'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) survey of directors and C-suite executives on board governance: As reported in last Monday's Fortune CFO Daily Newsletter, last week global consulting firm Protiviti, software platform BoardProspects, and Broadridge released this report, "Views on Board Governance — Where Directors and C-Suite Leaders Align and Diverge”, their inaugural study "offering insights regarding the board’s priorities, performance, and governance practices from the different perspectives of more than 1,000 C-suite leaders and directors."  Below are some of the "Key findings":

                  "Views on board performance: Boards and C-suite leaders are on the same page regarding the board’s priorities. Strategic planning and execution rates as the top board priority. Risk management oversight, CEO and management succession planning, digital transformation and integration of emerging technologies, and R&D/innovation are other top priorities. Most director and C-suite respondents “agree” or “strongly agree” that board members provide input into, and approve, corporate strategy and major policy decisions; represent the interests of shareholders and appropriate stakeholders; place the interests of the company ahead of their own interests; and devote sufficient time to fulfilling their fiduciary responsibilities......

                   "Talent and tech governance: Our results indicate that talent management and organizational culture demand more board attention — and more consensus. A notable divide exists between the board and C-suite in prioritizing talent and culture gaps. Digital transformation, the integration of new technologies and cybersecurity also warrant more board attention. In our view, to keep pace with evolving markets, boards should possess the knowledge and expertise to understand and assess the organization’s core technology strategy and operations while evaluating and contributing to capital allocation decisions regarding potential technology investments......"

                Based on the findings, the report provides a "call to action....(to) "sharpen the board’s focus on several key areas, enhance director engagement and drive an ongoing emphasis on continuous improvement of the board’s oversight." The call to action includes nine items, and below are four of them:

                   3. Sharpen the focus on crisis management: Our survey suggests a need for a stronger board focus on crisis management. As the coming year unfolds, new and existing geopolitical, economic, environmental, social and cyber-related crises could arise and/or conflagrate. In addition, the results of national elections occurring all over the world during 2024 can lead to disruptive impacts extending beyond the voting countries’ borders, with particular emphasis on the United States.

                   4. Don't forget cybersecurity issues: One more area identified by our survey requiring additional board time and attention is cybersecurity. The ever-changing cyber threat landscape and growing geopolitical tensions are likely the reasons for this finding.

                   7. Engage directors in shaping the board agenda: The survey noted that board members agree less frequently than C-suite executives that they are given an opportunity to influence the agenda in advance of formal board meetings. To that point, when planning for future meetings, the board chair or lead director should consider involving board members in setting the agenda. Recommendations could be solicited in executive session. Such involvement would elevate the level of director engagement.

                   8. Self-assess board performance: At least annually, the board should conduct a robust self-assessment of the performance of the full board, each board committee and each individual member of the board to determine whether they are functioning effectively. The self-assessment process should be conducted on a confidential, anonymous basis and ensure that the board and each committee are staffed and appropriately led, individual board members are effective in fulfilling their fiduciary obligations, and the oversight processes in place are contributing value. The process should encourage candor and be rooted in trust and transparency with an eye toward continuous improvement. One way to approach the assessment process is to summarize strengths and opportunities for improvement and have the full board and each board committee discuss the results in executive session with the intention to develop and implement improvement plans. The process can be supported by written questionnaires, one-on-one interviews and group discussions facilitated by a member of the board or a third-party adviser. The board should vary the approach over time to encourage director engagement and address key themes or topics, as identified by the board chair or lead director.

                      – The process should be designed to provide meaningful and actionable feedback. It should present an opportunity to ensure that committee workloads are manageable.

                      – The process should include an evaluation of composition and onboarding criteria....

                      – Informal feedback from the CEO, CFO, CHRO, CPO and other senior executives as to how the board can best contribute value can provide useful insights to the self-assessment process......."

              (ii) on Netflix's successful (so far) co-CEO management governance structure: Few major companies today have a co-CEO management structure, and when Salesforce abandoned that structure in Nov. /22, that left only seven companies among the Fortune 500 with co-CEOs (see item (ii) from Dec.6/22), most notably Netflix which announced in Jan./23 that Reed Hastings, its co-founder and co-CEO, was stepping down as CEO (and transitioning to the role of Executive Chairman), but that the company's co-CEO structure would be maintained, with Greg Peters and Ted Sarandos to serve as co-CEOs: see item (iv) from Jan.23/23. (Note that the co-CEO structure was discussed in this recent HBR article, "Is It Time to Consider Co-CEOs?": see item (iii)(b) from June 29/22). 

                  The co-CEO management structure, and its effectiveness to date at Netflix is discussed in this WSJ feature article last Monday, "Netflix’s Co-CEOs Are Nothing Alike. That’s a Good Thing." Below are some excerpts:

                  "When Netflix announced last year that Greg Peters and Ted Sarandos would become co-CEOs of the streaming giant, some executives inside the company worried the arrangement was doomed to fail......The co-chief-executives’ arrangement didn’t look like a recipe for success. But so far, the naysayers’ fears are being proven wrong......

                   "The co-CEO model is out of vogue. Companies such as BlackBerry predecessor Research in Motion, Salesforce and Oracle have tried and abandoned the model. The conventional wisdom is that the structure leads to confusion over who makes the big decisions and blurs accountability. At Netflix, that Peters and Sarandos are polar opposites—from very different but equally powerful wings of the company—might have turned out to be an advantage, making it easier to split up responsibilities harmoniously.....

                    "On investor calls, Peters and Sarandos generally stick to their own expertise, passing the baton between them. “So with that, I tag team to my partner, co-CEO,” Peters said on a January call. Through a spokeswoman, Peters and Sarandos declined to be interviewed. Peters told tech site Stratechery in January that while Netflix doesn’t need to have co-CEOs to succeed, it is well-suited for the model. “There’s these two very deep, very important centers of expertise, and we get to have a CEO who’s hopefully, I’ll say with a little bit of humility, good at both of those.”.......

                    "The real test of the co-CEO partnership will come if the company hits another rough patch—if growth stalls and pressure to cut costs increases—or if the executives have to spar over which new initiatives should get investment. Tough, candid conversations are crucial to make the co-CEO model work, said Scott Taylor, a professor of organizational behavior at Babson College. “When you see co-CEOs fall apart, it’s often because the nature of the relationship is territorial and there is a lack of clarity around each one’s direction,” Taylor said."

              (iii) are workers on public company boards coming?: Earlier this year, a coalition of trade unions launched a proxy contest to place three employee reps on the Starbucks board (see item (iii) from Jan.31/24), though the proxy fight was dropped when Starbucks agreed to work with the union toward a “foundational framework” on collective bargaining (see item (iii) from March 14/24). Now it seems that Boeing's largest union is seeking a seat on the Boeing board, as reported in this FT article last week, "Boeing’s largest union seeks seat on plane maker’s board" (which, note, refers to the recent union call for a board seat at Starbucks):

                   "Boeing’s largest labour union is seeking a board seat at the plane maker, saying “we have to save this company from itself” as quality control concerns draw scrutiny from customers, passengers and regulators. The International Association of Machinists District 751, which represents 32,000 workers at factories in the US state of Washington, began contract negotiations with Boeing this month. One of its aims is to have a greater voice at the company, district president Jon Holden said in an interview. 

                      "Adding a union representative would bring “a grounding and a balancing” to the 13-person board, he said. “We are motivated to ensure our members have a say,” he said. “We’ll be proposing that we have a seat on the board of directors. We believe that we have a unique ability to understand the production system . . . With what’s going on these days, we are oftentimes the last line of defence, and we have to save this company from itself.”.......

                      "The union is pursuing a 40 per cent pay rise over three years as part of its contract negotiations, as well as seeking to have Boeing’s next new plane built in Washington state. The machinists also plan to pursue a two-pronged strategy to win a board seat, first in contract talks and then next year via a campaign targeting Boeing’s 2025 shareholder meeting. Regarding the board seat, Boeing said it would “continue to review all of the union’s proposals and plan to discuss them at the bargaining table”. 

                       "While the board seat is a new goal for the union, Holden said “we’re serious about it, and we believe we can bring value”. He added that the union also would support a seat for the union of Boeing’s engineers, were they to pursue it. Holden said the seat is one aspect of union bargaining proposals aimed at ensuring the company is building safe aeroplanes.......

                       "The move by the machinists comes after a labour coalition tried to advance a board slate at  Starbucks, where hundreds of coffee shops have unionised in recent years. The effort was dropped this month after the company agreed to take up contract talks with the Workers United union. While union representatives on corporate boards are rare in the US, Germany has adhered to “co-determination” for decades, a system that gives labour a voice at the board level at larger companies. German supervisory boards are split between representatives for shareholders and unions, making it in effect impossible for executives to enact big plans without union support.

                        "Even in the US, having a board-level union representative is not unprecedented. Douglas Fraser, who was president of the United Auto Workers, joined the board of Chrysler in 1980 after the UAW granted the company $460mn in concessions to help the financially floundering carmaker. An employee stock ownership plan at United Airlines in the 1990s also awarded board seats to unions. 

                         "But the presence of a union representative on a corporate board creates a conflict of interest, said corporate governance expert Charles Elson, because union representatives owe their allegiance to workers while board members have a fiduciary duty to shareholders. Typically, workers want higher wages while shareholders want to pay lower wages. “You can argue a good wage benefits the employees and the company, but it’s a tough one,” he said. “You can’t negotiate with yourself . . . It puts you in an odd fiduciary pickle.”

              (iv) Conference Board with latest data on women on boards and in the C-suite at the S&P 500 companies/latest S&P data on women in the C-suite/Deloitte's 8th. edition of 'Women in the Boardroom': 

                  (a) As reported in this Fortune  newsletter last Monday, "S&P 500 boards have hit a tipping point that may lead to more female CEOs", last week the Conference Board published this report on gender diversity in the boardroom and in the C-suite, "Women in Leadership: Are We at a Tipping Point?" Below is from the report: 

                    "Corporate America’s boardrooms are significantly more gender diverse than its corner offices. Today, 33% of board members at S&P 500 companies are women, an 8-point increase since 2019. By contrast, just 9% of CEOs in the S&P 500 are women, up 4 points since 2019—but this may soon change. S&P 500 boards that appointed a female CEO have been more gender diverse than the average S&P 500 board. If past is prologue, the fact that 33% of all S&P 500 corporate directors today are women may mean that more boards are positioned to choose a female CEO. Indeed, today’s female CEOs were appointed by a board where, on average, one-third of the directors were women. 

                     "Of course, the composition of the board is only one possible factor at play. The main question should always be whether the individual is the best qualified to lead the company. But to ensure that women are equally considered, boards can focus on 1) having a diverse pipeline of internal talent (over the past decade, more than 70% of S&P 500 CEOs have come from inside the company), and 2) establishing an inclusive vetting and interview process that provides more than one opportunity for directors to interact with the candidates."

                       Below is from the Fortune Newsletter, quoting Conference Board ESG Center senior researcher, Merel Spierings:

                       "The growing presence of women in corporate boardrooms may soon lead to more women in the corner office,” says Conference Board ESG Center senior researcher Merel Spierings. “Our rationale: Today’s female CEOs in the S&P 500 were appointed by a board where, on average, one-third of the directors were women. The fact that 33% of all S&P 500 corporate directors today are women may indicate that more boards are positioned to appoint a female CEO.” Overall, the gap between gender diversity on boards that hire female CEOs and overall board diversity is narrowing. The Conference Board expects progress based on that trend—it’ll be up to boards to make it a reality."

                (b) Below is from this Bloomberg article today, "Women Lost C-Suite Seats in Corporate America, S&P Says":

                   "Women’s representation in senior level positions at US companies faces an “alarming turning point,” with steady growth showing signs of fatigue for the first time in two decades, according to a new report. Women accounted for 11.8% of the approximately 15,000 C-suite roles in the S&P Global Total Market Index in 2023, researchers at the data provider said, down from 12.2% the previous year. That suggests women ceded about 55-60 positions with ‘chief’ in the title to men last year.

                    "Though the absolute decline may seem small, it’s significant considering women’s representation in top roles had been increasing for years, from 6.5% in 2005. Across a broader swath of senior positions, numbers nearly tripled in that time period to 22.3% in 2023. The sudden loss of representation in the C-suite is “particularly disappointing,” said Sarah Cottle, head of data and insights at S&P Global Market Intelligence. “There’s not just a loss in momentum but a loss in seats.” The report’s authors don’t say why the growth in female representation is stalling, but they noted a “waning focus on diversity initiatives,” with mentions of ‘diversity’ and ‘inclusion’ becoming rarer on earnings calls......."

                  (c) Note that Deloitte recently posted on its "Insights" webpage its "Women in the boardroom, eighth edition", a  "Deloitte Global report on gender diversity on boards and women in leadership."

               (v) press release of the day: On Oct. 5/23, Nasdaq-listed, hotel booking platform trivago N.V. announced in this press release that its current CFO, Matthias Tillmann, would step down as CFO "at the close of this year to pursue other interests", with "Robin Harries to join the company as CFO no later than April 1, 2024" and Tillmann to "continue to serve as a consultant until March 2024, facilitating a seamless transition with his successor." Yesterday, in [http://An experienced executive in Finance, Business Development and Marketing, Harries is no stranger to the travel tech business or trivago, having held various leadership positions with the company between 2012 and 2018. Most notably, he played a vital role in the 2012 acquisition by Expedia, leaving trivago in 2018 after leading the company's successful Nasdaq initial public offering in 2016 and driving its global expansion in Asia Pacific.]this press release, trivago announced that Robin Harries had assumed the position of CFO, as follows:

                    "trivago N.V. today announced the completion of its leadership change with the arrival of newly appointed Chief Financial Officer Robin Harries, effective April 1, 2024. Harries’ expertise will complement and enrich the new leadership team tasked with implementing a refined strategic focus to unlock value for both users and advertisers. An experienced executive in Finance, Business Development and Marketing, Harries is no stranger to the travel tech business or trivago, having held various leadership positions with the company between 2012 and 2018. Most notably, he played a vital role in the 2012 acquisition by Expedia, leaving trivago in 2018 after leading the company's successful Nasdaq initial public offering in 2016 and driving its global expansion in Asia Pacific......"

              --------------------------------------------

Please contact me if you would like to be on the distribution list and receive every issue of this newsletter directly in your inbox.