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Boards & Governance

"Boards & Governance," which covers corporate governance, proxy issues, executive compensation, and shareholder activism, is written by CW Deputy Editor Joseph McCafferty. He welcomes questions, comments, and statements from readers on corporate governance and shareholder activism and will address them here when appropriate. Readers can contact him at jmccafferty@complianceweek.com.

Walmart Costs for FCPA Probe Hit $439 Million and Counting

March 26, 2014 View comments

Walmart hasn't paid a dime in FCPA fines, but the allegations have been costly nonetheless. Walmart said in its latest Form 10-K filing last week that so far it has shelled out $439 million in total costs—$282 million in fiscal year 2014 and $157 million in 2013—for compliance enhancements and investigation costs related to possible violations of the Foreign Corrupt Practices Act. Details inside.
 

ISS Will Be Sold to Vestar Capital Partners for $364 million

March 19, 2014 View comments

Proxy adviser Institutional Shareholder Services will be sold by its parent company MSCI to Vestar Capital Partners, a private equity firm, in a $364 million transaction that is expected to close in the second quarter. ISS will operate independently once the transaction is completed, and the current executive team is expected to remain in place. More inside.
 

Auditor Tenure, Internal Controls Could Be Hot Shareholder Topics

March 11, 2014 View comments

Auditor tenure, cyber-security, and the recent COSO framework for internal controls are among the top issues that shareholders are likely to ask about, and companies must be prepared to address, at upcoming annual meetings, says the accounting and consulting firm BDO USA. More inside.
 

Intel Announces Executive Compensation Overhaul

February 05, 2014 View comments

In a letter to shareholders this week, and filing with the Securities and Exchange Commission, Intel announced a variety of changes to its executive compensation practices. The moves, it says, will better align compensation arrangements with company performance.
 

Institutional Investors Petition SEC for 'Mix and Match' Board Elections

January 08, 2014 View comments

Institutional investors have petitioned the SEC to amend its rules for corporate board elections, allowing shareholders to more easily "split the ticket" and vote for any combination of management and dissident nominees. Shareholders have "extremely limited ability to vote nominees from different slates," Ann Yerger, head of the Council of Institutional Investors, which submitted the petition, said. More inside.
 

ISS Unveils Policy Updates for 2014 Annual Meetings

November 27, 2013 View comments

Pledging a new focus on "case-by-case" reviews, Institutional Shareholder Services has released a slate of policy updates that will guide its proxy recommendations throughout 2014 annual meetings. Among the topics covered are disclosing human rights issues in the supply chain, reports on lobbyists, and when a CEO or director is over-extended. More policy updates inside.
 

Proxy Advisor ISS Put Up For Sale By Parent Company

November 01, 2013 View comments

Institutional Shareholder Services, a dominant proxy advisory firm, is up for sale by parent company MSCI. On Thursday, MSCI's board of directors authorized the move, which comes amid increased scrutiny of ISS and rival Glass Lewis over the methodologies they use for shareholder recommendations and potential conflicts of interest.
 

ISS Opens Comment Period for 2014 Proxy Voting Policies

October 22, 2013 View comments

Institutional Shareholder Services, a leading proxy advisory firm, opened its comment period for 2014 proxy voting guidelines on Tuesday. Among the topics institutional investors and corporate issuers are asked to weigh in on are board responsiveness, director tenure, director rotation, and equity plan evaluation.
 

Nasdaq Petitions SEC for Proxy Advisory Firm Transparency

October 18, 2013 View comments

Citing concerns that proxy advisory firms "increase the costs of being a public company, [and] create disincentives for companies to become public in the first place," Nasdaq has petitioned the Securities and Exchange Commission to enact new disclosure and transparency demands on how those firms formulate their influential recommendations.
 

JPMorgan to Spend $4 Billion on Compliance and Risk Efforts

September 13, 2013 View comments

JPMorgan Chase announced last week that it plans to pour an additional $4 billion into compliance and risk management efforts as the bank continues to battle a host of legal troubles, including as many as seven separate investigations by the Justice Department. The bank also plans to dedicate 5,000 employees to those efforts. Full details inside.
 

Last Chance To Weigh In On ISS' 2014 Proxy Voting Policies

September 13, 2013 View comments

Sept. 13 is the last day to respond to Institutional Shareholder Services' annual global policy survey. Each year, ISS, an influential proxy advisory firm, solicits comments as part of a review of its proxy voting policies. In November 2013, it will announce updated proxy voting policies applicable to 2014 shareholders' meetings.
 

Support for Shareholder Initiatives Ebbed, Says Glass Lewis

September 12, 2013 View comments

The 2013 proxy season lacked much of the predicted drama, and many shareholder campaigns didn't muster much support, says proxy advisory firm Glass Lewis. Improved market conditions, better corporate performance, and improved transparency may be to blame for low vote levels, although some proposals on environmental issues and political spending gained traction. More findings inside.
 

Compliance Making Strides, but Much Work to Be Done

August 05, 2013 View comments

An exclusive new survey of compliance executives paints a muddled picture for corporate compliance programs today. The study, a joint project of Deloitte and Compliance Week, finds that more compliance officers report directly to the CEO or the board and fewer hold other responsibilities as well. The bad news: Nearly half of respondents still have small staffs and budgets below $1 million. Executive Editor Joseph McCafferty has more on the 2013 Compliance Trends Survey inside.
 

Instead of Millions, Exiting CEO Gets to Keep iPad, Phone

August 01, 2013 View comments

When CEO Andrew Miller got the boot from voice-conferencing company Polycom last week, he didn't get the multi-million-dollar kiss many CEOs get as they are shown the door; instead he got a one-time $500,0000 payment and some parting gifts—that is, he got to keep two Lenovo ThinkPads, an iPad, and his Samsung Galaxy 4 phone. More details inside.
 

Making Company Policies Manageable

May 28, 2013 View comments

Drafting a strong privacy policy is a difficult task, but creating one that is user-friendly and able to keep pace with changing technology? That's another story. Speakers at Compliance Week 2013 conference last week shared their suggestions for crafting effective policies and making them manageable.
 

Walmart FCPA Probe Costs Hit $230 Million and Running

May 16, 2013 View comments

The Justice Department has yet to sock Walmart with any fines or penalties related to a massive bribery and corruption investigation, and already the scandal is costing the retailer a not-so-low price. Walmart said last week that the cost associated with its own investigation into the charges hit $73 million in the first quarter, bringing the total costs so far to $230 million, with another $70 million forecast for the second quarter.
 

Walmart Links Executive Pay to Success of Compliance Programs

April 23, 2013 View comments

Reeling from a federal bribery investigation, Walmart trumpeted a series of beefed-up global compliance initiatives last year. Now, the company is telling shareholders that it plans to link the success, or failure, of those new compliance goals to executive pay, including bonuses paid to CEO Michael Duke. More details inside.
 

CEO Compensation Increases Slowed in 2012, Bonuses Plunged

April 16, 2013 View comments

A new analysis by Towers Watson finds that executive pay crept downward last year, largely due to a "steep decline" in annual bonuses. According to the study, companies are continuing to move to performance-based long-term incentive plans. The study also finds that companies decreased use of earnings per share as a metric. more executive compensation analysis inside.
 

Report: Barclays Needs a Cultural Overhaul

April 05, 2013 View comments

A culture motivated by profit and a win-at-all-cost attitude led to highly risky behavior that directly contributed to a series of scandals at British bank Barclays, according to a scathing independent report released this week. "Some bankers appeared oblivious to reality," the report states. More details inside.
 

When Banks Game the Risk Picture

March 22, 2013 View comments

Banks may be playing a game of fudging that could have bigger repercussions on the financial system than if they were manipulating earnings. In a report issued earlier this month, a Senate committee accused JPMorgan Chase of fooling regulators into thinking it was taking less risk than it was. Inside, Executive Editor Joseph McCafferty considers the dangers of manipulating risk assessments and what it means for such regulations as the Volcker Rule.
 

Time for Sensible Thinking on Easing Disclosure Overload

March 01, 2013 View comments

Regulators, such as the Securities and Exchange Commission, like to talk about reducing disclosure overload and streamlining regulations, but such projects never seem to go further than the initial stage of talking about them. The problem, as Executive Editor Joseph McCafferty sees it, is that no one can ever agree on what should be cut.
 

First Batch of Say-on-Pay Failures Emerge from Annual Meetings

February 28, 2013 View comments

Proxy season has barely started and already shareholders at three companies, including Navistar and Nuance Communications, have turned a non-binding thumbs down to their executive compensation programs. Others, including Apple and Citigroup, are also facing shareholder scrutiny of their pay plans. More details inside.
 

Lawsuit Dropped as Qualcomm Rethinks Political Spending Disclosures

February 27, 2013 View comments

The New York State Common Retirement Fund has withdrawn its lawsuit against Qualcomm after the company agreed to revise its political spending disclosure policy. The updated policy calls for internal reviews of contributions made to candidates, political organizations, and trade associations, as well as public, online disclosures of such spending. Details inside.
 

JPMorgan Shareholders Look to Oust CEO Dimon as Board Chairman

February 20, 2013 View comments

A coalition of shareholders with more than $820 million invested in banking giant JPMorgan Chase is pushing for an independent board chairman and removing CEO Jamie Dimon from that role. Promoting a shareholder proposal filed for the bank's annual meeting in May, they say the current board structure creates a "clear conflict of interest" with the potential to adversely affect their investments
 

When Political Clout Bites Back

February 15, 2013 View comments

A few years ago Chesapeake Energy lobbied Oklahoma to adopt a state law mandating that companies incorporated there have classified boards. Now Chesapeake, which recently dumped founder and CEO Aubrey McClendon and is looking to reform its poor corporate-governance ways, must crawl back to legislators and ask them to reverse a law it helped write. Executive Editor Joseph McCafferty has the rundown inside.
 

Shareholders More Willing to Support Environmental, Social Proposals

February 14, 2013 View comments

Environmental and social shareholder proposals are gaining greater voting support from investors at public companies, according to a new survey by the Investor Responsibility Research Center Institute. From 2005 to 2011, average support for such proposals more than doubled. More survey results inside.
 

Deluge of Paperwork Blamed for Board-Based Security Risks

February 11, 2013 View comments

A surge in paperwork and expanded responsibilities has left corporate board directors struggling to set appropriate risk management cultures at the businesses they oversee, according to a new research report. Twenty-five percent of respondents said they can't get their risk duties done, and some directors are blindly creating more risks as they fall behind with current duties.
 

If You Build It, They May Not Come

January 25, 2013 View comments

A new report finds that the intended audience for the massive and costly effort to attach identifying tags to financial information—known as eXtensible Business Reporting Language, or XBRL—isn't jumping on the bandwagon. Analysts and investors find that the data is unreliable and doesn't cover all the information they use. Inside, Executive Editor Joseph McCafferty looks at what's wrong with XBRL and whether the problems can be fixed.
 

Stuck in Regulatory Limbo

January 18, 2013 View comments

What do the Volcker Rule, International Financial Reporting Standards, and cornerstone provisions of the JOBS Act have in common? They are all awaiting decisions by regulators and rulemakers so that companies can begin planning to implement them—that is, if they ever happen at all. Inside, Executive Editor Joseph McCafferty considers the endless delays and postponements that plague regulatory actions and paralyze compliance departments.
 

The Costs and Benefits of Regulatory Cost-Benefit Analysis

January 11, 2013 View comments

Federal agencies such as the Securities and Exchange Commission and the Commodity Futures Trading Commission are under siege from legal challenges to rulemaking, based on allegations of faulty cost-benefit analyses. Inside, Executive Editor Joseph McCafferty considers the effect such challenges could have on rule-writing, including the potential for clearer regulations.
 

It's Not Just the Crime or the Cover-up, It's the Inaction

January 04, 2013 View comments

We all know the saying, "It's not the crime, it's the cover-up." Organizations can take this one step further: even simply looking the other way when faced with evidence of a major problem is nearly as bad. As more details emerge from Walmart's bribery scandal centered in Mexico, Executive Editor Joseph McCafferty considers what responsibility Walmart's top executives had to act on evidence of corruption.
 

Proxy Advisers Make Changes to Voting Guidelines for 2013

December 07, 2012 View comments

The two major proxy advisory firms, Glass Lewis and ISS, recently issued updates to their U.S. proxy voting guidelines. Among the changes for 2013 are tweaks to ISS's peer group analysis model and measures from both firms to gauge the responsiveness of the board when shareholder proposals gain more than nominal support. Inside, Deputy Editor Joseph McCafferty gives a rundown of what's different for 2013.
 

Despite Say-on-Pay Successes, Companies Still Tinker With Plans

November 09, 2012 View comments

A new survey by Towers Watson found that even though most U.S. public companies received strong shareholder support for their executive compensation programs during the most recent proxy season, nearly half will revisit their process for linking pay and performance ahead of the 2013 proxy season. Many, however, still haven't actually conducted a pay-for-performance analysis to demonstrate support that claim, or revealed that data to Shareholders.
 

Leveraging Data Management to Enable Compliance

November 01, 2012 View comments

Companies in the life sciences industry have long been ahead of the curve on data management, since their companies are extremely data reliant and because the information they collect is so sensitive. Inside, Deputy Editor Joseph McCafferty provides some of his observations from a roundtable he recently hosted on leveraging data management at healthcare companies to enable compliance.
 

Slaying 'Zombie' Directors Needs Bar Associations' Brains, CII says

October 26, 2012 View comments

In letters sent yesterday to the American Bar Association and the Delaware State Bar Association, the Council of Institutional Investors urged a crackdown on so-called "zombie" directors on corporate boards. It is urging the associations to amend the Model Business Corporation Act and Delaware General Corporation Law and require directors in uncontested elections to be elected by a majority of the votes cast.
 

Stock Bounces Boost Director Pay as Companies Debate Per-Meeting Fees

October 25, 2012 View comments

An annual analysis of Fortune 500 board pay by Towers Watson found that, for the second consecutive year, compensation for outside directors increased modestly, even as companies reconsider the design of their director pay packages. More are eliminating board and committee meeting fees in favor of fixed retainers. More results inside.
 

These Elections Are Rigged

October 12, 2012 View comments

As the November elections draw near, there are a lot of things that remind us how imperfect our system of democracy is—negative ads, for instance. But they are faultless compared to board elections. In the worst cases, directors fail to get more than half the votes, even though they are running unopposed, and keep their seats anyway. Inside, Deputy Editor Joseph McCafferty examines board elections and finds little to like.
 

Boards Look to Put Their Own Houses in Order

September 26, 2012 View comments

There's been no shortage of governance failures lately, so no surprise, then, that boards are looking to tidy up the boardroom. According to a recent survey from PwC, boards are working on self-improvement, including putting board evaluations to use, emphasizing continuing education, and putting in more hours. Deputy Editor Joseph McCafferty takes a closer look, inside.
 

Time to Split the Chairman and CEO Jobs

September 06, 2012 View comments

Among the biggest debates in Corporate America is the one over whether the chairman and the CEO should wear the same set of pants. Compliance Week Deputy Editor Joseph McCafferty looks at recent analysis from GMI Ratings, including evidence that over the long term companies that divide the jobs outperform those that combine them, and concludes that it's time to spit the CEO and chairman roles.
 

Are Corporate Directors Overpaid?

August 17, 2012 View comments

A survey just out from Hay Group finds that median director pay at the largest 300 public companies jumped 6.3 percent last year, from $213,774 in 2010 to $227,250 in 2011. Critics say directors work too little and fail too often to earn so much, while others say they are more engaged than ever and have a thankless job. Inside, Deputy Editor Joseph McCafferty looks at how board members earn their keep.
 

When Clawbacks Attack

August 09, 2012 View comments

The Dodd-Frank Act requires companies to adopt a clawback policy that lets them recover ill-gotten incentive pay. The SEC hasn't implemented the rule yet, but that's not keeping companies from putting clawback policies in place voluntarily. Inside, Deputy Editor Joseph McCafferty examines the trend and looks at what clawbacks can and can't do.
 

Barnes & Noble's Options Blunder

July 26, 2012 View comments

Bookseller Barnes & Noble recently gave its CEO William Lynch a big raise, including a grant of 1 million stock options. One problem: the award exceeded the allowable number of options that can be granted to any one individual over a three-year period. The company was forced to render half of the options "ineffective," and is now asking shareholders to vote to raise the limit. More details inside.
 
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