Across the Board
McKinsey Under Criminal Investigation Over Opioid-Related Consulting
DOJ investigates the firm’s role in advising the makers of OxyContin and other opioids
“The Justice Department is conducting a criminal investigation into consulting firm McKinsey related to its past role in advising some of the nation’s largest opioid manufacturers on how to boost sales. Federal prosecutors are also probing whether McKinsey or any of its employees may have obstructed justice in relation to records of its consulting services for opioid producers, according to people familiar with the investigation, which has been ongoing for several years. A grand jury has been empaneled in Virginia as part of the federal investigation into McKinsey’s opioid-related consulting… The criminal probe centers on consulting advice McKinsey gave to drugmaker clients including Purdue, Endo International and Mallinckrodt that previously sparked mass civil litigation against the firm. Government and private plaintiffs filed hundreds of civil lawsuits in recent years accusing the consulting firm of exacerbating opioid addiction.” THE WALL STREET JOURNAL
Wanted: An Executive to Repair Boeing
The plane maker is searching for a new CEO, considering several former Boeing executives
“When Boeing named Stephanie Pope to the new position of chief operating officer in December, the move was widely viewed as a sign that she might succeed the company’s chief executive, Dave Calhoun, in the next few years. Four months later, facing its second big crisis in five years, the company has begun a fresh search for another chief executive. And Ms. Pope appears to be just one of several potential candidates for one of the most prominent and perilous positions in corporate America: fixing Boeing. Late last month, the company announced that Mr. Calhoun would step down at the end of the year, much earlier than expected. The chairman of Boeing’s board vacated his position immediately, and the head of its troubled commercial planes business departed.” THE NEW YORK TIMES
Should a CEO Choose Their Successor?
The CEO is unmatched when it comes to company knowledge, but boards should steer the process
“Choosing the right CEO is one of the most consequential and complicated jobs a board is charged with. The top leader sets the tone and culture for the rest of the company. They choose the rest of the executive team, who then drives the strategy and helps mitigate risk. Getting CEO succession right can be transformational for a company. Getting it wrong can erode shareholder value. This imperative has become even more acute as an increasingly fraught environment marked by digital transformation, economic uncertainty, polarization and instability makes the CEO's job more challenging than ever.” DIRECTORS & BOARDS
Doing DEI Differently
Amid pushback, experts offer an alternate path to address a critical and treacherous issue
“Paul Sarvadi believes in the spirit of diversity, equity and inclusion.… But, like a lot of those same people, he also believes that something has gone very wrong with the way DEI has come to play out inside many companies in this country. ‘DEI did start with unifying objectives [but] graduated to this kind of check-the-box mentality,’ says Sarvadi…. The most essential thing, Sarvadi suggests, is that instead of chasing doctrinaire DEI, companies should pursue a strategy that emphasizes three goals… Commonality … Equality … Cohesiveness…” CORPORATE BOARD MEMBER
The Rise of the Chief AI Officer: Is a Board Equivalent Necessary?
Discussions about AI use and governance in the boardroom are still in the early stages
“As AI continues to advance at an exponential rate, businesses are realizing that traditional governance methods are struggling to keep up with the complexities of the modern digital economy. The rise of the Chief AI Officer in the C-suite underscores this shift, buttressing the growing importance of AI in corporate leadership. However, this raises a critical question: Shouldn't this forward-looking approach also apply to the board of directors? With recent studies pointing out the urgent need for AI governance, it is clear that boards must not only adapt to but also proactively monitor the incorporation of AI into corporate strategy.” FORBES
Board Oversight of AI: How Will Companies Manage the Risks?
Disclosures, extending across industries, were most commonly made in the risk-factor section
“It is in this context that companies interested to deploy or otherwise affected by AI will have to thoughtfully consider how to manage such risks in order to responsibly realize the benefits of this emerging technology. Companies, both public and private, are increasingly raising an important question: How should the board of directors oversee AI? In his remarks this month at The SEC Speaks in 2024, Deputy Chief Risk Officer in the SEC Division of Corporation Finance’s Office of Risk and Strategy Johnny Gharib said there has been a significant increase in the number of annual reports filed by large accelerated filers that mentioned AI, with a majority doing so.” JD SUPRA
AI-Powered Boards
When does a board consider appointing an AI as a director?
“Surprisingly, last month’s announcement regarding the addition of an Artificial Intelligence (AI) member to the board of Abu Dhabi’s International Holding Company (IHC) does not appear to have galvanized global attention. Co-developed by a local Emirati AI company G42 and Microsoft, Aiden Insight, the first AI board member in the Middle East, is positioned to be a game changer for corporate boards and their regulators worldwide. In fact, it is not the first time an AI board member has been appointed to a corporate board. Exactly a decade ago, Hong Kong’s Deep Knowledge Ventures had assigned Vital as the sixth AI member of its board of directors, marking the first attempt to bring AI to the board not as an enabling mechanism but rather as a decision-maker.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
“ES” Versus “G” in Corporate Governance
Must governance trade-offs be made for corporations to pursue social benefits and not just profits?
“If the transaction costs of coordinating joint ownership around social goods are sufficiently high, it is impossible to achieve all three of the following corporate governance features simultaneously: liquid share trading of ownership interests; low cost removal of directors by stockholders; and a credible commitment to producing a voluntary, costly corporate social good. The trilemma implies that it is not possible to separate corporate governance institutions from corporate externality policies. If founders want to produce a costly corporate public benefit, they have to restrict share transfers or governance rights. If founders want to reap the benefits that arise from making managers accountable to market forces, they’re not going to produce a costly corporate public benefit.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
Dear Board Directors, Please Don’t Shoot the Proxy Messenger
Are proxy advisers really to blame for fomenting such revolts?
“Proxy advisers are used to being caught in the crossfire between boards and shareholders. Still, it was a surprise to see AstraZeneca chair Michel Demaré take a direct shot at the messenger in the Financial Times last week. He lambasted advisers for having had the temerity to recommend a vote against chief executive Pascal Soriot’s pay package at the pharmaceutical company’s recent shareholder meeting.” FINANCIAL TIMES
In Case You Missed It: White Men Are Now Less Than Half of Corporate Board Members
Corporate diversity efforts have resulted in more women and minorities sitting on boards
“Through the decades, corporate boards have been mostly white and mostly male. That started changing in the early 1970s. Fueled by the historic gains of the Civil Rights Movement that broke down racial and gender barriers, a variety of social groups such as the National Black MBA Association and the National Organization for Women pressured corporations to build diversity programs into their management structures. Over the years, a dramatic change has occurred. My latest research on the corporate boards of the top 50 companies from 2011 to 2023 shows that the percentage of whites dropped to 73.6%, the percentage of men dropped to 65.3% and, rather remarkably, the percentage of white men dropped below 50%, to 49.5%.” THE CONVERSATION
