The Conference Board Governance Center Blog


Expect the impact of any Dodd-Frank Act rollback to be minimal

Financial choice logo2

By Gary Larkin, Research Associate, The Conference Board

Nearly four months into President Trump’s first term, the perception is that a full rollback of the Dodd-Frank Act rules related to corporate governance and executive compensation is not in the cards. (See our related blog post from February  13.) Instead, management and directors of public companies can expect some tinkering when it comes to enforcing existing rules and finalizing others.

In speaking to two former SEC commissioners and a fellow at the Millstein Center for Global Markets and Corporate Ownership at Columbia Law School, I can say that public companies aren’t going to wait around to see how it plays out.  The gist of what they told me is that while the federal government can roll back regulations, it can’t always change a company’s behavior and routine that the regulations helped institute.

The House Financial Services Committee earlier this month voted along party lines to send the Financial CHOICE Act to the House floor. Among many things, the bill would limit the use of Say on Pay, eliminate the CEO pay ratio, conflict minerals, and hedging policy disclosure rules, and limit clawbacks to those executives responsible for company financials when there is a restatement.

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The Conference Board/Millstein Center General Counsel Summit highlights available

The Conference Board Governance Center and the Millstein Center for Global Markets and Corporate Ownership at Columbia Law School recently released the highlights of a Summit they co-sponsored on Short-Termism and Public Trust.

The report from the Summit, which was held September 27, 2016 at Columbia University, includes highlights of the group’s discussions on short-termism and the role of boards of directors and general counsel:

  • Genesis of the Summit (Ira M. Millstein, founding chair, Millstein Center; R. William Ide, chair, The Conference Board Governance Center Advisory Board)
  • The Short-Termism Debate and The New Drivers of Corporate Governance: The Market at Work, Abusive Capital, or Both? (Millstein; Former Delaware Supreme Court Chief Justice E. Norman Veasey)
  • The Path Forward for Corporations and their Boards (William E. McCracken, former chair, Millstein Center; Stephen M. Cutler, vice chair, JP Morgan Chase; Peter R. Gleason, president, National Association of Corporate Directors)
  • The Path Forward For the Summit Initiative to Further Long-Termism and Rebuild Public Trust in Business (Laura Stein, executive vice president, general counsel and public affairs, The Clorox Co.; Ide)

In addition to the comments made by panelists, there is an appendix of related material. A complimentary copy of the summary is available on The Conference Board Governance Center website.


What causes corporate directors to overreach their fiduciary responsibilities?

By Patrick R. Dailey, Ph.D.

Present-day corporate directors are being equipped by governance educators, driven by regulators, and pressured by activists to be more actively engaged in pursuing their fiduciary and governance responsibilities. They are encouraged not to be simply fiduciary custodians of the interests of shareholders but active leaders with specialized knowledge of risks and visionary opportunists.

Directors have responded. They have increased their attention and time commitment to their responsibilities: strategic transformation, compliance oversight, succession, and governance duties. They are more alert in protecting their enterprise from risks and more inclined toward increased transparency expected by their shareholders and the media.

With the corporate landscape increasingly filled with “watch dogs,” astute directors clearly recognize that errors in their judgment and/or timing are not casually overlooked by stakeholders these days. As the job has become more demanding, it certainly has become less forgiving. With the increasing scrutiny and expectations, what are directors inclined to do to guide their companies and protect their reputations, if not their wealth? Read the rest of this entry »


Why corporate governance failures continue

By Frederick D. Lipman, Esq

In 2012, I wrote a Director Notes publication for The Conference Board entitled “From Enron to Lehman Brothers:  Lessons for Boards from Recent Corporate Governance Failures.”  It included a review of independent investigative reports, books and articles on various financial disasters, including Enron, AIG and Lehman Brothers and noted the presence of actual and potential whistleblowers who might have warned the audit committee or other independent directors of the impending calamity. However, the information never reached the independent directors. The article advanced the proposition that in order for boards to fulfill their oversight obligations, the organizations they serve must have established robust whistleblower and compliance policies and programs to encourage reporting that can help identify risk exposures, fraud, or other illegal activity. The corollary of that proposition is that the current practices of audit committees and other independent directors are not sufficient to protect shareholders from unpleasant surprises.

Since 2012, the march of corporate governance failures has continued unabated. Financial disasters have occurred in the automotive, banking, and medical products industries. In the case of General Motors, there was in 2014 yet another publicly released investigative report by Anton Valukas which recited that the GM board of directors and its audit committee had complied with all currently considered good corporate governance practices and, nevertheless, never knew of the impending major enterprise risk resulting from faulty ignition switches on the Chevrolet Cobalt and other vehicles.

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What Every Board Member and C-Suite Executive Should Know About Transforming Sustainability into Business Strategy

By Terry F. Yosie

A growing number of the world’s largest companies are turning to “sustainability” as a strategic lens to help anticipate and navigate the complexity of the international economy, meet the expanding expectations of a growing global middle class, and manage the heightened risks to their businesses from environmental and social disruptions. As a result, sustainability has migrated from the periphery to the core of business strategy and planning. Boards and C-suite executives across multiple business sectors—chemicals, consumer products, information technology, transportation, and retail, to name a few—are on an accelerated course to understand the sustainability concept and its implications for their businesses.

Four major parameters define sustainability from a board and C-suite point of view:

  • Decoupling the intensive use of natural resources and materials from growth strategies;
  • Transitioning to a lower carbon economy;
  • Collaborating with value chain partners, governments and citizens so that business products and solutions ameliorate larger-scale societal problems; and
  • Ensuring the adaptability of a business to global megatrend challenges such as climate change, water resource scarcity, population growth and large scale urbanization.

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