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!”

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.

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 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.

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.

The obituaries reminded us that this was the man who transformed the way we use technology, how we listen to music, watch TV shows and movies. Not only a genius, Steve Jobs will be remembered as the leading figure of our time.
Jobs saw himself as neither a hardware engineer nor a software programmer, but a technology leader who chose the best people possible.  And once they worked for him, he encouraged them, yes but more often he prodded and criticized them. Occasionally, he even humiliated those who dared to bring him anything short of “insanely great.”
Be careful, leadership gurus, how you spin these critical characteristics. In anyone less than Steve Jobs, that is, all of us, such insistence on being better, not settling for less could turn mean, harsh, brutal.

Steve Jobs meddled, demanded that everyone do better. Steve Jobs who suffered his own purgatory at a young age, grew success outside of Apple and returned to create greater triumphs in recreating the company, embodied the gifts and the knowledge to elicit extraordinary loyalty.

“He was the most passionate leader one could hope for, a motivating force without parallel,” wrote Steven Levy, author of the 1994 book “Insanely Great,” which chronicles the creation of the Mac.

In a webinar, sponsored by Jim Kristie of Directors & Boards magazine and
the law firm Morvillo Abramowitz, Barry A. Bohrer and Richard D. Weinberg
discussed “Internal Investigations 2011: What Directors Need to Know.”

In light of the new SEC rules that reward whistle-blowers with rich bounties,
the renowned attorneys stressed the need for strong compliance programs and a
corporate culture that encourages employees to report problems early.

Weinberg suggested that boards consider “prepared preliminary action plans,”
which could include how the board would handle an internal investigation,
vetting outside attorneys and forensic experts in advance and discussions about
whether they would delegate oversight of the investigation to audit or a
special committee.

How the board handles the investigation is critically important in terms of
disciplinary action. Did the organization self report? Did they handle the
investigation expeditiously and credibly?  Did they engage independent
help in the form of advisors, attorneys and forensic specialists?

Shareholders, employees and the public are watching.

In Winston & Strawn’s excellent eLunch (webinar) program last week, “Preparing for the 2012 Proxy Season: Governance and Executive Compensation Strategies,” Michael Melbinger, Christine Edwards, Oscar David, Erin Stone and Erik Lundgren reviewed the past season and advised that this is no time for complacency. (The presentation is still available online.)  Boards should be reviewing what they learned from their shareholders and preparing for the upcoming season, which will feature more Dodd-Frank requirements in the CD&A and other disclosures that link pay to performance.  “Prepare early.  Think about it now.  Tell your story,” Melbinger told the audience.

The SEC wanted Say on Pay to cause boards to interact with shareholders.  That’s what happened, particularly for companies with contentious issues.  Those that prepared executive summaries, used charts and plain English to explain their compensation plans and even those who filed supplemental materials were largely successful.

The curtain has been lifted. Shareholders have greater expectations for communication with the board, more involvement in governance.  Smart boards will anticipate shareholder issues and minimize contentious issues. Don’t
wait for 2012 proxy season.  Begin now.

In a Blank Rome LLP webinar, partner Keith Gottfried warned participants not to be
that board. Conduct your own evaluation of the board’s vulnerabilities: Has the
board failed to hold management accountable? Is the compensation excessive?
Does the board lack sufficient industry experience? Has the board explained how each director is qualified?  Is the board lacking in diversity? Is the board sufficiently independent?  Is there a perception that the board is not “fully engaged”?

Paul Schulman of MacKenzie Partners and Chris Cernich of ISS also participated in the webinar.

Shareholders are now part of the governance dialogue.  Not only must the board carry out its duty of care to represent all shareholders, but they must convey in
board structure and leadership how the board governs.  The webinar together with the presentation is posted on the Blank Rome website.

In a Blank Rome LLP webinar, partner Keith Gottfried warned participants not to be
that board. Conduct your own evaluation of the board’s vulnerabilities: Has the
board failed to hold management accountable? Is the compensation excessive?
Does the board lack sufficient industry experience? Has the board explained how each director is qualified?  Is the board lacking in diversity? Is the board sufficiently independent?  Is there a perception that the board is not “fully engaged”?

Paul Schulman of MacKenzie Partners and Chris Cernich of ISS also participated in the webinar.

Shareholders are now part of the governance dialogue.  Not only must the board carry out its duty of care to represent all shareholders, but they must convey in
board structure and leadership how the board governs.  The webinar together with the presentation is posted on the Blank Rome website.

Entrepreneurs, they say, “need to look beyond day-to-day operational firefighting.  They need the timeliest, savviest, most reliable counsel about markets, trends and companies.” The authors provide a helpful guide to the natural stages of enlisting advisory help.  Sure, the entrepreneur can go it alone, but he or she is likely to fall victim to “myopic decision-making to which nearly all closely held companies are prone.” A private company may seek independent board members when it needs liquidity but the right independent advisors can bring so much more to emerging companies. Not only do independent directors help the entrepreneur to develop stronger, more professional management, but they often oversee the creation of financial and operational controls. The presence of talented business men and women serving as independent directors also sends a message to world that the CEO entrepreneur is confident enough to challenge his thinking in growing a stronger company.

One of the questions posed during the webinar was about the performance of internally developed CEOs versus externally recruited CEOs.  A recent study by the Kelley School of Business of Indiana University, led by Fred Steingraber, directly addresses this question.  An article outlining the study’s findings (co-authored by me) appeared in a recent issue of Corporate Board Magazine. The study, which details the superior performance of internally developed CEOs, examined the leadership of the most successful non-financial S&P 500 companies from 1988 through 2007. The 20-year duration was critical to the study because it minimized distortions of performance that could have occurred over shorter time spans of three, five or even 10 years. In addition, this two-decade period was characterized by different economic cycles, globalization, dramatic technology advances, shifting consumer preferences and changes in leaders competing under a wide variety of conditions.

In our article, we summarized how this group of 36 S&P 500 non-financial companies was distinguished by consistent, superior leaders over the 20-year span, outperforming the remaining S&P 500 firms in seven measurable metrics: return on assets, equity and investment, revenue and earnings growth, earnings per share (EPS) growth and stock-price appreciation.

We believe this study demonstrates the ability of “home-grown leadership” to consistently generate superior results and the importance of the board’s focus on effective CEO succession.

Compensation consultant Robin Farracone of Farient Advisors warns boards not to “just sit there and do nothing” because it invites opposition to grow. Let it fester, she says, and it places the board and the company in a negative spotlight that “creates reputational damage and could even have a depressive effect on the stock price.”  

Boards have been reluctant to engage with shareholders because they often don’t have a picture of what a board engaging with shareholders might look like.  Often, they believe it is the job of the investor relations department. But “say on pay” focuses on the board’s role in approving compensation programs for the named officers for the company.  And shareholders expect the board to be responsive. 

“Good engagement takes different forms, but it’s critical to get an early start,” says Patrick McGurn of ISS, also interviewed in the Corporate Secretary article.  The Dodd-Frank requirement for Say on Pay voting was designed to encourage dialogue between the board and shareholders.  Some boards, like Prudential, established a dedicated compensation committee email address and actively seeks electronic queries on pay matters and anything else related to board work.  Prudential regularly sends board members and representatives on engagement exercises with investors.

Not only should board members be able to demonstrate that the compensation program is aligned with performance, but they should be able to explain compensation in general terms.  This has proven to be a difficult task that directors should correct by requiring themselves to explain

In rushing to get the rule in place, the SEC failed to “determine the likely economic consequences” of the rule and its effect on “efficiency, competition and capital formation” — all of which it must do by law.

But directors should consider the level of shareholder concern about their governance record–and not just the unions that are seeking increased benefits. Creeping federal regulation is the result of “corporate officers and directors are not doing their jobs,” according to Hillary Sale in her paper, The New ‘Public’ Corporation. “They have failed to understand the force of public scrutiny and have, thereby, failed their corporations.  They are not good public company stewards.”

The message to companies about the past ten years of increasing shareholder power is that shareholders are part of the governance conversation. Whether the SEC redoes its analysis and reissues its rule, corporate directors would do well to consider the level of shareholder disappointment that helped create Dodd-Frank and develop more effective board-shareholder engagement to satisfy and encourage long-term investment and participation.

 The search firm identified five concerns that boards need to address: 1) Preparing the next generation of chairmen with the caveat that not all CEOs are automatically suited to becoming chairmen, noting the critical skill of running a board meeting, drawing out and listening to all points of view, synthesizing the arguments and reaching conclusions without appearing to dominate. 2) The right of non-executives to seek advice because creating supplementary information channels is important for non-executive chairmen to discharge their duties in leading the board in oversight. 3) The pressure to appoint more women to boards has resulted in quotas in Norway.  And while many protest that there aren’t enough women with the relevant experience to serve, their view is that “there is a pool of potential candidates if boards are prepared to look less at proven general management experience and more at talent potential—to consider creative ideas and take some calculated risks.

While many sitting CEOs find it too time-consuming to sit on additional boards, Owen posits that 4) it is in the long-term interest of business that more working CEOs serve on boards. The 5^th challenge is to create more engaged boards but they note that when there are individuals in the boardroom who are really not contributing, it is “always uncomfortable to change the status quo” and ask the poor performing directors to leave.

One of the more interesting sidebars is “The Decline of the Guinea Pig,” which described the job of an independent director as a “delightful perk for important (and often self-important) business folk at the end of their professional career.”  These independents were “sometimes known as ‘guinea pigs’—for a guinea and a free lunch they were happy to sleep through any chief executive’s presentation of his corporate plan.”

Tell your story was the theme of the action items that Melbinger suggested.  “Silence is not golden. Unless you affirmatively, unequivocally adopt best practices, unambiguously disclose them and beat ISS over the head with them, you run the risk that ISS and others will assume that you do not follow that best practice.”

Now is the time for boards to review what they learned from shareholders – whether at the annual meeting or proxy voting or shareholder outreach.  As for compensation,  and get rid of the problems and follow best practices now.

Rumsfeld calculated that he has lived through a third of our nation’s history.  As both the youngest and oldest Secretary of Defense, a White House Chief of Staff, Representative to NATO and four-term congressman from Illinois, he has been an active participant in that history. He took four years to write the book and digitized a portion of his archive and made it available on his website www.rumsfeld.com  in conjunction with the book’s publication.  Since launching in February, the site has received over 18 ½ million hits. Access to such a rich trove of information shows that “decisions are made with imperfect information.”   The bestseller has been called the first memoir of the information age.

Many U.S. and international institutions date back to the Truman years, an inflection point at the end of WWII and the beginning of the Cold War.  NATO, the UN, DoD, CIA and so many other organizations date back to those days.  “We’ve been changing and the world has been changing. And we need to be comfortable that the rest of the world is not like us.” 

Rumsfeld’s message was that all organizations need to continue to transform.  He’s led by example, making handwritten and typewritten memos and papers from his long government service available for everyone to draw their own conclusions.

In his recent comments at a financial industry conference in New York he conveyed what his company has learned in practice. “What did we do wrong,” was their initial reaction when AFLAC investors asked for the SOP prior to the new regulations.  Directors and management “came to the shared belief that investors should have the right to know how the compensation packages at a company are calculated.”

In his view, lack of transparency has an impact on stock price because it creates uncertainty for investors. Companies should view Say on Pay votes as part of an ongoing effort to be more transparent with investors. AFLAC’s conclusion is that open communication with investors and analysts is better for long-term growth.

Using his example of his work as CEO of NACD, Daly demonstrated how important it is for CEOs to invite candid dialogue from the board. “Trust is built over time and developed through actions, not words. The way to develop trust is for the board and management to recognize that they are on the same team, that communication is straight-forward, two-way and “straight from the horse’s mouth.”  It’s also important to telegraph emerging issues.  Duberstein noted that management and boards are on the same team but have different roles—management is charged with execution and the board need to actively participate in strategy decisions and provide oversight for all shareholders by monitoring performance and asking the right questions.

Properly managing executive sessions and giving good feedback to the CEO was discussed. Levine, a best-selling business author, noted that the CEO of Broadridge has a practice of calling each board member prior to the meeting to get a sense of the board’s issues and concerns. “That way, we’re already engaged before the meeting.”

What the discussion among these leaders with broad experience emphasized was how important both boards and CEOs have to do to “get it right.”  The webinar provided valuable insight.

Boards need to get the information they need and engage in rigorous discussion when it comes to oversight of a company’s risk management and growth.  “There’s no need to be disrespectful, but it is critical that directors get the answers they need to understand the issues.” 

Fellow panelist Lisa A. Payne concurred.  “You have to train management to eliminate the mind-numbing presentations that go out in the board books and tell them that management should come to the board with a handful of overheads so that we can use our time together to get to the heart of the matter.”  She is Vice Chairman and Chief Financial Officer of Taubman Centers, Inc. and a director of Masco Corporation and Taubman and a trustee of the Munder Funds.

Executive session is a key tool for the board.  “We often begin with an executive session,” said Payne. “It enables us to focus on the key issues through the duration of the meeting.  We often meet again in executive session after the formal meeting.”

The discussion centered on the role of the board in encouraging employees to use the internal system to report any concerns.

“We do employee surveys at our company,” said Roberta S. Brown, a director at several regulated energy companies. “The HR Committee asked to see all the written comments that accompanied the surveys,” she said as a way to better understand employee issues and concerns.  “And we learned that employees were impressed to hear we read them.”

The board’s action sent a message to employees that their opinions were valued and concretely conveyed that the board was concerned about employee sentiment on all issues.  In that way, the board encouraged the use of the internal mechanism to report concerns.  It also conveyed the importance of “tone at the top” in terms of the board’s commitment to hear the employees’ perspective on issues.

His presentation was part of the NACD Director Professionalism training in Houston May 4-6.

Rather than getting caught up in the minutia, directors should ask management, “Are we on track to meet our financial goals and if not, what is the company doing about it?” He encourages directors to ask the CFO if he/she is comfortable with the financial demands of the CEO.  “Is there pressure to make the numbers?”

Directors should ask internal auditors if they have any concerns with accounting or reporting issues. In following up with the external auditors, directors should ask how the company differs from others in the industry? What weaknesses did they find?  How aggressive is the company’s accouting policies relative to the competition? And, is management responsive to the issues they raise?

Shaw cited chapter and verse of well known companies whose directors didn’t ask the basic questions.

Asking some obvious questions would have saved millions of dollars of shareholders’ investment and sometimes the company itself.

His presentation was part of the NACD Director Professionalism training in Houston May 4-6.

Rather than getting caught up in the minutia, directors should ask management, “Are we on track to meet our financial goals and if not, what is the company doing about it?” He encourages directors to ask the CFO if he/she is comfortable with the financial demands of the CEO.  “Is there pressure to make the numbers?”

Directors should ask internal auditors if they have any concerns with accounting or reporting issues. In following up with the external auditors, directors should ask how the company differs from others in the industry? What weaknesses did they find?  How aggressive is the company’s accouting policies relative to the competition? And, is management responsive to the issues they raise?

Shaw cited chapter and verse of well known companies whose directors didn’t ask the basic questions.

Asking some obvious questions would have saved millions of dollars of shareholders’ investment and sometimes the company itself.

Communication professionals have pointed to Arthur W. Page, a PR executive for AT&T from 1927 to 1946 who developed a set of principles about how a company should operate including “a successful corporation must shape its character in concert with the nation’s. It must operate in the public interest, manage for the long run and make customer satisfaction its primary goal.”

Professor Sale has used the law to describe how officers and directors of companies should act. She attributes the creeping regulation as a result of “the failure of officers and directors to govern in a sufficiently public manner has resulted not only in scandals, but also in more public scrutiny of their decisions, powers and duties.” The government and the media, she says, is driven by the public, and now “have increasing influence over corporations, which requires a change in the way officers and directors understand and do their job.”

CEOs and corporate directors would do well to read her excellent article in the Duke University journal, “Law and Contemporary Problems.”

The bell has already been rung. The government and a larger public are involved in corporate governance and their concerns need to be addressed.

John Wilcox, the Chairman of Sodali commented, “that directors of U.S. companies are not ready for open dialogue with their investors, even on a narrowly defined topic such as corporate governance and the annual meeting. The reason they are not ready is because U.S. companies – and boards in particular – are generally on the defensive in their communication with shareholders. Instead of communication, U.S. companies practice disclosure. Disclosure is defined by prescriptive rules and enforced by liability and regulatory penalties.”  This, he says makes “boards and shareholders mistrustful of each other and relies on adversarial modes of engagement.

Boards guided by legal counsel continue to respond by addressing the “letter of the law” grudgingly meeting new demands for transparency rather than the spirit of the law, which Mary L. Schapiro, SEC Chairman emphasized as “true engagement with shareholders.”

In this environment, Washington will continue to regulate, with many unintended consequences until CEOs and their boards see shareholders as part of the governance process and critical to not only their long-term health but the health of capitalism in the 21^st century.

Barton spent 18 months talking to 400 business and government leaders around the world to develop his Harvard Business Review article, “Capitalism for the Long Term.”

McKinsey has posted videos of Barton discussing his ideas as well as articles to encourage others to engage in the discussion.  “There’s a lot of things that business leaders can fix,” Barton says in one short video.  “We don’t need the government to tell us what to do but we need to get out there and move on it.”

Moving on it requires adjustments, shifting from a quarterly to a long-term focus, serving stakeholders while building value for shareholders, and strengthening governance.

Pointing to the increased complexity of business, Barton observes that the current governance model was developed for another time 30 years ago.  The most shift is that directors need to spend more time on board work to understand the business well enough to provide strategic advice. He points out that boards of private equity firms spend about 74 days a year; corporate boards spend 15-20 days, too little to provide the strategic help that companies need in a competitive, global and 21^st century environment.

Barton spent 18 months talking to 400 business and government leaders around the world to develop his Harvard Business Review article, “Capitalism for the Long Term.”

McKinsey has posted videos of Barton discussing his ideas as well as articles to encourage others to engage in the discussion.  “There’s a lot of things that business leaders can fix,” Barton says in one short video.  “We don’t need the government to tell us what to do but we need to get out there and move on it.”

Moving on it requires adjustments, shifting from a quarterly to a long-term focus, serving stakeholders while building value for shareholders, and strengthening governance.

Pointing to the increased complexity of business, Barton observes that the current governance model was developed for another time 30 years ago.  The most shift is that directors need to spend more time on board work to understand the business well enough to provide strategic advice. He points out that boards of private equity firms spend about 74 days a year; corporate boards spend 15-20 days, too little to provide the strategic help that companies need in a competitive, global and 21^st century environment.

As we said in our tweet earlier today (Karen Kane@BoardAdvisor)  Daly is right to use his position to encourage shareholder education by asking the country’s top 1000 CEO’s to mobilize employees to participate in corporate governance by voting their proxies.

Daly calls Broadridge the major player in investor communications and proxy distribution, providing the digital pipes for these transactions but he also notes that Broadridge makes no more or less money from an increased exercise of proxies.

Companies and the boards of directors that provide oversight need to embrace the concept that engaging shareholders has never been more important in restoring trust. Shareholders need to be reminded that their proxy represents their investment, their wealth and their financial returns.

“It is clear to me that when raising capital, creating jobs and effectively competing in an ever increasingly global market, companies need input and support from shareholders to validate they are on the right track.”

Social media may be a helpful competency but so much of what is embedded in the Dodd-Frank Act is a call for greater transparency, better communication between directors and the shareholders who elect them.  Social media is communication, albeit faster and user-generated.  Since the concept of communicating directly with shareholders is a new concept, boards need the assistance of high-level communication strategists—either as board members or consultant –to help boards craft their own communication policy and get them ready for the dialogue shareholders are demanding.

What directors are really worried about is hijacked media where a company’s asset or campaign is taken hostage by those who oppose it. Managing social media is rooted in best communication practices including crisis management.

Social media may be a helpful competency but so much of what is embedded in the Dodd-Frank Act is a call for greater transparency, better communication between directors and the shareholders who elect them.  Social media is communication, albeit faster and user-generated.  Since the concept of communicating directly with shareholders is a new concept, boards need the assistance of high-level communication strategists—either as board members or consultant –to help boards craft their own communication policy and get them ready for the dialogue shareholders are demanding.

What directors are really worried about is hijacked media where a company’s asset or campaign is taken hostage by those who oppose it. Managing social media is rooted in best communication practices including crisis management.

The Chicago Council on Global Affairs, co-partnering with the CFA Society of Chicago  convened the session to discuss the current state of the economy.

While acknowledging that there remain challenges to the economy, Zandi expressed optimism noting the way American businesses have dramatically improved their operations since the financial crisis, cutting costs and increasing productivity.  “U.S. companies are making money everywhere,” he said.  “They’ve got their cost structure down and improved their unit labor cost, which is rising in other countries.”  And, he added, companies are in a historically strong cash position, enhancing their global competitive strength.

What an optimal time for companies to get ahead of the Dodd-Frank Act requirements to more actively engage with  shareholders by taking steps now to convey how boards are providing better oversight, more engagement in corporate strategy and greater respect for the shareholders.  

Mindful of Regulation Full Disclosure, the call would be scheduled 10 to 15 days before the annual meeting and cover material that is in the proxy.  While every company will need to examine its particular needs, this proposal is a framework that encourages dialogue.

Directors should embrace this opportunity to efficiently communicate with institutional investors and beneficial owners with the ability to interact directly with shareholders not filtered through proxy advisory firms or solicitors.

Yes, it will require preparation.  But shouldn’t those who are paid to represent the interest of shareholders be able to discuss the company’s governance framework and philosophy, the board’s structure, effectiveness and succession planning? Directors should be able to discuss the internal controls and risk management practices and even answer questions about executive compensation.  

Such dialogue could be enormously helpful to boards at this critical time in helping to restore trust in their work in providing governance oversight.

Mindful of Regulation Full Disclosure, the call would be scheduled 10 to 15 days before the annual meeting and cover material that is in the proxy.  While every company will need to examine its particular needs, this proposal is a framework that encourages dialogue.

Directors should embrace this opportunity to efficiently communicate with institutional investors and beneficial owners with the ability to interact directly with shareholders not filtered through proxy advisory firms or solicitors.

Yes, it will require preparation.  But shouldn’t those who are paid to represent the interest of shareholders be able to discuss the company’s governance framework and philosophy, the board’s structure, effectiveness and succession planning? Directors should be able to discuss the internal controls and risk management practices and even answer questions about executive compensation.  

Such dialogue could be enormously helpful to boards at this critical time in helping to restore trust in their work in providing governance oversight.

The McKinsey global managing director has spent the past 18 months talking to more than 400 business and government leaders across the globe.  He concludes that capitalism has been and can continue to be the greatest engine of prosperity ever devised.  However, if the fundamental issues revealed in the recent crisis remain unaddressed and the system fails again, “the social contract between capitalism and the citizenry could rupture, with unpredictable but severely damaging results.”

Barton confirms that boards must become more effective, representing a firm’s owners and serve as the agent of long-term value creation. Being a director is also a much bigger job, requiring more time and deeper understanding of the company and its strategy.  He makes many of the same points that Fred Steingraber and I make in our article in Corporate Finance Review, “What Boards Need to Do to Preserve Their Relevance and Provide Value in the World of the New Normal.”

There is an urgency for management and boards to work together to fight the tyranny of short-termism, and “infuse their organizations with the perspective” that serving the interest of all stakeholders is an essential to maximizing corporate value.  Finally, boards need to bolstered to govern like owners.

Inaction will produce the most negative consequences.

It might be well for U.S. directors to consider that governance concepts that originate outside of the U.S. have a history of moving into the American mainstream rather quickly. Consider “Shareholder Say on Pay,” which began when U.K. cabinet minister Stephen Byers’ 1999 white paper suggesting that shareholders have a more active role in overseeing companies by requiring a “non-binding shareholder advisory vote on remuneration.” In 2002, the U.K. government adopted the Directors’ Remuneration Report Regulations, which made annual pay votes mandatory.  By 2004, say on pay spread to continental Europe as the Netherlands made it a requirement, moving to Norway, Sweden, Spain, Portugal, Denmark, France, Germany and Australia before institutional investors in the U.S. filed shareholder proposals at 44 companies by 2007. Just last week, the SEC finalized the rules on say-on-pay and say-on-golden parachute rules.

Diversity is on the minds of American directors, according to the recent PwC’s Annual Corporate Directors Survey with 45 percent of them citing the difficulty in finding qualified candidates of diverse gender, race and with expertise in technology.  A whopping 86 percent of directors say they use their own network of contacts to recruit new board members. Given the possibility of quotas for women on U.S. company boards and the new rules for greater transparency in describing the competencies of every board member, directors are well advised to look more broadly for board candidates or shareholders may propose their own candidates in proxy access.

It might be well for U.S. directors to consider that governance concepts that originate outside of the U.S. have a history of moving into the American mainstream rather quickly. Consider “Shareholder Say on Pay,” which began when U.K. cabinet minister Stephen Byers’ 1999 white paper suggesting that shareholders have a more active role in overseeing companies by requiring a “non-binding shareholder advisory vote on remuneration.” In 2002, the U.K. government adopted the Directors’ Remuneration Report Regulations, which made annual pay votes mandatory.  By 2004, say on pay spread to continental Europe as the Netherlands made it a requirement, moving to Norway, Sweden, Spain, Portugal, Denmark, France, Germany and Australia before institutional investors in the U.S. filed shareholder proposals at 44 companies by 2007. Just last week, the SEC finalized the rules on say-on-pay and say-on-golden parachute rules.

Diversity is on the minds of American directors, according to the recent PwC’s Annual Corporate Directors Survey with 45 percent of them citing the difficulty in finding qualified candidates of diverse gender, race and with expertise in technology.  A whopping 86 percent of directors say they use their own network of contacts to recruit new board members. Given the possibility of quotas for women on U.S. company boards and the new rules for greater transparency in describing the competencies of every board member, directors are well advised to look more broadly for board candidates or shareholders may propose their own candidates in proxy access.

What a shame!

Just a few weeks ago, a number of CEOs gathered to discuss their agenda for dealing with the sluggish economy and other key challenges in a Wall Street Journal CEO Council.  Their view was the need for “jobs, jobs, jobs” to get the economy moving. Doesn’t that sound like business and unions are on the same page?

“If the U.S. wants sustainable job growth, it must strongly embrace global trade” the CEOs concluded.

In the meantime, “free trade” has become a toxic term. Like it or not, the U.S. competes in a global marketplace. Business and government need to join forces to foster broader understanding that there are benefits for the U.S. to engage globally.  At the same time, business needs to do a better job explaining what they are doing well in the international market and how it benefits consumers.

The truth is that there is no turning back to isolation and protectionism. “ Rebuild the consensus around free trade by emphasizing the benefits to the developed world.  Encourage the flow of intellectual capital through immigration and across borders. Business should talk more about the jobs created from trade and the benefits to consumers. ”

Communication can help to open minds to the benefits and opportunities of a global environment .

Columbia Acorn may be a different because they do their own homework, reading the proxies for every stock they own.  The fund has a lower turnover than most– 20 percent.  “Compare that with a hedge funds that is 11 seconds,” said McQuaid, President and Chief Investment Officer of Columbia Wanger Asset Management  at an NACD  panel on performance metrics and compensation this week.

In addition, McQuaid would like it to be easier to find basic information in the proxy that the small and mid-cap investor cares about:  How many options are outstanding? How many options were awarded?  How many shares do directors own personally?

With a 26 year career in the investment business, McQuaid recognizes that companies are competing for talent and not adverse to high pay for superior performance.  “Good management can add value to a company and increase shareholder return.”

“Speaking both as a regulator and as a former board member, I believe that it is vital that shareholders and board members move beyond the minimum required communications and become truly engaged in the shared pursuit of high quality governance.

“For boards and their companies, engagement means more than just disclosure. It means clear conversations with investors about how the company is governed — and why and how decisions are made.

“But engagement is a two-way street. Boards can also benefit from access to the ideas and the concerns investors may have. Good communications can build credibility with shareholders and potentially enhance corporate strategies.”

It wasn’t surprising then that the first question during the Q&A asked about running afoul of Regulation FD.  As she has said in the past and repeated “Reg FD doesn’t present a barrier to director-shareholder communication. “We have provided additional guidance to directors such as pre-clearing conversations, imposing no-trading restrictions on the shareholders who are talking to directors.  In short, Regulation FD is not meant to be a barrier.”

In conclusion she noted that, “Technology, investor attitudes and the way financial markets work have all changed dramatically during the past decade. The way in which we, and in which you and your shareholders communicate, must similarly change.

“The SEC cannot and is not interested in determining the communications strategies of individual companies. But we are interested in breaking down barriers that may prevent effective engagement, and affect investor confidence and, ultimately, financial performance.”

Boards should be developing communication plans now, re-examining their governance documents in light of the changing environment and developing strategies to contribute to improved governance.

In the tumult of change, Krol was concerned about the company’s risk and proposed that he and members of the board visit every division of Tyco, talk to the leadership and build a risk profile of the company, an enterprise-wide assessment. Not only were the board members able to develop an assessment of the company’s risk, but  in the process, board members got to know the next level of leadership in the company. Tyco divisional management liked the unfettered access to the board. Of course the company had its own risk assessment process and they are currently combining the two.

It’s not easy to take on such a task.  But after developing a process and executing on it, the board came to a deeper understanding of the company. Directors like Jack Krol, willing to spend the time and energy to help a company recover and become better, bring real value to shareholders.

If ever there was a time for compensation committees to clearly and credibly communicate, given the scrutiny they are under for creating and approving executive compensation, it would seem to be this proxy season.  The first step in “Say on Pay” would be for the committee to clearly articulate their decisions in arriving at the executive compensation decisions. It gives them an important chance to “tell their story.” 

“Directors must ensure that the CD&A—which is the primary tool for shareholders to understand executive pay—is straightforward, complete and written in plain English,” said Warren Batts, veteran CEO, chairman, director and NACD “Director of the Year” in a blog on executive compensation. “In addition, directors need to respond to shareholder questions and concerns as quickly as possible.  I have stood up as chairman of the Compensation Committee more than once to explain what we were doing and why—and never had a negative comment afterwards.”

 Compensation Committees that take the time to carefully explain the philosophy and background of its decisions is a sign of respect for shareholders.  Getting advice on how clearly you’ve accomplished that assignment could be the most cost-effective risk mitigation tool of the season.

Have you given your board the tools it needs to navigate the coming proxy season?  It’s up to you to see that your board is prepared.

The Dodd-Frank Act creates new requirements for board disclosure and greater transparency.  Governance power has shifted to shareholders, who are now empowered to hold boards and management accountable. How your board moves forward in this new environment is critical.

CEOs need to see their boards as helping them to restore confidence in the system. If you wear the mantle of both CEO and chairman, it’s even more critical that you set the tone for clear disclosure and genuine engagement with shareholders. It sends a signal that you respect their importance in the long-term health of the organization.

 The new disclosure rules encourage boards to build trust with shareholders through the application of sound principles, transparent communications and actively engaging with them to secure a favorable vote. Board members will need to become better communicators.  But they need guidance in demonstrating independence and credible oversight.  Some basic communication planning should begin now.

 What may prove to be a best in class approach is for the board to articulate its principles, its own “Articles of Governance” to serve as the source for board communication and shareholder engagement.  By reviewing its current identity, which resides in governance and legal documents, the board can craft a comprehensive board governance doctrine that prepares the board for the upcoming proxy season and beyond.

 This proactive approach enables the board to discuss and decide in advance how it will handle critical issues.  By working through issues in an atmosphere of calm, the board is better prepared to face a crisis and even avoid or mitigate one.

Disclosure in governance is an area we understand well and we would be happy to assist you.

During this period leading up to the proxy season, directors should be engaging in some form of self-evaluation to understand what their vulnerabilities are—do shareholders have concerns about executive compensation, the capabilities of the current board of directors or other governance issues? 

Nazareth reminded the participants that “investor protections has been a focus of the SEC and one way of ensuring protection is good corporate governance.”  

Directors should “consider ways to enhance shareholder communication so that you’re not in the position of your 3% shareholders feeling that they need to nominate their own directors because they are not being represented appropriately by the current board.”

Directors, do you have a shareholder engagement program? Have you reviewed and assessed the board capacity for shareholder communication and dialogue?  Have you discussed how you will handle increased dialogue and interaction with shareholders?

The board world has changed.  Shareholders have greater power to influence board composition and executive pay based on the provisions of Dodd-Frank for proxy access, say on pay, limits on broker discretionary voting.

By remaining silent, boards increase the power of proxy advisors as the only independent guidance to shareholders on how to vote.  Boards increasingly need to engage with key shareholders, initiating communication and dialogue.

Get started now.

Hurd and his predecessor, Carly Fiorina, who was also fired by the board, brought new meaning to the HP Way.  Certainly, it was a different company than when brilliant engineers and founders William Hewlett and David Packard were at work in the company. Their instinctive style of “managing by walking around” would be almost impossible to replicate. Fiorina, ambitious and eager to make her mark aggressively drove the Compaq merger while a subplot revealed that the HP board had its own problems as chairwoman Patricia Dunn stepped down facing felony charges. After the scandal, Hurd’s success was welcomed even if he took a cost-cutting and execution style approach to management.

With Hurd occupying both the Chairman and CEO role, Robert Ryan has served as lead director since 2008.  But it has been Mark Andreessen handling the Hurd resignation.  As the founder of another storied company, Andreessen has the gravitas to insist on a leader that not only performs well but behaves well.

Andreessen is given to greater transparency as well as sensitivity to culture and a larger group of stakeholders including investors, employees and the larger public given that he is an under-40 wildly successful entrepreneur now leading a company that provides a platform for social networking websites.

Andreessen is the spark that HP needs at this time, setting the tone and communicating what the board is doing on behalf of shareholders and stakeholders.

Gregory made these remarks on a National Association of Corporate Directors and Weil Gotshal webinar attended by hundreds of directors on Friday as boards try to gain a better understanding of the requirements that the new legislation that President Barack Obama signed into law on July 21, 2010.

“I want to emphasize that the theme within the legislation is that boards are the problem,” said Gregory.

Boards are well advised to recognize that the implementation of the legislation will fundamentally change their interactions with shareholders.  For directors who have eschewed any contact with shareholders, they must engage with shareholders in meaningful ways to elicit their support.  The sooner and more intelligently that they begin this dialogue, the better for them.

Gregory made these remarks on a National Association of Corporate Directors and Weil Gotshal webinar attended by hundreds of directors on Friday as boards try to gain a better understanding of the requirements that the new legislation that President Barack Obama signed into law on July 21, 2010.

“I want to emphasize that the theme within the legislation is that boards are the problem,” said Gregory.

Boards are well advised to recognize that the implementation of the legislation will fundamentally change their interactions with shareholders.  For directors who have eschewed any contact with shareholders, they must engage with shareholders in meaningful ways to elicit their support.  The sooner and more intelligently that they begin this dialogue, the better for them.

“I’d hate to think that the U.S. corporate world will become as dysfunctional as the U.S. Senate,” he said, referring to “this monstrosity ” of legislation.  His questions to his fellow panel members reflected his belief that new regulations were going to stifle performance.  ”This is meant to encourage dialogue with shareholders, which is an important principle of the legislation,” the panelist replied.

It turns out the moderating director has  the  educational and legal experience that boards seek.  But he’s 70 years old.  He has served on his current board since 1977.  The other director who joined the board with him is 86 and a third director, who is 83, joined the board in 1959.  There are younger board members–74, 62, 52 and 46.  But clearly, this is a board that needs to renew itself.

The world has changed.  Board work has changed.  It requires recognition of the important role that shareholders play in governance.  The director may be an esteemed professional but he has missed the last ten years of shareholder activism, brought about because boards turned a deaf ear to shareholders.

“I’d hate to think that the U.S. corporate world will become as dysfunctional as the U.S. Senate,” he said, referring to “this monstrosity ” of legislation.  His questions to his fellow panel members reflected his belief that new regulations were going to stifle performance.  ”This is meant to encourage dialogue with shareholders, which is an important principle of the legislation,” the panelist replied.

It turns out the moderating director has  the  educational and legal experience that boards seek.  But he’s 70 years old.  He has served on his current board since 1977.  The other director who joined the board with him is 86 and a third director, who is 83, joined the board in 1959.  There are younger board members–74, 62, 52 and 46.  But clearly, this is a board that needs to renew itself.

The world has changed.  Board work has changed.  It requires recognition of the important role that shareholders play in governance.  The director may be an esteemed professional but he has missed the last ten years of shareholder activism, brought about because boards turned a deaf ear to shareholders.

“Enterprise risk management is not limited to crisis situations.  Establishing governance best practices to anticipate threats is a critical part of the challenges facing boards,” he writes. And further, “To fulfill fiduciary responsibilities, questions and preparation both strengthen a company’s ability to respond to unforeseen events.”

Levine, a veteran board member and author of such best-selling business books as “Cut to the Chase” notes the need for board-level conversations and processes that review performance, risk and ethics.

What’s still important:  having a crisis plan. It can be as simple as a flow chart:  How will you marshal your resources? Do you have a crisis webpage ready to go live when the crisis hits? Do you have well-defined process, a central point of contact for responding and making decisions?

Begin by developing a set of principles.  Live by them.  Then, listen, engage and move forward with transparency.

While you want to be flexible about engaging and solving the problem, a number of key elements should already be in place:  Do you have contacts lined up at the key stakeholders and influencer groups expected to be impacted in your crisis scenarios? And more important, do you have relationships with these stakeholders so that you can reach out to them early in the crisis to get input and help? Do you have internal contacts to proactively manage those relationships? Has your company/organization moved to a stance of engaging with key audiences early in resolving a crisis instead of facing off under old-school confrontational approach?

Scenario planning is invaluable.  One of the best guides remains “Shell Global Scenarios to 2025:  The future business environment: trends, trade-offs and choices.”

Ask for help.  Form new alliances.  Let your customers, employees, suppliers and community members tell you what’s important.

You won’t do everything right, but if you move forward guided by principles, you will be regarded as a decent member of the community.

Even with the containment cap placed over the ruptured oil well a mile deep in the gulf, the live camera feed of the spewing oil creates a disturbing visual representing the ineptitude of BP and Tony Hayward himself.  Earnest Hayward, promising to “make it right,” has become fodder for late night comedy.

Beyond stopping the leak from the well, what does Tony Hayward need to do to save BP’s reputation and his own?

The gruesome images from the Gulf Shores, combined with the nearly incomprehensible size and scale of the disaster, only magnifies the extreme lack of control faced by BP in managing this PR nightmare.

Hayward’s biggest fault is not seeing the explosion and gushing well deep below the ocean’s surface as an epic, global crisis. If Hayward had chosen to move beyond the legalese offered by counsel and his network of advisors, was there anything he could have done or said that would improve his standing with the public? Did he have any good choices?

BP has been innovative in asking the public to help solve the problem, a laudable effort largely unrecognized. BP has received more than 20,000 ideas on how to stop the flow of oil or contain the oil spill. However, the promise to clean up every drop of oil and “restore the shoreline to its original state” appears as futile as the booms bobbing on the Gulf barely containing the oil. As globs of oil foul the wetlands and the beaches, the company’s commitment to meeting all of its responsibilities seems impossible to achieve.

The other media star of this drama, President Barack Obama sought first to maintain distance between BP’s gusher and his presidency.  Reading the downward drift of the polls on his own leadership, he paraded his concern on Larry King Live, in a third visit to Louisiana, and in political briefings and radio addresses. Obama also promoted new regulations and ordered an investigation into BP’s behavior.

What can each man have done differently—and do differently going forward—to gain credibility and respect? What positive developments can come out of the BP oil spill?

1. Hayward and Obama need to forge a new business/government relationship that stops the name-calling and blame-laying—and instead conveys to a concerned public their shared dedication to solve the problem. On their own, they are each appealing for votes or applause or vindication, which the public finds insulting.
2. They must create a way for the public to participate in the solution. What programs can be put in place to engage the public in volunteerism related to the crisis? This type of work is cathartic for individuals who are grieving the loss of pristine coastlines and shorebirds. What’s more, images of volunteer crews would supply positive, inspirational images to replace the current onslaught of disturbing images.
3. Obama must appoint an unassailable environmental leader—such as Bill Ruckelshaus—to  develop energy policy that is green and business neutral. This individual must find innovative ways to invite participation and dialogue.
4. Invite the nations of the world to join together to create an environmental prize, based on solving or making progress in solving the world’s greatest environmental problem—an environmental Nobel.
5. Create a new meaning for the British and U.S. relationship for the Fourth of July. Tony Hayward and BP should develop a unique participatory event for Americans on July 4^th. Think big.

Even with the containment cap placed over the ruptured oil well a mile deep in the gulf, the live camera feed of the spewing oil creates a disturbing visual representing the ineptitude of BP and Tony Hayward himself.  Earnest Hayward, promising to “make it right,” has become fodder for late night comedy.

Beyond stopping the leak from the well, what does Tony Hayward need to do to save BP’s reputation and his own?

The gruesome images from the Gulf Shores, combined with the nearly incomprehensible size and scale of the disaster, only magnifies the extreme lack of control faced by BP in managing this PR nightmare.

Hayward’s biggest fault is not seeing the explosion and gushing well deep below the ocean’s surface as an epic, global crisis. If Hayward had chosen to move beyond the legalese offered by counsel and his network of advisors, was there anything he could have done or said that would improve his standing with the public? Did he have any good choices?

BP has been innovative in asking the public to help solve the problem, a laudable effort largely unrecognized. BP has received more than 20,000 ideas on how to stop the flow of oil or contain the oil spill. However, the promise to clean up every drop of oil and “restore the shoreline to its original state” appears as futile as the booms bobbing on the Gulf barely containing the oil. As globs of oil foul the wetlands and the beaches, the company’s commitment to meeting all of its responsibilities seems impossible to achieve.

The other media star of this drama, President Barack Obama sought first to maintain distance between BP’s gusher and his presidency.  Reading the downward drift of the polls on his own leadership, he paraded his concern on Larry King Live, in a third visit to Louisiana, and in political briefings and radio addresses. Obama also promoted new regulations and ordered an investigation into BP’s behavior.

What can each man have done differently—and do differently going forward—to gain credibility and respect? What positive developments can come out of the BP oil spill?

1. Hayward and Obama need to forge a new business/government relationship that stops the name-calling and blame-laying—and instead conveys to a concerned public their shared dedication to solve the problem. On their own, they are each appealing for votes or applause or vindication, which the public finds insulting.
2. They must create a way for the public to participate in the solution. What programs can be put in place to engage the public in volunteerism related to the crisis? This type of work is cathartic for individuals who are grieving the loss of pristine coastlines and shorebirds. What’s more, images of volunteer crews would supply positive, inspirational images to replace the current onslaught of disturbing images.
3. Obama must appoint an unassailable environmental leader—such as Bill Ruckelshaus—to  develop energy policy that is green and business neutral. This individual must find innovative ways to invite participation and dialogue.
4. Invite the nations of the world to join together to create an environmental prize, based on solving or making progress in solving the world’s greatest environmental problem—an environmental Nobel.
5. Create a new meaning for the British and U.S. relationship for the Fourth of July. Tony Hayward and BP should develop a unique participatory event for Americans on July 4^th. Think big.

It’s the Lake Wobegon syndrome where 95 percent of directors think they’re doing a good job. CEOs see it differently.  According to work by Heidrick & Struggles, CEOs “almost universally confide” that they have one or two directors who provide wide counsel, offer advice on key issues and contribute both formally and informally to the enterprise.  That means that 80 percent of the directors are seen as not being very effective by the CEO.

The fictional town of Lake Wobegon, where “all the women are strong, all the men are good looking, and all the children are above average,” has been used to describe a real and pervasive human tendency to overestimate one’s achievements and capabilities.

CEOs need to see their boards as providing a competitive advantage to them and their enterprise. If board members are less effective, the board needs to replace them.  Without outside help, CEOs and other directors find it hard to ask less effective directors to leave.

CEOs need to ask, are they giving their boards the right tools to be effective.  Is management teeing up information for decision, providing the context and the why for the company considering it. Or, do boards get a firehose of information or worse yet, only the information that management want them to see? Are boards spending their time on the right issues?  Do boards have access to tools and advisors to make them more effective?

Boards are working harder than ever.  CEOs need to see to it that the board has the resources it needs to create strong work groups.

While the news is full of reports about shareholder concerns over the value their elected representative, the board of directors, bring to the enterprise, it turns out that CEOs have questions too.

It’s the Lake Wobegon syndrome where 95 percent of directors think they’re doing a good job. CEOs see it differently.  According to Heidrick & Struggles, CEOs “almost universally confide” that they have one or two directors who provide wide counsel, offer advice on key issues and contribute both formally and informally

If that’s where shareholders and the larger public are today on corporate governance issues, directors should take notice. A top-down standard setting enforcement process of the 1970s isn’t going to fix the more complex issues today. He concludes that “people affected by change have to be deeply involved in crafting of solutions” and “we have to get better at both involving people in the process of change and providing them with enough information to make that involvement useful and worthwhile.”

While he’s talking about environmental issues, couldn’t that be applied to boards and shareholders?

As Bonnie Hill has observed in her years as a director engaging with shareholders, “We have learned so much from our interaction with shareholders. It has made us better directors.”

The world has changed.  We can’t fight the last war or use yesterday’s solutions to solve today’s problems. The new tools are more direct engagement with shareholders, not to pacify them but to involve them in the long-term investment of our companies.

Of course, there’s much more to being the Investor Relations Officer than supporting the CFO or making presentations at major financial conferences or even the daily routine of interacting with analysts and shareholders. Many IROs provide analysis and information to management about who is buying and selling the company’s stock. They may hire a surveillance firm to assist, but they are front-line analysts, interpreting aggregated information and making strategic recommendations.

Amid increased shareholder activism as well as regulatory and congressional proposals, boards increasingly want access to this information as well.  Such requests offer the IRO a unique opportunity not just to respond to the board but help them take the next step in achieving greater effectiveness with shareholders.

In this new era of transparency and disclosure, boards need to understand the quality of shareholder interactions and ensure that the company provides transparent, effective shareholder communication across multiple audiences-including investors, brokers, owner research groups, employees, customers, and the community and public at large. As a member of management, the IRO can provide intelligence on stock and investment strategies to the board; however, the larger issues of governance communication best practices requires the perspective of an outsider. To preserve its oversight function, boards need an independent communication advisor to help them think through their communication practices.

The board-shareholder communication discussion begins in executive session. How will the work of shareholder communication be handled? Will it be a subcommittee of an existing committee? Is it naturally the role for the lead director or independent chair?  Has she or he had media training?  Does the rest of the board know how to handle telephone calls and other information requests by referring the inquiry to the designated board member? What kind of standard does the board want to establish in communicating with shareholders?

An independent communications advisor with governance expertise can facilitate the board’s work in this area, bringing a unique skill set as well as an outside perspective. The consultant’s corporate experience recognizes management’s communication resources and expertise, balancing message consistency with the board’s responsibility for oversight.

How would the board handle a corporate governance challenge?  Advance planning is the key to avoiding or minimizing negative impact.  The board needs to preserve its independence by deciding how it will engage with shareholders and the public—constituencies that have in some cases lost faith in the board’s ability to provide oversight. In other words, decisions about board-shareholder communication must emanate from the board.

The IROs who see that the tide has turned in favor of empowered shareholders—shareholders who want and expect unfettered access to the board they elect—will recognize the importance of communication expertise for the board. By anticipating and meeting the board’s need for communication help amid cynicism and increased scrutiny, they engage a powerful ally in the company’s reputation. As the board utilizes communication opportunities and begins to develop shareholder loyalty, the IRO helps to build a base of shareholders who embrace longer-term investing.

The Financial Times concludes, “The [note] is an implicit admission that Goldman’s long-held strategy of giving short shrift to criticism of its behavior and pay policies during the crisis has done little to quell the public backlash against the Wall Street bank.”

After such a mea culpa, how will Goldman Sachs handle its annual meeting?  Will it be a kabucki show or will Chairman and CEO Lloyd  Blankfein lead his directors in a sincere effort to engage with shareholders?  Blankfein has a chance to demonstrate that he’s committed to minimizing reputation risk by making the meeting a true opportunity for shareholders to question and receive genuine responses from him and the board of directors.

It’s a dramatic change and they should be preparing now.

Proposals being submitted for inclusion in upcoming company proxies include

• The right to call a special meeting
• Independent board chairman
• The end of the supermajority vote requirement
• Say-on-pay
• Review/report on political spending

Over 60 boards have proactively adopted “say on pay” in addition to those institutions that are required to offer shareholders an advisory vote on compensation by virtue of the TARP funds they received.  How involved is the board in writing and reviewing the proxies?  What do they know about the sentiment of their shareholders on these issues?

In the current environment, boards should be actively engaging with shareholders.

Not only does Prudential Financial prove that the proxy can serve as an effective communication vehicle to shareholders while fulfilling its legal requirement, but the company has added a number of innovations that set a new standard for others.

It begins with the Letter from the Board of Directors to our Shareholders: “As stewards of the Company, we are committed to governing Prudential in an an effective and transparent manner.  We hold ourselves to high standards with respect to governance “best practices” and we believe that communicating with you on significant matters is an important part of our obligation to align governance and management with the best interests of shareholders.”

The letter summarizes the way the board has been responsive to shareholders, items that will be explained in depth in the proxy but the letter enables the board to highlight its shareholder-friendly approach, from the advisory vote on executive compensation, the special financial award to 15,000 employees, clawbacks, the board’s active engagement in succession planning and how it has approached risk oversight.

It also invites shareholders to write to the board providing an email address for independent directors as well as a website for feedback on executive compensation. How simple and effective.

The proxy does a nice job of describing the current board and their qualificationsas well as a process for selecting directors including an explanation of how shareholders can recommend director candidates. The board explains its process and philosophy for compensation.

Best of all, it’s in plain English, clear, readable and understandable.

But if shareholder voting on the election of directors is viewed as a critical component of good governance, how do you get registered shareholders to vote?

The SEC has launched an investor-focused Web site to help consumers invest wisely and avoid fraud. The site, www.Investor.gov provides tools and information, a way to ask questions, research brokers and even the mission of the SEC in ensuring fairness in the markets.   There’s a tab for proxy issues where the SEC explains “Your right to vote”, “Voting Your Shares”, “What You Should Do” and “How to Vote.”

Some companies see the opportunity to engage with shareholders.  Peggy Foran of Prudential Financial and has taken a creative approach, offering retail shareholders who vote their proxies an environmentally correct tote with the Prudential logo.  Or, the proxy-voting shareholder can also opt for a donation to a charity.

Not only will such a move encourage shareholders to vote but it signals the company’s true desire to engage with shareholders.

Navigating this proxy season will not be easy but companies that find creative ways to engage with their shareholders will improve their position and set the stage for the future.

But if shareholder voting on the election of directors is viewed as a critical component of good governance, how do you get registered shareholders to vote?

The SEC has launched an investor-focused Web site to help consumers invest wisely and avoid fraud. The site, www.Investor.gov provides tools and information, a way to ask questions, research brokers and even the mission of the SEC in ensuring fairness in the markets.   There’s a tab for proxy issues where the SEC explains “Your right to vote”, “Voting Your Shares”, “What You Should Do” and “How to Vote.”

Some companies see the opportunity to engage with shareholders.  Peggy Foran of Prudential Financial and has taken a creative approach, offering retail shareholders who vote their proxies an environmentally correct tote with the Prudential logo.  Or, the proxy-voting shareholder can also opt for a donation to a charity.

Not only will such a move encourage shareholders to vote but it signals the company’s true desire to engage with shareholders.

Navigating this proxy season will not be easy but companies that find creative ways to engage with their shareholders will improve their position and set the stage for the future.

As boards take a hard look at their risk oversight process, they naturally turn to the risk element of the company’s strategy.  The SEC’s proxy disclosure rules will require boards to take a good hard look at how they oversee risk.  “If there isn’t a clear framework in place, that’s probably job number one” according to the roundtable report.

As boards engage in risk discussions, they are becoming more insistent that management provide alternatives and choices regarding the company’s strategy, as opposed to the “review and concur” approach of the past. In this way, some boards are helping to develop and determine the company’s risk appetite.

As one director said, “It takes time, effort and calories to do this right, but digging into the strategy is the only way to really understand what risks the company should or shouldn’t be taking.”

Smart CEOs look to the board in the strategy process.

In his opinion article in AgendaWeek, Richard Koppes discusses the ways directors can rebuild trust.  Because Koppes has served for 30 years in highly regarded expert in corporate governance, his words should reassure directors, especially those who began their service ten years ago.

In an article ”Giving Boards Their Voice”  in  the new Korn Ferry International Briefings on Talent,  I discuss  the shift–from behind-the-scenes advisors to highly accountable public figures. It  is a profound transformation that boards are only beginning to grasp.  The article discusses the importance of board-shareholder communication.  By establishing independent communication, boards and their companies may succeed in quieting dissenting shareholders and even winning the confidence of investors enabling companies to operate in the interests of the long term.

It’s clear that strong effective boards are in everyone’s interest.  Directors who offer a strategic sounding board for management, and bring to bear their wisdom and experience as the company encounters challenges, are to be highly prized.

It will take more than just committed directors to improve corporate governance.  CEOs, whether they hold the title of chairman or not, need to make the investments in effective boards. In addition to their personal commitment to make the relationship work, they need to provide the resources and support to help directors be effective.

Charles Elson, the corporate governance expert at the University of Delaware, traces the origins of  shareholder activism to the anger shareholders were feeling that they were being ignored.

The truth is that there are strong energized boards and business leadership dedicated to delivering durable long-term value through sustained economic performance, sound risk management and high integrity and through meaningful consultation with shareholders.  But the new book paints a dark picture because so little was known about corporate governance until the financial collapse.

Good directors should be concerned about ”Money for Nothing.”  If they thought the legislative changes were merely grandstanding efforts by politicians, they are wrong. Actions by the SEC and Congress reflect the general concern that governance isn’t being carried out effectively.

Good boards are stepping up to the new environment to demonstrate that they can make corporate governance more effective to serve the company, its shareholders and stakeholders.  It will take reevaluation and rededication.

In this era of transparency, everyone will be watching.  The public won’t settle for less than effective oversight.

Charles Elson, the corporate governance expert at the University of Delaware, traces the origins of  shareholder activism to the anger shareholders were feeling that they were being ignored.

The truth is that there are strong energized boards and business leadership dedicated to delivering durable long-term value through sustained economic performance, sound risk management and high integrity and through meaningful consultation with shareholders.  But the new book paints a dark picture because so little was known about corporate governance until the financial collapse.

Good directors should be concerned about ”Money for Nothing.”  If they thought the legislative changes were merely grandstanding efforts by politicians, they are wrong. Actions by the SEC and Congress reflect the general concern that governance isn’t being carried out effectively.

Good boards are stepping up to the new environment to demonstrate that they can make corporate governance more effective to serve the company, its shareholders and stakeholders.  It will take reevaluation and rededication.

In this era of transparency, everyone will be watching.  The public won’t settle for less than effective oversight.

Smart CEOs and boards will see this as an important opportunity to use the current proxy season as a way to reach out to shareholders in a credible way.  By drafting CD&As in plain English that are designed to explain the board’s philosophy in devising pay programs that reward performance rather than failure.

The InterimCEO is a worldwide network of interim, contract and project executives.  Their website has posted my comments on board leadership on their home page. The InterimCEO network serves as a rich resource for executives and companies that are looking for assistance.

Kenneth Feinberg managed to create a program that persuaded 98 percent of the 3,000 victims’ families of 9/11 to stay out of court and instead apply to his fund while dispensing the $7 billion that seemed to satisfy almost everyone. Then, last year, he took on the job of administering pay for the executives of the failed businesses bailed out by taxpayers.  Not only did he create a credible template but injected common sense in the way that executives are paid. 

Directors could take a lesson.

Who but Warren Buffett could describe the current practice of a fictional greedy CEO engineering the approval of his rich pay package  by engaging the compensation firm of “Ratchet , Ratchet and Bingo” to prove to the board that he is worth it?  Buffett,  the Chairman and CEO of Berkshire Hathaway  , takes $100,000 in pay and say he would pay the company to do the job.  “It’s a great job!”  However, while he’s been running Berkshire Hathaway, the ratio of top pay to average pay at public companies has multiplied roughtly 11 times, from 24:1 to 275:1.

As Steven Brill conveys in his excellent profile of Feinberg in the New York Times Magazine, Feinberg shows himself to be a straight shooter, independent and fair.

That’s what most shareholders are asking directors to be–independent and fair.

Add to his remarks, those made recently by National Economic Council director Larry Summers, “there is no financial institution that exists today that is not the direct or indirect beneficiary of trillions of dollars of taxpayer support for the financial system.”

It would be wise for bank directors to consider these views when approving compensation plans.

Clearly, one issue for shareholders during the 2010 proxy season is how the board provided oversight for CEO compensation.  In 1951, legendary investor Benjamin Graham suggested that directors submit to an interrogation in order to justify “the generous treatment” they are asking shareholders to approve.  “The stockholders are entittled to be told… just what are the excellent results for which theyse arrangements constitute a rewarded and by what analogies or other reasoning the board determined the amounts accorded are appropriate.”

Surely such questions are valid 59 years later.

Clearly, one issue for shareholders during the 2010 proxy season is how the board provided oversight for CEO compensation.  In 1951, legendary investor Benjamin Graham suggested that directors submit to an interrogation in order to justify “the generous treatment” they are asking shareholders to approve.  “The stockholders are entittled to be told… just what are the excellent results for which theyse arrangements constitute a rewarded and by what analogies or other reasoning the board determined the amounts accorded are appropriate.”

Surely such questions are valid 59 years later.

To Cutler’s concern that ”the strongest voices in corporate governance are not being heard,” we offer the suggestion that directors could use their strong voices to communicate with greater clarity, rather than settling for languages that satisfies lawyers.

Both Kerstetter and Cutler lauded SEC Chairman Mary Schapiro who has moved quickly to bolster the SEC’s regulatory and enforcement powers. At the same time, she strives to communicate intent in all the “why” of the SEC’s action. 

Take the recent press release about increased disclosure:  The SEC announced new “rules to enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies.” The rules “will improve corporate disclosure regarding risk, compensation and corporate governance matters when voting decisions are made,”  said Schapiro.

It’s true that shareholders are a diverse group and it is not the job of the board to satisfy everyone, but listening to varied points of view always improves decisionmaking.

To Cutler’s concern that ”the strongest voices in corporate governance are not being heard,” we offer the suggestion that directors could use their strong voices to communicate with greater clarity, rather than settling for languages that satisfies lawyers.

Both Kerstetter and Cutler lauded SEC Chairman Mary Schapiro who has moved quickly to bolster the SEC’s regulatory and enforcement powers. At the same time, she strives to communicate intent in all the “why” of the SEC’s action. 

Take the recent press release about increased disclosure:  The SEC announced new “rules to enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies.” The rules “will improve corporate disclosure regarding risk, compensation and corporate governance matters when voting decisions are made,”  said Schapiro.

It’s true that shareholders are a diverse group and it is not the job of the board to satisfy everyone, but listening to varied points of view always improves decisionmaking.

The rules will be in effect by the 2010 proxy season and could be published as early as next week.

Do boards understand that they are being challenged to communicate more openly with their shareholders?  Better communication gets to the heart of many of the governance issues that the SEC and the pending legislation hope to address.

So what’s a board to do?

Boards should think in concrete terms about what they have communicated with their shareholders in the past and how they can improve the clarity of communication.They should avoid legalese and adopt plain English in their discussion about risk, compensation and governance.

Greater disclosure is about clarity.  Boards are in a communication battle they can win if they recognize the element of respect in their communication with the company’s owners.

A case study in corporate rehabilitation, McCracken focused on the culture of CA, which he saw as a board responsibility. McCracken describes the continuation of the company’s journey to excellence as “we’re in the fifth chapter of a 10 chapter book.”

In his panel discussion for the NACD Conference on Governance, McCracken also revealed that he believes the job of the lead director or chairman as requiring significant time—one and a half to two days a week or six or seven days a month.

Directors acknowledge a new environment where every director is spending more time on respective board assignments, especially the chairs of the audit or governance committees of the board.

McCracken took the unusual step of hiring an executive coach to help board members learn to work together and establish a company culture focused on transparency, teamwork and collaboration.  “It takes time and effort to build trust.  

McCracken also observed: You can’t do both jobs—serving as chairman and CEO.  He has taken over as interim CEO as they search for a new CEO.

 “The Chairman runs and manages the board and the CEO runs the company.” 

 Perhaps attending quarterly board meetings and an occasional telephonic meeting were the typical director time commitment a generation ago, but not today.  Certainly, for the board to understand the risks in a corporate strategy means a much greater time commitment.

 It’s a bigger job today. Without an increased time commitment and an ability to work well together, “all that experience of the directors does not get engaged.”

Clearly, management needs to take full advantage of directors and the experience they bring for the long-term growth and benefit to the company and its shareholders

Write a blog.  It gives you a chance to connect to your audiences in a very authentic way.  It’s about having a dialogue rather than a press clip.

Do it now.  The field is yours:  not many CEOs are blogging.

Blog to establish leadership.  Blog to get customer feedback.

Start the conversation.

Wall Street executives are no different than the welfare queens–they’re taking our money, opined Minow. “They are capitalists on the way up and socialists on the way down.”

Clawbacks are meant to be punitive, she agrees:  “It’s not your money–you didn’t earn it.”

In her view, too big to fail means the company is a utility and those who manage utilities need to be paid accordingly.  Her view is that “too big to fail is really too big to succeed.”

“Remember when we gave Chrysler $1.8 billion?  We thought that was a lot of money. AndLee Iaococca wouldn’t take more than $1 in salary until Chrysler was outperforming the competition. Let’s remember what we learned from that.”

Minow believes that outsized pay packages are a risk indicator especially in the way they describe their programs.   “Companies tell us that they have established principles and accompanying metrics.  We like it when we hear that there are nine principles for compensation.  We hear a number and the word, metrics.  But then the next sentence is that the company will pay out IF any ONE of those metrics are met.”   Clearly, this is not what she had in mind.

Boards are really asked to be disagreeable, says Minow. “It’s the duty of the board to imagine the worst and deal with it, like a mystery novel writer.”

In her brief remarks, Minow showed that she cares passionately about these ideas.  “It’s up to us to fix corporate governance. It’s not the government but the boards and the shareholders.  It’s our responsibility for capitalism to work.”

Wall Street executives are no different than the welfare queens–they’re taking our money, opined Minow. “They are capitalists on the way up and socialists on the way down.”

Clawbacks are meant to be punitive, she agrees:  “It’s not your money–you didn’t earn it.”

In her view, too big to fail means the company is a utility and those who manage utilities need to be paid accordingly.  Her view is that “too big to fail is really too big to succeed.”

“Remember when we gave Chrysler $1.8 billion?  We thought that was a lot of money. AndLee Iaococca wouldn’t take more than $1 in salary until Chrysler was outperforming the competition. Let’s remember what we learned from that.”

Minow believes that outsized pay packages are a risk indicator especially in the way they describe their programs.   “Companies tell us that they have established principles and accompanying metrics.  We like it when we hear that there are nine principles for compensation.  We hear a number and the word, metrics.  But then the next sentence is that the company will pay out IF any ONE of those metrics are met.”   Clearly, this is not what she had in mind.

Boards are really asked to be disagreeable, says Minow. “It’s the duty of the board to imagine the worst and deal with it, like a mystery novel writer.”

In her brief remarks, Minow showed that she cares passionately about these ideas.  “It’s up to us to fix corporate governance. It’s not the government but the boards and the shareholders.  It’s our responsibility for capitalism to work.”

Well-known and respected governance attorney Holly Gregory led a group of experienced lawyers reflecting diverse shareholder, corporate and academic perspectives in examining the roles and responsibilities of shareholders and boards under corporate law.

Their report, formally “Report of the Task Force of the ABA Section of Business Law Corporate Governance Committee on the Delineation of Governance Roles & Responsibilities” aka “Governance Task Force” reflects a year of work, sets a constructive tone for boards, shareholders and policy makers to work together in strengthening corporate governance. The report reminds us that shareholders are not the only beneficiaries of the modern corporate system, which has created wealth on a scale previously unseen.  The Governance Task Force report points out that corporations contribute to the public good by employing people, innovating, improving products and services, paying taxes, supporting various community and charitable programs that benefit society at large.

Anyone interested in corporate governance should read the report, not only for the detail of the legal constructs that have created our current system, but for granular detail in the footnotes complete with links that enable the reader to follow their research and come to their own conclusion.

If you are looking for a scapegoat, there isn’t one. Nor does a brush tar one group.   Instead, the report describes how shareholders, management and boards have specific responsibilities to bring accountability to the effective management and oversight.

The recommendations are logical. “Shareholders should act on an informed basis with respect to their governance-related rights…apply company-specific judgment when considering the use of voting rights…consider the long-term strategy of the corporation as communicated by the board in determining whether to initiate or support shareholder proposals.”

Boards should “embrace their role as the body elected by shareholders to manage and direct the corporation by affirmatively engaging with shareholders to seek their views, consider shareholder returns and facilitate transparency.” In addition they should “acknowledge at times the company’s long-term goals and objectives may not conform to the desires of some of the shareholders.” In addition, they should “disclose with greater clarity how incentive packages are designed to encourage long-term outlook…”

Policymakers should “in the context of reform initiatives” understand the rationale for the current roles and “carefully consider how to best encourage the responsible exercise of power by key participants in the governance of corporations so as to promote the long-term value creation….”

The report should be required reading for all shareholders.

While many measures are drawn from Senator Charles Schumer’s (D-N.Y.) Shareholder Bill of Rights, this greatly expands the scope.

Just last week, David Gergen, American political consultant and presidential advisor during four administrations, opined about the state of the economy at the Council of PR Firms’ Critical Issues Forum according to Weber Shandwick’s Chief Reputation Strategist, Leslie Gaines-Ross in her Reputation Exchange blog.

What a message for corporate boards to take the initiative to build trust by engaging with shareholders with effective board-shareholder communication programs.

“ These days, it’s not unusual for a board member—typically the lead director or a key committee chair—to initiate the contact with RiskMetric’s research team.  It’s common for a director to lead the discussion, ” said Patrick McGurn, Special Counsel , RiskMetrics Group.

These discussions typically focus on an issue upon which RMG will make a vote recommendation rather than a rating.  “We’ve been encouraged by the broader response to the concerns we raise about governance,” McGurn said.

Many directors were hoping that concerns over executive compensation would melt away as the stock market improved, but the populist outrage over executive pay has only increased, which is reflected in the government’s growing intervention in the boardroom.

“Today, the government has its torso in the door, not just its foot,” observed McGurn.  If boards aren’t responsive to shareholder concerns, they place the company’s reputation as well as their own reputations at risk. “Investors expect boards to be more accountable because they see the directors as their elected representatives.”

With say on pay and proxy access all but deferred for the 2010 proxy season, shareholder petitionsand vote-no campaigns will be the focus.  “Every director looks at the results of the vote-no campaigns,” said McGurn “The directors who have worked hard and anticipated the issues will have an easier time.

“As Warren Buffet said, ‘when the tide rolls out, it’s clear who’s wearing a bathing suit.’ And the tide has rolled out.”

Said McGurn: “Smart boards that take control to improve shareholder engagement will be better positioned in this new environment.”

“This is a new era,” Sheehan told the audience at the National Association of Corporate Directors. “The financial crisis of the past year has resulted in the erosion of the trust of the American public in business.  We represent our members and beneficiaries but we also believe we are a proxy for the American public who invest in public companies.”

To restore trust, companies need to operate with transparency, acknowledge the role of the shareholders and demonstrate that management and directors are accountable.

“We may be seen as activist shareholders, but our interests are aligned,” said Sheehan.  “We want to see companies maximize their value.  If you do well, we do well for our 833,000 public school educators and their families.”

Adapting his remarks from his new book “7 Lessons for Leading in Crisis,” George told directors that boards are in crisis, having lost the trust of shareholders and the public.  It will take nothing less than board leadership to face the reality, work in concert with other board members, figure out the cause of the failures and become transparent in their actions because boards are in the spotlight every day.”  The good news is that if boards take these steps they can help to return the focus to the long-term health of companies for the benefit of community and shareholders.

Often characterized as “player-coaches,” these independent directors play an important role in taking the company to the next level.   “We find that the CEOs of these companies listen better to these independent directors because they’ve been there–they’ve run a business; they’ve been successful.  They can make enormous contributions as mentors.  However, the independent board members don’t work for the PE firm but rather have a fiduciary duty to act in the best interest of the company.”

In the best of all worlds, engagement,  focus on strategy and commitment to one’s fiduciary duty are qualities that directors of private equity and corporate boards share.

“When you join a board, you put your reputation on the line,” said Craig J. Duchossois, CEO of the Duchossois Group, a privately held company. “Do your due diligence on the company.  Does the company share your values? Talk to management, other board members, employees, customers and the community.” He made his remarks in a panel on Private Company Boards at a Chicago NACD meeting.

When Duchossois was asked how he did his due diligence, he turned to his newest board member in the audience, Donna Zarcone, “why don’t you tell us,  Donna.”

“We did due diligence on each other,” said Zarcone.  “You have to.  It’s so important. With a private company, you want to look at everything that’s available in the public realm.  Then, you need to do a lot of private checking, with other board members, with management, employees, customers, the community. ”

“Don’t be shy about asking management for what you need to make a decision,” added Michelle Collins, an advisory board member of Svoboda, Collins LLC, a private equity firm. “It’s a great test of how the CEO treats his board members.”

He had six suggestions.

First, he reminded them that being a board member is an honor but it is also an enormous responsibility.  Be sure that you understand the business at a fair level of detail.

Second, make sure that your risk management is married to a solid strategy. “Be prepared to challenge basic assumptions. ”

Third, don’t let structure of the organization become so complex that you don’t understand it.  “You always want to be able to say no.”

Fourth, focus on succession planning, “not just for the CEO but for the top eight to ten leadership positions.”

Fifth, understand leverage–not just financial leverage but investment leverage, product leverage and operating leverage.

Sixth, pay attention that you are getting the right information.  “If you don’t understand something, seek out more information from management through additional meetings or lunch but never behind the back of the CEO.”

After his brief remarks, commentator and nationally known personal financial expert Terry Savage interviewed Liddy and posed questions from the audience.

Liddy began his remarks reminding the audience of the very difficult times of a year ago and how the financial system was in a very precarious state.  “I had some relevant experience and I was asked to serve my country.  I think most of you would have done it, too.”

Thanking Liddy for his service, the audience rose in a standing ovation.

He had six suggestions.

First, he reminded them that being a board member is an honor but it is also an enormous responsibility.  Be sure that you understand the business at a fair level of detail.

Second, make sure that your risk management is married to a solid strategy. “Be prepared to challenge basic assumptions. ”

Third, don’t let structure of the organization become so complex that you don’t understand it.  “You always want to be able to say no.”

Fourth, focus on succession planning, “not just for the CEO but for the top eight to ten leadership positions.”

Fifth, understand leverage–not just financial leverage but investment leverage, product leverage and operating leverage.

Sixth, pay attention that you are getting the right information.  “If you don’t understand something, seek out more information from management through additional meetings or lunch but never behind the back of the CEO.”

After his brief remarks, commentator and nationally known personal financial expert Terry Savage interviewed Liddy and posed questions from the audience.

Liddy began his remarks reminding the audience of the very difficult times of a year ago and how the financial system was in a very precarious state.  “I had some relevant experience and I was asked to serve my country.  I think most of you would have done it, too.”

Thanking Liddy for his service, the audience rose in a standing ovation.

It’s not just the company’s top ten shareholders who are watching.  In the face of the economic crisis and the ongoing volatility of the financial markets, doesn’t it make sense for the board to communicate what they do to provide oversight, represent all shareholders and add value?  After all, it’s the individual board members who will face “no” votes and risk failing to be elected.

The world has changed.  Directors can no longer operate from behind the curtain and expect that shareholders will understand that they are doing their job.  Directors have an opportunity to educate the less sophisticated investor and reassure the public at large that they take their responsibility  seriously. By communicating appropriately, directors show respect for shareholders and keep them invested in the company.

It’s not just the company’s top ten shareholders who are watching.  In the face of the economic crisis and the ongoing volatility of the financial markets, doesn’t it make sense for the board to communicate what they do to provide oversight, represent all shareholders and add value?  After all, it’s the individual board members who will face “no” votes and risk failing to be elected.

The world has changed.  Directors can no longer operate from behind the curtain and expect that shareholders will understand that they are doing their job.  Directors have an opportunity to educate the less sophisticated investor and reassure the public at large that they take their responsibility  seriously. By communicating appropriately, directors show respect for shareholders and keep them invested in the company.

That’s why smart boards are getting ahead of the curve.  Even if the U.S. Chamber of Commerce issues a statement saying that it is “disturbed by the change” to eliminate broker discretionary voting, smart boards are preparing for the 2010 proxy season.  Rather than railing against an activist Securities and Exchange Commissioner, most directors recognize underlying shareholder concerns.  They are serious about good governance because it’s a business value.