Posts Tagged ‘Succession’

What Is a Board’s Role in a Family Business?

Editor’s Note: Mary Ann Cloyd is leader of the Center for Board Governance at PricewaterhouseCoopers LLP. This post is based on a PwC publication by Catherine Bromilow and John Morrow; the complete publication, including interview insights, is available here.

Individual- and family-owned businesses are a vital part of our economy. If you or your family owns such a company you understand how important the company’s success is to your personal wealth and to future generations. If you’re a nonfamily executive at a family company, you also recognize that its profitability and resilience is vital to your job security and financial well-being.

…continue reading: What Is a Board’s Role in a Family Business?

Board Challenges: The Question of CEO Succession

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday June 8, 2014 at 9:28 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Wayne Lord, president of the World Affairs Council of Atlanta. This post is based on a white paper report from the 2013 Global Strategic Leadership Forum by Dr. Lord, available here.

The World Affairs Council of Atlanta’s 2013 Global Strategic Leadership Forum focused on a critical issue facing boards of directors: CEO succession. As arguably its most crucial responsibility, the board’s process for hiring and developing CEOs must be an extraordinarily thorough one that addresses the complexities of the modern global company. While there is no exact template that fits all circumstances, the board must ensure that its processes and oversight accurately reflects the organization’s future needs, identifies the skills and experience required in today’s complex global economy, and builds and closely monitors a truly robust succession plan.

…continue reading: Board Challenges: The Question of CEO Succession

Board Refreshment and Director Succession in Investee Companies

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday May 25, 2014 at 9:00 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Rakhi Kumar, Head of Corporate Governance at State Street Global Advisors, and is based on an SSgA publication; the complete publication, including appendix, is available here.

State Street Global Advisors (“SSgA”) believes that board refreshment and planning for director succession are key functions of the board. Some markets such as the UK, have adopted best practices on a comply-or-explain basis that aim to limit a director’s tenure to nine years of board service, beyond which, investors may question a director’s independence from management. Such best practices have helped lower average board tenure, and have encouraged boards to focus on refreshment of director skills and plan for director succession in an orderly manner.

…continue reading: Board Refreshment and Director Succession in Investee Companies

CEO Succession in the S&P 500: Statistics and Case Studies

Posted by Matteo Tonello, The Conference Board, on Friday April 25, 2014 at 9:02 am
  • Print
  • email
  • Twitter
Editor’s Note: Matteo Tonello is Managing Director at The Conference Board, Inc. This post relates to CEO Succession Practices: 2014 Edition, a Conference Board report authored by Dr. Tonello, Jason D. Schloetzer of Georgetown University, and Melissa Aguilar of The Conference Board. For details regarding how to obtain a copy of the report, contact matteo.tonello@conference-board.org.

CEO Succession Practices, which The Conference Board updates annually, documents CEO turnover events at S&P 500 companies. The 2014 edition contains a historical comparison of 2013 CEO successions with data dating back to 2000. In addition to analyzing the correlation between CEO succession and company performance, the report discusses age, tenure, and the professional qualifications of incoming and departing CEOs. It also describes succession planning practices (including the adoption rate of mandatory CEO retirement policies and the frequency of performance evaluations), based on findings from a survey of general counsel and corporate secretaries at more than 150 U.S. public companies.

…continue reading: CEO Succession in the S&P 500: Statistics and Case Studies

Considerations for Directors in the 2014 Proxy Season and Beyond

Posted by Amy L. Goodman, Gibson, Dunn & Crutcher LLP, and John F. Olson, Gibson, Dunn & Crutcher LLP and Georgetown Law Center, on Monday January 27, 2014 at 9:19 am
  • Print
  • email
  • Twitter
Editor’s Note: Amy Goodman is a partner and co-chair of the Securities Regulation and Corporate Governance practice group at Gibson, Dunn & Crutcher LLP and John Olson is a founding partner of Gibson, Dunn & Crutcher’s Washington, D.C. office and a visiting professor at the Georgetown Law Center. The following post is based on a Gibson Dunn alert by Ms. Goodman, Mr. Olson, Gillian McPhee, and Michael J. Scanlon.

As we begin 2014, calendar-year companies are immersed in preparing for what promises to be another busy proxy season. We continue to see shareholder proposals on many of the same subjects addressed during last proxy season, as discussed in our post recapping shareholder proposal developments in 2013. To help public companies and their boards of directors prepare for the coming year’s annual meeting and plan ahead for other corporate governance developments in 2014, we discuss below several key topics to consider.

…continue reading: Considerations for Directors in the 2014 Proxy Season and Beyond

Executive Pay Disparity and the Cost of Equity Capital

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday September 15, 2013 at 9:50 am
  • Print
  • email
  • Twitter
Editor’s Note: The following post comes to us from Zhihong Chen of the Department of Accountancy at City University of Hong Kong, Yuan Huang of the School of Accounting and Finance at Hong Kong Polytechnic University, and K.C. John Wei, Professor of Finance at Hong Kong University of Science & Technology (HKUST).

In our paper, Executive Pay Disparity and the Cost of Equity Capital, forthcoming in the Journal of Financial and Quantitative Analysis, we investigate the association between executive pay disparity and the cost of equity capital. Understanding the association is important because the cost of capital is one of the key considerations for managers in their capital budgeting and corporate financing decisions. In fact, the cost of capital is a more direct yardstick of corporate investment and financing decisions than firm valuation. A higher cost of capital means fewer positive net present value (NPV) projects, leading to fewer growth opportunities. In addition, the cost of capital summarizes an investor’s risk-return tradeoff in his resource allocation decision (Pástor, Sinha, and Swaminathan (2008)).

In general, there are two perspectives on executive pay disparity. The tournament perspective views the large pay gap between the CEO and other executives as the prize for a tournament in which players compete for the CEO position (Lazear and Rosen (1981); Kale, Reis, and Venkateswaran (2009)). A large pay disparity motivates non-CEO senior executives to work hard and to invest in firm-specific human capital. This, in turn, helps build a large pool of skilled internal candidates for the CEO position. The availability of skilled internal candidates not only reduces the entrenchment of the incumbent CEO by increasing the bargaining power of the board, but also reduces CEO succession risk. Therefore, this perspective predicts a negative association between executive pay disparity and the cost of capital.

…continue reading: Executive Pay Disparity and the Cost of Equity Capital

Risk Oversight; Effective Board and Committee Leadership

Editor’s Note: Jeffrey Stein is a partner in the Corporate Practice Group at King & Spalding LLP. This post is based on two reports from the Lead Director Network by Mr. Stein, Bill Baxley, and Rob Leclerc, available here and here.

Board oversight of risk and effective board and committee leadership are high priorities for virtually every board of directors. While success in these matters has always been essential to maintaining a high-performing board, how boards approach the risk oversight function and seek to maximize board and committee leadership continues to evolve. Strategic risks can threaten a company’s very existence and stakeholders continue to challenge traditional approaches to board leadership.

The Lead Director Network (the “LDN”) and the North American Audit Committee Leadership Network (the “ACLN”) met on June 4th and June 5th to discuss risk oversight and effective board and committee leadership. Following these meetings, King & Spalding and Tapestry Networks have published two ViewPoints reports to present highlights of the discussion that occurred at these meetings and to stimulate further consideration of these subjects. Separate reports address Board Oversight of Risk and Effective Board and Committee Leadership.

The following post provides highlights from the LDN and ACLN meeting, as described in the ViewPoints reports.

…continue reading: Risk Oversight; Effective Board and Committee Leadership

Communication Practices in CEO Succession

Posted by Matteo Tonello, The Conference Board, on Thursday July 25, 2013 at 10:22 am
  • Print
  • email
  • Twitter
Editor’s Note: Matteo Tonello is managing director at The Conference Board. This post relates to an issue of The Conference Board’s Chart of the Week series authored by Dr. Tonello.

A review of the CEO succession announcements made by S&P 500 companies in 2012 showed that they typically included details on when the succession would take effect, why the departing CEO is leaving, and whether the incoming CEO will be named board chairman; a statement by the departing CEO on his/her belief that the board has selected a qualified replacement; a statement by the lead independent director that the incoming CEO is the right choice for the company, given its current position, and thanking the departing CEO for his/her service; a statement from the incoming CEO that the existing management team is strong, the company is well positioned for the future, and expressing appreciation that the board has selected him/her as chief executive; and a description of the incoming CEO’s professional qualifications, and, if necessary, details on other director or senior management changes that will take place.

…continue reading: Communication Practices in CEO Succession

The Landscape of CEO Succession Issues

Posted by Brian Breheny, Skadden, Arps, Slate, Meagher & Flom LLP, on Tuesday July 23, 2013 at 9:10 am
  • Print
  • email
  • Twitter
Editor’s Note: Brian V. Breheny is a partner at Skadden, Arps, Slate, Meagher & Flom LLP. The following post is based on a Skadden memorandum by Mr. Breheny, Regina OlshanNeil M. LeffMarc S. GerberMichael R. Bergmann.

A board’s decision as to whether, when and how to terminate the employment of a CEO and hire a successor is among the most critical decisions facing the board of any company—large or small, public or private, established or start-up. In most cases, however, a CEO termination is a rare event and one with respect to which—as would be expected—the board, the company’s general counsel and its human resources professionals may have little or no experience. In addition, the situation is further complicated by contractual, regulatory and personal factors.

This post describes the substantive and procedural considerations that boards will want to take into account when there is a change of CEO. In it, we assume that the board has made the business decision relating to CEO succession and is focused on strategy, implementation and minimizing potentially costly and/or embarrassing oversights and errors. Many but not all of the same considerations apply in respect of executive officers other than the CEO, and some additional considerations may apply to such other officers; in any event, their relative significance likely will differ from the case of the CEO.

…continue reading: The Landscape of CEO Succession Issues

Governance Lessons from the Dimon Dust-Up

Editor’s Note: Ira Millstein is a senior partner at Weil, Gotshal & Manges LLP and co-chair of the Millstein Center for Global Markets and Corporate Ownership at Columbia Law School.

The recent shareholder “campaign” by a coalition of large institutional investors – AFSCME Employees Pension Plan, Hermes Fund Managers, the New York City Pension Funds, and the Connecticut Retirement Plans and Trust Funds – sought on its face to pressure the JPMorgan Chase & Co. board of directors to amend the bylaws to require that the role of chair be held by an independent director. It became a referendum on two additional issues: Mr. Dimon’s competence as a manager, and the competence of the board’s oversight of risk management. Unfortunately for “good governance,” the three issues become conflated and lead to harangues, heat, and polar positions by all sides, leading to little that’s instructive. It’s worth separating the issues to seek guidelines for the future.

Thoughtful advocates recognize that the board should have flexibility to determine leadership based on the company’s circumstances and rather than seeking to mandate the practice of independent chairmanship, view it as the appropriate default standard – or presumptive model. Even so, very few advocates of the independent chair model favor stripping an extant CEO/chair of the chair title; rather, they urge boards to consider separation upon CEO succession, unless there is an urgent need.

…continue reading: Governance Lessons from the Dimon Dust-Up

Next Page »
 
  •  » A "Web Winner" by The Philadelphia Inquirer
  •  » A "Top Blog" by LexisNexis
  •  » A "10 out of 10" by the American Association of Law Librarians Blog
  •  » A source for "insight into the latest developments" by Directorship Magazine