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Frequently Asked Questions
  Investors, Innovation, and Performance Top SEC's Draft Strategic Plan
Identification Number 1613
Investors, Innovation, and Performance Top SEC's Draft Strategic Plan
Publication Date: June 20, 2018

The Securities and Exchange Commission has published a draft strategic plan that focuses on investors, innovation, and performance as the top strategic goals in coming years. SEC Chairman, Jay Clayton, stated that "this plan focuses on the most important goals and initiatives that will best position the SEC to fulfill our mission of protecting investors, ensuring fair, orderly, and efficient markets and facilitating capital formation." The SEC is seeking public comment on the proposed draft that will guide the SEC's priorities through 2022.

Read more >>
Publication Date*: 6/20/2018 Mailto Link Identification Number: 1613
Frequently Asked Questions
  Nasdaq Talks to. . . T. Rowe Price about Their Investment Philosophy on Shareholder Activism
Identification Number 1614
Clearhouse
Nasdaq Talks to. . . T. Rowe Price about Their Investment Philosophy on Shareholder Activism
Publication Date: June 20, 2018

Corporate management teams and boards are under intense pressure to adapt to a business environment that is rapidly and continuously changing on multiple fronts. This rapid rate of change is also driving shifts in investor priorities and tactics: Investors are protecting the long-term value of their portfolios by becoming more assertive and actively engaged with the companies they invest in, particularly in the ESG realm.

As shareholder activism becomes more prevalent in the capital markets, and activist campaigns are more often debated in the public domain, it is increasingly important for companies to understand how their institutional investors manage and respond to these situations. However, ESG issues are not universally prioritized or consistently defined within the investment community, which cultivates fear and uncertainty around activist activity.

T. Rowe Price, a global investment management firm with over $1 trillion in assets under management, proactively addressed this issue by publicly clarifying their investment policies related to shareholder activism. Key message points from T. Rowe Price's Investment Philosophy on Shareholder Activism include the following:

  • Each activism campaign represents a unique set of conditions and should be assessed on its own merits.
  • T. Rowe Price takes a multi-year view when making decisions related to activist campaigns with an objective of sustainable, long-term performance by the company.
  • Proxy voting decisions rest with individual portfolio managers.
  • Proxy contest voting decisions will be shared with both parties in the campaign in advance of the vote, upon their request.
  • Companies are asked to remain open to serious, well-supported ideas for value creation, even if they originate outside the company.
  • T. Rowe Price has adopted internal policies prohibiting investment personnel from attempting to initiate activism campaigns by indirect means, such as pitching ideas to activist investors.
  • Portfolio companies should contact T. Rowe Price directly for the firm's view on any investment or voting matter related to them; activists have no authority to speak on behalf of T. Rowe Price.
By shining a light on the firm's potential actions in managing activist agendas and campaigns, T. Rowe Price has given their portfolio companies—and the activists who may target them—a clear roadmap in dealing with the firm under those circumstances. Public companies, and the capital markets as a whole, could stand to benefit if other major investment firms and asset managers provide a similar level of consistency and transparency in their approach to managing shareholder activism.

We spoke with Donna Anderson, Vice President and Head of Corporate Governance at T. Rowe Price, about the company's investment philosophy on shareholder activism and how clarifying their stance will help their portfolio companies navigate activist investor situations.

Q: What was the impetus behind T. Rowe Price's Investment Philosophy on Shareholder Activism?

A: As T. Rowe Price has grown, and as U.S. style activism has spread to Europe, we kept finding ourselves in situations where it was clear there was confusion—either on the company's part, on the activists' part or within the firm—as to our philosophy on navigating activist campaigns. Our policies haven't changed, but we decided it was time to write them down and share them with the public. We wanted to clearly communicate to our portfolio companies what we believe our roles and responsibilities are, and what they can expect from us, if they find themselves in an activist situation.

We have also increased our disclosure around broad ESG issues in general, to make them more transparent to our clients. We updated our baseline ESG policy and published two other pieces related to ESG this year: an engagement policy and a set of responsible investment guidelines.

Q: The document states emphatically that other shareholders do not have the right to speak on behalf of T. Rowe Price. Does this happen often in activist campaigns?

A: No, I wouldn't say it happens often, but when there's a campaign of some kind there are a lot of voices chiming in, including shareholders, advisors and other investors. Communication can get chaotic and emotional.

At T. Rowe Price, we often speak with both sides in a campaign or proxy contest because understanding investor plans is part of our due diligence in those situations. We want to make it very clear that we are available to our portfolio companies during that time, and that if they hear another party make a statement on our behalf they should confirm it directly with us. We also want to make clear our instructions to other investors: While we may ask a few questions or express a particular viewpoint in meetings with activists, we don't want those conversations to be misconstrued or used out of context.

Q: What is the benefit of sharing voting decisions with companies and investors in advance?

A: T. Rowe Price has always shared voting decisions with the direct parties (the companies and the activists sponsoring proxy contests) in advance of the vote, if they ask us to. There's a message in every vote; we think it benefits management of our portfolio companies to share with them directly how we are voting and what message we are sending with that vote.

Q: Is T. Rowe Price trying to discourage short-term activism by stating the company applies a multi-year timeframe in decision-making related to activist campaigns?

A: These days, it's rare to find an activism campaign that's strictly about financial engineering, at least in our portfolios. Super short-term oriented activism campaigns can't get any traction because they are not going to get the support of long-term shareholders.

We confirmed our timeframe to clarify our decision-making process: We're not looking at the next 50 years, we're not just looking at the next three quarters. We're looking at the next several years, the next business cycle—that's the framework we use generally for our investment research. When presented with two choices, we apply that timeframe in our analysis of which path is likely to create more shareholder value.

Q: Voting independence is a tenet of the T. Rowe Price investment policy. Do proxy advisory firms play a role in contested proxy votes at T. Rowe Price?

A: Our statement about voting independence is not meant as a knock against proxy advisory firms, but to illuminate a unique aspect of T. Rowe Price's investment process: our portfolio managers have autonomy to vote individually.

We value and utilize the research we receive from ISS on our portfolio companies. However, we don't have a standing blanket policy for how we vote in proxy contests. Each contest is analyzed and voted independently in our shop.

We believe that the vote is an asset of the fund, not of the fund company. When one of our portfolio companies is the subject of a campaign of some kind, the multiple owners of the stock within T. Rowe Price—along with appropriate internal advisors and analysts—all attend meetings together to jointly discuss the situation. If multiple T. Rowe Price portfolio managers own a stock and find they ultimately disagree on how to vote, they each have autonomy to represent the interests of their own fund shareholders.

Q: Do you expect other large investment firms to follow your lead on this?

A: No one should be surprised to see an increase in transparency throughout the industry with regards to how and why investors undertake the decision-making processes that they do. It is a growing trend for investors to disclose more, particularly related to ESG issues. I can't speak for the motivations of other firms, but at T. Rowe Price we are experiencing heavy demand from our own clients for case studies, examples, and engagement stories.

Q: What is the most important takeaway for companies that may be concerned about becoming a target of an activist campaign?

A: Again, it's about direct engagement with shareholders. Companies are better off getting shareholder sentiment directly from their shareholders, rather than listening to advisors who may have a vested interest in scaring boards.

The advisory community has grown tremendously in recent years to the point that there is now an unhealthy balance of voices warning boards. Law firms, governance consultants, and others are injecting a level of fear in companies that is sometimes out of proportion to the probability they will be targeted. We meet with companies that surprise us when we hear how nervous they are about shareholder activism, because their risk of being targeted is so low they shouldn't spend much time worrying about it.

Don't assume anyone else can accurately tell you what your shareholders are thinking. Let us speak on our own behalf.

For more information, read:
T. Rowe Price's Investment Philosophy on Shareholder Activism >>
T. Rowe Price ESG Integration: Guidelines for Incorporating Environment and Social Factors >>
T. Rowe Price Engagement Policy >>

***

Ms. Donna F. Anderson, CFA serves as Vice President and Head of Global Corporate Governance at T. Rowe Price Group, Inc. Ms. Anderson leads the policy-formation process for proxy voting and T. Rowe Price's engagement efforts with portfolio companies. She also serves as a specialist for incorporating ESG considerations into T. Rowe Price's investment research process.


The views and opinions expressed herein are the views and opinions of the contributor 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.

Publication Date*: 6/20/2018 Mailto Link Identification Number: 1614
Frequently Asked Questions
  Bringing Lessons From #MeToo to the Boardroom: 7 Questions Boards Should Ask
Identification Number 1576
Clearhouse
Bringing Lessons From #MeToo to the Boardroom: 7 Questions Boards Should Ask
Publication Date: June 18, 2018

This article was originally published by MITSloan Management Review on June 7, 2018. With permission, minor changes to the text of this article have been incorporated in this version.

Boards need to be proactive in shaping a corporate culture that does not tolerate sexual harassment.

Has your board reflected upon the #MeToo and #TimesUp social movements, and about the continuing wave of CEO resignations amid misconduct allegations? Whether you are a member of the board of a public, private, or nonprofit company, procedures for addressing and preventing sexual harassment must be on your board's agenda. Directors need to do the right thing for employees, for customers, and for all stakeholders. The time for boards to act is now. Here are seven questions boards should ask.

As advisers to boards for a combined 40 years, we have had many discussions about the challenges facing companies. Understanding risk appetite and ensuring the company has a process in place for managing its risks is usually at the top of the list.

When we delve deeper into how boards manage risk, we often hear that different risks are monitored by different committees. For example, accounting risks come under the purview of the audit committee, and risks related to cash and stock incentive programs are monitored by the compensation committee.

But what about sexual harassment? Companies generally agree that while sexual harassment in the workplace is unacceptable behavior on the part of an individual, the ensuing silence or lack of consequences for the behavior reflects a problem with corporate culture — and, ultimately, culture is the responsibility of the entire board.

This begs the question: How do we monitor culture and focus board attention on preventing sexual harassment and misconduct at their organizations? Our answer, based on experience helping boards increase effectiveness, is that directors must first implore their board chair to put this topic on the board agenda. Even though it may be an uncomfortable issue, boards must start the dialogue about this "new" risk. To begin, we suggest directors ask the following seven questions:

How do our current policies measure up to best practices?

Too often, the board does not read company policies or require human resources leadership to review policies and procedures annually to gauge the effectiveness of the reporting process. Directors may think this level of review is "stepping on management's toes." However, the board must determine whether the company's current policies and procedures related to preventing workplace sexual harassment and discrimination are adequate. Asking HR how these policies are communicated and to define "best practices" is not crossing the management/board line. Directors should weigh in on whether the CEO and the management team are communicating the right message.

Do employees trust and use our procedures for reporting harassment?

While there are many methods and procedures organizations use for employees to report harassment or complaints, hotline calls to a company's dedicated ethics line are a good example. Board directors sometimes utter a sigh of relief when they hear there have not been any hotline calls at their organization, but it's a common misconception that few calls to the ethics line equates to a "good" company culture. In an open and trusting culture there are many calls — calls for how to handle a matter, calls for clarification, and, yes, some calls that report a potential problem. Informed directors ask how many calls are received in a given time period and require that calls be categorized.

The hotline is an early-warning system, and directors are looking for trends, not individual case details. Not only does this offer a chance for early intervention, it is also an indicator that employees trust the company will do the right thing. The more comfortable employees are raising issues, the lower the potential risk of the company mishandling a case of harassment. If an abuse or infraction of a policy happens, ensure it is treated fairly and consistently and that real penalties, rather than a slap on the wrist, are imposed.

When does the board get notified?

Keeping with our example of hotline reports, let's now think about how and when the board should be notified. We've found that real-time sharing of reports varies in organizations, but regardless of reporting structure, it's crucial that the full board be notified at least semiannually (though preferably more frequently) about trends and statistics of employee reports.

Directors should also understand the escalation protocols. For example, is there a mechanism to ensure that if a question is raised about the CEO's behavior, it gets immediately reported to the board chair? Ask if the right manager oversees incoming hotline calls and talk through the reporting procedures.

What is company culture like at the mid-employee level?

Boards have regular interaction with the CEO and senior executives. They convene at board meetings, strategize at retreats, and enjoy dinner together. Most often, camaraderie is genuine, and it may lead directors to believe that company culture is similarly positive.

But what about the next level down, with managers who directors see once a year, if that often? And what is the culture like among employees these managers supervise, and with whom the board never engages — how do these employees view the company?

To better understand a company's culture, directors might consider unstructured office tours. One director told us he learned more about company culture while walking around the operations floor than he did in the boardroom. Additionally, directors should ask to see the annual employee satisfaction survey results — and not just the cover page. Initiate a discussion with management about how a potential claim of sexual harassment might be handled in-house and how the board could better monitor culture.

Does the board composition need a refresh?

Companies are not static, and boards must evolve accordingly. A regular injection of new talent around the boardroom table will promote fresh ideas and a disciplined challenge to the status quo. Problems can fester when thinking becomes too insular and when no one takes a step back to deliberate on the culture of the business. One board director told us that the mere presence of a new director in the boardroom causes the conversation to change, but when the new director is a woman, this change is magnified.

Gender diversity on boards is a high priority among institutional investors. Additionally, female board members we spoke with reflecting on the #TimesUp campaign felt that if there had been support at the top of the company and better gender diversity on boards, then they might have felt comfortable speaking up earlier.

What's our crisis response plan?

Boards must be proactive in their thinking and planning around the issue of sexual harassment. Even when following best practices and promoting healthy corporate cultures, bad behavior can (and will) still occur. California provides a good example: Since 2005, employers in the state with more than 50 employees have been required to conduct two hours of sexual harassment awareness training for supervisors and executives every other year. However, what about the boards of directors for these companies? They need to be included in at least some part of this training as well.

Part of any crisis response plan requires getting ahead of a potential crisis, discussing these issues and establishing a culture of zero tolerance starting at the board level and then messaged throughout the organization.

How do we vet our board members and CEO candidates?

Sexual misconduct can be prevented, and prevention must be promoted at the top of the organization. While this is often articulated to be the case, the truth is usually more nuanced. Clearly, recent revelations highlight that we have lived in a culture where sexual misbehavior has been ignored, tolerated, and overlooked. Diversity in the boardroom can provide some mitigation in that it tends to curtail groupthink and group complacency. We need strong directors who will not be afraid to speak up or question unacceptable behavior within the organization they serve. It is easy to assume that directors, by virtue of their title, have the fortitude and wherewithal to do the right thing in all situations. But this is not always the case, and boards have a responsibility to interview and reference for these characteristics.

Instances of sexual harassment and other forms of sexual misconduct boil down to bad behavior, power abuse, and poor judgment within the organization. Failing to implement proper protocols around sexual harassment in the organization can lead to many problems including decreased brand reputation, litigation, and a variety of other risks, as well as the associated decrease in shareholder value. Boards must take the lead in fostering a respectful work culture.

***

Patricia Lenkov is founder and president of Agility Executive Search LLC. Known for her work on board diversity and a member of the Women & Leadership Advisory Council at Concordia University in Montreal, Canada, Lenkov holds a BA (with distinction) in psychology from McGill University in Montreal, and an MBA from Concordia University. She tweets @Patricia_Lenkov. Denise Kuprionis is founder and president of The Governance Solutions Group (GSG), a board advisory practice. Kuprionis is a senior fellow at the Conference Board's Governance Center, is a National Association of Corporate Directors Board Governance Fellow, and a visiting professor at Xavier University, Cincinnati, Ohio. She tweets @mdkup.


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.

Publication Date*: 6/18/2018 Mailto Link Identification Number: 1576
Frequently Asked Questions
  T. Rowe Price Clarifies Stance on Shareholder Activism
Identification Number 1612
T. Rowe Price Clarifies Stance on Shareholder Activism
Publication Date: June 18, 2018

T. Rowe Price, a global investment management firm with over $1 trillion in assets under management, has published its investment philosophy on shareholder activism. Core tenets of the firm's shareholder activism policies include:
  • Taking a long-term (multi-year) perspective when making decisions related to activist campaigns.
  • Clear communication, following applicable laws, regulations and internal policies, with companies, activists and other investors about proxy voting decisions related to activist campaigns.
  • The belief that corporate management teams have better information about their businesses than outside parties, while they and their boards are expected to remain open to well-supported ideas for value creation from outside the company.
  • Proxy voting decision-making resides with T. Rowe Price portfolio managers, not proxy advisory firms.
Read T. Rowe Price's Investment Philosophy on Shareholder Activism >>
Publication Date*: 6/18/2018 Mailto Link Identification Number: 1612
Frequently Asked Questions
  What companies can learn from new SEC proxy guidance
Identification Number 1575
What companies can learn from new SEC proxy guidance
Publication Date: June 15, 2018

On May 11, 2018, the SEC's Division of Corporation Finance issued a series of interpretations on how companies can comply with the proxy rules and Schedules 14A/14C. These proxy interpretations include 45 questions and answers that replace prior guidance to reflect substantive and technical changes and provides new guidance as well. Corporate Secretary has reviewed the guidance to identify changes and highlights practical considerations and steps for companies to take.

Read more >>
Publication Date*: 6/15/2018 Mailto Link Identification Number: 1575
Frequently Asked Questions
  Webinar: How Do Public Company Boards Rate Themselves on Cybersecurity?
Identification Number 1544
Webinar: How Do Public Company Boards Rate Themselves on Cybersecurity?
Publication Date: June 13, 2018

On Thursday, June 14th, Nasdaq's Chief Information Security Officer, Lou Modano, and Willis Towers Watson's Global Head of Cybersecurity, Anthony Dagostino, will review a board survey from the Willis Towers Economist Intelligence Unit on how public company boards rank their cyber defense programs. The webinar will cover where boards rank themselves highly and where they feel they are falling short; how boards are carving out specialized groups to manage cybersecurity; where boards should focus resources to avoid increased spending; and the role of human resources in an organization's cyber risk culture.

Read more and watch webinar >>
Publication Date*: 6/13/2018 Mailto Link Identification Number: 1544
Frequently Asked Questions
  Nasdaq Introduces Tomorrow's Capital Podcast
Identification Number 1543
Nasdaq Introduces Tomorrow's Capital Podcast
Publication Date: June 6, 2018

Nasdaq's first podcast, Tomorrow's Capital, is a new way for Nasdaq to engage with clients and the industry as a whole. Each 30 minute episode will contain stories and insights from economic thought leaders shaping the global economy. The first season will have five episodes, with a new episode coming out every week. The inaugural episode features Nasdaq's General Counsel Ed Knight and former U.S. Treasury Secretary Larry Summers discussing emerging markets, digital currencies, U.S. trade policy and the secular stagnation theory and more.

Listen to Podcast >>
Publication Date*: 6/6/2018 Mailto Link Identification Number: 1543
Frequently Asked Questions
  Strong ESG Practices Can Benefit Companies and Investors: Here's How
Identification Number 1542
Clearhouse
Strong ESG Practices Can Benefit Companies and Investors: Here's How
Publication Date: June 5, 2018

Veteran board member Betsy Atkins presents a compelling argument for proactively addressing ESG issues through formal corporate governance policies.

Environmental, social and governance (ESG) issues should be a top concern of corporate management and boards. There was a time when a public stance on ESG issues was a public relations tactic. However, in today's rapidly changing business climate, attention to ESG issues is becoming critical to long-term competitive success.

Major institutional investors recognize this and are making it clear that they expect the companies they hold to take a proactive approach to ESG policies and messaging. In his annual letter to CEOs, Blackrock's CEO Larry Fink wrote "a company's ability to manage environmental, social, and governance matters demonstrate the leadership and good governance that is so essential to sustainable growth, which is why we are increasingly integrating these issues into our investment process." During the 2017 proxy season, State Street Global Advisors (SSGA) put this ethos into action by voting against the re-election of directors at 400 companies that SSGA said failed to make any significant effort to appoint women to their all-male boards.

The advantages of proactively tackling ESG issues go beyond appeasing institutional shareholders and creating a good public relations story. A robust ESG program can open up access to large pools of capital, build a stronger corporate brand and promote sustainable long-term growth benefitting companies and investors. Here's how:

1.   Strong ESG programs can increase stock liquidity.

Individual and institutional investors alike are investing massive pools of capital in corporations that proactively govern and operate in an ethical and sustainable manner. Sustainable and impact investing is actively growing at double-digit rates. In fact, according to the US SIF Foundation, total U.S.-domiciled investments using sustainable, responsible and impact (SRI) strategies, reached $8.72 trillion, an increase of 33 percent from 2014 and a 14-fold increase since 1995. That represents about one of every 6 dollars under management.

Investment research and consulting firms like Sustainanalytics and MSCI have developed indices that measure and rank companies based upon ESG criteria relative to their industry peers. The investment funds and ETFs that benchmark these indices are raising trillions of dollars to be deployed toward companies that execute sound ESG policies; these are long-term oriented shareholders that can potentially fuel demand for your stock.

Many investment firms are also incorporating ESG evaluations in their portfolio risk assessment, which is a telling indicator that capital will continue to flow towards companies with strong ESG programs and practices.

2.   ESG initiatives can unlock competitive value.

Companies that recognize the importance of adapting to changing socio-economic and environmental conditions are better able to identify strategic opportunities and meet competitive challenges. Proactive and integrated ESG policies can widen a company's competitive moat relative to other industry players.

Starbucks (Nasdaq: SBUX) learned this as they were trying to expand their market share in China. For years after entering that market, Starbucks struggled to gain momentum on expansion. They stumbled upon the answer when they offered healthcare to their employees' parents. Once they did that, sales growth skyrocketed and now Starbucks has 2,000 stores in one of the fastest growing markets on the globe.

Executives who take steps to improve labor conditions, enhance the diversity of their teams, give back to their communities, and take a stand on sustainable environmental policies also strengthen the company's brand. As millennials in particular become employees, consumers, and investors, they take note of good corporate actors and reward them with loyalty.

3.   A proactive stance on ESG issues can keep activists at bay.

Activists have used governance weaknesses as a tool in proxy contests and campaigns against companies for years, but increasingly they are targeting management teams and boards that fail to take a proactive stance on potential environmental or social issues.

Companies that proactively address ESG issues can set the bar for the entire industry and at the same time help immunize themselves against activist intervention. Wynn Resorts (Nasdaq: WYNN) recently embraced their commitment to gender diversity by increasing the number of women on their board from one to four. With a board that is 36% female, Wynn is now in the top 40 S&P 500 companies in terms of female board representation.

If your company does become the target of an ESG-focused activist, don't despair. Activist investment firms and hedge funds are establishing their own ESG funds, such as ValueAct Capital and Jana Partners. Many of these investors are interested in collaborating with companies to develop ESG policies that unlock the long-term value we mentioned above. For example, Jeff Ubben, CEO of ValueAct Capital, recently joined the board of energy company AES Corporation to help continue the company's transition to clean and renewable energy sources (following divestiture of its coal assets).

4.   ESG Investors are "stickier."

ESG investors are values-based investors who are more interested in what happens during the next decade than the next quarter; they understand that change takes time. Investors incorporating ESG into their mandate often work alongside a company to strengthen it, as they are more interested in building long-term value over a multi-year period than in flipping the stock in the near term for a "sugar high."

5.   Companies that espouse strong ESG values tend to attract and retain the best talent.

Millennials care deeply that the companies they work for (and the businesses they support) embrace values that are aligned with their own, and environmental and social responsibility are very important to them. Employees who are passionate about the organization, who are loyal, and who feel valued drive an intangible good will that strengthens the brand of the company and improves the overall productivity of the workforce.

Best Practices

To realize the full benefit of a proactive stance on ESG issues, it's important to adhere to some best practices for benchmarking and strengthening the company's ESG program:

Identify the appropriate ESG criteria for your industry and your company.

When developing an ESG policy framework, companies should not try to be all things to all people. Rather, identify three to five measurable ESG criteria that are material to your businesses and your constituencies, and are aligned with your corporate strategies.

For example, an oil and gas company that is fracking should measure water and waste management and impacts on scarce natural resources. If your business is centered around service personnel as Starbucks is, social training on anti-harassment and racial sensitivity will make consumers feel welcome and strengthen the corporate brand. Wynn Resorts, as a business that delivers premium services to clientele, focuses on employment initiatives to ensure they attract and retain the best workforce: workplace safety and sensitivity, gender equality, a Women's Leadership Forum, and diversity and inclusion. Wynn Resorts also addresses the environmental impacts of their large hotel properties. They recycle 95% of the water they use, and many properties are LEED certified. Wynn Las Vegas just announced a multi-use development, Paradise Park, powered by 100% renewable energy sourced from a 160-acre solar energy facility, making it one of the most environmentally conscious planned developments in Las Vegas.

An effective way to benchmark your company's ESG framework relative to your peers is to research industry rankings within a major sustainability ranking index. There are a number of nonprofit global advocacy organizations that identify and rank corporate ESG programs:

These organizations, as well as ESG advisory companies like Sustainanalytics and MSCI, analyze a broad range of criteria for each industry, only some of which include: climate change impacts, natural resource scarcity, supply chain management, labor practices, political contributions, board composition and workplace diversity and inclusion. The influence of proxy advisory firms like ISS and Glass Lewis over institutional investors has grown in recent years, so reviewing the governance scores they apply to your company can be another useful benchmark.

Pursue inclusion within relevant ESG indices.

As mentioned above, inclusion in ESG index funds and/or ETFs can boost demand and liquidity in your company's stock. Once your company has identified the elements of its ESG framework, have your general counsel contact three or four ESG funds or ETFs to research their criteria for inclusion (and exclusion). From there, identify which of these indexes map most closely to your corporate strategy and to the priorities of the shareholder base that you believe represent your best long-term holders.

Most ESG pools of capital apply their own unique set of inclusion and/or exclusion criteria to determine which companies to include. For example, to qualify for inclusion in the FTSE4Good Index Series, companies must be working towards environmental sustainability, supporting universal human rights, ensuring good supply chain labor standards, countering bribery, and mitigating and adapting to climate change. Companies that have been identified as having business interests in tobacco, nuclear weapons systems, or firearms, however, are excluded from that series.

Tell your story and stay true to it.

Once your company has determined the appropriate criteria for its ESG framework, the next steps are to establish metrics, measure them on a regular basis, and share progress publicly; otherwise, you will be accused of "greenwashing." Companies that are guilty of greenwashing spin a PR narrative of high standards for environmental protections and human rights, but don't walk the talk. Greenwashing is going to become harder to get away with as the SEC increasingly calls for companies to file corporate social responsibility and sustainability reports.

Investors have a number of criteria they use to determine whether a company is greenwashing or truly integrating ESG policies in their business practices. Companies that are truly committed to executing their ESG policies make them a senior management priority of the CEO and general counsel, and tie compensation to ESG metrics. They voluntarily report ESG goals, and progress towards meeting them, to all stakeholders via the annual CEO letter, annual reports, internal corporate communications, and/or annual sustainability reports on the corporate website.

***

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

Publication Date*: 6/5/2018 Mailto Link Identification Number: 1542
Frequently Asked Questions
  5 Keys to Understanding and Addressing Workplace Retaliation
Identification Number 1536
Clearhouse
5 Keys to Understanding and Addressing Workplace Retaliation
Publication Date: May 29, 2018

The Ethics & Compliance Initiative (ECI) empowers organizations to build and sustain high quality ethics and compliance programs.

An alarming trend is occurring in our workplaces; retaliatory behaviors are on the rise. According to the Global Business Ethics Survey (GBES), a longitudinal study of employees in for-profit organizations, rates of retaliation for reporting suspected wrongdoing have doubled over the past 3 years. Forty-four percent of employees who alerted management to a potential violation said that they experienced some form of retribution for having stepped forward.

Retaliation is very difficult for leaders to address; not for lack of desire or recognition of its importance. It is often not reported and therefore it quietly perpetuates, with victims sometimes experiencing ongoing punishment from management and peers. It can also be difficult to prove, with only circumstantial evidence to rely on, addressing the problem becomes even harder.

Despite the challenge, it is vital for an organization's long-term success that boards and senior leaders acknowledge and prioritize retaliation as a credible business risk.

There are 5 key insights that can help directors and executives better understand and address retaliation:

1.   Reporting and retaliation rise and fall together.

In part, the retaliation trend is the result of corporate investment in ethics and compliance (E&C) programs that encourage employees to recognize and report suspected wrongdoing. When an organization successfully implements an E&C program to encourage employees to report misconduct, they are often successful in creating "speak up cultures" with increases in reports by as much as 33%. However, along with that, they often see the employees who report being punished by their colleagues for coming forward. It is the difficult reality of E&C programs; the more employees attempt to report wrongdoing, the more likely it is that they will experience repercussions for having done so.

Twelve percent of employees who report wrongdoing only once say they experienced retribution. That number increases to almost 40% of employees who attempt to report three times. The likelihood that that those individuals will be retaliated against increases by another 50% if they try to come forward two times thereafter. Eighty percent of employees who try to report wrongdoing five or more times say they experience retaliation. This pattern is true globally. In working to mitigate retaliation in an organization, employees should feel assured in being able to report wrongdoing confidentially.

Another worrisome trend is that, in the past, reporting and retaliation have tended to rise and fall in similar amounts. However, over the past three years, reporting rose by 7% while retaliation rates increased 50%. It is difficult to say why this is the case. However, one possibility is that the majority of misconduct that was observed involved senior leaders. Generally speaking, wrongdoing that occurs at higher levels of an organization tends to be more serious in nature. The more power a violator has, and the more serious the alleged misconduct, the more likely it is that employees who report will experience reprisal.

2.   Most retaliation is social in nature.

Nearly 60% of employees who say that they have experienced retribution for reporting indicate that they were snubbed or shunned in subtle gestures, excluded from social situations, or overlooked in teaming environments. Nevertheless, half of employees say that they experienced verbal abuse by their supervisor or someone else in management, and almost 40% said that they almost lost their job.

3.   It doesn't matter whether the retribution really happened.

So long as an employee perceives that he/she has experienced retribution, the damage is done. Not only will that individual be unlikely to report the retaliation, the likelihood of their going outside the organization to report to a third party (such as an enforcement agency) is greatly increased. Furthermore, that individual is 65% less likely to come forward to report any other act of misconduct, should that take place. Therefore, it is important that management actively seeks out and manages perceptions of the reporting process.

4.   Acts of retaliation have a long-lasting and wide-reaching effect.

When retribution occurs, three new problems surface. A new form of misconduct has taken place (the retaliatory act); a new victim (the reporter) has been created; and the retaliatory act seeds an environment that is cancerous to the overall culture of the organization. Once it becomes known among other employees that retaliation occurs, there is a widespread silencing effect. Fifty-three percent of employees with first-hand knowledge of misconduct do not come forward out of fear that they will experience retribution for doing so. This fear of retribution then enables misconduct to become engrained in the culture of the organization. Therefore, tolerance of retaliation can be a leading indicator of future misconduct.

5.   Retaliation can be reduced and even eliminated.

The more an organization does to implement a high-quality ethics and compliance (E&C) program, the less retaliation occurs. While it may sound contradictory to the first insight in our list, the quality of the program makes a difference. While more than half of those who report misconduct say they experienced retaliation in companies without high quality E&C programs, only four percent say they have suffered from retaliation in companies with high quality programs. The same pattern is true for the extent to which misconduct occurs in the first place. That is because the higher the quality of the program, the stronger the culture in the organization. The stronger the culture, the less retaliation occurs.

To improve the quality of E&C efforts, boards and executives should shift from a narrow view of risk and compliance to a broader focus on culture and accountability. Message matters. Individuals are more likely to come forward to report wrongdoing if they believe that their report will make a difference; and they trust that they will be protected by management if they come forward. That is not a message of compliance. Boards should insist that management establish safe "speak up cultures" that emphasize a set of core values as the highest priority and the standard for all conduct. Management should also promote the availability of resources for those who observe wrongdoing; empower individuals to come forward; and clearly communicate that all individuals who engage in retaliation will be disciplined.

When it can be identified, retaliation is very difficult to prove in such a way that management can formally respond with legal or disciplinary action. Yet it is essential for leaders to find a way to address retaliation, for the sake of individual employees and the ongoing vitality of the organization.

***

The Ethics & Compliance Initiative (ECI) is a best practice community of organizations that are committed to creating and sustaining high quality ethics & compliance programs. ECI provides independent research about workplace integrity, ethical standards, and compliance processes and practices in public and private institutions.


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.

Publication Date*: 5/29/2018 Mailto Link Identification Number: 1536
Frequently Asked Questions
  Nasdaq CEO Adena Friedman on New Technologies, IPOs and Diversity
Identification Number 1541
Nasdaq CEO Adena Friedman on New Technologies, IPOs and Diversity
Publication Date: May 29, 2018

Nasdaq CEO Adena Friedman speaks with Intel Capital President Wendell Brooks about new technologies in fintech, IPOs and diversity. She discusses how data exchange can impact industries beyond the capital markets and explains how Nasdaq is using blockchain and machine learning to empower markets around the world.

Watch here >>
Publication Date*: 5/29/2018 Mailto Link Identification Number: 1541
Frequently Asked Questions
  Betsy Atkins Talks to Arthur Levitt about the Current State of Boards: Part 3
Identification Number 1534
Clearhouse
Betsy Atkins Talks to Arthur Levitt about the Current State of Boards: Part 3
Publication Date: May 23, 2018

What is the role of the board in keeping companies relevant? What is a "dinosaur" board and why should you avoid one at all costs? How can boards proactively prepare for activists? Are we entering a new era for boards?

During a wide-ranging and informative interview, veteran board member and venture capitalist Betsy Atkins and Bloomberg Radio host and former SEC Chairman Arthur Levitt discuss these important topics, and more. We divided their interview into three separate articles. Parts 1 and 2 were posted previously. Part 3 is presented below.

Arthur Levitt: You say that the biggest threat to companies these days is that they aren't relevant. What can a board do to keep a company relevant?

Betsy Atkins: The board can open the aperture and look externally by bringing in outside speakers. The board can also add learning visits to their multiday annual strategy off sites, including visits to key geographic areas like Silicon Valley, China, Hangzhou and Shenzhen.

AL: What are the qualities of an effective board member?

BA: Active listening, active self-education on the company's sector and competitors, an independent frame of reference and a commitment to be an asset and add value to the company, versus just providing oversight. Oversight is merely table stakes.

AL: Should outside consultants be brought in to help source new board members?

BA: Yes, external search firms can be very helpful and their networks can be indispensable to creating a diverse slate of candidates.

AL: You would like to see a sunset clause for directors. Why, and how is this clause structured?

BA: Yes, I think it would be valuable for boards to have a sunset clause of 10-12 years for directors. I think that board members can "go native" at a certain point in time and lose objectivity and contemporary relevance. Boards need to refresh their boards regularly to meet the opportunities and challenges of the next five to seven years of the company's journey, just as they forward-hire their leadership team given the outside market velocity of change.

AL: You warn against serving on a "dinosaur" board—what is this? In general, if asked to be on a board, what questions should I ask about the company?

BA: A dinosaur board is a board where there is very little engagement, it's very formal, and management is reluctant to share the juicy strategic challenges, issues and decisions—instead they only bring topics to the board when they are fully and finally baked for ratification. Typically, these tend to be larger boards.

What I look for when vetting a board to serve on is a size of nine members or fewer and board colleagues who are very differentiated from one another with multiple diverse experiences that I can learn from. I look for a CEO who is open minded and who sees the board as an asset, not a necessary evil. I look for a company that can be a category owner or leader in a space that is going through significant change, since I personally find that more interesting.

AL: You made a list of things a board should look at annually, and one of them is to do an "activist review." What is this?

BA: An activist review is an external view of your company from the point of view of an activist. Ask yourself is there value to unlock by spinning off divisions or selling assets, how has your company compared to peers on financial metrics like bloated headquarters costs and G&A? Has your company been efficient with how they have spent their capital? Are you performing in the top quartile of your peers or not? You should have your bankers or an outside specialist firm like Spotlight Advisors (a specialist in activism) perform this review.

AL: You say that boards need to consider the "lifecycle" of their companies when making decisions. Would you explain?

BA: In the 90's, Jim Collins (who wrote the book Good to Great) pointed out that 40% of all companies cease to exist in 20 years. Today, that lifecycle has become considerably shorter—more like 50% of companies are gone within a decade. Companies should look closely at where they are in their lifecycle: Are you going to slowly melt and lose value for the shareholders? Are you an octogenarian company? Is it time to go private or sell yourselves or merge? Are you able to innovate and grow? (Sometimes you have the DNA to do that and sometimes you don't.) At Polycom where I was a director, we concluded it was the right thing to take the company private.

AL: Is there such a thing as an independent director?

BA: Yes, I believe so. Directors need to have 100% alignment as a fiduciary for the shareholders. If you make every decision as if every penny of your life savings—and every penny of everyone in your family and your village—depends upon it, then you will always have the right business judgement on behalf of the shareholders.

AL: Do most boards have adequate crisis management plans ready?

BA: Absolutely not. Boards should review crisis management plans annually. As part of their annual enterprise risk management audit process, boards should identify the top risks and have specific crisis management plans in place for each and every one. Importantly, boards should test these plans with a simulated test annually, just as they would conduct disaster recovery testing annually.

AL: Is the blockchain and its disruptions a topic that boards are concerned about now?

BA: I think the blockchain protocol is particularly relevant to specific industries, like financial services and real estate with distributed transactions. It is in the early emerging stages and companies in the affinity industries should do some research as to whether it will be relevant for their boards. For a traditional manufacturing or retail company, it may not be as relevant.

AL: How have boards changed over the years you have served?

BA: In the 1990's, board service was formal and there was a lower amount of interaction for directors. It was death by PowerPoint and formal approvals. The Enron and WorldCom meltdowns resulted in a very important but little understood catalyst of change—the executive session. Directors were then unsupervised and able to talk amongst themselves about their thoughts of the company's performance and risks, which led to the annual strategy off-site, which coupled with the internet era and technology acceleration has led to a higher level of board engagement. The new era will be one of boards looking forward to the future competitive contemporariness, as opposed to backward looking last quarter oversight.

For more information, read Betsy Atkins Talks to Arthur Levitt about the Current State of Boards: Part 1 and Part 2.

***

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

Arthur Levitt is currently the host of Bloomberg Radio's "A Closer Look with Arthur Levitt" and serves on the board of directors at Bloomberg LP. Levitt was the 25th Chairman of the U.S. Securities and Exchange Commission, and in 1999, became the Commission's longest-serving Chairman until his resignation in 2001. He also serves as a senior advisor to Goldman Sachs & Co. and an advisory board member of the Knight Capital Group.



The views and opinions expressed herein are the views and opinions of the contributors 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.

Publication Date*: 5/23/2018 Mailto Link Identification Number: 1534
Frequently Asked Questions
  The Promise of Market Reform - Reflections One Year Later
Identification Number 1535
The Promise of Market Reform - Reflections One Year Later
Publication Date: May 23, 2018

In May 2017, Nasdaq laid out a blueprint for revitalizing the U.S. capital markets with the objective of creating more robust, efficient and transparent markets and significant progress has been made on many of the proposed reforms. Nasdaq's President, Nelson Griggs, recently provided an update on that progress, along with the work Nasdaq continues to do with its partners, to build capital markets that work better for the investing public and entrepreneurs. In addition, the Subcommittee on Capital Markets, Securities, and Investment of the House Financial Services Committee held a hearing on May 23rd to examine potential legislation aimed at eliminating regulatory hurdles that harm the ability of "Main Street" businesses, early-stage companies, smaller companies and emerging growth companies to access capital, innovate, grow and create jobs. Edward Knight, Nasdaq's Executive Vice President and Global Chief Legal and Policy Officer, testified at this hearing.

Read the update on Nasdaq's Blueprint to Revitalize the Capital Markets >>

Learn more about the hearing, watch an archive, and access Mr. Knight's testimony >>
Publication Date*: 5/23/2018 Mailto Link Identification Number: 1535
Frequently Asked Questions
  Nasdaq CEO: We need more female leaders in the financial industry
Identification Number 1533
Nasdaq CEO: We need more female leaders in the financial industry
Publication Date: May 21, 2018

In a recent interview with CNN's Poppy Harlow, Adena Friedman, CEO of Nasdaq, discussed the importance of getting more women involved in the finance and tech industries. In that regard, Nasdaq recently signed the Parity Pledge, a commitment to interview at least one qualified woman for every senior executive role. Friedman's plan to reinvent Nasdaq as a technology company involves "more diversity of thought" and "more diversity of views" and the continuation of bringing great people into the industry.

Read more >>
Publication Date*: 5/21/2018 Mailto Link Identification Number: 1533
Frequently Asked Questions
  An Early Look at US 2018 Proxy Season Trends
Identification Number 1532
An Early Look at US 2018 Proxy Season Trends
Publication Date: May 18, 2018

With proxy season in full swing, Institutional Shareholder Services has identified some early trends. Their research indicates that: virtual-only meetings are on the rise; more proxy disclosures feature discussions regarding company culture, board refreshment, and diversity; and majority support for director elections remains consistent with prior years. Social issues, including lobbying and political contribution disclosures, take the lead in terms of the number of proposals filed by shareholders.

Read more >>
Publication Date*: 5/18/2018 Mailto Link Identification Number: 1532
Frequently Asked Questions
  SEC Wants Boards' Views on Contested Shareholder Proposals
Identification Number 1526
SEC Wants Boards' Views on Contested Shareholder Proposals
Publication Date: May 16, 2018

This Wall Street Journal Article explains that while the SEC usually allows companies to exclude shareholder proposals that relate to the company's ordinary business, there is room for argument on whether issues go beyond day-to-day business into significant policy areas—such as the environment. In these circumstances, it appears from recent decisions that the Securities and Exchange Commission is eager to see that the Board of Directors has considered the issue. In that regard, the SEC had indicated in guidance that a company's board is in a better position than the agency to determine the relevance to a company's business operations of any policy issue raised in a proposal.

Read more >>
Publication Date*: 5/16/2018 Mailto Link Identification Number: 1526
Frequently Asked Questions
  Janet Hill Shares Leadership Lessons from 20 Years in the Boardroom
Identification Number 1524
Clearhouse
Janet Hill Shares Leadership Lessons from 20 Years in the Boardroom
Publication Date: May 10, 2018

Nasdaq's Winning Women series seeks to share the insights of successful business women from inside the boardroom and C-suite.

In the first of our series on Winning Women, Caren Merrick, Nasdaq company director and entrepreneur, spoke with fellow veteran board member and expert on corporate diversity and inclusion Janet Hill. During the interview, Janet shared key insights gleaned from more than two decades of board service on high-profile public company and foundation boards, such as The Carlyle Group (Nasdaq: CG), Esquire Financial Holdings, Inc. (Nasdaq: ESQ), The Wendy's Company (Nasdaq: WEN), and the Kennedy Center for the Performing Arts.

Admit what you don't know.

Dave Thomas, the CEO of Wendy's, was successful in growing his company because he recognized early on what he didn't know. Dave was something of a mentor for me, from the time I joined the Wendy's board in 1993 until his passing in 2002. He started the company with one restaurant and by the time I joined the Wendy's board he had 2,000. Today, Wendy's has nearly 8,000 stores. I'll never forget him mentioning, in a rather offhand way, that when he went from one store to two stores he knew he needed help to manage his business. I admired that; I see it as a show of strength when someone admits they need help or don't know something. Dave was a great leader who surrounded himself with smart people who could help manage the aspects of the business he didn't know.

Boards need to diversify by adding youth and talent deeper into the C-suite.

Technology is evolving geometrically, at warp speed. And every company in the country is concerned about cybersecurity.

You can't have a boardroom full of 60 and 70-year old men and expect they will be as technologically proficient as someone who is 35 or 40. The obvious answer is to bring younger members onto boards, although corporate America has resisted this idea.

Anybody in their 20's or younger was born with a digital gene. Hand a brand-new iPhone to a 10-year-old (like my husband did with our granddaughter) and watch her set it up in minutes and then train the adults around her how to use it.

Of course, we can't put 10-year-olds on the board. But a 35-year-old is on the cusp of the digital age and many have enough significant work experience to be an asset on a board. I don't see this as an experiment: younger members would not just be there to provide a digital edge for the board. Like everyone else, they would be expected to serve on the audit committee, the comp committee, and to have a good understanding of operations.

Another prejudice that hampers boardroom composition is stacking the board with current or former CEOs. Boards have to think beyond the CEOs and COOs in the C-Suite and consider female executives who are in other positions in the C-Suite. For example, bringing on a chief information officer or a senior vice president of information technology, or chief marketing officer. They're not the CEO, but frankly they know more about IT and other topics than the CEO of their company.

Engage men to develop a solution to gender imbalance.

There aren't enough men engaged in the process of bringing women on boards, and I don't believe we should let them off the hook. But we can do a better job of leveraging their existing networks, instead of asking them to work outside of them when recruiting women and minorities.

Male executives traditionally use informal settings to search for new board members: their friends, their country clubs, their golf games, their bankers, their tennis partners. One of the reasons that many white men ultimately suggest white male candidates is because the networks they are reaching out to haven't suggested women or minorities. But that doesn't mean those networks don't know diverse candidates. Men just need to change the question they are asking when they tap their networks.

In my work consulting with companies to improve their diversity and inclusion, I would suggest to CEOs and boards that they go back to their sources and say, "You gave me the best board member when you suggested John Doe. Now, I want you to suggest to me a minority or a woman because you did such a bang-up job on that last referral." And usually, when they went back to their golf buddy or banker or former colleague with that request, they got a good recommendation for a woman or minority.

"Three women on the board" is not a magic threshold for inclusive boardroom dynamics.

I know that Harvard Business Review published study on gender imbalance in the boardroom that concluded there was a clear shift in dynamics when boards have three or more women, but I do not agree with them in this case. I have served on 12 corporate boards; on many of them I was the only woman. On the Board of Dean Foods, I'm one of two women, although I've been on that board since 1999 and during that period there were some years in which I was the only woman. I'm one of two women on the Carlyle Board. I served on the Board of Tambrands when it had 12 board members and six of us were women.

The number of women on the board has never made a difference in how I'm treated—whether I'm the only woman, or one of two, or one of three or more. I've never felt isolated or that my voice was not heard. I don't think a critical mass of three is a magic sweet spot.

And for the record, being "listened to" does not mean that every time I say something in the boardroom, the company follows my direction. Every collaborative and collegial board is going to have disagreements. In fact, the board is advantaged by having different opinions and different approaches on how to achieve success for the company.

That said, I do believe boards need far more women. There are enough women in the pipeline ready and able to serve.

Front line employees are a valuable resource for board members.

Board members should have (or make) the opportunity to meet employees who are on the front lines of customer service. When I served on the board of Sprint, we had a number of call centers around the country. People working in call centers had the first line of contact with our customers. I made a point to visit Sprint call centers wherever I was traveling and meet those folks.

I would usually ask them two questions. One icebreaker question: "What is your favorite football team?" I was a Cowboy fan, so I could tease them about their team if it wasn't the Cowboys. The other question was "What are the most common questions you get from customers?" I found a lot of useful information to take back to the Sprint board by talking to front line employees who had direct contact with Sprint customers.

New board members should ask questions: the answers can be illuminating to the entire board.

Board members can add value from day one, even if they don't yet know all the nuances of the business or the industry, just by asking questions to educate themselves.

I learned this when I joined the board of a tech operation back in 1999 and I was thrown into the audit committee, although I'm not a typical audit committee member. I felt lost at the end of the first audit committee meeting, so I asked the CFO to annotate the financials to help me better understand what kind of accounting principles were used to put together the balance sheet.

With the exception of cash, almost every item on the balance sheet turned out to be an estimate based on certain principles of accounting. When the CFO presented that annotated balance sheet at the second audit committee meeting, the other committee members were shocked to see certain items on the balance sheet were estimates and not a firm fact figure. These were experienced financial professionals; many were former CFOs and one member was the CEO of his own company.

Ultimately, we spent a great deal of time in my second audit committee meeting going over that balance sheet. It turned out to be extremely illustrative for the entire audit committee. And this happened because I was not afraid to say (in front of the rest of the board), "I need an annotated balance sheet in order to better understand how you prepare the materials for this meeting".

Extend the benefit of the doubt to people you don't know.

When I left a very segregated New Orleans in 1965 to attend college at Wellesley I had never met anyone white until I walked on the campus. When I called home expressing doubt that Wellesley was the right place for me, my mother gave me very important and prescient advice: "Extend the benefit of the doubt to people you don't know." Her advice changed my life (I stayed at Wellesley) and as it turns out the advice endures. It certainly can be used in the context of on boarding new directors in the boardroom, especially if an all-male, all-white board is welcoming their first minority or female director. Both sides should extend the benefit of the doubt.

In terms of recruiting new members, we can give the benefit of the doubt by not using the word "qualified" as a qualifier when vetting women and minority candidates. Let's stop saying "We could use a few qualified women on this board." I personally never use this word. No one ever says, "We could use a few qualified white males." There's an assumption that if the candidate is a white male he's qualified.

As chair of the governance committee on the Dean Foods board, it's an insult to me to suggest that I would damage the company by bringing an unqualified person, including an unqualified white male, onto the board. Every time I say women, it goes without saying I mean women who are qualified.

***

Janet Hill has served as Principal at Hill Family Advisors since 2008, where she oversees her family's assets and investments. She is currently a director of The Carlyle Group (Nasdaq: CG), Dean Foods, Inc., Echo360, Inc., Esquire Financial Holdings, Inc. (Nasdaq: ESQ) , and Green4U Technologies, Inc. Ms. Hill previously served on the boards of Houghton Mifflin Company; Sprint Nextel Corporation; Tambrands, Inc.; and The Wendy's Company, Inc. (Nasdaq: WEN). She also serves on the Board of Trustees at Duke University, the John F. Kennedy Center for the Performing Arts, the Knight Commission on Intercollegiate Athletics, and the Wolf Trap Foundation.

Caren Merrick is the CEO of Caren Merrick & Co. Previously, she was founder and CEO of Pocket Mentor, a mobile application and digital publishing company that provides leadership development and career advancement. Caren currently serves on the boards of The Gladstone Companies (Nasdaq: GAIN, GLAD, GOOD, LAND) and the Metropolitan Washington Airports Authority. She is also a co-founder and former Executive Vice President of webMethods, Inc., a business-to-business enterprise software solution, which went public on Nasdaq before being acquired.

Publication Date*: 5/10/2018 Mailto Link Identification Number: 1524
Frequently Asked Questions
  Digitization Inside and Out of the Boardroom
Identification Number 1522
Digitization Inside and Out of the Boardroom
Publication Date: May 2, 2018

Advancements in technology have changed the way company leadership and directors communicate and share information to stakeholders. Stacie Swanstrom, Executive Vice President and Head of Board & Leadership Solutions at Nasdaq, explains that, through digitization, "directors are turning away from printed documents in favor of digital information that is easy to share and accessible on mobile platforms, like board portals." This article addresses the opportunities that digitization can provide for companies as well as investors.

Read more >>
Publication Date*: 5/2/2018 Mailto Link Identification Number: 1522
Frequently Asked Questions
  The Conflicted Role of Proxy Advisors
Identification Number 1523
The Conflicted Role of Proxy Advisors
Publication Date: May 2, 2018

The American Council for Capital Formation recently published a report which found that proxy advisory firms are operating with limited oversight and are moving toward an increasingly activist stance on issues relating to the environment, as well as social and political issues. The report, titled "The Conflicted Role of Proxy Advisors," examines the impact such proxy firms have on major policies at most publicly traded companies. The report also examines the biases and conflicts of these influential proxy advisory firms.

Read the report here >>
Publication Date*: 5/2/2018 Mailto Link Identification Number: 1523
Frequently Asked Questions
  Hearing on "Oversight of the SEC's Division of Corporation Finance"
Identification Number 1520
Hearing on "Oversight of the SEC's Division of Corporation Finance"
Publication Date: April 30, 2018

On April 26, 2018, the Capital Markets, Securities, and Investment Subcommittee of the House Financial Services Committee held a hearing entitled "Oversight of the SEC's Division of Corporation Finance." During the Hearing, William Hinman, Director of the Division, described the Divisions efforts to make the public company model become more attractive and his current priorities, which include initiatives to facilitate capital formation and provide investment opportunities. Director Hinman, stated that the Division will examine its processes to determine where it "can make enhancements while maintaining important investor protections" and continue "to work on a full rulemaking agenda, with a focus on reforms to make our disclosure regime more effective."

Read Director Hinman's testimony >>

Watch the Hearing >>
Publication Date*: 4/30/2018 Mailto Link Identification Number: 1520
Frequently Asked Questions
  Recommendations to Expand the IPO On Ramp
Identification Number 1518
Recommendations to Expand the IPO On Ramp
Publication Date: April 27, 2018

A broad coalition of industry participants, including, Nasdaq, the U.S. Chamber Center for Capital Markets, the National Venture Capital Association, and SIFMA, has published a report providing recommendations for reform to help more companies go and stay public. The topics covered in this report include:
  • Enhancements to the JOBS Act
  • Recommendations to encourage more research of smaller public companies
  • Improvements to certain corporate governance, disclosure and other regulatory requirements
  • Recommendations related to financial reporting, and
  • Recommendations regarding equity market structure
Read the report here >>
Publication Date*: 4/27/2018 Mailto Link Identification Number: 1518
Frequently Asked Questions
  Nasdaq Submits Application to suspend UTP trading for certain securities
Identification Number 1519
Nasdaq Submits Application to suspend UTP trading for certain securities
Publication Date: April 27, 2018

On April 25, 2018 Nasdaq submitted an application to the U.S. Securities and Exchange Commission seeking to suspend the unlisted trading privileges ("UTP") of certain Nasdaq-listed operating companies, which are thinly traded. Nasdaq believes that suspension of UTP for these securities will result in an improved market structure and more efficient trading environment for these securities, while reducing market complexity.

Learn more about Nasdaq's application>>

Read Nasdaq's application to the SEC here >>
Publication Date*: 4/27/2018 Mailto Link Identification Number: 1519
Frequently Asked Questions
  PCAOB Seeks Public Input on its Strategic Plan
Identification Number 1515
PCAOB Seeks Public Input on its Strategic Plan
Publication Date: April 23, 2018

Following the recent appointment of five new Board members, the Public Company Accounting Oversight Board is taking a fresh look at the organization and its future direction in fulfilling its mission. In that regard, the PCAOB is seeking input into its 2018-2022 strategic planning through a public survey. The brief survey asks for participants' perspectives on the PCAOB's vision, priorities, and opportunities in fulfilling its mission. Survey responses are requested by May 15, 2018.

Read more >>

Take the survey here >>
Publication Date*: 4/23/2018 Mailto Link Identification Number: 1515
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