Congratulations Chicago Fed, Terry Savage and MoneySmart Week


The Chicago Fed kicked off MoneySmart Week and celebrated the 10th year of what has grown from a week of financial literacy events in Chicago to a national program with partners such as Visa and the American Library Council.
Terry Savage, Sun-Times columnist, who wrote the book on financial literacy, recalled the first meetings at the Fed with the idea of connecting people who needed financial advice with the information that a host of financial service companies could provide.
As she noted, it wasn’t just the concept of a program of partner, but rather the Fed’s leadership under Fed President Michael Moskow and now Charlie Evans that supported and advanced the program.  The turnout at the Chicago Fed today in kicking off a 10th year was a testament to the importance of the topic and the Fed’s ongoing support and expansion of the program.
Alejo Torres, Chicago Fed’s Senior Outreach Manager, recognized the many partners that have contributed to the program over the years.  In reviewing the history, Fed Public Affairs VP Doug Tillett explained, “It’s the power of connecting people to resources they need.”
As Chicago City Treasurer Stephanie Neeley and United Way CEO Wendy DuBoe CEO of the United Way concurred, improving financial literacy is needed now more than ever!

Saving the Economy with Candor, Compromise and Equity for All

Taking inspiration from George Washington’s Farewell Address, Paul Schott Stevens, President and CEO of Investment Company Institute addressed the issue of our troubling economic situation and our national security. Saving the Economy with Candor, Compromise and Equity for All.

He laid out the cost of our staggering indebtedness, fourth only to Japan, Iceland and Greece brought about by a 30 year practice in Washington of using the national debt to avoid saying no to anyone. Whoever takes office in January of 2013 will be presiding over a country whose debt is 103 percent of GDP. With interest payments on the debt soon to exceed the Defense Department’s budget, Admiral Mike Mullen, former chairman of the Joint Chiefs of Staff,  said that the debt is the biggest risk to our economy and national security.

How do we move from “kicking the can down the road” or ignoring our plight to address our debt and put the U.S. back on a sound financial footing for prosperity and growth?

Stevens gave us three principles: candor, compromise and an equitable solution in the broadest sense.

Candor is first, says Stevens because “A great nation is honest with itself about its priorities.” That is, take the debt seriously and deal with it. The most promising solutions to our fiscal problems are multi-faceted and require compromise, something we must insist that our representatives do. Finally, solutions must be equitable in the broadest sense, meaning that budget cuts alone or tax increases alone can solve the problem, but a combination of the two.

Avoiding Distraction, Focusing on Delivering Value

John W. Rogers, Jr., the founder of Ariel Investments and director of the Aon, Exelon and McDonald’s corporate boards, offered practical leadership for corporate directors at the Directors Roundtable at Katten Muchin on Wednesday, February 29, 2012.

Activist investors have become a factor in today’s boardrooms, Rogers said.  “It’s important that boards don’t become distracted by activist investors,” Rogers said.  “That’s the challenge. For that reason, it’s important for boards to become knowledgeable about all shareholder concerns.  Directors should understand all shareholder issues, in addition to activist investors.  They can become knowledgeable by reading and understanding the issues that buy-side and sell-side analysts raise. I have seen activist investors become quite destructive when not properly addressed.”

While Rogers is well known for founding Ariel Investments 29 years ago, the former basketball star from Princeton University has the distinction of beating Michael Jordan one-on-one.  The YouTube video has garnered more than five million views.

Tell Your Story on Compensation

As the leading provider of executive compensation data, Equilar knows compensation.  In an ongoing effort to keep directors informed, Equilar brought concrete examples of how smart companies are going beyond SEC rules and ISS pronouncements to “tell their story” on compensation.

In the webinar, “Anticipating and Addressing Potential Negative Recommendations,” Andrew Comstock presented examples from Harsco, Staples and Starbucks and other companies to show the critical value of communicating how the board is handling compensation.

Additional charts, headlining the practices the board is undertaking, the key is showing how the board is proactive in addressing compensation issues.  “Your Board of Directors took steps during fiscal 2011 to strengthen its policies and practices regarding executive education,” was the way Headwater outlined the steps they took.

Most interesting was the way CalSTRS and BlackRock described their “opportunities for discussion.” Instead of a one-size-fits all, BlackRock said it would provide a “fair, respectful and in particular, open minded airing of views” and that it is “willing to support unconventional approaches as long as they can be expected to serve the interests of long-term shareholders.”  CalSTRs “believesthat there is an opportunity for the marketplace, issuers and shareholders to work together in the developent of a realized pay model.”

In this changing world of governance, engaging in the issues in a meaningful way brings great value.

Insight into the 2012 Proxy Season

Given the changing landscape in corporate governance, Winston & Strawn held its fourth eLunch program to help clients understand the 2012 proxy season. (All sessions are available on the law firm’s website.)
Having analyzed 50 proxy statements filed by Large Accelerated Filers from mid-November 2011 until mid-January 2012, the legal team of Chris Edwards, Mike Melbinger, Erik Lundgren, Oscar David and Karen Weber were able to offer real insight into how to best handle some of the most challenging issues boards are facing from ISS recommendations to say-on-pay responsiveness, board risk oversight, proxy access and reporting on the company’s political spending and lobbyist. By providing examples of how companies are handling these issues, they gave other companies insight into how they can better manage the 2012 proxy season.
The themes of the firm’s advice fell broadly into three categories—stand by your principles, communicate clearly and often and don’t procrastinate—know what your issues are and be proactive in addressing them.
Melbinger, whose compensation blog, is widely viewed as the best in the business, noted that he has blogged about the requirement for companies to report on how they addressed the shareholder advisory say-on-pay vote.  There is not a defined response, but the board must address how they considered shareholder input, even if it was to ignore the advice the shareholders were giving.Shareholder interest in compensation doesn’t end with management.  This year, there are several proposals asking for Say on Board pay.
Today, shareholders are clearly part of the governance conversation and companies must respond.

The Challenging Task of Fundraising

The best board members of non-profits understand that they need to bring their passion for the non-profit’s mission as well as a willingness to contribute and assist in fundraising.
“Fund-raising is a challenging aspect for non-profits in this environment,” observed Francesca  Edwardson, CEO of the American Red Cross of Greater Chicago Region.
“Given the fiscal challenges that our government is facing, it’s even more critical that board members understand how much the organization is depending on them to assist in publicizing the good works of the organization and not being afraid to ask others to help support us.”

The Chicago Red Cross is “Helping people prevent, prepare for and respond to emergencies. Serving Cook, DuPage, Kane, Kendall, Lake, McHenry, Will, Kanakakee, Grundy, Dekalb counties in Illinois and several counties in Northwest Indiana.

If you’ve missed what the Red Cross is doing in your own backyard, sign up to follow the organization on Twitter (@chicagoredcross) where you’ll learn things like:
“Yesterday our responders helped accommodate three dozen people displaced by
home fires. Thanks volunteers!”

Taking a Lesson from Non-Profit Boards

Maryann Waryjas of Katten Muchin and Gail Meneley of Shields Meneley Partners convened a group of non-profit board members and supporters to a breakfast panel discussion, “Stepping Up to Leadership: What Nonprofits Need from Board Members” featuring Francesca Edwardson, CEO of the American Red Cross of Greater Chicago, Ricardo Estrada, CEO of Metropolitan Family Services, and Richard Malone CEO of YMCA of Chicago.  David Coolidge, vice-chairman of William Blair and a veteran director of 28 non-profit and public company boards, served as moderator.

Malone spoke of the importance of board members helping with external stakeholder relations, especially in the way the organization should be perceived by the community, bringing important information back to leadership.  Edwardson spoke of her pride in being a servant to the Red Cross and how important it was for directors to bring their passion to a non-profit board. Estrada spoke of the value of director expertise to fill in gaps of knowledge and expanding the network of the non-profit.

Since fundraising is an important element of non-profit board duties, all three leaders spoke about their concern of losing a strong board member, either through term limits or retirement.  Yet these leaders said they’ve learned to have faith in their board’s nomination and governance committees or leading directors in their thoughtful and proactive efforts to identify new talent in renewing the board with new skills that help to contribute to the longevity of the organization.

As strong leaders of their organizations, they spoke of the value in the engagement with their boards, an impressive demonstration of governance.

In addition to Katten and Shields Meneley, the Roundtable was an undertaking of Gloria Castillo of Chicago United, Ted Dysart of Heidrick & Struggles and Brad Wilks of Sard Verbinnen.

Anticipating an Uncertain Proxy Season

Patrick McGurn, Special Counsel, Institutional Shareholder Services, offered his insights into his firm’s just published governance policy for 2012 in a Winston & Strawn LLP  webinar.  He urged companies to tell shareholders about their outreach efforts, what actions the company was taking as a result of last year’s shareholder votes on Say on Pay and other issues and how the board would adjust disclosure as a result.  Most importantly, he advocated a proactive approach, not waiting for the proxy, but to make supplemental filings now that could be re-emphasized in the proxy.
He saw the coming proxy season more like 2009, the depth of the downturn and the “high-water mark” for activists rather than last year’s relatively easy proxy season. He noted the backdrop of a presidential election and the anger that is being expressed in the Occupy Wall Street movement.
McGurn advocated more engagement and reaching out to the second tier of the shareholder base. He noted that opposition has come from these groups in the past.
The goal of such engagement is a dialogue.  Since the Say on Pay votes are advisory, it’s making shareholders part of the governance process.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and what they heard in sessions with He characterized the upcoming proxy season as “uncertain” noting a presidential election on the horizon, anger as expressed by the Occupy Wall Street groups and As he looked broadly at the

The Simple Truth of Winning Investors Over

In a webinar sponsored by the Harvard Business Review, Baruch Lev, professor of
Accounting and Finance at the Stern School of Business of New York University,
debunked a number of favorite investor myths not with opinions but with quantitative
research.

The webinar is based on Lev’s latest book,  “Winning Investors Over:  Surprising Truths about Honesty, Earnings Guidance, and Other Ways to Boost Your Stock Price.” He points out that capital markets are crucial to companies’ success and those who lead them. But corporate leaders are largely mired in misconceptions that
govern their behavior to the detriment of employees, investors and interested
parties. Perhaps one of the biggest myths is that investors are focused on
short term, quarter-to-quarter results.

Instead, Dr. Lev presents detailed research that charts how investors
are patient and  have strongly supported long-term growth investments from 1947 to 2007.

The bromide to winning this battle is honest, regular communication with investors coupled with conservative accounting. He advises companies to go beyond required
disclosure to enhance investor understanding.  And actions such as corporate leaders increasing their personal investment in a company also goes a long way to convey credibility.  “Share some knowledge.  Let your investors know what’s in the
pipeline of products.”

By challenging conventional wisdom and backing it up with research, Baruch Lev gets it right.

Merging an Airline—Creating a Culture

Chicago’s newest hometown CEO,  Jeff Smisek took to the stage at the Executive’s Club of Chicago and offered some simple lessons for creating a new culture for the 86,000 employees of United, the largest airline in the world.  Yes, he addressed the huge challenges facing the enterprise—taxes, regulation, a capital intensive and labor intensive business. But, he noted, if you get the culture right, everyone is focused on doing the right thing and United-Continental will not just be the biggest airline but the best—the world’s leading airline.

Smisek acknowledged that mergers are difficult enough for employees but if you have the same terrible boss after the merger as you had before the merger, it’s not going to help you make the airline better. The new United has a new culture based on dignity and respect.  “It’s simple. It’s what your mommy told you: ‘Treat people the way you want to be treated and never tell a lie.”

That culture will encourage employees to use their best judgment in doing the right thing, the key to being a great company. And, he’s made it the responsibility of the top 700 leaders in the company to help him root out the bad bosses by tying it to their compensation.

His remarks were brief, the answers to questions candid and forthright and the warm welcome conveyed the audiences support that he’s the man to get the job done.