5/19/22 – Issue 7.69 – Your weekly news on all things board. 

Not by laws alone… California’s board diversity legislation may have been overturned, but it has already changed the landscape and we expect boards to continue their diversification efforts. After all, shareholders, consumers, stock exchanges and legislators in other states continue to demand board diversity. Meanwhile, median CEO pay at large corporations, fueled by equity awards, increased to a record $14.7 million in 2021. Intel joins the ranks of companies whose executive pay proposal earned a “No” vote; shareholder advocacy group As You Sow reports that last year, shareholders rejected 16 compensation proposals. The Moderna board faces scrutiny after several high-profile executives have come and gone in quick succession, including a newly appointed CFO who exited after just one day on the job—observers question whether the board is practicing appropriate diligence and oversight around senior hires.

BOARDS ADD VALUE: At Boardspan, we spend a lot of time talking to board members about the ways they add value and the many challenges they’re facing. Check out this two-minute video that highlights what we’ve learned.

In the Spotlight

California Judge Rules “Women On Boards” Law Unconstitutional

“A state judge struck down a California law requiring companies in the state put female directors on their boards, the second legal setback in as many months for efforts to mandate board diversity…. The California law mandated that public companies with headquarters in the state have at least two or three women on their boards by 2021, depending on the size of the board.… Last month, another judge in the same state court struck down a law that required public companies in California to have at least one racially, ethnically or otherwise diverse director by 2021.” WALL STREET JOURNAL

What’s Next For Board Diversity Initiatives?

“Now that both California board diversity statutes have been invalidated… corporate boards and the stakeholders and communities those boards serve are asking what is next for statutory governance initiatives? … Both statutory mandates are now void and California-based public corporations are not obligated to comply with them. For Nasdaq issuers, however, beginning August 8, 2022 an initial board matrix must be filed reflecting the issuer’s board diversity statistics using a Nasdaq template. The rule also requires… issuers to explain whether or not they have at least two diverse directors and if not, why not.… In addition to the Nasdaq initiative, other states such as Washington, Illinois and New York have passed legislation addressing corporate board representation….” NATIONAL LAW REVIEW

Across the Board

5 Ways to Address Human Capital Management Concerns

“Put simply, investors, proxy advisors and employees want to see more detailed and quantitative human capital management disclosures. When addressing these topics, companies consider the following… [1] Provide detail that demonstrates the depth of your HCM strategy… [2] Include information on leadership responsibility, relevant programs, established publicly disclosed goals and targets… [3] For calendar year-end companies, begin thinking about revisions to your 2023 HCM disclosure… [4] Consider peer benchmarking to identify any gaps in your disclosure and needed policy updates… [5] Build in time for [a board committee] review…” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

Twitter Board Plans to Enforce Merger Agreement with Musk

“Twitter’s board said it plans to enforce its $44 billion agreement to be bought by Elon Musk, saying the transaction is in the best interest of all shareholders…The merger agreement includes a specific performance provision that allows Twitter to force Musk to consummate the deal, according to the filing. That could mean that, should the deal end up in court, Twitter might secure an order obligating Musk to complete the merger rather than winning monetary compensation for any violations of it… The board’s statement comes as Musk appears to be maneuvering to ditch or renegotiate his offer.” BLOOMBERG

A New Record: Median 2021 CEO Pay Reaches $14.7 Million

“The median pay package for chief executives of the biggest U.S. companies reached $14.7 million in 2021… Much of the pay consisted of equity awards…The median salary, bonus and other cash compensation was $4.1 million…. Boards have emphasized equity awards over the years, in part because institutional investors have pushed to better align executive pay with shareholder returns. Some big investors are also asking to link CEO pay to climate, diversity and other measures...” WALL STREET JOURNAL

Intel Shareholders Reject CEO Comp

“Intel shareholders voted last week against the company’s compensation for its top executives, according to a regulatory filing published on Monday. The vote is advisory, and won’t immediately affect the compensation of Intel’s executives, but sends a signal that some Intel investors are closely watching the performance of CEO Pat Gelsinger and the progress of his turnaround plan… In 2021, 16 companies had executive pay packages rejected by shareholders, according to As You Sow, an activist investor group.” CNBC

Only One Day On the Job: Moderna CFO Exits, Board Criticized

“Moderna became a $50bn success story by developing a Covid-19 vaccine at an unprecedented pace. But the biotech may have broken a less illustrious speed record this week when it removed its chief financial officer after just a day in the job. The Boston-based biotech said Jorge Gomez was leaving the company following the disclosure of an investigation at his former employer, the dental equipment maker Dentsply Sirona, which it said was linked to financial reporting issues. The sudden departure of Gomez…marks the latest in a series of executive departures at Moderna… Critics warn that the Moderna board of directors’ inability to detect potential problems at Dentsply during due diligence on Gomez — a process commonly undertaken on all new C-suite hires — points to weaknesses in corporate governance systems.” FINANCIAL TIMES

SPACs Rush to Find Merger Deals Amid Market Slowdown

“Firms that have gone public through mergers with special-purpose acquisition companies have tumbled lately alongside the technology sector and cryptocurrencies…. Those declines have slowed the creation of new SPACs and the pace of deals to a fraction of last year’s record levels. They have also prompted some companies that had previously agreed to go public through SPACs… to call off the deals and attempt to raise money privately instead…. Because so many SPACs raised money during the frenzy early last year, roughly 280 face deadlines in the first quarter of 2023, figures from data provider SPAC Research show.” WALL STREET JOURNAL

What Do Layoffs Mean for the Tech Sector?

“[The] tech sector, as a whole, appears to be scaling back as the economy enters a turbulent stretch…. The layoffs from across the tech industry are occurring for a variety of reasons, but it’s clear that the sector—which experienced explosive growth over the past two decades, leading to the creation of hundreds of tech ‘unicorns’ born of deep-pocketed venture capitalists and private equity firms—may be running out of froth… venture funding fell 13% quarter-over-quarter during the first three months of 2022, according to data from Crunchbase….” FAST COMPANY

ISS Backs McDonald’s Over Icahn In Animal Welfare Dispute

“Proxy advisory firm Institutional Shareholders Services on Monday recommended McDonald's shareholders vote for the company's directors in a boardroom fight with billionaire investor Carl Icahn over animal rights…. ISS… wrote on Monday that Icahn has ‘not made a sufficient case, on an issue-specific or broader view of ESG, that the immediate replacement of incumbent directors is necessary at this time…’ The report did note that investors who prioritize [ESG] issues may want to ‘withhold (votes) on these directors’ to signal to the company that more attention needs to be paid to these matters at the board level.” REUTERS

JetBlue Launches Hostile Takeover of Spirit Airlines

“JetBlue launched a hostile takeover of Spirit Airlines after its earlier acquisition offer was rejected…. Earlier this month, Spirit’s board of directors rejected JetBlue’s $32-a-share bid to acquire the airline in favor of an existing merger agreement with Frontier… The board cited antitrust issues and ‘an unacceptable level of closing risk’ to its shareholders… JetBlue is urging Spirit shareholders to vote against the Frontier deal. The company also said it remains open to a ‘consensual transaction at $33’ but will proceed with its hostile takeover in the meantime.” THE VERGE

From the Boardspan Library 

What Could Go Wrong? Five Questions Prospective SPAC Directors Should Ask

“There may be a temptation to think all SPACs are created equal apart from their size and industry focus, but SPACs vary, including as to the quality of their sponsors, their jurisdiction of formation and their ability to indemnify directors. A SPAC is only as good as its sponsor, and those differ considerably in sophistication, experience and reputation, so researching the sponsor is crucial. Potential SPAC directors should also consider the backgrounds of their fellow directors and whether they have the experience and commitment required to oversee the SPAC.” SKADDEN via BOARDSPAN

Seat at the Table 

• Network management software company Juniper Networks elects to its board Steve Fernandez, global CTO at insurance company AIG

• Open-source software company SonarSource elects to its board Kevin Thompson, former CEO of management software company SolarWinds

• Kay Sears, VP and general manager of autonomous systems for Boeing Defense, Space and Security, joins the board of satellite communications company Iridium

• Pop culture lifestyle brand Funko elects to its board Rich Paul, CEO and founder of sports agency KLUTCH Sports Group
• Automotive platform Holley elects to its board Anita Sehgal, SVP of marketing and communications for the Houston Astros
• Health and wellness company Nutrabolt elects two members to its board: Jody Macedonio, CFO at Chobani; and Alicia LeBeouf, head of industry - retail and grocery at Meta

About Boardspan
Boardspan is the leading provider of digital governance solutions for boards across all sectors. Our cloud-based assessments, benchmarking analytics and governance education programs complement our board search and advisory services to deliver a holistic approach to governance. Boards of all sizes and stages rely on Boardspan to deliver analytics, insights and outcomes that improve their effectiveness and performance. Clients include KKR, The Kellogg Foundation, Ingersoll Rand, Farfetch, McAfee, Beyond Meat, Box, e.l.f. Beauty, Satellite Healthcare and the U.S. Olympic & Paralympic Committee.