2008 NACD Corporate Governance Conference

The final conference sessions focused on preparing directors to move forward and engage with the toughest issues in this challenging environment.

• Today began with a session on A Roadmap for Executive Compensation.
• Followed by a session entitled The Board Book: An Insider's Guide for Directors and Trustees.
• After the concurrent sessions, the final panel of the conference examined Prescriptive Standards, or Governance Principles?

While the conference sessions have ended-NACD's conference coverage has not. Stay tuned in the coming days, when we'll be posting additional conference discussion and resources-and links to download any handouts or presentations you may have missed.

To read the letter, click here.

Interestingly, nearly one-third of conference attendees said they had replaced or otherwise turned over their CFO within the past two years. While a majority of conference attendees were very satisfied with their current CFO, some 30% were only somewhat satisfied, and a full 8% were "not satisfied."

NACD members looking for additional discussion of the relationship between the CFO and the board can reference these past Directors Monthly articles:

• Your CFO Can't Go It Alone
• Eight Questions CFOs Think Directors Should Be Asking
• Today's CFO: New Prominence and Relationship to the Board

For the results of the audience response on CEO Succession, please see the previous post on the release of NACD's 2008 Public Company Governance Survey.

Q: Which of these executives does your board meet with in executive session without the CEO? Select all that apply?

CFO	9%
General Counsel	16%
Tax	1%
Internal Audit	37%
CIO	4%
None	33%
Total Responses: 230

Q: Have you turned over your CFO in the past 24 months?

Yes	31%
No	69%
Total Responses: 241

Q: How satisfied are you with the overall performance of your CFO?

Very satisfied	60%
Somewhat satisfied	33%
Not satisfied	8%
Total Responses: 230

Once again, the 2008 Public Company Governance Survey identified CEO Succession as an area that clearly warrants additional board focus-rated as the 3 rd "Top Issue," but also identified as an area of relatively weak board performance.

NACD Conference attendees confirmed both of these points. They overwhelmingly agreed that the board has an important role in the development of internal CEO candidates. However, only 56% indicated that CEO Succession is a regular item on the board's agenda.

Q: Is CEO Succession a regular item on your board's agenda in both good times and bad?

Yes	56%
No	44%
Total Responses: 197

Q: Do you believe it is the role of the board to ensure the company is nurturing and developing internal CEO candidates?

Yes	90%
No	10%
Total Responses: 230

Additional benchmarking data on CEO Succession practices can be found in NACD's Public Company Governance Survey Report. Conducted annually, the extensive NACD 2008 Public Company Governance Survey report covers more than 100 governance topics based on in-depth responses from over 700 public company directors and proxy data from 5,000 public companies.

This year, for the first time, we tracked a breakout group of participants who rated themselves as most effective in managing the top governance issues-including CEO Succession-and analyzing the responses of these "Effective Boards" in order to gain insight on valuable new perspectives and ideas in corporate governance. A special section breaks out governance practices in 22 industry sectors.

Order your copy now!

An NACD Announcement

In his welcoming remarks, NACD Chair Bob Hallagan recognized the NACD board and their inspirational work in driving NACD's vision and strategy. Hallagan announced that Barbara Hackman Franklin, director of Aetna and the Dow Chemical Company and former U.S. Secretary of Commerce, will succeed him as NACD's chair. "The governance committee sought someone who was highly respected, whom Washington looks to for leadership," Hallagan said, "and I'm thrilled that Barbara accepted this challenge."

Sally Jewell: The Not-for-Profit Director of the Year

William H. Gates, Sr., co-chair of the Bill & Melinda Gates Foundation, presented the Not-for-Profit Director of the Year Award: "There's a remarkable diversity in the contributions Sally Jewell has made," he said. "However, Sally's 'bottom line' is always an ever-present concern for human welfare."

Sally Jewell accepted the award noting that "When you give, you get more back in return." For example, "at the Initiative for Global Development, we helped to show what the U.S. can do-not with our guns and our words, but with our actions." Jewell ended with her favorite quote, by Margaret Mead: "Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has."

David Phillips: Private Company Director of the Year

Anne Eiting Klamar, CEO of Midmark Corporation, presented the Private Company Director of the Year Award. "Over the years, David Phillips has sat on over 17 boards and has served as trustee, director, president, or chair of no less than 58 civic organizations.He expects-not encourages, but expects-forward motion at all times. This is what good boardsmanship looks like: Quickly and decisively taking action."

David Phillips accepted the award, encouraging every member of the audience "who has never had the privilege of serving on a closely held company to jump on the opportunity. What a thrill it is to serve on a board where management really wants and seeks out your advice-rather than merely filling a public requirement. Try it-it is great."

Andrew J. McKenna: Public Company Director of the Year

James Skinner, vice-chairman and CEO of McDonald's Corporation, presented the Public Company Director of the Year Award, stating that "Andrew McKenna is the cornerstone of leadership on every board on which he sits. Simply stated, Andy makes each board on which he serves better. He brings out the best in each of his peer directors."

Andrew McKenna accepted the award, mentioning a few considerations the "CREAM of the crop crowd"-should keep in mind:

• Courage: All of us directors need to have courage-to execute whatever we are required to do.
• Responsibility: We have a responsibility to our shareholders and company.
• Engaged: Be engaged: know about the company and understand the company on which you serve.
• Accessible: Directors need to be accessible: There are times when directors need to be available on a moment's notice.
• Maturity: Know when to oversee, and know when to back off and support management.

John C. Whitehead: B. Kenneth West Lifetime Achievement Award

Ira Millstein, senior partner of Weil, Gotshal, & Manges LLP, presented the B. Kenneth West Lifetime Achievement Award, remarking that "John Whitehead typifies the best that America can produce." Millstein continued, noting that we have lost the trust in every one of our institutions in the public and private sector. The reason: the leadership of these institutions was transferred to ideologues who wouldn't listen to what others had to say-or those ruled by pure greed. Missing from this debacle were the early generation of leaders-typified by John. Men who understood that you had to listen; men who appreciate listening to other people and learning form them-without being concerned about their own personal rewards. If the financial sector will ever be trustworthy again-we need men like John.

John Whitehead accepted the award, receiving a standing ovation from the full audience. He said, "I shudder-and I know all of you do too-whenever I see a headline that indicates a board failure." Yet, he continued, for every failure, there are a hundred more boards working successfully. We must always be ready to speak up with questions when we see something that is not quite right. It is hard to do, but important, or else we risk our reputation and that of the company we serve.

After reminiscing about how much governance has changed since serving on his first board in 1949, Whitehead continued, "There are two subjects of importance on which consensus has not been reached, and I'd like to make a brief comment on each. The first is about money, the second about titles."

He noted that the boards of directors have to do something about the bonuses and golden parachutes given to CEOs. The general public and the average stockholders will never understand the justification for such amounts, especially when the results are unfavorable. I hope we can move toward more moderate salaries-with bonuses (linked to performance), or we will encourage legislation much worse than what we face today. The second problem is CEOs insisting on the title of both Chair and CEO. Each new CEO needs and experience advisor, which the chair role can provide.

Whitehead concluded by stating that he is "proud to receive this award on behalf of all the excellent directors out there who protect our great system of democratic capitalism."