January/February 2012-- Vol. XXXIII No. 192
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WHAT DO INVESTORS REALLY WANT? by Michael R. Levin
Ignore the voice of shareholders at your peril. |
| The board of directors has the legal task of serving as proxy for the wishes of shareholders. Why, then, do boards put so much effort into ignoring, muzzling or misreading what investors say? Michael Levin, a noted investor activist and advocate, offers a wish list of what investors really want from their boards—if those boards will listen. |
“SAY-ON-PAY” BECOMES “SUE-ON-PAY” by Claudia H. Allen
Plaintiff attorneys are putting teeth into failed say-on-pay votes. |
| Critics of “say-on-pay” complain that negative votes on executive pay lack teeth since they are advisory. However, plaintiffs’ attorneys are discovering a new tool to make a lost say-on-pay vote sting—lawsuits. What trends are evolving in litigation against companies that lose a vote of confidence in their pay plans? |
ADD BOARD SERVICE TO YOUR CEO DEVELOPMENT by Karen Kane
Do your CEO successors really know how the boardroom works? |
| Heavier time demands of both top executives and directors have made it less and less likely new CEOs will gain outside board seasoning. The result: CEOs with limited knowledge of how boards work, less exposure to peers, and lagging boardroom diversity. What if your company instead made exposure to outside boards a basic element of your top executive succession planning? |
THE DODD-FRANK CLAWBACK AND THE PROBLEM WITH EXCESS PAY
by Jesse M. Fried and Nitzan Shilon
Boards have discretion to recoup illicit CEO pay—but almost never do. |
| The Dodd-Frank Act requires firms to adopt clawback policies for recovering certain types of excess pay—overpayments resulting from errors in performance measures (such as reported earnings). The authors discuss the costs of excess pay to investors and explain why most firms’ existing arrangements fall far short of what the Dodd-Frank Act is likely to require. The authors also offer guidance to boards seeking to eliminate the types of excess pay not reached by Dodd-Frank. |
HOW SECURE ARE YOUR BOARD COMMUNICATIONS? by Paul A. Johns
Lost board books and laptops, plus lax data security, remain common.
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| With the growing potential for legal liability, insider trading and strategic disaster, standards for corporate information security have tightened. However, there is a weak link in handling some of the company’s biggest secrets—the board. A new study by Thomson Reuters finds global boards increasingly worried over their own info security lapses—yet doing little about it. |
CONVERSATIONS: RALPH WHITWORTH When boardroom “outsiders” come inside. |
| As proxy reforms become more of a reality in the U.S., boardrooms increasingly face a new phenomenon: directors elected from the outside, which the current board or management never nominated, and may not welcome. Ralph Whitworth founded activist investment firm Relational Investors LLC in 1996. Relational Investors was one of the first funds to invest in underperforming companies and use the governance process to prod changes. |
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IN
REVIEW Index to
actions, regulations and surveys. |
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SPOKEN
& WRITTEN Excerpts
of articles and speeches. |
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DIRECTORS'
REGISTER Recent
board elections. |