There is, of course, a competing view that favors a single person serving as chair and CEO, but with a separate lead independent director. Respected business leaders, corporate attorney Marty Lipton, for example, express a more traditional view that the chair/CEO model is better for driving long-term shareholder value in many companies. Supported by historical data that purportedly shows little correlation between splitting the roles and shareholder value, proponents of the merged role have a point when they suggest that the chemistry needs to be right to split the roles—or else risk adversity between board and management.

With that said, government and shareowners are forcing the issue.  Legislation introduced by Sen. Charles Schumer (D-NY) and Rep. Gary Peters (D-Mich.) would prohibit CEOs from serving as board chairs, while investors have been submitting resolutions with this proscription.  The Securities and Exchange Commission (SEC) is moving to require that companies justify their board leadership structure, and the New York Stock Exchange and NASDAQ have also considered adopting listing rules that would require separate positions with the goal of making boards more independent.  We have only to look at this year’s general meeting of Bank of America—where shareowners re-elected CEO Kenneth Lewis as a board member but stripped him of his chairmanship—to know that a sea change is fast approaching.

The independent chair model has been adopted successfully in Europe, Canada, and Australia as a surefire approach to creating an independent, and empowered, board.   Increasingly, US boards are concluding that separating the chair from the CEO is the right thing to do—to underscore commitment to best governance practices and to ensure a more accountable, more transparent organization.

A non-executive board chair offers several distinct benefits, including:

• Curtailing conflicts of interest

• Ensuring that the CEO is accountable for managing the company in alignment with shareholder interests

• Serving as an objective conduit for the board to express its views on management

• Enabling the board to better fulfill its regulatory requirements and manage risk

• Ensuring that the CEO is effectively guided and mentored in his or her performance

• Gaining clearer focus on corporate succession plans

Whether forced or voluntary, the use of an independent board chair is becoming a reality. If the reality is here, what are the implementation issues and implications?   This article explores immediate questions and practical considerations in separating the roles and managing a smooth transition.

When should we make the split?
In my role as an advisor to boards, I have seen leadership structures transition in a variety of circumstances, some more successfully than others.  One thing that is certain is this:  when the CEO has been recruited for both roles (and, historically, new CEOs assumed that the chair title came with the territory), it is immensely difficult to separate these two functions midstream.  Typically, CEOs are reluctant to relinquish power, and those who do give up the chair role may find it difficult to take direction from a new chair.  Similarly, those who cede the CEO role may be prone to undermining the new CEO’s authority.  Wearing just one hat when one is used to wearing two requires tremendous resolve.

Many companies that have voluntarily split the CEO and chair roles have done so as a result of poor financial performance and pressing shareholder demands.  When the roles are separated due to adverse circumstances, as opposed to a commitment to good corporate governance, the decision to split roles may waver as the financial picture improves.

The most natural transition point is when the current CEO/chair is ready to retire or leave the company.   A leading report from the Millstein Center for Corporate Governance and Performance at Yale University’s School of Management proposes that companies either appoint a separate chair after the current CEO/chair exits—or explain to their shareholders why they chose not to.

Make the division of roles integral to your company’s succession planning and ensure that the issue of board leadership is continuously discussed.  Separation during succession provides the opportunity to carefully evaluate candidates and document the roles and duties of each position—at a time of your choosing when you can implement the process based on good governance rather than in reaction to a negative event.

In the interim, consider strengthening the role of your lead independent director, who can potentially be groomed as the next chair.  Avoid the temptation to have a rotating lead or presiding director, since building relationships and proving leadership qualities over time is crucial to a future transition. Many functions of the chair can be handled by a strong lead independent director. The difference between the two positions may be a matter of time commitment. A non-executive chair may be more effective, however, in reducing what some have perceived as undue influence on the board by a “dual-hatted” chair/CEO.

What is the chair’s role versus the CEO’s?
Once you decide to split these roles, carefully delineate the role of the chair versus the role of the CEO.  This “two-in-box” structure is akin to the CEO-COO structure and similarly adds complexity to the operating structure of the organization. As such, spending time upfront defining roles is critical. Defining the different but complementary duties of these two positions will likely reduce the potential for duplication and conflict between them and reduce the risk of one or both derailing in the role.

In general, the chair runs the board, determines its priorities and meeting agendas (albeit with input from the CEO and other board members), leads board meetings, facilitates communications among board members and the CEO outside of board meetings, builds investor relationships, presides at the annual meeting, and briefs the CEO on issues of concern to the board.  The CEO manages the company and is accountable for corporate performance.  In the split model the chair should not take on company management responsibilities or be involved in company operations, and the CEO should not try to run the board.

What kind of person will make a good chair?
Determine the required experience, skill set, and personal attributes for the chair position.

Look for a candidate who:

• Can lead with confidence
• Can conduct effective meetings and knows where to spend time versus being agenda driven
  • Has emotional consistency and can deal with a crisis
  • Can limit distraction and build consensus
  • Has a Socratic style and can ask hard questions in a constructive way
  • Can solicit viewpoints and listen with sensitivity
• Can be content in the chair role, without a “hidden agenda” of seeking executive leadership in the company
• Can demonstrate continued independence in his or her relationship to management
• Has strong interpersonal  capability and can build “trust” easily with multiple constituencies
• Is a strong communicator and is willing to share information back and forth openly and transparently
  • Has been a CEO (although not required, this is a real plus)

The most important attribute of the chair is the ability to build relationships—among board members, between the board and management, and with the CEO.  Directors must be comfortable in approaching the chair about difficult issues.  At the same time, the chair may at times need to challenge the CEO and must communicate candidly.

The ideal candidate will bring to the table significant leadership experience but at the same time, be content in now playing a less prominent, more supportive role.  Effective chairs have cultivated a collaborative, non-dominating personal style that brings out the most in board members.

How do we delineate the role of chair versus CEO?
Job responsibilities, objectives, and appropriate activities for both positions should be drawn up in writing.  Duties should be clearly spelled out to the board, company employees, and shareowners. The chair job description should also include the amount of involvement and time commitment the position will likely require.  Allocating too much time may increase the potential that the chair will get immersed in daily management activities.  Yet allocating too little time may limit the chair’s effectiveness, particularly if the company faces a major crisis or change.

It is essential to ensure that the chair and the CEO have the right chemistry, with complementary skills and leadership styles. Like Goldilocks’ porridge, their fit needs to be just right.   This takes careful thought and planning, not simply filling an empty chair.   If the “Venn diagrams” of the chair and CEO have no overlap, it will be harder for them to gain alignment, and if they overlap too much, they will gravitate to the same things—creating higher levels of friction. Job descriptions will not only provide a blueprint for finding the right person for each role; they will serve as guideposts for how the two roles will interact.  They will also reduce the risk that either leader will overstep their bounds once appointed.

How long a term is appropriate for the chair?
Most directors today are elected annually.  The chair position is typically a three- to five-year term, but the position is reconfirmed each year—typically through a performance review.

How much should we pay for the position?
The independent chair position is a demanding job, so commensurate pay is a reasonable expectation. The main factor to consider in setting chair compensation is the amount of time devoted to the role, and the amount of money that is fair and equitable for the time invested.  The chair should be paid more than a lead director, but less than the CEO.  A study from compensation research firm Equilar finds that the median incremental pay for non-executive chairs in 2008 was $150,000, compared to $20,000 for the lead director. For those who argue there is little difference between a lead director and a non-executive chair, the pay gap suggests otherwise.

The tipping point to consider is this:  At what level of compensation is the chair no longer independent?  Too much compensation can raise questions of involvement in company operations. A compensation consultant can provide benchmarks for setting the chair pay formula, determining the best mix of cash and equity, and ensuring competitiveness with comparable organizations.

Who takes the lead in the selection process?
Increasingly, the Governance and Nominating Committee has become the epicenter for making decisions n board composition.   These members are tasked with making sure that the board is staffed with the right kinds of directors with the right kinds of competencies, including the chair. This committee should lead chair selection, at some distance from the current CEO/chair.   In later stages of the process, the entire board should reach consensus to ensure those chosen for both positions have full board support.

Before posting the chair position to a wider audience, assess the leadership talent already at the table.  Often, the most effective chairs come from the ranks of current non-executive directors.  Those who are on the board know the business well and, ideally, have already earned the trust of their board colleagues.

How do we assess the chair’s job performance?
The board’s responsibility is not only to elect and support the chair, but to assess his or her effectiveness in role execution.    Performance assessment is recognized as a best practice in governance, and the New York Stock Exchange is increasingly requiring it.

Establish benchmarks for chair performance and conduct annual reviews.  Start with a chair self-assessment and include assessment tools, such as 360-degree reviews, that have been validated by research.  Draw on outside expertise, particularly if you are experiencing problems in chair performance.  Outside facilitation can be an effective tool for board and chair performance evaluations alike. Open and  personal appraisals are crucially important. The chair of the Governance and Nominating Committee should be a senior independent director who can effectively lead the performance assessment process and maintain confidentiality

Taking the proactive approach
In today’s financially tumultuous times, the practices of boards of directors and management are being monitored with ever-increasing vigilance.  The government and shareholders are demanding change, and the expectation for boards to improve themselves will continue to grow.  Adopting independent chairs voluntarily, with careful planning and deliberate execution, is a proactive way to promote responsible governance and retain, or restore, market trust.

Tom Wajnert advises senior executives, boards and directors of businesses in transition.  He  has extensive experience leading large, publicly owned companies, including AT&T Capital Corporation, where he served as founder, chairman, and CEO. He has also served on the boards of several NYSE-listed firms and privately owned companies. For more information, see www.twaj.com.

In a June 17 proxy solicitation, reports Bloomberg, Exelon urged NRG owners to expand the company’s board and elect its nine independent nominees who, Exelon claims, have an unbiased perspective to the bid, unlike the “entrenched” board. The NRG shareholders’ meeting is scheduled for July 21.

Exelon increased its bid from .485 to .545 per Exelon share in exchange for 1 NRG share.

NRG, the second-largest electricity producer in Texas, said Exelon’s bid does not reflect the full value the company has created. Due in part to its acquisition of RRI Energy, NRG today raised its 2009 forecast for adjusted earnings before interest, taxes, depreciation and amortization by $325 million, to $2.5 billion. A stock-buyback plan was expanded 52 percent to $500 million.

Despite the early complaints, six hours later, Citigroup’s slate of directors were elected, with each director receiving at least 70 percent of votes cast. There were no representatives of the U.S. government, who is set to own as much as 36 percent of the company.

Not so much as a cup of coffee was served at the meeting to avoid criticism for using any of the $50 billion in taxpayer funds Citigroup received.

CEO Vikram Pandit voiced his sympathy, saying he felt their pain. “There is a great temptation to gloss over the bad news and exaggerate the good news,” he said near the start of the meeting. “You’re not going to hear any of that today.”

Unlike last year, where then-chairman Sir Win Bischoff grew impatient at times as shareholders refused to relinquish the microphone, he was more composed. Even as one shareholder called the board “dumb,” Chairman Richard Parsons politely thanked them for their feedback.

The board received much of the criticism, however attacks were subdued by the fact that several longtime directors were not standing for re-election.

Levinson will no longer be CEO, but will be charged with steering integration of the two companies, serve as a scientific adviser, and be nominated to the Roche board, the Swiss company said in a statement released yesterday.

Roche has appointed several of its own executives to top non-research positions at Genentech as of May 1, including Pascal Soriot as CEO.Roche said Susan Desmond-Hellmann, president of product development at Genentech, will hand over her responsibilities by mid-year, after which she will also act as an adviser to the company and join the scientific advisory board.

During the eight-month-long takeover battle that ended in March, Roche had said it expected Genentech senior management to stay on, but some shareholders and analysts have surmised that the biotech company’s prolific scientists and top managers would view the acquisition as an opportunity to leave.

Roche said Richard Scheller, executive vice president of Genentech research, will lead an independent research and development group within Roche, which will report directly to Chief Executive Severin Schwan.

Roche also said that William Burns, CEO of the Roche pharmaceutical group, will retire next January 1 and will also be nominated to the company’s board.

In addition, Marc Tessier-Lavigne, currently executive vice president of Genentech research drug discovery, will succeed Scheller as head of research and be appointed as Genentech’s chief scientific officer.

On the commercial side, Roche said Soriot, currently responsible for operations of the pharmaceutical division at Roche, will be appointed as CEO of Genentech, where he will lead all pharma activities in the United States.

Ian Clark, head of commercial operations at Genentech, will take over as head of global marketing and chief marketing officer for Roche’s entire pharmaceutical division.Pat Yang will continue as head of technical operations at Genentech, while Hal Barron, currently head of Genentech development and chief medical officer, will become head of global development for oncology, immunology/tissue growth repair and virology.

Roche said David Ebersman, Genentech’s chief financial officer, and Steve Juelsgaard, chief compliance officer, will leave the company.

]]> http://www.directorship.com/genentech-names-roche-ceo-chairman/feed/ 0 http://www.directorship.com/ten-must-dos-for-the-audit-committee-this-year/ http://www.directorship.com/ten-must-dos-for-the-audit-committee-this-year/#comments Sun, 01 Feb 2009 04:00:00 +0000 Mary Pat McCarthy http://www.directorship.com/?p=4236 The New Year will pose significant challenges for boards and their audit committees. When considering and carrying out their 2009 agendas, the following items should be high on the list:

 Closely monitor the impact of the financial crisis/recession on the company; focus on financial forecasts and earlywarning indicators. Understand the recession’s impact on the company’s earnings, cash flow, liquidity, and compliance with debt covenants, and monitor key indicators of trouble. Recommend that management assemble a crisis-management team to monitor the impact of the crisis on a “realtime” basis, and to develop and stress-test worst-case scenarios. A strategic response to this crisis is critical.

 Assess the company’s exposure to third parties in financial distress. Ensure that management is monitoring the impact of the crisis on the company’s key customers, suppliers, insurers, partners, banks, underwriters, counterparties, and other third parties that may be experiencing financial difficulty (or have filed for bankruptcy). An up-to-date inventory of potential exposure to third parties is essential.

 Understand the impact of the financial crisis on the company’s financials— particularly the balance sheet. Focus on the investment portfolio, including debt and equity securities, to identify declines in value or impairments that should be reflected in the financials. Help ensure that management has identified possible impairments of goodwill, deferred taxes, patents, and other intangibles, and that fair values determined by management and valuation experts are reasonable. Assess how changes in financial markets have impacted the valuation of pension plan assets and funding requirements.

 Focus on fair value and liquidity disclosures. Understand the company’s disclosure processes for fair value accounting and liquidity issues—and how the application and impact of fair value accounting is described in the MD&A and other periodic filings. Consider whether the description of the company’s liquidity risks is sufficiently robust and specific to the company.

 Make sure your risk discussions with management are healthy and productive. With the benefit of hindsight and possible “lessons” from the financial crisis, consider the adequacy and effectiveness of the company’s governance processes for managing risk (management’s processes and the board’s). Be a catalyst in helping to pose the right questions, including: Can management provide a holistic view of the company’s major risks—both on and off the balance sheet? Are the top risks facing the company understood and agreed upon? How rigorously does management stress-test key risk assumptions?

 Help the company and the board prepare for change. With the financial crisis and globalization changing the world in dramatic ways, step back and consider what the emerging business environment will look like. Does management understand how this new environment will impact the company’s risk profile, and the viability of its strategy and business model? And keep International Financial Reporting Standards (IFRS) on the radar, given the potential scope and scale of conversion.

 Pay attention to the basics of effective oversight—like having the right mix of committee member experience and skill sets, committee independence and leadership, an understanding of the company’s strategy and financial risks, and the adequacy of support for the audit committee.

 Be sensitive to the strains on the CFO, internal auditor, and finance organization. The demands of the financial crisis on liquidity and cash flow, possible resource constraints, and pressures to meet performance expectations have all exacerbated the normal rigors of the CFO’s and finance teams’ jobs. Recognize their critical role by helping to maintain the focus on long-term financial performance, injecting objectivity into financial disclosures, and ensuring they have the right expertise and resources (including the budget) to do their jobs well.

 Expand the audit committee’s information sources. Consider whether the information the audit committee receives comes from a balanced variety of sources (versus relying too heavily on information from management), and whether the information flow promotes sufficient internal transparency (versus fragmented or partial views). Getting the right information is essential to providing effective oversight of the company’s financial reports, its risks, internal controls, and finance team.

 Monitor the tone from leadership and throughout the organization. In this environment, it is more important than ever to be acutely sensitive to the tone from—and the example set by—leadership, and to reinforce a culture of compliance and a commitment to financial reporting integrity throughout the organization.

Mary Pat McCarthy is U.S. vice chair of KPMG LLP and executive director of KPMG’s Audit Committee Institute.

Despite the energy of Yahoo’s critics in the weeks leading up to the August 1 annual meeting, the event itself wajavascript: Saves remarkably sedate. In fact, when the proxy votes were posted that afternoon, no director earned less than 78 percent approval—by no means a show of rousing support, but nowhere near the revolution that some had expected. Members of the media consequently dubbed the meeting a virtual non-event; the board had successfully weathered the storm and shareholders seemed more content than anyone had expected. “It’s almost as if the past six months never happened,” noted BusinessWeek in its coverage of the annual meeting.

Many dissident shareholders weren’t pleased with the meeting’s benign results. Others, among them Eric Jackson, founder of Ironfire Capital, an activist investment firm that owns about 3.2 million Yahoo shares, didn’t believe them. In a blog post on his website, Jackson questioned the validity of the election.

While allegations of wrongdoing in director elections are extremely rare, Jackson is not the first to cry foul. The proxyvoting process is complex, obscure, and, as underscored by Jackson’s complaint, woefully imperfect.

Through the complications of custodial ownership (85 percent of shares are controlled by custodians—banks and brokerage firms) and the sheer scale of an election in which hundreds of millions—and sometimes billions—of votes are cast and counted, the proxy-voting process can be a web of confusion. A widely circulated essay on proxy voting titled “The Hanging Chads of Corporate Voting” describes the process as “noisy, imprecise, and disturbingly opaque.” Edward Rock, one of the paper’s co-authors, claims that “most of the people who run companies and administer the rules that govern them do not understand how proxy voting works.”

For example, Jackson knew that something was wrong with the Yahoo results, but he didn’t know how to prove it. Instead, he noted an inconsistency in the number of votes cast. He found that the publicly posted results from Yahoo’s 2007 proxy indicated a total of 1.2 billion votes, with the 2006 vote count closer to 1.3 billion. The 2008 vote count? Just under 1.05 billion—200 million fewer than the average of the last two years.

“It was bizarre,” says Jackson. “Given the increased scrutiny and media attention, there’s no reason for such a drastic drop [in shareholders casting votes].” Jackson posted the findings on his blog and shareholders took notice.

Gordon Crawford, portfolio manager for Capital Research Global Investors, which owns a 6.2 percent stake in Yahoo, immediately requested a recount from Yahoo and Broadridge Financial Solutions (formerly ADP), the proxy-services manager that administered the vote. Broadridge performed the recount with disarming speed: On August 5, Yahoo issued a press release claiming a “truncation error” that resulted in some directors getting fewer “withheld” votes than had actually been cast. The modified count added 200 million votes to three directors’ “withheld” column—CEO Jerry Yang and chairman Roy Bostock among them—and 100 million to two others. The changed votes weren’t enough to dislodge any directors (Bostock’s 39.6 percent disapproval was highest), and the overall vote count—1,046,098,584—remained the same. Yahoo maintains that the mishap was an honest mistake. Critics aren’t so sure. The problem is that without much transparency in the system, shareholders like Jackson are forced to take Yahoo’s and Broadridge’s word for it.

Nuts and Bolts

When a proxy vote occurs, the “issuing company” must perform a number of duties besides producing the proxy card and its accompanying literature, including identifying the shareholders. As most of the shares are held by custodians, the issuer must identify these custodians and determine the number of shares held by each. This is accomplished by soliciting the Depository Trust & Clearing Co. (DTCC), the holder and “bookkeeper” of the vast majority of all securities held in the United States. The task is complicated by the fact that custodians frequently lend the shares out to other institutions.

Because most investors prefer not to let the issuer know their vote, it is necessary to use a third-party administrator to find the beneficial shareholders. The administrator’s duties also include issuing and collecting the vote. The administrator is hired by the custodians, but is paid by the issuing company. The dominant administrator in this process is Broadridge, which administers most of the proxy votes in the United States—“the lion’s share,” according to a company representative. An archived SEC filing on Broadridge’s website claims the company processed 70 percent of all U.S. shareholder votes in 2006.

It is only after the voting rolls have been determined that the vote can take place. The administrator collects proxy-voting materials from the issuing company and transmits them to the beneficial shareholders. This is accomplished by either mailing voting materials (which include an individual ballot along with a proxy statement and the issuing company’s yearly report) to the beneficial owner, or posting them online so electronic votes may be cast.

After voting has closed, the administrator sends the returned votes to a separate transfer agent (also paid by the issuing company), who counts the votes and determines the

results. For votes that could be contested, such as elections at companies with shareholder unrest, a tabulator instead counts the votes. Two major tabulators are IVS and Corporate Election Services (which tabulated the contested Yahoo vote). After the tabulator or transfer agent counts the vote, making sure that the total number of votes cast matches the issuer’s records, the results go back to the administrator, who reports them to the issuer, and then the issuer releases them to the public. “It is a difficult, obscure, and complex system,” says Rock, “and with a system of this complexity, things will invariably go wrong.”

It’s not just complexity that raises the possibility of problems. Another obstacle is the narrow window in which the vote must be conducted. Delaware corporate law mandates that the “record date”—the point in time prior to a shareholder meeting at which the shareholder voting rolls are determined—must be within 10 and 60 days of the meeting. Most companies take the full allotment to allow for potential hiccups, but sometimes 60 days isn’t enough. Each of the steps required to ensure a smooth vote can take days and even weeks, and there are innumerable reports of voting materials never making it to shareholders, or of voting materials arriving well after the vote has concluded.

Another problem that accompanies the record date is the routine practice of securities lending. Voting rights go to the borrower of the share, usually a short seller, who ostensibly has an interest in seeing the share price decline. Therefore, short sellers may be inclined to vote against directors to foster the impression of turmoil at the company.

As in many corporate affairs, the specter of conflict-of-interest also rears its head during the proxy-voting process. In a given shareholder vote where the issuing company’s board is at stake, the conflict can be defined as the issuer versus the shareholders. But the issuer also happens to be in charge of controlling the vote up to a point, after which control cedes to an administrator, who is paid by the issuing company. This fundamental bias present in a proxy election means that the odds are, by default, positioned in the issuer’s favor, especially because abstaining votes (or those that never arrive in the first place) generally count in the existing board’s favor.

But none of these obstacles would matter were it not for the fundamental flaw in the proxy-voting system that Rock views as the chief impediment to legitimate elections: the lack of transparency in the process as a whole. “In any election, you want to establish an end-to-end audit trail so that you can show the vote was fair and accurate,” says Rock, “but the current proxy-voting system is too complex to allow that to happen.” Very few votes are contested, and regulators such as the Securities and Exchange Commission rarely probe into specific proxy contests. Critics charge that there are insufficient checks on the process to ensure that voting moves smoothly and in accordance with proper conduct. It is this lack of transparency that leaves shareholders, company personnel, and regulators in the dark.

In the Yahoo case, this lack of transparency has been a source of frustration for certain shareholders. “No one from Yahoo or Broadridge has provided an answer to where the extra votes went…it doesn’t give you confidence that they went back and analyzed the votes. It’s more like they just wanted a quick fix,” says Jackson.

Chuck Callan, Broadridge’s senior vice president of regulatory affairs, called the error “an isolated incident brought about by a confluence of factors,” and claimed a review of past votes found that no such error had occurred previously.

A Voting Monopoly

With its “lion’s share” control of the U.S. proxy-services market, Broadridge has a kind of monopoly that most companies dream of. Since Broadridge (then called ADP) began offering proxy-voting services in 1989, it has come to define the industry. In its first year, it administered voting for 31 client custodians; today, Broadridge annually processes around 818 billion votes in 14,000 elections.

Broadridge cites a variety of internal and external checks to ensure the integrity of its system, including annual reviews with both the SEC and NYSE. It also reports that its voting system—which constantly moves towards electronic recording and away from paper ballots—saved clients almost $500 million in the recent proxy-voting season. Broadridge’s services are “unparalleled in the public market,” Callan says.

But critics like Rock continue to cite transparency as being essential to an accurate and trustworthy voting system. “If the public had access to the vote, we could be confident in Broadridge’s ability to effectively administer the proxy,” he says, “but without that transparency, we can’t trust that this huge and complex process is going through without a hitch.”

A Better Way?

Identifying a problem is easy, but how to revamp a system as complex and far-reaching as proxy voting? An end-to-end audit trail that would allow a given proxy-election’s results to be verified by a third-party would require regulators such as the SEC to increase oversight and develop new methods to probe a given vote.

“Investors would feel better assured that their best interests were being looked out for if there was more oversight by the SEC,” says Patrick McGurn, special counsel at RiskMetrics. “Shareholders need to know that their vote counts, and that means more oversight on more levels. If there were more independent inspectors, voters would have better faith in the system.”

In their paper, Rock and co-author Marcel Kahan propose an outright “redesigning of the architecture” in which the complexities of the custodial ownership system of share-voting are discarded in favor of the “Spanish” model. Spain’s public companies distribute shares to investors through a centralized bookkeeping system in which the company registers its stock sales through a depository known as IBERCLEAR. Through this method, third-party intermediaries such as investment banks and stock brokers are not involved in the voting process; when a proxy vote occurs, the third-party vote administrator just has to contact IBERCLEAR to determine who should receive proxy materials.

The proof of the efficacy of this system is the fact that voter rolls are taken a mere five days before the shareholder meeting, not the 10-to-60-day window offered in the United States. One vote for one share, and one regulatory system to keep the numbers in line. “I’m not sure how easy it would be to implement,” says McGurn, “but the more streamlining, the better.”

We May Never Know

Several months after the Yahoo share-holder meeting, the controversy surrounding the alleged missing votes has for the most part faded from the public eye. Yahoo’s board remains whole—Carl Icahn’s negotiated additions notwithstanding.

Eric Jackson’s disappointment in what he now refers to as the “scandal” also remains. “I’m frustrated with how the voting scandal played out,” he says. “Yahoo’s strategy was ‘put your head down and hope it goes away,’ and that’s exactly what happened. It may have just been a mistake on Broadridge’s part, but Yahoo cooperated with it, and so we’ll probably never know just what happened with the vote.”

For Jackson, frustration with the outcome of the Yahoo vote gave rise to a brief flurry of media attention, but ultimately led to no changes in the makeup of the Yahoo board. However, this brief time in the limelight was perhaps not in vain, as it exposed deficiencies of proxy voting as a whole.

As companies and regulators consider the possibility of improving the proxy-voting process, expect more complaints like Jackson’s. Expect, too, that the conversation will likely emerge in the forefront of regulatory discussion.

In this current period ofvolatility, directors may be surprisedat how quickly a company’sfortunes can change. Theymay find themselves in a difficultsituation through no fault of theirown or their board’s. It is of paramountimportance in these circumstancesfor directors toremember that even in the mostuncertain of times, the fundamentalsof directorship continueto apply: directors must responsiblyoversee company affairs. Thebusiness-judgment rule remainsthe standard for judicial review oftheir ordinary-course businessdecisions.

Although well known to mostdirectors, like the Boy Scoutmotto, it bears repeating: In thebroadest sense, it is the responsibilityof directors to oversee theaffairs of a company and it ismanagement’s job to run the day-to-day operations. In times ofmarket uncertainty, there aregenerally three main areas onwhich directors should focustheir attention: the state of thecompany’s business, the qualityand depth of the company’s management(including successionplanning), and the company’sliquidity.

This Year’s Model

Paying careful attention to theoverall state of the company’sbusiness is central to a director’sresponsibilities. Directors should,in response to changing economicconditions, evaluate thesustainability of the company’sbusiness model. For example, thecollapse of the subprime mortgagemarket caused significantcollateral damage—some ofwhich was foreseeable and muchof which was not—to many companiesin different industries.Financially disruptive events mayoccur with little warning. However,if a company’s managementand board are aware of potentialvulnerabilities arising fromchanging market conditions andare willing to adapt their businessmodel and strategy, they may beable to reduce their exposure intime to avert a crisis.

Similarly, as economic conditionschange, it is important thatthe board is certain that it has theappropriate management team inplace to weather any crisis. Management’squalifications andcapabilities should be reassessedin terms of experience, expertise,commitment, leadership ability,and depth. Moreover, the boardshould make certain that the chiefexecutive officer knows that he orshe has the support of the boardfor the company’s strategic direction,if that is the case, or directorsshould communicate their concernsif there are any differeringviews on strategic direction.

An important part of thisprocess is making sure that theboard hears regularly from thechief executive officer’s directreports so it has sufficient confidencein the entire managementteam. This should be an importantcomponent of the board’ssuccession planning process aswell. These matters should beaddressed during the board’sexecutive session, which shouldbe on the agenda for each boardmeeting.

Minding the Store

Once directors have satisfiedthemselves that the businessmodel and the chief executiveofficer’s strategy continue to beappropriate, and that the currentmanagement team is capable ofeffectively managing the company’scurrent circumstances,directors should be sure theyunderstand the key elements ofthe company’s business performance.Directors should have aclear understanding of how revenuesources might react tochanging conditions in the economyin general or their industryin particular. For example, directorsshould have a general understandingof the company’s customerbase and whether it ischanging in meaningful ways.Directors also should have a goodoverall sense of the company’soperating costs, including laborand goods sold, as well as selling,general, and administrativeexpenses. Directors should take abroad view of the company’sfinancial and market position inorder to be able to ask managementabout potential vulnerabilitiesin performance, dependingon different economic scenarios.

Cash is King

Board members also need to focustheir attention on the company’sliquidity. This issue is especiallyimportant in today’s market environment.A clear understandingof the company’s cash flow andcredit arrangements, includingcovenant obligations, is vital.Directors should also be aware ofwhether the company’s businesshas a seasonal need for cash andbe assured that at the point of thecompany’s greatest need for cash,it will continue to have sufficientaccess to capital to meet the needsof its business. It is important thatmanagement can explain whatwill occur if cash flow is not asstrong as anticipated. For example,if a business downturn were tocoincide with a peak cash need,how severely would the company’sliquidity be affected?

Liquidity is Queen

Liquidity and its close cousin, solvency,are key in the merger andacquisition context. The failedpurchase of footwear retailerGenesco by its smaller competitorFinish Line is a cautionarytale. Finish Line attempted toacquire Genesco in a highlyleveraged transaction. The transactionhad no financing condition,but the financing commitmentprovided to Finish Line wascontingent on the solvency of thecombined company. Althoughthe strategic transaction appearedto be relatively certain of closingwhen it was announced, that wasno longer the case when, due to asharp decline in business, the solvencyof the combined companywas put in doubt.

In the merger and acquisitioncontext, directors should be carefulto examine the liquidity andsolvency risks, particularly inhighly leveraged transactionswhere financing is at risk, and considerthe impact on the companyif the transaction is announced,but fails to be consummated.

It is worth noting that, in thezone of insolvency, directors’obligations may shift from thecompany’s shareholders to thecompany’s creditors, dependingon which state law applies to thecircumstances. Under Delawarelaw, when a company is insolvent,the board’s priority potentiallyshifts to encompass theinterests of creditors. This is anarea that is highly dependent onspecific factual circumstances,and directors of a company facingpotential insolvency should seekexpert legal counsel in determiningthe parameters of their duties.

Directors should always focuson succession planning, but achallenging economic environmentincreases its importance. Ifa company experiences a downturnat the same time that thechief executive officer (or anotherkey member of management)exits without a clear successor, itwill be difficult for the board andthe remaining management teamto effectively deal with the challengesfacing the company. Asdirectors are considering contingencies,they should be mindfulof the succession plan andwhether it continues to be appropriatein light of changing circumstances,both internal andexternal.

Need to Know

Reporting and information systemsare the enemies of liability.Directors’ fiduciary duties do notchange with market conditions,nor does the applicability of thebusiness-judgment rule. Thedegree of vigilance required of adirector changes, depending onthe circumstances a particularcompany is facing. Directorsshould pay close attention to marketconditions and think carefullyhow trends or events affect thecompany’s business and strategy.As long as directors act on a fullyinformed basis, in good faith, andin the manner they reasonablybelieve to be in the best interestsof the company, their ordinary-coursebusiness decisions will receive the protection of the business-judgmentrule. In cases where thetraditional business-judgment rule applies,directors’ decisions are protected unless aplaintiff is able to carry its burden of proofin showing that a board of directors has notmet its duty of care or loyalty. In Delaware,it is clear that directors will only have liabilityin their oversight role in exceptionalcircumstances, such as when directorsutterly fail to implement any reporting orinformation system or controls; or whendirectors implemented such a system orcontrols, but consciously failed to monitoror oversee its operations, thus disablingthemselves from being informed of risks orproblems requiring their attention. Ineither case, imposition of liability requiresshowing the directors knew they were notdischarging their fiduciary obligations.

In light of recent cases, directors shouldactively seek information that will makethem “fully informed,” which is the keyprinciple at the core of the duty of care. Tobe fully informed, directors need to givedue consideration to relevant materialsand engage in appropriate deliberation. Adirector’s conscious disregard of his or herresponsibilities to the company—eitherthrough knowingly making decisions withoutadequate information and deliberationor through systematically ignoring aknown risk—will not satisfy the legalrequirement to act in good faith and on afully informed basis.

In this context, it is the responsibility ofthe directors to request information theyneed to make a fully informed decision, aswell as the obligation of the managementteam to provide sufficient information. Inturn, directors are entitled to rely on membersof management and other experts inmaking their decisions. Moreover, directorsshould not hesitate to ask the board’sadvisers for advice as to whether the informationprovided to them is sufficient forthem to make a decision.

Under Cover

In the current litigious environment, it isimportant to ensure companies have upto-date indemnification arrangements inplace for board members and that companieshave purchased adequate director andofficer liability insurance polices.

All of these arrangements should bereviewed on a regular basis to ensure thatdirectors have the fullest coverage availableto them so they are protected againstthe risk of personal liability for theiractions as directors. While director andofficer liability insurance polices havebecome more expensive, they are generallyavailable in most cases and should bepurchased. Retentions and exclusions ininsurance policies should be carefullystudied, so directors understand wherethey have protection and where they donot. Directors also should request informationabout the financial strength of thecompanies providing different layers of theinsurance coverage.

In addition, directors should considerthe impact of a bankruptcy of the companyon the availability of director and officerliability insurance. It is important tofocus on how rights are allocated betweenthe company, on the one hand, and thedirectors and officers, on the other hand,who may be claiming entitlement to thesame aggregate dollars of coverage. Inorder to eliminate any ambiguity thatmight exist as to directors’ rights to coverageand reimbursement of expenses in thecase of a bankruptcy of the company,many companies have decided to purchaseseparate supplemental insurancepolicies covering the directors and officersindividually (often known as “side-A”coverage) in addition to their standardpolicies. In the case of a bankruptcy, thiswill be money well spent.

Board directing is an active pursuit.Directors should satisfy themselves periodicallythat the company is pursuing the rightstrategic direction, that business and liquidityare sufficiently stable, and that managementis prepared for contingencies in bothits specific industry and the economy generally.If there are no storm clouds on thehorizon for a particular company, there isno need to schedule additional board meetingsor seek the advice of outside consultantssimply because economic conditionsare uncertain. That said, directors shouldstay in contact with management betweenboard meetings, particularly when externalevents occur that could potentially affectthe company’s business and strategy. Directorsmay request information from managementbetween board meetings and offercounsel to the chief executive officer orother members of management as appropriatefor their particular company. In avolatile business climate, directors shouldbe active, not passive, in exercising theiroversight responsibilities.

It is important to note that, absent anysubstantial reason to believe that the company’smanagement is not providingappropriate information or that managementis ignoring “red flags,” directors areentitled to rely on management’s reports,advice, and decisions.

David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz. Laura A. McIntosh is a consulting attorney for the firm.

The new board was appointed as thecompany enters the second phase of its development. It recently expanded itscapital base by inviting new shareholders and the second close of a$200-million pan-regional fund focused on the Middle East and South Asia region.

The interview, which aired Tuesday on Fox’s “Cavuto”program, took place at the Mid-State Correctional Facility in Marcy, New York.  During the interview, Kozlowski told Fox’sNeil Cavuto that he doesn’t think anybody set out to pay him the amount ofmoney they did, in excess of $100 million a year, according to Reuters.

Because of the fact that he accepted the risk of being paidprimarily in stock, Koslowski also stood to benefit enormously when the company’sshare price began to lift and the stock split. “And that’s the way the board wanted it,” he told Cavuto, as reported byReuters.  “There was a deal inplace.  The deal was there, and I earnedevery single penny of that deal.”

What’s more, he added that federal legislation to cap taxdeductions for CEO pay to $1 million in the early 1990s was a catalyst in startingthe trend of offering CEOs performance-based stock options packages, and thatboards were also to blame for CEOs of underperforming companies receiving largeseverance packages.

“I think boards have a hard time looking a CEO in the eyesometimes and saying, ‘You’re out of here,’” Kozlowski said in theinterview.  “They’ve worked with this guyfor a long time.  And so, in order tomake themselves feel better, they throw a lot of money at them.”

Kozlowski, currently serving an eight-to-25-year federalprison sentence after a jury found him guilty in 2005 of grand larceny, fraudand conspiracy, was also ordered to pay restitution and fines of close to $200million.  Regardless, he said he is notguilty and is appealing the verdict, according to Reuters.

In a non-binding vote, nearlytwo-thirds of AGL shareholders rejected the company’s remuneration policy,which included last year’s $11.2 million package and a $5.7 million exitpayment for dumped chief executive Paul Anthony. He departed after the companylast month issued a large downgrade to its earnings forecast.

AGL Chairman Mark Johnsonsaid it was impossible to comply with shareholder wishes as Mr Anthony hadalready pocketed the money. “The remuneration of Paul Anthony is whataccountants call sunk costs,” Johnson told media after AGL’s annualmeeting in Sydney.”It’s in the past.”

Many institutional investorsfollowed the recommendation of Institutional Shareholder Services and votedagainst the remuneration report. It is understood ISS expressed severalconcerns to Johnson before yesterday’s meeting, including “excessivetermination arrangements” for Anthony and the board’s decision to awardhim with a maximum short-term incentive payment just two months before thecompany issued the profit warning.

“I’m not surprised at all.That’s what people had been telling us,” Johnson said.

During the meeting, he revealedplans to step down at some point during his next three-year term. Nearly 17 percent of shareholders voted against his re-election as a director.

The plan, which would ensure aprominent role at Fidelity for the Johnson family, raises at least twoimportant questions: when the 77-year-old partriarch will depart from his posts,and how much power his daughter will wield if she becomes chairman.

Johnson has expressed doubts inrecent months about his daughter’s readiness to run Fidelity, say some of hisconfidants. Under the plan he has shared with Fidelity’s board, says a personfamiliar with the matter, Abigail Johnson wouldn’t necessarily become CEO atthe same time she assumed the chairman’s post.

Which, if either, of thesescenarios will come to fruition is uncertain, because Mr. Johnson remains incontrol and hasn’t announced any plans to leave.

Directors agree that Mr. O’Neal’sinitiative was something of a no-no, particularly in today’spost-Sarbanes-Oxley business world, where full disclosure is all-important. Butthey also doubt that that blunder alone was big enough to have cost him thecorner office.

The much larger issue was Mr.O’Neal’s failed gamble on investments in subprime mortgages and complex debtarrangements that led the firm to take an $8.4 billion write-down, and anoverall loss of $2.3 billion in the third quarter—the largest loss in thecompany’s storied nine-decade history. Being perceived as going behind theboard’s back just put another log on the fire, observers say, and perhapsallowed the board, already facing scrutiny for its oversight of the true natureof Merrill’s risk-taking, to cast Mr. O’Neal as a headstrong executive whoacted first and checked in later.

Directors and governance expertscontacted by Financial Week don’tdownplay the seriousness of keeping something as material as a major businesscombination from their boards.

“Ten years ago, a CEO couldprobably get away with not sharing that kind of information with the board,”said Patrick McGurn, special counsel of RiskMetrics Group, a governanceresearch firm. “But in this post-Enron era, any CEO would be foolish to keepmerger discussions from the board.”

Lionel Allan, CEO of the SiliconValley chapter of the National Association of Corporate Directors, and formerdirector of Catalyst Semiconductor and Global Motorsport Group, saidSarbanes-Oxley makes it more important than ever that boards are always awareof what the CEO is doing and why.

 “I can’t believe a secret talk in isolationwould ever lead to a forced resignation,” said former Deloitte & Touche CEOJ. Michael Cook, now a director at Eli Lilly, International Flavors &Fragrances and Comcast. “The board could have easily sat Mr. O’Neal down andsaid, ‘Look, in the future, these are the rules of the road in terms ofnotifying us of any merger discussions.’ But throw the supposed talks in with thewrite-off and you’ve got a different story.”

Sites, a consultant to Wexford Capital LLC, is also ageneral partner of Rock Creek Partners II Ltd., a private equity fund of investmentand advisory firm Rock Creek Capital Advisors.

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Mark Rivers last week announced his resignation from theboard of directors of mall-based fashion apparel retailer Charlotte RusseHolding Inc., part of recent changes to the company’s board.

Also last week, the company appointed Herbert Kleinberger tothe board effective immediately. Kleinberger will also serve on the company’s audit and compensationcommittees. 

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DuPont, a science-based products and services company, announcedlast week that Marillyn A. Hewson, executive vice president at Lockheed Martin,has been elected to the company’s board of directors.

Hewson brings with her experience in leadership positions inthe aerospace industry, including a 24-year career at Lockheed Martin, whereshe led a broad range of businesses and strategic functions.  As part of her new position with DuPont, shewill be responsible for ensuring that customers around the world receive thebest-value sustainment services and total life cycle support for theiraircraft.

___________________

Leading super-premium coffee company Peet’s Coffee & TeaInc. has appointed Libby Sartain to its board of directors.

Sartain, who currently serves as an executive vice presidentand chief people at Yahoo! Inc., brings with her a distinguished 30-year careerin human resources.  Before joiningYahoo! in 2001, Sartain held executive and officer positions at SouthwestAirlines, where she led all HR functions. She is the co-author of two widely read books on successful employmentstrategies and contributes regularly to industry business publications on HRand management issues.

Wendell S. Reilly and J. Powell Brown have been elected tothe board of insurance company Brown & Brown, the company announced last week.

Reilly is currently the managing partner of GrapevinePartners LLC of Atlanta, Ga., a private equity investment firm focused on mediaand communications.  Previously, he waschairman and CEO of Grapevine Communications LLC, a group of local TV stationsthat were merged to form Piedmont Television, as well as CFO of Haas Publishingand CFO of The Lamar Corporation, a national outdoor advertising company.

Brown was elected as president of Brown & Brown inJanuary, and was previously a regional executive vice president.  He also serves in an executive officercapacity for certain subsidiaries, and oversees most of the company’s wholesalebrokerage and public entity operations throughout the country.

“I have known Wendell Reilly for many years in connectionwith his services on behalf of Emory University, where he nowserves on the board of trustees.  Hebrings a fresh perspective to the board as we guide Brown & Brown to thenext level.  Powell Brown cut his teethin the insurance business and has proven to be an able leader within thecompany for more than a decade,” said Nominating/Corporate Governance CommitteeChairman Bradley Currey Jr.

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ValueVision Media Inc. CEO William J. Lansing has steppeddown from his position at the request of the company’s board of directors.  Lansingwill also be leaving the board, of which Chairman John D. Buck will be takingover as interim CEO of the company.

The board has retained Spencer Stuart, a leading globalexecutive search firm, to assist in a selection committee in starting anational search for a permanent successor to Lansing.

The firm, currently unnamed, is meant to reduce carbondioxide emissions in energy consumption by developing environmental techniquesfor car motors and other devices. According to AP, Hayek told the dailypublication Berner Zuitung that he had to decide between Clooney and formerVice President Al Gore to join in on the venture, but chose Clooney because itremains unclear whether Gore will run as a presidential candidate.

Clooney will sit on the board along with Swiss astronautClaude Nicollier and others.  It isunknown when the new company will be launched.

CarMax, Inc., the nation’s largest retailer of used cars, announcedtoday that its board of directors has elected Shira D. Goodman, executive vice presidentof marketing at Staples, Inc., and Ronald E. Blaylock, founder, chairman andCEO of Blaylock & Company, Inc., to serve on the board.

Goodman, who joined Staples in 1992, has held a variety ofpositions of increasing responsibility in general management and marketingprior to her promotion to executive vice president in 2001.  Under that role, she is responsible for thestrategic, creative, operational an financial aspects of all Staples’marketing, advertising, public relations and charitable giving programs.

Blaylock, who launched Blaylock & Company in 1993, wasappointed non-executive chairman in 2007 when the company was acquired byRobert Van Securities, Inc.  Blaylock hasprevious experience holding senior management positions with PaineWebber andCitigroup.

Plug Power, Inc., has announced that Roger Saillant, who hasbeen president, CEO, and aboard member of the company, plans to retireeffective April 7, 2008.  Saillantinformed the board of his direction during a routine meeting held on Oct.18. 

As a result, the company’s board has appointed a searchcommittee to seek out a successor, comprising independent director and Chairmanof the board George C. McNamee; Maureen O’ Helmer, Esq., an independentdirector and chairman of the board’s corporate governance and nominatingcommittees; and Gary K. Willis, an independent director and chairman of thecompensation committee. 

Dennis M. Oats has been appointed to the board of directorsat Universal Stainless & Alloy Products, Inc., the company announced lastweek.  Oats fills the independent boardseat left open by George Keane, who retired in May. 

Oats most recently served as senior vice president of theSpecialty Alloys Operations of Carpenter Technology.  At Universal Stainless, he will serve on eachof the committees on the four-member board, of which Oats brings with himextensive experience in the steel industry to the position of director.

Kennametal, Inc. has announced that the company’s presidentand CEO, Carlos Cardoso, has been elected to the board of directors at TheStanley Works, an S&P 500 company and supplier of tools and securitysolutions.

Cardoso, recently named one of the best CEOs in the capitalgoods/industrials category and machinery sector by Institutional InvestorMagazine, joined Kennametal in 2003. Previously, he held executive leadershippositions with Flowserve Corporation, and Honeywell/AlliedSignal.

Mary L. Cleave, a former associate administrator for NASA’sScience Mission Directorate, has been appointed to Sigma Space Corp.’s board ofdirectors.

A veteran of two space shuttles flights, Cleave flew aboardSTS-61B in 1985 and STS-30 in 1989, logging a total of more than 10 days inspace.  She will be joining General(retired) John H. Hall and Thomas Bouchard as non-officer members of Sigma’sboard.

Coca-Cola Co. has announced that its board of directors elected former U.S. Secretary of Labor Alexis M. Herman as a director of the company, effective immediately.  As part of the election, Herman was also appointed to the Public Issues and Diversity Review Committee.

Herman served as the Nation’s 23rd Secretary of Labor, and was the first African-American to lead the U.S. Department of Labor.  She currently serves as chair and CEO of New Ventures, chair of the diversity advisory board of Toyota Motor Sales, U.S.A., Inc., and is also a member of the boards of Cummins, Inc., Entergy Corporation and MGM Mirage. 

Video game developer Atari, Inc. this week announced the appointments of Wendell Adair, Eugene I. Davis, James B. Shein, and Bradley Scher as independent directors to the company’s board.  Davis has also been elected as non-executive Chairman, and Adair, Davis, and Shein will serve on the audit committee, with Adair serving as Chair.

What’s More, Adair, Shein and Scher will serve on the compensation and governance committee, with Shein filling the role of Chair.  All four new members will also serve on a special committee that will review related party transactions.

Adair comes tot he board with 35 years experience specializing in restructuring and corporate finance, while Davis comes on as the founder and chairman of Pirinate Consulting Group, LLC.  Shein is currently a professor of management and strategy at Northwestern University, and Scher is a managing member of Ocean Ridge Capital Advisors, LLC. 

The company also elected Curtis G. Solvig III, of AlixPartners, as the company’s chief restructuring officer. 

The Multicore Association announced this week thattechnology provider Texas Instruments has joined the consortium as an executiveboard member.

“As a long-time provider of multicore products, TI makesa notable addition to the Multicore Association’s Executive Board,” saidMarkus Levy, Multicore Association president, in a recent statement. “TI’sexperience in this industry will enable them to help guide this consortium indelivering the most beneficial standards for enabling multicoreapplications.”

Multicore, a global non-profit based on developing standards that help speed time to market for products that involve multicore implementations, is structured to provide three levels of membership including executive board, working group, and university members.

Currently, directors at the company are elected by class to staggered three-year terms.  If the amendment is approved, declassification will be phased in over a three-year period, and beginning with the 2011 annual meeting, directors will be elected each year for one-year terms.

“Our board of directors has reviewed these issues carefully and decided to begin instituting this change,” said John Faraci, International Paper chairman and CEO, in a recent statement.  “Over the past several years, the company considered the issue of annual director elections, and with the transformation plan well underway, we believe the timing is right to move forward.”

In late September, a research report from Moody’s indicated that the paper and forestry products industry lagged other industries in corporate governance matters. The report found that companies in the industry tended to have anti-takeover defenses, entrenched boards and management teams, and other indicators for poor governance.

]]> http://www.directorship.com/international-paper-dumps-staggered-board-elections/feed/ 0 http://www.directorship.com/kellywood-rejects-unsolicited-proposal/ http://www.directorship.com/kellywood-rejects-unsolicited-proposal/#comments Thu, 01 Jan 1970 00:00:00 +0000 Joseph McCafferty http://www.directorship.com/?p=2691 Kellywood Company, a marketer of apparel and consumer soft goods,announced that its board unanimously determined that an unsolicitedproposal by Sun Capital Securities Group, LLC, is not in the bestlong-term interest of the company and its shareholders.

The company’s board also appointed Robert H. Campbell, a board member and chairman of the Compensation and Executive Organization Committee, a non-executive Board Chairman as of January 1.

President and COO Jeffrey Mallett was elected to the board of directors of Synacor, an internet tool and portals builder, the company announced Wednesday.

Currently serving as a director and chairman of the board of SNOCAP Inc., a provider of digital music licensing and copyright management services, Mallett since 2002 has been a principal owner and executive committee member of Major League Baseball’s San Francisco Giants club. He also held various positions at Yahoo! from the mid-1990s until 2002, including the role of president and COO.

Leading healthcare and real estate investment trust Ventas, Inc. announced that its board has elected Ronald G. Geary to Chairman of the company’s Audit and Compliance Committee, of which he is already a member. The board also appointed Douglas Crocker II to fill a vacancy on the committee caused by the recent death of its former chairman, Christopher T. Hannon.

Ventas’s audit committee will now comprise Geary and members Crocker and Sheli Z. Rosenberg. All three are independent under the New York Stock Exchange and Securities and Exchange Commission rules. The company is currently looking for a member to fill its vacancy on the board.

California-based Harmonic, Inc., a leading provider of high performance video solutions, announced Wednesday that it has elected Patrick Gallagher to its board of directors. Gallagher, a highly experienced telecommunications executive with significant international expertise, currently serves on the board of directors at Gentronics NV, a publicly traded company in the Netherlands. He is also the vice chairman of the board at Golden Telecom, a leading facilities based provider of integrated telecommunications and internet servies.

Gallagher has held senior management positions during his 17-years at British Telecom, including group director of strategy and development, president of BT Europe and a member of the BT executive committee, as well as vice chairman and CEO at FLAG Telecom, a leading provider of international network transport and data services.

Jeffrey M. Leiden, a managing direct or at life sciences venture capital firm Clarus Ventures, has been elected to the board of directors at Millennium Pharmaceuticals, a Massachusetts-based biopharmaceutical company.

Leiden, who has more than 20 years experience in the biomedical and pharmaceutical sectors, has also served as president and COO of the Global Pharmaceutical Business of Abbott Laboratories, a diverse heath care company. Prior to joining Abbott in 2000, Leiden was the Elkan R. Blout Professor Biological Sciences at Harvard School of Public Health, as well as a professor of medicine at Harvard Medical School.

Trident Microsystems, Inc. has announced that Sylvia D. Summers will be the company’s new CEO effective October 17. Summers, who will also fill a vacancy on the Board of Directors after its expandsion to six members, will succeed Glen M. Antle, who has served as Chairman and acting CEO since former Chairman and CEO Frank C. Lin resigned last November, after an investigation found the company had used incorrect measurement dates when accounting for stock options grants.

Summers has held positions with Advanced Micro Devices, Inc., Cisco Systems, Inc., and Storage Technology Corp., and has served as president and CEO of the privately held Silvan Networks.

Amid other changes, eBay, Inc. has announced that Niklas Zennstrom has stepped down as CEO of Skype, a networkking website that it acquired in 2005 and which Zennstrom co-founded in 2003. In turn, Zennstrom will now become the non-executive chairman of Skype’s Board of Directors, and taking his place as acting CEO will be eBay CSO Michael van Swaajj, until the company finds a permanent successor.

Additionally, Skype President Henry Gomez, who remained a senior vice president at eBay during his two-year stint at Skype, will return to eBay as senior vice president for corporate affairs.eBay has also announced that it paid nearly $530 million to settle all of its future obligations under an earn-out agreement signed with certain Skype shareholders when the company was acquired by eBay in 2005.

Starting January 1, 2008, Alan D. Wilson will take over as president and CEO of McCormick & Company, Inc., a leader in distributing spices and seasonings to the food industry, the company announced today.Wilson, who was elected to the role by McCormick & Co.’s Board of Directors, will also join the Board, effective November 27. Wilson, who has been with McCormick & Co. since 1993, was named president and COO of the company last December. McCormick’s current president and CEO, Robert J. Lawless, announced that he plans to retire on January 1, but will continue to serve on the Board.

i2 Technologies, Inc. announced an update today on its search for a CEO. It was stated during the company’s second quarter earnings call in August that the board of directors’ goal was to find a candidate by the end of the third quarter.Having interviewed an outstanding list of possibilities, including interim CEO Pallab Chatterjee, the Board has since narrowed the list down and is pleased with the finalists, the company has said. A selection is expected to be made in the next 30 to 45 days.

What will be the two or three main issues for directors in the coming year?

There will be a continued change in the directors’ role. Because of new laws and regulations, directors have been more compliance oriented. But there’s a morphing out of that focus into more of a performance mode. Compliance, obviously, is part of directors’ performance; it’s the gatekeeper role. But directors are getting away from pure compliance and becoming more concerned with issues like strategy and adding value for shareholders. There is also renewed interest in their role of providing oversight on risk management.

What have you learned about the opportunities and the challenges during your tenure so far?

Opportunities are many. We have a highly dedicated staff—people whose hearts and heads are in the right place. When I think of our membership, it’s clear to me that board members have a real thirst for education, and they value peer education more than any other kind. Our 21 chapters are ready to serve the needs of our membership. One of the more interesting aspects is that when we do research and push into the field, we hear what our members are thinking and it helps inform the kinds of programs we develop.

What kinds of activities will you be focused on in this upcoming year?

We want to work more closely to develop creative ways to be interactive with chapters. Here’s an example: We think that the area of compensation that the SEC has been active in, issuing deficiency letters and inquiries, is an important one for board members. We need to create a special education module for the chapters to implement locally on areas such as compensation. Then we want to help directors in their local communities understand boardroom and governance issues better. And we want to help directors interact with their peers. We will spend a lot of time and capital on new and strengthened education programs. Some new programs will be directly related to the committee structures.

What is the elevator pitch for why directors should become NACD members?

There are plenty of reasons: peer-to-peer encounters, the opportunity for camaraderie with other directors and networking, the education tied to our Blue Ribbon Commission, the quality of our information which is cited by others, such as the Delaware Chancery Court. To do those things, we will need to have a transparent process that has sufficient due diligence to vet ideas for the benefit of directors. The final reason, and perhaps the biggest and least understood reason, is the ability of our members to participate in a process that culminates in the NACD being the voice of directors.