12/5/24 – Issue 9.45 – Your weekly news on all things board. 

As boards return from the Thanksgiving break, many find themselves facing a flurry of activity around their evolving relationships with their CEOs, a partnership where alignment is key, and tensions can run high if not managed proactively. A cautionary tale for all, Stellantis CEO Carlos Tavares' abruptly resigned following clashes with his board. And Elon Musk and his Tesla board, once again, see his pay package getting shot down by a Delaware judge. Apropos, we share some practical advice for CEOs looking to build trust along with a roadmap for strengthening leadership and oversight. Enter the recurring conversation of CEO succession planning, objective CEO reviews, and maximizing board meeting impact. There’s plenty to reflect on as the year winds down and timely for 2025 planning.

In the Spotlight

Stellantis CEO Carlos Tavares’ Abrupt Departure

Stellantis board and Tavares disagreed on short term priorities

“Targets deemed unrealistic or destructive by some board members triggered the sudden fall of Stellantis CEO Carlos Tavares just a month after he received their full backing… Unhappy with his aggressive targets for sales and cost cuts and his contentious dealings with the giant automaker's suppliers, dealers and unions, the board unanimously wanted Tavares to go… When board members started asking more specific questions about the executive's strategies, Tavares' reaction was: 'You do not interfere with my job - that is not your business.' Board members, irritated, continued pressing Tavares, the source said. They were unsettled by what they viewed as the CEO's relentless but narrow focus on cost-cutting, which had caused supply disruptions and angered dealers.” REUTERS

Elon Musk’s $50 Billion Tesla CEO Pay Can’t Be Reinstated

The judge said she would not reverse her decision to strike down the package after Tesla shareholders approved it a second time

“The shareholder who brought the suit, Richard J. Tornetta, contended that Tesla’s board had not acted independently of Mr. Musk when devising the package and that the company had provided ‘materially misleading’ information to investors. In her January ruling, after a trial in 2022, Chancellor McCormick said, ‘The process leading to the approval of Musk’s compensation plan was deeply flawed.’” NEW YORK TIMES

How New CEOs Can Start Off on the Right Foot with Their Board

A positive relationship starts with setting expectations

“First, it’s important for incoming CEOs to reflect on the fact that, in each position along their career path, they have had only one boss. In addition, each of these bosses previously held senior management roles in the company, making them very familiar with the responsibilities of the job. Now, as new or aspiring CEOs, they are about to have as many as 10 or even 15 bosses—otherwise known as the board of directors… Not only that, but CEOs will also report to board members who have never worked for the company, including many who have no experience working in the industry.” FORBES

Three Significant CEO Success Skills

Choosing the next CEO will always be one of the highest-stakes decisions a board will make, carrying both considerable rewards and inherent risks

“As a director, you will know that finding capable CEOs is only half the battle. The real challenge lies in ensuring these leaders will actually go on to succeed in the role and deliver sustained success in the face of unprecedented volatility and complexity. This shift in perspective matters more than ever. In today’s business landscape, change is not just constant — it's often dramatic.” DIRECTORS & BOARDS

From Boardspan this Week:

The Board and CEO Relationship: The Not-So-Secrets to Success

Board members who stay current in their external awareness are especially valuable as thought partners to the CEO

“No CEO succeeds alone. Their team, their customers, their investors and many other stakeholders all contribute to a CEO’s wins. Among these many relationships, the one with their board of directors is the most symbiotic. A CEO needs a board to share wisdom, serve as thought partners and provide objective oversight. The board, while providing ultimate accountability, very much needs the CEO as the primary leader and responsible party for success. The company’s success depends on a partnership rooted in collaboration and shared responsibilities.” BOARDSPAN IN COLLABORATION WITH TENEO

Across the Board

Balancing the Scales: The Critical Role of Risk Mitigators in Executive Compensation
Companies in the S&P 500 index generally are more mature and often are under heightened shareholder scrutiny. Therefore, they tend to maintain more robust risk mitigators compared to Russell 3000 companies

“Equity awards are the primary compensation vehicle for U.S. executives, comprising 71 percent of total CEO compensation for S&P 500 CEOs and 60 percent for Russell 3000 (excluding S&P 500). As compensation committees seek to maintain alignment of executive and shareholder interest, the use of risk mitigators in equity grants has increased over the past five years.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

Optimizing Audit Committee Meetings
Nearly two-thirds of board respondents believe their meetings could be more fruitful

“Across organizations, there’s a running list of strategic priorities demanding boards’ and senior executives’ attention. Deloitte research reveals that directors would like to be having more robust boardroom discussions on mission-critical topics such as talent, sustainability, and generative AI, to name a few. But finding more time for these discussions often isn’t feasible. How can executive teams make the most of the limited time they have with their boards?” DELOITTE INSIGHTS

US Corporate Board Diversity Growth Slows as New Directors Join

Corporate boards are more diverse than ever, but growth in racial diversity among new directors is slowing

“US corporate boards are more demographically diverse than ever before, though the rate of change in their makeup appears to be slowing based on gender and race trends for newly appointed directors… The proportion of new corporate directors who are women or people from non-White backgrounds has decreased in the past two years, despite sustained efforts to diversify boards… ‘These trends may partly reflect a natural slowdown as board representation approaches alignment with working-age demographics following the post-2020 push to increase diversity’.” BLOOMBERG LAW

Policy Survey 2024: Responsiveness to Shareholder Opposition

Investors and non-investors expressed very different expectations for how a board should respond when an advisory management proposal does not receive majority support

“The most popular answer among investors was that the board should generally refrain from the requested action… Meanwhile, non-investors were far more likely to defer to the board’s judgment… there appears to be a general consensus that expectations for how a company responds to significant levels of shareholder dissent are not influenced by whether the proposal is binding or advisory” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

Seat at the Table

• Professional services firm Accenture announces to its board Masahiko Uotani, Chairman and CEO of skincare firm Shiseido; and Jennifer Nason, Global Chair of Investment Banking at J.P. Morgan

• Intel welcomes to its board Eric Meurice, former President, CEO and Chairman of ASML Holding N.V.; and Steve Sanghi, former CEO of Microchip Technology

• Senti Biosciences names to its board Fran Schulz, former Senior Parter of Life Sciences at Ernst & Young

• Software firm CCC Intelligent Solutions elects to its board Neil de Crescenzo, former CEO of healthcare firm Optum Insight

• Vodafone adds to its board Simon Dingemans, former CFO at GlaxoSmithKline

• SM Energy appoints to its board Dr. Ashwin Venkatraman, President and CEO of machine learning firm Resermine

• Klotho Neurosciences welcomes to its board Riad El-Dada, former President of Merck

• Software firm D-Wave names to its board Sharon Holt, Principal at Fraser Stuart Ventures

• AI firm PROS Holdings adds to its board John Strosahl, CEO of device management firm Jamf

• Gorilla Technology Group elects to its board Thomas Sennhauser, CTO and Business Lead at Intel Corporation

• Workday welcomes to its board Liz Centoni, EVP and Chief Customer Experience Officer at Cisco 

• Beam Therapeutics names to its board Chirfi Guindo, CMO of Human Health at Merck & Co.

• Commercial real estate firm Colliers International Group nominates to its board John Sullivan, President and CEO of real estate firm The Cadillac Fairview Corporation

• Security products firm Allegion adds to its board Gregg Sengstack, former CEO of Franklin Electric

• Building firm Owens Corning elects to its board Michelle Collins, former National Automotive Sector Leader and a Senior Partner at Deloitte & Touche

• MassMutual welcomes to its board Amy Stepnowski, Chief Investment Officer at The Hartford

About Boardspan
Boardspan helps boards raise the bar on their critical governance mandates by combining cutting edge digital capabilities with high-touch consulting services. They are leaders in board assessments, individual director & CEO evaluations, board succession strategy & search, skills & composition analyses, and bespoke advisory work. Boardspan only works with boards, bringing deep experience, objectivity, an analytical orientation, and insight-driven recommendations. Clients include Blue Shield (CA), Colgate-Palmolive, Deckers, Dynatrace, elf Beauty, HubSpot, Ingersoll Rand, KKR, Lam Research, the PGA, Roblox, Salesforce, Synopsys, the USOPC, and scores more.