Whitworth Invests in HP
Relational Investors co-founder Ralph V. Whitworth is joining the Hewlett-Packard board of directors, expanding the board to 14 members, the technology company announced in November. The board also appointed Rajiv L. Gupta, chairman of Avantor Performance Materials and a director at Tyco and The Vanguard Group, as lead director. Whitworth’s appointment follows an agreement between HP and Relational Investors in which HP will nominate and support Whitworth for two years as long as Relational Investors remains a significant HP stockholder.
Ralph Whitworth
“We believe that Ralph will bring a constructive voice and a track record of value creation into the boardroom,” said Ray Lane, HP’s executive chairman of the board. “We look forward to benefitting from his perspective and experience.”
The California State Teachers’ Retirement System (CalSTRS) issued a statement applauding Whitworth’s appointment. The pension fund is a longterm investor in HP, owning 9.58 million shares valued at $255 million as of Oct. 31. Whitworth is a longtime advisor to CalSTRS.
“The Whitworth appointment is a serious first step towards allaying investors’ concerns about Hewlett-Packard’s governance, board composition and recent performance,” said CalSTRS Corporate Governance Director Anne Sheehan. “The addition of a large, credible shareholder will bring a valuable perspective to the board’s deliberations, and send a strong, positive message to Hewlett- Packard shareholders that this iconic California company is serious about making positive changes in its leadership practices.”
The San Francisco Chronicle reported that HP’s appointment of Whitworth is an effort to assuage investors who sold stock amid a growth slowdown in the months before Meg Whitman replaced Léo Apotheker as chief executive officer in September. “It’s definitely a positive development for the company,” Brian Marshall, an analyst at ISI Group in San Francisco, told The Chronicle. “The board needs help, and Ralph has the background to help them.”
Apple Names Non-Executive Chairman, Adds Iger to Board
Apple Co-Lead Director Arthur D. Levinson has been promoted to non-executive chairman of the board, while Walt Disney President and CEO Robert A. Iger will join the board, the technology giant announced. Levinson is chairman of Genentech and a director at Roche, Amyris and NGM Biopharmaceuticals. Iger is a board member of the US-China Business Council and a member of the President’s Export Council.
“Art has made enormous contributions to Apple since he joined the board in 2000,” said Tim Cook, Apple’s CEO. “He has been our longest-serving co-lead director, and his insight and leadership are incredibly valuable to Apple, our employees and our shareholders. Bob and I have gotten to know one another very well over the past few years, and on behalf of the entire board, we think he is going to make an extraordinary addition to our already very strong board.”
Schoewe Joins GM Board
Former Walmart CFO Thomas M. Schoewe has been elected to the General Motors board of directors. Schoewe served as CFO of Black & Decker before joining Walmart, and has served as CFO and controller of Beatrice Consumer Durables. He is a director at KKR Management, Northrop Grumman and PulteGroup. “We’re fortunate to have Tom join GM’s board of directors. He brings a wealth of business planning, financial experience and proven leadership, gained over more than 35 years at leading consumer-facing companies,” said Dan Akerson, GM chairman and CEO. “We’re eager to begin leveraging his expertise as we work to profitably grow GM’s business globally.”
Executives Move Up at SunTrust
SunTrust CEO Bill Rogers will take over the chairman role as of Jan. 1, 2012, succeeding the retiring James M. Wells III, according to a company news release. The announcement “concludes a long-planned succession process that began with our smooth transition of CEO responsibilities to Bill Rogers in June 2011,” noted Wells. “Bill is a seasoned and highly effective leader, with a deep understanding of our company and the industry. I can attest that he lives the values and mission of Sun- Trust in every interaction.”
Former Penn State President Resigns Board Posts
The fallout from the Penn State scandal continues for former university president Graham Spanier, who resigned his seat on the U.S. Steel board of directors. The Department of Defense accepted his resignation from the board of advisors of its Naval Postgraduate School, Bloomberg Businessweek reports. Spanier had been a board member at U.S. Steel since 2008, having served on the Pittsburgh-based steelmaker’s audit and corporate governance and public policy committees. As a board member, he had the highest total compensation last year at $191,000. U.S. Steel CEO John Surma is vice chair of Penn State’s board of trustees, which ousted Spanier and football coach Joe Paterno in November. The trustees say Spanier and Paterno failed to act after an assistant coach was accused of sexually abusing a young boy in a campus shower in 2002.
SEC Receives 334 Whistleblower Tips In Seven Weeks
Whistleblowers assisting the Securities and Exchange Commission in civil investigations against Bank of New York Mellon and State Street Bank over allegations that the two banks overcharged clients for currency trades are among the first filing claims under the Dodd-Frank Act whistleblower program, The Wall Street Journal reports. Former BNY Mellon currency trader Grant Wilson and former State Street currency employees Peter Cera and Ryan Gagne have filed claims related to the investigation, for which they provided emails and other internal documents. In the seven weeks since the whistleblower rules went into effect (offering plentiful bounties for those who tip off the SEC on alleged securities fraud), the SEC has received 334 tips. Former SEC Assistant Chief Litigation Counsel of the Division of Enforcement Jordan Thomas told the Journal that the majority of tips have been useful. “Some relate to senior people at large financial firms and other corporations, typically hard targets for the SEC to successfully bring enforcement actions against,” said Thomas.
Director Pay Rises 6 Percent
Median total director compensation at Fortune 500 firms increased 6 percent, to $212,512 in 2010 from $200,698 in 2009, according to an analysis by the professional services company Towers Watson released in November. Although directors received nearly 10 percent in compensation raises annually prior to the financial crisis, this is a marked increase from 2009’s 1 percent raise.
The report links the compensation bump to the increase in the value of equity awards, which have been growing since 2006. Equity award values increased 9 percent in 2010 and made up 54 percent of director pay, with the other 46 percent in cash. Cash compensation values also increased by 5 percent, to an average of $89,000. “Similar to executive pay trends, director pay levels increased in 2010, consistent with improved financial and stock performance,” said Doug Friske, global head of executive compensation consulting at Towers Watson.
“These changes also reflect increased demands placed on outside directors in terms of the time commitment as well as the level of debate, discourse and discord among directors. The question is whether this trend can continue, given growing uncertainty around the sustainability of the recovery.”
In addition, more of the 464 publicly owned companies surveyed are eliminating board and committee meeting fees, opting instead to compensate directors with fixed service retainers. Only 36 percent of companies paid meeting fees in 2010, down from 40 percent in 2009 and 62 percent in 2004.
Gallagher Named SEC Commissioner
Daniel M. Gallagher, former commissioner counsel and deputy director of the Securities and Exchange Commission Division of Trading and Markets, has been sworn in as the SEC’s newest commissioner. Gallagher had served as a partner with Wilmer- Hale following his previous SEC employment, and was appointed to the new position by President Barack Obama. He is credited with playing key roles in the SEC’s response to the financial crisis, credit rating agencies and credit default swaps.
The SEC has five commissioners, each appointed to five-year terms, and expiring on a staggered basis every June 5. No more than three commissioners may be members of the same political party.
A Test for Fraud Literacy
Financial Executives International has teamed up with the Center for Audit Quality, the Institute of Internal Auditors and the National Association of Corporate Directors on a new anti-fraud quiz. Board directors have grown increasingly watchful of how company management deals with reports of fraud. Said NACD board member Peter Clapman: “There are going to be incidents that occur on an ongoing basis within a company that the board of directors should know about and can find ways to know about. How the management deals with those situations—how the board of directors in effect directs if they have any concerns about how management is dealing with these issues about tone at the top—that’s something that the board of directors is in a unique position to enforce.”
SEC to Hedge Funds: Increase Disclosure
Hedge funds with more than $1.5 billion in assets must report detailed investment and borrowing information within two months after the close of a quarter privately to regulators, under a new Securities and Exchange Commission rule. The rule is intended to highlight the “lessons about the importance of monitoring and reducing the possibility that a sudden shock or failure of a financial institution will cascade through the entire financial system,” explained SEC Chairwoman Mary Schapiro. All but the country’s largest hedge funds will be allowed a six-month delay for the initial report.
Political Spending Disclosures Increasing, Demanded
Among the S&P 100, 55 firms now disclose direct political spending and assign oversight to the board, finds a new study from the Center for Political Accountability, which also noted that 43 firms release information on indirect political spending. The top 10 companies identified for transparency included Colgate-Palmolive, Exelon, International Business Machines, Merck, Johnson & Johnson, Pfizer, United Parcel Service, Dell, Wells Fargo and EMC.
CalSTRS recently put into place a policy calling for boards to require management to disclose political spending annually to shareholders. CalSTRS Investment Committee Chair Harry Keiley noted that shareholder proposals requesting this disclosure doubled from 2009 to 2010, to 89 of the fund’s portfolio companies.
Directors Report Uncertainty On Risk Plans
Only 19 percent of directors feel their board has effective plans to monitor risk exposure, with 57 percent noting they would like their board to increase its risk focus, finds a new PricewaterhouseCoopers survey of 834 U.S. company directors. In addition, 38 percent of directors wanted to spend more time on IT, with 46 percent believing their board’s ability to oversee its strategic use as less than effective.
CEOs Paid $1 in Salary
Larry Ellison, Oracle
John Mackey, Whole Foods Markets
Larry Page, Google
Richard Kinder, Kinder Morgan
Richard Fairbank, Capital One
Robert R. McEwen, U.S. Gold
Strauss Zelnick, Take Two Interactive
Source: Forbes.com
America’s 5 Highest-Paid CEOs
John Hammergren, McKesson
Compensation: $131.2 million, Net income: $1.2 billion
Ralph Lauren, Polo Ralph Lauren
Compensation: $66.7 million, Net income: $630 million
Michael Fascitelli, Vornado Realty
Compensation: $64.4 million, Net income: $830 million
Robert Iger, Walt Disney Co.
Compensation: $53.3 million, Net income: $4.55 billion
George Paz, Express Scripts
Compensation: $51.5 million, Net income: $1.29 billion
Source: Compiled by Forbes from CompuStat ExecuComp and SEC filings data. Includes salary, bonuses, perks and the value of exercised stock options, through Sept. 6, 2011.