What Boards Should Know About the Paris Agreement

The twenty-first session of the Conference of Parties (COP) convened in Paris Nov. 30-Dec. 11 last year to negotiate a legally binding international agreement on mitigating the effects of climate change. Known as both COP21 and the 2015 Paris Climate Conference, this historic meeting of parties to the United Nations Framework Convention on Climate Change (UNFCCC) resulted in the first-ever unanimous accord, with 187 countries pledging collective action to cut carbon emissions. Despite a U.S. Supreme Court setback to environmental regulations on February 10, this deal will have significant consequences for business worldwide—consequences that will unfold as governments establish regulations that enact their support for and compliance with the Paris agreement.

The Sustainable Innovation Forum 2015

(Photo: Climate Action/The Sustainable Innovation Forum 2015)

What are the key elements of the agreement?

The COP21 accord seeks to accomplish specific major goals:

  • To restrict the increase of global temperatures to “well below” 2.0°C beyond those of the pre-industrial era, and to endeavor to limit their rise to a maximum of 1.5°C above pre-industrial averages.
  • Curtailing the amount of greenhouse gases (GHGs) generated by human activity to levels that trees, soil, and oceans can absorb naturally by sometime within the latter half of this century.
  • To review each country’s contribution to emissions reduction every five years so they can scale up to the challenge.
  • For wealthy countries to provide “climate financing” that will enable poorer countries to adapt to climate change and switch from fossil fuels to renewable energy sources.

How can countries understand and manage their own emissions?

Like any business goal, understanding and managing emissions requires three basic steps: measurement—determining where you are and where you need to go; management—determining opportunities, challenges and actions; and reporting—monitoring and disclosing performance over time.

Among the most significant outcomes of COP21 are action plans for the ten largest CO2 emitters by country.  These countries include (in order of the size of their emissions) China, the United States, the European Union (28 member states), India, Russia, Japan, South Korea, Canada, Iran, and Saudi Arabia.  The major global economic sectors emitting the highest amounts of GHGs are establishing mitigation objectives (i.e., emission reduction targets) referred to as Intended Nationally Determined Contributions (INDCs).  For instance, the European Union has set a target of at least a 40% reduction by 2030, and the United States is aiming for a 26%–28% reduction by 2025.

Such a global effort will have credibility only if these INDCs are made publicly available. The five-page United States INDC published on the UNFCCC site outlines how the country is planning to measure, manage, and report its performance; it also references existing U.S. laws and standards and draws on the EPA’s Greenhouse Gas Inventory Report: 1990–2013.  This report breaks down responsibility for sources of GHG emissions over time and by major industry sector.

A significant amount of research went into the target of a 26%–28% reduction by 2025.  The U.S. federal government is already taking steps to reduce emissions, and public-private collaborations have developed that will enable these sectors to leverage high-efficiency, low-missions solutions and incentivize market and technology innovations in response to the challenge.

This drive is creating a global wave of new business and investment opportunities and is no longer regarded as a fringe activity. Goldman Sachs produces regular equity research, such as The Low Carbon Economy—GS Sustain equity investor’s guide to a low carbon world, 2015–25 and Standard & Poor’s has an entire team dedicated to analyzing sovereign ratings, corporate credit risk, and carbon efficient indices.

What kind of impact will climate change and the Paris Agreement have on a company’s valuation?

In an update to the Annual Study of Intangible Asset Market Value, Ocean Tomo LLC reveals that the intangible asset value of the S&P 500 grew to an average of 84% by January 1, 2015, which represents an increase of four percentage points over 10 years.  As management of intangible assets has become increasingly critical to a company’s valuation, expectations for transparency about how these ‘intangible’ risks are managed have risen.  These risks now extend to climate change and the costs and benefits of reducing GHG emissions.

Companies can show that they are actively managing climate-change risks and reducing their GHG emissions through research surveys like the CDP (formerly known as the Carbon Disclosure Project).  The CDP was founded in 2000 in order to collect data related to carbon emissions and distribute it to interested investors.  What began as a small group of activists has grown to include more than 800 institutional investors representing assets in excess of US $95 trillion.

Interested investors (asset owners and managers) have demonstrated their support of the CDP by becoming CDP signatories and being involved in a range of investment-related projects.  The list of CDP Signatories and Members includes some of the largest institutional investors, such as Bank of America, BlackRock, BNY Mellon, CalPERS & CalSTRS, Goldman Sachs, Morgan Stanley, Northern Trust, Oppenheimer Funds, State Street, TIAA-CREF, T. Rowe Price, and Wells Fargo.  The CDP is by far the most influential organization specializing in this area, and it maintains a comprehensive public collection of corporate performance information.

Data posted on the CDP website can be organized by country, index, industry, or company, and is also presented in reports such as the following:

These reports can be helpful to any company seeking to establish its own GHG emissions strategy.  Drawing from public sources also allows a company to see the commitments and disclosures of industry peers, what customers may expect, and how suppliers are improving their own efficiency.  In addition, GHG-specific data such as that reported through the CDP is now being integrated into specialized research tools, for example, analyses on Bloomberg’s Sustainable Business & Finance website.  Any company (or investor) with a Bloomberg subscription can quickly compare and contrast a range of GHG-related factors, ranging from policies (i.e., climate change policy, energy efficiency policy, environmental supply chain policy) to specific GHG metrics (i.e., energy consumption per revenue, total GHG emissions per revenue, percentage of renewable energy consumption).

Do corporate and institutional customers care?

Consider the manner in which new market demands ripple through supply chains: ISO 9000, Y2K, Dodd–Frank/Conflict Minerals, etc.  That same dynamic is playing out around GHG emissions.  Once an organization makes a commitment to understand its own GHG footprint, it soon recognizes the degree to which its purchasing decisions influence its overall GHG footprint.

In 2010, Wal­-Mart Stores Inc. announced its goal to eliminate 20 million metric tons of GHG emissions from its global supply chain by the end of 2015.  The company actually exceeded its commitment by eliminating 28.2 million metric tons, which is the equivalent of taking more than 5.9 million cars off the road for an entire year. Wal-Mart achieved this reduction by implementing innovative measures across both its global operations and those of its suppliers: enhancing energy efficiency, executing numerous renewable energy projects, and collaborating with suppliers on the Sustainability Index to track progress toward reducing products’ overall carbon footprint.  By 2017, Wal-Mart will buy 70% of the goods its sells in U.S. stores from suppliers that participate in this Index.

Then, of course, there is the world’s largest single procurement agency, the United States’ General Services Administration (GSA), which spends more than $600 billion annually.  The GSA and the U.S. Department of Defense (DoD) are both actively involved in the management of GHGs in their supply chains.  These and other federal agencies are working closely with the White House Council on Environmental Quality to understand the GHG footprint of the government’s purchasing decisions and to engage and educate suppliers on GHG reduction strategies.  The Federal Supplier Greenhouse Gas Management Scorecard lists the largest suppliers to the US government by spend and identifies whether the supplier discloses its emissions and whether it has set emissions targets.  This information is drawn from public sources, and, like the CDP, this scorecard creates added market pressure on public and private companies to measure, manage, and report on GHG-related activities.

Do consumers care?

In 2015, Cone Communications partnered with Ebiquity to field its third survey of global attitudes, perceptions, and behaviors around sustainability and corporate responsibility.  They conducted an online survey of more than 9,500 consumers in nine of the largest countries as measured by GDP: the United States, Canada, Brazil, the United Kingdom, Germany, France, China, India, and Japan.  The survey broadly described corporate social responsibility (CSR) to respondents as “companies changing their business practices and giving their support to help address the social and environmental issues the world faces today.” Respondents were then asked whether in the preceding 12 months they had:

Corporate Social Responsibility (CSR) graphic

 

What does the agreement mean for your business?

Awareness about fossil fuel use, carbon and GHG emissions, and climate change impact is proliferating in all segments of the economy—public and private companies; federal, state, and local governments; employees, customers, and shareholders; etc.  Today’s management teams and directors need to understand where their company stands on the risk/opportunity spectrum.  To begin or advance the boardroom conversation on climate-change risks and strategies for reducing GHG emissions, consider the following:

  • Look across the company’s value chain. Where is the company most vulnerable geographically?  Which facilities are purchasing power from the highest and lowest carbon emitting electric utilities? Are their GHG reduction opportunities through our electric utility or through other energy providers in our region?
  • Have we taken a public position on reducing GHG emissions? Have we set goals and targets?  If not, why not?  If so, how are we performing? Do we have quantifiable and verifiable information?
  • What positions have our largest customers taken on the issue of GHG emissions? What are their expectations of us as a supplier?
  • Is our industry sector a leader or a laggard? How is our organization doing in comparison with our peers?

As part of the lead-up to COP21, the Science Based Targets (SBT) initiative was formed to actively engage companies in setting GHG emission reduction targets.  A collaboration among the CDP, the UN Global Compact, the World Resources Institute, and the World Wildlife Fund, the SBT initiative publishes the emission reduction targets set by more than 100 of the world’s largest companies.  Here are just a few examples:

  • Coca-Cola Enterprises has committed to a 50% reduction of absolute GHG emissions from their core business operations by 2020, using 2007 as the base year. Coca-Cola Enterprises also commits to a 33% reduction of the GHG emissions associated with manufacturing of their products by 2020, using 2007 as the base year.
  • General Mills has committed to reducing absolute emissions by 28% across their entire value chain from farm to fork to landfill by 2025, using a 2010 base-year. These reductions include total GHG emissions across all relevant categories, with a focus on purchased goods and services (dairy, row crops, and packaging) as well as delivery and distribution.
  • Procter & Gamble has committed to cutting emissions from operations by 30% from 2010 levels by 2020.
  • Sony has committed to reducing GHG emissions from its operations by 42% below fiscal year 2000 levels by fiscal year 2020. The company also has a long-term plan for reducing its environmental footprint to zero by 2050, requiring a 90% reduction in emissions over 2008 levels by 2050.

In October 2015, more than 80 major U.S. corporations signed the American Business Act on Climate Pledge, among them such companies as  Alcoa, American Express, Apple, AT&T, Berkshire Hathaway Energy, Dell, GE, General Motors, Goldman Sachs, Google, Johnson & Johnson, McDonald’s, Nike, Pepsi, Pacific Gas & Electric, Salesforce, Starbucks, UPS, etc.  A range of quantitative GHG-emission reduction goals and targets are available for public review on the SBT website.

In addition, entire industries—such as the fashion and hospitality industries—are working together to set their own targets.  These types of voluntary public commitments are setting precedents and thus expectations for others within and across industries and economic sectors.

Given the pending presidential election in the United States and the existing regulations referenced in the United States’ own INDC, it is unlikely that significant regulatory changes will impact business in 2016.  It is likely, however, that existing standards and Executive Orders will shape the conduct and actions of specific industries.

Growing interest in the federal government’s own footprint and those of its suppliers may constitute the most significant impetus for change. As the GSA and the DoD increasingly seek suppliers with the lowest GHG emissions, these suppliers (public and private) will be incentivized to measure, manage, disclose, and verify their GHG emissions.

The Sustainable Innovation Forum 2015

(Photo: Climate Action/The Sustainable Innovation Forum 2015)

What do directors need to do now?

  1. First and foremost, become familiar with your company’s carbon profile and sustainability image. You need to know the carbon footprint of your company, the company’s plans to reduce that footprint, and the company’s messaging about those plans.
  2. Whether your company is public or private, make sure that its customers know the company’s story. Business-to-business customers expect suppliers to measure, manage, and report on carbon emissions. Directors can ensure that a credible and compelling message is communicated to customers.
  3. Conversely, directors can ensure that the company exhibits GHG consciousness when choosing major suppliers. In a choice between two qualified vendors, why not pick the one that is also better for the sustainability of your business and the planet?
  4. If you serve on the board of a public company, look for the names of your largest investors on the list of CDP signatories, realizing that more and more of these investors are conducting due diligence on carbon emissions in their portfolio companies. Urge your CEO to announce carbon reductions in any communications with your company’s climate-oriented investors.
  5. Develop your business case for carbon reduction and other sustainability measures. Reducing carbon emissions means the reduction in the use of fossil fuels, which translates to cost savings. Diversifying the firm’s energy portfolio to include lower emission sources is also a strategic move in today’s market.  Seeking out and procuring lower-emissions goods and services has become commonplace.  Leverage your procurement spend to help reduce your overall GHG footprint.
  6. Urge management to reach out to sources knowledgeable about climate change in order to learn more from them or even to consider them as possible business partners. Wall Street firms, private equity investors, lenders, insurers, rating agencies, and stock exchanges are all becoming involved in climate issues and can be valuable partners in identifying future risks and opportunities, as well as crafting new strategies.
  7. Ensure your investors understand and appreciate the value of investments your company makes to reduce its carbon footprint and improve the sustainability of its operations.

For more practical guidance on board oversight of this important issue, please use NACD’s Oversight of Corporate Sustainability Activities Handbook.

About BrownFlynn (www.brownflynn.com) and the authors:

BrownFlynn is a corporate sustainability and governance consulting firm with 20 years of experience supporting public and private corporations in the development and implementation of strategic corporate responsibility and sustainability programs.  www.brownflynn.com

Barb Brown, co-founder and principal, has led the firm since 1996, when it was established to address the growing demand from shareholders on intangible issues such as corporate responsibility; sustainability; environmental, social, and governance topics.  Recognized as a pioneer in the industry, Brown is a sought-after speaker, author, and thought leader and has contributed her expertise to a range of professional and industry groups, as well as numerous multinational corporations.

Mike Wallace is managing director at BrownFlynn. An NACD member, he has been a regular contributor to NACD programs and publications.  He has worked in the field of corporate responsibility/sustainability for more than 20 years and has presented on these topics to audiences at NACD Master Classes, the NACD Global Board Leaders’ Summit, and meetings of the Society of Corporate Secretaries, and the National Investor Relations Institute.  He advises public and private companies as well as boards and board committees on these issues.

The Recruiter as Business Partner

Digital communication has been with us for some time now, but the impact since 2000 is nothing short of staggering.

Increasingly sophisticated algorithms for analyzing online behaviors have shattered what might have been called collective knowledge into tiny shards of specialized information.

Remember the “thousand channel universe”?  It became the “five thousand channel universe” before the ink would have been dry if they still used it.  If you want to know what damage the emerald ash borer is doing in Canada, you have 136,000 sources to choose from, delivered in 0.80 seconds.

recruiting on line

Unfortunately, it’s just not that simple….

This kind of specialization has impact on every aspect of knowledge and information retrieval.  Recruiting is no exception.  With recruiting on line, if you really need to find a German-speaking, left-handed tire changer to work in a garage in Bogota, just click the mouse.  Voilà.

 

But, just a  minute

Why, then, do 63% of CEOs in the United States fret that their strategies and plans for growth are at risk because of the availability of people with key skills?

Why do 93% of them feel they have to change their strategy for attracting and retaining talent?

Perhaps it’s because, instead of making recruiting easier, being able to process hundreds of thousands of resumes doesn’t just fill the pipeline, it can clog it.  Giant job boards can bury a promising resume simply by weight of numbers when a query results in several hundred, if not thousands of supposedly qualified results.

The downside of digital.

But the counter is not the solution.  To meet this challenge, the pre-qualification process gets increasingly granular– the determination of attributes, must-haves and like-to-haves – at the organization’s end as the HR or Talent Acquisition group seeks to fight through the clutter, reduce the number of duds and shorten the ever lengthening time to hire.

And the outside recruiting professional becomes an order taker.

Jim O’Malley, a 25-year veteran of the leadership talent biz, wrote an interesting series on this recently in ERE Media.  He cautions against the linear mindset that reduces recruiting to receiving a request to fill an open position, undertaking a lot of activity to source people, and eventually winding up with a hire.

 

Recruiting is a circle

Instead of a straight line, he writes, recruiting is a circle of activities starting with strategic workforce planning and ending after the hire with onboarding and assimilation.

To be effective in all aspects, recruiters need to be 100 percent immersed in the business and act as true business partners. (My italics)

Far from being the order taker, the excellent recruiter is your consultant.   Skillsets that will bear strongly on the success of a mission are customer service, communication, willingness to learn, listening skills, problem solving and critical thinking, and knowledge of how best to leverage today tools and technology.

O’Malley talks more about this in the second of a five-part series on Talent Acquisition.   You can jump in here and learn more.

 

 

 

The Cornerstone Eagle February and March 2016

THE CORNERSTONE EAGLE is the newsletter for senior executives, friends and partners of the Cornerstone International Group around the world. The Eagle is majestic, free and towers above all else when gracefully gliding the currents in the air. The Cornerstone International Group likewise feels close affinity with the Eagle, in professionalism in our practice, honesty and integrity in all our interactions, and making positive changes in our work and processes to improve and create added value for our clients and candidates.

Download The Cornerstone Eagle – February

Uncle Sam as Shareholder and Regulator

The regulatory burden on U.S. public companies continues to increase and the government’s role has expanded from that of just regulator to, in some cases, shareholder. That might leave some directors wondering how far into the boardroom Uncle Sam can reach.

A panel of financial industry and government experts convened last fall to discuss the influence of the federal government when it acts as either a shareholder or a regulator. The Clearing House Association and the University of Delaware’s John L. Weinberg Center for Corporate Governance facilitated the discussion with a program called The Government as Regulator and/or Shareholder—The Impact on Director Duties, which  included the following speakers and panel members:

  • Rolin P. Bissell, partner, Young Conaway Stargatt & Taylor LLP
  • Amy Borrus, interim executive director, Council of Institutional Investors
  • Laban P. Jackson, Jr., director, JP Morgan Chase & Co.
  • Peter A. Langerman, CEO, Franklin Mutual Advisers, LLC
  • Giovanni P. Prezioso, partner, Cleary Gottlieb Steen & Hamilton LLP
  • Gregg L. Rozansky, managing director, The Clearing House Association
  • Mary Schapiro, former chair, U.S. Securities and Exchange Commission (SEC)
  • Collins J. Seitz, Jr., justice, Supreme Court of Delaware

Charles M. Elson, director of the Weinberg Center and professor of finance, moderated the discussion.

The panel offered a wide range of perspectives, but a few common themes emerged that are applicable to directors across a variety of industries.  

Most panelists agreed that the 2010 Dodd-Frank Act was a response proportional to the 2008 global financial crisis, but expressed frustration with certain government bailouts and the political motivations influencing them. Several panelists indicated they felt uneasy about the broad scale of intervention that the federal government made into the private sector to bail out failing companies. The panelists cited the example of the U.S. Federal Reserve Bank’s $85 billion bailout of American International Group (AIG) to illustrate how far agencies reached—even in the face of the internal corruption at the company. AIG’s credit default swaps lost the company $30 billion and are often blamed as a major reason the company collapsed in 2008. Controversy swirled when in March 2009, publicly disclosed information revealed that after the bailout, employees of AIG’s financial services division were going to be paid $218 million in bonuses. A June 2010 report by the Congressional Oversight Panel (COP)—a five-member group created by Congress in 2008 to oversee the U.S. Treasury’s actions—concluded that the Federal Reserve Board’s close relations to powerful people on Wall Street influenced its decision to help AIG.

While the panelists were critical of the bailouts, they agreed that Dodd-Frank was a reasonable response to help prevent future failure of companies. Directors’ bandwidth, however, to address their corporation’s most important strategic matters, including emerging risks, may be limited by the need to spend time ensuring compliance with Dodd-Frank. Most agreed that they do not expect a lessening of regulations in the near future.

Panelists also agreed that the Delaware court system—one of the most powerful legal arbiters of U.S. corporate governance—is not designed to address scenarios in which the federal government acts as an investor. When the federal government intervenes by investing in a company to salvage it, the government becomes a shareholder with greater legal privileges than a traditional, human shareholder who might challenge corporate decisions in the Delaware courts. In the event that the government challenges a company in the federal court system, the federal government would be tried in legal institutions where the ultimate power of appeal is granted by its own founding documents. Challenges to federal sovereign immunity and the federal government as shareholder would be difficult, if not impossible, to navigate.

The line between the government as a stockholder and regulator could be blurred when the regulatory influence over the company is pervasive. This issue may be particularly acute for wholly owned subsidiaries of public companies when the government closely reviews company decision-making and expresses views on what is in the best interest of the subsidiary.

Relationships between regulators and directors—though once strained by mistrust after the financial crisis—are beginning to improve. A panelist observed that, in several global markets, relationships between regulators and directors have steadily normalized over the past year and a half, in contrast to more tense interactions of previous years. As global regulatory standards are established, markets recover and stabilize, and businesses and regulators deepen their understanding of each other.

Forming relationships with regulators should be a strategic priority for directors. Most panelists insisted that good relationships with representatives from regulatory agencies are essential. Boards should aim to keep a level of candor with regulatory contacts that could be helpful when pushing back against regulatory action and when directors have suggestions for upcoming regulations. Directors should also acknowledge that regulators have an important function to carry out in a high-pressure, multi-stakes market environment that is a challenge to navigate for regulators and companies alike. A “kicking and screaming” approach to relationships with regulators was frowned upon, as it is not productive and is insensitive to the fact that developing or implementing regulation is demanding and complex.

Directors seeking to strengthen their oversight of corporate compliance and ethics programs can access the National Association of Corporate Directors’ (NACD) publication Director Essentials: Strengthening Compliance and Ethics Oversight. The guide provides an overview of the board’s role in compliance oversight and offers practical insights about fulfilling regulatory expectations.

Asia-Pacific Will Continue To Pace Global Growth In 2016

JAKARTA, Indonesia January 27, 2016 – Despite headwinds from the global economy, Asia-Pacific will continue to be the leader for global growth in 2016, confirms John Vijayarangam, Chair of the Asia-Pacific Region for Cornerstone International Group.

Asia-Pacific executive searchThe Regional Outlook Report, published today, is the first of an annual series of regional and national business outlooks prepared by member offices of the global executive search network.   Cornerstone International Group has 65 offices in 29 countries around the world, including 18 in the Asia-Pacific region.

After decades of double digit growth from China, growth in the emerging Asia (Southeast Asia, China and India) is projected to moderate gradually to an average of 6.2% annually.

China is slowing to a more sustainable pace and this will affect the growth prospects of the rest of the region as export demand drops and investment flows decline.  Japan is expected to see growth pick up following a year of stagnation.

 

ASEAN Economic Community Launched

“A much anticipated step at the very end of 2015 was the creation of the ASEAN Economic Community,” says Vijayarangam. “If this succeeds as a barrier-free common market among 10 countries, it would have a combined GDP of $2.4 trillion.”

The widening difference in economic performance between Asia’s two giants is expected to be increasingly evident in 2016 with India’s economic expansion continuing to outpace that of China.  India’s output is expected to grow by 7.6% this year, among the highest in the region, compared with China’s 6.4%, but India is a much more recent contender with GDP roughly one fifth that of China.

Indonesia and Malaysia, being exporters of non-oil commodities (prices have fallen sharply), will be affected by the trade swing.  India, on the other hand, is expected to pick up to one of the highest levels in the region. Among the ASEAN-5 and the CLM (Cambodia, Lao PDR and Myanmar) countries, growth in the Philippines and Vietnam will lead with 5.2%.

As Asia becomes the vanguard of economic development, Cornerstone with its strong network will be at the forefront of global Executive Search and HR consulting, providing strong support to multinationals and local business in Asia.

Details of the 2016 Regional report can be found here on the Cornerstone International Group global website.

National business outlooks have also been published for China, Hong Kong and Taiwan.

 

Hong Kong

The softening Chinese economy and a decrease in Chinese tourist arrivals is expected to adversely affect Hong Kong in 2016.  Read more…..

Taiwan

The weakening Chinese economy (Taiwan’s largest trading and investment partner), and the impact of the newly signed China-South Korean FTA is expected to soften Taiwan’s macroeconomic environment to 2% – 2.6%.  Read more…

China

The economic transition facing China is expected to be choppy as the government responds to both a slowing global economy and internal structural problems, especially shrinking labor force supplies, rigid currency and financial infrastructure and overstocked property markets.  Read more……

Look out Tiger Woods, I’ve Got a Plan!

On a recent flight I took on Southwest Airlines, the cover story in their in-flight magazine was about Dan McLaughlin and his experiment to become a professional golfer. At the age of 30, Dan quit his job to pursue a career as a professional golfer. The interesting twist is that he had never played golf before but was motivated by the thought of being a professional golfer. He committed to 10,000 hours of dedicated practice to mastering the game. The 10,000 hour experiment was popularized by Malcolm Gladwell the author of Outliers. 

The magazine covers Dan’s story over the past five years and his 5,700 hours of golf practice. His history of quitting the pursuits he started was a motivating factor for Dan. Even his family members felt like this was just the flavor of the day for Dan and he would quit the experiment before completion. His girlfriend told him that she would not continue her relationship with him because this was crazy in her mind. His golf club sponsors have come and gone and he continues his pursuit. Good for him!  I was proud of him and glad he had some funds to pursue this goal even though it was taking him much longer than he expected.  He only has 4,300 hours to go and is blogging about the experience and hopes to write a book. Should be an interesting read.

Golfer

The reason this article stuck me so deeply is that it reminded me of employees that are released from their employers and the hours it takes to become a professional job searcher.  People do not have 10,000 hours to become experts in job search. Take the example of Dan, in the Southwest story, who is into his 6th year of the experiment. He has hit within two strokes of par once and is golfing much better each year.  However, there has still not been any invites to join the PGA Tour as a professional golfer and not any prospects of this happening for some time to come.  

Job search is important not only for a way to financially support oneself, but for the well-being of the person, their family, their community and their future employers. For companies that have reductions and offer assistance to their employees, unemployment claim time is reduced, risk of liability is reduced and contributions to society is accelerated.

The professionalism of Career Development Partners’ transition team is over 70,000 accumulated hours of training our participants in job search. An unemployed person does not have 10,000 hours to become a professional expert in job search.

Companies that have reductions and provide career transition assistance to their employees are getting our experience in helping their people not only land faster, but a better fit for their skills and abilities. Better fit means moving into the role of active contributors vs. consumers. Harvard Business Review September 2015 said that “employees offered career transition assistance land 2.7 times faster.”

I commend those companies that provide assistance to employees that are propelled out into the job market as job seekers.  Career transition assistance launches our participants forward in a powerful way for success and contribution to society.

Recently we provided career assistance for a company that experienced a reduction of workforce with customized programs for professional level employees all the way to the shop personal. I was visiting with a number of their employees in the shop foreman’s office as the notifications were coming to an end and heard some encouraging conversations. One of the supervisors were sharing about the compassion of their company for providing assistance to all their employees throughout the plant. Another person said it sent a strong message to those that were not impacted that “our company cares about all their employees.” He said he was proud to work for a company like that.

Job search takes 10,000 hours to become an expert if Malcolm Gladwell’s theory is true.  With assistance, Career Development Partners makes expertise happen with 70,000 hours of accumulated experience plus from our team of professional career coaches.

Feedback from our customers commonly state, “not only do we protect their brand in the marketplace, but we enhance their brand.”

When we meet a person on the day of their release, we have the opportunity to brag on their employer because their company has invested in their future and we have been selected to assist them in the job search process.  What a great honor we have every day to impact lives.  

What to Watch For in 2016

Each year I find myself declaring that the profession of directorship has become more challenging than it was in the previous year. I believe we’ve now reached the point where we should recognize this escalation as the status quo, not an annual anomaly. The Securities and Exchange Commission’s director qualification disclosure requirements, the advent of proxy access, and the increasingly public role of shareholder activists have contributed to a business environment in which directors’ qualifications and performance are continually scrutinized.

Kenneth Daly NACD CEONACD’s mission is to help directors lead with confidence—and to foster stakeholders’ confidence in their directors’ ability to effectively serve their companies. I’d like to highlight three critical issues that we believe directors—of all company types—should focus on during the year ahead.

1. Director Awareness

The dramatic slowdown in China’s economy, plummeting oil prices, recent terrorist activities, and the rise of the digital economy have put a fine point on the need for directors to be aware of disruptors that may cause a drastic change in sea conditions for their organizations.

No one can be expected to anticipate every potential disruption. (Who could have seen Uber idling around the corner?) But foresight comes down to one deceptively simple practice: asking the right questions. Are board members exploring the possible impacts of a terrorist act on the company’s supply chain, investigating their organization’s vulnerability to a cyber attack, or considering new competitors that can bring products to market faster than ever before and with nominal investment?  Throughout 2016 ourNACD Directorship 2020 initiative will continue to focus on disruptive forces, putting a spotlight on the issues that may affect your companies in the years to come.

Suggested NACD Resources:
Environmental and Innovative Disruption: What Directors Need to Know
Leveraging Social and Demographic Trends

2. Shareholder Activism

It goes without saying that activist investors have gotten our attention. A record-setting 355 activist campaigns were announced in 2015, including 33 against Fortune 500 companies. Last year was also a record year in terms of activist campaigns resulting in board seats—127 resulted in at least one board seat for the activist or the activist’s appointee. Our own annual survey of public-company directors found that 20 percent of respondents’ boards were approached by an activist investor in the past year. But nearlyhalf of respondents reported that they are unprepared for an activist challenge.

Activists aren’t practicing black magic; they are performing effective due diligence and smart analytics on their holdings. Boards need to think like activists and anticipate the issues these investors may raise. Do your company’s metrics fall outside industry norms? Does your board composition have any perceived weaknesses? Do you engage with management about the assumptions that undergird your company’s strategy? In 2016, NACD will continue to provide resources that can help your boards to anticipate—and respond to—emerging issues.

Suggested NACD Resources
Identify the Enemies of Effectiveness and Think Like an Activist
Investor Perspectives: Critical Issues for Board Focus in 2016

3. Mergers & Acquisitions

M&A activity reached record levels in 2015. Given this phenomenon, it’s more critical than ever that boards understand their role in M&A. We believe it boils down to readiness and oversight.

At any given time, directors may need to consider either the sale of their own company or the purchase of another company. The board must carefully weigh all opportunities to buy or sell as part of its routine corporate oversight. Be on the lookout for NACD’s new M&A Board Resource Center, which will be available later this quarter. The center will serve as a one-stop shop to help boards participate effectively in the evaluation of proposed M&A transactions.

Suggested NACD Resources
FAQs on the Role of the Board in M&A
Recorded Webinar:  The Extent of the Board’s Role in M&A

NACD Cyber Summit
On a final note, I’d like to call your attention to the 2016 NACD Cyber Summit, which will be held on June 15 in Chicago. With Congress now considering passage of a bill that would require companies to publicly identify the “cybersecurity experts” on their boards, scrutiny of the board’s role in cybersecurity oversight has never been greater. This year’s Cyber Summit will equip directors and management with the tools they need to foster cyber resiliency and confidently oversee cyber-risk management.

If you would like to receive additional resources on the three issues mentioned above or more information about the Cyber Summit, I encourage you to contact your dedicated NACD Concierge. If you have not yet had a chance to meet the concierge assigned to you, give us a call at 202-775-0509, and we’ll connect you.

Thank you for being an NACD member. I wish you a successful year ahead.

Sincerely,

Ken

Understanding the Cyber Dialogue

Cybersecurity is more than a technological issue—it’s a business issue. In a BoardVision video moderated by Judy Warner—editor-in-chief of NACD Directorship magazine—Mary Ann Cloyd, leader of PwC’s Center for Board Governance, and Zan M. Vautrinot, former commander of the Air Forces Cyber Command and current director of Symantec, Ecolab, and Parsons Corp., discuss effective cyber-risk oversight, addressing the following questions:

  • How can boards communicate with management about cyber risk?
  • How does cyber risk fit into discussions about risk appetite?

Cyber Dialogue

Here are some highlights from that conversation.

Judy Warner: For directors, I think one of the greatest challenges around the issue of cyber is how to engage in an informed conversation with management. And how do they become informed about their oversight roles as they relate to cyber?

Zan Vautrinot: One of the things that was absolutely clear about the private sector and corporate leadership is that they understood how to have a discussion about risks and strategy. The only thing different with cyber is that some of the technology and some of the solution sets are slightly different, but the conversation is the same. It is a discussion about a particular kind of risk and how it relates to the kind of business you are [in].

Warner: Mary Ann, from your perspective, how does that conversation take place, or start to take place, at the board level? And is it a conversation for the full board or a specific committee?

Mary Ann Cloyd: I guess I always say it depends. I never want to be so prescriptive as to tell somebody what they need to do because every board and every committee is different. However, I do think that, given the magnitude of how this affects so many businesses, it’s not a technology issue. It’s a business issue. So, with that, where would you oversee any other business issue at your board? And I’m guessing that a lot of it would belong at the full board, with parts of it delegated down to a committee.

Warner: The NACD recently published a handbook on cyber-risk oversight, and one of the discussions is around risk appetite and where does cyber fit into that equation today. And I know, Mary Ann, you have said we need to think of cyber as any other risk.

Cloyd: I think you bring up two interesting things. [I]n fact, we did a small publication [at PwC’s Board Leadership Center] earlier this year, and we called it “Defining Risk Appetite in Plain English.” What prompted it was I had a director come to me and he said, “Mary, we’re doing our off-site strategy session and we always talk about risk appetite. Do you have a good pre-read that I could give to the board so that they can understand what risk appetite means?” So we did this to really put in plain English, in four pages or less, what the dialog is between management and the board, and how you develop and define your risk appetite. And, to me now—as you have so beautifully put this, Suzanne—cyber is just another part of that risk discussion and how it fits into your overall strategy.

Vautrinot: Right. And if you have already had a discussion about your strategy and those things that are most important to you as a corporate entity, is it the data that is unique that you’ve collected—the information and the access to that information—that makes your corporation unique? Is it the technology or your research and development? Is it your insight into financial transaction or merger and acquisition? Is it [about] manufacturing processes or distribution processes?

Every board and every management team knows what is most important to them being successful as a corporation. It is likely that those things are the areas that [the board] would want to focus on with assessing cyber risk. If you look at that area and say this is what is most important to us as a corporation, and this is the technology that we depend on to do that activity, now I can say that is sufficient or it is insufficient relative to the amount of risk I am willing to accept in that area. There may be other areas that aren’t core to the business, and so you are willing to accept a different amount of risk or put different systems in place that kind of sandbox it—[systems] that put a fence around, or that separate or provide different controls to allow [the lower-risk] activity to run more openly, whereas [higher-risk areas are] much more controlled and much more precious.

Additional NACD resources

NACD’s Director’s Handbook Series: Cyber-Risk Oversight

NACD—Building a Relationship With the CISO

NACD—Assessing the Board’s Cybersecurity Culture

NACD—Cybersecurity Risk Oversight and Breach Response

Executive Recruiting Is Not A Lottery

 

Throughout this January in the United States, a media frenzy grew over a lottery called Powerball.  Supposedly the largest lottery prize in the world, it grew to a staggering $1.5 billion before finally being won – and shared – by three groups of people this week.

$500 million each!  Wow.  How’s that for being lucky?

Executive Recruiting is not a lotteryLuck can change everything, as it will the lives of those winners.  This also applies to business.  Luck can certainly make a difference there too.  But it is not repeatable, reliable, consistent or sustainable.

To succeed, an organization must rely on processes that have reliability.  These processes must exist throughout the organization.

Recruiting, especially executive recruiting,  is perhaps one of the most important areas requiring predictability.  An organization’s future success depends upon its ability to attract and retain individuals who will contribute in the manner that is anticipated.

This is only possible by identifying the characteristics or traits required to succeed, then pursuing these in the selection as well as the employee development process.

There are many methods available for an organization to find and attract employees.  The appropriateness of each depends upon the nature and importance of the role.  There are some roles where the path of least resistance, and cost, should be followed.  It’s an economic decision.

Other positions may be a more significant contributor to an organization’s success.  In these, value should be the deciding factor.  An ineffective hire will “cost” an organization many times the cost of their recruitment.

Retained search for years has offered organizations the ability to reduce their risk by relying on a proven process to identify and recruit key employees.  Assessments have effectively given a more in-depth understanding of individuals; seeing how well they “fit.”  Coaching has helped individuals maximize their potential.

Current studies indicate the job market continues to improve, which makes it more difficult to hire and retain those employees that organizations want.

Are you taking advantage of these proven services to help you build the organization you envision?  If not, are you waiting for luck to deliver these individuals to your front door?

That may work.  But it certainly is not predictable and, if we go by the performance of lotteries, the chances of success are very, very small.

Retained search services can help you reduce your employee risks.

 

What to Watch For in 2016

A Message from NACD’s CEO to Our Members

Each year I find myself declaring that the profession of directorship has become more challenging than it was in the previous year. I believe we’ve now reached the point where we should recognize this escalation as the status quo, not an annual anomaly. The Securities and Exchange Commission’s director qualification disclosure requirements, the advent of proxy access, and the increasingly public role of shareholder activists have contributed to a business environment in which directors’ qualifications and performance are continually scrutinized.

Kenneth Daly NACD CEONACD’s mission is to help directors lead with confidence—and to foster stakeholders’ confidence in their directors’ ability to effectively serve their companies. I’d like to highlight three critical issues that we believe directors—of all company types—should focus on during the year ahead.

1. Director Awareness

The dramatic slowdown in China’s economy, plummeting oil prices, recent terrorist activities, and the rise of the digital economy have put a fine point on the need for directors to be aware of disruptors that may cause a drastic change in sea conditions for their organizations.

No one can be expected to anticipate every potential disruption. (Who could have seen Uber idling around the corner?) But foresight comes down to one deceptively simple practice: asking the right questions. Are board members exploring the possible impacts of a terrorist act on the company’s supply chain, investigating their organization’s vulnerability to a cyber attack, or considering new competitors that can bring products to market faster than ever before and with nominal investment?  Throughout 2016 our NACD Directorship 2020 initiative will continue to focus on disruptive forces, putting a spotlight on the issues that may affect your companies in the years to come.

Suggested NACD Resources:
Environmental and Innovative Disruption: What Directors Need to Know
Leveraging Social and Demographic Trends

2. Shareholder Activism

It goes without saying that activist investors have gotten our attention. A record-setting 355 activist campaigns were announced in 2015, including 33 against Fortune 500 companies. Last year was also a record year in terms of activist campaigns resulting in board seats—127 resulted in at least one board seat for the activist or the activist’s appointee. Our own annual survey of public-company directors found that 20 percent of respondents’ boards were approached by an activist investor in the past year. But nearly half of respondents reported that they are unprepared for an activist challenge.

Activists aren’t practicing black magic; they are performing effective due diligence and smart analytics on their holdings. Boards need to think like activists and anticipate the issues these investors may raise. Do your company’s metrics fall outside industry norms? Does your board composition have any perceived weaknesses? Do you engage with management about the assumptions that undergird your company’s strategy? In 2016, NACD will continue to provide resources that can help your boards to anticipate—and respond to—emerging issues.

Suggested NACD Resources
Identify the Enemies of Effectiveness and Think Like an Activist
Investor Perspectives: Critical Issues for Board Focus in 2016

3. Mergers & Acquisitions

M&A activity reached record levels in 2015. Given this phenomenon, it’s more critical than ever that boards understand their role in M&A. We believe it boils down to readiness and oversight.

At any given time, directors may need to consider either the sale of their own company or the purchase of another company. The board must carefully weigh all opportunities to buy or sell as part of its routine corporate oversight. Be on the lookout for NACD’s new M&A Board Resource Center, which will be available later this quarter. The center will serve as a one-stop shop to help boards participate effectively in the evaluation of proposed M&A transactions.

Suggested NACD Resources
FAQs on the Role of the Board in M&A
Recorded Webinar:  The Extent of the Board’s Role in M&A

NACD Cyber Summit
On a final note, I’d like to call your attention to the 2016 NACD Cyber Summit, which will be held on June 15 in Chicago. With Congress now considering passage of a bill that would require companies to publicly identify the “cybersecurity experts” on their boards, scrutiny of the board’s role in cybersecurity oversight has never been greater. This year’s Cyber Summit will equip directors and management with the tools they need to foster cyber resiliency and confidently oversee cyber-risk management.

If you would like to receive additional resources on the three issues mentioned above or more information about the Cyber Summit, I encourage you to contact your dedicated NACD Concierge. If you have not yet had a chance to meet the concierge assigned to you, give us a call at 202-775-0509, and we’ll connect you.

Thank you for being an NACD member. I wish you a successful year ahead.

Sincerely,

Ken