The Spring 2017 edition of Equilar’s C-Suite Magazine is hot off the press! After reading it cover to cover, we compiled our own high-level recap of what’s inside. Check out this edition’s major topics, familiar faces, and quotable tidbits:
The Board’s Role in M&A Activity
Mergers and acquisitions continue to draw more lawsuits than any other boardroom issue. How, then, can boards mitigate the risks associated with mergers and integrations? In this article, our own TK Kerstetter interviews Sean Lyons, Partner with Liberty Advisor Group and an expert in merger integration issues.
A common mistake we see is when companies declare victory on Day 1. In our experience, Day 1 is the beginning of the race. Management teams mistakenly convince themselves that the bulk of post-close integration work can be addressed by a 100-day plan.
With M&A activity being one of the most challenging areas of board oversight, we’ve spent a lot of time on this topic lately. In the C-Suite article, Lyons addresses mistakes commonly made during merger integrations. He also outlines the questions that boards should be asking of management when integrating business operations, company cultures, and technology platforms.
For any successful business, short- and long-term value creation is a delicate balancing act. Many governance professionals worry, however, that the laser focus on quarterly earnings is tipping the scale too far in one direction. In this article, Steve Odland, CEO of the Committee for Economic Development and current board member for General Mills and Analogic Corporation, points out that shareholders aren’t the company’s only stakeholder group—and that focusing solely on your shareholders in the short-term can have devastating long-term consequences.
This notion of short-termism aligns with the shareholder-centric model, analogous to eating the seed corn now rather than planting it for later. That leads to layoffs, less training, and lower long-term investment and innovation, among other consequences. It’s also why we’re seeing private companies invest at more than twice the rate of public companies…You can’t innovate on a short-term model.
This isn’t the first time we’ve heard from Odland on short-termism vs. long-termism. Be sure to also catch the exclusive interview at last year’s Board Leadership Forum where Odland explained why the advocacy of long-term value creation is so important to him.
Investor Focus on Board Composition
The topic of the year continues to spark discussion as institutional investors explain why board composition is currently the #1 governance issue. In this article, Vanguard’s Glenn Booraem, Principal and Investment Stewardship Officer, outlines why Vanguard and other major investors are so focused on composition, as well as what strategies boards can use to assess and refresh the board roster.
Automatic tenure-limiting mechanisms, such as mandatory retirement ages and term limits, are blunt instruments to effect board refreshment. While they may serve as one component of the board’s process for evolving its composition over time, we believe that underpinning the process of board evolution must be a rigorous periodic assessment of the board’s needs, capabilities and performance. First and foremost, we want to ensure that the board, viewed as an amalgam of what each director brings to the table and how they function as a team, is ‘fit for purpose’ in the context of the company’s strategic direction.
Board evaluations are the most efficient mechanism for assessing the alignment of board composition and company strategy, which is why we’ve begun a six-part blog series on the topic.
Also, be sure to catch Booraem in our Board Performance Review, a special series of panels where major investors and proxy advisors give their feedback on what boards are doing well and what they need to improve on. Let’s just say that board composition gets a lot of air time throughout these panel discussions! Watch the highlights for a high-level recap.
Also in this Issue of C-Suite Magazine…
- Donnelley Financial Solutions’ Ron Schneider and Christine Skizas outline best practices for structuring the CD&A and demonstrating pay for performance.
- TK Kerstetter considers the elements of a ‘high-performance board.’
- Equilar’s Matthew Goforth details the evolution of long-term incentives and how compensation committees can strike the right balance.
The quality of the information in C-Suite Magazine—particularly regarding trends in executive and director compensation—is among the best in the industry. Kudos to the Equilar team for a great issue!