Category Archives: boards of directors

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 shows more advancement. According to a 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.

Transforming UHG

Lori Sweere, executive vice president of HR for UnitedHealth Group, opened Bersin & Associates’ IMPACT 2011 conference this morning with a compelling keynote on business transformation.

In late 2007, you may recall, UHG was coming off a well-publicized stock-option scandal that led to the departures of its CEO, COO, CHRO and CFO. At the same time, the company was facing serious integration issues following some recent acquisitions.

“It was apparent that we needed to do something differently,” said Sweere, who was appointed to the top HR post there in May 2007.

To determine what steps needed to be taken, Sweere said she talked to 2,000 managers across the country. “What I found was that the majority of managers had limited faith in human capital,” she said.

In response, Sweere helped to craft a people strategy that focused on four areas: workforce capability, employee engagement, performance culture and human capital effectiveness.

I was particularly interested in hearing what Sweere had to say about how UHG approached the fourth area, human capital effectiveness.

Part of her response pertained to structure and included moving the recruiting function back in house. At the time, 75 percent of all positions were being filled from the outside, not a number Sweere considered acceptable. She also moved talent management and recruiting into a single entity that addressed talent acquisition, talent development and mobility — or what Sweere described as the “entire lifecycle of the employee.”

Further, to elevate the competency level of the company’s HR practitioners, Sweere and her team developed a curriculum and certification for HR generalists, who were required to earn a certification within two years. If they failed to do so, she said, they wouldn’t be able to retain their HR generalist jobs.

The goal, Sweere said, was to get HR generalists to “think strategically everyday … and learn how to effectively use data in a way that influences positive change.” She added that the initiative is now being expanding to centers of expertise, such as recruiting.

Latest Twist in Renault Spy Case

It may not come as a big surprise that someone in HR is paying a price for the Renault espionage debacle.

For those of you who haven’t been following the story, Renault terminated in January three executives, accusing them of selling company secrets. But following an investigation that showed a “chain of failings and dysfunctions,” the company eventually determined that the three executives were indeed innocent of any wrongdoing, as the executives contended from the beginning.

Renault appears to be close to settling with those who were let go. But in a press release issued yesterday, the company also announced some top leadership changes. While CEO Carlos Ghosn remains chairman and CEO, Renault’s No. 2 executive, Chief Operating Office Patrick Pélata, resigned from his post (though it’s worth noting he isn’t going to entirely sever his ties with the company, taking on a top role at the Renault-Nissan alliance). At the same time, the company announced it had dismissed three executives in its security department and suspended three others, including Jean-Yves Coudriou (an HR manager responsible for senior-executive staffing), “pending discussions concerning their future.”

(Interestingly, along with the changes, Renault’s HR chief, Marie-Francoise Damesin, was appointed to the company’s executive committee.) 

It’s not entirely clear what part these terminated or suspended executives might have played in the twists and turns of this bizzare tale. (Maybe none at all, if the terminations that started this chain of events is any indication.) But the suspension of someone in a senior HR role is a reminder of the often challenging and precarious role HR leaders can find themselves in as they conduct internal investigations.

To be sure, this wasn’t your typical internal investigation. Indeed, it has the makings of a good spy novel, with allegations of corporate espionage, Swiss bank accounts and accusations of fraud. But whatever the degree of drama, it definitely pays to move deliberately and carefully, considering what could be at stake.

Polling Shareholders

About half (51 percent) of U.S. companies plan to hold annual say-on-pay votes, while about four in 10 (39 percent) expect to hold votes every three years, according to a recent survey by Towers Watson.

One in 10 (10 percent) comanies plan to hold a shareholder vote every two years.

“Clearly, there’s no single right answer to the question of how frequently these votes should be conducted that will work for every company,” says James Kroll, a senior consultant at Towers Watson. “Each company seems to be assessing its own circumstances and needs, taking into account its specific shareholder composition and the degree of potential shareholder concern about the company’s executive-pay programs.”

As we mention in our latest HREOnline™ story, Remuneration Rumination, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires companies to hold say-on-pay votes every three years.

While experts quoted in that story wonder whether a mandatory say-on-pay system will help improve the size and structure of pay packages, they also recommend compensation structures that contain sufficient equity in the form of stock and options to align the executives’ interest with shareholders.

Executive stock awards should have long vesting periods, they say, and pay plans should reward executives for outperforming peer groups at other companies.

As for say-on-pay votes, nearly half (49 percent) of companies are unsure what vote tally will be considered a successful outcome by their boards, according to the Towers Watson survey.