From Boardspan this Week:
How Boards Set the Tone for the Organization
A strong corporate culture reinforces values critical to a company’s success. And boards help set the tone. This Boardspan Library piece looks at how to understand and oversee culture.
“Board directors tend to underestimate the importance of corporate culture when they should see it as among their top governance imperatives. Culture is inextricably linked with strategy and risk, and it can be an organization’s biggest asset or its greatest liability. Yet, recent studies indicate that more than 80 percent of directors don’t have a firm grasp on the culture that exists in the organizations they serve. Most directors would be hard pressed to define corporate culture, and those that can don’t always know what their role should be in influencing it.” CORPORATE COMPLIANCE INSIGHTS via BOARDSPAN
Across the Board
Do Non-GAAP Earnings Overinflate CEO Comp?
"Overpaid” CEOs are under scrutiny right now. Often non-GAAP earnings are a determining factor in awarding high compensation to CEOs. Is that an accurate measure? This article takes a closer look.
"Managers routinely claim that non-GAAP adjustments remove transient items in GAAP earnings and are thus more informative about their core, or ongoing, economic performance…However, other non-GAAP exclusions are persistent, suggesting some managers exclude losses and expenses not to inform but to increase investors’ perceptions of core operating earnings by reporting ‘everything but bad stuff’...legitimizing high CEO pay appears to be one of the potentially important reasons for firms to use non-GAAP earnings in contracting.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
Overseeing Third-Party Risk
How do you manage risk that comes from the outside: From partners, vendors, supply chain infrastructures, and more? Third-party risk is unavoidable and boards need to have a plan.
“In many companies, boards of directors and C-suite leaders have seen firsthand how rapidly risks related to third parties can threaten their own company’s ability to deliver on its mission and strategy. Some companies have also experienced how significantly the missteps of third parties—as well as fourth parties, fifth parties, and sixth parties in a third-party ecosystem—can tarnish the company’s brand and reputation.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
Deutsche Bank’s Board Faces Reconstruction
Seven of the ten employee representatives on the board call it quits.
“Deutsche Bank AG’s supervisory board is facing its biggest revamp in several years as the majority of labor representatives are set to be replaced…Only three incumbents — Jan Duscheck, Timo Heider and Manja Eifert — are seeking a renewal of their mandates. That would be the largest number of new appointments since at least 2018 for the board, which currently has 20 members.” BLOOMBERG
Shifting Dynamics in Board Composition
For the first time, one out of five board members are racial and ethnic minorities, while the percentage of women joining boards dipped slightly in 2022.
“Racial and ethnic minorities now hold 20% of all board seats at the nation’s largest public companies for the first time, according to a new study. Black people have experienced some of the biggest gains…Asian directors filled 7.2% of board seats while Hispanic directors held 3.6%, according to ICS. Directors of Middle Eastern or North African descent as well as Native American, Alaska Native, or Native Hawaiian directors each occupy less than 1% of board seats. The analysis shows the impact of investors pushing portfolio companies to diversify their boards.” THE WALL STREET JOURNAL
"The percentage of women joining boards slipped to 39% in 2022 from more than 40% in both 2019 and 2021…As of Dec. 31, 2022, women hold 28% of board seats at companies in the Russell 3000 index of the country’s 3,000 largest public companies, a 0.2% increase from the previous quarter and a 1.7% increase year-over-year.” BIZ WOMEN
Boards Governing AI Use in Companies
AI is suddenly everywhere in business, from determining actions to writing content. How much does the board need to oversee its use?
“The rapid evolution of generative AI challenges the ability of corporate governance to understand the new technology and to take the steps that may be necessary to monitor the application of AI within the organization. This ability of computer systems to quickly generate detailed text and visuals from simple input prompts offers companies a wealth of exciting opportunities, as well as certain unknowns. It’s ultimately the board’s job to keep tabs on both.” FORBES
Susan Wojcicki is Stepping Down from YouTube
Neal Mohan, the company’s chief product officer, will take over as CEO.
“Ms. Wojcicki’s departure signifies an end to the early, pioneering days of YouTube and its parent company, Google, and adds to a lengthening list of women who have left senior roles at big Silicon Valley companies in recent years. Google spent some of its early days headquartered in Ms. Wojcicki’s garage.” THE NEW YORK TIMES
Robin Hood Foundation Chooses a New Chair
Goldman Sachs executive Dina Powell McCormick will take the helm.
“Goldman Sachs executive Dina Powell McCormick has been named chair of the Robin Hood Foundation, a nonprofit backed by Wall Street executives and other business leaders that aims to combat poverty. McCormick, who was the group’s vice chair, was elevated by the board to chair on Wednesday, the foundation announced in a statement. Former Chairman, John Griffin, founder of Blue Ridge Capital, will remain on the board…” CNBC