- 14 years, internationally-recognized leader advising in board governance: board structures, policies and practices, corporate governance education seminars, expert witness/litigation support, board and committee evaluations.
- Served as the corporate governance expert witness in a major lawsuit against Enron (2008).
- Founding member and director, Board Advisory Services of Kennesaw State University’s Corporate Governance Center, the oldest governance center in the U.S.
- Clients include: Federal Home Loan Bank of Atlanta, Georgia Board of Regents, Diebold, Inc., Chubb Insurance, and Labaton Sucharow LLP.
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Nominating and Governance Committee Processes
- Boards are receiving more oversight and scrutiny from regulators, investors, media, politicians and the public.
It used to be when bad news surfaced about a corporation the spotlight would be focused on the CEO. Increasingly, this spotlight is now also illuminating the board:
- Large institutional investors, such as pension funds like CalPers, are using their leverage as significant shareholders to force certain firms to adopt governance reforms.
- Listing standards for market exchanges like NYSE now expect and demand specific governance practices.
- Politicians are quick to react to scandals such as Enron with new regulations.
- And, of course, it is now a matter of routine for the media to report on issues in the boardroom.
- Directors are devoting more time and effort in fulfilling their responsibilities.
With mounting regulations (such as Dodd-Frank) and increased oversight and scrutiny, the average board has had to become much more sophisticated in its processes than in the past. This has resulted in directors spending significantly more time on their duties than they used to. With time pressures on the rise, efficiency of governance becomes particularly important. In my conversations with 20 Nominating and Governance Committee chairs or members, 42 percent said that their committee's most important task was to get the right directors on the board. An equal percentage said their most important task was to ensure good governance policies and practices.
- Board members are much more likely to choose a new director that they already know.
In a study examining Nominating and Governance Committee processes (reported in a forthcoming article in the peer-reviewed Contemporary Accounting Research, based on research conducted by three colleagues and me at the Kennesaw State University Corporate Governance Center), we find that virtually all Nominating and Governance Committees focus on “chemistry and comfort” when nominating a new director. This is the main reason why so many companies either do not use search firms to identify potential director candidates, or if they do, they ultimately nominate a director that they already know.
This highlights the importance of getting the right people on the board. As one director told me, “One apple can truly spoil the bunch.” Directors are generally not willing to risk an unknown.