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5 Barriers to Gender Parity in the Boardroom
Publication Date: February 14, 2018

Despite calls to action from a swelling number of advocacy groups and the investment community, women remain drastically underrepresented in the boardrooms of Corporate America.

A Business Journals study published last month found that men outnumbered women by a six-to-one ratio in the boardrooms of the 3,000 publicly traded companies included in the study. That ratio increases significantly for companies with market caps under $1 billion.

In honor of International Women's Day in March, Nasdaq's Governance Clearinghouse is publishing a series of articles that will explore practical solutions to closing the gender gap in public company boardrooms. To kick off this series, we've invited Coco Brown of The Athena Alliance to share her perspective on the top barriers women face when breaking through the boardroom ceiling.

We want our readers to join this important conversation: What ideas or approaches do you believe would improve gender diversity in the boardroom? Send your ideas to no later than February 28th. We will compile the most compelling ideas and publish them on International Women's Day in March.

The Athena Alliance has a unique boots-on-the-ground role in moving the needle towards gender parity in the boardroom. Because we serve on the front lines of this initiative, we have a close-up perspective of the obstacles women face as they seek seats at the table. A lack of motivation and absence of a cohesive effort on the part of corporate America are still formidable obstacles to resolving this issue, but some of the barriers women face are self-inflicted—and it's important to shed light on that side of the equation as well.

Here are the five key barriers that we believe are obstructing progress towards gender parity in the boardroom:

1. Traditional board configurations severely limit the pool of qualified female candidates.

This issue is resolving itself organically, but slowly. As the fiduciary mandate of boards has expanded to include oversight of forward-looking risks and opportunities, boards are beginning to view themselves through an investor lens to self-assess for collusion, insular thinking, and lack of relevant skillsets. A traditional board configuration of sitting and former CEOs and CFOs can leave a board with critical skill gaps.

There are relatively few female CEOs to choose from when recruiting board members, which has contributed to the perception that the female executive talent pool is shallow. However, as boards begin to cast wider nets in search of relevant, modern skillsets, they open up seats to a deep well of qualified female candidates. There are many women with tested leadership experience in disciplines that modern boards need, such as engineering, digital technology, cyber risk management, supply chain management, operations, marketing, organizational structure and people.

2. There is no champion galvanizing the majority to resolve this issue.

As boards seek to broaden their skillsets, they could potentially accelerate progress towards gender parity by creating new opportunities for women to make meaningful contributions in the boardroom. While promising, this trend alone is not enough—women must have genuine access to these opportunities at a proportional rate to men, and men have to want to bring them in.

It's very difficult to create balance from imbalance without buy-in and intentional action from the majority in power. Men occupy 80-100% of decision-making seats on the average board, and therefore are in the best position to move the needle. Yet many men do not see a problem with gender imbalance, and/or do not believe there are enough qualified women to fill board seats.

Boardrooms began to diversify rapidly in the U.K. when Lord Davies championed the cause. An iconic male business leader in the U.S., who has the clout and charisma to coalesce efforts of the investment community and advocacy groups, could build powerful momentum towards moving the needle.

3. Boards aren't accessing diverse networks in their recruitment process.

Most boards rely heavily on their own networks to fill a candidate slate, just as professionals leverage their networks to find new job opportunities for themselves or fill jobs within their own organizations. The average profile of a board director is a 63-year-old white male. 60-year-old white men are mostly surrounded by other 60-year-old white men (and younger men who remind them of themselves). Women do this too, and so do people of different ethnicities and backgrounds. The problem isn't the method—it's access to diversity.

Progress hinges on opening up and expanding isolated and insular professional networks. In the absence of an iconic male business leader who can galvanize a movement to increase diversity in the boardroom, we need to create an organic groundswell by exposing influential men to networks of board-ready women.

While there are a growing number of databases cataloguing executive "board ready" women, these are not going to move the needle appreciably. Databases are essentially a collection of digital resumes. I personally have not obtained a job through a resume since I was 23 (and I'm not sure I did even then). It's all about networks. To be useful, static databases should be brought to life through face-to-face interactions.

Zack Rosen, CEO of Pantheon, recently attended an Athena Alliance event, one of only seven men who showed up out of 100 male executives invited. Zack emailed me the next day, stating that our event was "hands-down the best event I have attended all year." Why? Because although he showed up to show solidarity with our organization, he wound up leaving with unexpectedly valuable business contacts. "I never make that number of high-impact connections at one event. All of the women I interacted with were rare talents," Zack shared.

Zack was introduced to me through one of his investors, OpenView Venture Partners. Their senior managing partner, Scott Maxwell, also saw this sort of power in the Athena Alliance community and sent three CEOs from other companies in OpenView's portfolio to Athena's Seattle launch, who were in turn equally impressed and pleasantly surprised by how easy it can be to diversify their own top tier network in meaningful ways when motivated to move beyond the usual events and circles. These grassroots "guy-talking-to-the-guys" testimonials are an authentic and very effective means of bringing talented women into powerful male networks.

4. Women aren't always visible, or aren't visible in the right ways.

Women professionals limit their visibility in two ways: spending too much time in circles of women, and failing to realize their own worth.

Working women have long relied on the support of women's conferences, women's affinity groups, and women's business groups. By gravitating to gender-specific organizations, women are guilty of exactly what we accuse men of doing—limiting our networks to people who are like us. Women should instead build networks that include and leverage powerful men.

A side effect of underrepresented groups is too few role models. When women perceive that only the Sheryl Sandbergs and Meg Whitmans are qualified for board service, they incorrectly assume that they aren't yet at the right stratosphere to make themselves visible. It always shocks me (yet it happens often) when we invite a highly-qualified woman to join Athena Alliance and discover she has no idea she is of value to a corporate board.

Women who do land on a slate of candidates need to elevate their representation of what they bring to the boardroom. When we coach Athena Alliance members for board interviews, we instruct them to take off their business operator hats and instead think holistically about their careers, experiences, and touch points to industry. We ask them to consider what they can bring from that perspective to boardroom conversations about global business risks and opportunities, emerging threats, and disruptive technology developments. If a candidate focuses too much of her interview on how she executes her day-to-day operating role, the board may underestimate her ability to function at a higher stewardship level.

5. Women aren't always qualified in the right ways.

As women take a long view of the career roles and experiences that will enhance their value to public company boards, they need to understand that boards always use open seats to think about going from "here" to "there." Boards recruit candidates who are where they are heading, not where they are or where they've been. They also seek candidates with a strong degree of currency and connection to the markets and industries their companies operate in.

Given that parameter, there are several factors that can eliminate a woman for board service:
  • She has been out of the C-suite for five or more years, so is perceived as lacking current relevance and an innovative edge.

  • She has been a consultant for more than five years (unless she is a partner at a large leading global consultancy or is broadly recognized as an authority in her discipline).

  • She has served as a top executive for only smaller cap companies that generate less than $300M in revenue.

That said, there are many women who are not on the SEC filings of public companies who should be considered qualified for board service. These women represent the top 10% of their company's leadership and have had certain professional experiences that make them valuable in the boardroom, including:

  • She has significantly scaled a company in size, serving as part of an early or founding executive team that took a company public or through a significant acquisition.

  • She is part of a senior leadership team that grew a company from a small-cap to a mid- or large-cap.

  • She holds a large domain of responsibility, serving as CxO or VP of a large function or business line within a company of significant size and stature.

  • She holds a high-demand leadership role, such as CMO, CTO, Chief Product Officer, COO, or CIO in a company of $300M in revenue or greater in size.

It also helps to have served on notable non-profit boards, as they are governed like public company boards and are a great proving ground for board leadership.

Please join this important solution-oriented conversation and share your perspective on how to close the boardroom gender gap. Send your ideas to no later than February 28th. We will compile the most compelling ideas and publish them on International Women's Day in March.


Coco Brown is founder and CEO of The Athena Alliance, an organization dedicated to advancing diversity in the boardroom by preparing executive women for board service and facilitating board matches. Before founding the Athena Alliance, Brown served as the president and chief operating officer of Taos, an information technology consulting and services company based in San Jose, California.

The views and opinions expressed herein are the views and opinions of the author at the time of publication and may not be updated. They do not necessarily reflect those of Nasdaq, Inc. The content does not attempt to examine all the facts and circumstances which may be relevant to any particular company, industry or security mentioned herein and nothing contained herein should be construed as legal or investment advice.

proxy season
Planning for Proxy Season: It's Time to Consider an Interactive Proxy
Publication Date: January 30, 2018

To help companies prepare for the 2018 proxy season, Nasdaq's Governance Clearinghouse will post a series of articles over the coming months that feature new developments in technology, upcoming regulatory changes, and tips for enhancing your company's proxy presentation and readability.

Interactive proxies range in format from static PDFs with enhanced page navigation to sophisticated, multi-media documents that enhance the reader's overall experience. While only a small percentage of Nasdaq companies had some type of an interactive proxy in 2017, including East West Bancorp, Inc. (Nasdaq: EWBC), eBay Inc. (Nasdaq: EBAY), Intel Corporation (Nasdaq: INTC), Microsoft Corporation (Nasdaq: MSFT), and Nasdaq, Inc. (Nasdaq: NDAQ), we believe more companies will consider taking this step in the upcoming proxy season. There are a number of providers that offer a range of interactive proxy design and hosting services, including EzOnlineDocuments, ISS Corporate Solutions, and Mediant, with prices ranging from $3,000 up to around $20,000 depending on the provider and services selected.

In the first post of this series, Roy Saliba, Head of Product at ISS Corporate Solutions, highlights some of the reasons your company might consider adopting an interactive format as well as the nuts and bolts of creating an interactive proxy.

The Big Four: Advantages of an Interactive Proxy

1.   Increased shareholder participation in the proxy voting process

While an interactive proxy by itself will not compel a shareholder to vote their shares, it is another step that companies can take towards getting their shareholders more interested in reviewing the information in the proxy statement.

For investors, interactive proxies effectively break up an overwhelming proxy document into a better organized website with palatable sections to help foster a better understanding of overall content and key messages. Intuitive navigation, standardized presentation of data and content, and an overall better experience in digesting complex information help to engage shareholders in the voting process.

One of the key benefits for institutional investors is the integration of the ISS Corporate Solutions interactive proxy into ISS ProxyExchange, a platform used by institutional investors when making their proxy voting decisions. In an independent survey, institutional investors responded that proxy advisors' voting platforms are the primary source used to review a company's SEC filings and proxy materials, so having links to companies' interactive proxies embedded in the voting pathway allows for greater visibility for institutional investors.

2.   Insight into how investors and shareholders digest proxy content

Interactive proxy platforms embed analytics that can be leveraged to identify the sections of the proxy that are most often viewed, offering valuable insight into the key issues that shareholders are interested in or concerned about. This data enables companies to place greater emphasis on those areas in subsequent proxies and/or leverage those topics during shareholder engagement.

The ISS Corporate Solutions (ICS) interactive proxy solution currently allows companies access to a variety of analytics including:
  • geographical location of visitors
  • new versus returning users
  • type of device used (mobile/tablet/personal computer)
  • length of time visitors accessed the site
  • the specific pages viewed
  • the number of different pages viewed

3.   Increased shareholder engagement

The ICS interactive proxies were initially designed and developed in coordination with a group of institutional investors who were looking for an easier way to review proxy statements, particularly during peak proxy season. This group wanted a standardized format of searchable content to simplify the process of finding key information (versus scrolling through cumbersome PDFs or a single webpage on the SEC site). A key initial request was to streamline the overall navigation flow of the site so that readers could easily and intuitively locate content in the same manner for a large number of portfolio companies.

Retail and institutional investors alike have expressed a preference to reading proxy statements online (versus print), yet even those proxies available online in PDF format are designed for print and have not been optimized for an online experience. An interactive proxy offers companies an opportunity to tell their story in a modern and clean way on a digital platform that has been optimized to be scalable, mobile-friendly and interactive.

An interactive proxy is a strong statement by a company that it is focused on delivering the corporate governance story in the best possible way. Many companies come to think of their enhanced proxies as important Investor Relations and Public Relations assets.

4.   Integration of corporate branding

Interactive proxies allow companies to tell their governance stories using the most sophisticated technologies available today by transforming compliance documents into engaging and well-designed digital assets. The proxy statement is a key communications tool with a captive audience, but that opportunity is squandered if the information in it cannot easily be accessed or digested.

More and more companies are discovering the value of leveraging proxies to highlight key messages of their corporate governance stories. Brands are a powerful visual element of a corporation's identity, and the ability to integrate corporate colors and logos into an interactive proxy transforms it from only a compliance document into a communications asset as well.

Nuts and Bolts: Understanding the Process for Creating an Interactive Proxy

At ISS Corporate Solutions, we typically break up the process into two phases: customizing our proxy template platform for the client and populating it with their proxy content.

During the initial phase, we build out the template for a client company and customize it to match their corporate brand and identify with colors, logos, etc. This phase of the process typically takes about a week, and runs in parallel with the client creating the content of their print proxy. The second phase of populating the customized template with the actual proxy content typically takes between three to five business days, depending on how heavily stylized the print proxy is. This phase usually starts when the finalized proxy statement is sent to the printer.

ISS Corporate Solutions' interactive proxies are hosted on a separate site, so there are no specific requirements for a company's own website. However, we strongly encourage companies to add easily identifiable links to their interactive proxies on their IR sites, as companies that promote the interactive proxy on their investor relations pages and overall corporate websites see higher web traffic and increased engagement.

As companies see an increasing number of their peers adopting interactive proxies, and they become more widely used in the institutional community, we'll see continued growth in this space.


ISS Corporate Solutions (ICS) is a wholly owned subsidiary of Institutional Shareholder Services Inc. (ISS). ISS Corporate Solutions provides expertise in executive compensation, governance ratings, capital structure, sustainability, voting trends, and corporate governance research.

10 questions
10 Questions Your Company's Board Should Answer in 2018
Publication Date: January 16, 2018

Betsy Atkins encourages companies to kick off 2018 by proactively addressing the corporate governance hot-button issues of 2018—before their investors do.

Shareholders and institutional investors are holding companies accountable to an increasingly complex slate of stewardship principles.  How can a company prepare for the corporate governance challenges in the year ahead? We asked Betsy Atkins, veteran of 23 public company boards, how companies should begin to answer that question.  Betsy's answer: focus on the answers to these 10 questions.

1. Is our company vulnerable to an activist attack or takeover?

How do you get an impartial, inside-out view of how an activist sees your company? Engage an investment bank that your company does business with to scan for weaknesses that attract activist attention. Large investment banks have practices on activist readiness and a vested interest in ensuring your company is defended.

Read More: The Rise of the Investor-Centric Activism Defense Strategy >>

2. Is the board's committee structure optimized to leverage digital transformation?

All companies are tech companies today. Ensure your company remains contemporary and embraces digital transformation by adding a tech committee to the board. Focus this committee on the future. To ensure business model vibrancy, boards need to stay on top of tech trends and new business models, and actively consider integration of them into their companies' strategies.

If adding a tech committee to your board (as many companies are doing) isn't feasible, assign that focus to an underutilized committee. Your governance committee can review workloads across committees to determine the board's best approach for identifying and monitoring emerging opportunities and risks.

Read More from Betsy Atkins: Five Ways to Digitize Your Board >>

3. Do we have a plan to accelerate board refreshment and diversity?

Costly corporate scandals continue to be linked to passive and/or weak boards with little to no diversity, which means investors and regulators will continue to beat the board refreshment drum loudly in 2018. During the 2017 proxy season, State Street Global Advisors voted against the reelection of directors at 400 companies when those companies failed to take adequate steps to add women to their boards.

From a boardroom perspective, the definition of "diversity" has eclipsed gender to also encompass age, race, global perspective, evolving skillsets, and most importantly diversity of thought.

Companies are wise to get ahead of this issue before it becomes a proxy battle or a regulatory mandate. Investors and regulators alike are pursuing campaigns to increase transparency and accountability around diversity in the boardroom. The Boardroom Accountability Project 2.0 initiative, jointly sponsored by NYC Comptroller Stringer and New York City Pension Funds, is a perfect example.

Read More about the Boardroom Accountability Project 2.0 >>

4. Are we taking ESG issues into account?

ESG issues, historically thought of as a special interest for a minority subset of activist shareholders, are going mainstream. Advocacy for ESG agenda topics began in the EU and has now transitioned to passive investment firms here in the U.S. This is no longer a "gadfly" issue and while ESG reporting will impact some industries more than others, in 2018 companies should expect it to be a standard proxy concern for major shareholder groups.

Read More from the CFA Institute: 2017 ESG Survey Results >>

5. Are we prepared to handle a real-time crisis?

A solid crisis preparedness plan is key to mitigating the impact of internal issues or external events when (or preferably before) they escalate to crisis level, especially in the age of social media where a hiccup can become a firestorm. Yet there are numerous recent examples of companies that did not execute crisis management well, and experienced catastrophic damage to their corporate brands as a result.

Start by analyzing your company's top ten enterprise risks, and ensure there is a detailed action plan in place for each of them. It's also important to set up relationships now with reputable and experienced public relations and social media firms to handle communications in the event of a crisis.

Read More: 8 Crisis Management Mistakes to Avoid >>

6. Do we have a cyber security plan and data breach policy in place?

Adopting cyber security plans and data breach policies continues to be a top priority in 2018. Boards should confirm that corporate oversight of cyber risk and data security is robust, and includes the following:

  • regular external penetration testing as part of ERM and compliance;
  • a plan for dealing with a ransomware attack, including establishing a validated Bitcoin account;
  • anti-phishing training for employees;
  • established relationships with forensic cyber experts, law enforcement, and a third-party cyber mitigation company;
  • an annual review of cyber insurance policies; and
  • a data breach policy with crisis plan in place.

Read More from Betsy Atkins: Ransomware Defense for Boards >>

7. Do we have a robust slate of future leaders?

Given that average CEO tenure in corporate America is below five years, proactive succession planning and a deep leadership bench have never been more important. Long-term CEO succession planning and leadership development should also ensure development, retention, and replacement of senior officers within a company.

Identify future leaders early and create personalized development plans to fill out the gaps in each person on your company's leadership bench. Assess internal succession candidates via regular interaction during board meetings and strategy presentations, individual meetings between directors and potential internal candidates, and internal and external feedback from a variety of sources—including meetings with stockholders.

Read More from Forbes: Succession Planning Needs To Be Your No. 1 Priority >>

8. Are we ready for individual director scorecards?

ISS will begin rating individual board members, and while there will not be a director score, per se, the report will highlight a director's shareholder vote support and the Total Shareholder Return of the company since the director started serving on the board. This information could result in a "negative halo," impacting other boards that a director serves on in a negative way so make sure to have your Investor Relations narrative ready.

9. Have we confirmed the company's culture is free of sexually predatory practices?

2017 was a watershed year for exposing the toxicity of sexual harassment in the workplace. As 2018 begins, there is zero tolerance for toxic corporate cultures that create inhospitable working environments. Nothing less than a company's overall corporate brand is at stake. Investors want to know that companies and boards are taking a proactive approach in addressing this issue, so now is the time to reconfirm there are no sexually predatory practices rooted in your company's culture. Protect your company's brand equity by ensuring that the "tone at the top" does not tolerate sexually predatory practices or gender and racial bias, and that HR conducts proper compliance training.

Read More from NAVEX Global: High-Profile Sexual Harassment Claims Show a Toxic Culture Can be a Product Defect >>

10. Do we know how our CEO's pay compares to that of the company's median employee?

Know your pay ratios heading into proxy season! CEO pay has been reported for a long time, but beginning this year companies will need to comply with the SEC's pay ratio disclosure requirement. If the gap between your company's CEO and median employee pay is extreme, this may become a high visibility issue for investors and/or activists.

Be prepared for the difficult tasks of communicating your CEO pay ratio to both internal and external audiences as well as handling the repercussions that may result from the entire company knowing the median employee's pay.

Read More from Davis Polk: Pay Ratio Disclosure Rule: The SEC's Latest Guidance Should Ease Compliance Costs for Companies >>

Read More from Willis Towers Watson: The Do's and Don'ts of CEO Pay Ratio Communications >>


Betsy Atkins serves as President and Chief Executive Officer at Baja Corp, a venture capital firm, and is currently the Lead Director and Governance Chair at HD Supply. She is also on the board of directors of Schneider Electric, Cognizant, and a private company, Volvo Car Corporation, and served on the board of directors at The Nasdaq Stock Market LLC and as CEO and Board Chairman at Clear Standards.

Revitalize Banner

Enhancing Transparency in Regulation
Publication Date: January 10, 2018 

At Nasdaq, we believe transparency of our Listing Rules, policies and procedures results in fairer and more effective regulation. To this end, in 2012, Nasdaq created the Listing Center's Reference Library, which today houses more than 400 frequently asked questions about listing matters, 100 anonymized versions of appellate listing decisions and 350 written Staff interpretations of the Listing Rules. To reinforce the critical role transparency plays in our regulatory program, we continue to develop and enhance the utility of our Listing Center's Reference Library website and expand the information available through this free web portal.

It is with this in mind that Nasdaq Staff, in conjunction with the Nasdaq Listing Hearing and Review Council, developed the Listing Qualifications Transparency Report. This report includes anonymized information regarding the facts and circumstances that prompted Listing Qualifications Staff and Hearings Panels to exercise the discretion afforded by the Listing Rules to impose additional or more stringent criteria or to shorten time frames otherwise available to companies. It also describes instances when, following Listing Qualifications Staff review of certain share issuances, listed companies made significant changes to their transactions. We believe that sharing this information helps companies better understand how Nasdaq applies its listing rules, which helps companies and their advisors better comply with those rules. It is our expectation that we will prepare this report annually. We look forward to your comments, which can be emailed to us at

View the Transparency Report Here >>

governance news
December's Must Reads
Publication Date: January 9, 2018

Each month, we will scour the web to bring you the news items and thought leadership pieces you need to get the governance advantage.

1. The Last-Minute Holiday Gift Guide for Corporate Boards – Boardroom Resources
This Boardroom Resources article describes what company stakeholders, including institutional investors, proxy advisors, and shareholder activists, would like most in the New Year ahead.

2. How AI Will Invade Every Corner of Wall Street –
This Bloomberg article states that artificial intelligence ("AI") is laying a claim to the future of investing as big and small money managers have adopted it as a cornerstone strategy or research tool and discusses how far AI could potentially go over the next decade or two.

3. The PCAOB's Initiatives to Bolster Investor Trust in the Audit –
James Doty, former PCAOB Chairman, stated in a recent speech that "investors still clamor for better quality assurance, covering a broader set of information." Doty describes the initiatives underway to build trust in the audit profession, including greater transparency and a new audit report.

4. The Auditor's Report: Considerations for Audit Committees – Center for Audit Quality
This publication, by the Center for Audit Quality, aims to assist audit committees in preparing to navigate the new auditor's report. Changes to the auditor's report are a result of the Public Company Accounting Oversight Board's (PCAOB) June 2017 adoption of a new auditing standard, AS 3101, The Auditor's Report on an Audit of Financial Statements When the Auditor Expresses an Unqualified Opinion.

5. As Spencer Stuart Releases its Latest S&P 500 Board Index, How Does Your Board Compare? – Davis Polk
Each year Spencer Stuart publishes a report, The Spencer Stuart Board Index, which provides a detailed benchmark on key board practices. Several trends highlighted in the report, including board tenure, diversity, and committee composition, are discussed in this Davis Polk article.
2017 Spencer Stuart U.S. Board Index >>

6. CSR Matters: Leading CSR Practitioners Weigh in on Top Lessons Learned in 2017 –
In this article, some of America's leading Corporate Social Responsibility ("CSR") practitioners provide commentary regarding what they consider to be the biggest CSR lessons learned in 2017.

7. Heads Up for the 2018 10-K and Proxy Season: Spotlight on Corporate Sustainability –
This Weil, Gotshal & Manges LLP article highlights several notable sustainability proposals/disclosures in 2017 and discusses what companies and their boards should do now regarding sustainability given the expectation that a focus on corporate sustainability, specifically environmental, social and governance matters, will continue or even accelerate during the 2018 proxy season.

8. 'Tis the Season for 2018 Proxy Disclosure Preparation –
In preparation for the upcoming proxy season, guidelines and voting policies have been released by various proxy advisory firms and influencers, helping to inform institutional investors and other shareholders on vital corporate governance matters. This article provides a rundown of items relating to executive compensation garnering attention for the upcoming year from the Investor Stewardship Group, Institutional Shareholder Services, and Glass Lewis & Co.

9. Pay Ratio Disclosure Checklist –
Public companies need to consider appropriate disclosures regarding pay ratio calculations in addition to the disclosure of the pay ratio. This checklist, provided by Stinston Leonard Street, specifies the items to consider when drafting pay ratio disclosures.

10. Top Challenges Facing Boards in 2018 – Boardroom Resources
In this Boardroom Resources episode, Paula Loop, Leader of PwC's Governance Insights Center, identifies and discusses the top strategic and governance challenges that boards will face in the coming year.

Ransomware Payment: Legality, Logistics, and Proof of Life
Part Three: Notification, Remediation, and Insurance
Publication Date: January 8, 2018 

This is the third in a three-part series of white papers authored by Cybersecurity expert John Reed Stark. The series offers guidance for boards of directors on the legal issues, logistical considerations and financial implications of responding to ransomware threats.

Government measures to mitigate ransomware crimes are still somewhat theoretical and may be insufficient to stem the dramatic growth of ransomware, leaving companies to manage on their own the increasing risk of the current ransomware crime wave. Even under a best-case scenario, where a victim has maintained archives and can keep the business alive, ransomware victim companies will incur significant remedial costs, business disruptions and exhaustive management drag. However, with the right preparation and response, victim companies can lead recovery efforts with confidence and remediate ransomware attacks effectively.

In Part Three, John Reed Stark outlines basic steps companies should take as preemptive measures to avoid falling prey to ransomware, provides an overview of thresholds for notification requirements to regulators including the SEC and FINRA, and discusses the intricacies of insurance compensation.

Ransomware Payment: Legality, Logistics, and Proof of Life is a three-part series of articles that provides guidance on the legal issues, logistical considerations and financial implications when managing ransomware threats:

Part One of this series, Background and Reality, provided the keys to understanding the impact of recent ransomware strains, including a discussion of the nature and growth of ransomware; the dangerous aspects of some recent ransomware attacks; and the role (or lack thereof) of law enforcement when managing a ransomware attack.

Part Two of this series, Investigation and Response, examines the intricacies involved in ransomware response, including ransomware investigative tactics; ransomware payment logistics; and the legalities of ransomware response.

Part Three covers the remaining range of key ransomware essentials including: notification requirements, ransomware remediation, and ransomware cyber insurance. Part Three also provides some final thoughts on the entire ransomware imbroglio together with some recommendations for the future.

Read Part Three of Ransomware Payment: Legality, Logistics, and Proof of Life >>

Also popular from John Reed Stark on the Governance Clearinghouse:
Top Cybersecurity Concerns for Every Board of Directors >>
Cyber Defense in the Boardroom >>


John Reed Stark is President of John Reed Stark Consulting LLC, a data breach response and digital compliance firm. Formerly, Mr. Stark served for almost 20 years in the Enforcement Division of the U.S. Securities and Exchange Commission, the last 11 of which as Chief of its Office of Internet Enforcement. He also worked for 15 years as an Adjunct Professor of Law at the Georgetown University Law Center, where he taught several courses on the juxtaposition of law, technology and crime, and for five years as managing director of a global data breach response firm, including three years heading its Washington, D.C. office. Mr. Stark is the author of, "The Cybersecurity Due Diligence Handbook," available as an eBook on Amazon, iBooks and other booksellers.

capital markets
U.S. Capital Markets and the Road Ahead
Publication Date: December 14, 2017

We asked Tal Cohen, Senior Vice President of Nasdaq North American Equities, about the road ahead for U.S. capital markets. In this Q&A, Tal also shares his perspective about the current regulatory environment, the future of speed bumped markets, and explains why Nasdaq remains focused on its Revitalize Blueprint.

Q: What is the current regulatory environment under SEC Chairman Clayton?

A: Chairman Clayton has brought a renewed focused to IPOs in the primary market, in particular stemming the decline in the number of small and emerging growth public companies. He's been very consistent every time he's spoken that the SEC is focused on enhancing the attractiveness of the public markets for IPOs, and on ensuring Mr. and Mrs. 401K are not shut out of investments in emerging growth companies. Given that he was previously an IPO and M&A attorney, he's has both the background and the context to influence that debate.

Q: What are some of the initiatives Nasdaq is working to advance with the SEC?

A: Nasdaq is pursuing the proposals outlined in our Revitalize Blueprint, to enhance capital formation opportunities in the primary equity markets. In our blueprint, we are recommending that small and mid-cap companies be permitted to benefit from the choice to consolidate liquidity through the revocation of Unlisted Trading Privileges. We are also advocating for intelligent tick sizes, which we believe is a more tailored and effective approach for resolving sub-optimal tick sizes than the existing pilot.

On the product side, Nasdaq is focused on improving the trading experience on our markets by advocating for more stock splits, developing policies that support the growing ETF market, and rolling out enhancements to our closing cross. We are also filing a proposal with the SEC to introduce a midpoint extended life order (M-ELO) in our market that will help institutional investors buy or sell large orders or orders of significant size, and provide some level of protection when they do that.

Q: Do you think the SEC is rethinking speed bumped markets?

A: We think it's interesting that the commissioner who initially voted against IEX and the initial speedbump is now also clearly showing his views on a derivation of it that was recently proposed. We believe there is an opportunity to reengage the SEC on this issue, to make the case that speed bumps are a slippery slope. It's difficult for the industry to understand the implications of that, both from a public policy perspective and from a trading perspective.

We've asked the SEC to reexamine this topic on a broader basis than just CHX, to question whether the market has really benefitted from the speed bump during the past year. We also want the SEC to consider where this might lead over the next several years if speed bumps are allowed to continue to evolve and become part of the fabric of the market.

Nasdaq looked into the opportunity to take one of our exchange medallions and launch a speedbump market. But after some discussion, we decided there was a more elegant solution that we could put in place—one that didn't have the unintended consequences of a speed bump and that didn't have our customers incur additional costs to connect and take market data from a new, fourth exchange. And the manifestation of that solution is M-ELO.

M-ELO is our "day one" response to the speedbump market, one that provides protection for investors and minimizes the impact of market-moving events that can erode execution quality. We believe we'll be able to enhance and evolve M-ELO to meet a variety of different needs of institutional investors in the marketplace—needs that we don't capitalize on today.

Q: Are there other market structure developments on the horizon that will impact listed companies?

A: The access fee pilot could have some impact on listed companies. An overarching point we make to the SEC, and the industry, is that we need to involve the issuer in secondary market pilots and discussions. We often think about the issuer after the fact. Instead, we need to solicit issuer feedback on these market structure changes upfront, as they could have a material impact on how issuer stocks trade and how investors feel about building positions or unwinding positions in those companies.

The access fee pilot is an excellent example. Lowering the incentive to provide liquidity could do one of two things: lead to wider spreads or more off-exchange activity. Is that in the best interest of the issuer? Is that something at the end of the day the issuer finds of value? An alternative might be to marginally lower the explicit cost of trading for an intermediary, but increase the cost of investing in a company for a buy side institutional investor. This would be more meaningful to the issuer, who's looking at their stock and wondering why on day one it had a one or two cent spread, but post the access fee pilot it's become a three to four cent spread. And they are wondering why their investor base now looks different and feels differently about their company.

As they design these pilot programs, the SEC should be mindful of allowing companies to opt out of a program, if they experience a degradation in stock trade performance or an adverse impact on their stock price. The SEC did not create that outlet when they initially designed the tick size pilot, which was a point of contention for issuers.

Q: Speaking of the Tick Size Pilot…have we seen any benefits from it?

A: Issuers have not seen an increase in liquidity, an increase in research coverage or any indication that this is helping the IPO market. Using those three things as the criteria on which we judge it, we have not identified a benefit for issuers.

From a trading perspective, the results have been mixed, and most of what we projected and forecasted is happening. There are wider spreads and, in some stocks, it's more costly to build a position to trade or execute. On the flipside, we have seen a greater persistency of the quote so the quote is more stable, and there's more size or quantity to be done at the inside. But that has come at a price, because both implicit and explicit costs seemed to have gone up for brokers.

Q: There are currently 13 exchanges and dozens of other trading venues a security can trade on. Is this too many?

A: It's not a question of whether there are too many exchanges—it's a question of whether the market as a whole is working for small and mid-cap issuers the way it does for large cap issuers and large ETFs. Multiple exchanges work for some of the market, but not all of the market.

Nasdaq's Revitalize Blueprint offers more tailored, nuanced solutions to dealing with competition and fragmentation within the public markets.

Q: Has there been feedback on Revitalize from issuers or the trading community that's made Nasdaq reconsider parts of the initial blueprint?

A: Nasdaq included 25 separate proposals within the Revitalize Blueprint, and we knew some of them would be hotly debated on both sides of the fence. The proposals in the blueprint were meant to engage capital markets stakeholders in a robust dialogue and then move discussions forward to solutions. Issuers and investors have come to us and said Revitalize shows thought leadership, and is an aspirational blueprint to help vet what the real issues are and then build consensus—particularly on the issues that are passionately debated by both sides.

Revitalize was structured that way by design, and as a result of the feedback so far, we now have a better sense of the issues we'll be able to get support for—and build consensus on—pretty quickly (like proxy reform) and the issues that will require deeper discussions (like shareholder activism, short-sale disclosure, and dual-class stock issuances).

Q: What is the next step in implementing Revitalize?

A: I think the next step for Nasdaq is to choose a handful of the 25 proposals within that blueprint to put forward, and then work with the industry, the SEC and the government on resolving those issues. We know that these issues are top of mind for the SEC.

This is not just a U.S. issue, or about one exchange versus another exchange in the U.S. The Revitalize Blueprint is about the health and vitality of the U.S. capital markets and their global competitiveness. It's about job creation. It's about wealth creation. It's about making the public markets once again attractive to issuers, and how that will, in turn, benefit Main Street investors at the end of the day.

Read more about Revitalize here >>


Tal Cohen joined Nasdaq in April 2016 as the Senior Vice President of North American Equities. Prior to joining Nasdaq, he was the Chief Executive Officer of Chi‐X Global Holdings, LLC. Tal currently serves as a Director on the Investment Industry Regulatory Organization of Canada (IIROC) Board and as a Director on the Canadian Depository for Securities (CDS) Board.


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In the News
Society for Corporate Governance Complimentary Directors' Cut Newsletter
Publication Date: January 22, 2018

The Society for Corporate Governance is now offering complimentary access to its Society Alert - Directors' Cut® newsletter. This quarterly online newsletter is a compilation of governance-related news from the preceding quarter's weekly Society Alerts, with a view toward a director and C-suite audience. Each issue covers a range of relevant developments and guidance in areas such as audit/financial reporting, board composition/refreshment, board and key committee oversight, and shareholder engagement/activism - as well as institutional investor developments & perspectives.

Read the Society Alert - Directors' Cut for 2017 Q4 >>

Subscribe >>

The long and short of unfair trade rules
Publication Date: January 18, 2018

In this op ed, Edward Knight, Nasdaq's General Counsel and Chief Regulatory Officer, describes why it is important to add transparency into who is shorting a stock and why. Knight states that the current lack of transparency around short positions affects investors by "denying them the necessary information to make informed decisions about the company." Knight describes Nasdaq's proposal for the SEC to adopt short disclosures that would parallel existing long disclosure rules, a regime that has been in place for many years and is familiar to market participants.


Blackrock CEO, Larry Fink, Publishes his Annual Letter to CEOs
Publication Date: January 18, 2018

Each year, Larry Fink, CEO of BlackRock, crafts his annual letter to CEOs. In this year's letter, Fink describes a "new model of shareholder engagement – one that strengthens and deepens communication between shareholders and the companies that they own." Fink states that the effort regarding improving long-term value must be a year-round conversation and describes the importance of the board's engagement in developing a company's long-term strategy and creating value for all stakeholders. Blackrock manages approximately $6.3 trillion in assets, including $1.7 trillion in active funds.


SEC Commissioners Sworn In
Publication Date: January 11, 2018

On January 11, 2018, Robert Jackson and Hester Peirce were sworn in as SEC Commissioners.


The SEC's Office of the Investor Advocate: 2017 Report on Activities
Publication Date: January 5, 2018

The SEC's Office of the Investor Advocate (OIA) recently issued its 2017 annual Report on Activities. The report-required by Congress-describes the OIA's activities in a number of areas, including public company disclosure and the SEC's Disclosure Effectiveness Initiative, financial accounting and auditing standards, the definition of materiality, and corporate governance and the universal proxy.


Proxy Advisory Firm Legislation Advances In The House
Publication Date: December 26, 2017

The House passed the Corporate Governance Reform and Transparency Act of 2017 (H.R. 4015), introduced by Congressman Sean Duffy (R-WI), which requires proxy advisory firms to register with the Securities and Exchange Commission, disclose potential conflicts and operate in a more transparent manner. Proxy reform is a key component of Nasdaq's Revitalize blueprint.

Read more>>

Senate Approves New SEC Commissioners
Publication Date: December 22, 2017

The Senate approved the White House's nominees for the two open commissioner seats at the Securities and Exchange Commission. The two seats will be filled by Hester Peirce, a Republican and senior research fellow at the Mercatus Center at George Mason University and Robert Jackson Jr., a Democrat and professor and the director of the Program on Corporate Law and Policy at Columbia Law School. With the addition of Peirce and Jackson, this increases the number of SEC Commissioners to five along with Commissioners Michael Piwowar, Kara Stein and SEC chair Jay Clayton for the first time in more than two years.

Read more from the Wall Street Journal>>

Update on Proxy Advisory Firm Legislation
Publication Date: December 13, 2017

Last month, Congressman Sean Duffy introduced H.R. 4015, The Corporate Governance Reform and Transparency Act, to enhance accountability, transparency, responsiveness, and competition in the proxy advisory firm industry. That bill, which is supported by the U.S. Chamber of Commerce, BIO, and hundreds of public companies, and is consistent with recommendations previously made by Nasdaq, is now scheduled for a vote on the House floor next week. Interested persons can contact your Congressional Representatives now to express support. To obtain contact information, click on the link here and enter a ZIP code.

H.R. 4015 >>

Replay of webinar with Rep. Duffy >>

Read more about Nasdaq's blueprint for Revitalizing the Capital Markets >>

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