Category Archives: boards of directors

Report: HR Really Is Becoming More Strategic

Back view of businessman

Back view of businessman

We’ve all been hearing and talking about HR professionals becoming better strategic leaders and business partners for years, so there’s no real surprise here.

But in this report from the Cranfield Network on International Human Resource management, in collaboration with the Society for Human Resource Management and the Center for International HR Studies in the School of Labor Employment Relations at Penn State University, we do have new numbers. And they’re worth noting.

The report, Human Resource Management Policies and Practices in the United States, outlines the results of a survey of almost 700 senior-level HR practitioners in organizations with 200 or more employees.

It finds HR is more often on an organization’s board of directors or executive team and taking sole responsibility for major policy decisions than in years past.

Specifically, in terms of leadership, 70 percent of responding organizations said HR has a place on the board now, compared to 63 percent in 2009 and 41 percent in 2004. Also, two-thirds of responding organizations (66 percent) said they have a written HR-management strategy. As the report states:

“The HR department appears to be moving away from working jointly with line management in terms of where the responsibility lies for major policy decisions across a whole range of HRM activities such as pay and benefits, recruitment and selection, training and development, industrial relations and workforce expansion/reduction.

“In most cases, there has been an increase in either the HR department taking sole responsibility for these activities or line management taking responsibility (but at a much lower absolute level), with a concurrent reduction in the number of cases where both parties collaborated on the activity led either by HR or by line management. On average, line management is most active in the area of training and development, and least active in establishing pay and benefits policies.

“This trend implies that HR and line management roles may be becoming institutionalized, with each party focusing on its own responsibilities. The increasing regulatory environment may be playing a part here, with firms needing clear guidelines around responsibilities to ensure compliance with regulations and standards.”

This last sentence certainly underscores what we’ve been hearing lately as well!

The report also confirms the use of technology as a foundation for increased strategic HR leadership, with 83 percent of organizations using HR-information systems or electronic HR-management systems and 67 percent using employee self-service options.

Interestingly, according to the report, HR departments remain involved in the development of business strategy, either from the outset or through consultation, although their involvement has declined slightly (ranging from 80 percent in 2004 to 78 percent in 2009 to 76 percent in 2014/15).

Also, interestingly (and it’s hard to pinpoint what’s behind this), there was a decrease in the percentage of HR departments not consulted when the organization was going through a merger, relocation or acquisition between 2004 and 2009 (8 percent in 2004 and 4 percent in 2009); however, in 2014/15 the percentage returned to 9 percent, a level similar to that reported in 2004.

On a more positive note, though, the report states …

” … more than one half of HR departments report that they are consulted from the outset in such situations, which has remained stable since 2004 at 54 percent to 61 percent (depending on the type of organizational change), an indication that HR continues to be involved in processes vital to the success of organizations.”


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What’s On CFOs’ Minds These Days?

CFOHow are chief financial officers in North America feeling these days? They’re concerned, but fairly optimistic on matters such as hiring and their company’s growth prospects, according to Deloitte’s latest CFO Signals survey, for the year’s first quarter.

Gyrations within the global economy — particularly China and Europe, along with the strengthening dollar — have the 100 CFOs from North America’s largest companies concerned, yet most feel positive about their company’s prospects for growth this year. Forty eight percent expressed improving optimism while only 14 percent expressed declining optimism.

Domestic hiring expectations among the CFOs rose to 2.4 percent, up from the previous quarter’s 2.1 percent. CFOs in the energy/resources industries are the most optimistic at 4 percent, while manufacturing CFOs have the lowest optimism, at 0.5 percent. Meanwhile,  optimism on offshore hiring rose to 3.1 percent from the previous quarter’s 2 percent.

Shareholder activism is a big concern, with close to three-fourths of the CFOs saying they have experienced some form of shareholder activism. About half said their companies have made at least one major business decision specifically in response to such activism. As noted in this story, some investors are specifically targeting companies’ executive-pay practices — particularly when they feel pay and severance are way out of line with performance and with the median pay received by employees.

Finally, China appears to have definitely lost its luster: Only 18 percent of the CFOs describe China’s economy as good, compared to 34 percent in the last quarter. And only two percent describe Europe’s economy as good — and just 10 percent expect it to improve in the next year.

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The Push for Gender Wage Equality

On the heels of Patricia Arquette’s call for wage equality at last Sunday’s Academy Awards ceremony, Arjuna Capital issued a press release yesterday referencing Arquette’s remarks and calling attention to eBay’s decision to oppose the wealth-management GettyImages_478267645firm’s gender-pay-transparency proposal.

Could proposals like this one be a preview of things to come? I would think many HR leaders probably hope they won’t be.

Here are some specifics from the Arjuna’s release …

“eBay’s Board has committed to publicly oppose a shareholder proposal filed by Arjuna Capital … requesting eBay publicly report the pay disparity between male and female employees and set goals to close the gap.

This is the first year the issue of gender wage equality has been put to the proxy ballot of a U.S. corporation and the Company’s opposition comes in the face of public outcry and regulatory efforts … .

The eBay Board has stated that it believes that implementation of this proposal is not in the best interests of eBay and its stockholders.”

Arjuna’s proposal calls for eBay to issue a report that would be “adequate for investors to assess eBay’s strategy and performance” and “would include the percentage pay gap between male and female employees, policies to improve performance and quantitative reduction targets.”

In case you’re not familiar with Arjuna (I certainly wasn’t), here’s a snippet from its website …

“Our mission is twofold: Through our research and activism, we seek to advance the understanding of what sustainability means for investor returns and corporate profitability.

We bring the fruits of those efforts to our clients in the form of the most diverse, sustainable, profitable and suitable investment opportunities on offer.

We work to build and preserve our clients’ wealth while serving the common good through enlightened engagement in the capital markets.”

In its response to Arjuna, eBay wrote …

“We remain committed to our ongoing efforts to promote diversity in the workplace and strongly believe we continue to make demonstrable progress in building a diverse eBay. As such, the Board feels that the proposal would not enhance the Company’s existing commitment to an inclusive culture or meaningfully further its goal and efforts in support of workplace diversity.”

Natasha Lamb, director of equity research and shareholder engagement for Arjuna Capital, said the eBay proposal is Arjuna’s first and only attempt to seek information on pay gaps. “But our goal,” she explained, “is to invest in companies committed to the innovation and success diversity fosters, and we intend to continue to seek more transparency on these issues.” (She said she’s heard similar proposals, independent of Arjuna, were sent to the boards of ExxonMobil and Wal-Mart for the current proxy season.)

Lamb said she was surprised by the board’s opposition, since the eBay proposal is clearly in the interest of enhancing shareholder value.

Of course, not everyone agrees that would be the case.

Yesterday afternoon, I spoke with Alan Johnson, managing director of Johnson Associates, a New York-based compensation-consulting firm, who told me he wasn’t at all surprised eBay’s board would reject the proposal.

“In terms of eBay,” Johnson said, “the assumption is being made that the jobs are the same, but the reality is that that may not be the case. eBay, for instance, may have a big call center staffed by females. If that’s true, it would skew all the numbers.”

Johnson noted that the Arjuna proposal is an attempt to put “a lot of pressure on fixing something that may not be correctable” and could ultimately “do a lot of harm” by encouraging employers like eBay to offshore jobs or hire part-time workers.

Apparently not one to mince words, Johnson described the effort as “naïve” and a “big, expensive distraction.”

Like I said, not everyone agrees the proposal is a good idea.

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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.”

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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.


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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.



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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.

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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.”

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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.

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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.

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