Directors & Boards: Column

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Question of the Month Comments

Question of the Month, November 2006

In 2007, what oversight areas are likely to be the hottest issues for boards?

Director Comments:

“We will continue to see shareholder demands for accountability whether it is compensation or structural related. The upcoming season should be the peak in compensation issues given the new disclosure requirements.”

“It’s just a matter of time before we all go private or list in Tibet. With lawyers, DAs, reporters, and "for hire" rating agencies dictating where boards are focusing, value creation will only be possible in the private sector.”

“U.S. domestic economic stress in the automotive and housing sectors particularly will fuel a grass roots reaction to i) loss of U.S. jobs for middle-class income, ii) pay gap highest/lowest worker, iii) corporate profits seen as based on U.S. consumers backs, i.e. oil, goods from China creating margins for e.g. Wal-Mart, Nike. This will mean boards need to look at outsourcing, domestic labor and CEO pay in the context of a corporation’s strategy/positioning.”

“As a consultant I am seeing more nervous CFOs since their name along with the CEO’s will certify executive pay under the new SEC disclosure rules that carry significant penalties if they get it wrong. CFOs are looking for a premium for the additional exposure. Can you blame them?”

“There will be a continued push for a further shift away from the ‘dominating chairman/CEO’ as well as greater demand for real independence in the recruitment of board members and mix of skills of the directors. Expect more human resource executives to be selected for board service. The HR skills will bring real competence to compensation and governance committees.”

“The compensation committees of the next few years will become what the audit committees were following the passage of Sarbanes-Oxley.”

“The continuing challenge for the board is to acquire enough information to fulfill its responsibility and but not so much as to interfere with management running the company.”