Across the Board
Is Your Board Asking the Really Tough Questions about Risk?
Each governance failure is unique, but several themes appear consistently, including a lack of focus on top risks, skill gaps and low-quality management information
“Senior management has borne the brunt of criticism in recent memory in high-profile cases involving risk management and internal control failures. While management failures often are at the root cause of losses, penalties and reputational damage, boards of directors are increasingly being cited for significant risk governance failures. Substantial investments have been made in risk functions, including standing up dedicated risk committees, developing risk appetite statements, improving reporting and requiring board members to undergo mandatory risk-specific training.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE
Transforming Board Oversight of Geostrategic Risk
Effective board oversight may require integrating political risk across board committees and seeking external perspectives and education
“Nearly two decades of financial turmoil, a global pandemic, sometimes unexpected military action, the restructuring of global trade, and supply chain shocks, have led many to yearn for a return to regular order — one that now seems unlikely to happen… despite several large risk events in recent years, political risk and geostrategy remain an infrequent item on the board agenda. Boards at just under a third of companies (32%) discuss geopolitical risk more than once a year.” EY
Restoring Confidence: The Board’s Mandate
Achieving and preserving stakeholder trust is an increasingly critical responsibility of an organization’s governing board, given evolving shifts in public attitudes and perspectives
“The board can provide value in support of management’s efforts to preserve organizational trust as part long-term value preservation. From a 'macro' perspective, that support would involve assuring that the board and the management team have a shared perspective of the threat (and lessons related) to organizational trust arising from the so-called 'Grievance Crisis'. Is there leadership-level agreement on the legitimacy of the concern, the factors that have spawned it, and its ultimate implications for internal and external trust? From a 'micro' perspective, that support would likely involve a board/management effort to strengthen operational characteristics that tend to most directly influence perceptions of trust; e.g., ethics, equity, compliance, quality, reliability and integrity.” CORPORATE BOARD MEMBER
World Economic Forum Opens New Probe into Founder Klaus Schwab
Founder quit after board moved to investigate whistleblower allegations, which he denies, including use of luxury property and travel
“World Economic Forum founder Klaus Schwab is under investigation by the organization he created after a new whistleblower letter alleged financial and ethical misconduct by the longtime leader and his wife. The anonymous letter was sent last week to the Forum’s board and raised concerns about the Forum’s governance and workplace culture, including allegations that the Schwab family mixed their personal affairs with the Forum’s resources without proper oversight…. The board of trustees decided to open a probe during an emergency meeting on Easter Sunday. Schwab opted to resign immediately as the chairman, instead of staying on for an extended transition period as previously planned…. A few weeks ago, Schwab, 87, said he’d step down as nonexecutive chairman of the Forum’s board, and the Forum said the succession process would be completed by January 2027. The whistleblower letter blew up that timeline.” WALL STREET JOURNAL
The Return of Elon Musk
In recent months, the company's vehicles have been flooding the used-car market, while sales have been plummeting across Europe, China, and the US
“Elon Musk is finally giving Tesla investors what they asked for — but many traders online say the lasting damage to the car company may be done… His step back from politics addresses long-running concerns investors have had about Musk's divided attention. Investors have been dismayed by what they see as a long list of distractions for the Tesla CEO since he acquired X in 2022. But while markets reacted positively to Musk's return to the EV maker, many investors commenting online say they don't see it making a big difference, considering the company's underwhelming first-quarter earnings and the reputational damage done by the CEO's politicking… Some investors also said they believed Musk's politics had already inflicted significant brand damage.” BUSINESS INSIDER
The Boardroom Eruption Over the Future of Harley-Davidson
How a dispute over the next CEO, remote work and DEI led to a director’s resignation and his public battle to oust other board members
“Boardroom drama usually happens behind closed doors. But at Harley-Davidson, a fight to define the future of the iconic American motorcycle brand has spilled into public view…. They had begun searching for a new CEO this year after the current leader, Jochen Zeitz, 62, privately told them he was ready to retire. Eight directors—the entire board except for Zeitz, who also serves as chairman—later held a vote. None of the candidates won majority support, including the one backed by the company’s second-largest shareholder, New York investment firm H Partners. To some on the board, it was a sign that they needed to keep searching. To Jared Dourdeville, the 36-year-old representative of H Partners, it was the last straw… Typically, an investor seeking to influence a company’s strategic direction wants a seat at the table. In this case, Dourdeville resigned from his seat on the board and went public with complaints about what he called ‘cultural depletion’ and the loss of senior leaders. After back-and-forth sniping through securities filings, H Partners this past week launched a campaign it dubbed ‘Free the Eagle’ to force out the directors.” WALL STREET JOURNAL
Krispy Kreme Proposes a Massive Board Change
The omnichannel doughnut chain, whose stock has lost more than half of its value this year, nominated four directors to its board
“The nominees include two people familiar with the restaurant business: Bernardo Hees, the former CEO of Burger King and later Kraft Heinz, along with Patrick Grismer, the former CFO and current chairman at Panera Brands.… Krispy Kreme said that it is believed that the board will form a strategy and operating committee that Hees will chair. Hees, who has been executive chairman of the car rental company Avis Budget Group, has a long track record of aggressive cost cuts, both at Burger King and Kraft Heinz…. It’s unusual for companies to nominate so many newcomers to a board of directors like this, but it follows a difficult four years on the public markets for the doughnut chain.” RESTAURANT BUSINESS
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