8/1/24 – Issue 9.28 – Your weekly news on all things board. 

The aftermath of the July 19 CrowdStrike tech outage will likely be playing out in boardrooms and court rooms for some time. This week Delta Air Lines said the widespread tech outage, which occurred when the cybersecurity firm sent a software update to millions of machines running Microsoft Windows, has cost it $500 million and that it is preparing litigation against both CrowdStrike and Microsoft. Given the scale of disruption caused, with some 8.5 million devices reportedly taken offline, it’s unlikely that this will be the only legal action CrowdStrike faces.

Boards of organizations that didn’t face such dire consequences could turn the debacle into an opportunity to pressure-test plans to handle crises. An article posted the day of the outage provided a helpful guide to using the crisis as a real-time tabletop exercise; boards may find value in reviewing the points made while the crisis is past but still fresh.

In other news: Boeing hires a new CEO to turnaround the troubled aerospace giant, when U.S. boards benefit from international directors, activist investors sharpen their claws, 2024 (so far) sees record ESG and anti-ESG proposals, comparing board and c-suite perspectives, and best practices for getting a board IPO-ready.

In the Spotlight

Delta CEO Says CrowdStrike Tech Outage Cost It $500 Million

The airline notifies CrowdStrike, Microsoft to prepare for litigation after it canceled thousands of flights over several days in July

“Delta Air Lines Chief Executive Ed Bastian said the carrier took a $500 million hit from the CrowdStrike technology outage that hurt its operations. With more than 5,000 flight cancellations over several days, Delta faced deeper disruption and took days longer than rivals to get back on track after the outage knocked key systems offline. The U.S. Department of Transportation is investigating how the airline handled the disruption and its customer response. Delta has hired prominent litigator David Boies, chairman of the firm Boies Schiller Flexner, and notified CrowdStrike and Microsoft to prepare for litigation, according to letters reviewed by The Wall Street Journal.” THE WALL STREET JOURNAL

In Case You Missed It

CrowdStrike Outage: An Opportunity for CEOs & Boards to Test Preparedness

Boards should not let this crisis go to waste

“For those impacted, [the CrowdStrike software glitch was] a total disaster.... This will take time to fix—an uncomfortable, powerless position for CEOs and directors. But even here, amid the mess, there is opportunity. What should you be doing to put this crisis to use? You should be watching and evaluating and learning how your team and your technology is responding in real time. Don’t let this crisis go to waste. Focus on a few key things, perhaps, and make a list of how well you’re doing on a bunch of key points.” CHIEF EXECUTIVE

From Boardspan this Week:

The 2024 Board Benchmark Report

The power of performance benchmarking is undeniable. For boards, it’s essential to understand how they stack up against peers, identify new trends and lean into the broader governance landscape.  The 2024 Board Benchmark Report enables boards to build on successes and identify areas for improvement, ensuring continuous growth and effectiveness. Learn how your board compares and what you can do to achieve excellence.

Across the Board

Boeing Hires Kelly Ortberg as Its Next CEO…

Ortberg has a long and sometimes tense history with his new employer

“Boeing hired Robert ‘Kelly’ Ortberg as its next chief executive, picking an aerospace veteran to steer the jet maker through its manufacturing turbulence and a regulatory storm. Ortberg ran one of Boeing’s big suppliers, Rockwell Collins, until 2018, when it merged with another aerospace manufacturer and eventually ended up part of RTX. He built a reputation on Wall Street as a savvy dealmaker and worked closely with airlines and the Pentagon, before abruptly retiring in 2021. The 64-year-old takes over an American manufacturing giant that is grappling with quality issues, production slowdowns, high-stakes labor negotiations and a plunging share price. Boeing has lost nearly $25 billion since 2020 and its operations are burning through more than $1 billion a month.” THE WALL STREET JOURNAL

… Aerospace Veteran to Steer Turnaround

Ortberg faces a multitude of issues, including reviving jet production and rebuilding trust with regulators, the industry and the public

“Ortberg's experience in integrating acquisitions such as steering Collins through an $8.3 billion deal to purchase BE Aerospace in 2016 will face a fresh test at Boeing. The plane maker is working to integrate Spirit AeroSystems into its fold after clinching a deal earlier this year to buy back the fuselage maker. His appointment also addresses industry push for hiring an outsider to steer Boeing out of its troubles.” REUTERS

The Global Board

International crises increase the need for non-U.S. board members
 

“The global challenges for boards have grown exponentially over the last two years. The constantly evolving relationship between the U.S. and China, Russia's invasion of Ukraine, COVID's continuing effect on global supply chains and the worldwide concern over the effects of climate change are just a few of the issues that suggest American corporate boards could use the perspective of international directors. But why is it worth the extra effort to engage international directors, and what sorts of companies would prosper most by including them on their boards? Just as boards can benefit from gender or ethnic diversity, there are many advantages to including directors who can add a global perspective.” DIRECTORS AND BOARDS

The Tech-Forward Boardroom
Fostering richer boardroom conversations on technology

“According to Deloitte’s 2023 Global Technology Leadership Study, 67% of organizations surveyed say at least one of their board members has experience in a technology leadership role, compared to 56% in 2020. Despite technology and telecommunications being the most common industry background for new directors, there is often still a gap in how well the board and technology leaders (chief information officers, chief technology officers, chief information security officers, etc.) are connecting on technology topics. Only 36% of board members surveyed report having full confidence in their technology leaders, and more than four in 10 C-suite executives say their board’s oversight of technology matters is not sufficient in either scope or depth.”  DELOITTE

Activist Investors Have Sharper Claws—and They Want Board Seats
Activist funds have gotten a boost due to an SEC rule change allowing investors to use what’s called a universal proxy card

“In the first half of the year, 449 U.S. companies were subject to demands from activist investors, a 9% jump compared to the first half of last year. And hedge funds are taking swings at big targets. More than half the demands made to companies in the first half were at large-caps with market values of $10 billion and up… The boardroom battles are generating significant media buzz, which can be time-consuming and distracting, especially at large companies where it might lead to CEO departures or strategic shifts. A 2023 study found that an activist on a board doubled the likelihood of a CEO exiting a company…. Notably, the first half also saw the most expensive battle waged between an activist investor and a company in U.S. history. The grudge match between Nelson Peltz’s Trian Fund Management and Robert Iger’s Walt Disney Company rang up total bills estimated to be $65 million or higher. Trian at one point controlled 33 million Disney shares worth about $3 billion, a stake augmented by former Disney executive Isaac Perlmutter’s holdings.” FORTUNE

Record ESG And Anti-ESG Shareholder Proposals In 2024 
Sending mixed signals to CEOs and Boards

“Boards and CEOs can use these findings to help determine the level of shareholder engagement that may be required to avoid potential problems involving backlash on ESG issues. According to a recent report, shareholder proposals on environmental, social and governance (ESG) and anti-ESG issues reached record numbers through May of 2024, but support for these proposals has been mixed… Although anti-ESG proposals have skyrocketed in recent years, they’ve garnered limited support from shareholders. Furthermore, while ESG proposals have also surged, support for environmental and social proposals has declined. Corporate board members can use these findings to help their board determine the level of shareholder engagement that may be required now and, in the future, to avoid potential problems involving backlash on ESG issues. The bottom line: although it seems anti-ESG sentiment is growing, boards will need to devote significant time and resources to addressing ESG concerns.” CHIEF EXECUTIVE

Comparing Board and C-Suite Perspectives
How effective is the board? It depends on who you ask

“The roles and responsibilities of today’s board members look different from those of their predecessors. The modern director’s oversight role has greatly expanded as corporate strategies quickly pivot to address competitive pressures, acquisitions and new technologies. In this environment, boards need a different roster of skills and experience to lead the organization. But our C-suite survey on board effectiveness found that only 28% of executives feel their boards are armed with the right combination of skills and experience. There was also a wide disparity between the importance of having specific competencies on their board. While executives prioritized industry, regulatory/public policy and environmental expertise as their top three competencies, directors prioritized more of the traditional board oversight areas like finance, risk management and operations.” PWC

Going Public? Consider Some Pre-IPO Board Governance Leading Practices 
Following leading practices for board composition, structure, and governance can help you create an effective and connected governance framework

“The IPO governance process typically begins with shaping your board of directors to meet the requirements of operating as a public company… Recruiting—the thread that runs through most of these considerations—demands a great deal of thought and planning. Board members typically serve in their roles for many years. Conducting the required due diligence to find board members with skills that align to the company’s strategy as well as members who fit into the board (and company) culture can take time; and it will serve your company well to vet a broad slate of candidates.” DELOITTE

Seat at the Table

Boardspan congratulates entrepreneur Biz Stone, co-founder of Twitter, Medium, Jelly, and the investment firm Future Positive, and Joe Jordan, President - U.S. and Global Services for global food services chain Domino’s, on their appointment to The Boston Beer Company board. Boardspan is delighted to have advised the company on these placements. 

• American Airlines names to its board Howard Ungerleider, former President and CFO of chemical firm Dow

• Williams-Sonoma appoints to its board Arianna Huffington, founder of The Huffington Post

• American Eagle Outfitters elects to its board Stephanie Pugliese, former President of the Americas at Under Armour

• Design firm MillerKnoll adds to its board John Maeda, VP of Engineering and Head of Computational Design of Microsoft’s AI Platform; Tina Edmundson, President of Luxury at Marriott International; and Jeanne Gang, Founding Partner of architectural firm Studio Gang

• Financial services firm SouthState Corporation welcomes to its board Merriann Metz, General Counsel, Chief Compliance Officer and Corporate Secretary for Publix Super Markets

• Organigram elects to its board Craig Harris, Assistant General Counsel of Corporate & Commercial Legal at British American Tobacco

• Coinbase adds to its board Chris Lehane, VP of Public Works for OpenAI; Paul Clement, former US Solicitor General under President George W. Bush; and Christa Davies, CFO of insurance agency Aon

• Real estate investment firm Welltower appoints to its board Andrew Gundlach, President and Co-CEO of investment advisor Bleichroeder LP

• Food solutions company SpartanNash welcomes to its board Dorlisa Flur, former

  Chief Strategy Officer of supermarket firm Southeastern Grocers

• Boston Scientific elects to its board David Habiger, President and CEO of data analytics firm J.D. Power

• Farmland Partners announces to its board Dr. Bruce Sherrick, Managing Partner at Integrated Financial Analytics & Research

• New Gold adds to its board Christian Milau, former CEO of Equinox Gold

• Consumer health firm Kenvue welcomes to its board Kathleen Pawlus, former CFO and COO of Global Assurance at EY; and Kirk Perry, President and CEO of analytics firm Circana

• Biopharmaceutical firm Immatics appoints to its board Dr. Alise Reicin, President and CEO of Tectonic Therapeutic

• Industrial process fluid firm Quaker Houghton elects to its board Nandita Bakhshi, former President and CEO of Bank of the West; and Lucrèce Foufopoulos-De Ridder, former EVP of Polyolefins, Circular Economy Solutions and Innovation & Technology of sustainability firm Borealis Group

• Sotera Health adds to its board Christopher Simon, President and CEO of plasma provider Haemonetics

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.