21 June 2017 | Oliver Gill| CITY A.M.
FTSE 100 firms are failing to furnish shareholders with sufficient information on the risks facing their businesses, according to a report released today.
The Chartered Institute of Internal Auditors (CIIA) concluded just 32 per cent of the UK’s blue chip companies provided “any tangible metric on risks, or mitigation, within the strategic report section of their annual reports”.
UK legislation mandates all FTSE 100 companies must include a “strategic report” within their annual financial statements. This should contain a description of key financial and non-financial risks facing the firm. Read more
2017 | Boardroom Resources
Consider all the things that can go wrong at a company today, and risk oversight seems like a near impossible task. From industrial accidents to disgruntled employees caught on camera, today’s digital world accelerates the flow of information—often leaving companies with more risks to manage and less time to respond. This tumultuous environment can be challenging for boards to oversee.
In a recent collection of publications titled the Risk Oversight Series, PwC’s Governance Insights Center refocuses the board’s attention on the risks that matter most (i.e., the ones that directly impact a company’s strategic objective). These key risks can vary by industry and company size; yet, one area of oversight that tends to be virtually ubiquitous is reputation risk. Read more
27 November 2009 | Al Gore and David Blood | Financial TImes
Why do investors and business leaders continue to focus on the short-term and ignore the fact that businesses that think long-term end up more competitive and profitable? Behavioural economists believe they have the answer: our brains are hard-wired to think short-term because evolution has rewarded serial short-term successes such as avoiding predators and other dangers that faced our ancestors. Their survival ensured our existence – but predisposed us to the same kind of short-term thinking. As a result, even though our world is very different from theirs, long-term decision-making remains the exception, not the rule.
The global financial crisis had its origins in short-term, unsustainable strategies and actions. Before the crisis and since, we (and others) have called for a more long-term and responsible form of capitalism – what we call “sustainable capitalism”. Yet despite our collective best efforts, one year on, the capital markets seem to be reverting to business as usual. Read more
22 May 2017 | Joe Nocera | BloombergView
In-person corporate presentations are relics. (They don't even have free coffee.)
For the last three or four years, ISS Analytics, a division of the influential proxy advisory firm Institutional Shareholder Services, has sent out a press release to mark the busiest day of annual meeting season. This year, it was Thursday, May 18; 128 companies met with shareholders that day, from Fortune 500 companies like Intel Corp. to penny stocks like Osprey Medical Inc., a kidney-care company.
I hadn’t been to an annual meeting in years, but back in the day I’d attended some classics. I was at the disastrous Home Depot Inc. meeting in 2006 where chief executive Bob Nardelli’s contemptuous treatment of shareholders probably cost him his job. In 2008, I saw several members of the Rockefeller family turn against Exxon Mobil, the fount of their wealth, by offering several global warming resolutions. And in 2009, I saw hedge fund billionaire Bill Ackman shed actual tears at a Target Corp. annual meeting. (He’d just lost a proxy fight.) Read more
2 May 2017 | Mark E.S. Bernard | LinkedIn
20 Cybersecurity Questions for Executives and the Board of Directors
1. How do we integrate Cybersecurity with the organisation's strategic direction and plan?
2. What are our principal Cybersecurity risks?
3. Are we taking the right amount of Cybersecurity risk . . . Read more
4 May 2017 | Joe Nocera | BloombergView
Once it was a good idea to link CEO pay to the stock price. But the practice has gone too far.
"Maximizing shareholder value" is one of those concepts that falls under the adage, "Be careful what you wish for." I know this because, a long time ago, I was one of those wishing for it.
It seemed like such a good idea at the time, back in the late 1970s and 1980s. For too long, the compensation of top executives was disconnected from any performance criteria, including whether they made money for shareholders. CEOs did pretty much whatever they wanted, with no fear of consequences. Thus, companies that needed to slim down, wouldn't. Companies that needed to deploy capital more intelligently, didn't. Executives who should have been fired, weren't. Read more
13 Apr 2017 | Chuck Blakeman, Founder, Crankset Group | Inc.com
Terrible treatment of customers by companies like United Airlines and Wells Fargo is as predictable as rain. Their most notable snafus aren't outliers, but knowable results of a downward spiral that every company can learn from.
We've all seen the recent video of David Dao, an innocent United Airlines passenger being knocked around, bloodied and brutally dragged off a plane semi-unconscious. What is surprising is that people are surprised.
For some companies, these are patterns, not mistakes. United and Wells Fargo are very similar in their culture. We can learn from looking at both of them together.
Last fall, Wells Fargo was exposed for creating 2 million fake accounts, and brazenly using their customer's names to do it. Just a couple days ago they were also exposed for aggressively pushing small business owners into extremely confusing and costly credit card processing schemes. One expert said, "Wells Fargo makes it all but impossible for small businesses to understand which fees are being assessed and how." Again, what's surprising is that these things get reported like we should be surprised. Read more
7 Apr 2017 | Mike Sturm| Personal Growth
I’ve been in the business world for nearly 10 years now. Not enough to call myself a vet, but enough to have been in various kinds of interactions with a sizable cross-section of people. In that time, I have heard a lot of talk about ethics, integrity, and good company culture. I have also seen and heard a lot of unethical stuff, things that lack integrity, and betrayals of good company culture.
Since my background is in ethics (in that I did my graduate work in philosophy, focusing on ethics), talk about business ethics always caught my attention. When it did, I often found myself underwhelmed by the substance of such talk. There was little of it. I saw a lot of slides with way too many bullet points. I heard a lot of talks with abstract and general principals that focused on community involvement, charitable donations, customer service, and employee benefits and perks. What I rarely hear is solid, actionable principles that are given to the people of a company, and not just slipped into marketing material. Read more
23 Mar 2017 | GS. Ramakrishna Velamuri, William S. Harvey, S. Venkataraman | Harvard Business Review
Most business leaders hesitate to take a firm stand against corruption, even in environments where it is widespread. Some may see benefits from indulging in corrupt practices such as faster processing of permits or less interference from governmental officials. At the same time, the perceived costs of corruption are low, due to poorly formulated anti-corruption laws and ineffective enforcement, which leads to a very low likelihood of prosecution and punishment. As a result, as much as they may detest corruption, most business leaders end up succumbing to it. Indeed, many see themselves as victims of the endemic corruption rather than as its perpetrators – “Everyone else is doing it,” they may tell themselves, “So we have to do it too.” Read more
22 Mar 2017 | Taylor Griffin, David Larcker, Stephen A. Miles and Brian Tayan | Columbia Law School's Blog
The New York Stock Exchange requires that the board of each publicly traded corporation “conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively.” The purpose of this exercise is to ensure that boards are staffed and led appropriately; that board members, individually and collectively, are effective in fulfilling their obligations; and that reliable processes are in place to satisfy basic oversight requirements. Read more
16 Mar 2017 | Colin Price| Heidrick & Struggles
With proxy season in full swing as companies around the world get ready for their annual meetings, shareholders should ask themselves a different question this year. Don’t just ask whether an individual is qualified to be on a board. That question is obviously important, but it isn’t enough. Think, as well, about the board as a whole, and ask whether the mix of people is right for your company.
To understand the importance of mix, you need look no further than Theranos, the high-profile start-up that raised capital at a valuation as high as $9 billion but that has blown up over the past year and a half. The company claimed it would revolutionize blood testing by requiring only a few drops, rather than vials, of blood from patients and stood by its technology even as evidence mounted against it, but was eventually exposed. Read more