In a Director Note recently published, The Conference Board reviews current corporate practices on risk oversight by members of the board of directors of U.S. public companies. The study is based on findings from a survey of 359 SEC-registered business corporations conducted by The Conference Board in collaboration with NASDAQ OMX and NYSE Euronext. Data are categorized and analyzed according to 22 industry groups (using their Standard Industrial Classification, SIC, codes), seven annual revenue groups (based on data received from manufacturing and nonfinancial services companies) and five asset value groups (based on data reported by financial companies, which tend to use this type of benchmarking).

The publication details where the board assigns risk oversight responsibilities, whether it avails itself of dedicated reporting lines from senior management on risk issues, and the degree to which it adopts a standardized framework on enterprise risk management (ERM). Given the correlation between risk and strategy, data on the frequency and forms of strategic reviews is also presented.

The following are the main findings discussed in the study.

…continue reading: Risk in the Boardroom

In our study, CEO Succession Practices (2013 Edition), which The Conference Board recently released, we document and analyze 2012 cases of CEO turnover at S&P 500 companies. The study is organized in four parts.

Part I: CEO Succession Trends (2000-2012) illustrates year-by-year succession rates and examines specific aspects of the succession phenomenon, including the influence on firm performance on succession and the characteristics of the departing and incoming CEOs.

Part II: CEO Succession Practices (2012) details where boards assign responsibilities on leadership development, the role performed within the board by the retired CEO, and the extent of the disclosure to shareholders on these matters.

Part III: Notable Cases of CEO Succession (2012) includes summaries of 11 episodes of CEO succession that made headlines in the past two years and that were carefully chosen to highlight key circumstances of the process.

Part IV: Shareholder Activism on CEO Succession Planning (2012) reviews examples of companies that have recently faced shareholder pressure in this area.

The following are some of the major findings discussed in the study:

…continue reading: Statistics on CEO Succession in the S&P 500

In a Director Note recently published, The Conference Board assesses how and to what extent social and environmental issues are integrated into the strategic agenda of the board of directors of U.S. public companies. The report is based on findings from a survey of 359 SEC-registered business corporations conducted by The Conference Board in collaboration with NASDAQ OMX and NYSE Euronext. Data are categorized and analyzed according to 22 industry groups (using their Standard Industrial Classification [SIC] codes), seven annual revenue groups (based on data received from manufacturing and nonfinancial services companies) and five asset value groups (based on data reported by financial companies, which tend to use this type of benchmarking).

The study updates a previous edition of “Sustainability in the Boardroom,” released by The Conference Board in June 2010.

The following are the main findings discussed in the study.

…continue reading: Sustainability in the Boardroom: A 2013 Update

The Conference Board, NASDAQ OMX and NYSE Euronext jointly released the 2013 edition of Director Compensation and Board Practices, a benchmarking study with more than 150 corporate governance data points searchable by company size (measurable by revenue and asset value) and 20 industrial sectors.

The report is based on a survey of public companies registered with the U.S. Securities and Exchange Commission. The Harvard Law School Forum on Corporate Governance and Financial Regulation, Stanford University’s Rock Center for Corporate Governance, the National Investor Relations Institute (NIRI), the Shareholder Forum and Compliance Week also endorsed the survey by distributing it to their members and readers.

The following are the major findings from the 2013 edition of the study:

…continue reading: The 2013 Director Compensation and Board Practices Report

The effects of say on pay on shareholder engagement, the introduction of proxy access proposals, and the resurgence of board declassification resolutions were the principal themes of the last proxy season and are expected to continue to take center stage in 2013, according to a report issued today by The Conference Board in collaboration with FactSet Research Systems Inc.

Proxy Voting Analytics (2008-2012) analyzes data on voting by shareholders of U.S. companies that held their annual general meetings (AGMs) in the January 1-June 30 period during the last five years. Aggregate data on shareholder proposals, management proposals, and proxy contests is examined and segmented based on market index (whether the Russell 3000 or the S&P 500) and 20 business industry groups.

The report is supplemented with an appendix offering detailed recommendations from Conference Board experts for companies facing situations of shareholder activism.

Data analyzed in the report includes:

…continue reading: Proxy Voting Analytics (2008-2012)

Major companies across industrial sectors are putting more effort and investment into demonstrating good corporate citizenship on environmental, social, and related governance factors. However, research shows that it may be getting harder for companies to gain recognition for doing so.

Last year, Brandlogic and CRD Analytics prepared the 2012 Sustainability Leadership Report: Measuring Perception vs. Reality, marking the second year for the annual report and continuing our pioneering work in measuring and comparing real sustainability performance to the perceptions of key stakeholders. This follow-on study used the same methodology established for the inaugural report, as described in a November 2012 issue of Director Notes (see “About the Sustainability Leadership Report,” p. 2, for a summary). [1] Moreover, the follow-on study validated the methodology’s usefulness as a management framework for making decisions about if and where to invest in sustainability, both on the operational and communications fronts.

With a second set of data in hand, we are able to observe year-over-year movement. Overall, real performance on sustainability is rising, reflecting ongoing and intensifying corporate efforts to define and achieve sustainability goals.

However, perceived performance, on average, is declining. The findings suggest that it is becoming more difficult to achieve differentiation among those audiences who are most attentive to sustainability, despite a better track record. This finding is both striking and surprising. Why is perception slipping despite an increasing volume of communications around sustainability? In what follows, we explore possible answers.

…continue reading: The Bar Is Rising on Sustainability Leadership

Current views regarding the proper pay plan design to achieve pay for performance vary. This post discusses the three dimensions of pay for performance, demonstrates how to measure them using historical pay data, and presents a simple pay plan that achieves perfect pay for performance (PP4P) using annual grants of performance shares. It also highlights pay practices that weaken pay for performance and offers recommendations for directors to deepen their understanding of pay-for-performance issues.

…continue reading: Achieving Pay for Performance

In the aftermath of the financial crisis, companies and their boards have been grappling with new disclosure requirements related to board risk oversight in the United States, Canada, and Europe. Unfortunately, many organizations that have wanted to improve their risk management capabilities have attempted to implement a traditional form of what is generally known as enterprise risk management (“ERM”). Many companies that have tried the traditional ERM route have been disappointed with the results. Many of these ERM programs have focused on multiple workshops that ask participants to identify potentially negative events, assess their likelihood and consequence, log risks identified in “risk registers,” plot them on color-coded risk “heat maps” and report the top 10, 20 or 100 risks to the board. In most ERM programs, this exercise is repeated each year and the updated risk register results are reported to the board or a committee of the board. This approach to ERM has proven to be suboptimal at best, and has even proved “fatal” when companies completely missed entity-threatening risks. These poor results can be related to the fact that these initiatives miss the fundamental point of formalized risk management—increasing certainty that objectives, both strategic and value creating, as well as core foundation objectives like obeying laws and producing reliable financial statements, will be achieved with a tolerable level of risk to senior management and the board.

…continue reading: Board Oversight of Management’s Risk Appetite and Tolerance

Operational sustainability performance is becoming increasingly important to corporations and their stakeholders, but operational performance is not the only measure that matters. There is also considerable value in communicating the corporate sustainability story. This report looks at the potential benefits to corporations of demonstrating good environmental, social, and governance (ESG) performance and discusses five common characteristics of sustainability “leaders”—companies that excel in both the operational and communication dimensions of sustainability.

As economic and societal priorities change over time, so do the criteria that define corporate leadership. The world’s “best” organizations have, at various times, been identified as those that excel in research and development and new product development, those that display excellence in operational and process reengineering, or those best able to focus on core competencies. More recently, the yardstick has been the ill-defined term “innovation”—the ability to be a game changer via breakthrough products or business models.

…continue reading: Charting a Path to Sustainability Leadership

A growing number of corporations are releasing stand-alone sustainability reports. To provide insight into corporate sustainability performance, many reports contain sets of performance indicators. However, questions remain about what should be reported and the indicators disclosed vary widely. This report presents an analysis of the indicators disclosed in 94 Canadian corporate sustainability reports.

Sustainability policies, plans, programs, and projects have been initiated in corporations around the world. Given the broad nature of sustainability, the breadth and depth of these initiatives varies widely. For example, initiatives as diverse as measuring a corporation’s carbon footprint, fostering diversity in the workplace, and supporting community development could all be classified under the umbrella of sustainability. These initiatives are of interest to a variety of internal and external stakeholders. Depending on the issue, these stakeholders may include employees, investors, customers, suppliers, regulators, nongovernmental organizations, and local communities, to name a few.

One important way corporations share information about their sustainability initiatives is through the release of publicly available reports. Although the titles of these reports differ, they typically include words such as “sustainability,” “responsibility,” “accountability,” or “citizenship,” and they focus on addressing the economic, environmental, and social dimensions of corporate performance through a review of both qualitative and quantitative information. (For the remainder of this issue, the term “sustainability report” is used.)

…continue reading: Reporting on Corporate Sustainability Performance