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®
Thought Leadership in Governance since 1976 First Quarter 2018
ON THE TABLE
for 2018
• SEXUAL HARASSMENT
• BLOCKCHAIN
• ENVIRONMENTAL, SOCIAL
& GOVERNANCE • DIRECTOR
LIABILITY • GENDER
DIVERSITY • SHAREHOLDER
ENGAGEMENT • TRUTH IN
FINANCIAL REPORTING
• BOARD SIZE
TRIBUTE TO MILTON L. ROCK,
Directors & Boards' Longtime Publisher
@DirectorsBoards
directorsandboards.com
DB1Q18_Cover.indd 991 2/2/18 11:32 AM
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®
Vol. 42 No. 2 • First Quarter 2018
IN THIS ISSUE 30
Features
COVER STORY:
ON THE TABLE FOR 2018
19 Sexual Harassment
Boards can’t be silent. By April Hall
21 Blockchain: ‘Fraud’ or Fortune?
What directors need to know about the technology behind
Bitcoin. By Eve Tahmincioglu
19
24 Environmental, Social & Governance
Key transparency and performance issues for 2018.
By Thomas Singer
27 Director Liability
Boards are on the hot seat over data breaches, illegal sales
practices and more. By Maureen Milford
21
30 Gender Diversity
Former DuPont CEO looks to bolster gender diversity in the
C-suite and boardroom. By Maureen Milford
33 Shareholder Engagement
BlackRock, CalSTRS, among other investors, upping pressure
on boards. By Eve Tahmincioglu
36 Truth in Financial Reporting: Is Your CEO Lying?
AI, a focus on non-financial data and more may shed light.
By Jan Alexander
38 Board Size
Governance experts see smaller boards as more effective,
but who’s listening? By Eve Tahmincioglu and April Hall 36
FIRST QUARTER 2018 1
DB1Q18_Contents.indd 1 2/2/18 1:51 PM
®
First Quarter 2018
Departments
4 From the Chairman
On the Table: Blockchain By Robert H. Rock
6 Editor's Note
Social-Good Deficiency? By Eve Tahmincioglu
8 BOARDBOOK
The latest governance statistics; what’s trending on social media
and online; top of mind insights from the former chair of the FDIC
Sheila Bair who is a director at Thomson Reuters, Host Hotels,
the Industrial and Commercial Bank of China; and the CEO of
8
the Committee for Economic Development and the former CEO
of Office Depot and AutoZone Steve Odland who is a director at
General Mills and Analogic; and a board meeting survival guide
from a director at West Pharmaceuticals.
Columnists
41 Legal Brief:
Say on Pay
New limits on board discretion. By Doug Raymond
45 54
43 On the Governance Agenda:
Boardroom 2018 Game-Changers
Everything from AI to corporate culture. By Dennis T. Whalen
45 Compensation Matters:
A CEO Pay Ratio Tipping Point?
Boards and compensation committees should prepare for
a bigger role on broad-based pay topics. By Blair Jones and
Seamus O’Toole
64 ENDNOTE
Special Tribute: ‘A World Without Milt’
Milton L. Rock, longtime Directors & Boards publisher, dies at 96.
By James Kristie
Directors Roster
47 New director appointments from October to December 2017.
My Board Journey: David Baker Lewis, director, H&R Block (p. 54).
Spotlights: GoPro’s openly gay director Rick Welts (p. 49); Facebook’s
first non-white director Kenneth Chenault (p. 50); Maria Zuber, first
women to lead a NASA robotic planetary mission appointed to Bank
of America’s board (p. 53); John B. Veihmeyer who was appointed to
64 Ford’s board (p. 56); Anna Patterson who joined Square’s board (p. 58).
2 DIRECTORS & BOARDS
DB1Q18_Contents.indd 2 2/2/18 1:51 PM
Expectations
for boards
are rising.
Does yours have
the vision to rise
along with them?
KPMG can provide you with an array of informed,
insightful perspectives on how to build a more
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Anticipate tomorrow. Deliver today.
©2017 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Some of the services or
offerings provided by KPMG LLP are not permissible for its audit clients or affiliates. NDPPS 714475
KPMG_DB3Q17.indd 2 10/6/17 8:26 AM
LETTER FROM THE CHAIRMAN
www.directorsandboards.com
™
®
On the Table: Blockchain
A
t the beginning of far beyond cryptocurrency market data provider, in
Editorial Advisory Board
each year, Directors and could help banks shift which I am an investor, re-
Robert H. Rock & Boards identifies money between foreign leased a survey in Novem-
Chairman, MLR Holdings the critical issues that will currencies, which current- ber 2017 revealing lim-
Chairman be “on the table” of up- ly requires a cumbersome ited current deployment
Norman R. Augustine coming board meetings. process involving separate of blockchain technology,
Former Chairman and CEO Our editors not only rec- accounts in every country. but predicting accelerat-
Lockheed Martin Corp. ognize those issues that In addition ed adoption as
Robert L. Crandall will require heightened to money, any- pilot projects
Former Chairman and CEO board attention, but also thing of value are scaled up
AMR Corp. uncover those that could including land, t o f u l l p ro -
Robert L. Dilenschneider disrupt the way business is cars, art, insur- duction. The
Chairman done. In terms of the for- ance and intel- survey found
The Dilenschneider Group Inc. mer, our editors continue lectual property that 12% of
Bonnie W. Gwin to focus on sexual harass- can be repre- large organiza-
Managing Partner of the North ment, gender diversity, and sented digitally tions consider
America Board of Directors Practice environmental, social and on a blockchain blockchain to
Heidrick & Struggles governance (ESG) issues; and be trans- be a top pri-
Charles M. Elson in terms of the latter, they ferred, stored ority in 2018,
Director are delving into the trans- and managed very effi- though only 4% have im-
John L. Weinberg Center formational capabilities of ciently and very securely. plemented the technology.
for Corporate Governance digital technology, in par- A few companies have Boards of directors need
University of Delaware
ticular blockchain. implemented blockchain to be aware of blockchain
Thomas P. Gerrity Blockchain is a shared strategies, primarily in fi- technology’s potential to
Professor and Former Dean record of transactions, nancial exchange and per- create competitive advan-
The Wharton School
maintained in an online, sonal payment applications. tages, which can be both
University of Pennsylvania
distributed ledger, which Many more companies are internal and external. And
Ann McLaughlin Korologos establishes trust and con- now exploring possible boards need to recruit
Former U.S. Secretary of Labor sensus without the need for applications to effect effi- directors who are digital
Susan R. Salka a trusted intermediary.Thus ciencies and new ways of savvy and educate those
President and CEO blockchain technology can doing business in areas. who are not, so that they
AMN Healthcare Services Inc. provide great efficiency and However, companies can determine whether
Russell E. Palmer high security. will need to get all criti- blockchain technology
Chairman and CEO Blockchain is the tech- cal participants to enlist in can provide significant
The Palmer Group nology behind the crypto- their blockchain “ecosys- competitive advantages.
Jeffrey A. Sonnenfeld currency mania kicked-off tem,” which in a supply A first step is to devel-
Associate Dean, Executive Programs by Bitcoin, a peer-to-peer chain application would op a proof of concept
Founder and CEO electronic cash system that include suppliers, trans- and experiment with its
Chief Executive Leadership Institute allows any participant in porters, manufacturers, application. At the very
Yale School of Management
the network to cheaply distributors and regulators. least, directors need to
D & B is an international
and efficiently verify and Given such scaling chal- ask what are the potential
journal of corporate governance and settle transactions. But lenges, the adoption pro- risks of ignoring block-
leadership, directed to the interests of Blockchain technology cess will be gradual. 451 chain technology.
board members, chairmen, CEOs, senior
offi ers, and advisers to the board. It was potentially has a multitude Research, a technology
founded by Stanley Foster Reed in 1976. of powerful applications business intelligence and
4 DIRECTORS & BOARDS
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EDITOR'S NOTE
www.directorsandboards.com
™
®
Social-Good Deficiency?
D
David Shaw
o we just lack the Watch. State Street faced into the ESG realm, in-
Editor and Publishing Director wherewithal to do a huge embarrassment last cluding climate change
Eve Tahmincioglu the right thing? year when a gender-pay and gender diversity.
Executive Editor and Digital Director There have been calls discrimination settlement Another topic we tack-
eve@directorsandboards.com from large investors and by the firm went public. le is the hype surround-
April Hall, Senior Editor others to push directors Aside from what could ing blockchain, the shared
april.hall@directorsandboards.com
to consider the great- be viewed as investor hy- online ledger being hailed
Barbara Wenger, Roster Editor er good for society. And pocrisy, there’s as the ultimate
Monica McLaughlin, Art Director we’ve been giving it a lot a general lack secure tech-
Peter Begalla of ink in our pages, in- of knowledge n o l o g y. E x -
Conference and Education Director cluding a cover package among cor- perts we talked
on environmental, social porate leaders to provide a re-
Published by MLR Holdings LLC
and gover nance issues when it comes ality check. We
Robert H. Rock, Chairman (ESG) in the last issue of to how they also offer the
William U. Rock, President Directors & Boards. c a n p l ay a n metaphor of a
Lisa M. Cody, Chief Financial Officer The latest ESG push ESG role. carbon copy,
came from BlackRock’s A recent for those of us
Editorial and Business Offices
1845 Walnut Street, Suite 900 CEO Larry Fink sending Deloitte sur- who remem-
Eve Tahmincioglu
Philadelphia, PA 19103 an ultimatum to corpora- vey of 1,600 ber those, as a
Ph: 215-567-3200, Fax: 215-405-6078 tions across the country C-level executives around good way to think about
eve@directorsandboards.com
to make social good part the globe found that “less how blockchain works.
Advertising of the overall business than a quarter of those We also take on truth
Scott Chase, National Account Executive strategy plans or else. (We surveyed believe their in financial repor ting
301-879-1613, scottchase@verizon.net address this in our share- own organizations hold and a movement to use
Mike Bachman holder engagement article much influence over crit- technology, and other
National Account Executive
215-405-6070 in this issue.) ical factors such as educa- methods, to figure out if
mike.bachman@directorsandboards.com Last year, a host of in- tion, sustainability and so- CEOs are lying. And we
Denis Cambruzzi stitutional investors, in- cial mobility.” delve into director liabil-
National Account Executive cluding State Street, made The reality is executives ity, board size and sexual
Ph: 949-494-5075, Cell: 949-280-6364
Denis.Cambruzzi@directorsandboards.com getting more women on and directors are going to harassment.
boards a rallying cry. The have to figure out how Our senior editor April
Events Director, Justine Wood firm even erected a stat- they and their organiza- Hall’s conclusion after all
jwood@familybusinessmagazine.com ue of a young girl star- tions can influence a host her research is that direc-
Accounting, Jerri Smith-Baldwin ing down Wall Street’s of societal issues, partly tors can’t stay silent on
215-405-6071
charging bull. It became a because a growing num- the thorny issue of sexual
Subscriptions/Fulfillment global female-power icon. ber of shareholders want harassment in the work-
Barbara Wenger, 215-405-6072 Alas, there seems to al- them to and partly be- place any more.
bwenger@directorsandboards.com
ways be a don’t-throw- cause it’s the right thing As for the social-good
Chairman Emeritus stones-if-you-live-in-a- to do. deficiency, I’d love to hear
Milton L. Rock glass-house moment. In this issue we pulled your thoughts on wheth-
Turns out, BlackRock together eight key top- er it exists in Corporate
Directors & Boards (ISSN 0364-9156) is published quar-
terly, ©2018 by MLR Holdings LLC. All rights reserved. has investments in com- ics we believe are going Amer ica and what the
No portion of this publication may be reproduced in any
form whatsoever without prior written permission from
panies that are drilling in to be "On the Table for role of directors should be.
the publisher. Subscriptions are $325 per year in the U.S.; the Amazon, according 2018", and not surpris- Email me: eve@directors
$350 (by air) elsewhere. Article reprints — Contact Jerri
Smith at 215-405-6071.
to the nonprofit Amazon ingly many of them fall andboards.com.
6 DIRECTORS & BOARDS
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BOARDBOOK WHAT’S ON THE AGENDA?
Director Data
Riskiest of the Risk: What Directors and C-Suite are Worried About
Top Ten Risks for 2018
Source: The sixth annual Executive Perspectives on Top Risks Survey conducted by global consulting firm Protiviti and the Enterprise Risk Management Initiative in the North Carolina
State University Poole College of Management. https://www.protiviti.com/sites/default/files/united_states/insights/nc-state-protiviti-survey-top-risks-executive-summary-2018.pdf
8 DIRECTORS & BOARDS
DB1Q18_BoardBook.indd 8 2/2/18 1:12 PMEvolving Chair and CEO Roles
• The prevalence of the combined Chair and CEO role has declined • The prevalence of Lead Directors has grown modestly from
slightly over the past five years, from 59% in 2012 to 54% in 2016. 73% in 2012 to 75% in 2016.
• The non-executive Chairman role is increasing in prevalence — • Total compensation was $405,000 for Non-Executive Chairs and
29% of the analysis sample utilized the role in 2012 compared to $298,000 for Lead Directors, compared to total pay of $265,000
33% in 2016. The use of a Non-CEO Executive Chairman remains for a typical Director.
uncommon (13% in 2016).
Source: Mercer analysis of 326 companies in the S&P 500 with median revenues of
$10 billion that filed proxy statements between January 1 and May 31, 2017.
#ESG Mania? Disclosing More
Environmental, social and governance issues rise among shareholder proposals, “Over the past five years, we have seen an acceleration of the
outpacing all other proposals evolution of proxies from compliance documents to a communi-
cations focus,” says Ron Schneider, director of corporate gover-
nance services with Donnelley Financial Solutions. “This involves
going beyond disclosing information to explaining why gover-
nance, compensation and other key practices are appropriate for
a company and therefore deserving of investor support.”
Boards Volunteer More Information
About Corporate Practices
(percentage of companies, 2013-2017
6.3%26.0% 17.7%47.0% 20.8%28.0%
Board Evaluations Shareholder Engagement CEO Succession Plans
Source: Equilar’s Corporate Governance Outlook 2018
http://www.equilar.com/blogs/341-boardroom-indicator-185-shareholder-proposals.html Source: Equilar’s Corporate Governance Outlook 2018
New Is In…the Boardroom
There were nearly
400 new independent
director appointments
in 2017, the most in a
decade.
Among the newbies:
Source: Spencer Stuart 2017 U.S. Board Index. https://www.spencerstuart.com/~/media/ssbi2017/ssbi_2017_final.pdf?la=en
FIRST QUARTER 2018 9
DB1Q18_BoardBook.indd 9 2/2/18 1:12 PMBOARDBOOK
Survival Guide
How Tom Hofmann
prepares for board meetings
T
echnology has long infiltrated the board- that would come before the audit committee,” he explains.
Tom Hofmann, director, room, including everything from board Many of the boards he’s served on have been close to home, so his travel
West Pharmaceuticals, portal apps for tablets to filing sharing schedule is typically easy to manage. West Pharmaceuticals is based in
Fox Chase Cancer systems. Exton, Pa., just a short drive from his home in a neighboring suburb, Malvern.
Center, Temple
University Health
Thomas Hofmann, the former CFO of He also serves on the boards of nonprofits Fox Chase Cancer Center and
Sunoco, Inc., and current director for West Temple University Health, which are also local.
Pharmaceuticals, has embraced the changes, to a point. Hofmann dresses business casual for the public company board meetings
He uses the portals provided by the boards on which he serves, but there’s he attends, but his non-profit board gatherings tend to be more formal, basi-
part of him that’s still old school — often opting for printed out documents cally office appropriate.
and face-to-face interactions whenever possible. He prefers face-to-face committee and board meetings, so he only joins in
“I’ve been around for a long time,” he quips. “I prefer hard copies.” telephonically if he’s tied up with a nonprofit responsibility. And he estimates
About half of his fellow board members also use print documents just like between the three boards he serves on, including committee and board meet-
him. But, when meetings are finished and minutes are distributed, the hard ings, he has 40-45 meetings a year.
copies are destroyed. Between meetings, Hofmann monitors news and gets notifications from
One tech advance he does appreciate is digital document delivery. It’s company management, and industry and governance sources to make sure
been great, he says, for board members to get information in a timely manner he’s on top of what may be impacting the organizations he oversees.
prior to meetings. As a member of the National Association of Corporate Directors, he
receives governance updates regularly and other specific reports from think
tanks and accounting firms that specialize in the pharma industry.
“I’ve been around for a long time,” “A number of the boards I’ve been on are in the oil and gas field,” he says,
he quips. “I prefer hard copies.” noting, however, that he was also on a medical device corporate board prior
to this one. “I didn’t grow up in that industry, so [the information] is helpful.”
Hofmann likes getting committee reports, the board book, and other doc- He advises new board members to “be well prepared and focus on the
uments piecemeal so he has time to give everything a thorough read. When major drivers of the business.” — April Hall
reports were sent in the mail in the past, the companies would wait for all
materials before sending the package, which would delay delivery.
When he’s served as chair of audit committees, Hofmann’s communica-
tion with company CFOs has been extensive prior to meeting with other board
members.
“In addition to developing the agenda, we’d discuss all significant
accounting and reporting issues, as well as any other significant matters
This is an ongoing feature of Directors & Boards. To be considered as a subject for
Survival Guide, contact Eve Tahmincioglu at eve@directorsandboards.com.
10 DIRECTORS & BOARDS
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Top of Mind
What directors are thinking
SHEILA BAIR, DIRECTOR:
Thomson Reuters, Host Hotels, and the Industrial and Commercial
Bank of China
T
he great American author Willa Cather once said, “Too much information can be deadening.” What my kid’s
call “TMI” is a common public ailment with today’s technology-driven communications. And it can be fatal for
boards of directors who need enough information to ask the right questions of management and make reasoned
decisions, but who can quickly lose sight of the important issues if inundated with too much minutiae.
This challenge to know how much information is enough has been particularly acute for the directors of large banking organizations
who have been hit with a raft of new regulations since the 2008 financial crisis. Bank supervisors have — justifiably — looked to
governing boards to make sure regulatory concerns are addressed in a timely way. Yet I hear from many large bank board directors,
particularly in the United States, that they are overwhelmed by the sheer weight and complexity of regulatory matters addressed to
them by bank examiners.
To its credit, the Federal Reserve Board proposed guidance last August to more clearly distinguish supervisory expectations for boards
from those of senior management. I applaud this effort which Fed Chair-nominee Jerome Powell describes as intended “to enable directors
to spend less board time on routine matters and more on core board responsibilities.” Importantly, Chair-nominee Powell has clarified that
while supervisory matters will now be addressed to management, boards will receive copies of examination and inspection reports so
they can hold management accountable for remediation. The Fed has struck a good balance in this guidance, which should be welcome
relief to beleaguered bank directors.
Sheila Bair was chair of the U.S. Federal Deposit Insurance Corporation from 2006-2011. She is a founding board member of The Volcker Alliance,
a nonprofit dedicated to excellence in public service.
STEVE ODLAND, DIRECTOR:
General Mills, Inc. and Analogic Corporation
A
s a former CEO and board member of two companies that recently have gone through a CEO change, CEO
succession is top of mind. About 86% of new CEOs are chosen from internal candidates. So review of internal
bench strength, development plans and performance of all senior team members is critical. Boards are making
a far greater commitment to grooming internal talent to become the next CEO because these individuals already
know the company, the culture and the strategy. This is important as new CEOs must engage like they are merging
onto a freeway — come up to speed and get into the flow without causing major accidents!
Boards also should be involved in external recruiting for key positions from which CEO successors will be chosen. Even when companies
bring in an outsider, they generally bring the candidate on below the CEO to try them out and bring the candidate up to speed. Succession
plans are becoming more transparent as well. This allows a board to monitor internal and external reaction to potential candidates. In the
end, a well-developed and frequently evaluated CEO succession plan can determine the success of any company.
Steve Odland is the CEO of the Committee for Economic Development and former CEO of Office Depot and AutoZone.
12 DIRECTORS & BOARDS
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#CorpGov: What’s Trending
14 DIRECTORS & BOARDS
DB1Q18_BoardBook.indd 14 2/2/18 1:13 PMBOARDBOOK
Top Articles on www.DirectorsAndBoards.com
Company Predators Are a
Boardroom Issue
R ecent news has been dominated by
allegations of sexual harassment against
high-profile individuals and against companies
that tolerate a culture of sexual harassment
within the entertainment and high-tech
industries.
At Fox News, CEO Roger Ailes and popular
“The O’Reilly Factor” host Bill O’Reilly were
2017’s Top 10 Corporate Governance Articles finally forced to step down by the board
of parent company 21st Century Fox after
C orporate governance disruptors in 2017
included massive cyber breaches; virtual
annual meetings; the Trump presidency; and
• Reputational Risk: Communicating the
Importance of Principled Behavior
• Should Everything Be for the Record?
persistent allegations of sexual harassment and
financial settlements with their accusers. In the
blockchain mania. • Cyber Responsibility Officially Reaches case of O’Reilly, the decision came after the loss
And that’s what drove the most-read the Board of dozens of sponsors of “The O’Reilly Factor.”
articles on Directors & Boards this year. • A Massive Gap in CEO Readiness Travis Kalanick was forced to step down as
Here’s a rundown on the top 10: • Opinion: Corporate Directors MIA in CEO of Uber by major Uber investors, not the
• Virtual Shareholder Meetings: Fortifying Cybersecurity Battle company’s board, after allegations became
or felling corporate democracy? • Blockchain Technology: A corporate public that a culture of sexual harassment
• Becoming a High-Tech Director directors checklist was the norm within Uber, as well as other
• Forecasting the Trump Governance allegations of unethical and illegal conduct by
“Windstorm” https://www.directorsandboards.com/ the company.
• Many Directors Are Culture Clueless news/2017s-top-10-corporate-governance-articles
https://www.directorsandboards.com/news/
company-predators-are-boardroom-issue
Blockchain Technology: A corporate directors checklist
I n its simplest terms, blockchain technology
allows several parties to transact business in
real time by recording information to a ledger
because Delaware is the legal home of more
than two-thirds of Fortune 500 corporations
and of more than half of all publicly traded
through a network of computers. The record companies in the United States. Evolving the CIO Role in the
is only updated on the ledger if everyone who Because blockchain technology replaces Digital Age
is a party to the transaction is in agreement. the need for a trusted intermediary, it can
Once updated, the record cannot be changed
and becomes an immutable record of the
transaction.
transform the way business is conducted
across almost every sector, from finance
to manufacturing, from healthcare to
In my role with technology companies (which
today means all companies), I’ve seen a
turbocharged evolution hit the role of the chief
The enactment of Delaware’s blockchain agriculture. information officer. Just within the past 12-18
amendments (that authorize corporations to months, the role of the CIO has quickly been
maintain corporate records on a blockchain) https://www.directorsandboards.com/news/ transformed.
in August of 2017 catapulted blockchain blockchain-technology-corporate-directors- At Schneider Electric, our CIO stepped up
technology into the mainstream. This is checklist to become our effective new chief digital
transformation officer. At Volvo, our CIO reports
to the new chief digital officer position. My other
Top 10 Boardroom Actions for 2018 boards are likewise closely involved in seeking out
the digital leadership we know will be needed.
W hat should be on the first boardroom
agenda for 2018?
Start by asking yourself a few tough
from rethinking board committees to setting
up a crisis management plan.
To survive in the new business era, the
company needs a digital transformation leader.
questions, before your investors do. https://www.directorsandboards.com/news/ https://www.directorsandboards.com/news/
Go to the link below to see top 10 corporate top-10-boardroom-actions-2018 evolving-cio-role-digital-age
governance actions for directors, everything
FIRST QUARTER 2018 15
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BOARDS & BUSINESS DISRUPTION
How private and family businesses build an
engaged and effective board of directors to
copilot through today’s turbulence, including
blockchain, sexual harassment, cybersecurity,
the ‘Amazon’ effect, and more.
TO LEARN MORE, Directors & Boards, Family Business Magazine and Private Company Director
AND REGISTER, visit: invite owners, shareholders and board members of privately held companies to
www.privatecompanydirector. the Private Company Governance Summit 2018, May 16-18, 2018, at the
com/PCGS18 Westin City Center, Washington, D.C.
QUESTIONS ABOUT THE The sixth annual Private Company Governance Summit is the only national
PROGRAM? conference focused exclusively on the unique governance challenges of privately
Contact Peter Begalla, owned businesses, including closely held companies, family-owned companies
Conference and Education and private equity-owned companies. Learn from directors, business owners,
Director, pbegalla@ investors and experts who can guide you on the governance path to success.
familybusinessmagazine.com
or (703) 850-5497
CONFERENCE REGISTRATION RATES
Early Registration Pricing Past attendees of the Private Company Governance
(before March 18, 2018) Summit or the Transitions conferences qualify for an
additional discount on their registration fees:
Private company owners, shareholders, managers
and investors, and public and private company $1,507.50 First attendee
board members: $1,125 Additional attendees from the same
$1,675 First attendee company/board
$1,250 Additional attendees from the All other attendees: advisers, consultants, others
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same company/board allied to the field:
$2,350 Each attendee
PCGS_2pg_DB1Q18.indd 16 2/2/18 12:15 PMCONFERENCE PROGRAM PREMIERE SPONSOR
WEDNESDAY, MAY 16, 2018 practices and sexual harassment claims, set
off a national conversation on private company
4-5 p.m. Preconference Session
governance and the importance of having directors
Capitalizing on Business Disruption: who can guide management and shape business
Starting and building the private company values.
board This session will address the important issue
Business disruption is fast and furious today, and of tone at the top. Successful private boards
boards can play a key role to help private companies members and owners will share their experiences SILVER SPONSOR
manage and capitalize on the turbulence. Get on how they established a culture that allows the
practical and actionable advice from those who know company to deal successfully with reputational
this first hand. risk, the impact of key social issues, and crises.
This session spotlights past Private Board of the
Year awardees who will share how boards bolstered 10:30-11:00 a.m. Networking Break
their success. They will also offer practical steps they
11:00-12 Workshop
took to build their boards and how they managed
the transition from a family/insider board to a Setting Your Private Board’s Priorities
professional board. Learn the nuts and bolts of their BRONZE SPONSORS
12-12:15 p.m. Networking Break
board journeys, including:
• What board structures they choose (advisory or 12:15-1:30 p.m. Lunch and Keynote
fiduciary, fully or partially independent); Conversation
• How they find and compensate directors,
1:30-3 p.m. Expert Briefing
• Lessons they learned and how they adjusted to
• Defining board roles: Chairman, corporate
create high-functioning, strategic boards?
secretary, lead director and committee chairs.
5:30-6:30 p.m. Opening Session • Engaging private equity and other outside
Board Dynamics in Private Company investments.
Governance: Moving beyond “yes men.” • When to sell all or part of the business.
Private company boards are only as effective as • Cybersecurity primer for boards.
company owners and shareholders allow them, and • Advisory vs fiduciary boards.
support them, to be. • Planning for the most effective board meeting.
This session offers practical advice and • The board and succession planning. strategy or more? How diverse should your board
real examples of how to build collegiality and • What’s Blockchain, and why should I care? be in terms of gender and ethnicity?
effectiveness without “yes men” or disengaged
directors. It will answer a host of board dynamic 3-3:15 p.m. Networking Break 6:30-9:00 p.m. Group Dinner and Private Boards
questions:
3:15-4:15 p.m. Session of the Year Awards
• How do you create the best ABCs — attitude,
behavior and candor — within your board? The Owner-Board Relationship:
• How to teach directors about family/private Creating effective shareholder/family, FRIDAY, MAY 18, 2018
company history, and dynamics to build management and board interaction. 7:30-8:30 a.m. Breakfast
understanding? A private company board can only be effective
with trusted and solid relationships between 8:30-9:15 a.m. Keynote Interview
• How do you manage that board most effectively?
company management/owners, family members
9:15-9:30 a.m. Networking Break
6:30-7:15 p.m. Keynote Interview and directors.
This session will offer real-world best practices 9:30-10:30 a.m. Workshop
7:15-9 p.m. Networking Reception and Dinner
on how to create effective family or owner Board Best Practices
governance (through family and owners’ councils)
THURSDAY, MAY 17, 2018 and develop systems for effective communication 10:30-10:45 a.m. Networking Break
7:30-8:30 a.m. Breakfast between shareholders and the board. Solid
10:45-11:45 a.m. Session
business governance needs solid ownership
8:30-8:45 a.m. Conference Introduction governance. The Private Board’s Role in Digital
Business Disruption Shaping Private Disruption: Your copilot through turbulence.
4:15-5:15 p.m. Concurrent Workshops All private companies need to push management
Company Governance for the Next
Preparing the Next Generation for to address the impact of digital disruption on their
Five Years
Board Service companies, whether it’s the “Amazon” effect,
8:45-9:15 a.m. Keynote Interview Identifying, developing and training management cybersecurity or such emerging technologies as
and family members for board roles. blockchain.
9:15-9:30 a.m. Networking Break This session will offer real-world guidance on
Board Composition, Refreshment and
9:30-10:30 a.m. Session how the board can maintain ”noses in, fingers
Diversity out” with management, and still reassure the
Uber-Sized Governance Lessons: How to refresh your board and build the most shareholders they represent that they have solid
The private board’s role in shaping effective diversity of experiences and background. strategies for the digital future.
corporate culture. What should your board look like? What skills
Scandals at Uber, including shady business do you need — M&A experience, technology, 11:45 a.m. Conference Close
PCGS_2pg_DB1Q18.indd 17 2/2/18 12:15 PMON THE TABLE FOR 2018
ON THE TABLE
for 2018
• SEXUAL HARASSMENT
• BLOCKCHAIN
• ENVIRONMENTAL, SOCIAL
& GOVERNANCE • DIRECTOR
LIABILITY • GENDER DIVERSITY
• SHAREHOLDER ENGAGEMENT
• TRUTH IN FINANCIAL
REPORTING • BOARD SIZE
18 DIRECTORS & BOARDS
DB1Q18_CoverStory.indd 18 3/23/18 3:01 PMON THE TABLE FOR 2018
SEXUAL HARASSMENT:
Boards Can’t Be Silent
Company policies and more women on boards could stem financial
fallout.
By April Hall
T
he issue of sexual harassment has been high-profile men in many fields have fallen,
kept quiet in the boardroom. including actor Kevin Spacey, U.S. Senator Al
The thorny topic is often treated Franken, Fox News Channel’s news chief Roger
under the larger umbrella of healthy Ailes and anchor Bill O‘Reilly. It seems there
company culture, says Eric McCarthey, are more claims every day and the issue is forc-
a director for Spar Group, Salsbury Industries ing its way to the fore for not only executives,
and Interra International LLC. but directors as well.
At its core, he says, sexual harassment is a While company executives have addressed
question of culture and tone at the top that can firings, there has been little talk from board di-
no longer be a “silent” issue or kept in a com- rectors.
mittee. If you’re a director, he adds, sexual ha- Most boards of directors haven’t even talked
rassment policies are “very material to one of about sexual harassment as a business issue, ac-
your responsibilities. It is a duty of care and a cording to a recent survey.
duty of loyalty” to employees and shareholders. Some 77% of directors surveyed said their
And with the rise of the #MeToo movement, boards had not discussed, and 83% had not reas-
it’s a responsibility that’s becoming harder and sessed, company risk as a result of media reports
harder to ignore. There are not just potential of sexual harassment.
bottom-line implications (20th Century Fox set- The survey, from theBoardlist and Qualtrics,
tled $90 million over sexual harassment claims), was taken in July, in the wake of summertime
but a growing effort to end forced arbitration scandals that led to the ousting of Uber founder
may mean more accusations will be pushed into and CEO Travis Kalanick.
court and the public spotlight, increasing risks “To be fair, the Harvey Weinstein story hadn’t
of damage to the high-powered accused and the happened yet,” points out Sukhinder Singh
brand for which they work. Cassidy, CEO and founder of theBoardlist. “It
In recent months, harassment claims have wasn’t a conversation then, but I’d be shocked
grown to epidemic numbers, an avalanche part- in six months if we see it isn’t becoming one.
ly triggered by revelations of movie executive My hope is when sexual harassment is not just
Harvey Weinstein’s pattern of sexual predation. in tech, but politics, the media, entertainment,
When facts came to light, he was ousted from boards will start addressing company culture
his own company and stripped of industry ac- proactively.”
colades and memberships. Since then, more That’s beginning to happen.
FIRST QUARTER 2018 19
DB1Q18_CoverStory.indd 19 3/23/18 3:01 PMON THE TABLE FOR 2018
principles. He suggested bringing in outside
resources to evaluate aspects including the
role of zero-tolerance policies.
But it’s not just tone and awareness. Mc-
Carthey advises that ancillary policies need
to be re-evaluated, including things like
travel and entertainment guidelines that
may contribute to the opportunity for sex-
ual harassment claims.
When a claim of sexual harassment is re-
ported, the first step is to investigate the
claim for its validity, McCarthey says. But
after that investigation, it’s time to turn to
any patterns surrounding the behavior. And
there are times when the board needs to
step into that investigation.
McCarthey has firsthand experience. At
a company where he sat on the board, the
CFO was accused of sexual harassment of
a subordinate.
The conversations about the need to dis- “We were brought into the loop fairly
Some 77% of cuss sexual harassment and policies surround- early on by the CEO of the company,” he
directors surveyed ing it are starting across industries with a focus explains. The first step, particularly because
on corporate culture, says Paula Loop, leader of the involvement at the C-suite level, was
said their boards of the Governance Insights Center at PwC. “to get as many facts as we could.”
had not discussed, “[Directors] are thinking about it from a In the end, the claim was credible and the
risk perspective as a culture issue and the im- CFO was fired.The process was “swift,” and
and 83% had pact [a sexual harassment claim] could have the board worked closely with the human
not reassessed, on the brand or the reputation of the com- resources executive. During the investiga-
pany,” Loop says. tion they found the incident to be isolated
company risk as Part of the discussion, she continues, must and he credits the CEO for staying poised
also include asking the company’s manage- and modeling “great leadership” during the
a result of media ment,“What have you done recently to make process.
reports of sexual sure everyone knows the policy and reinforce A key way to stem the sexual harassment
it in the company.” tide, is by bolstering gender diversity.
harassment. Checking in with every level of employee Having more women — who are the
at a company is “the new normative” of board majority of the victims of sexual harassment
engagement, McCarthey adds. — on boards could help men understand
“The new normal is you have to get out the pervasiveness and dynamics of the prob-
and talk to people in the company periodi- lem, McCarthey maintains.
cally, to go touch and feel the company’s op- “The thing that happens with having
erations at a bunch of different levels.” more women in the boardroom, and this
It’s only through this type of interaction a is so positive,” he stresses, “is it gives the
director can get a sense of the culture, he says. board a higher emotional quotient in un-
Tone at the top and good leadership derstanding the subtle things about diver-
modeling is the responsibility of the board, sity and gender relationships that are blind
which should include reviewing workplace spots for men.” ●
20 DIRECTORS & BOARDS
DB1Q18_CoverStory.indd 20 3/23/18 3:01 PMON THE TABLE FOR 2018
BLOCKCHAIN:
‘Fraud’ or Fortune?
What directors need to know about the technology behind Bitcoin.
By Eve Tahmincioglu
W
hether it’s JP Morgan’s CEO dispersed among a network of computers.
Jamie Dimon publicly eat- It’s different than a typical database that’s
ing his words about block- housed on one computer, server or the cloud
chain, or Kodak attempting and accessed by individual computers, smart-
to resurrect its photo dom- phones, etc. In the blockchain, there’s essen-
inance with the technology, the promise of tially a carbon copy of the ledger/database
what is essentially a more secure, shared online on all the devices looking to use/access it
database is getting hard to ignore. and it can’t be changed without sign-off
Blockchain — the technology behind from all parties in the network.
cryptocurrencies such as Bitcoin — has been Zealots in the blockchain universe like to
hailed as the next big disruptive business say the technology is immutable, unable to
force, already being tested in everything from be changed, because of its unique structure,
tracking Chinese pork to making insurance and is thus unhackable. Many tech experts,
underwriting more efficient. however, are dubious of claims it can’t be
“2017 was the year of enthusiasm,” says
A
Christian Catalini, assistant professor of Tech- t its core, blockchain technology is a ized community of bike ownership, record
nological Innovation, Entrepreneurship, and network of computers that are con- ownership rights in land, intellectual proper-
Strategic Management at the MIT Sloan nected by complex algorithms. ty, and other items. The list goes on and on.
School of Management, about blockchain. Parties to a transaction on a blockchain Last summer, the State of Delaware
“2018 is the year of more mature deployments see the same information at the same time. amended its corporate law to expressly
and the slow adoption in real-world uses.” When the parties agree to the terms of a authorize corporations to maintain their
But he warns, “Markets are overreacting transaction, those terms are recorded on the stock ledger on a blockchain. As support
and people are flocking to anything with blockchain. Once recorded, the terms become for blockchain technology grows, it will
‘blockchain’ on it. It’s important to cut a permanent record that become increasingly
through the hype.”
It behooves directors everywhere, he adds,
cannot be altered. Each
party has the same copy
What’s more important for
directors of corporate
to understand the technology and figure out of a mutual ledger which Blockchain? boards to engage with
what it means for their organizations. provides an audit trail of this subject matter. The
So why all the blockchain-mania? For who did what and when. Blockchain technol- technology may be complicated, but the
business operations, much of the interest fo- ogy allows parties who normally would not concepts are straightforward.
cuses on its potential to provide heightened trust each other to transact business directly,
levels of efficiency, transparency and security securely and efficiently, without the need for —Andrea Tinianow, Esq., the founder
for a host of business transactions without a trusted third party intermediary. of the Delaware Blockchain Initiative and
the need for an intermediary. Blockchain technology is now used to Chief Innovation Officer at Global Kompass
There are endless articles trying to explain track the provenance of diamonds, digitize Strategies, Inc., a global management con-
what blockchain is, but the consensus de- the rights of gold ore, organize a decentral- sulting firm.
scribes it as an open, online ledger/database
FIRST QUARTER 2018 21
DB1Q18_CoverStory.indd 21 3/23/18 3:01 PMON THE TABLE FOR 2018
It’s different than a typical database that’s housed on one computer, server or the cloud and
accessed by individual computers, smartphones, etc. In the blockchain, there’s essentially a
carbon copy of the ledger/database on all the devices looking to
use/access it and it can’t be changed without
sign-off from all parties in
the network.
compromised but do see it as more secure cy “to empower photographers and agencies
than many existing systems. to take greater control in image rights man-
“Blockchain’s going to be a game chang- agement.”
er,” says Patricia Oelrich, an independent There is also a lot of blockchain interest
board member with the Federal Home Loan when it comes to tracking products, especially
Banks Office of Finance and a board mem- in the food safety arena.
ber of the Association of Audit Committee Walmart is experimenting with it to track
Members, Inc. “But I think boards in general pork supplies in China and mangoes in the
are struggling with ‘what it means to me.’” United States.
There is a lot of confusion out there about The retail giant partnered with IBM and
blockchain, partly brought on by the mad Tsinghua University in Beijing last year to
scramble by investors and businesses to figure pilot the use of blockchain to trace food items
out if they’re missing the boat on Bitcoin, more efficiently in the event of a foodborne
the cryptocurrency. News reports and atti- illness.Tests conducted by Walmart found that
tudes about Bitcoin and blockchain’s prom- “blockchain reduced the time it took to trace
ise seem to change daily. a package of mangoes from the farm to the
Indeed, after deriding the technology last store from days or weeks to two seconds,” ac-
year and calling it a “fraud,” JP Morgan’s cording to a joint press release from the three
Dimon told Fox News last month that he organizations in December.
regretted what he said, adding that: “The Blockchain could also be a game changer
blockchain is real.” for the insurance industry.
And Eastman Kodak’s shares recently sky- Blockchain technology could completely
rocketed after the company announced it was upend the insurance value chain, according
launching a new image-rights service based to a recent PwC report titled Blockchain, A
on blockchain. Catalyst for New Approaches in Insurance. Here
In a release, the company said it was using is how:
blockchain technology to create KODAKOne, • Development/acceleration of new prod-
an image-rights management platform, and ucts/markets for which business models were
KODAKCoin, a photo-centric crypto-curren- difficult to define until now.
22 DIRECTORS & BOARDS
DB1Q18_CoverStory.indd 22 3/23/18 3:01 PMON THE TABLE FOR 2018
• New approaches to underwriting, con- And, he adds, boards who haven’t already “2017 was the year
tracts and claims management, particularly done so need to bring in the company CIO
through a combination of smart contracts and and other top tech managers, to talk to direc- of enthusiasm,” says
the Internet of Things (IoT). tors about blockchain, what’s being done and Christian Catalini,
• Overhaul of the modus operandi of insur- what the plans are for the future.
ance agreements. A report from Gartner found that while the assistant professor
• New reinsurance approaches, particularly majority of directors have heard about block- of Technological
internal reinsurance via smart contracts. chain, many don’t understand its full potential.
• Transformation of asset management To bolster the education process, the consult- Innovation,
with automated settlement and delivery of ing firm put a checklist together for CIOs on
intangibles. what they should recommend to directors
Entrepreneurship,
“Blockchain promises cost savings and it if they see merit in building or expanding and Strategic
promises to produce those cost savings in a blockchain in their organizations:
more secure fashion,” says Joe Calandro, a • Propose that the board commission a sce- Management at the
managing director at PwC and a fellow at the nario-planning exercise by engaging senior MIT Sloan School
Gabelli Center for Global Security Analysis at executives to map out how three possible fu-
Fordham University. tures for blockchain will affect the enterprise’s of Management,
Calandro cautions, however, against think- business. about blockchain.
ing it’s foolproof. “If history taught us any- • Advise the board to take a hard look at
thing, nothing is immutable. If someone wants the company’s value chain and its sustainabil- “2018 is the year
to crack it they can.” ity by analyzing which parts would need to
But, he adds, blockchain makes it harder for change as blockchain propels a transition to a
of more mature
nefarious players because hacks can be identi- frictionless market. deployments and
fied quickly given the shared distributed system. • Introduce to the board a plan to conduct
There are privacy issues. a fresh business and competitor analysis by the slow adoption in
“On a distributed ledger, it’s very difficult to taking into account the business dynamics real-world uses.”
keep private data,” explains Emin Gün Sirer, and risks that smart contracts and blockchain
associate professor and co-director of the Ini- make possible.
tiative for Cryptocurrencies and Smart Con- • Encourage innovation by organizing visits
tracts at Cornell University. “If your business to at least five blockchain startups related to
relies on private data in some way, you don’t your industry in the next six months, so that
want to be putting it on an open blockchain.” you can more effectively update the board on
While most uses for blockchain are focused cross industry blockchain developments.
on open source-type systems like Bitcoin, the Federal Home Loan Banks’ Oelrich has
technology can also be implemented with a been doing all she can to educate herself about
permissioned model, expected to be the norm blockchain, including attending presentations
for businesses. Using the closed model, “each and reading up on the technology.
participant has a unique identity, which en- From the board perspective, she notes,
ables the use of policies to constrain network “what we should be asking as part of the
participation and access to transaction details,” tech strategy is where blockchain is today and
according to Blockchain for Dummies, IBM Lim- where it might fit into the tech strategy down
ited Edition. the line.”
Before jumping on the blockchain band- Directors, she stresses,“can’t stick their head
wagon, Sirer suggests directors join block- in the mud.You’ve got to know what’s going
chain consortiums that are now being formed on out there. The problem with tech today,
in an array of areas, including supply chain, it can slam you real fast if you’re not on top
fintech and insurance. of it.” ●
FIRST QUARTER 2018 23
DB1Q18_CoverStory.indd 23 3/23/18 3:01 PMON THE TABLE FOR 2018
ENVIRONMENTAL,
SOCIAL & GOVERNANCE:
Key transparency and
performance issues for 2018.
By Thomas Singer
W
hen it comes to New Year’s more than half report on this metric, women
resolutions, socially con- represent only about one in five management
scious directors might con- positions.
sider tackling this trifecta: Directors should pay particular attention
gender diversity, climate to imbalances between the median percent-
risk and sustainability-tied compensation. age of women in the overall workforce and
These issues stood out in a recent Confer- the median percentage of women in man-
ence Board study, which looked at transpar- agement positions. For instance, data from
ency and performance in select areas of S&P the financial sector show a significant imbal-
Global 1200 companies. ance. Despite women accounting for 52% of
the workforce among financial companies,
Gender diversity at the man- women represent only 27% of management
agement and board levels positions at these companies, a gap of 25 per-
Only 12% of North American companies centage points.
disclose the percentage of women in man- Diversity data for boardrooms is not any
agement positions. By comparison, European rosier. Today, women fill only one in five
companies are almost four times more likely board seats among S&P Global 1200 com-
to report this information in their annual re- panies. Even among health care companies,
ports or sustainability reports. where on average women account for more
The low levels of disclosure highlight an than half of the workforce, women held only
unflattering reality: Women hold just one in 20% of board seats. Given these figures, it
four management positions among North comes as no surprise that the issue of board
American companies. And while disclosure diversity is getting the attention of share-
represents a step in the right direction, by holders. Last year, for example, shareholders
no means will that alone move the diversity in the U.S. voted on eight proposals asking
needle. Among European companies, where companies to prepare a report on steps to-
ward increasing board diversity. Two of these
shareholder proposals passed.
Directors can take a step toward improv-
ing board diversity by considering the “Every
Other One” approach. Coined by the Com-
mittee for Economic Development, the ap-
proach entails appointing a woman to every
24 DIRECTORS & BOARDS
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