the weight of america’s 2019-05-16آ  1 the weight of america’s boards ranking...

Download THE WEIGHT OF AMERICA’S 2019-05-16آ  1 THE WEIGHT OF AMERICA’S BOARDS Ranking America’s Largest

If you can't read please download the document

Post on 27-Jun-2020

0 views

Category:

Documents

0 download

Embed Size (px)

TRANSCRIPT

  • THE WEIGHT OF

    AMERICA’S BOARDS

    Ranking America’s Largest Corporations by the

    Governance Capacity of Their Boards

    2016 Edition

    Chicago, Illinois

  • Illustrations: SeanKellyStudio.com

  • An In the Boardroom

    Publication

    A Research Report by THE LEADERSHIP QUOTIENT

    Research Affiliate of

    Boardroom Consultants

  • blank

  • TABLE OF CONTENTS Overview ............................................................................................................... 1 Introduction ........................................................................................................... 1 Background & Foundation ......................................................................................... 3 Our “Business Acumen Weight” Valuation Methodology .................................................. 4 Quick-Take Analysis ................................................................................................ 5 Current Status of Board Diversity ................................................................................ 8 Appropriate Governance Capacity Guidelines & Ideal Board Weight .................................. 10 Preview of Governance Scores & Companies That Distinguished Themselves ...................... 11 2016 Board Weight & Governance Capacity Observations & Findings ...... 13 Improving Your Governance Capacity Ratings ............................................. 25 Closing Reflections & Official 2016 Board Weight Rankings ....................... 29 America’s Largest Corporations Ranked by Revenue & Market Cap ................................... 31 Alphabetical Index ................................................................................................. 41 Director Distribution by Business Acumen Category ...................................................... 46

    * * *

    We wish to thank the many board directors who have provided us with their insight and encouragement.

  • 1

    THE WEIGHT OF AMERICA’S BOARDS

    Ranking America’s Largest Corporations by the Governance Capacity of Their Boards

    by James J. Drury III and James J. Drury IV

    OVERVIEW Introduction As we present our 5th The Weight of America’s Boards report, a bit of reflection. Its introduction in 2011 was an attempt on our part to propose a thoughtful, analytical process by which the “governance capability” of America’s corporate boards could be assessed. With a 30-year history providing board counsel and recruiting board directors, we found ourselves on more than a few occasions being asked whether a particular board was either “good or bad” or “strong or weak”, whenever a well-known company found itself in significant difficulty. In our professional role as a trusted board advisor, we always declined to comment. However, in many of these situations, we did have an opinion, primarily based on our professional experience and judgment, not fact-based knowledge. An informed opinion would have required first-hand observation of the process by which directors made critical decisions in the boardroom, over a sustained period of time – which is implausible given that board proceedings are highly confidential by necessity. There are many significant factors that must be considered when evaluating the quality of a board director, and most of them are subjective: integrity, intelligence, judgement, commitment, collegiality, to name a few. There is one factor, however, that can be assessed objectively that all directors should possess in equal measure: a high level of demonstrated accomplishment and acumen in their chosen field of endeavor. As the role of a public board is to govern the performance of a business enterprise, we firmly believe that “business acumen” is the most essential quality of an effective board director. That fundamental belief provides the objective framework for our board assessment model. Our methodology involves a calibration of a board’s “capacity to govern well”, which is based upon the

    “weight” of combined business acumen present in the boardroom. The assessment of a board’s “quality”, without objective criteria, is little more than a subjective exercise. However, we believe if a board possesses both a high “capacity to govern well”, and highly capable “boardroom leadership”, that is as close as one can get to having confidence that it is a good board, a strong board, and a quality board. With each publication of our report, our confidence in the value of our assessment model has been reinforced. Many of the boards assessed by our model have expressed their appreciation for the recognition they have received, acknowledging their good standing in the media and their annual reports. A good number of boards have also requested multiple copies of our report to share with their directors in order to discuss a strategy for strengthening their governance capacity. We would like to recognize, in particular, Blackrock, PPG, and Parker Hannifin for making our top 10 list in each of the five years that our repot has been published. Perhaps the strongest support for the rationale of our assessment model emerged recently in a research project conducted by our firm. In order to strengthen our professional insight regarding what makes a great board and a great director, we were privileged to conduct in-depth personal interviews with 30 of America’s most accomplished and respected board directors. Together, their collective director experience has been gained in the boardrooms of 60 Fortune 500 companies, ranging in scale from the largest to the smallest. One of the questions we asked was, “When you think of the most respected and effective directors that you have observed in the boardroom over the years, what are the most important characteristics that they have in common?” With few exceptions, the most frequently mentioned characteristic was “high business acumen and achievement”, confirming our instincts.

  • 2

    We are pleased to share our 2016 board report. Its findings will provide a uniquely objective perspective regarding the governance capacity of the largest 500 companies by revenue, and the 500 largest companies by market cap (more than 600 leading public companies), and their 6,000+ board directors. Our report will also serve as an alternative point of view when considering the opinions voiced by shareholder activists and institutional investment advisors. Background & Foundation THE ROLE OF TODAY’S CORPORATE BOARD Historically, a board’s fiduciary oversight role has been defined as both powerful and limited, firmly grounded in the principles of corporate law and governance mandate. However, some prefer a simpler definition. In the words of one of America’s most respected retired CEOs, and a director of Fortune 50 corporations, the role of a board is twofold: “To determine who runs the place, and who owns the place.” The clear separation between the board’s governance-oversight responsibility and manage- ment’s decision-making responsibility is widely understood. Yet that distinction does not seem to satisfy those who hold boards accountable for almost every corporate failure, misstep, and transgression. The board seems to be viewed as the conscience of the public corporation. It is almost assumed that a board should have anticipated and prevented anything that goes awry. A board’s responsibility is complex and multifaceted. A board oversees management performance, safeguards the long-term health of the business, and represents the interests of shareholders. In addition, it must consider the interests of other company stakeholders: employees, pensioners, customers, suppliers, and the communities in which the company operates. As the governance role of boards continues to be under scrutiny and criticism by shareholder activists, the “capacity to govern well” becomes ever more important. GOVERNANCE CAPACITY – WHAT IS IT? The true measure of a board’s governance capacity is its perceived ability, and courage, of its directors to understand complex business issues and take action. In examining a board’s governance capacity, do its directors have the heft and seasoned experience to

    step up to the plate? When it comes to business acumen, are they heavyweights or lightweights? A fundamental premise of our report is that we value business experience more highly than non- business experience in measuring governance capacity. Our research shows that the more accomplished a director is in business achievement, the more likely that director is to engage the CEO, management team, and other directors in rigorous discussion regarding critical business issues. If there is any question about the value of business acumen, observe which directors lead in a crisis, and which directors follow. TRENDS THAT CONCERN US Based on our experience advising boards, there are a number of factors and trends that we believe will be detrimental to board governance capacity, unless they are reversed:  A marked erosion of overall boardroom business

    acumen, as fewer of America’s most accomplished business executives occupy boardroom seats.

     Growi

Recommended

View more >