Current news articles that are relevant to the topics of Extreme Personal Leadership® and Enlightened Corporate Governance®.
Times certainly have changed. Many CEOs greeted corporate governance demands with choice four-letter words in recent years. So it was remarkable when, on July 21, a small cohort of America’s best-known business leaders penned their name to the “Commonsense Corporate Governance Principles,” covering topics from executive pay to board composition. Signers were careful not to label it an authoritative national code, such as those developed in nearly every other major market. But the text is as close as the United States has yet come to one. With the initiative now digested in the market, it’s time to review what the new principles got right and what’s needed to make them take root.
All business owners and executives have varying experiences and perspectives on the approach and qualities necessary for effective leadership. And not all situations require the same type of leadership style. Great leaders adapt to their surrounding environments and empower the team to succeed together.
These and ever-evolving challenges facing corporate boards prompts an updated snapshot of what is expected from the board of directors of a major public company—not just the legal rules, but also the aspirational “best practices” that have come to have equivalent influence on board and company behavior.
As a provider of long-term, near-permanent capital to listed companies through our index investing, SSgA is focused on maximizing the probability of long-term value creation on behalf of our clients. Our primary emphasis is on good corporate governance practices, which is a precondition for sustained, long-term performance.
Organizational change comes at a cost. It requires people to sacrifice something they value, whether it’s time, money, responsibilities, control, status, comfort, or relationships. The more your change effort disrupts those things, the more people will resist or even rage against it.
The idea that directors could suffer penalties imposed by the external labor market when they fail in their oversight responsibilities is not a new one. Fama (1980) suggests that external labor market penalties could provide incentives for directors and help ensure shareholder-aligned oversight of firms.
Tom Hanks is starring in another movie that provides not only good entertainment, but a great tutorial in sound leadership practices.
Douglas W. Hubbard, who developed Applied Information Economics as a practical application of scientific and mathematical methods to complex decision making, goes out further on a limb when it comes to measurement. According to Mr. Hubbard:
The effectiveness of a company’s board of directors is critical for ensuring that the company has a sound and long-term business strategy that is executed within an environment of prudent risk management. Board effectiveness contributes to the sustainability of the corporation over the long term and is therefore of vital importance to stockholders and other stakeholders. A periodic board evaluation has become part of the accepted governance landscape and, if conducted properly, can be a valuable tool to increase board effectiveness. In addition, board evaluations are now required by certain stock exchange rules and governance documents of many public companies.
Presidential candidates once campaigned on taxes, government spending, and foreign policy. But more recently, executive compensation has suddenly become a hot topic for winning the public’s approval. In the U.S., Donald Trump has called high CEO pay “a total and complete joke” and “disgraceful,” arguing that CEOs stack boards with their buddies who rubber-stamp excessive pay.