10/3/24 – Issue 9.37 – Your weekly news on all things board. 

Regulatory scrutiny, relentless innovation, and investor demand for results define the business landscape. The FTC, which has had a tight grip on corporate transactions as it aims to ensure ample competition in markets, this week approved Chevron's acquisition of Hess, provided Hess's CEO has no seat on Chevron's board. As AI gets baked into businesses everywhere shareholders demand justification for the enormous investments in AI, and OpenAI announces a new round of funding that positions it as one of the most valuable start-ups in history. Activist investors continue to be, well, active, with Glenview Capital pushing CVS to make changes. 

In the Spotlight

F.T.C. Clears Chevron’s Purchase of Hess with Board Condition

FTC said the oil giant could acquire the smaller company as long as the chief executive of Hess did not join its board

“The Federal Trade Commission said on Monday that it would let the oil giant Chevron acquire Hess but that the chief executive of Hess would not be allowed to join Chevron’s board because of how he communicated with leaders of OPEC… It is also the latest example of the F.T.C.’s taking issue with the conduct of U.S. oil and gas executives in recent years. After oil prices rose in 2022, many independent oil producers agreed to join forces or sell themselves to larger rivals… In this case, the F.T.C. called out the chief executive of Hess, John B. Hess, for praising the Organization of the Petroleum Exporting Countries, a foreign cartel that coordinates oil output in ways that would be illegal in the United States.” NEW YORK TIMES

From Boardspan this Week:

What's on the minds of Nominating & Governance Chairs?

From crisis preparedness to AI expertise to board succession planning, the NGC is covering a lot of ground. Learn what we're hearing from high-performing boards and get actionable tips to prepare your board for the future.

Across the Board

OpenAI Gets $6.6 Billion in New Funding, Valuing the Company at $157 Billion
The company has several significant challenges ahead despite the freedom provided by billions of dollars of new investment

“The maker of ChatGPT announced it received $6.6 billion in new funding, valuing the company at $157 billion — one of the most valuable start-ups ever… Some investors on Wall Street and in Silicon Valley have expressed concern that huge spending on data centers and chips to power AI projects will be difficult to recoup in the form of profits.” WASHINGTON POST

California Governor Vetoes Sweeping A.I. Legislation
The bill would have been the first in the nation to place strict guardrails on the new technology, but Gov. Gavin Newsom said the bill was flawed

“Gov. Gavin Newsom on Sunday vetoed a California artificial intelligence safety bill, blocking the most ambitious proposal in the nation aimed at curtailing the growth of the new technology. The first-of-its-kind bill, S.B. 1047, required safety testing of large A.I. systems, or models, before their release to the public… Mr. Newsom said that the bill was flawed because it focused too much on regulating the biggest A.I. systems, known as frontier models, without considering potential risks and harms from the technology.” NEW YORK TIMES

AI Shareholder Proposals on the Rise

AI is the hot topic of 2024

“The trend is clear: shareholder proposals focused on AI are increasing and are garnering support. While shareholder proposals as an escalation tactic have generally been more popular in the US than in other regions of the world, companies globally need to be prepared for increasing investor engagement on AI. Investors should be expected to approach AI risks no differently than they would approach other risk mitigation issues: they will want to see that the board and company are thinking critically about vulnerabilities and taking active steps to address them." HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

Glenview Capital Plans Push for Changes at CVS
Larry Robbins, founder of healthcare-focused Glenview, has established a large position in CVS

“A major hedge-fund investor will meet top executives of CVS Health on Monday to propose ways the struggling healthcare company can improve its operations, the potential start of an activist stance by the fund… In the past, Robbins has suggested ways various healthcare companies can improve their operations and worked with them in a cooperative manner. Yet he has also been an activist in at least two instances, pushing for board seats while exerting other pressure on executives. Most recently, Glenview pressed Tenet Healthcare to oust four of its board members.” WALL STREET JOURNAL

Charles Schwab Names President Rick Wurster as Next CEO
Walt Bettinger, who oversaw the company’s rise to a personal-finance juggernaut, will retire after a 16-year tenure

“Charles Schwab has named Rick Wurster as its next CEO, promoting an executive who has been primed for years to take the top job and who will be tasked with steering the brokerage through a turnaround… Longtime CEO Walt Bettinger will retire from the top job and continue to be executive co-chairman of the board alongside namesake founder Charles ‘Chuck’ R. Schwab… Schwab’s playbook of making easy money on client cash has been upended and the company is looking to increase the revenue it brings in from more lucrative services like loans and financial advice.” WALL STREET JOURNAL

The Case for More Company Insiders on Boards
Until the 1970s, corporate boards were dominated by inside directors — people employed by or affiliated with the company in some way

“As the rules and norms changed, non-independent directors began to disappear. The average percentage of independent directors grew from a minority to a majority and then to a supermajority. By 2005, 75% of directors of large public companies in the U.S. were independent. As of 2023, Spencer Stuart research found that 85% of directors are independent — which generally means that for many companies the only inside director left is the CEO. However, with few exceptions, empirical studies have found no connection between board independence and company performance outcomes." HARVARD BUSINESS REVIEW

2024 Director Compensation Report
At median, total director compensation saw more muted increases in 2024 as compared to 2023

“FW Cook’s 2024 Director Compensation Report studies non-employee director compensation at 300 companies of various sizes and industries to analyze market practices in pay levels and program structure.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

Seat at the Table

• Moderna announces to its board Abbas Hussain, former CEO of Vifor Pharma

• Genius Sports adds to its board Robert Bach, former Chief Xbox Officer and President of Entertainment and Devices at Microsoft

• Liberty Mutual Insurance welcomes to its board Jeff Dailey, former Chairman, President and CEO of Farmers Group; and Linda Mantia, former Senior Executive VP and Chief Operating Officer of Manulife Financial Corporation

• CNO Financial Group adds to its board Jess Turner, EVP and Global Head of Open Banking and API at Mastercard

• Sealed Air elects to its board Anthony Allott, former President and CEO of rigid packaging manufacturer Silgan Holdings

• Energy products firm UGI Corporation names to its board Melanie Ruiz, Chief Information and Technology Officer of janitorial solutions firm ABM Industries; and

  David Bingenheimer, EVP and General Manager of Ecolab Digital for hygiene firm Ecolab

• BlackBerry welcomes to its board Lisa Bahash, former SVP of Automotive and Transporation with electronics manufacturer Jabil

• Thermal Management tech firm Modine appoints to its board Mark Bendza, CFO at enterprise security firm Telos Corporation

• Food safety firm Neogen announces to its board Thierry Bernard, CEO of sample-to-insight solutions firm QIAGEN

• Creative technology firm Cricut elects to its board Heidi Zak, CEO of online apparel brand ThirdLove

• Software firm Appian names to its board Carl Hartman II, Co-Founder and Chief Technology Officer of Nomi Health

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.