What we also discovered in putting the list together was that in some instances, it became impossible to separate the captain from the team. This year’s D100 is a case in point: Our editors and board of advisors were nearly unanimous in our selection of President Barack Obama as this year’s most powerful corporate governance influence. And yet, to do justice to the seismic shift his policies have brought about in the boardroom, we also had to recognize the many other  “New Voices” in the Administration who are now leading the greatest financial reform of American business since the 1930s.

So, we ask that in the pages ahead you pay more attention to who counts, and less to how we count, in arriving at our final selection of individuals and institutions that have met the requirement to be “most influential.” We think you’ll agree it’s an intricate and impressive mosaic where the whole equals much more than the sum of its parts, which may or may not be greater than 100.

Regulators & Rulemakers

Team Obama
It is often written that reasonable people may disagree, and with Americans and their Presidents, it is practically a way of life. But even an unreasonable person could only conclude that this President and his Administration are having a profound and lasting influence over the boardroom. President Barack Obama has demonstrated an enormous capacity for calm in uncertain times. His relative youth leads to frequent comparisons to John F. Kennedy and his communications skills to those of Ronald Reagan. But it is his aggressive response to the unparalleled economic challenges that greeted him at the dawn of his young presidency that harkens back to an earlier figure of towering influence,  Franklin D. Roosevelt.

FDR’s massive social and financial reform programs—the creation of Social Security as part of the New Deal, the establishment of the Securities and Exchange Commission (SEC) and the Federal Deposit Insurance Company (FDIC)—helped restore confidence in the nation’s banking system coming out of the Great Depression. One could plausibly take major portions of FDR’s New Deal and substitute his name with President Obama’s.  The implementation of the $787-billion American Economic Recovery Act one month after Obama took office, coupled with his handling of the Troubled Asset Relief Program (TARP), which sought to strengthen the financial sector by buying up the assets and equity from troubled banks, has clearly helped the nation avoid further financial disaster and put the economy on the path to recovery.

And finally, turning again to the FDR playbook, Obama assembled a team of wise men and women, formidable economic and business minds, whose decisions are having a lasting effect on the role of the corporate director. Preeminent among them was the choice of Rahm Emanuel as chief of staff. Described as a veritable “influence machine,” within the Administration and Congress, the former Congressman from Obama’s home state of Illinois is known as a hard-charging, brutally candid, sometimes combative, acutely intelligent man who can get things done and knows the ways of the Capitol and the boardroom.

The Enforcers
Perhaps second only to Obama in terms of her influence on boards and corporate governance, career regulator Mary Schapiro heads up the 75-year-old SEC. Before the crisis, the agency’s very existence was in question: “Obsolete,” “out of touch,” and “behind the times” were just some of the many terms uttered by detractors. The Commission, under former chairman Christopher Cox, was pilloried for missing the Madoff scandal.

As former SEC chairman and Directorship 100 Hall of Famer, Arthur Levitt described her: “She has the skills, the intellect, and the character to be a superb SEC chair.” But Schapiro will face a new kind of challenge in the role, not just that of proving her own qualifications, but also instituting a significant remodeling of the SEC itself, as she works to bring it into the new regulatory era.

Moving swiftly to address regulatory concerns in the wake of the financial crisis, the SEC has rolled out a series of proposals that could embody the biggest change to the rules of the game for directors in some time. Schapiro, who is no stranger to the boardroom, having served on the boards of Duke Energy and Kraft Foods, has overseen proposed rule changes on proxy access, broker voting, say on pay, and new requirements for disclosure on executive compensation and director qualifications. It’s now up to her and fellow commissioners Kathleen Casey, Elisse Walter, Luis Aguilar, and Troy Paredes to determine the final regulations that emerge from the proposals.

Other key players Schapiro has brought into the SEC include Senior Advisor Kayla Gillan, Chief Accountant James Kroeker, and Director of Enforcement Robert Khuzami. Gillan was a founding board member of the Public Company Accounting Oversight Board (PCAOB) and former general counsel to CalPERS. Kroeker joined the SEC as deputy chief accountant in 2007 from Deloitte and Touche where he had been a partner in the firm’s national accounting services group. Kroeker recently said that the proposed road map for the convergence of International Financial Reporting Standards,pushed to the back burner amid the larger issues of market reform, would be restored as another top priority. Khuzami is a former federal prosecutor, has pledged to improve the SEC’s enforcement performance by creating specialized units to provide “structure and resources for staff to ‘get smart’ about certain products, markets, regulatory regimes, practices and transactions.”

TARP Overseers
Another example of Obama’s preference for brains over politics was his reappointment of Sheila Bair to chair the FDIC. Another fiscally conservative Republican, on Bair’s watch alone this year, 94 banks have failed, creating a new challenge:  how to replenish the fund. Bair has also been an integral part of the team overseeing TARP. Neil Barofsky is a former New York assistant attorney general confirmed by the Senate in December as special inspector general. Dubbed the “TARP Cop,” his job is to figure out how and where the $700-billion TARP funds are spent, reporting directly to the President and providing updates to the Congressional Oversight Panel chaired by bankruptcy expert and Harvard Law School professor, Elizabeth Warren. COP’s first report, released in February, casti-  gated then-Treasury Secretary Henry Paulson for his performance and lack of transparency, reporting that the Treasury Department  had overpaid by $78 billion for the assets it bought from banks.

Interestingly, while Obama sponsored and was a strong proponent of  “say on pay” legislation while a senator, since appointing Kenneth Feinberg special master of compensation, he has appeared unwilling to make the issue a top priority. Feinberg, who has immersed himself in some of the country’s most troublesome and high-profile cases, is considered a superb choice, both in terms of skill and temperament, by Capitol Hill insiders. His most noteworthy case was the 33 months of pro-bono work he did following the 2001 terrorist attacks to determine how much each victim would receive from the federal government’s September 11th Victim Compensation Fund.

Feinberg may in fact be perfectly suited for a job that most compensation specialists see as thankless, and possibly as a “no win” situation. As the Obama Administration’s comp expert, Feinberg was called on to monitor the compensation of executives in what were once some of America’s most prestigious corporations, now TARP recipients, including American International Group (AIG), Bank of America, Citibank, Chrysler, GMAC, and General Motors.

Fed to the Rescue
To prevent American capitalism from spiraling deeper into the abyss, nine months after President Obama made his first Cabinet announcement, he re-nominated Ben Bernanke as Federal Reserve chairman. The former Princeton economics professor was selected by Bush in 2005 to succeed Alan Greenspan. In 2008 after the market crashed, Bernanke invoked emergency powers, slashed interest rates, and spent trillions of dollars to right the financial system. Just last month, he declared the recession “likely over.” Though he seldom gives interviews, Bernanke is never far from the public eye and has been a stalwart in the transition between presidential administrations and in the effort to stem the economic slide.

When then President-elect Obama named his economics team, it included players who, like Bernanke, were already steeped in the crisis details, demonstrated a studied understanding of Depression-era economics, or some combination of both. Enter Treasury Secretary Timothy Geithner and Chief White House Economic Advisor Lawrence H. Summers. Geithner, who is currently pushing legislation to provide more systematic regulation of financial institutions, including new limits on executive compensation, recently told one interviewer that he is optimistic major reforms will be passed.

Prior to his appointment replacing Henry Paulson, Geithner was president of the Federal Reserve Bank of New York and part of the team central to the critical negotiations that resulted in Bear Stearns being tucked into JPMorgan Chase, Merrill Lynch going to Bank of America, Lehman Bros. disappearing, and Citigroup and other struggling banks getting a lifeline.

Summers, the former Harvard University economist who became its president following his tenure as Treasury Secretary to President Clinton, is director of the Cabinet’s National Economic Council. The group was established in 1993 to coordinate and ensure that the President’s economic policy agenda is carried out.

Rounding out the team, Paul Volcker, the former Fed chief under Clinton, was selected to chair the president’s economic recovery advisory board. And Christina Romer, a former UC Berkeley economist, who administration sources suggest is well- regarded by both parties, chairs the Council of Economic Advisers. Her appointment was seen as a further triumph of brain over politics in Obama’s approach to talent recruitment.

Other key findings from the report include:

• The median decrease in total realized compensation was 6.38 percent, which is still well out of line with the economic downturn. (Total realized compensation includes the value realized on vesting of shares, option value realized, pension/non-qualified deferred compensation earnings and pension pay in the last year.)

• Approximately 75 percent of CEOs included in the study received a base salary increase in 2008, up from 73 percent in 2007.

• More CEOs saw declines in realized compensation in 2008 than in 2007 (just over 56 percent and 40 percent, respectively).

• Oracle CEO Lawrence Ellison is the only CEO to appear in The Corporate Library’s list of the top ten highest paid CEOs in both 2007 and 2008, having earned approximately $750 million in realized compensation over the period.

The package included $2.3 million of compensation and almost $699.8 million from the vesting of one- quarter of the equity granted as he took the firm public at $31 a share in 2007, said the Corporate Library, which specializes in governance issues. Schwarzman, Blackstone’s founder, was granted $4.7 billion in equity at the time of the offering. Schwarzman, 62, took the world’s largest private equity firm public at the height of the market boom.

His pay package toppled Oracle Corp. CEO Larry Ellison, 64, who fell to second with $557 million, according to the survey. Ellison had $543 million in exercised stock options. His total compensation in 2007 was $193 million, according to the survey.

“Given that the other 75 percent of his $4.7 billion 2007 equity grant will vest in equal installments over the next four years, it is reasonably safe to assume that Schwarzman will remain at the top of highest-paid CEOs list, or close to it, for a few years to come,” the report said.

Seven of the top-paid executives worked for energy companies. Ray Irani of Occidental Petroleum made $222.6 million, John Hess of Hess earned $159.6 million and Michael D Watford of Ultra Petroleum Corp. took in $116.9 million, the report said. Seven of the 10 on the list made more than $100 million last year.

“I am shocked that in this time of extreme financial crisis for the bank that you would spend the time and legal expenses to challenge a resolution of this sort when the bank could simply ask the proponent to withdraw in light of the fact that you were now implementing the advisory vote,” wrote Tim Smith of Walden Asset Management in a letter to BofA executives. Walden was behind one of the say-on-pay proxy initiatives. “Is this a sign that bank executives don’t even know how to have a simple conversation with their shareowners to work out a basic agreement?” he scathed.

The BofA case highlights a well-known fact in the relationship between boards and shareholders: what we have here is a failure to communicate. The financial crisis and swooning stock market have heightened investors’ hunger for more information on corporate governance issues. Frustrated shareholders unsatisfied with structures in place for executive compensation, CEO succession planning, board nominations, and other hotly debated governance issues, are calling for a forum to voice their concerns directly to the board. “The collapse of the economic system has everyone talking about corporate governance… boards need to have a rational dialogue with shareholders,” says Stephen Brown, director and associate general counsel of corporate governance at TIAA-CREF.

Currently, the majority of boards do not have an open forum in which both sides are receptive and willing to meet to hear the other side’s concerns. Proxy resolutions, viewed today by some activists as a way to “knock on the door” of boardrooms, could instead become a last resort should changes be made in how investors and directors communicate with one another.

The news is not all bad. According to a recent survey by Spencer Stuart, data collected over the past 10 years from proxy reports filed by S&P 500 companies and surveys of corporate secretaries and general counsels found that 45 percent of respondents reach out to shareholders in some way. However, despite this number, only recently has progress been made toward regular dialogue that seeks to find middle ground between boards and investors. Pfizer was something of a test case in 2007, when it planned a meeting with large shareholders to discuss governance issues. Last summer, UnitedHealthcare Group created an advisory committee to allow shareholders to suggest new directors. PepsiCo signed a broad set of governance guidelines last June known as the Aspen Principle, which includes a promise to facilitate more communication with their shareholders. The boards of Home Depot, Hewlett-Packard, and Northrop Grumman have held dialogues with shareholders on compensation issues or even to discuss board nominees.

The Reg FD Effect

These companies are still the exception rather than the rule. Over the last several years, major changes have occurred that have curtailed the amount of information disclosed to investor groups. Barry Genkin, partner at Blank Rome, who has advised CEOs, boards, and audit and compensation committees in proxy battles, believes a lot of the unrest began when regulation prevented the amount of information companies made public, known as Regulation Fair Disclosure or Reg FD. “Companies used to meet with analysts and those analysts would write up reports,” says Genkin. “After new regulations intended to prevent ‘selective disclosure,’ companies were limited to only information they could place in an 8-K or press release.” Instead of working out other ways to inform investors, companies simply sent out less information, he says.

Edward E. Lawler III, a professor at the University of Southern California Marshall School of Business and founder and director of the University’s Center for Effective Organizations, believes that the SEC’s more recent efforts to push companies for more disclosure has backfired. “In a failed effort by former SEC chairman Christopher Cox, who pushed for more disclosure—what he got was more paper,” argues Lawler. “It backfired. With 30-page proxy statements, I don’t think people became more knowledgeable.”

“Information didn’t dry up,” adds Genkin. “But it wasn’t as robust.” Overall, Genkin agrees that companies have not dealt well with the disclosure requirements to investors. “A constant communication mechanism needs to happen,” says Genkin. “Enlightened companies who are aware of their company’s communication shortcomings need to be very aggressive.”

Some experts think that boards will soon have little choice but to communicate better with large shareholders. “Early on, investors were rebuffed because they were coming from a single direction,” says Patrick McGurn, special counsel at proxy advisory firm RiskMetrics Group’s ISS governance services unit. “Investors were reaching out and directors did not reach back.” McGurn emphasizes that the old way of communication is being absolved. He advises boards to open the door to large investors, and he says progress is being made, with some boards more actively connecting with their largest shareholders and telling them the changes their board is looking to make. “[Directors] want to stop any backlash that might happen when such information is actually disclosed in a proxy statement,” says McGurn. Establishing an open line of communication could help directors and investors avoid lengthy and costly proxy battles later on.

Last year, the National Association of Corporate Directors assembled a blue-ribbon commission on board and shareholder communications. Among its many recommendations was that the governance committee should have oversight of board and shareholder communications and make efforts to ensure that they are open, candid, and productive.

Pfizer’s Breakthrough

The concept of open communications is not new. As far back as 1992, Martin Lipton, a partner at Wachtell, Lipton, Rosen & Katz, and an opponent of “excessive” input by investors, and Harvard Business School professor Jay Lorsch called for the boards of U.S. companies to “meet annually in an informal setting with five to 10 of the larger investors of the company,” according to the paper, Talking Governance: Board-Shareowner Communications on Executive Compensation, co-authored by Stephen Alogna of Deloitte & Touche and Stephen Davis, project director at the Millstein Center at the Yale School of Management and the founding editor of Global Proxy Watch.

“The collapse of the economic system has everyone talking about corporate governance…boards need to have a rational dialogue with shareholders.

- Stephen Brown, TIAA-CREF

“It’s still a very slow and very rare process in the United States for boards to open up dialogue,” says Davis. “The investor relations function tends only to get investors to buy shares when pushing out information, but a two-way dialogue is what is needed.”

An important step toward opening the lines of communication occurred in 2007, when pharmaceutical giant Pfizer’s board decided to plan a meeting with larger shareholders for the sole reason of discussing governance issues. “When it comes to finding channels and pioneering ways of opening dialogue, Pfizer is a good example,” says Davis. Pfizer’s board met with 30 of its largest investors and took questions from them on corporate governance issues. “This is not about strategy, and it’s not about a dog-and-pony show,” Margaret “Peggy” Foran, former senior vice president of corporate governance, associate general counsel, and corporate secretary of Pfizer, said at the time. “[The board] just wants to gather as much information as possible to make the best decisions. I never thought of listening as a dangerous sport.”

Foran, now vice president, general counsel, and corporate secretary of Sara Lee, believes that eventually Sara Lee will follow the example set by Pfizer. She believes informal “listening exercises” involving large investors, lead directors, the CEO, and executives like herself, can lead to an official meeting, such as Pfizer’s. With many issues investors are seeking to address, boards realize that shareholder groups are diverse—and not everyone is going to leave the table happy.

Pfizer director Suzanne Nora Johnson agrees that creating a dialogue can be a positive step in building trust between boards and stakeholders. Yet, she says, the board serves a broad range of sometimes competing stakeholder interests, and it cannot select the ideals of a few at the expense of the many. “There are many different types of stakeholders,” says Nora Johnson. “You have to listen carefully and best evaluate whether the stakeholder has both short-term and long-term interests.” Since the 2007 meeting, the Pfizer board has not met again with shareholders apart from the annual general meeting, scheduled for April. But Nora Johnson says the board found the experience to be beneficial and says it will hold similar meetings again in the future, either annually or biennially.

“I think you will see a lot more informal [meetings between shareholders and directors],” says Foran. “For the past five or six years, boards have gotten more involved, with the help of shareholder proponents like RiskMetrics.” Moreover, Foran says, it’s becoming noticeably routine that all board members are attending annual meetings rather than only a select few.

Yet some directors do not agree that such meetings can be productive. Ashok Shah, a director at Sapient, a technology consultancy, thinks that opening the lines between directors and shareholders could create static. “I believe strongly that the relationship with the shareholder should be with one body in the company,” he says. “Today it’s mostly the CEO and the management team, and having that one relationship with the shareholder is the most productive and healthy method, rather than introducing one more conversation with the board. Otherwise, you have two teams talking with shareholders, which could lead to confusion and contradiction.”

J. Thomas Presby, a director who serves on multiple boards, including American Eagle Outfitters and Tiffany & Co., isn’t sure if greater communication is the answer. “At this moment, I’m not persuaded. I’ve attended a lot of annual meetings; most are orderly, and there are some but not a lot of questions. No one has stood up and said they need more communication,” he says.

To be sure, shareholders are a varied lot, often equipped with competing agendas and different views on governance. Genkin warns of the shareholder wolves in sheep’s clothes—the investor who is only interested in short-term performance. From his experience, there are shareholders out there looking to pursue their own aims under the guise of everyone’s interest. He notes that boards can hone in on who is legitimately concerned with the company’s long-term well-being and those looking for fast returns. Careful listening is required. “I’ve had activist shareholders approach boards saying ‘we’re your friends,’ while offering views that could be useful to the board,” says Genkin. “Some of the ideas of activist shareholders have become beneficial to the company and it becomes a win-win.”

Good Listeners

Many directors are warming up to the idea of establishing better communications with investor groups. Last fall, Bonnie Hill, a director at Home Depot, told a gathering of directors at an NACD conference: “Directors are accountable to—and should be responsive to—shareholders.” She said it should be the lead director or committee chairs who meets with large shareholders and that the talks should be structured and well planned. “The chairman or CEO should be the first point of contact. Then I think there are directors who might be clearly involved, such as the chair of the compensation committee. But it’s important to identify in the boardroom what kind of communication will take place—and who will do what.”

Some directors say that any outreach should be more of a listening exercise for boards than engaging in a back-and-forth dialogue. “It would certainly benefit the company if there were a more open line of communication between shareholders and directors,” says Charles “Randy” Whitchurch, a director at SPSS and Scan Source. “But this should be more of a one-way conversation, the board ought to be hearing the shareholders. I do not think the board should be the voice of the company speaking to shareholders; that’s the role of management. I think the danger of having a conversation is that it will become more of a two-way debate. Directors aren’t always as tuned into what the company’s message is. You run the risk of directors going off message…having been a CFO of a public company for 17 years, it was very important that we followed clear protocols on who and how we communicated with shareholders.”

Thomas C. Wajnert, lead director at Reynolds American, agrees that the focus should be on gathering feedback from shareholders. “Yes, they should be communicating, but I think it should be in the context of listening,” he says. “I think where the board has to draw the line is engaging in a debate—the board needs to be in listening mode.” Governance Road Show Opening the lines of communication means going beyond a telephone call or email. TIAA-CREF’s Brown suggests a “governance road show,” where a combination of general counsels, corporate secretaries, and lead directors, go out to meet with their investors. The hope is that relations will improve and become more accessible if investors know senior leaders in the company are interested in their concerns. “One firm we work with sends its general counsel to make the rounds with its large investors,” says Brown. “The feeling on our side is: we have access and feel as comfortable picking up the phone as he does.”

“I think the dangers of having a coversation is that it will become more of a debate. Directors aren’t always as tuned into what the company’s message is. You run the risk of directors going off message.”

- Charles “Randy” Whitchurch

Boards are expected to enact a more proactive role in listening to issues concerning shareholders. Experts believe that boards who refuse to adjust their communications strategy risk repercussions during proxy season. “The boards who are worried [about lack of communication with shareholders] are who should be least worried,” says Nell Minow, editor and co-founder of The Corporate Library. “Those who aren’t worried…they’re in trouble.” Minow advises that boards be open to more frequent dialogue, even if that means overhauling the way business is done.

Once the doors to dialogue are opened, rather than a lot of “babbling,” says Foran, it is better to seize the opportunity and narrow the criteria. “Shareholders should use the dialogue constructively— not micromanage,” she warns. “If boards allow shareholders to use the opportunity to talk as a weapon, boards are not using their fiduciary duty in the correct way.” Foran believes that in most cases, investors are trying to learn and understand—not attack. She notes some companies are initiating dialogues before a crisis rather than fending off shareholders made angrier because they feel ignored.

There may be another reason to for boards to seek more open communications with shareholders: majority voting. Some experts think that shareholders may withhold votes for directors who they perceive to be unopen to hearing their concerns. “There is a carrot and stick equation with communicating—with majority voting being the stick,” says McGurn. “If companies don’t dialogue when they’re approached by investors, they’ll see some effort to withhold or vote against.” If that begins to happen, some directors may be putting their largest shareholders on speed dial.

Experts warn that despite the Troubled Assets Relief Program’s (TARP) efforts to curb excessive pay, stock options not worth much now could exponentially increase, resulting in huge payouts for executives.

The Corporate Library believes that TARP money will not be paid back to the government in full until a bank or other recipient is in good financial health. The compensation regulations from ARRA include:

• a ban on incentive compensation that encourages risk taking

• clawback provisions for the top 25 executives

• a ban on golden parachutes for the top 5 executives

• a ban on bonuses, retention awards or other cash or stock incentives of any kind, except for restricted stock that does not vest while TARP money is owed, and that comprises less than one-third of the total amount of annual compensation of the employee receiving the stock (the Act does not define what would be included in annual compensation)

• a waiver for compensation subject to written agreement on or before February 11, 2009

• the introduction of a policy regarding “luxury expenditures”

• the introduction of a “Say on Pay” vote

• a review of prior payments to the top 25 executives to ensure they were not “inconsistent with the purposes of … [ARRA]” and, if so determined, the Act gives the Secretary to the Treasury authority to reimburse the government with respect to this compensation

Paul Hodgson, a senior research associate at The Corporate Library, writes that CEOs will still be overpaid—stocks rising will indicate restoration of value, not a gain. He usesCEO James Wells of SunTrust Banks as an example of practices not consistent with the purposes of ARRA.

According to Hodgson,for2008,James Wells earned just over $1.25 million with no bonus, no vesting of stock and no option profits. At the beginning of the year he was awarded equity with a grant date value of more than $6.8 million which was worth a little over $560,000 on February 17, with the stock option component of this grant worth nothing at all.

While this is somewhat reflective of the collapse in the company’s stock price, the proxy also discloses that the compensation committee has granted–subject to stockholder approval of the plan–25,075 shares of restricted stock, 25,075 shares of performance stock based on relative Total Shareholder Return, and 852,941 stock options with an exercise price of $9.06. This is in addition to the 50,000 shares each of restricted stock and performance stock, and 250,000 stock options already awarded to Wells on February 10th, again at an exercise price of $9.06. These awards pre-date the ARRA regulations by just a single day and are of even greater concern because typical stock option grants to the CEO in the past ranged between 40,000 and 250,000.

Wells had 953,000 outstanding, underwater stock options (not so much underwater as drowning) at the end of 2008, writes Hodgson. The combined 2009 awards would appear to be a repricing in everything but name. Using the company’s own calculations, the “grant date value” of the combined awards is less than half the grant date value of the 2008 awards, but this is not the issue. The issue is that the upside potential of these awards is huge. The highest exercise price for outstanding stock options for Wells is $85.06. If the stock price were to return to that level, the options would be worth over $89 million, with the restricted stock worth $12.8 million.

While such a rebound may seem unlikely, in a period of 10 years it is not impossible. Even if the stock price were to rise to the lowest exercise price of Wells’ outstanding options–$50.50–the options would be worth over $45 million and the restricted stock $7.6 million. While shareholders would clearly benefit from such a return, for most it merely represents restoration of value rather than a gain and such compensation is clearly excessive for a CEO who oversaw the decline in value.

Once financial health is restored, Hodgson implies that we will be faced with the same over-the-top compensation packages that paved the way for risky behavior, leading us to our current economic crisis.

The firm expects the 2009 proxy season to include an all-time high in withold votes for directors, increased focus on regulatory matters, much greater attention to how boards manage risk—particularly true at banks and other financial service firms.

Shareholder proposals to achieve more shareholder input on executive compensation will also see a significant rise in support, as will proposals that seek to limit CEO power by splitting the CEO and chairman roles.

The survey is based on compensation data from more than 3,000 public companies and 23,000 directors, making it the most comprehensive analysis of director pay available.

The Corporate Library, now in its tenth year as a fully independent corporate governance research and advisory firm, also found that:

• Median total board compensation for S&P 500 firms is more than $2 million.
• Median total compensation for individual directors of S&P 500 companies is just under $200,000.
• In contrast to their CEO colleagues, compensation for directors in the S&P 500 did not increase by more than that for directors of smaller companies.
• Company size is the greatest influence on board and director compensation.

The report also compares total board compensation as well as director compensation policy at some of the most prominent financial services companies involved in the subprime lending crisis. “The difference in how these companies compensated their boards was interesting,” said Research Associate Greg Ruel, co-author of the survey. “For instance, the lead director was paid $100,000 at Freddie Mac while the going rate was $25,000 to $30,000 at comparable companies. Directors at Lehman Brothers earned $2,500 for attending committee meetings while directors at AIG and Washington Mutual earned $1,500 to attend their committee meetings. There are also vast differences in equity compensation practices amongst the group.”

The survey, titled, “The Corporate Library’s Annual Director Pay Survey: Director Pay 2008,” is also co-authored by Senior Research Associate Paul Hodgson. It is available for $75 from The Corporate Library’s online store.

The Corporate Library’s survey also found:

• the median increase in total board compensation was just under 11 percent;

• the median increase in compensation for individual directors was almost 12 percent;

• this is the third year of double-digit increases for directors and boards, though the rate of increase appears to have slowed;

• median total board compensation for the S&P 500 is more than $2 million;

• median total compensation for individual directors of S&P 500 companies is less than $200,000.

A recent survey by The Corporate Library found that while females receive higher base salaries than their male counterparts, when cash bonuses, perks, and stock compensation is factored in, female CEOs only make 85 percent of the pay packages male CEOs bring in.

The median actual compensation for females is $1,746,000 compared to $2,049,000 male pay packages. Females of larger corporations fair worse as their earning power is less than two thirds of male CEOs.

The survey adjusted pay for size, performance, and industry, but none of these factors distinguished the reason for the discrepancies. Tenure did not lend a solution to the differential in pay.

“Perhaps it is the number of female CEOs,” speculated Senior Research Associate Paul Hodgson, co-author of the report. “Less than 3 percent of CEOs were women, so there were nearly 33 times as many male CEOs as there were female CEOs. This is a shockingly low number in any major Western economy, but the small number of women in the sample – only 80 – may be affecting the findings.”

While more than 15 percent of women CEOs lead financial services companies, compared to 12 percent of male CEOs, the distribution of industries for female CEOs was not different enough from male CEOs to have significant or consistent effect, according to the report.

The median increase in totalactual compensation between 2006 and 2007 was 22 percent for S&P 500 CEOsand 15 percent for Midcap CEOs. On the other hand, Smallcap CEOs received amedian pay increase of 5.5 percent. The Corporate Library’s calculation fortotal actual compensation includes profits realized on the exercise of stockoptions and value realized from vesting restricted stock awards.

Total actual compensation increases are well ahead of risesin annual compensation, which includes base salary and annual cash bonuses. “While2007 was a relatively unsuccessful year for many companies, and this can beseen in the single digit increases in total annual compensation, this had yetto affect equity compensation,” said Senior Research Associate PaulHodgson, co-author of the report. “On the other hand, total annualcompensation did not go down.”

The survey, also co-authored by Research Associate Greg Ruel,examined compensation data in 3,242 U.S. and Canadian companies, makingit one of the most comprehensive CEO pay surveys on the market. Median totalactual compensation for all CEOs in the survey was just over $2,000,000, butlevels varied widely. For example, Lawrence Ellison, CEO of Oracle, earned almost$193 million, while some CE Os earned nothing. Median total actual compensationfor S&P 500 CE Os was just over $9.2 million.

“The Corporate Library’s CEO Pay Survey: CEO Pay2008” is available for download in The Corporate Library’s onlinestore. A fee is required to purchase the report.

A self-proclaimed capitalist, Minow writes there is nothing that “infuriates” her more than executives are paid substantial salaries without earning them. She links the problems associated with executives’ compensation as incorrectly favoring quantity over quality. “If the executives’ compensation is tied to the volume of business rather than the quality of business, we should expect deal makers to be more attentive to the number of transactions than the value they create,” she says.

Minow further compares the salaries of former CEOs Stanley O’Neal of Merrill Lynch and Martin Sullivan of AIG. O’Neal’s $91 million salary for 2006 was based on performance metrics paid out before the financial services company claimed $23 billion in write-downs.

Likewise, former AIG CEO Martin Sullivan received $68 million despite the company reporting losses for two consecutive quarters, totaling $13 billion.

Minow noted that fewer than 13 percent of public companies have claw-back policies requiring executives to return bonuses that are found to be based on inflated numbers. Executives, instead, “take the money and run.”

To ensure that executives are forced to earn their pay, Minow believes that shareholders should have a say in the matter. A “say on pay” vote on executive compensation should be standard for public companies in the U.S. She notes that the U.K. and several other countries have enacted various say-on-pay initiatives for shareholders.

The announcement was made last night at the Changgyeong Palace in Seoul last week where the investor-oriented group is hosting its annual conference.

Minow, one of America’s most recognized corporate governance advocates, is the former president of ISS (now RiskMetrics Group). She founded The Corporate Library in Portland, Maine, with Robert A.G. Monks in 1999 with whom she has also co-authored three business books including the soon-to-be released next edition of the MBA textbook, Corporate Governance.

Minow was named to the inaugural list of the Directorship 100 which noted “the queen of good corporate governance” is known for “her pointed criticism of corporate boards that allow, in her view, CEOs to operate without oversight.”

]]> http://www.directorship.com/corporate-librarys-minow-hailed-by-icgn/feed/ 0 http://www.directorship.com/oil-ceos-comp-up-4x-average/ http://www.directorship.com/oil-ceos-comp-up-4x-average/#comments Thu, 01 Jan 1970 00:00:00 +0000 Joseph McCafferty http://www.directorship.com/?p=2796

An analysis of CEO compensation at 25 of the largest publicly traded global oil and gas companies found that median income for of those executives increased more than four times the rate of that of executives in the Standard & Poor’s 500-stock index as a whole.

Equilar, the compensation research consultancy, conducted the analysis for BusinessWeek. While oil prices skyrocket, some analysts tell BW that oil-company CEOs in particular are getting pay raises on factors that don’t control, such as the price of oil, rather than “managerial prowess.”

“Energy companies’ improved performance is almost entirely due to high oil prices,” says Paul Hodgson, an executive pay analyst for The Corporate Library, a corporate governance research organization in Portland, Maine. “But if [their executives] deny culpability for high oil prices, why are they getting rewarded for them?”

Executive comp for CEOs at the 12largest U.S. oil companies rose by 5.8% from 2006 to 2007, from a medianof $14.6 million to $15.4 million. That’s more than fourtimes the increase of compensation for S&P 500 CEOs, whose medianincreased by 1.3% from 2006 to 2007, or $8.7 million to $8.8 million,according to Equilar.

For the U.S. companies in the study, total compensation includesbase salary, bonus, payouts form short-term and long-term incentiveplans, the grant-date value of new stock and option awards, and othercompensation.

Topping the list was Occidental Petroleum’s longtime chief Ray Irani,who received a $33.62 million package in 2007, actually down from$52.14 million in 2006.

The head of the No. 1 U.S. energy major had theNo. 2 compensation package: ExxonMobil’s Rex Tillerson, with $21.66 million in 2007, up from $18.37 million in 2006.

]]> http://www.directorship.com/oil-ceos-comp-up-4x-average/feed/ 0 http://www.directorship.com/yale-fetes-rising-stars-of-governance/ http://www.directorship.com/yale-fetes-rising-stars-of-governance/#comments Thu, 01 Jan 1970 00:00:00 +0000 Joseph McCafferty http://www.directorship.com/?p=2330 The Millstein Center’s first list of rising stars recognizes corporate governance professionals under the age of 40 who, nominated by their peers and chosen by a committee, have made “their mark as outstanding analysts, experts, activists, and managers.”

“This is the first year we are recognizing the next generation of corporate governance leaders,” said Ira M. Millstein, senior associate dean for corporate governance at the Yale School of Management and an architect of corporate governance recognized last fall by Directorship magazine in its Directorship 100, an inaugural list of the most influential players in corporate governance. “Every one of this year’s 56 recipients is a rising star in his or her own right. I’m honored to be able to recognize them in this way,” Millstein said.

The rising stars of corporate governance are:

• Sanaa Abouzaid, corporate governance officer, International Finance Corp.
• Tagbo Agbazue, project coordinator, African Institute of Corporate Citizenship
• Steve Alogna, senior manager, corporate governance services, Deloitte & Touche
• Annalisa Barrett, senior research associate, The Corporate Library
• Rachel Beck, business columnist, Associated Press
• Sagarika Chatterjee, senior analyst, F&C Investments (London)
• Warren Chen, managing director, M&A and quantitative analyst, Glass, Lewis & Co.
• Patrick Daniels, partner, Coughlin Stoia Geller Rudman & Robbins
• Andy Eggers, president, Proxy Democracy
• Maureen Errity, firm director, Center for Corporate Governance, Deloitte & Touche
• Todd Fernandez, senior research analyst, Glass, Lewis & Co.
• Jun Frank, senior research analyst (Asia), Glass, Lewis & Co. 
• Nichol Garzon-Mitchell, deputy general counsel, Glass, Lewis & Co.
• Rebecca Grapsas, associate, corporate department, Weil, Gotshal & Manges
• Dan Heitger, associate professor of accounting and co-director of the Center for Business Excellence, Miami University
• Alexandra Higgins, research associate, The Corporate Library
• Quinton Huckeby, analyst, Proxy Governance
• Catherine Jackson, manager, corporate governance and proxy voting, Ontario Teachers’ Pension Plan
• Fianna Jesover, senior policy manager, corporate governance, Organisation for Economic Co-operation and Development
• Bess Joffe, associate director, corporate governance, Hermes Equity Ownership Services
• Jan-Friedrich Kallmorgen, director, Europaische Investorenshutzvereinigung
• John Keenan, senior analyst, pension and benefits policy, AFSCME
• Matt Kelly, editor-in-chief, Compliance Week
• Dan Konigsburg, director of corporate governance, Standard & Poor’s Equity Research
• Claudia Kruse, vice president European Environmental, Social and Governance Research, JPMorgan (London)
• Rakhi Kumar, corporate governance policy analyst, The Institute of International Finance
• Laura Lonsdale, ombudsman, Tyco International
• Allie Monaco, vice president of research, Proxy Governance
• Michael McCauley, senior corporate governance officer, Florida State Board of Administration
• Mary Jane McQuillen, director, socially aware investment, ClearBridge Advisors
• Jason Mefford, vice president, business process assurance, Ventura Foods
• Jeffrey B. Miller, chief compliance officer and counsel, Synthes
• Matt Orsagh, CFA, CIPM, senior policy analyst, CFA Institute Centre for Financial Market Integrity
• Rajesh Parthasarathy, president and CEO, MENTISoftware
• Dan Pedrotty, director of the office of investment, AFL-CIO
• Christian Plath, assistant vice president, corporate governance, Moody’s Investor Services
• Michael Pryce-Jones, senior analyst, Proxy Governance
• Naheeda Rashid, corporate governance and engagement, Hermes Equity Ownership Services
• Tracey Rembert, senior governance analyst, Service Employees International Union
• Joel Rogers, director of consulting services, RedHawk Communications
• Nicole Sandford, partner, board advisory services practice, Deloitte & Touche
• Hege Sjo, European Governance and Engagement, Hermes Equity Ownership Services
• Phillip Spathis, executive officer, governance and engagement, Australian Council of Superannuation Investors
• Alan Srulowitz, vice president, internal controls, CA, Inc.
• Tracy Stewart , corporate governance manager, Florida State Board of Administration
• Scott Stokes, deputy research director, GovernanceMetrics International
• Daniel Summerfield, co-head of responsibleinvestment, Universities Superannuation Scheme
• José Tabuena, vice president integrity and compliance/corporate secretary, MedicalEdge Healthcare Group
• Peter Taylor, head of corporate governance, Aberdeen Asset Management
• Meagan Thompson-Mann, president, MCTM Governance
• Carla Topino, senior research analyst (Europe), Glass, Lewis & Co.
• Dan Wadsworth, senior director of corporate client group, NASDAQ Board Tools
• Kerrie Waring, COO, International Corporate Governance Network
• Mark Watson, partner, Tapestry Networks
• Brittany Wedereit, vice president, proxy research, Glass, Lewis & Co.
• Clarence Yang, associate, Barclays Global Investors

The selected stars were recognized earlier this week during a reception at the 2008 Yale Governance Forum hosted by the Millstein Center.

While there has been an overall slowdown in pay, the CEOs of the S&P 500 have been less affected by this than CEOs of smaller companies. As CEO compensation analysis has increased in importance, we have substantially discounted the pricing on this report to make it more accessible.

“The median increase in annual compensation of just over 5 percent was driven largely by base salary rises and increases in the cost of benefits and perquisites,” said Senior Research Associate Paul Hodgson, the author of the study. “Given the focus on perks, and the anecdotal evidence that many boards were set on reducing them, this comes as something of a surprise. Perhaps the high cost of jet fuel is driving costs up.” On the other hand, the dramatic fall in the number of CEOs receiving cash bonuses contributed significantly to the overall slowdown in pay growth.

The report, titled The Corporate Library’s Preliminary CEO Pay Survey: CEO Pay 2007, is based on a survey of 614 companies that filed a proxy statement in the first quarter of 2008. It represents an early analysis of pay movements prior to The Corporate Library’s full report, due this fall, that will cover more than 3,200 companies. The 12-page preliminary report is available for $45 from The Corporate Library’s online store at www.thecorporatelibrary.com.

Using data from The Corporate Library’s database and CERES, the study notes that the number of shareholder resolutions found on proxy statements underestimates the effect of shareholder activism, as growing numbers of resolutions are being withdrawn when companies agree to make changes to their environmental policies.

Furthermore, environment-related resolutions that make the ballot have garnered steadily increasing support over the period studied. “This increased level of support means that companies can no longer afford to dismiss the environment as a fringe concern,” said Research Associate Sasha Pagella, author of the report. “Perhaps the growth in the number of withdrawn resolutions for 2008 is an indication that this is beginning to happen.”

The Report is available from The Corpoate Library ($) 

Two-thirds of these directors continued to serve despite the dissatisfaction among shareholders, according to the report titled, “Shareholders Say No, Boards Say Yes.”

According to Senior Research Associate Annalisa Barrett, the study’s co-author, “The data suggested that shareholders rejected these directors for a variety of reasons, primarily independence concerns and attendance problems.”

The overall impact of the disapproval was surprisingly minimal as “boards seem to need that push provided by majority voting to take shareholders’ seriously.” Only three of the companies had adopted any form of majority voting for director elections.

The Corporate Library’s 2008 Proxy Season Foresights series predicts that the 2008 season will be much more controversial as tussles between corporations corporations, lawmakers, and investors becomes more aggressive.

The Association of BellTel Retirees, a nonprofit that says it represents 100,000 former employees of the teleco, wants the board of directors to adopt a policy that would require future board chairmen to be selected only from the independent directors who have not served as an executive officer of the company.

Part of the rationale, according to a press release issued by the retirees yesterday, is that the CEO as chairman creates an “ambiguity about who is working for whom. There is a built-in barrier to replacing a poorly performing CEO.” 

Over the years, the retirees’ association have proposed numerous shareowner proxies that forced corporate governance changes at the company; most recently, in 2007, the Verizon board voted in favor of an advisory non-binding say-on-pay resolution that allows shareholders to approve or disapprove of the executive compensation package of senior executive officers.

The Corporate Library singled out Verizon for the second straight year as one of 12 “pay for failure” companies with the worst combination of excessive CEO pay and negative shareholder returns over the most recent five-year period, the retirees’ association pointed out. In the five fiscal years through 2006, CEO/Chairman Ivan Seidenberg received $68.6 million in compensation while total shareholder return was a negative 5 percent. The Wall Street Journal reported that after Verizon’s stock declined 25 percent during 2005, the board decoupled its chairman/CEOs incentive compensation from stock appreciation.

 Verizon’s annual meeting is scheduled for May 1 in Lincoln, Neb.