Posts belonging to Category boards of directors



A Study in Greed

CEOWhen top managers and executives pursue “extreme wealth,” it’s the company’s shareholders that often pay the price, according to new research.

In a study that recently appeared in the Journal of Management, a team of researchers conducted a statistical examination of 335 companies, analyzing stock market returns and dividends, and conducting interviews with top executives and an independent panel of experts from a variety of disciplines, including academic scholars and senior business executives.

The study looked at the size of CEOs’ perquisite packages, analyzed the difference between a CEO’s cash compensation and that of his or her No 2. executive, and performed an analysis of CEOs who were overpaid compared to a benchmark of their peers.

In the process, the authors—led by Katalin Takacs Haynes, assistant professor of strategic management at the University of Delaware—found the “pursuit of extreme wealth by top managers can lead to lower performance and loss of shareholder value,” according to a summary of the findings appearing at UDaily, the University of Delaware’s online news service.

“Self-interest is OK, but eventually it reaches a tipping point,” said Haynes. “When it is taken to the extreme—when it becomes greed—it is detrimental to firm value.”

There is somewhat of a silver lining in the findings, however. The researchers also concluded that a powerful board or long CEO tenure can “moderate the relationship between greed and shareholder return.”

Some CEOs “appear to direct more of the firm’s resources toward themselves than others, and this can occur more when managers have a lot of discretion or have a short tenure, or if the board is weak,” according to Haynes. “Interestingly, we found that the negative effects of executive greed on shareholder wealth decreases as CEOs experience more time in their role.”

HR can play a part in mitigating this effect, Haynes told HRE.

“There are some points for HR executives to consider when designing compensation packages, while keeping shareholders’ preferences in mind,” she says.

“”Encourage shareholders to actively participate in the compensation process,” for example. “SEC regulations allow for shareholders to express their opinions about compensation packages via the ‘say on pay’ regulations.”

While say-on-pay is non-binding, “ignoring shareholder no-votes invites public scrutiny and negative attention to the company,” adds Haynes, advising HR executives and compensation committees to pay close attention to shareholders who choose to actively participate in the executive compensation process via say-on-pay.

HR leaders must also look out for “the indicators of greed,” she says, such as excessive perquisite compensation in the “other annual” and “all other” categories; the ratio of the CEO’s total comp package to that of the organization’s second-in-command; and CEO pay at peer companies and industry benchmarks, which help identify possible overpayment of your organization’s chief executive.

“CEOs play a significant role in setting their own pay, and are not passive recipients of pay,” says Haynes, “as the term ‘overpayment’ implies.”

The G Quotient: Why Gay Executives Excel

I was intrigued to find a book review in an academic journal about a study that was done all the way back in 2006 on the dearth of gay executives in corporate America. Intrigued on two 454213821 -- Letter Gcounts actually: 1) that I had never heard of this study and 2) that the review was appearing so long after it was conducted and published. Well, it turns out, the answers to both are kind of interrelated.

The very title of the study, and book , by Kirk Snyder, a professor at the Marshall School of Business at the University of Southern California, says a lot — The G Quotient: Why Gay Executives are Excelling as Leaders … and What Every Manager Needs to Know. The findings are also substantive and compelling: As Snyder was studying employee engagement, he noticed that employees of gay executives often had higher levels of job satisfaction than employees of other leaders.

“What he noticed was a connection between some characteristics of gay male executives and what were considered desirable [business leadership] principles, including diversity, creativity and emotional intelligence,” writes Irene F. Stein, an associate core faculty member at the University of the Rockies, in her book review (same title as the book) that appeared in the November 2013 issue of the Journal of Psychological Issues in Organizational Culture.

Snyder then explains the reasons he thinks many gay executives operate naturally under what he has named the “G Quotient” — seven principles of leadership he found he could actually measure using a simple assessment: inclusion, creativity, adaptability, connectivity, communication, intuition and collaboration.

“Much of the connection [between gay business leaders and these seven principles] stems from growing up knowing they are different, and having to adapt to the realities of their environment to feel safe,” Stein writes. “Consequently, gay men develop three fundamental learned skills — adaptability, intuitive communication and creative problem solving — skills that are often demonstrated by gay executives.” Not to mention effective leaders.

So why did Kenneth Sherman, editor-in-chief of JPIOC, assign this fascinating book review to Stein some eight years after Snyder’s study and book publication? Because, as he told me when I called him, too few people have heard about it (myself included). More importantly, at the time it was written, no Fortune 500 CEOs were openly gay and “I still haven’t heard of a single CEO coming out since.”

So does Sherman think corporate America actually needs this infusion? Well, yes, he does. But it goes beyond simply being gay. He says the real message here for employers and HR leaders is that gay business leaders’ effective leadership skills come from the ways in which “they developed their own pathways of adult development and [the fact that] the things they may have encountered at various stages of their lives have predisposed them to certain sensitivities that aren’t really negative things, but positive things.”

If more top business leaders would “simply go around the room” at the next staff or business — or even executive-leadership — meeting and “hear their people’s stories about the challenges of their lives and the things they have rebounded from and now champion,” he says, “the business world would be less rigid,” and all employees would be more engaged and satisfied.

“And guess what,” he says, “companies are going through difficult and strenuous times too.” In other words, he explains, the dialogue could go both ways and workforces would be connected and more productive in ways we can only imagine at this point. “Change,” he says, “comes in small increments.”

I called Stein, too, just to get her take. She says she agrees with Snyder “that the more we can accept everyone’s perspective, including gender identification, the better it will be for business.”

To her, she says, “it’s really the same kind of thing with what women can bring to the workplace … kind of having a more holistic view of employees [and business leaders] and wanting them to bring their whole selves” to work.

I guess considering Stein’s point about women, Sherman’s “small-increments” reference makes sense. Look how long it’s taken us to fully incorporate women into the workplace. And we’re still not there yet, not in terms of pay equity, executive ranks, board representation … or, yes indeed, female CEOs.

 

EU Gender-Quota Proposal Creates Quite the Stir

It appears agreeing on a proposal to require company boards in the European Union to be made up of at least 40 percent women is a bit dicier than some thought.

At least that’s what’s implied by Viviane Reding’s comments in this New York Times report about the European Commission postponing its decision on the proposal due to tough opposition and concerns over its legality. The proposal was initially scheduled for a ruling Oct. 23 and will now come up for discussion again on Nov. 14. (Here’s an earlier Times story that provides more background on the proposal.)

As Reding, the European commissioner for justice, said in the Oct. 23 piece, the figure being considered “is still 40 percent. But the way to arrive there has been looked at in a different way.”

The debate “was very intense,” she said, explaining that the discussion on the legality of any quota was one reason the meeting that day in Strasbourg, France took the several hours that it did. No doubt other reasons included Reding’s proposed penalities and sanctions that companies and organizations would face if they failed to improve their boards’ female representation.

According to the story, the issue has divided the European Union, with Britain leading the countries that regard the proposed rule as counterproductive and unworkable. Other countries taking that view include The Netherlands, Malta, the Czech Republic, Latvia and Bulgaria.

I went searching for the latest rundown on where all countries — including the United States — stand on female representation on boards of directors. Not a whole lot out there, but I did find this paper (free download included) by University of Pittsburgh School of Law professor Douglas M. Branson, An Australian Perspective on a Global Phenomenon: Initiatives to Place Women on Corporate Boards of Directors. According to his report on research he did:

The statistics indicating the representation of women on corporate boards vary widely from country to country. Norway, which passed its controversial quota law in 2003, in effect mandates that 40 percent of a public company’s directors be women by 2008, a goal which has been achieved.

According to Catalyst Inc. [a New York-based organization promoting inclusive workplaces], in the United States, the proportion of women on boards of large, publicly held companies stands at 16.1 percent, but with the proportion stagnant from 2004 onward. Portugal has the fewest females on corporate boards of publicly held corporations, accounting for just 6 percent.

Overall, the 2010 European average was 11.7 percent but, again, the numbers varied widely. After Norway, the highest five were: Sweden (28.2 percent), Finland (26 percent), Netherlands (20.9 percent), Denmark (14 percent), and the United Kingdom (11.5 percent). Besides Portugal, the laggards included Italy (3.6 percent), Luxembourg (6 percent) and Germany (7 percent).

Two years [2010 to 2012] have seen significant change, to between 13 percent and 14 percent. France, which adopted a quota law early in 2011, is thought to be responsible for half or more of the EU increase, with the percentage of women directors increasing from 12 percent to 24 percent in 14 months.

On the Pacific Rim, Australia leads among the countries from which statistics are available, with 13.8 percent. New Zealand follows with approximately 10 percent. Others in the queue include Hong Kong (8.9 percent) and Peoples Republic of China (7.2 percent). The caboose is Japan (1.4 percent).

Not sure where I stand on all this. Not sure quotas ever really improve the overall makeups of organizations or countries. My guess, though – having not been invited to that fiery Oct. 23 meeting – is that the lower-scoring entities “may protest [the most], methinks,” to (sort of) quote Shakespeare.

 

 

Do As We Say, Not as We Do …

There’s just one question that comes to my mind while reading over the alleged misdeeds of former Best Buy Chairman and Founder Richard M. Schulze: Just what was this guy thinking?!?

By this point the general outline of the story is fairly well-known: Schulze has just resigned after acknowledging he knew about an “improper relationship” between Best Buy’s (married) CEO and a younger female employee, yet failed to report it to the board of directors. CEO Brian Dunn, who resigned last month, “violated company policy by engaging in an extremely close personal relationship with a female employee that negatively impacted the work environment,” according to a report by the board’s audit committee, which began looking into the matter in March after a Best Buy HR exec heard about it, according to the New York Times.

The 51-year old Dunn and the 29-year-old employee appeared to have had a rather intense relationship, even if–as they maintain–it was not sexual. According to the audit report, the CEO contacted the female employee by cellphone “at least 224 times during one four-day and one five-day trip abroad, including at least 33 phone calls, 149 text messages and 42 pictures or video messages.” Things got especially awkward in the workplace when the employee began boasting to other employees about her relationship with Dunn and the favors he provided her with, including tickets to concerts and sports events.

For me, the kicker is when an executive provided Schulze with a signed, written statement from another employee detailing the relationship between Dunn and the young woman. Chairman Schulze proceeded to confront Dunn with the written allegation and ask if it was true. Dunn denied it was true, and Schulze dropped the matter, failing to follow company policy by notifying the appropriate company officials. Let me state that again: Schulze confronted Dunn with a SIGNED, WRITTEN STATEMENT from a whistleblowing employee, and then did nothing. So, Best Buy, how’s that whistleblower program working out? How’re the corporate ethics folks feeling these days? And how’s that whistleblowing employee doing–does he or she still have a job at Best Buy?

After flagrantly violating company policy, Dunn is walking away with an estimated $6.6 million severance package. Schulze will receive the “honorary title of chairman emeritus” when his resignation is official in June.

An “Ooops!” from Yahoo

Yet another reminder for HR to not only be diligent in verifying a job candidate’s credentials, but to also be diligent in monitoring any outgoing communications from their company regarding their executives’ backgrounds: According to the Associated Press, Yahoo shareholder Daniel Loeb–who owns 6 percent of the company and is trying to replace its board of directors–is now questioning the integrity of the company’s leadership after he revealed that it posted inaccurate information about CEO Scott Thompson’s educational background.

According to a recent filing by Yahoo with the Securities and Exchange Commission, Thompson has a bachelor’s degree in computer science from Stonehill College in Massachusetts. There’s just one small problem, as Loeb discovered: Thompson does, in fact, have a degree from Stonehill, but it’s in accounting, not computer science.

Loeb also cited Yahoo for inaccuracies involving the educational background of board member Patti Hart. Yahoo’s SEC statement listed Hart as having a degree in marketing and economics from Illinois State University; in fact, Hart has a degree in business administration from ISU, with specialties in marketing and economics.

On Thursday, Loeb wrote a letter to Yahoo’s board calling for an independent investigation, questioning Thompson’s ability to lead and citing the company for poor governance:

 If Mr. Thompson embellished his academic credentials we think that it 1) undermines his credibility as a technology expert and 2) reflects poorly on the character of the CEO who has been tasked with leading Yahoo at this critical juncture. Now more than ever Yahoo investors need a trustworthy CEO.”

Yahoo’s stock price has languished between $10 and $20 for the last three years as its performance has severely lagged competitors such as Google. Thompson, who before joining Yahoo in January served as president of eBay’s PayPal division, laid off 2,000 Yahoo employees–14 percent of the workforce–last month in a cost-cutting move. Loeb is trying to have himself and three allies elected to the board, asserting that they have the expertise to turn the struggling company around. Yahoo acknowledged the inaccurate bios but it is sticking by its CEO, releasing a statement that said:

This in no way alters the fact that Mr. Thompson is a highly qualified executive wiht a successful track record … Under Mr. Thompson’s leadership, Yahoo is moving forward to grow the company and drive shareholder value.”

Bamboo Ceiling Shows Few Cracks in U.S. Boardrooms

This isn’t the first time I’ve come across information about the need for more Asian-Americans in top leadership posts in corporate America. But these numbers I found surprising enough to share.

In two separate reports, Los Angeles-based Leadership Education for Asian Pacifics Inc. has unveiled pretty telling evidence that, no matter how well-trained and well-educated they are, Asian-Americans are still woefully missing from America’s boardrooms.

In this study, LEAP finds 116 Asian and Pacific Islanders held 135 board seats at Fortune 500 companies in 2011, representing 2.4 percent of the total number of board seats at those companies. Worse still, a staggering 77.8 percent of those companies have no API representation on their boards.

In another study, the organization finds 75 APIs holding 78 board seats at the top 100 nonprofits in this country last year, representing 2.55 percent of the total 3,061 board seats in those nonprofits.

Contrast that with the fact that these API Americans constituted 6 percent of the U.S. total population in 2010, according to a report by the Selig Center for Economic Growth that incorporated U.S. Census figures, and its buying power was expected to grow 42 percent from $544 billion in 2010 to $775 billion in 2015.

Somethin ain’t right. This definition of bamboo ceiling from Wikipedia reveals another nuance of what certainly looks and feels like bias to me:

Bamboo ceiling – The exclusion of Asian-descendants from executive and managerial roles on the basis of subjective factors such as “lack of leadership potential” or “inferior communication ability” whereas the East Asian-descendants candidate has superior objective credentials such as education in high-prestige universities (in comparison to their white counterparts with only lower-prestige university credentials).For example, research shows that there are a decent number of partners at leading prestigious law firms in the United States who did not attend top notch law schools. However, an East Asian American partner of a leading law firm who did not attend a “Top 16 Law School” (according to the U.S. News ranking) would be seldom found.

LEAP CEO Linda Akutagawa took a good part of an hour today to talk with me about the problems of perception and cultural differences that both Asian and western employers and employees need to work on. In other words, just because Asian values include speaking only when you have something important to say, and showing respect for colleagues and – most especially – your boss by keeping quiet when they’re speaking doesn’t mean Asian-Americans don’t have leadership skills.

“Companies, and their HR executives, should really be looking at what leadership really is in their companies,” she says. “Does it mean aggressive, networker, fast on your feet, good communicator? Or does it allow for someone who does not exhibit those behaviors?”

And Asian-American workers, she says, need to better understand how their values and cultural behaviors are impacting their career-development paths. That’s something her group can help with, along with helping HR leaders design and execute better Asian and western outreach and education efforts.

“There are so many things HR executives can do to better these numbers,” Akutagawa says. And they should, when you consider the skills and talents companies are missing out on in top-leadership and board positions. “A lot of corporations have nonprofit partnerships; HR executives could be getting more active and vocal about trying to place talented and interested Asian-Americans on their boards so they can be getting that kind of corporate-leadership experience.”

The most important focus for HR leaders, though, should be on building up their talent pipelines to include more Asian-Americans, she says. “My hope is for HR to think long-term about this,” she adds, so API top talent is able to move beyond mid-management — where most of these employees’ career ladders end — so they’re better represented in the top-management succession chain and top-of-mind instead of disregarded when board positions open up.

The good news, small though it may be, is that the Fortune 500 board-representation numbers from 2011 are at least better than 2010, when 96 APIs held 115 board seats, representing only 2.1 percent of the total 5,520 board seats at those companies. Long way to go though.

Giving Some Clarity to Succession

In his annual letter to shareholders, issued on Saturday, the legendary Warren Buffett confirmed that Berkshire Hathaway has a CEO successor in place as well as two back-ups. But he still left investors guessing the identities of those individuals.

No doubt Berkshire shareholders should be able to take some comfort in knowing that a successor has been identified. Yet I’m sure they’d sleep even better were they to know their names.

But then there would be nothing left to speculate about.

Earlier today, Buffett told CNBC that the letter’s mention of a plan wasn’t really a change—that the board has always had a preferred candidate and two backups. That, however, may not have been entirely clear to many shareholders, at least until Saturday.

I’m sure it was no accident Buffett inserted the mention near the very the beginning of his 22-page letter. The Berkshire chairman obviously didn’t want shareholders to miss the point. Though reportedly in good health, he is 81, after all.

Considering the importance of CEO succession, it never fails to amaze me how few companies actually have plans in place.  Buffett notes in this year’s letter that one of the principal roles of the board of directors is to ensure “the right people are running the business” and “that the next generation of leaders is identified and ready to take over tomorrow.” So why do we continue to read studies, like one released by Korn/Ferry, that report just 35 percent of companies have CEO succession plans in place?

Whether you personally consider it news or not, maybe Buffett’s reference—and some of the press reports it generated—will, at the very least, lead a few more boards to put it a bit higher on their agendas.

More Confirmation of a Benefits-Bottom Line Connection

Came across this recent news piece from Prudential (courtesy of WorldatWork) that confirms what we’ve been hearing: Senior managers, boards of directors and finance/treasury professionals are all getting much more involved in their companies’ benefits decisions.

The Prudential study finds 40 percent of plan sponsors say the employee-benefit decision-making process in their company has changed over the past five years, demonstrating increased attention to the bottom-line impact of benefits.

The study, which surveyed plan sponsors, plan participants and broker/consultants, finds the influence of senior management has increased the most (45 percent say they’re more involved). More than 20 percent of plan sponsors also say boards, finance/treasury and employees themselves are all playing more important roles in deciding what benefits are offered and how much money should be allocated to them.

The most dramatic perception of change came from benefits brokers and consultants, with more than two-thirds of those surveyed (69 percent) seeing changes in the areas and seniority of people involved in the benefits decision-making process.

This certainly underscores Dave Shadovitz’s Leader Board post yesterday from this week’s IBI/NBCH Health and Productivity Conference at the Fairmont San Francisco. Findings from a study presented there — looking at chief financial officers’ perspectives on the role health plays on financial performance — shows most CFOs now consider health an organizational imperative.

Inerestingly, both studies also indicate this interest by top leaders in their organizational health goes beyond finances alone. In the study of CFOs, their newfound interest isn’t confined to healthcare costs, but extends into the cultural and overall performance impact — including sick days, absences, turnover and opportunities lost.

Likewise, the Prudential study looks at the growing importance this new focus has on employees’ overall satisfaction with their benefits; which, of course, enhances overall performance.

“Our research suggests that greater involvement throughout the employer organization may enhance the decision-making process and lead to more relevant benefits offerings,” says John DeLorenzo, senior vice president of sales and account management for Prudential Group Insurance. “Companies that are more focused on benefits tend to pay more attention to communications, which in turn leads to higher levels of employee satisfaction.”

 

Women Still Not Making Big Strides as Business Leaders

Not the greatest news for women leadership in business, if you go by recent reports from Catalyst, the New York-based organization dedicated to expanding women’s opportunities in the global marketplace.

According to the 2011 Catalyst Census: Fortune 500 Women Board Directors, Executive Officers and Top Earners and prior Catalyst censuses, women in corporate America have made no significant gains in the last year and are not further along the corporate ladder than they were six years ago. Youch.

Here are some of the more discouraging statistics, based on responses from 497 U.S.-based companies: Women held 16.1 percent of board seats in 2011, compared to 15.7 percent in 2010. (If we were rounding these, which we usually do, they’d be the same.) In both 2010 and 2011, less than one-fifth of companies had 25 percent or more women directors, while about one-tenth had no women serving on their boards.

There’s more. In both years, women of color still held only 3 percent of corporate board seats. And the number of women holding executive-officer positions actually went down, from 14.4 percent in 2010 to 14.1 percent in 2011.

The salary picture is no brighter for these women executive officers, either: In 2010, women held only 7.6 percent of executive-officer top-earner positions, a percentage that actually went down a tenth of a point in 2011, to 7.5 percent. That leaves men accounting for 92.5 percent of top earners in the year we’re about to usher out the door. Lastly, in both years, nearly one-fifth had 25 percent or more women executive officers, yet more than one-fourth had no women executive officers at all.

How can this be? Hard to say. Ilene H. Lang, president and CEO of Catalyst, says that — considering another Catalyst study demonstrates sustained gender diversity in the boardroom correlates with better corporate performance — “continued obstacles to progress make no sense.”

I know in my 11 years here, we’ve written many stories suggesting top-talent, high-performing women are rethinking the corporate-ladder top-leadership track because of its detriment to their very delicate work/life balance. But I would have thought corporate America would be further along than this by now in helping women solve those challenges — through greater flexibility, leadership development, telecommuting and teleworking options, coaching and mentoring, you name it … just sayin.

At least, on a positive note, a more expanded look by OnlineSchools.com shows more advancement. According to this recently launched “Women at Work” infographic by the Foster City, Calif.-based digital resource for online education, some 78 million women are projected to enter the workforce by 2018, with 10 percent of women over 25 holding an education beyond a bachelor’s degree in 2009, compared to only 1.7 percent in 1960.

OK, well, there’s that. I just hope those 78 million are being supported better by then.

 

SHRM Transparency Group Granted Long-Sought Meeting with SHRM Board

What was intended to be a meeting to announce an aggressive new move to get members of the board of the Society for Human Resource Management to speak to the SHRM Members for Transparency changed course Sunday when Kathryn McKee, a leading member of the transparency group, announced somewhat of an olive branch from the SHRM board.

It wasn’t any formal move by either group, McKee told attendees at a luncheon near the site of SHRM’s 2011 Annual Conference & Exposition in Las Vegas. The branch came in the form of a chance meeting Saturday in one of the conference halls between McKee; Henry Hart, corporate counsel for SHRM; Rob Van Cleave, immediate past chair; and Jose Berrios, current board chairman.

“Henry Hart said to me that the board of directors had just voted to agree to meet with this group,” McKee said. “There’s a hole in the soul of SHRM, but a miracle just happened yesterday that may begin” to repair that hole.

Though no firm date for the meeting has been set, McKee said she had the SHRM board’s word that the two groups would meet shortly after the conference to begin discussion about future leadership and leadership practices that had become a bone of contention since the transparency group began expressing concerns and hopes for such a meeting as far back as 2005.

“I looked in each one of their eyes,” McKee said, after also telling the luncheon group that she had demanded, and got, hugs from each. “I believe them.”

Issues the transparency group hopes will soon be put on the table include its  contention that SHRM board members should be SHRM-certified and many currently are not, the fact that many board members are not current or former practitioners, and the fact that SHRM board directors had voted recently to pay themselves fees for their voluntary services (something transparency group leader Mike Losey called “absolutely wrong” and in defiance of the SHRM bylaws he followed himself through many years as the association’s past president and CEO).

The group — in anticipation of an upcoming announcement just hours away that SHRM had just named a new CEO, Hank Jackson, past interim president and CEO — is also hoping Jackson will also be a part of that meeting, or meetings, between SHRM and the SHRM transparency group going forward.

Gerry Crispin, a leading member of both groups and founder and co-CEO of staffing site CareerXroads, told those in attendance that the transparency group was prepared to activate a section of Article 7 of the SHRM bylaws that would have forced the meeting if 10 percent of SHRM members would express favor for such a meeting. Crispin detailed how the transparency group was prepared to employ social media pushes — through LinkedIn, Facebook and Twitter — to garner that support, something he and others assured listeners would be, no doubt, very successful.

More importantly, they say, should the promised meeting fail to happen, or fail to lead to their desired goals, such a push to force a meeting would be instituted after all.

“We are very excited that this is a step in the right direction,” said transparency group member Kate Herbst.