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28 Feb. 2018 | Comments (0)

Over the first two months of 2018, The Governance Center has released three pieces of research that cover the corporate secretaries’ perspective on the corporate director job, the “New Paradigm” corporate governance framework for directors and investors, and the impact of excessive director compensation.

This research is available to all members of The Conference Board and its Governance Center:

Just What Is the Corporate Director’s Job? Corporate Secretaries’ Perspectives on Board Member’s Job Description

The latest in our series on the job description of a corporate director is based on a Society for Corporate Governance panel discussion and interviews with two corporate secretaries. To download the report, click here. [Registration is required.]

Here are some highlights:

  • Corporate secretaries aren’t convinced that disclosure of formal board skill matrices, which some investors are vocally demanding, will necessarily improve board composition and functioning. They tend to agree that while a formal board skills matrix could be a good internal tool for the board to assess its skills.
  • Corporate secretaries recommend proactive actions boards can take to handle a potential crisis. Those actions include determining ahead of time how involved it will be in managing a crisis, understanding how critical communications and information flow, and creating a predetermined list of advisors who know the company.
  • Corporate secretaries have a unique position to assess whether a board is “too collegial,” with directors who are almost afraid to upset anyone, especially the chair and CEO. Corporate secretaries agree that having directors with a tendency to “ruffle feathers” can be beneficial as long as all directors still maintain an appropriate level of respect for each other.

As part of the research, report author and Governance Center Research Associate Gary Larkin interviewed Robert Bostrom, corporate secretary and general counsel of Abercrombie & Fitch. The complete interview is posted on the Governance Center Blog.

What Is the ‘New Paradigm’ Framework? Highlights of The Conference Board Governance Center Fall 2017 Meeting

During the 2017 fall meeting of The Conference Board Governance Center, Martin Lipton, founding partner of Wachtell, Lipton, Rosen & Katz, spoke about his “New paradigm”for corporate governance, which is a solution to the short-termism problem that is undermining companies’ long-term prosperity and spurring attacks on companies by short-term financial activists. A central premise of the "New Paradigm" for corporate governance is that corporations and institutional investors can together forge a meaningful and successful private-sector solution, which may preempt a new wave of legislation and regulation. To read the highlights publication, click here. [Registration is required.]

More than 65 business leaders and corporate governance practitioners heard Lipton’s speech about his “New Paradigm: A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth.” His remarks were followed by a panel discussion on short-termism and the general impact of the New Paradigm governance and long-term sustainability framework that was moderated by Sabastian Niles, a partner at Wachtell Lipton.

The panelists were Ronald O’Hanley, incoming CEO of State Street Corp. (and previously CEO of State Street Global Advisors); Judith Samuelson, vice president and executive director, Business and Society Program, The Aspen Institute; and Rodney Zemmel, managing partner, McKinsey & Co.

Director Notes: Are Directors Paid Too Much? An Analysis of Corporate Board Member Compensation from 1997-2012

The first Director Notes report of 2018 focuses on under- and overcompensation of corporate directors and their impact on companies. The authors looked at several databases and analyzed company performance over a 15-year period. To download the report, click here. [Registration is required.]

Some of the report’s conclusions:

Excessive CEO pay has been researched and discussed extensively. However, relatively little attention has been placed on the compensation of outside directors. To address this, the authors develop a model to predict expected or normal director compensation. On average, there is greater evidence of over- rather than undercompensation.

The study concludes that director excess compensation may be a sign of board entrenchment while an increase in overcompensation of directors reduces pay-for-performance sensitivity.

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