'THE DAILY CORPORATE GOVERNANCE REPORT’ (for public company boards, the C-suite and GCs)
Please see the items below with the related links (NOTE: access to link content may be metered, require a no-charge registration or require a paid digital subscription)
(i) * CCGG's 2023 'best practices' for proxy circular disclosure: Last Thursday, the Canadian Coalition for Good Governance (CCGG) released its useful, annual publication on 'best practices' for proxy circular disclosure in Canada, its "2023 Best Practices for Proxy Circular Disclosure", filled with sample disclosure of various proxy circular disclosure items from the most recent proxy circulars of prominent Canadian issuers. Here is how the CCGG describes the publication:
"The Best Practices publication, which is updated annually, presents examples of high-quality public disclosure of important corporate governance policies and executive compensation practices. CCGG prepares this document for reporting issuers to provide them with guidance on effective communications with shareholders, emphasizing the substance of disclosure that investors expect of regulatory filings. In addition to refreshed examples throughout the document, this year's Best Practices also features updated and enhanced commentary in the areas of board and management diversity and executive share ownership requirements, among other topics.
"Furthermore, during the recently completed season of CCGG’s Board Engagement Program, disclosure-related recommendations continued to account for a considerable portion of requests made to issuers over the course of our meetings. Amongst such requests, recommendations to enhance circular disclosure related to (i) performance measures and targets used to determine executive compensation outcomes, (ii) management succession planning and diversity, and (iii) director skills and experience featured prominently during our discussions. As a means of informing better disclosure in these areas, we encourage issuers to review the examples included in this year’s edition of the Best Practices."
The publication is divided into two main disclosure sections, Disclosure of Governance Practices, and Disclosure of Executive Compensation, with examples of proxy disclosure taken from the most recent proxy circulars of such prominent Canadian issuers as: Celestica; Thomas Reuters; TransAlta; TELUS; BNS; BCE (board skills matrix); Brookfield; Intact Financial; Manulife Financial; Sun Life Fianacial; CGI Group; TD; TC Energy; Teck Resources; Enbridge; Kinross Gold; and Pembina Pipeline.
(ii) CEO successions: from board member to CEO/an in-depth look at the recent CEO succession at Disney/CEO succession planning at Boeing and Levi Strauss:
(a) As reported in this FT article earlier this month, "Why companies are tapping the boardroom for their next CEO", several UK-listed companies have recently appointed a current board member as new CEO. As the article also notes, appointing a board member as interim CEO after an unplanned departure of the CEO is sensible (see (iv)(b) below for an example of a board member serving as a very temporary, interim CEO.) Below are excerpts:
"FTSE companies hunting for their next chief executive may not need to look further than their own boardroom. Consumer goods group Unilever, retailer John Lewis, financial services provider Hargreaves Lansdown and telecoms operator BT have in the past year all appointed a CEO who was already a non-executive director on their board.
"At a time of geopolitical and economic uncertainty it seems that when it comes to leadership, company chairs and their colleagues believe it is better the devil you know. There are previous examples of the trend. Amanda Blanc, chief executive of insurer Aviva, and Warren East, the former head of Rolls-Royce, were non-executive directors, as was the head of Pearson, Andy Bird, and Simon Thompson, of Royal Mail, who both announced this year that they were stepping down. In fact, of the 59 FTSE 350 chief executives who have started in their roles since January 2022, a third served on the board before their appointment, according to headhunter Spencer Stuart.
"In the US — where it is less common to have been on the board prior to taking the top job — 17 per cent of the 245 S&P 1500 chiefs appointed since the start of last year were company directors before they became the boss. The upside of recruiting an existing director as chief executive is that — in theory — they already have a good working relationship with the company chair, the rest of the board and the executive team. These so-called insider-outsider candidates are separate enough from the leadership team that they can make changes but they understand the culture, strategy and business model of a company and have had a front-row seat to any troubles it may be facing. “They know the company and likely know where the bodies are buried,” said Kit Bingham, head of the UK board practice at executive search firm Heidrick & Struggles.......
"However, appointing a board member can also be a sign of weakness. It can be indicative of a lack of imagination, an inadequate talent pipeline, poor succession planning, risk aversion or a manifestation of a panicked leadership. It can trigger criticism similar to that thrown at companies including Disney and Starbucks when they reappointed former chief executives.......
"Putting a board director in as interim chief executive after an unplanned departure, while a broader search takes place, may make more sense. It means the company does not have to shift a top executive into the CEO role temporarily, who then may feel they have to leave if they do not ultimately secure the top job......As chairs seek out safety and stability in times of crisis, transitions from the board to the top executive role are likely to endure."
(b) Earlier this month the Stanford Graduate School of Business published the most recent article in its "Closer Look" series (a "collection of short studies through which topics, issues, and controversies in corporate governance are explored"), this one an in-depth examination of the recent CEO succession at Disney, "CEO Succession and The Walt Disney Company." Here is how it is described in the accompanying note posted on the Stanford website:
"CEO succession planning is a critical exercise for any organization. And yet, experience clearly demonstrates that many companies fail to successfully handle the transition from one CEO to the next. What are the causes of this breakdown? We examine the challenges of a careful, deliberate, and well-scripted succession through the example of The Walt Disney Company. We ask:
-- Why is it so difficult for some companies to find a successor to the outgoing CEO?
-- When is it better for a company to select a successor who carries forward the strengths of a predecessor, and when is it better to promote someone different?
-- How can a board maintain control of the process, while still leveraging the expertise, insight, and judgment of the outgoing CEO?
-- How difficult is the CEO job of a typical, large multinational corporation?
-- Does the high pay that CEOs receive reflect a limited supply of talent, or governance breakdowns that impede the proper evaluation of talent?
-- Under what circumstances is it the right decision to bring back a former CEO?"
(c) For CEO succession planning at Boeing and Levi Strauss, see items (iv)(a) and (e) below. (Note also (iv)(b) below.)
(iii) removing the CEO in response to activist campaign by prominent activist hedge fund Elliott Investment Management/press release of the day: On Nov. 27, prominent activist hedge fund Elliott Investment Management announced in this press release that it had acquired an investment of about $2 billion in NYSE-listed, wireless cell tower and communications infrastructure company Crown Castle Inc., and that it was seeking "new executive and board leadership among other changes", in response to which Crown Castle issued this press release (see item (iii) from Nov. 28.) Then last Thursday, Elliott sent this letter to the Crown Castle board, as reproduced in this press release the same day, calling on Crown Castle to change its CEO and reconstitute its board. Crown Castle obliged, announcing on the same day in this press release a CEO transition, as follows:
"Crown Castle Inc. today announced that Jay Brown informed the Company’s Board of Directors on December 6, 2023 of his decision to retire as Crown Castle’s President, Chief Executive Officer and a Director of the Company, effective January 16, 2024. The Board has appointed Anthony Melone, a member of Crown Castle’s Board, to begin serving as interim CEO at that time. The Board will conduct a search process to identify a permanent CEO......"
Elliott responded favourably to the announced CEO transition in this press release on Friday, as follows:
"Elliott Investment Management L.P. today released the following statement on behalf of Managing Partner Jesse Cohn and Senior Portfolio Manager Jason Genrich regarding the leadership transition announced at Crown Castle Inc.
"The leadership transition that Crown Castle announced yesterday marks a step in the right direction toward a new chapter of value creation at the Company. Consistent with our previous statements, we believe that additional significant changes are needed to ensure that Crown Castle is best positioned to fulfill its potential for shareholders. We look forward to continuing our dialogue with the Company's Board regarding the necessary next steps, including a comprehensive review of the Fiber business, meaningful governance enhancements and a robust and transparent search process for Crown Castle's next CEO."
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(iv) (other) press releases of the day:
(a) The Boeing Company (Boeing) announced this morning in this press release the internal appointment to the newly created position of chief operating officer (thus naming the apparent successor to the company's current CEO, as reported in this WSJ story this morning, "Boeing Picks a Frontrunner to Be Its Next CEO"), as follows:
"Boeing today announced Stephanie Pope as executive vice president and chief operating officer of The Boeing Company. In this newly created position, effective January 1, 2024, Pope will report to Boeing President and Chief Executive Officer Dave Calhoun.
"As Boeing COO, Pope will oversee the performance of the company's three business units with responsibility for driving supply chain, quality, manufacturing and engineering excellence across the company. The business unit Chief Executive Officers, the Boeing Chief Engineer and the President of Boeing Global will report directly to Pope. Senior corporate functional leaders will continue reporting to Calhoun.......Stephanie Pope has been serving as president and chief executive officer of Boeing Global Services since April 2022......Pope's successor to lead Boeing Global Services will be named at a later date......"
(b) Gildan Activewear Inc. announced this morning in this press release the departure of its CEO, and the appointment of a new CEO from outside the company effective Feb.12/24, with a current director to act as interim director until then, as follows:
"Gildan Activewear Inc. today announced that Glenn J. Chamandy has left his position as President and Chief Executive Officer and director of the Company. Vince Tyra has been appointed President and CEO effective February 12, 2024. Craig A. Leavitt, a director of the Company since 2018, will serve as Interim President and Chief Executive Officer until Mr. Tyra assumes his new position......
"Vince brings to Gildan a deep understanding of the apparel industry from manufacturing processes to distribution and brand building. He led alphabroder where he spearheaded the transformation of the business through a merger and during his six years as CEO.......
(c) NYSE-listed, music listening platform Spotify Technology S.A. announced last Thursday in this press release that its CFO was leaving the company, with the VP, Financial Planning and Analysis taking on the additional role of CFO on an interim basis, as the company "launches an external search for a successor", as follows:
"Spotify Technology S.A. today announced its Chief Financial Officer, Paul Vogel will be leaving the company on March 31, 2024. The company has launched an external search for his successor. In the interim, Ben Kung, Vice President of Financial Planning and Analysis, will take on expanded responsibilities to support the company’s realignment of its financial leadership team.
"Spotify has embarked on an evolution over the last two years to bring our spending more in line with market expectations while also funding the significant growth opportunities we continue to identify. I’ve talked a lot with Paul about the need to balance these two objectives carefully. Over time, we’ve come to the conclusion that Spotify is entering a new phase and needs a CFO with a different mix of experiences. As a result, we’ve decided to part ways......" shared Daniel Ek, Founder, Chief Executive Officer and Chairman of the Board of Directors.......";
(d) NYSE-listed provider of financial information and analysis, S&P Global Inc., announced last Thursday in this press release the departure of its CFO "to pursue another professional opportunity,", as follows:
"S&P Global today announced that Ewout Steenbergen, Executive Vice President and Chief Financial Officer (CFO), has decided to leave the Company to pursue another professional opportunity, which will be shared next week. Steenbergen, who assumed the role of CFO in November 2016, will remain until March 2024 to ensure continuity and a successful transition....S&P Global has begun the process of evaluating both internal and external CFO candidates";
(e) On Nov.8/22, Levi Strauss & Co. announced today in this press release that it had appointed the current CEO of Kohl's Corporation, Michelle Gass, to the new position of president effective in Jan./23, thus "putting in motion a succession plan for Gass to succeed (Chip) Bergh as CEO within the next 18 months" (see item (v)(b) from Nov.8/22). Last Thursday, Levi Strauss announced in this press release the completion of this CEO succession plan, with the president Michelle Gass being promoted to CEO effective Jan. 29/24, and the current CEO Chip Bergh to become executive vice-chair of the board until his retirement in Apr./24, and then transition to the role of senior advisor until the end of the company’s 2024 fiscal year. as follows:
"Levi Strauss & Co. today announced that Chip Bergh has decided to retire from the company as of April 26, 2024. In anticipation of Bergh’s retirement, the company’s board of directors has elected Michelle Gass, currently the company’s president, to succeed Bergh as president and chief executive officer effective January 29, 2024, completing the transition plan announced on November 8, 2022.
"In addition, the board has elected Bergh as executive vice chair of the board until his retirement date. Thereafter, Bergh will transition to the role of senior advisor until the end of the company’s 2024 fiscal year......Since starting as president of LS&Co. in January 2023, Gass has been responsible for leading the Levi’s® brand, including its product, merchandising and marketing functions, as well as the company’s digital and global commercial operations, while working closely with Bergh......"
The terms of the transition of the current CEO Chip Burgh to executive vice-chair of the board and then to senior advisor, including compensation, are described in the related Current Report, as follows:
"To facilitate the transition and enable continuity, the Company and Mr. Bergh have agreed to an arrangement which will allow the Company to leverage Mr. Bergh’s expertise through the transition date. Pursuant to the arrangement, during his service as Executive Vice Chair of the Board until the retirement date, Mr. Bergh will receive his current base salary and target annual incentive compensation opportunity, with any paid bonus taking into account, on a pro-rated basis, Mr. Bergh’s period of service as CEO and President and his service as Executive Vice Chair of the Board in 2024. In addition, he will be provided with health, welfare and fringe benefits consistent with those provided to the Company’s other senior executives generally and certain perquisites consistent with those historically provided to him while serving as CEO and President.
"In the Senior Advisor role until the transition date, Mr. Bergh will report to the Board and the CEO, provide advice on strategic and operational matters, and meet with key stakeholders at the Company’s request. Mr. Bergh will receive a one-time consulting fee of $1,000,000, payable upon his appointment as Senior Advisor. In addition, Mr. Bergh will receive administrative support in the amount of $200,000 annually for four years commencing with his role as Senior Advisor. While serving as Senior Advisor, he will not be entitled to a target annual incentive compensation opportunity or a long-term incentive award. All of Mr. Bergh’s then-outstanding long-term equity incentive awards as of the transition date will vest in accordance with the “retirement” treatment provided therein...."
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