NACD Remembers Roger W. Raber

Dr. Roger W. Raber

The National Association of Corporate Directors (NACD) mourns the loss of our past president Dr. Roger W. Raber, who died peacefully at home on the evening of October 10, 2017, after a long and valiant struggle against an illness. No mere summary can express the value he brought NACD, the nation, and the world. The details of his extraordinary life of service can be found in his obituary notice below, and members can read more about his dedication to NACD here.

Peter Gleason

President & CEO, NACD


OBITUARY NOTICE

Dr. Roger W. Raber

November 28, 1942 – October 10, 2017

Dr. Roger W. Raber, whose advocacy work helped to usher in the modern era of corporate governance, died peacefully at his home in Washington, DC, home on October 10th. He was 74. The cause was complications from Alzheimer’s disease.

Dr. Raber was born in Jamaica, New York. After attending Saint Anthony College in New Hampshire, he received a BA in Philosophy and an MA in Theology and Religious Education from Manhattan College. He later received an MA and doctorate in Administration in Higher Education from Teachers College at Columbia University.

From an early interest in theology, his career evolved from educational administration to professional education, this latter area focused at first in banking and later in corporate governance.

Dr. Raber served as director of admissions at the City University of New York in the early 1970s, and as Deputy Provost at the College at Old Westbury, State University of New York, later that decade. In 1980, he became director of education for the National Association of Mutual Savings Banks in New York City, and for the next two decades he would apply his educational expertise in the banking field, moving on to become an executive vice president of the National Council of Community Bankers; president and CEO of the Center for Financial Studies in Connecticut; and managing director, member services, at America’s Community Bankers. While living in Connecticut he chaired the Weston School District, elected by the residents to restore the integrity of the school system following several crises. During the 1980s he served as a director of Starpointe Savings Bank, staying on the board while it integrated into Dime Savings of New York.

In 1999, he began his service as president and CEO of the National Association of Corporate Directors, serving for the next seven 2 years in this capacity, where he built an organization that was strong both financially and culturally.

In his role as CEO, he responded at a personal level to NACD members affected by the tragedy of September 11, 2001, strengthened by his faith. His ability to steer through crisis would be tested at the national level soon thereafter following the December 2001 bankruptcy of Enron, when he testified on the nature of good governance to Congress. His remarks were influential in determining the governance standards later set by the major stock exchanges.

During his tenure at NACD, paid membership grew from 1,800 to 10,000. He developed educational partnerships with a variety of organizations, including Dartmouth College, University of Southern California, Rice University, Duke University, and University of Georgia and created relationships with Association of Corporate Counsels, Financial Executives International, National Investor Relations Institute, America’s Community Banks, Executive Leadership Council, World Bank/IFC) and several governance institutes in Asia, Central Europe, and Latin America. He also established strategic alliances with several leading professional Institutional Shareholder Services, the Nasdaq Stock Market, New York Stock Exchange, major D&O insurers, and leading professional service providers.

Dr. Raber had a special love for the nonprofit sector. He formed a Not-for-Profit Council at NACD, and conducted the first surveys of nonprofit governance. And although he presented boardroom education programs to many of the nation’s largest public companies, his most treasured assignment was his work with the board of the American Red Cross.

He practiced what he preached about governance, ensuring that NACD would have an independent and diverse board and strong bench strength. Many of the employees he mentored are still with NACD, including its current leader. Thus the Raber legacy lives on.

During his years at NACD and after retirement, he served in many advisory roles. He was a member of the board of overseers of Malcolm Baldridge National Quality Program at the U.S. Department of Commerce, and an advisory board member at the University of Delaware, Weinberg Center for Corporate Governance. He also served on the board of Washington Campus, a nonprofit facilitating a better understanding of government. His three professional engagements in the NACD years included service as an advisory board member to CFM Partners in Washington, DC (banking education), James F. Reda & Associates in New York and Atlanta, a compensation practice (now part of Arthur J. Gallagher & Co.), and the Project Management Institute.

In 2007, after stepping down from NACD leadership to serve as a senior advisor to the organization, he continued some of his advisory roles. In 2010, he was diagnosed with Alzheimer’s, and faced the disease with all the energy and good cheer he had given his life’s earlier missions. He agreed to participate in two clinical studies at the Memory Disorders Program at Georgetown University Medical Center. During these seven years as he came to terms with the disease, he continued his volunteer work with the West End Library, as well as So Others Might Eat, and Miriam’s Kitchen, two social service programs for the homeless population in Washington, DC. Always a family man, his final years were full of joy as his beloved children themselves became parents. His last gift of many to humanity was the donation of his brain to Georgetown University Medical Center for further research with Alzheimer’s disease.

He is survived by his wife of 45 years, Dr. Marie Raber, Associate Dean of the School of Social Work at Catholic University; their son Commander Roger W. Raber, Jr., U.S.N., his wife Heather, and their two sons, Jack and Elliot; as well as their daughter, Robyn Borgelt, her husband Nate, and their children Anna and William.

A funeral Mass will be held at Holy Trinity Catholic Church in Georgetown on October 21, 2017, at 10:30 A.M.. There will be a one-day wake at De Vol Funeral Home the day before from 2:00 P.M. to 4:00 P.M., and from 6:00 P.M. to 8:00 P.M. All are welcome. In lieu of flowers, the family asks that donations be sent to Georgetown University, Attn: Memory Disorders Program, Bldg. D, Suite 177, 4000 Reservoir Rd., NW, Washington DC, 20057.

The Board’s Role in Addressing Geopolitical and Regulatory Shifts  

Jim DeLoach

Jim DeLoach

Assumptions about the geopolitical and regulatory environments are critical inputs into strategy-setting. If one or more assumptions prove invalid, the strategy and business model may require adjustment, and whether the organization is proactive or reactive is often a function of the effectiveness of its monitoring process. Protiviti recently met with 22 active directors during a dinner roundtable. The discussion revealed directors’ oversight concerns amid escalating geopolitical tensions and significant regulatory shifts.

Key Considerations

The jury is still out regarding what the Trump administration and Congress can accomplish on major policy fronts. What has become evident is that there are many policy initiatives that could have significant impacts on business at home and globally. These initiatives include tax reform, fair trade, energy independence, immigration policy (including H-1B visas), infrastructure investment, employment and labor, and streamlining of governmental agencies, among others.

Regulatory shifts are also possible, including healthcare reform, dismantling Dodd-Frank, and a scaling-back of the Environmental Protection Agency. Regulations could be impacted by cutbacks at several agencies.

Some directors expressed concern over the short-termism of thinking inside the Beltway, as well as longer-term sustainability issues such as income inequality, student debt levels, and pay-for-performance. They also voiced concern about policy decisions that could create talent shortages.

What role does the board play in overseeing developments in policy and regulatory reform, and how often is the board briefed on fresh developments? How are significant geopolitical developments considered?

Several concepts for sound oversight were discussed.

1. A process is required to navigate the effects of policy, regulatory, and geopolitical shifts. This process should include monitoring legislative, regulatory, and global market developments through hiring insiders and consultants; tracking developments in published sources; monitoring geopolitical hot spots; and keeping close tabs on special interest groups. The process also entails engaging legislators, regulators, and policymakers through a variety of communications tactics, and continues with responses to new legislation and regulations through performing impact assessments, updating policies, and modifying existing and implements new processes and systems.

During the roundtable, several directors expressed concern about fair trade and risk of protectionist policies. The new administration appears to be committed to a reset of the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership. It is also focused on addressing trade issues with China. How these policy initiatives play out can significantly affect companies’ operations in or exports to these foreign markets and even transactions with suppliers in these markets.

2. Evaluate strategic assumptions. Every organization’s strategy has underlying explicit or implicit assumptions about the future that represent management’s “white swans,” or expectations about the regulatory environment and global markets. In these times of uncertainty, it makes sense for the board to assess the underlying strategic assumptions in light of likely policy actions by the executive or legislative branches that can impact the regulatory and geopolitical landscapes. If it’s possible that one or more assumptions might be rendered invalid, senior management should assess the ramifications to the strategy and business model.

3. Consider the implications of scenarios germane to the sectors in which the organization operates and prepare accordingly. Management should define plausible and extreme scenarios. The impact of various policy initiatives on the company’s markets, channels, customers, labor pool, supply chains, cost structure, discretionary spend, and business model should be considered. Scenario planning can be useful for formulating response and contingency plans. One major Japanese automaker spent three months following the 2016 election evaluating alternative scenarios resulting from Trump’s policies and their impact on U.S. and global sales. The company formulated contingency plans to pivot should a disruptive change occur, while also embracing the incoming administration as a market opportunity.

4. Prepare for more discretionary spending capacity. The Trump administration is looking to reduce the corporate tax rate significantly, make it easier for U.S. firms to repatriate profits earned and taxed abroad. It also seeks to eliminate the corporate alternative minimum tax and provide special deductions for firms engaged in domestic manufacturing. While these proposals have a long road to being passed, companies should consider how to deploy the hypothetical additional cash flow. Some examples include undertaking new investments, reigniting deferred projects, enhancing compensation to retain employees, and increase dividend rates, among other options.

5. Pay attention to sovereign risk. The primary objective of managing sovereign risk is to protect company investments from risks of impairment and sustain returns on investment (ROI). Investment impairments from confiscatory actions such as nationalization of the business or expropriation of assets may occur. ROI reductions may arise from discriminatory actions directed to the company, a targeted industry, or companies from certain countries in response to American policy. Actions could include additional taxation, price or production controls, and exchange controls. In addition, investment impairments and ROI reductions may occur due to circumstances such as violent political unrest or war. These risks must be addressed by understanding the driving forces of change in countries where the company does business and taking proactive steps to manage exposures.

When high risk of confiscation or discrimination emerges, your company might consider repatriation of cash to the extent allowed by controls and currency conditions. Look at managing down the investment by avoiding additional capital investments, cessation of inventory replenishment from abroad, and financing payroll and other operational functions through local cash flow. Initiating an exit by divesting assets is an option if a willing buyer is available. If necessary and feasible, moving tangible and nontangible assets out of harm’s way may be appropriate. Entering into joint ventures with local and foreign partners may reduce exposure to confiscation risk since the presence of nationals can take a multinational under the radar. If cost-effective, political risk insurance is another option covering the risks of confiscation, political violence, insurrection, civil unrest, and discrimination.

6. Diversify if revenue mix is dependent on government funding. Defense contractors can capitalize on defense spending and materials companies; heavy equipment manufacturers and construction contractors can focus on infrastructure spending opportunities. However, companies and nonprofit organizations with a high dependency on government contracts and federal funding may want to evaluate opportunities to deploy their core competencies in markets other than the public sector. It is not unreasonable to surmise that the new administration and the current Congress will restrain growth in budgets in areas that are not deemed a priority.

As priorities and policy direction become clearer over time, companies can firm up their responses to potential changes in the operating environment. Meanwhile, it is never too early to start thinking about alternatives. Directors should ensure that their companies’ boards are paying attention.

Dig into deeper insights from Protiviti by visiting their Board Perspectives piece on emerging geopolitical and regulatory challenges.

Corporate Culture, Public Trust, and the Boardroom Agenda

In the final mainstage panel discussion of the National Association of Corporate Directors’ (NACD) 2017 Global Board Leaders’ Summit, Richard Edelman, the CEO of communications marketing firm Edelman, spoke with Nicholas Donofrio and Helene Gayle about how corporate culture drives long-term value. He preceded the conversation by offering some sobering statistics. Since 2001, Edelman has researched and measured the trust invested in business, nongovernmental organizations, media, and government by the public. It found that, around the world, only 47 percent of the general population thinks these institutions are trustworthy.

Little more than half (52%) of respondents say they trust businesses. CEO credibility dropped in all countries surveyed, reaching an all-time nadir of 37 percent. Fearful over disappearing employment opportunities, people perceive their current way of life as being threatened, resulting in a rise in protectionist, antitrade sentiments. In addition, looking at survey responses from the investor community, 76 percent of investors indicated that companies should address one or more social issues, ranging from employee education and retraining to environmental issues.

From Edelman’s point of view, business is the last fortification defending public trust in our age-old social institutions. “The board matters,” Edelman said. “Reputation matters. Are you engaged when a company is considering the issues of the day? You have to be. You can’t sit back and let management do this themselves.”

When looking to solve the widespread issue of flagging trust in businesses, directors may do well to take a look at corporate culture. Healthy corporate cultures help drive bottom-line results, increase customer satisfaction, and attract top talent at all levels of the organization. And in the past year alone, media headlines in industries ranging from banking to healthcare to entertainment to automotive manufacturing have highlighted examples of how deficient corporate culture can lead to financial and reputational disaster. As both a source of competitive advantage and as a potential risk, culture is a natural component of boardroom agendas. Yet all too often, it is regarded as a secondary human-resources issue that gets directors’ attention only when a problem arises. In NACD’s most recent public company governance survey, less than half of directors reported that their boards assessed the alignment between the company’s purpose, values, and strategy in the last 12 months.

To upend the common perception of culture as a soft issue, NACD convened directors and governance professionals to develop practical guidance that directors can use to enhance their culture-oversight practices. The resultant publication, The Report of the NACD Blue Ribbon Commission on Culture as a Corporate Asset, makes ten recommendations on culture oversight and offers associated action steps and tools for directors. Donofrio, a director of Bank of New York Mellon, Advanced Micro Devices, and Delphi Automotive PLC, and Gayle, a director of the Coca-Cola Co., the Rockefeller Foundation, and the Center for Strategic and International Studies, co-chaired the commission.

“In many ways, the issue of trust is aligned with issues of culture,” Gayle observed. “While we have a sense of what our culture is, we haven’t defined it and put those pieces together so that culture can be a unifier across those issues.”

“It truly is not just about [financial] results anymore,” Donofrio added. “It’s about what you did and how you did what you did.” And if board members have concerns about how those results were achieved, it’s time to start asking the CEO and management team questions about the beliefs, protocols, and procedures underpinning the company’s performance. If the chief executive is resistant to examining these issues in an open dialogue with directors—or, worse, is taking positions contrary to the company’s espoused culture and values— that is a sign the company does not have the right leadership in place. As Gayle emphasized, “Creating and managing the company’s culture is the responsibility of the CEO and management team. Culture oversight, and holding leaders accountable for a vibrant and healthy culture, is the board’s job.”

Regarding the rising importance placed on a company’s stance on social issues such as education, the environment, or free trade, Gayle advised that directors frame boardroom discussions on these matters in terms of how a given issue is aligned with the business and take into consideration the communities in which the firm operates and the customers it serves. When Edelman asked if board recruitment should include asking directors about their views on key social issues, Donofrio said that these discussions ultimately tie in to the director-recruitment process, where the criteria for board candidates should include their ability to contribute to and support healthy culture—in the boardroom and across the firm as a whole.

Gayle agreed. “How you relate to society is part of how the company sees itself and how the company expresses its culture. Having a well-thought-out position on how [a particular social issue] furthers the business, how it creates an environment of trust, and how it fosters talent—all those things have to do with culture.”

 

Download The Report of the NACD Blue Ribbon Commission on Culture as a Corporate Asset for recommendations and guidance to help boards benchmark and improve their culture-oversight practices. NACD members can access the report’s toolkit that contains boardroom discussion guides, sample culture dashboards, and other materials.

Culture and the Rewards System

David Swinford

Take a look at the business section of any publication today and it’s clear: discussions of corporate culture have leaped from the pages of academic commentary to the agendas of directors across the world. Between the coverage of misdeeds at Wells Fargo & Co. to reported gender bias and workplace toxicity in the technology sector, the issue of a company’s culture is front and center. Investors, boards, and management teams are seeing direct impacts to shareholder value, which is leading companies to pay attention to their culture without any regulatory mechanism in place encouraging them to do so. They are trying to understand the common current that runs through their organization and whether it creates an environment for value creation or an environment that hinders it.

As we noted in Pearl Meyer’s contribution to the Report of the NACD Blue Ribbon Commission on Culture as a Corporate Asset, creating a culture of performance begins with the people. It’s not about formal corporate values or mission statements, nor is the culture fully represented in the leadership of the management team and its “tone at the top.”

How companies evolve beliefs and procedures around hiring, retaining, developing, and rewarding a workforce—and how they implement them practically—is what defines a corporate culture at its core.

Thinking about culture in this way does require expanding one’s perspective on the topic. Similarly, when it comes to aligning compensation with that culture, we have to think broadly. Constructing executive pay programs so they support the organization’s long-term business strategy has become a fairly steady drumbeat, but is that executive pay program also in line with company-wide recognition and rewards systems? Ideally, it should be. A productive compensation philosophy is one that is well-known and well-understood at all levels and meets the achievement and recognition needs (both financial and non-financial) of its workforce and management team.

There are two straightforward questions a board can ask to uncover the firm’s true philosophy when it comes to talent development, career progression, and compensation:

  • how do people move up within the organization; and
  • what can stall or derail a career?

The answers will point directly to the culture and have tremendous influence on the company’s success.

Operating under the assumption that a “good” culture is the goal, in a positive environment there is always a high level of transparency. Employees up and down the command chain understand the system, believe it is fair, and have a clear idea about how they can advance their careers. There is consistency at all levels in the kinds of behaviors that are compensated in some way and it is clear that actions which run counter to the company’s values are not rewarded.

Accountability is a key part of the system. Personal performance and team and/or business unit achievements are evaluated on the basis of well-established goals and metrics. And finally, a degree of flexibility offers room to evolve strategy or take into account changing business needs or circumstances.

Perhaps what’s most important for boards and management to know is that this scenario is not mythical or unattainable. There are companies well known for their vibrant, performance-based cultures and the long-term value creation that follows. What they share is a company-wide compensation philosophy that carefully tracks to their business and talent strategies. They implement programs that appropriately incentivize, but also more holistically develop talent, understanding that people are at the heart of the company’s success.

As readers of this blog can attest, the role of the board is going to evolve. Today, we are seeing a demonstrated need for greater stewardship over corporate culture. As this and other “soft” issues become increasingly important to investors and impactful to the bottom line, the compensation committee will continue to find  itself in a unique and powerful position to effect change and build value for the organizations they serve.

David Swinford is president and CEO of Pearl Meyer. 

Benefits for Providing Outplacement From a Client

Most of us are familiar with how outplacement can assist those being affected by a reduction in force (RIF) or a smaller scale layoff.  Employees can utilize outplacement services to complete a skills assessment, develop a resume, begin looking for new job opportunities and receive help in developing public statements about their departure from an organization.  What is less well-known is the value offering outplacement can bring to the company.

This recession is affecting business across industry lines, and many companies are being forced to lay off workers.  Whether an organization is letting go 10 or 1,000 people, providing outplacement can provide significant value — not just to the individuals being affected, but to the company as well.  In fact, the benefits of outplacement can outweigh the costs.  Of course when the economy is stalled and companies are looking for ways to cut costs, outplacement may seem like a luxury.  Why pour capital into departing employees when you could invest in those who are staying and initiatives to move the company forward?  By investing in outplacement, organizations are not only helping those who have been laid off leave with dignity, they are also investing in the future of their organization.

Here are some ways offering outplacement services can benefit organizations.  It can:

PROVIDE A COMPLETE RIF STRATEGY

Outplacement consultants can develop a plan for carrying out all aspects of a layoff including coordinating the day-of events and services, and creating strategies for handling the critical days before and after.  It is best if the team comes in early so it can provide the most value.

SUPPORT MANAGERS

Outplacement professionals can support managers, leaders and management teams throughout the process.  Managers are not always familiar with how best to break the news of a layoff, how to inform those who are affected, or even how to reassure and motivate their remaining team or department members. The outplacement team can give managers the tools they need to endure the layoff process and help their own teams recover and move on.

RE-RECRUIT CURRENT EMPLOYEES

A RIF can often leave employees shaken and unsure of their futures with the company.  They may be left wondering, “Am I next?”  Leadership can utilize outplacement strategies to communicate with employees to let them know where they stand, what the organization’s plans are for the future and how the company will support them.  Employees will be better able to focus on their work today, if they aren’t preoccupied with thoughts of being laid off tomorrow.

RECRUIT FUTURE EMPLOYEES

The marketplace of potential future employees is watching during the layoff process, and will take note of how people are treated.  If the RIF is bungled, the organization may have trouble competing for top talent when the economy rebounds.

PROTECT REPUTATION

Unfortunately, mishandling a layoff can sully even the most stellar reputation.  Community-based organizations, such as banks and hospitals, also need to be cognizant of how their customers might react to a RIF.   Public companies need to think of their shareholders.  Outplacement professionals can coach company leaders in how to best support individuals so they can leave the company with their dignity intact — and the organization’s hard-earned reputation can stay unblemished as well.

CREATE A COMMUNICATIONS PLAN

Employees will be more trusting and productive during difficult times if they can rely on regular and honest communication from leadership.  When employees know that leadership is promoting open dialog about a RIF (and its fallout), they can take their focus off office rumors, and put it back on work.  Outplacement teams can help management institute multiple forms of communication — both formal and informal — including staff meetings, town hall-style meetings, email messages, informational coffees and frequent walks around the office to answer employees’ questions.  Outplacement consultants can also help develop a media strategy to determine if and how a public statement should be made.

MINIMIZE RISK

Outplacement teams can also help mitigate other risks, such as IT, financial, legal, violence and even public relations threats.  Undergoing a layoff can leave companies vulnerable, so risks should be minimized to ensure the health of the organization.

LOOK TOWARD TO THE FUTURE

Often, leadership teams are so focused on the day of the layoff, they don’t plan for what will come after.  How will the organization regroup, move forward, and maintain or redefine the culture, mission and goals?  An outplacement team can develop strategies and tactics to help the organization focus on what comes next.

It may be tempting in the face of a financial crisis for organizational leaders to consider cutting outplacement services, but it will be costly in the long run.  Bringing on a team of outplacement professionals will help to ensure organizational resilience.  A layoff can be a devastating event for a company, but with the proper planning and strategy, the organization can come out on the other side and begin to rebuild a bright future.

This article was provided to Career Partners International by Elaine Varelas in Boston, MA.

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Emerging Governance Lessons from Equifax

Michael Peregrine

It’s way too early to make any judgments on board conduct in the Equifax controversy. That’ll be for the courts to decide, and they’ll take a long time getting there. But it’s not too early to draw some useful governance lessons from the situation, if media reports are to be believed. And these are lessons that apply regardless of whether the board serves a publicly held, privately owned or nonprofit corporation.

Some of these lessons relate to the board’s crisis management responsibilities. Others relate to the oversight of the board-CEO relationship. Still others invoke expectations of board cybersecurity oversight.

All of the possible lessons are premised on the increasing recognition of the inevitably of crisis, be it black swan or foreseeable, cybersecurity-related or “from out of left field.” For most complex enterprises, crises are just going to happen. The only questions are when, how big the crisis will be, and from what direction it will come. The most prescient of boards will embrace this inevitably and prepare for a corporate governance version of Defcon 3.

The other lessons are more practical in nature.

1. Emergency Succession  The swiftness of Mr. Smith’s removal speaks to the “nuts and bolts” value of having an emergency executive succession plan. The sudden Smith transition is a shocking example of how emergency succession applies to circumstances beyond customary triggers such as death, health care and family considerations. In today’s crisis-oriented environment, the need to separate from, and replace even the youngest, seasoned and most successful executives can arise at a moment’s notice.

Succession is a part of the board’s basic responsibilities that often gets lost amid the confluence of best practices and consultant messaging. Such planning can be complicated. According to the New York Times, the Equifax board regarded many of its original replacement candidates as “tainted” by ties to the cyber breach—including some executives who are believed to have sold company stock after the breach was discovered but before it was disclosed to the public.

2. Structuring the Separation There’s also the need to anticipate both the classification and the financial terms of executive separation in the context of a crisis environment. According to media reports, Mr. Smith’s separation was described as a retirement. Yet, the board announced that it was reserving the right to retroactively classify the separation as for-cause termination, based upon the ultimate findings of a board special committee charged with the responsibility for reviewing the data breach. Such a reclassification would have obvious and material implications for Mr. Smith’s compensation arrangements, including valuable stock awards.

This action by the Equifax board reflects several key realities of the crisis environment.

  • It will often be difficult to fairly ascertain the presence of cause for termination purposes in the direct aftermath of a crisis. The consideration of the results of an internal investigation may be a necessary and equitable precondition.
  • While not yet considered best practice, the use of clawbacks and other forms of executive compensation disgorgement arrangements is increasingly viewed as an effective response to executive fraud, malfeasance, or other misconduct. Clawback application has most recently been demonstrated by the actions of a financial services company board in response to a significant corporate controversy.
  • Boards must face the harsh reality of the need to impose separation in advance of intense scrutiny by the media, regulators, and possibly even legislators. The sometimes corporate brutality of “throwing executives under the bus” may be perceived as both part of an effective board response (i.e., to demonstrate board accountability), and necessary to preserve the reputation of the company and the interests of its stakeholders. According to the Wall Street Journal, the departures of the Equifax information officer and chief security officer were not considered by the board to be actions significant enough in stature. Thus, the concept of “strict accountability” for executives in the context of major corporate controversies may increasingly be considered an indirect part of the compact between the board and management.

3. The Standard of Conduct  Another lesson is for the board to reconsider the effectiveness of its own cybersecurity oversight efforts. The leading judicial decisions have to date established a high Caremark-style barrier for demonstrating breach of cybersecurity oversight responsibilities. Notable in this regard was the decision of the court in the Home Depot case to extend the protection of the business judgment rule to the board’s conduct, despite its clearly expressed concerns about the speed with which the board implemented protective measures.

However, boards should not place unreasonable reliance on Caremark protection. As instances of cyberbreaches become more egregious, it is reasonable to project a stricter approach to director liability in future cases.

4. The Self-Critique Perhaps the most basic governance lesson from Equifax is the need for board self-evaluation. Any board-driven internal investigation of a corporate controversy will benefit from consideration of the adequacy of the full board’s related oversight efforts. For example, the Wall Street Journal reported that weaknesses in Equifax’s cybersecurity measures were “apparent to outside observers in the months before the hack.” Was the board made aware of these weaknesses? If not, why not? Such a self-critique has been an accepted component of truly comprehensive internal investigations since the “Powers Report” from the Enron board. The willingness to consider how possible governance inadequacies may have contributed to crises can serve as a powerful demonstration of the board’s good faith and assumption of ultimate responsibility.

Equifax is not, as some have characterized it, the second coming of Enron. That’s unnecessary hyperbole at this point. As exaggerated as commentary may be, what is known about the crisis offers a valuable teaching moment to boards about expectations of fiduciary conduct in crisis situations, cybersecurity or otherwise.

Michael W. Peregrine, a partner in McDermott Will & Emery, advises corporations, officers and directors on matters relating to corporate governance, fiduciary duties and officer/director liability issues. His views are his own and do not necessarily reflect the views of McDermott Will & Emery, its clients, or NACD.

Isaacson: To Be Like da Vinci, Be Passionately Curious

In addition to serving as the CEO of the Aspen Institute and having served as the managing editor of Time and as the chair and CEO of CNN, Walter Isaacson is an author and historian who specializes in telling the life stories of the great minds that have fundamentally shaped our world.

From Benjamin Franklin and Albert Einstein to Henry Kissinger and Steve Jobs, Isaacson has observed that the common denominator among the greatest geniuses in human history is a sense of curiosity that spans multiple disciplines—that and a little rebelliousness. He sat down with NACD Directorship Editor in Chief Judy Warner at the 2017 NACD Global Board Leaders’ Summit to discuss his latest book, a biography of Leonardo da Vinci, and the relevance of the life and work of the ultimate Renaissance man to the digital age.

For Isaacson, Leonardo’s unquenchable curiosity was one of his defining qualities, observing that the questions that the artist would jot down and explore through the course of his notebooks would never directly result in a larger project, be it a work of art or an invention. But there was value in the process of discovering answers to even the most mundane of questions, be it figuring out why the sky is blue or how they made locks in Milan. The artist developed a heightened understanding of the patterns of the world in which he lived, and this understanding fueled his work.

“Sometimes you wander and you do what any good corporate director would do, which is have a vision of what you’re doing and be tactical and open when something comes up. Especially in the digital age, you have to be open to this,” Isaacson said.

And openness to exploring new possibilities has been a guiding principle in Isaacson’s own career. “I began with print, and now dabble in everything from films to podcasts to television and books,” Isaacson reflected. “Each time, I say, ‘Hey, that’s a new opportunity.’ Leonardo was fascinated by everything, and that’s the best advice you can give someone: always be passionately curious.”

Isaacson also identified diversity as a critical factor to innovation. Looking at the Florence, Italy, of the 1400s, he observed that an influx of immigrant populations allowed for people of different background to mingle and exchange ideas. He also sees similar social conditions as being the impetus for the creation of jazz, which some have hailed as America’s greatest art form. “If there are people with different viewpoints and backgrounds, the edginess produces a creativity that uniformity doesn’t produce,” Isaacson said.

Thanks in part to the edginess of his environment, Leonardo helped to redefine art—as did his rival, fellow master painter Michelangelo. For Isaacson, the competition between these two men was paralleled in the late twentieth century by the competition between technology titans Steve Jobs and Bill Gates. But where Jobs focused on end-to-end control of his products and emphasized elegant design, Gates focused on creating software and letting other companies create the hardware that would serve as vehicles for his products. “And each model works well,” Isaacson said. “There’s no right answer. Jobs believed that beauty mattered, but Bill Gates produced a better business model.”

Jobs and Gates also helped to usher in the digital age, which, like the Renaissance, has completely reshaped how we think about and orient ourselves to our world. This new environment—driven by machines, machine learning, and artificial intelligence—has made some wonder how people will fit in to it. “I hear people say you have to learn coding. That’s ridiculous. We’ve learned that machines will learn how to code better than us, but they can’t learn creativity. What will matter in the future is getting people to connect the arts and technology. We need to be like Leonardo, which is to make no distinctions. Love the beauty of an equation as much as you love the beauty of a brush stroke.”

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