Across the Board
Former Twitter Executives Sue Musk Over Unpaid Severance
Former CEO, CFO, legal chief, and GC dispute Musk’s claim he had cause to fire them
“Four former top Twitter executives sued Elon Musk, saying he owes them a collective more than $128 million in severance. The executives, who led the company during a lengthy and at times hostile takeover process in which they sued the billionaire to follow through with the acquisition after Musk changed his mind, say he fired them citing gross negligence and willful misconduct, which they deny. Musk said at the time they were fired for cause and he didn’t have to pay severance. The lawsuit, filed Monday in federal court in California, escalates a more than yearlong dispute between the former executives and the billionaire. The plaintiffs are Parag Agrawal, Twitter’s former chief executive; Ned Segal, its former chief financial officer; Vijaya Gadde, its former chief legal officer; and Sean Edgett, its former general counsel.” THE WALL STREET JOURNAL
Lawyers in Musk Compensation Case Seek $5.6 B in Tesla Stock
Amount would be a record-breaking payday and a rare stock payout
“Chancellor Kathaleen McCormick’s January decision to strike down Musk’s pay package at Tesla was the largest verdict in the history of the Delaware Chancery Court. McCormick ordered Musk, Tesla’s chief executive, to return the stock options he received under his 2018 compensation package, which the company had valued at a maximum of $55.8 billion. The judge sided with Tesla shareholder Richard Tornetta, who alleged that the board of directors breached their fiduciary duties to investors in approving the compensation. It is now up to McCormick to figure out how much returning the compensation package would be worth to Tesla—and, relatedly, how much of that pie attorneys should receive in the form of fees. “The lawyers who did nothing but damage Tesla want $6 billion. Criminal,” Musk wrote on X Friday night.” THE WALL STREET JOURNAL
The Rising Complexity of Board Directorship (PODCAST)
Three experts offer advice on advice on dealing with increased responsibilities
“Sean Brown: The business world has changed dramatically over the past few years. What does it mean to be a board director today? Frithjof Lund: With all the new challenges coming up, from geopolitics to generative AI and digitization to sustainability, being a board director is probably more complex than ever. New topics pile onto the board agenda almost by the day. We’ve also seen a massive increase in the expectations of the board to engage on strategy, investments and M&A, performance management, risk, talent, and the organization.” INSIDE THE STRATEGY ROOM (MCKINSEY)
GE Board of Directors Approves Spin-Off of GE Vernova
Following completion of the planned spin-off, GE will operate as GE Aerospace
“General Electric Company's Board of Directors announced its approval of the previously announced spin-off of GE Vernova, clearing the way for the launch of GE Vernova and GE Aerospace. According to GE Chairman and CEO and GE Aerospace CEO H. Lawrence Culp, Jr., both companies will be fully independent, with GE Vernova focusing on the energy transition and GE Aerospace handling flight.” YAHOO FINANCE
The Bitter Board Lessons of Harvard’s Disaster
Takeaways from a cautionary tale
“The negative buzz over board challenges experienced by Harvard, Tesla and Boeing shows remarkably parallel problems over the same period. Harvard’s stumble is particularly educational for boards facing a governance crisis. At a recent Yale Higher Education Leadership Summit, 87 percent of 70 college and university presidents attending concluded that it was right for Harvard’s former president, Claudine Gay, having lost the legitimacy to lead, to step down, with 60 percent also expressing support for Harvard in pushing her from office…However, with the Harvard Corporation board silent at the time of the exit and for months afterward, it is not surprising that people were confused. Morning Consult survey data shows major reputational damage to the Harvard brand by the general public, with falling applications, job placement problems and a withdrawal of major donors.” CORPORATE BOARD MEMBER
Labor Group Drops Campaign For Starbucks Board Of Directors
Starbucks reports significant progress in talks with Workers United
“A coalition of labor groups has ended its proxy campaign to nominate three people for Starbucks’ board of directors amid tense labor negotiations at some Starbucks stores, after the company reported significant progress toward negotiations with the Workers United union…The Strategic Organizing Center (SOC), a coalition of several North American labor groups and itself a Starbucks shareholder, launched a campaign in November to elect its own slate of three new directors at the coffee giant’s March 13 shareholders meeting, including a former National Labor Relations Board chair. But the organization announced Tuesday it was withdrawing its nominees following last week’s announcement that Starbucks and the Workers United union had agreed to work together to create a framework for collective bargaining agreements at unionizing Starbucks stores.” FORBES
The Board of Directors Is in Charge (OPINION)
Moelis, Crown Castle, and other examples of dealing with activism
"The shareholders don’t make the decision; the board does. Now, the directors are elected by the shareholders, and when the company has a controlling shareholder, the idea that the directors are in charge can feel somewhat absurd. The controlling shareholder — say, a founder and chief executive officer who owns 60% of the stock — can come into the boardroom and say ‘I want you to sell all of the company’s assets to me for $1,’ and the directors will say ‘no, in our independent judgment that’s a bad idea,’ and the founder/CEO/shareholder will say ‘okay you’re fired,’ and she will replace them with more pliable directors. And she can do that, because she has the votes.” BLOOMBERG
Relationship Between CEOs And Boards Needs Improvement
Many CEOs judge themselves harshly on their ability to operate efficiently with their board
“Can your board honestly assess whether there is effective interaction with the CEO? Effective communication between the board and CEO doesn’t mean that there will be no friction. There will be disagreements, but are there mechanisms in place to work through the rough patches? Do directors and the CEO agree on how an effective board should operate? Is there respect for differing opinions? Is there tolerance and acceptance when additional convincing (or research) is required to gain consensus? Most of the time, board members and the CEO know when there are problems in the boardroom.” CORPORATE BOARD MEMBER
Latino Representation on Fortune 1000 Boards Grows
KPMG report notes an increase from 2.7 percent in 2019 to 5.0 percent in 2023
“The study shows slightly greater gender diversity among Latino directors: 32 percent of Latino directors are women, compared to 30 percent of all public Fortune 1000 directors. Among the newest Latino directors--those added to boards between January 2022 and June 2023--only 28 percent are women. Of all directors who joined public Fortune 1000 boards in the same time frame, 39 percent are women. In terms of age diversity, Latino directors contribute to a younger demographic on boards. Roughly half of the Latino directors studied are under the age of 60, a notable contrast to the broader demographic of all public Fortune 1000 directors, where only one-third fall into this age bracket.” KPMG
Role of Internal Audit in ESG Heats Up Amid Wave of Regulation
Internal audit teams' responsibility to verify material ESG data continues to expand
“Across corporate governance, internal audit executives are central to board oversight duties and in particular interfacing with the board’s audit committee. Indeed, audit executives’ duties include risk management, controls, and governance processes and policies, and they report on these to boards of directors, audit committees, and relevant stakeholders…The role in internal audit in ESG data and reporting is critical for the usefulness of sustainability information to be enhanced, both to improve the value of sustainability information and to be capable of verification. Verifiable data signals to investors that the information is reliable and can be trusted to be complete, neutral, and accurate.” REUTERS
Time to Rethink Talent in the Boardroom
A big challenge is finding time amid a growing list of priorities vying for boards’ attention
“Boards, like the organizations they oversee, are being pulled in multiple directions: The advent of innovative technologies like generative artificial intelligence, evolving stakeholder expectations, demands for climate action, the need for progress on diversity, equity, and inclusion, and the changing economic, political, health, and geopolitical landscape are all transforming the role of organizations in society. Ultimately, at the center of all this change are the people inside organizations doing the work.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
