The Conference Board Governance Center Blog

Oct
28
2010

Basel Report on Corporate Governance Better Read for Boards Than Standards

As world leaders prepare for the G-20 Summit in Seoul, South Korea, Nov. 11-12, the Basel III capital reform plan will be a big part of the discussion as countries continue to figure out how to best deal with fallout from the 2008-2009 financial crisis. While those international banking reforms that were written by the Basel Committee on Banking Supervision primarily address capital ratios and transition arrangements, there is another report written by the same committee that should be on the reading list of all corporates worldwide.

The committee’s Principles for Enhancing Corporate Governance, which came out earlier this month, can easily be applied to all public and private companies. The report is an update on 2006 guidance, which was derived from a 1999 report. In the new report, the committee focuses on six areas that are the core of every corporate governance program: board practices, senior management, risk management and internal controls, compensation, complex or opaque corporate structures and disclosure and transparency. Read the rest of this entry »

Oct
27
2010

Blog Honored by LexisNexis

The Conference Board Governance Center Blog continues to make its mark felt in the corporate governance blogosphere. We have been named to the LexisNexis Top 25 Blogs for 2010 for its Corporate & Securities Law Community and UCC, Commercial Contracts and Business Law Community.

LexisNexis Top 25 Blogs 2010

In the first year of the blog, it has been my pleasure to provide analysis of timely board governance issues, commentaries from prestigious guest bloggers, Q&A’s with some of the top experts and a compilation of such resources as white papers, SEC comment letters, legal briefs and client memos and other corporate governance blogs. For our second year, I plan to expand the breadth of the blog as well as the number of subscribers.

As for the LexisNexis honor, we at the Governance Center are quite proud to be among such blog honorees as James McRitchie’s CorpGov.net, The Corporate Library Blog, Francis G. X. Pileggi’s Delaware Corporate and Commercial Litigation Blog, and the Harvard Law School Forum on Corporate Governance.

We plan on continue to make the Governance Center Blog a must read for all directors and those in the corporate governance space. I just want to thank the team at the Governance Center (Matteo Tonello, director of corporate governance research; Paul DeNicola, director of the Governance Center; Brandi Mathis, center manager; Jaclyn Duran, center program administrator) for all their work committed to the blog. I also want to thank the team over at LexisNexis for this honor.

“The honored blogs contain a wealth of information for the business law community, with timely news items, practical information, expert analysis, tips, frequent postings, and helpful links to other sites,” according to a LexisNexis statement.

However, the voting isn’t over, according to the folks over at LexisNexis. They still need to name the top blog for 2010. The polls are open for Top Business Blog of the Year, with a winner being announced on Nov. 3.  You will need to be registered in order to vote.  If you haven’t previously registered, follow this link.  Registration is free and does not result in sales contacts. Once you are logged in, you can then vote by checking the box next to your favorite business law blog then submitting the results.

For a list of all the blog honorees, click here.

Oct
21
2010

Report: Say on Pay Picking up Steam at Financials

On the same day the SEC issued its long-awaited proposed rules on advisory votes for executive compensation and “golden parachutes,” The Conference Board Governance Center announced in its 2010 U.S. Directors’ Compensation and Board Practices Report that Say on Pay is gaining some traction among financial service companies but almost no companies surveyed have adopted such a policy for golden parachutes.

The Oct. 18 report, [Read it here.] which was conducted in collaboration with the Society of Corporate Secretaries and Governance Professionals and was sponsored by the Deloitte Center for Corporate Governance, found that 22 percent of financial services companies surveyed have adopted Say on Pay compared to just 3.8 percent in manufacturing and 2.8 percent in non-financial services. Among financial companies, the advisory vote has been introduced by 42.9 percent of those with assets valued at $100 billion or higher. The report states that is mostly due to the large banks that participated in the Troubled Asset Recovery Program (TARP). Overall, 93 percent of all respondents don’t have Say on Pay policy.

The report is based on a survey of 279 corporate secretaries that took place in May and June 2010. [Download report here. (Free to members.)] It was written by Matteo Tonello, director of corporate governance research for The Conference Board, and Judit Torok, senior research analyst in The Conference Board’s human capital department.

Other major findings from the report include:

  • The largest companies (by revenue) predominantly elect directors via majority voting. More than three-quarters of companies in the largest revenue group utilize some form of majority voting, and 95.1 percent also include a mandatory resignation policy.
  • Boards increasingly focus on risk oversight. Almost all financial companies with asset value equal to $10 billion or more have a designated chief risk officer. Nearly half of all non-financial companies and 46.2 percent of manufacturing companies have an enterprise risk management committee at the management level.
  • Large companies, in particular, utilize clawback provisions. At least 40 percent of companies in the manufacturing and non-financial services industries have adopted clawback provisions to recoup executive compensation in the case of a restatement or fraud.

The proposed SEC rules, which are due to take effect for proxy season 2011 following the Nov. 18 public comment period deadline [See Say on Pay and golden parachute proposed rule and institutional investment manager proxy voting disclosure proposed rule.], would require public companies to do the following:

  • Shareholder approval of executive compensation (Say on Pay): Section 14A (a) of the Exchange Act would require such votes to take place at least once every three years beginning with the first shareholders’ meetings taking place on or after Jan. 21, 2011. Such a vote would have to be disclosed in the annual proxy statement and the Compensation Discussion & Analysis would have to include whether a company considered the results of the non-binding vote.
  • Shareholder approval of the frequency of shareholder votes on executive compensation: Starting with Jan. 21, 2011, at least once every six years companies would have to allow shareholders to vote on how often they would hold Say on Pay votes.
  • Shareholder approval and disclosure of golden parachute arrangements: Companies would have to disclose compensation arrangements for executive officers in connection with mergers, going private transactions and third party tender offers. Also, companies would have to provide a shareholder advisory vote to approve such golden parachute arrangements in merger proxy statements.
  • Institutional investment manager reporting of votes: Such managers would have to file annual statements with the SEC disclosing their votes on Say on Pay, frequency of Say on Pay, and golden parachute arrangements. The rule would apply to every institutional investment manager who manages certain equity securities with an aggregate fair market value of at least $100 million.

A separate survey of more than 700 private and public company directors released by the National Association of Corporate Directors (NACD) on Tuesday found there is urgency for risk and crisis oversight and a better feeling about the alignment of CEO pay to performance. Corporate board directors rank risk and crisis oversight among the top three priorities compared to 16th in 2007.  A total of 78 percent of directors believe their CEO’s executive compensation program improved corporate performance and 75 percent believe their CEO’s pay matches their performance. This compares to a 2007 NACD survey that found 77 percent of directors thought CEO pay was excessive.

Oct
20
2010

Directors Beware! Next Crisis is Upon Us

Don’t look now public company directors, but the next financial crisis may be upon us and it looks a lot like the 2008 crisis that was borne out of the housing bubble. Apparently, the underlying cause of the collapse of the mortgage-backed securities (MBS) and collateralized debt obligations (CDO) markets two years ago has not gone away.

The attempted resolution of millions of foreclosures on American homes by big banks (prior to Bank of America’s decision yesterday to reinstitute foreclosures after a short investigation of its processes, many large banks had temporarily halted foreclosures) that have acted as servicers of those loans has exposed an ugly secret. It was that those banks may not have the legal right to seize those properties because the oversecuritization of the notes has made proof of ownership a problem. In short, one by one some state courts are finding the Mortgage Electronic Registration Systems (MERS) that was used to make securitization of those loans easier may have decoupled the payment promises made by borrowers from the mortgages they signed. Read the rest of this entry »

Oct
14
2010

Survey: Quotas, Mandates Not Answer to Close Gender Gap on Boards

The gender gap on U.S. public company boards continues to grow yet female directors agree with their male counterparts that quotas or such “silver bullet” solutions as requiring three women on a board are not the answers, according to two recent surveys.

However, they do agree that “fresh perspectives on the board (including the value added by competent women candidates) and leadership indicators (rather than regulatory or legislative tweaking) are more likely to improve shareholder trust and confidence,” Elizabeth Ghaffari, founder of Champion Boards, a service of Technology Place, and a director herself, wrote me in an e-mail today. Read the rest of this entry »

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