line,” he writes, “there really wasn’t a lot of attention paid to the accounting of options for all the known reasons, and as the company was growing so fast, certainly at the time the deeper documentation was deemed unnecessary, which was part of our defense. During the years that were charged, 1998 to 2003, there were notions that these were principles subject to interpretation and discretion rather than hard and fast rules.”

In his calm and self-effacing manner, Ruehle isn’t looking for sympathy or even empathy for the ordeal of his three-year criminal trial, nor does he make himself out to be any kind of hero due to his vindication. In fact, like the main character of Franz Kafka’s The Trial, Joseph K. (who also happens to be a CFO), Ruehle seeks only to show the reader what it took to maintain sanity while dealing with a judicial system trying to destroy a person for something he did not do.

What was not in doubt, even to prosecutors, was that Ruehle ever acted out of any desire for self-enrichment. After the Broadcom IPO, he had exercised only 15,000 options out of more than two million in-the-money vested options. Since this made for a much weaker case, the aggressive assistant U.S. attorney needed extra ammo to get any of the 16 counts against Ruehle to stick.

That’s where the plot thickens.

Missing the usual pegs on which to seek a conviction, Stolper, according to the trial record, intimidated witnesses until they provided the right kind of testimony, his kind.

As reported in detail in Mr. Ruehle, You Are a Free Man, motions were to be submitted prior to closing arguments, and Ruehle’s defense attorney, Richard Marmaro, and his team filed the following details of Stolper’s prosecutorial misconduct: “There is now clear and convincing evidence that the government in this case: attempted to dissuade a witness from testifying on Mr. Ruehle’s behalf; threatened an immunized witness with perjury prosecution if he testified consistently with prior sworn testimony [that the witness had made to the SEC]; suggested how defense and prosecu- tion witnesses should testify [coached one witness 24 times on her testimony]; pressured two witnesses into dubious and invalid plea agreements [relating to a trumped-up drug-related charge against Broadcom co-founder and former CEO, Henry Nicholas, which was later dropped due to defects in the prosecution]; leaked information related to an ongoing grand jury investigation in an effort to gain cooperation [leaked to the WSJ]; discussed adverse employment consequences for witnesses who did not cooperate [spoke to the employer of one witness which resulted in her termination]; elicited false and misleading testimony.

“On the trial’s Rule 29 motion [if ruled in favor, it is an acquittal that cannot be retried]: Not a single witness has testified that Mr. Ruehle knew or believed that Broadcom’s financial statements were false or misleading in any way.

“The testimony has established that Mr. Ruehle repeatedly urged the finance department to openly discuss issues with the company’s auditor [E&Y]; Mr. Ruehle established that Opinion 25 was widely misapplied throughout corporate America, causing 220 companies… to restate or correct financial statements.”

‘The Truth Is Never Negotiable’
The robe worn by District Court Judge Cormac J. Carney concealed not just a professional football player’s build but also a wide receiver’s determination. Carney came straight from judicial central casting. As a UCLA undergraduate, he played wide receiver for the Bruins while racking up a 3.5 GPA. He then played one year of professional football before entering Harvard Law School. His court appointments ranged from one side of the political spectrum to another, from California Gov. Gray Davis to President George W. Bush.

When Judge Carney heard testimony about Stolper’s actions, he bristled. Toward the end of the trial, Carney even placed a gag order on Stolper, denying him a speaking role. Rather than limp to the finish line, Stolper apparently lost interest, as he simply stopped showing up in court.

On Dec. 15, 2009, the day after all final motions had been filed, the courtroom was standing room only—an overflow room had to be provided. Between prosecutorial misconduct, drug charges and billionaire indictments, the media frenzy was as sharp as it was guttural. At the start of the day, Ruehle wrote a note to his wife, Julie: “Need to stay focused. I am prepared to accept what- ever is decided today.” And Julie wrote back: “My hands are shaking….No matter what the judge decides we are grateful to him to have allowed the door to the truth to get unlocked. Thank God for Judge Carney. Thank God for the truth.”

Ruehle captures Judge Carney’s remarks – so eloquently spoken they would please our founding fathers – in his description of the final day of the trial:

“Judge Carney entered behind his bench, as always. He began by greeting all the attorneys for the government and for the defense. After the greeting, he declared he would read his decision into the record: “‘I heard all the evidence present at Mr. Ruehle’s trial….I now know the entire story of what happened….Based on the complete record now before me, I find that the government has intimidated and improperly influenced the three witnesses critical to Mr. Ruehle’s defense. The cumulative effect of the misconduct has distorted the truth-finding process and compromised the integrity of the trial. To submit this case to the jury would make a mockery of Mr. Ruehle’s constitutional right to compulsory process and a fair trial…. The lead prosecutor somehow forgot that the truth is never negotiable. The U.S. Attorney is the representative, not of an ordinary party at a controversy, but of a sovereignty whose obligation to govern impartially is as compelling as its obligation to govern at all, and whose interest, therefore, in a criminal prosecution is not that it shall win a case, but that justice shall be done…while he may strike hard blows, he is not at liberty to strike foul ones. I don’t think anything needs to be said further other than Mr. Ruehle, you are a free man.’”

Postscript
Andrew Stolper remains an Assistant U.S. Attorney. On his personal website, he takes pride that his work for the DOJ has been featured in national headlines in publications such as The Wall Street Journal and The Los Angeles Times. It is ironic because today he has achieved some measure of fame—a Google search for “Andrew Stolper prosecutorial misconduct” will return over 8,000 citations.

Ruehle’s defense attorney, Richard Marmaro of Skadden Arps, heads up the firm’s West Coast SEC enforcement and white-collar defense practice. It is very possible that without brilliant defense counsel, despite his innocence, Ruehle’s memoirs might have been written from a prison cell.

Today, Bill and Julie Ruehle have started an enterprise consulting business, Ruehle CFO Advisory Services, LLC, that works with early- to mid-stage technology companies from internal controls to financial and business strategy.

Broadcom remains a global leader in semiconductor solutions in the communications industry and was ranked No. 344 on Fortune’s list of the top 500 companies in America, with revenues now nearly $8 billion. Samueli remains as board chair and CTO. Brocade is still a leader in enterprise data storage and networking. In 2011, it was ranked among Fortune’s top 100 companies to work for. Comverse had a more difficult time righting itself but was finally relisted by Nasdaq in 2011 and today is growing again, and supports a billion-dollar market valuation.

The final cost of Broadcom’s defense of stock options backdating was reportedly more than 120 million shareholder dollars.

Melissa Means

There are several key considerations for organizing an effective search committee to manage and keep the rest of the board informed about and appropriately involved in the internal and/or external recruitment process.

Once the decision is made to establish a search committee, the first person appointed should be the chair. The best candidates to lead the committee typically are directors who have been through a CEO transition, who live within a reasonable distance of the company’s offices (because of the likelihood of numerous in-person meetings), and who have the available time, leadership skills and commitment to see the process through to completion.

Once a chair has been identified, the board should determine the committee’s size and membership. Many search committees are comprised of three to five board members, including the independent chair of the board/lead director and a representative from the compensation committee. The COB/lead director and the search committee chair are charged with keeping the full board in the loop, while the compensation committee representative ensures continuity with the company’s existing compensation program as the incoming CEO’s pay package is developed.

Next the board should decide whether and how to compensate search committee members. Most companies provide additional pay for service on the three major standing board committees (audit, compensation and nominating and corporate governance) in the form of cash retainers and/or meeting fees. However, we find many boards overlook the need to consider compensation for a newly created ad hoc search committee.

As a general rule, any decision regarding whether to compensate an ad hoc committee ideally should be made prior to the committee’s formation. Once the committee has begun its work, it may appear self-serving to go back and compensate members for services already provided. In our experience, companies that consider the issue upfront do end up providing some form of compensation. We recommend that the additional payment be delivered entirely as a cash retainer, rather than as meeting fees, because of the issues involved in having to define and track search committee meetings. Typically, companies set a cash retainer for an ad hoc committee’s chair and members that approximates the cash retainer provided to the audit and compensation committee members.

Following these simple steps for managing the process of establishing a search committee will help the company and the board start off on the right track toward a successful CEO transition.

Melissa Means is a managing director in the Boston office of Pearl Meyer & Partners, where her areas of expertise include total compensation strategy, executive compensation, short- and long-term incentive compensation strategy and design, market practices benchmarking, and board of directors compensation.

This letter contains our comments on the Board’s Concept Release # 006-2011 on Auditor Independence and Audit Firm Rotation. The comments and recommendations within are presented on behalf of the National Association of Corporate Directors (NACD), a national nonprofit organization of nearly 13,000 corporate director members. I have served as president and CEO of NACD since 2007, and was previously a public company auditor for 33 years.

Kenneth Daly

After much study of this Concept Release, including recent member surveys and focus group discussions among audit committee chairs, NACD has concluded the following:

• The corporate director community shares the PCAOB’s view that external auditor independence, objectivity and skepticism are critical objectives to pursue. NACD supports a rigorous process led by the audit committee, endorsed by the board, and communicated to shareholders.
• Mandatory audit firm rotation is not an effective way to achieve that objective. The audit committee has a statutory responsibility for the external audit relationship, and we see no evidence that a requirement for mandatory audit firm rotation will increase the quality of financial reporting and therefore investor confidence.
• There is an alternative solution that audit committees have suggested and NACD presents in this letter. It is a solution in which boards own and execute a rigorous process for oversight, act on the results as necessary, and proactively communicate the process and outcomes to shareholders.

The Role of the Board in Relation to the Issuer’s External Auditor
In today’s public company boardroom, members of the audit committee come to the table with a significant stake in the effectiveness of the external auditor. Under the Sarbanes-Oxley Act of 2002, the audit committee is directly responsible for the appointment, compensation and oversight of the external auditor. NYSE and NASDAQ requirements call for the audit committee to hire and fire the outside auditor.

This post is excerpted from NACD CEO Kenneth Daly’s prepared testimony to the PCAOB.

NACD sees no evidence—either in our annual research or in our education programs for thousands of directors per year—that audit committees are unclear about their statutory responsibility with regard to the external auditor. Nor do they believe that responsibility would be better performed by others.

The audit committee should decide if and when to change the auditor in the best interests of the company, its financial reporting and the audit risk presented. Removing that authority from the audit committee could result in an undue weakening of the oversight and guidance that directors provide to U.S. companies.

Furthermore, our members believe substituting a mandatory requirement for better oversight seems unlikely to give investors a measure of comfort. In a survey of audit committee members we conducted in June of 2012, a full 94 percent of respondents did not believe mandatory rotation would make a significant impact on shareholder confidence and value.

Our discussions with some investor groups about the value of mandatory audit firm rotation have yielded mixed opinions. We will continue to collaborate with these groups to try to better understand their thinking and to gauge their reaction to enhanced proxy reports by audit committees on the matter of auditor evaluation. (See item I below.)

The Process by Which Boards Oversee Auditor Independence, Objectivity and Skepticism
NACD knows that boards are using the auditor evaluation processes as a primary tool for providing oversight of auditor performance and to make decisions about auditor retention or rotation.

Statistically, our research from the survey conducted in June 2012 shows that:

• More than 90 percent of NACD members have a defined process to regularly evaluate the performance of the independent auditor.
• The vast majority of them (80%) include criteria for determining whether to re-appoint or select a new audit firm.
• Seventy-six percent of respondents told us that the audit committee also involves the full board in auditor evaluation, providing access to the evaluation and opportunities to “weigh in.”

A Plan for Improving Rigor and Transparency in the Board’s Oversight of the External Auditor
NACD has determined that the auditor evaluation process is a key element of effective oversight for auditor independence, objectivity and skepticism. We have also determined that more rigor and transparency of the auditor evaluation process is both welcome and achievable by the boards of public issuers. This sentiment is shared by many of our members, our national board of directors and our advisory council of audit committee chairs who serve on the boards of Fortune 500 companies.

To that end, NACD suggests a three-pronged approach to robust oversight of auditor independence, objectivity and skepticism such that the board continues to have decision-making responsibility for the selection and rotation of the external auditor.

I. Rigorous Evaluation Process
As the first and most critical component of a plan for effective oversight, NACD has been working with a coalition of leading organizations to develop a tool to assist audit committees in performing an annual evaluation of the auditor.

The evaluation tool is scalable, and it specifically includes an evaluation of the auditor’s independence, objectivity and skepticism.

As a next step, we are exploring methods by which audit committees can enhance their communication to shareholders about their process for evaluation and oversight, including their use of this tool.

II. New Standards and Tools From the PCAOB
New issuances from the PCAOB comprise a second component of effective oversight for auditor independence, objectivity and skepticism.

• Newly adopted AS 16 appropriately updates the substantive matters auditors should discuss with audit committees about issues raised during and the results of the audit, including the quality of the company’s accounting. NACD is now urging our constituency to participate fully in the substance of the auditor/audit committee discussion, while at the same time assessing the quality of the auditor’s communications. For example, we are delivering an interactive webinar on AS 16 to our members, sponsored by the Center for Audit Quality (CAQ), to help audit committees understand the context of the standard as well as the expectations.
• In this regard, we are also appreciative of the PCAOB’s recent release of information for audit committees on the PCAOB’s inspection process. It provides an overview of the inspection process and report, as well as good insights for audit committees on how to discuss and digest the contents of those reports.

Coupled with a rigorous board process of external auditor evaluation, these PCAOB issuances provide a stronger platform for audit committee oversight of auditor independence, objectivity, and skepticism.

III. Director Education and Awareness
Audit committees take their responsibilities seriously. As a third component of effective oversight, NACD promotes the sharing of leading practices between audit committees and continues to provide educational and informative resources for directors and boards.

Our educational efforts address the range of audit committee responsibilities—from the oversight of the auditor’s performance, to financial reporting and the need to employ a healthy dose of skepticism in their work.

In a new development, we have rolled out the first of a five-part series of webinars on skepticism. The first module is titled “The etiquette and ethics of skepticism.” It informs members of the financial reporting supply chain about how to be skeptical without creating a chilling or punitive environment—including the audit committee, management, and the internal and external auditors. This is one of the tools we’re developing for boards in collaboration with Financial Executives International, The Institute of Internal Auditors and the CAQ to aid in the detection and deterrence of fraud.

Conclusion
We at NACD believe that audit committees can do a better job of communicating with shareholders about how they fulfill their oversight responsibilities for the external auditor’s performance.

We are dedicated to encouraging more transparency and want to explore ways that audit committees can provide more information, both within and separate from the audit committee report in the proxy. In fact, the use of the tool, Audit Committee Annual Evaluation of the External Auditor, could lead to enhanced proxy reporting.

We have concluded that mandatory audit firm rotation is unlikely to improve financial reporting, and that audit committees should retain the responsibility for oversight of the external auditor.

I suggest instead that we work with boards and shareholders on this issue. Let’s agree on enhancements to the audit committee’s process of evaluation and oversight, and better clarify how the audit committee communicates that process back to shareholders. The attached auditor assessment tool provides a framework, and NACD and our coalition are committed to educating and supporting directors on how to use it effectively.

Christopher R. O’Dea

In one situation, a Dutch pension fund’s CSR consultant questioned a defense industry stock held in the portfolio of a fund in which the pension fund had invested. The issue: one of the company’s divisions produced land mines that were on a UN prohibited list. Even for this sophisticated firm, the level of detail of the consultant’s mission—to specifically assess compliance with CSR and ESG criteria—was some surprise, as was the requirement to establish a documented internal procedure to review and resolve such inquiries. For less astute companies, the need to create and manage such a detailed new compliance procedure could present a significant barrier to doing business in countries where CSR criteria are on a par with financial reporting requirements.

This is just one illustration of how governance-based and CSR requirements have become sophisticated tools of business strategy and national policy outside the United States and for the most part—Argentina’s seizure of YSF shares owned by Spain’s Repsol notwithstanding—go well beyond blunt instruments like nationalization.

In Chile, the state-owned copper mining company, Codelco, recently demonstrated how a new marriage of resource-based leverage with savvy understanding of the tools and techniques of corporate governance and global capital markets can fuel a new style of fighting for control of nationally critical natural and corporate resources. The Codelco matter drew in two major Japanese banks as financing sources, along with a host of lawyers and IR/PR reps from Santiago to Tokyo and London. The heart of the dispute was an option to buy a major stake in Chile’s Sur copper complex that was granted by the Chilean government to ExxonMobil in 1978 and subsequently renegotiated twice. In October 2011, Codelco moved to exercise its option to buy 49 percent of the Sur mine held by Anglo, arranging a bridge loan from Mitsui to finance the purchase; a month later Anglo sold 24.5 percent of that stake to Mitsubishi, triggering a legal dispute over who could do what—and at what price. Anglo and Codelco settled after nearly a year of intense litigation, cobbling together a four-party arrangement with a separate board of directors to run the Sur mine. The settlement will allow development of the mine to proceed, but the episode provides boards with a template for assessing the risks that might arise from the use of the latest governance and activism techniques in a context of rising resource nationalism, state capitalism and constrained global growth.

While CSR and ESG issues certainly aren’t unknown to American companies, they don’t yet command the respect from American boards and management that such matters receive in the EU and emerging markets. When it comes to CSR topics, “in the U.S. we do not have anywhere near as rich a dialogue as other democracies,” says Steve Coll, president of the New America Foundation and author of Private Empire: ExxonMobil and American Power. Speaking to the Chicago Council on Global Affairs recently, Coll noted that the American political economy hasn’t created U.S. government-owned companies like the oil and other resource/utility companies found in most other developed economies, where those running both companies and the government share a common philosophy about business and the congruence of national with industrial goals. In contrast, the roles of a colossus like ExxonMobil and the United States in the world “are not contiguous,” Coll says. For the U.S., the result is a system where companies evaluate social policies as investment decisions, in stark contrast to other developed economies and emerging markets where social and environmental policies are integrated into both business and political life.

Ernst & Young’s proxy season data show that CSR and environmental resolutions increased to 40 percent of total resolutions in 2011 compared to 30 percent in 2010. While such resolutions are winning more shareholder support, with an average vote in favor of more than 18 percent in 2010 compared to just 7.5 percent in 2000, CSR/E resolutions still fell short of the 30 percent hurdle that garners board attention, with barely more than one-quarter winning that support in 2008. There are indications from professionals in the CSR and environmental fields that boards and top management may merely tolerate, rather than embrace, the entire sector. For example, a recent program offered by the PR University unit of Bulldog Reporter, a public-relations industry website, trumpeted a webinar on CSR with the inauspicious title “Sure-Fire Strategies for Boosting Brand Equity and Proving ROI to the C-Suite.” PR pros were told that “in just 90 information-packed minutes,” they could expect to “discover dozens of new ways of maximizing the return on your CSR efforts.”

Another sign that CSR initiatives perhaps haven’t become embedded at the board strategy level is turf battles among staff departments for influence over governance matters. With say-on-pay discussions, for example, the National Investor Relations Institute says “IR plays a limited—if any—role in say-on-pay discussions, according to a survey earlier this year of 181 US companies by IR Insight, the research arm of IR magazine.” According to NIRI, the corporate secretary tends to take the lead, with just 41 percent of IROs who responded to the survey saying they had any involvement at all in say on pay during 2011. In its e-mail about the survey, NIRI notes, “for IR, one of the challenges of reaching out is that your existing buy-side contacts are normally not involved in pay discussions, so new relationships must be forged with governance teams. Looking at this positively, it’s clear say on pay has helped IR broaden its influence and network of contacts.”

While say-on-pay isn’t directly related to emerging market matters, concerns about staff influence and the lack of organizational clarity for dealing with any governance issues threatens to short-circuit the board’s ability to count on accurate, timely information about complex governance matters in emerging markets—markets that might be major strategic growth targets.

What’s shaping up for all U.S. companies operating internationally is an agenda much like what Coll describes already at ExxonMobil: a portfolio of increasing political, geological and environmental risks. Such a risk profile requires acute sensitivity to local issues and communities in every country where a company operates. Emerging market nations are adopting legal tools from the developed world that will enable consumers and investors to pursue governance initiatives—Mexico last year passed legislation allowing class-action suits for the first time, illustrating that every board overseeing international operations will be well-served to modernize its emerging-market risk assessment matrix and update it frequently.

Complicating the picture, emerging market nations are having trouble meeting their own lofty CSR and ESG goals. Brazil, for instance, has committed to 2020 targets of a nearly 40 percent cut in its growth curve of greenhouse gas emissions and a reduction of Amazon deforestation levels by 80 percent compared to average rates registered for the period of 1996-2005. These are commitments of global interest to the environmental community, but they may be out of reach because of the latest revisions to the Brazilian Forest Code.

Former Brazilian Senator and Environment Minister Marina Silva gave an impassioned sketch of the tension between development and the environment at a private conference in Santiago with the Dean’s International Council of the University of Chicago Harris School of Public Policy, just before the Brazilian Senate passed the controversial rainforest bill. “The bill that was approved by the Senate undermines protection of the forest, provides amnesty for those who deforest and will increase deforestation,” Silva said after the vote.

Part of the problem facing boards is the lack of information about governance practices and CSR issues in emerging markets.  According to the IFC’s Global Corporate Governance Forum, for the past three years, approximately 1,000–1,200 papers have been published each year on the Social Sciences Research Network with the term “corporate governance” appearing as a key word in the abstract—but fewer than 1 percent of these papers focus on emerging markets.  And many of those focus on the board structures of companies that are part of family-controlled groups that are common in emerging market economies. This leaves a gap about emerging substantive trends that could impact financial, operational, legal and regulatory matters.

Filling in that information gap would help every board better evaluate its emerging market risks, and creating a dynamic, streamlined organization that handles CSR matters with the same alacrity as financial reporting would be a sensible first step for many boards.

Christopher O’Dea is a business consultant who focuses on global growth strategy. He can be reached at 312-804-1720 or odeachicago@aol.com.

Of these 48 companies, which account for almost 40 percent of the 124 S&P 500 companies with staggered board structures at the start of 2012, 33 proposals have already gone to a vote, with 27 passing resolutions to institute annual director elections. At least 15 more companies are expected to bring declassification proposals to management in the near future. Thirty-eight companies submitted and passed precatory proposals from SRP-represented investors, “and it is expected that declassifications will take place in many of these companies,” said Bebchuk, who is also director of the Program on Corporate Governance at Harvard Law School.

“There is a significant body of empirical evidence documenting an association between staggered boards and lower firm valuation. Furthermore, there is widespread support for board declassification among institutional investors,” said Bebchuk in an interview with NACD Directorship. Bebchuk has conducted a large amount of research on the effects of staggered board structures and is the co-author of “The Powerful Antitakeover Force of Staggered Boards: Theory, Evidence and Policy.”

The six proposals that did not pass were posed to companies with 80 percent supermajority requirements (Alcoa, CIGNA, Eli Lilly, PPG Industries, St. Jude Medical and Teradata). The 27 companies that implemented measures garnered an average of 99.2 percent of votes cast, and 80.7 percent of votes outstanding.

Of the 90 total shareholder proposals submitted by the SRP, 80 have moved, or may move, the companies to adopt annual election policies.

The 2012 proxy season marked the first year the SRP has partnered with institutional investors to effect boardroom changes. The 2011-2012 advisory board is comprised of Chairman Richard Breeden and Members Jesse Fried, Jeffrey Gordon, Reinier Kraakman, Michael McCauley and Peter Mixon.

The SRP represented and advised six institutional investors in submitting proposals: the Illinois State Board of Investment, the Los Angeles County Employees Retirement Association, the Massachusetts Pension Reserves Investment Management Board, the Nathan Cummings Foundation, the North Carolina State Treasurer and the Ohio Public Employees Retirement System.

“Many of the companies approached have displayed responsiveness to shareholder concerns,” Bebchuk said. “The large-scale declassification to which the work of the SRP and SRP-represented investors has contributed can be expected to benefit shareholders and the economy.”

Patrick R. Dailey 

If your board has experienced change, and whose hasn’t, then you have experienced the testing of the cultural rules and dynamics by directors. Rough patches do emerge in the behavioral dynamics of any board. These range from mild and virtually undetectable reactions to severe boil-ups. Early recognition and corrective action are essential to preserve the work ethic and spirit of a high-performing board, one that also must satisfy its directors’ expectations for professionalism, adherence to sound governance practices and the protection of one’s personal reputation.

Large Problems Typically Begin as Small Problems

Typically, behavioral problems start small. And just as typical, these problems don’t just magically disappear. Left unchecked, small issues tend to fester and morph into larger issues that become more visible, more destabilizing to the conduct of a board, and more vexing to resolve—the ones we read about in The Wall Street Journal such as Hewlett-Packard, Yahoo, Best Buy, Chesapeake Energy or News Corp. Tackling small problems is easier than large ones.

Understanding Board Culture

Simply, culture implicitly communicates the rules for behaving in a team. Culture teaches the dos and don’ts. And, culture will penalize those who fail to abide by the norms and unwritten rules. Every board develops a unique culture and the ground rules are defined by the factors presented in Figure 1, “The Board of Directors Culture Model.” The five factors capture the elements of board culture which are most significant in defining the cultural ground rules of a board—these factors represent the norms, standards and values that will be learned by newly appointed directors, played out in the everyday functioning of a board, and those factors which will be tested during times of change and re-assessment. For a full description of the board culture model see “Understanding Your Board’s Culture“  (NACD Directorship, September 2011).

Diagnosing Trouble Ahead

Astute board leaders are sensitive to the early warning signals of trouble—those looming rough patches. They have lots of help with best practices and professional advice. Notably, the National Association of Corporate Directors publishes white papers and other resources that advocate good governance practices. These papers are part of a library of recommendations for structuring boards, operating with transparency and independence and renewing board competency. NACD’s Key Agreed Principles to Strengthen Corporate Governance for U.S. Publicly Traded Companies is important reading for chairs and all directors for building boards that work.

The task of diagnosing looming trouble typically falls to board leadership: the chairman, presiding director or committee heads, but it is the task of all directors to be alert to matters that impact governance, threaten their fiduciary responsibilities, their reputation and their personal satisfaction from board service. No one wants to be on a lousy board.

“Diagnosing Board Trouble” (Table 1, below) is a reflection of the Key Agreed Principles filtered through behavioral dimensions of the Board Culture Model. The diagnostic factors in the Table present early indicators of behavioral dysfunction. Diagnosing Board Trouble was not created to troubleshoot policy, regulatory or financial threats. The indicators are organized within the five culture factors of the model to facilitate diagnosis and problem solving.

Addressing Problems

Individual Problems. The beauty of addressing problems while they are small is that the problem is likely not entrenched, and a collegial chat from a designated and respected board colleague often brings unwanted behavior and sentiment back within acceptable culture standards. The board moves forward constructively.

Board Problems. Collective problems pose greater risk and challenge in how and when to bring a matter up for discussion. Group dynamics will typically lead a board to discount or dismiss a matter as untrue or irrelevant. Regrettably, formal board evaluation procedures don’t often put much of a spotlight on the behavioral matters addressed in Table 1. So, the task falls to board leadership for testing the waters and pushing forward to open the problematic indicators for discussion. Some boards choose to hand out the Diagnosing Board Trouble chart and empower any board member to bring forward concerns or the need for discussion. If the dysfunction is yet to be ingrained, problem solving can operate without much resistance; if the dysfunction has become ingrained in the culture, the challenge of change and making change stick is formidable. The board must make a commitment to change and have milestones to gauge progress.

Attempting to Correct Individual Behavior Using Group Talk. In the spirit of collegiality and perhaps tact, often the disruption or dysfunction a single director creates for the board is not brought directly to the individual for correction. Instead, the problematic behavior is teed up and discussed as a matter for the full board to correct as if the full board was the culprit—group talk. Not isolating and correcting the problem with the individual will trigger resentment by those who operated within the ground rules and are now puzzled at why they are being corrected. Best to treat the problem director not the full board.

Recommendation

Develop an “Our Way” Statement. Because dealing with “soft issues” is often unfamiliar ground for boards, it is valuable to author a one-page statement of the board’s culture—address beliefs, attitudes and behavioral expectations for the way things should be done. Communicate differing levels of intensity to signal what is of high importance and adherence. Importantly, identify those behaviors that are contrary to the board’s expectations. This brief statement sets expectations for how directors work together.

Tailor the Chart: Diagnosing Board Trouble. To reflect those unique and likely troublesome matters occurring on your board, edit and adjust the diagnostic items in the chart. Discuss the tailored chart and reach consensus among directors that the chart leads the board in the right direction. This supplements the “Our Way” statement as a diagnostic tool. Add the tailored diagnostic chart to your board’s annual board evaluation process.

Provide “Our Way” and the Diagnostic Chart to newly appointed directors. Have a board member or someone from the nominating committee preview these documents with new directors.

Keep it Relevant. Periodically review “Our Way” to ensure it reflects the expected culture of your board. Revise the Diagnostic Chart to enable small problems to be dealt with early on.

Patrick R. Dailey, Ph.D., is a partner in Board Quest LLC, a board of directors consultancy, and serves on the board of the NACD Atlanta chapter. He can be reached at 310-400-9992 or pdailey@boardquest.com.