Key elements of a Crisis Plan

Board leadership for companies in crisis

Five questions will tell if your board is engaged

By Taylor Simonton

A crisis can quickly turn into a disaster if a company is unable to respond properly.

According to National Association of Corporate Directors (NACD) Director Handbook Series (www.NACDonline.org), Board Leadership for the Company in Crisis, co-authored by Suzanne Hopgood and Michael W. Tankersley, “Early-stage and financially stressed companies often exist in a state of continuous crisis. Mature, well-managed companies may experience crisis only rarely.

“But no one escapes entirely. The leaders of successful companies, and those that have merely managed to survive, always carry with them stories of crises averted or overcome. The vast majority of the failures-the companies pushed into distress sales, bankruptcy, or irrelevance-have been brought down by crises that overwhelmed their ability to gather sound information, plan and respond.”

The board of directors is responsible for assuring that the company’s management has a sound crisis plan. The Colorado Chapter of NACD sponsored a Director Roundtable on “Board Leadership for Companies in Crisis,” which Suzanne moderated. Our Roundtable discussed actions of successful boards of directors in thinking through crisis response in advance, identifying steps to take when faced with a crisis and ensuring critical elements are in place at the board level to deal with a crisis.

Suzanne shared her views in an interview on the five questions which framed our Roundtable discussions:

How do I, as a director, think about a crisis in advance?

The steps to crisis planning start with identifying the risks that can destroy the company. Those risks might include product malfunctions, plant explosions, shareholder activism, inadequate human and financial resources, supply chain failures, risks stemming for a bad culture and government investigations. These many risks suggest that the board of directors should be involved in understanding exactly what risks would endanger the company’s survival or long-term success.

What are the key steps in crisis planning?

The first steps involve developing a team and a 24/7 contact list. Secondly, work through the list of risks identified to be certain that it is complete. Lastly, discuss ways to mitigate as many risks as possible. Identifying risks and discussing mitigation of risks create a better understanding of a risk/reward relationship.

Conducting a practice drill involving the participants verifies the responsibilities of each participant and makes it a working plan. When a crisis first appears, the information represents only the tip of the iceberg and there is far more not yet revealed than is presented. Assuming that you already know the worst will lead to bad decisions. What you do not know is likely to be far worse.

What are the first questions in a crisis?

The most important question for a board of directors to determine immediately is whether the CEO and/or CFO are part of the problem or part of the solution. If they are part of the problem, the board may have to step in to assume leadership or communications roles. A spokesperson and a crisis leader, not necessarily the Chair or Lead Director, should already be identified as a person with experience and who is prepared to take charge. The next question is who in the organization has the necessary critical information. Then, who is in charge of communications and how quickly can you issue the first information?

How are communications handled?

In a crisis, the communications person should be sitting at the table with the lawyers, board of directors, CEO and other key participants in resolving the crisis. While the lawyers are focused on limiting the company’s liability, the public relations/communication function is to preserve the company’s reputation. A well thought out communications strategy is critical. A variety of messages should already be created and ready to send. Maintain a website which is “dark” but ready to use to deliver messages.

The spokesperson for the company should have completed media training. If the crisis attracts national or international interest (such as with explosion, environmental disaster, major product recall, etc.), the spokesperson, who should be the CEO or board representative, needs to convey leadership, confidence and sincerity.

Is there a team?

Having the right people on the team, being able to communicate immediately and having a crisis plan whereby each team member knows what their overall responsibilities are is critical to a successful result. Team members may include the senior management team, a member of the board of directors, external audit partner, outside counsel, public relations firm, criminal defense counsel, bankruptcy counsel, investment banker, etc. While this list may seem extensive and unnecessary, imagine trying to Google “criminal defense lawyer” when the U.S. Attorney is already in your office with a subpoena. Recognizing and using board members’ specific skills is critical. Many companies weather serious crises that no one ever knows about because of their successful crisis plan execution.

 

Taylor Simonton, CPA, is Chairman and Past President of the Colorado Chapter of National Association of Corporate Directors (NACD), a retired PricewaterhouseCoopers National Office SEC Partner, and is serving or has served on the board of directors of five Colorado companies, usually as an audit committee financial expert. With over 10,000 members, NACD is the only membership organization delivering the insights and wisdom that corporate board members need to confidently navigate complex business challenges and enhance shareowner value. Taylor may be reached at tsimonton@nacd-colorado.org or www.linkedin.com/in/taylorsimonton.

http://www.cobizmag.com/articles/board-leadership-for-companies-in-crisis/

 

A city of the future?

Hartford had an inaugural ball last night for our newly elected Latino Mayor, Attorney Pedro Segarra.  His spouse, Charlie Ortiz, accompanied him.  The ballroom of 900 diverse people (with proceeds to charity organizations) was filled with business people, non-profits, government, neighborhood people, city and suburban residents of different ethnic, cultural, economic, religious, experiences, educational backgrounds, ages, and political beliefs, all giving Mayor Segarra their rousing and vocal support.  We have many challenges, but if last night is any indication, we have come together around a leader who came to the city as a 15-year-old runaway and has made a solid contribution ever since.  Our differences don’t matter.  The challenges we face do.  The energy and commitment to work together and overcome the barriers/hurdles was evident throughout the evening.  Are we a city of the future?  We may be..  We’re not bogged down in pettiness and I hope we can continue to expand upon that energy.  It was a magical evening and spawned so much hope for the future.

http://www.courant.com/news/connecticut/hc-hartford-mayoral-ball-0122-20120121,0,6170563.story

Is it “Bain” or about “doing the right thing”?

Who is asking “is this the right thing to do” when business or political decisions are made?  Big banks and mortgage lenders had bet against their own customers, taken chances comparable to playing the roulette table, and gambled away our future.  Certain Congressmen used insider information to bet against our country.  Isn’t that the issue today?  When egregious executive compensation is granted, while the workers receive little or no increases and reduced benefits, who is asking “is this the right thing to do?”  When a F-500 company sells a product on-line, verifies the sale and charges for it…EXCEPT they don’t actually offer what they’ve sold, who is asking “is this the right thing to do?”  Whether it’s Bernie Madoff or any other business engaged in deceitful practices, isn’t this the question we’re all asking, “is it the right thing to do?”  The question isn’t whether Bain operated within the law.  It most likely did, but did anyone ask, “is this the right thing to do?”  I think that’s the fundamental question we’re all asking today that’s made Bain the scapegoat.  What’s happened to our culture that the person asking “is this the right thing to do?” has been silenced.

I served on the board of PointBlank Solutions, Inc which was faced with extremely challenging times.  After every discussion and before a decision was made one of the board members would ask, “is this the right thing to do?”  It’s a wonderful question to ponder as we’re making decisions that impact a wide variety of people’s lives.

I grew up in a family owned business.  No decision was ever made solely to make money.  My dad had the opportunity to purchase the A+ location in town, but he would have had to tear down an old New England church in order to use the site.  The church is still standing.  His answer clearly was “no it’s not right to destroy a landmark, much-loved church so I can make more money.”  Is that what’s missing in our business and political environment today?  Has making money become the only consideration in making business decisions?  Have the ones who might have asked “is it the right thing to do?” been silenced?

I’m working through my third fraud experience in the past twelve months and I know how pervasive fraud is, which is a different issue from operating within the law but without regard for doing right.  I watch employees who need their jobs in order to support young families wrestle with doing things they know are wrong, but they need the job, especially in this environment.  I watch their actions take a nick out of their soul every day and I hope they can someday regain the ground they’ve lost.  They hate it!

Aren’t these the fundamental questions we’re asking about our own culture and the culture of the businesses we so want to succeed and grow and employ more people?

Is it the right thing to do?

 

A Model for 2011 Executive Comp changes

The following was provided by Lawndale Capital:

“In an 8-K filing on January 4, 2012, P&F Industries (O-PFIN) disclosed it has entered into a new 3-year Employment Agreement (“New Agreement”) with current Chairman and CEO Richard Horowitz replacing one that expired at the end of 2011 (the “Expired Agreement.”)

Previously, Lawndale Capital Management, P&F’s largest independent shareholder, in a May 25, 2011 13D filing and letter to P&F’s board, called for a reduction or elimination of egregious compensation terms in any new contract with Mr. Horowitz, in particular lower “guaranteed” base compensation. Lawndale’s 13D filing and this May 25, 2011 letter can be found at: http://www.sec.gov/Archives/edgar/data/75340/000093583611000074/pf13da.htm

It appears that the New Agreement differs from the Expired Agreement in several material respects:
Mr. Horowitz’ Base Salary has been reduced from the Expired Agreement’s minimum $975,000/year to $650,000/year;

• Mr. Horowitz’ “Target Bonus” has been reduced to 50% of Base Salary vs. 90% of Base in the Expired Agreement and, in addition, PFIN’s Compensation Committee has the right in Year 2 or 3 of the New Agreement to reduce the Target Bonus % (from 50%) and apply such Target amount into a long-term cash or equity incentive plan;

• Mr. Horowitz’ “maximum bonus”, based on exceeding performance targets, is established at 150% of Base Salary vs. no apparent maximum in the Expired Agreement at all; and

• The New Agreement allows someone, other than Mr. Horowitz, to be elected Chairman of P&F’s Board without triggering an onerous and costly “Termination Without Cause or for Good Reason” event. In the Expired Agreement any removal of Mr. Horowitz as Chairman triggered the same costly Termination/severance provisions. “

What a tangled web we weave when attempting to deceive..

Twice in 2011 I suspected parties with whom I had business relationships of stealing money.  Both times I asked for  specific documents over a 5-12 month period until I had sufficient information to prove the fraud and take further action.  Both times I have been shocked to receive what I requested, including specific lists of unauthorized/inappropriate payments made and who they were made to, which confirmed the fraud.    I’m fascinated that over time I have received all the evidence I’ve needed to show long-term intentional misappropriation of funds simply by asking for the documents which show exactly what was occurring.  I equate this process to conducting a very focused discovery process but without litigation.  And no I don’t know why people deliver information that could lead to jail time for them.  I’m fascinated that this worked twice in 2011.

The first sign of fraud is always in asking for information which should be readily available and not being able to get it.  I can only think of one reason not to share information from a legitimate request.  Once refused information, it pays to become much more interested, focused, and aggressive about getting the (now mysterious) information.

Remember when there were consistent complaints about people on welfare acting as though they were “entitled”.  There are many people today at all levels who believe they are entitled to take what they want to achieve a certain life-style.  Employees who are the sole support of their families are particularly vulnerable to supervisors directing them to take inappropriate actions and it becomes harder and harder to extricate themselves from the deceit.

We’re in a time that requires constant diligence in order to protect our investors, the company, and ourselves.

Dad and his granddaughter discuss Belgium visit to WWII family

Dad and his grand-daughter, Cheryl, visited the family Dad stayed with as a WWII soldier in Belgium.  This is their discussion of the visit, which was remarkable for both of them.  Dad’s book, “A Citizen Soldier Remembers:  1942-1946″ tells the story of his war years.

“We just want guys like ourselves sitting across the table”

Thank you, TK Kerstetter (TK’s Holiday Boardroom Gift List) for a thoughtful list of gifts for Lead Directors, Compensation Committee Chairs, Qualified diverse board candidates, Investors, Congress, and Public Company Directors. Not surprisingly, I particularly like TK’s comments about Qualified diverse board candidates: “I’d like to gift this group a jackhammer. I’m really frustrated when I hear that there are no qualified diverse candidates to recruit to their company’s board. I’d rather someone just come out and say, “We just want guys like ourselves sitting across the table.” That’s at least being honest. The jackhammer will allow qualified diverse individuals to, once and for all, break through this concrete ceiling and by doing so, open the door for some amazing board candidates (who also happen not to be sitting or retired CEOs). By the way, I’m actually talking about diversity of thought when I say diverse candidate but that can’t help but include gender and ethnicity as well.”

http://www.boardmember.com/The-Board-Blog-TKs-Holiday-Boardroom-Gift-List.aspx

Using Social Media – a personal viewpoint

As promised, here is my explanation of how I use blogs, Facebook, Twitter, and Linked-In.

I first signed up for Facebook so I could communicate with my then 18-year-old Great niece, who was leaving a very small town in Northern NY state for school in LA and I wanted to stay close to her.  My “friends” really are friends and family and I post frequently to keep them up to date with what’s going on in our lives and my family (and friends) do the same.  Frequently when I see someone I haven’t seen in months, we pick up the conversation from our last post, which may be a trip the other person took or an event we attended, or a family gathering.  I post frequently about my Dad, with who our family seems always to be on some adventure. Five of us took him to Dublin for his 89th birthday and we’ve been on adventures (and family golf tournaments) since then, which we’ve posted.  Friends are always asking for an update.  A frequent concern/question I am asked is people telling me they don’t want to share information, especially personal information, with others.  As one lawyer stated, “I don’t want pictures of me wearing a lampshade on Facebook”.  Well…. DON’T POST THEM, then!!  What each of us posts is totally within our control.  Many of my friends don’t post anything but tell me they enjoy reading about my family’s adventures… and our great meals together.  In short, it’s a way to keep up with family and friends.  I found college classmates from my one year at Northeastern (before transferring), who I have thought about often since then and am so happy to re-connect with them.  I am also connected to news outlets (NPR, etc) where I want to be certain I read certain subject or topic-specific information from them.  Lastly, our Chief Operating Officer in the city started a group known as Downtown Dwellers, which now has 515 participants.  The conversations are wide-ranging from announcing art openings to concerns residents have about an issue to recommendations for specific services.  It’s fascinating and it’s fun to then meet people whose postings we’ve been reading.

Twitter:  My only regular postings on Twitter are from feeding both of my blogs into Twitter and I seem to be accumulating followers.  I also use Twitter to keep up to date with emergency notifications.  Our city Chief Operating Officer, a local weather man, Fire Chief, and Mayor are local Tweeters and are good communicators on Twitter in a crisis.  News journalists who followed the trial of former Mayor Perez Tweeted from the courtroom so we could follow the action as it was happening.  Twitter is the best location for “breaking news” pieces that are relevant to my life.  The trick is to “follow” people who make valuable, interesting, and timely contributions.  It’s our choice who we follow.  Delta has a Twitter account whereby you can contact them by Twitter and they will respond to the issue you’re having immediately.  That’s very helpful.

Linked-In consists of my business connections.  Again, you connect with people who want to connect with you and vice versa.  There is useful information and contacts on Linked-In as on FB and Twitter, depending what you want to know and how you want to use the site.

Blogs:  I have two blogs:  hopsuz.wordpress.com and hopgoodgroup.wordpress.com.  hopsuz is my personal blog and I post mostly bicycle information about trips or packing or traveling.  hopgoodgroup is more business focused and I post my own insights from my experiences or thoughts about articles from others I find worthwhile.

For each and every one of my posts, I ask myself if I were in a deposition how I would feel about answering questions about a post I’m about to make and it causes me to think carefully about what I’m saying, which I think is good.

Nick Bilton’s book about social media suggested that in the new world, we would use these vehicles to be always current on the topics we care about, which could be world news, or sustainability, or whatever… I didn’t understand it at the time, but I understand much better.  As the world is overloaded with data we need a filter and our social networks serve that purpose.  We don’t have to sit through the evening news which is already outdated, much of the time is spent on advertising, and the rest of topics we don’t much care about.  We can stay current on topics of interest in choosing carefully who we “follow” or connect with on our social networking sites.

There is much that I’ve missed and I will update this as topics occur to me, but it’s a start for those who would like to hear one person’s reason for participating and how I use the sites available to me.

For boards of directors, knowing that someone is monitoring sites so if there’s a video or posting that has the opportunity to impact the reputation of the company or “go viral”, someone will be reacting quickly should cause numerous questions to be asked at the board.  Conversely the marketing and sales opportunities are endless as are the opportunities to learn more about the customer.

Social Media Challenges & the Board – Social Media Guru, Doug Chia

Doug Chia is Corporate Secretary and Assistant General Counsel for Johnson & Johnson.  His interview with TK Kerstetter addressed “Educating Board Members on Social Media Challenges”.  Board members need to understand how Social Media is being used by the company AND against the company.  Social Media sites such as Twitter and Facebook will become, if they’re not already, part of everyday life.  Facebook has more than 800 million users, which would make it the third largest country in the world if it were a country.  If companies are not using social media tools to drive business, their competitors are.  Boards need to understand both how companies are using social media to drive business and connect with customers.  They also need to know the reputational risks arising from those using social media outlets to share negative information about the company and how to address those concerns.

Doug actively participates on Social Media sites and is knowledgeable about the great benefits of participating as well as the need for companies to have policies and procedures around a social media strategy.

As individuals, we all need to develop our own personal social media strategy:  how much do we share, do we post comments, who are our “friends”, how do we use Facebook, Linked-In, Twitter, etc.? I will share my own strategy on the next posting.

Thank you, Doug for an informative program.  The link is below.

http://www.boardmember.com/this-week-11-17-11.aspx

Building a board

TK Kerstetter conducted a great interview with Linda Rebrovick, Nom/Gov Chair, HealthStream.  She provides valuable information concerning the women’s organizations with directories of experienced women directors.  The challenges she faces as Nom/Gov Chair:  Board Evaluations guide the company to have the right board with proper skills, expertise, and diversity.  Diverse groups drive the board to better answers.  Diversity of thought leads to diversity of race, gender, and international expertise.  Women’s organizations:  ION (15 chapters with 10,000 women), Women Business Leaders in US Healthcare, Women Corporate Directors – the only global women’s director organization - 1350 women on 1500 boards.  There is no lack of qualified candidates and these organizations provide qualified candidates for boards to consider.

http://www.boardmember.com/this-week-11-10-11.aspx

BP Crisis

Robert Dudley was interviewed on NPR and, for the most part, gave a very good interview.  Where he did leave some concern, was saying he would start to focus on safety in October.  I think we have enough evidence now, based on the three disasters they’ve had over the past five years, the “well from hell” nickname, shutting off the alarm on the well, and shortcuts to safety, to conclude that BP has a culture of cost-cutting, not safety.  If that’s true, he already has other disasters brewing within the company because of this focus and culture.  We hope he is already focused on safety and has engaged experts for a full analysis of their safety procedures and we hope the board has also asked for this analysis.

Risks to watch

An executive recruiter told me that he has never seen so many senior managers seeking other jobs. The reason, he shared, is that they have been under so much pressure for so long that they need a change. This is an important message for several reasons: 1. We have all experienced a serious drop in customer service in many companies, which addresses brand loyalty and reputation. 2. How many companies can really afford to lose members of their senior staff right now, when the ranks were seriously thinned two years ago?
As we define risks, shouldn’t human resource risk be at the top of our list in this environment? If senior staff members have already decided to leave, they’ve already revised their resumes and are actively looking. By the time we start thinking about this risk, the resignations will already be arriving.
It’s time to look at our operations, determine which managers constitute the largest risk to the company, determine if they have been fairly treated, and improve their situation.

Controlling shareholders

Ten of the largest 50 companies are state (government) controlled. What sorts of risks does this entail? Petrobras in Brazil is the second largest company in the world, by market cap. It is 55.7% owned by the government. Gazprom in Russia is the largest extractor of natural gas in the world, whose controlling shareholder is the Russian government. As we face global shortages of water, food, and energy, will these companies behave as business or political entities? In our own companies, are we drilling into the risks associated with this important international dynamic?

Lack of focus – a risk?

Why isn’t operations experience a more common criteria for board and c-suite candidates? An operations background requires the leader to make choices concerning the allocation of the two resources that are never unlimited: time and money. The results of those allocation decisions determines how successful we are at executing a strategic plan. Shouldn’t we be thinking more about operations backgrounds and skill sets in order to ensure the successful execution of a plan? Are we putting more faith in “vision” than in the successful execution of a plan?
Successful small business people have extensive experience at maximizing limited resources. What we can learn from them than we can bring to our own companies?
We, of course, have to start with a culture and an understanding that we can’t have everything. We have tough choices to make and priorities to establish along the way. It’s easier to have a “vision” that includes all the things we want. That’s fine, but when we get to the plan and the execution, we need the person who can and will make the tough choices of decking the resources against the priorities. We can’t give partial resources to a long list of priorities and expect to succeed.

The Digital World

Every now and then there is a serious WOW! and for me it’s learning that the iPad will download the WSJ and NYTimes in its entirety along with the New Yorker, Harvard Business Review, the Economist, Bloomberg, O, and most other magazines….. so when I travel anywhere I have all my up to date reading materials without carrying a backpack full of papers/magazines. In addition, of course, it downloads books. I don’t have to carry any reading materials any longer to be fully informed and current. Amazing. Really really amazing. Good for the environment and my back!!!
I’m reading “I’m Living in the Future and Here’s How it Works” by Nick Bilton.
There really is so much to learn in this new world.

The Future is Here. It just isn’t evenly distributed

The future is here. It just isn’t evenly distributed.
That’s the message in Nick Bilton’s book, “I Live in the Future and Here’s How it Works”. Bilton is the Lead Technology Writer and Reporter for the New York Times and was a researcher in the NYTimes R & D labs, looking into the future.
He offers some mind-bending ideas, which are well worth thinking through.
He believes the future lies in our hand-held devices because they are now and are becoming much more personal to each of us. With 4.6 billion phones worldwide there is a 70+% market penetration and our cell phones are with us all the time. They have and will increasingly become the object that connects us to loved ones, information, and they are becoming an extension of our relationships. Studies show that the size of the screen is not relevant so even watching movies on our iPhones is a sought after experience.

Eric Schmidt, Chair and CEO of Google, said in an interview about a year ago that our cell phones would be doing things we never dreamed of within the next 2-5 years.

The cell phones will be the conveyor of “experiences”. Bilton says we will no longer accept “content”. It has to be an “experience”. The closest analogy he provided was the difference between music and a concert. U2 has the best understanding of creating the “experience” that I’ve seen. They go way beyond a concert and create an extraordinary experience for their followers, with a 10-story high-tech stage, video, and sound system. This is vastly different from buying a CD.

Steve Jobs created the “experience” when he developed iTunes. It wasn’t that customers wouldn’t pay for music. What they wouldn’t pay for was the extraordinarily painful and time-consuming experience involved in purchasing and downloading music, which made it actually easier to drive to the store and purchase a CD, or the much easier and more efficient route of downloading illegal music. Jobs turned that purchasing opportunity into a quick, reasonably priced experience and has sold 10 billion songs as a result.
What will happen to newspapers and news reporting, as we’ve known it? Bilton tells us that ALL content is a story and it all needs to be in the form of story telling. Music, news, photos, books, advertising, public relations, TV, connecting to friends, is all about story telling. The story telling has become how the content is delivered. It has to be an experience.

Being a reporter, of course he addresses the news industry and how it must change. The news will follow us, rather than us seeking news. Our definitions of “news” will also go through some serious definitional changes. Is news as the WSJ and NYTimes defines it, or is “news” what my friends on Facebook are discussing? If you agree, and this is a leap for me, that the only news we’re interested in is that which our friends are interested in discussing, then that dramatically changes our definition of “news”. Providing social network access to our chosen “news outlets” will give them the opportunity to “push” relevant news and links to us as our friends are discussing it. That is such an interesting concept. So, if our friends are discussing on Facebook why bikers in the Netherlands simply will not wear bike helmets, then we would receive the news article discussing how the latest emphasis is making helmets cool for kids. We can participate and add to that discussion.

Allowing our mobile device much greater access to our location and social networks will make the information coming to us more timely and relevant, without any direction from us.

Our concepts of location, trust, space, time, and connections will all change with this new world.

Foursquare is counting on that to be true. They started 20 months ago and have 4 million members. It’s a site where you “log in” when you visit a location, which may be a restaurant or retailer. The person who visits the most becomes the “mayor” and the retailer/restaurateur may decide to bestow benefits on the “mayor”. It could not be a more perfect loyalty program for retailers/restauranteurs as each participants notifies through the site of their patronize of that particular venue each time they’re there.
Separately, in this past election Facebook had a “I voted” log in. 12 million people participated saying they had voted. Imagine the information Facebook has about how engaged their members are and how to reach them through this social network.

The biggest change to come will be when the “Digital Natives” arrive in the workplace, having never existed in a non-digital world, unlike us, the “Digital Immigrants”.

Our hand-held mobile devices will allow all the information coming to us to be specific to our interests, needs, and connections so we’re always tuned in to what we want to know and the information is all linked and is personal to each of us.

As we look at the composition of our boards today, we should be asking who on the board is asking questions about this new environment and how we’re addressing it.
The future is here. It just isn’t evenly distributed.

The criteria Warren Buffet uses

to buy a business. He bases his acquisition decisions on the passion the owner has for the business and whether he believes the owner/seller will have that same passion after he’s bought the business. He looks for whether the seller has a passion for the business or for the money. My parents owned and operated hotels and restaurants. They define what he looks for and he would have done business with them. They loved the business, the customers, participating in the community, excelling at food and hospitality. Even today, our family makes certain the holiday table is set perfectly, the food presented beautifully, and HOT, because that’s what mother taught us.
This links to the video of him explaining what he looks for.

When Leadership, Marketing Genius, & Timing intersect

In a world of (dis)stress, global & domestic turmoil, and too much yelling and controversy, when a leader successfully validates a dream to take us back to the future in real-time, we pay attention. Saturday night in Hartford was definitely a SCORE when Howard Baldwin re-kindled the dream of The Hartford Whalers returning to the city. They left 20+ years ago and left a hole in our hearts/pride. Baldwin took over the Wolf Pack (AHL) franchise (attendance 5,000/game) several months ago & initiated a marketing campaign to rename them the Ct Whale and restore the old beloved uniforms as part of a long-term plan to bring back an NHL team to Hartford. The change to Ct. Whale occurred Sat night before 13,000 fans, vastly exceeding anyones expectations. He has re-kindled a dream and made us smile. He’s returning us to the future through perfect timing, a brilliant marketing plan, and strong leadership and we can watch in real-time. Lots to learn for all of us as we watch this progress!
PS. The Ct. Whale won in overtime. The next big event is outdoor hockey at Rentschler Field.

The year of 11.11.11 & developing countries

Sub-Saharan Africa is forecast to be one of the fastest growing regions in the world in 2011. It remains a difficult place to do business, but hard to ignore as the developed countries growth is stagnant and developing countries are experiencing 4X the growth rate. Nigeria is the region’s most populous country, the 2nd largest economy, and is the largest oil producer.
Fastest growing areas, according to the Economist, are: telecom, banking, retailing and manufacturing. The expanding middle class will increase demand for goods.
These virtually unknown cultures, governments, business ethics, and resources will present plenty of challenges for those looking to access growing economies. How will we balance risk, opportunity, and reward in this new economy?

The Risks of accurate accounting???

Our Governor today announced that moving to GAAP (Generally Acceptable Accounting Principles) would cause major problems in the state. No. The major problems have been caused by Creative Accounting, deferring obligations like pension costs, floating long-term debt to cover operating costs, and overspending. Accurate accounting did not and will not CAUSE the problems. Finally recognizing the crisis we’re in so we can start dealing with it will be shocking, but is a necessary beginning for all of us.

Tell me what I want to hear!

A great risk for both the CEO and the board, are C-suite officers, who focus their energies on what the CEO and the board most want to hear and delivering good tidings. They can then be the messengers of good news, which is always received better and rewarded more generously. As CEO of troubled companies, my greatest challenge was convincing the C-suite and all employees to deliver the bad news, allowing me the opportunity to fix the problem. It took a significant and consistent effort on my part to convince staff and employees that I HAD to hear the bad news.

How do I know what I don’t know?

WikiLeaks has demonstrated to all of us that we really don’t know what we don’t know. How good is our security? And what is our crisis plan if critical information, such as customer (or employee) bank account numbers, social security numbers and bank (401K) balances were published on the internet? How realistic are we about what is confidential and what isn’t in our organizations? Is it time to revisit all of these assumptions and policies? How aggressively are we thinking about defining risk and where risk comes from? Are we including our PR/communications consultants and IT leaders in those discussions about identifying risk? Is it time to redefine our risk profile?

REI is (run by WOMEN) and is worth watching

REI has consistently been a leading edge company in its facility with social media (From Riverfront Recapture: “Beginning today, REI will donate $50 to Riverfront Recapture each time you use your mobile smart phone (iPhone, Droid or Blackberry) to “check-in” via Facebook at the West Hartford REI location)”, “Stewardship” (“Stewardship is our commitment to get people outside and leading healthy active lives, caring for our planet by protecting shared natural spaces, and engaging others in making a difference.”) Rather than worrying about the competition, they encourage and support outdoor activities (“REI is passionate about the outdoors. We are committed to inspiring and educating others to experience the benefits of active outdoor lifestyles, protecting and enhancing shared natural spaces, and mentoring the next generation of outdoor stewards. We also support hundreds of nonprofit organizations and are actively engaged in our communities across the country.”)
BTW, the $50 donation has us on our way to REI today with our Christmas list…. what a great marketing incentive.

Dad, the Marines & Navy, and our independence

Dad replaced his furnace for a 50% energy savings. The Navy/Marines strategy is to “out-green” Al Qaeda, the Taliban, and petro-dictators — the military loses 1 person for every 24 fuel convoys in Afghanistan.
The Navy is flying an F/A-18 fighter powered by jet fuel and alternate aviation biofuel at Mach 1.7 along with amphibious assault ships, combat boats, and helicopters. Marines are testing solar energy efficiency in remote bases in Helmand Province. All of this enhances our national security by reducing US dependency on the Middle-East. Semper Fi
What are our companies doing to reduce our dependency on oil and find more efficient/cost-effective alternatives?

http://www.nytimes.com/2010/12/19/opinion/19friedman.html?_r=1&ref=thomaslfriedman

Definition of Risk: Challenging the Kremlin

Khodorkovsky, formerly 1 of world’s wealthiest, now sentenced to 7 more years in a Russian prison, for challenging Putin. Very strong message to all Oligarchs and Russians.

How do we consider the risk of online sabotage.

Gartner.com predicts that by 2015, “a G20 nation’s critical infrastructure will be disrupted and damage by online sabotage.” What does this mean for our company? How do we think about this as a risk to operations? Do we engage with government to discuss utility (communications, fuel, safety), financial, internet, transportation disruptions and what their crisis plans are? What disruptions would cause our businesses to fail? What other countries infrastructure disruptions would seriously impact our ability to do business? How do we responsibly and realistically assess this threat? Who leads this discussion?

Focus on board leadership

In response to a question about what a board evaluation should include, here’s a list: 1. Focus on strategy and the metrics around strategy 2. CEO succession planning 3. Understanding what behavior compensation is driving and why 4. Oversight of and driving an ethical culture 5. The agenda focuses on the critical issues 6. The right leaders are in place: CEO, board leader (chair or lead director) and committee chairs 7. Focus on shareholder communication

What does board diversity look like?

Isn’t it a range of skill sets, experiences, and cultural backgrounds? If 65% of our customers are women (as they are at GM), shouldn’t that be a consideration in determining if we have the right mix of people on the board to be certain relevant questions concerning our products and services are being asked?

What Does Board Diversity Look Like?V.II

We’ve watched highly respected companies careen into crisis and a company CEO/spokesman, Tony Hayward, become a joke on late night television. Should an experienced crisis expert be on the board who can identify risk, ask the right questions about safety, culture, crisis preparation, and communication strategy? What is our crisis plan and communication strategy in the event of a crisis? Does the board understand their role if the CEO cannot function? Who would be the spokesperson? Who is their team? Is there a (currently dark) website ready to launch, if necessary, to communicate? In the ten minutes a company has to start communicating information in a crisis, are we prepared, or are we leaving communications… and our reputations… to social networks?
Suzanne Hopgood and Michael Tankersley co-authored Board Leadership for the Company in Crisis based on their real life experiences.

A test for all of us

Sandra Day O’Connor: Before speaking out ask yourself whether your words are true, whether they are respectful and whether they are needed in our civil discussions.

Diversity V.III

If the majority of customers and employees of our company are Hispanic, should that impact criteria for board members? Does someone on the board understand how the Hispanic culture could impact the success or failure of the product? Are we certain that without that voice, we will know when we are about to step on a community’s beliefs or values or practices? Do we know the buying power of the Hispanic community (and/or other cultures) where we do business? Who will be asking these questions and providing input in our discussions about short and long-term strategy?

What have we learned from Twitter and Tunisia??

How did the people in Tunisia overthrow a government when there was no opposition party???? The impact of Twitter and Facebook continues to grow and surprise us. This is a learning experience. Our customers… and employees are forming the same type of bonds and communications.

Transparency is….

when we really don’t want to tell anyone what we’ve done or the results of our actions, then we usually should. That’s my measure of corporate (and personal) disclosures. The more we don’t want to disclose an event, the greater importance it might carry for early and accurate disclosure? We see too many companies who knew of issues years before they were disclosed, so they not only have to deal with the issue/crisis, but their reputation for not being honest with their consumers, employees, and shareholders. How does this impact an employee culture when the employees have known for years that the company is not being honest?

Leading Edge Diversity.. Hartford??

Over the past 10 yrs public company CEO’s have been Indian (The Hartford), African American (Aetna), and female (The Phoenix). The current Mayor, Atty Pedro Segara, is a Hispanic gay mayor. Our previous governor is female. The population of the city includes a large segment of S Americans (there now is a Brazilian Consulate), Indians, Caribbeans, Europeans, and Africans. When the neighborhood group, Hartford 2000, first began in the ’90′s it was composed of people from a variety of ethnic backgrounds and economic situations. Hartford 2000 leadership demanded respect in opinions and disagreements expressed, and the consolidation of interests to move the city forward through the successes of the neighborhoods standing together. Is Hartford a leading edge city? Time will tell, but maybe we can all learn something about the benefits of seeking out diverse cultures, gender & ethnicities, and economic backgrounds.

Is culture a risk?

BP’s culture, apparently put schedules and profits first and not safety. So far their culture has cost 15 lives in the Texas City explosion, a 4,000 barrel spill in Alaska, a smaller spill in Alaska, 11 lives in the Gulf, an environmental disaster, & $40 Billion cost to the company. BP has created a “Global safety division” with authority to shut down an operation. Does that change a culture? No. Cultural changes take time and have to permeate the whole company.
More on my next post.

Risk, Crisis, and Egypt

What are we learning about Risk & Crisis as the situation in Egypt unfolds? 1. Crises really are about the unexpected 2. Communication/transparency is key. While internet was shut down and reporters attacked, information is flowing. 3. We are all interconnected. What happens in Egypt impacts us all. 4. Being at the front of a crisis provides much greater flexibility than reacting later. 5. The initial reports of a crisis are typically understated, only identify the tip of the iceberg, and often result in inappropriate responses. These are lessons for us all as we review our crisis plans.

Must see from Egypt!

Kristof interview with 80-year old female advocate for women’s rights. Says many women demonstrators for democracy “have never been out of the house”.

http://video.nytimes.com/video/2011/02/03/opinion/1248069611811/undaunted-in-tahrir-square.html?ref=opinion

Food/water shortages & Risk

“The U.N. Food and Agriculture Organization issued an alert Tuesday that a severe drought was threatening the wheat crop in China, the world’s largest wheat producer, and was even resulting in shortages of drinking water for people and livestock.” What are the ramifications of these shortages and the 2.5 million people directly impacted. China’s role as the producer of 1/6 of global output may impact global food supply.

Corp. Boards, Baseball, and Diversity V.IV

Shouldn’t a board of directors be like a baseball team? Shouldn’t we know each of the positions we fill & what our secondary skill sets are, e.g. a first baseman who can hit, etc. When we need a left-handed pitcher, we seek the best left-handed pitcher. Shouldn’t we operate like a team, with the best skill sets we can find to succeed in a global economy? Unlike a baseball team, we need to define what the positions are beyond Financial Expert. That takes a careful assessment of the company, strategy, career experience, areas of expertise (like strategy or crisis), background, and culture. We can then define what skills sets and areas of expertise we need and match those against the existing team. There’s a time when we’re most effective and other times and circumstances when we’re not. We each need to recognize when and how our skills are the most valuable….. and when they’re not. That makes us incredibly valuable.

“You can’t manage a secret”

If you’re a CEO, it’s really hard to encourage Sr. Staff to report bad news, and harder still to hear it. Alan Mulally, Ford CEO, has a weekly Business Plan Review meeting with his Sr. Staff analyzing each segment of the business. It’s hard to hide bad news with that kind of rigorous review. You can’t manage what you don’t know about, but Sr. Staff is typically conditioned to only deliver good news and be rewarded for that good news….Messengers with bad news typically get shot. It takes an aggressive effort to encourage and require factual and truthful reporting of bad news so it can be managed. Mulally has found one way to do it.

Is Whistleblower reg the real risk?

Is the risk to corporations really with the SEC’s Whistleblower regulation, or is it as much with Facebook, Twitter, and WikiLeaks? Will employees who need their job and who support a family really take the risk in identifying themselves to the SEC? Whistleblower lines have been mostly quiet from employees alerting the organization to wrong-doing. Will this change or will they post anonymously on a social network site or send documents to WikiLeaks instead? Are we focusing on where the risks really are within our organizations? Aren’t we interested in catching wrong-doing when it’s relatively minor and there’s nothing significant to gain by contacting the SEC? What steps are we taking to ensure a culture where employees will share concerns without any fear of retribution, which I think is extremely difficult for the organization to convey? Why would any employee risk their job to alert management of wrong-doing? If we can’t answer that question, the organization is open to employees sharing through other avenues.

Are women really qualified?

The most recent search criteria for the “female position” on a corporate board I saw is as follows: Sitting or recently retired CEO of a large cap Health Care company, served on at least 3 public company boards, and Olympic Gold Medalist…… Ok, I added that last one. What do we think the end result of this search will be? “There are no qualified women for our board”. “We would have had to drop our standards.” Do any of the current board members meet this standard??? This would be funny if it didn’t impact a company’s current and future performance. Catalyst’s survey showed that Fortune 500 companies with 3 or more women on their boards perform significantly better than others. Maybe that result is really an indication that the entire board wants to hear from different perspectives and be certain the dialogue is rich and thorough, and it’s that commitment to differing views that makes the company more successful. Isn’t this the reason to be serious about finding the right women who can add value to our boards, expand our knowledge base, improve our discussions, and participate in improving the performance of our company?

Women and Ethics

“Studies also suggest women have less tolerance for ethical lapses and are more likely to perceive specific business practices as unethical.” Don’t we want this perspective and these voices protecting us and our company as part of improving corporate performance? Isn’t this part of our responsibility as board members?

http://www.forbes.com/2011/02/24/women-corporate-board-of-directors-forbes-woman-leadership-diversity.html

SEC defines “Red Flags” for Audit Comm

The SEC’s complaint against the Audit Committee of DHB Industries, Inc. identified “red flags” which included: personal and business relationships with the CEO, Auditor #1 resigned after reporting material weaknesses in controls, accounting understaffing, lack of inventory management, failure to disclose a related entity. Auditor #2 resigned and issued material weakness letter in inventory valuations, saying the AUDIT COMMITTEE ITSELF WAS A MATERIAL WEAKNESS, and the 10K was filed without consent. Auditor #3 issued an “advisory statement” detailing inventory manipulation.
In 2004 the SEC issued subpoenas concerning the related party entity. The 2004 proxy included a fraudulent “resolution” allowing reimbursement for 10% of annual net for the CEO’s annual “business and personal expenses”. The SEC’s complaint stated: “from.. 2003 through 2005, they were willfully blind to numerous red flags signaling accounting fraud, reporting violations, and misappropriation at DHB. …..overstating inventory values, failing to include.. charges for obsolete inventory, and falsifying journal entries.”
The complaint went on to say the Audit Committee”….enabled DHB’s former chief executive officer, David Brooks, to divert at least $10 million out of the company through fraudulent transactions with a related entity he controlled….also facilitated DHB’s improper payment of millions of dollars in personal expenses for Brooks. …included such items as luxury cars, jewelry, art, real estate, extravagant vacations, and prostitution services. ..DHB’s SEC filings.. contained materially false and misleading financial .. information. “
The former CEO, David Brooks, has been convicted on numerous charges.
I served on the board which replaced the DHB board, replaced the management team, and addressed the many crises. The company, renamed PointBlank Solutions, makes bullet resistant vests for the military.

http://www.sec.gov/litigation/litreleases/2011/lr21867.htm

Ask me no questions, I’ll tell you no lies

We’re in an environment now where fraud is more prevalent. As companies and individuals start working their way out of the recession, many have not improved. Many leaders who viewed themselves as very smart rather than lucky, became accustomed to great success and all that came with it. Many have looked for ways to enhance their situations, which have not improved, and have a feeling of entitlement from past successes. It can be easy to fall victim to “the 2 cent temptation”. Worldcom started with missing earnings by 2 cents and borrowing from the next quarter. That grew to an $8 Billion fraud. It all started with 2 cents. Seemingly small decisions are made that are very small adjustments… end of the quarter adjustments, diverting small amounts of money to cover inappropriate expenses, trying to recoup losses, not disclosing material events, not sharing negatives in an acquisition … those situations start as very small events, but unfortunately they cannot be unwound and then they escalate. This is the environment we’re in today. There is tremendous pressure on some management teams to make that 2 cent earnings miss go away and they may lose their job if they don’t quietly cooperate. It’s time for us all to be paying close attention and asking questions.

Directors disclosures to shareholders

A great article.

http://foundersforum.gmiratings.com/2011/03/a-directors-duty-to-inform.html

Is the lack of bad news good news?

Unfortunately, many CEO’s make it clear that they do not want to hear bad news… and as a result, they don’t….. until a plant blows up, or a defective product is recalled, or a member of the board or senior management is arrested. Members of Senior Management take their cues from the CEO. Under the best of circumstances, it’s already difficult to convince Senior Management they should be reporting bad news, since we all know that the messenger is the one who gets SHOT. When the CEO reinforces the message that (s)he does not want to hear bad news, they have made it highly unlikely that they will hear the concerns of division heads, the General Counsel, CFO, COO, head of HR, Safety, etc. Visibly and intentionally rewarding those that share a concern goes a long way to establishing a culture of sharing bad news, but it has to be a well thought out plan that is consistently executed. It is very difficult for an employee who supports their family to step forward and take a chance of being the messenger who is “shot” and ultimately losing their job. Do we as board members think about this and think about how difficult it really is for an employee to alert management and/or the board to concerns? If the whistleblower line is silent, is this an indication that there may not be an environment/culture within the organization that encourages sharing concerns? What role should the chair of the Audit Committee take in encouraging a culture of openness? These are all questions and discussions that may go a long way in protecting the company.

Southwest’s Crisis Plan/Execution

Attached is a report on the Southwest’s immediate actions in executing on their crisis plan. It does not mention the communications piece of the crisis, but I think we can agree Southwest kept it’s customers and the public fully informed as it moved through insuring the safety of its customers, reputational concerns that could arise out of how they handled the crisis, identifying the problem, developing a solution, communications, resolving the problem, and returning to full production. With both regulators and Boeing stymied about action steps, Southwest took leadership and pulled the potentially impacted planes out of service. They stayed ahead of government requirements so they were able to move more quickly and efficiently in returning to full service. With the amount of attention and inspection these planes have received, they would be my first choice to fly.

http://online.wsj.com/article/SB10001424052748704630004576249144015341786.html?mod=WSJ_hp_LEFTTopStories

Sr. Mgt. vs. Congress

If a Senior Management team were directed to reach agreement on a major initiative and present their decision to the CEO with the ramifications outlined by a specific deadline, they would be expected to do exactly that. If the senior officers reported to the CEO that they couldn’t reach agreement and therefore the company had to close down, is there any chance the Senior Management team would retain their jobs? What a ridiculous idea!!! Oh wait… unless we’re talking about Congress, which has just incurred material amounts of time and money, have impacted thousands of government and private employees and employers, and have seriously impacted the credibility and reputation of our country through their actions. Imagine how countries around the world are viewing us right now? In a crisis, communications is key. What messages are we sending to people around the world who are fighting for democracy?
In thinking about this analogy, it’s nice to know our companies are run by adults who have the best interests of the company and their stakeholders at heart. It’s a good comparison.

China and US Pecans?

China is buying 1/4 of all Pecans grown in the US so prices have increased 50%. A small but vivid example of the global impact of China’s import “appetite”, which extends to oil as well.

How intimidating is an FBI raid?

If the FBI arrived at our place of business with a search warrant and wanted to interview us as they were seizing documents and computers, how would we react? Would we really have the presence of mind to say we want to be very helpful and cooperative, but really need to have someone experienced (a white-collar criminal defense attorney) lead us through the process. A friend recently had this happen and it was the first time I clearly understood the intimidation factor of having guys/women with that very large font FBI on their bullet proof vests and carrying big guns, who want to interview you right then. It seems to me that a FBI interview is similar to a deposition, which we carefully prepare for to be certain we don’t speculate, we answer thoroughly and we stick to what we actually know. (“Just the facts ma’am”). We need someone to lead us through that process so we’re clear what we actually know vs. what we’ve “pieced together”, heard from a co-worker, etc. is clearly defined in our mind so we’re not rattling on about things we really know nothing about. The water fountain gossip is not what we “know” and it’s not up to us to “piece together information”. We can get in a lot of trouble for providing false information to the FBI so having someone guiding us through the process who knows the rules and can help us separate what we “know” from speculation and gossip is important. This example has made me rethink whether it’s just a company that should know a criminal defense lawyer. Do we even know how to source a white-collar criminal defense lawyer to contact? Maybe we should do that groundwork now.

When should a director have legal counsel?

If you hear, “You have the right to remain silent. Anything you say can and will be used against you in a court of law. You have the right to speak to an attorney, and to have an attorney present during any questioning.” we absolutely need our own white-collar criminal defense lawyer. As I posted previously, the questions we would be asked will be on the record and will approximate a deposition. The differences will be that we don’t know what the situation is, we don’t know who is being investigated or charged, we don’t know if WE are a target of the investigation, we have not had a chance to think about what we’re being asked, and have not had our attorney ask us what we actually “know” vs what we speculate or what we’ve heard from others, and we don’t have someone with experience advising us. We could actually end up getting ourselves in trouble while we’re desperately trying to be helpful.
Lastly, as we review the Miranda statement and think about what we’ve just been told in the unemotional confines of our office without the FBI agent with the big gun asking us questions, why would we ever answer questions if we actually thought about what we’ve just been told. “You have the right to remain silent. Anything you say can and will be used against you in a court of law.” They really do mean exactly what we’ve been told. It’s worth thinking this through. If our company is ever a subject of investigation, we will have thought through our reaction and responses so we’re not caught off guard and intimidated into making the wrong decisions.
My friend was caught in this situation last week and it was the first time I realized how intimidating the whole process was. It would be very easy to quickly respond to the intimidation. ALL of my law enforcement buddies have said the same thing: do not talk to law enforcement without legal counsel.

Four Questions Every CEO Should Ask About IT

From the WSJ: “Question No. 1. Are we using technology to transform our business, or are we just adding bells and whistles to existing processes?” 2. “Question No. 2. Are you ignoring important business differences as you standardize processes across the company?” “Question No. 3. Who is making sure the company’s digital strategy is being implemented?” “Question No. 4. Is electronic data empowering your people or controlling them?”
This is a very good start for a board discussion around each question with the head of IT. Good WSJ article.

http://online.wsj.com/article/SB10001424052748704336504576258561056702944.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsThird

Facebook f/c $2B EBITDA? 600MM users

$100 Billion value? Profit margins 50%. Organic growth. Amazing!

http://online.wsj.com/article/SB10001424052748704436004576297310274876624.html?mod=WSJ_hps_sections_tech

Indra Nooyi “Performance with Purpose”

I admit that I have a soft spot for PepsiCo and I am fascinated by Indra Nooyi, who I think is an extraordinary leader. When I was CEO of Houlihan’s, PepsiCo provided us with very helpful and useful marketing information, even though they were not our vendor. They were one of many company’s which stepped up to help us as we went through a very troubled time. Indra Nooyi has been with PepsiCo since 1994. She has been in charge of PepsiCo’s long-term corporate strategy. “To do the job well requires vision, the communications skills to articulate that vision, and the ability to make people believe in the vision.” (The New Yorker May 16, 2011). She wants PepsiCo to be “the defining food and beverage company of the world.” She wants to increase the “good for you” segment, made up of snacks and drinks made of grains, fruit, nuts, vegetables, and dairy, from a $10B business to $30B by 2020. Then they have the “better for you” portfolio and the “fun for you” divisions, which is made up of chips and soda. 3 billion people eat or drink one of their products each year.
Nooyi says PepsiCo must be “the good company”. It must aspire to higher values than just selling soft drinks and snacks. She calls this “Performance with Purpose”.

John Bogle(Vanguard)-Shareholders decide on political contributions?

The Supreme Court Had Its Say. Now Let Shareholders Decide. “What makes this strengthening of shareholder rights particularly important is that over the past 50 years control of corporate America has shifted from individual stockholders to institutional stockholders. But these institutional investors have been unwilling to challenge political activities by corporate boards, even when those activities are not in their shareholders’ interests.”
“The outcome of these votes this proxy season will be a powerful indication of whether our money managers are observing their fiduciary duty and putting the interest of the small investors and pension funds that are their clients before their own.”

http://www.nytimes.com/2011/05/15/opinion/15bogle.html?_r=1&ref=opinion

Gov. Malloy-civil & respectful negotiations!! Leading edge?

Thank you Gov Malloy for conducting difficult and crucial negotiations without vitriol, lack of respect, and most of all, without turning our state into a media circus of divisiveness. Thank you for conducting negotiations in private where the work could get done without political positioning and destructive rhetoric. Perhaps this model of respect and integrity is one others could/should follow.

Massey: “culture in which wrongdoing became acceptable, where deviation became the norm”

Once again, a bad corporate culture and focus on production instead of safety combined to contribute to a major disaster and loss of life:
“Massey exhibited a corporate mentality that placed the drive to produce coal above worker safety”. “Many systems created to safeguard miners had to break down in order for an explosion to occur.”

Major Findings:
The Upper Big Branch coal mine explosion was a manmade disaster that could have been prevented.
Massey Energy put coal production ahead of safety.
Poor ventilation in the mine allowed explosive methane gas to accumulate.
Poorly maintained and malfunctioning water sprayers failed to control a small methane ignition.
Massey Energy failed to control coal dust, which turned a small ignition into a series of massive explosions.
Federal and state regulators failed to rigorously enforce mine safety laws.
UBB miners worked in an atmosphere that was hostile to regulation and to miners who complained about safety issues.
Massey failed to maintain a tracking system in the mine that would have told rescuers who was underground and where after the blast.

There is always someone who knows!

Peggy Noonan’s article in today’s WSJ says “They were open secrets. Everyone knew. And maybe the lesson this week is that people should pay more attention to what they know.” This goes for companies who are engaging in illegal, unethical, unsafe, or just plain bad behavior as well as the behavior of Schwarzenegger, DSK, and Gingrich. Someone always knows. As board members, the question is, how do we get them to alert us or what “Red Flags” do we truly focus on as “Red flags”? Now more than ever the question might be, how do we get them to tell us before they tell the SEC? This all goes back to ensuring the company has a culture that rewards sharing information, especially concerns employees may have. Companies that operate in silos, prohibit cross-communication, and/or the CEO or Senior Management make it clear they do NOT want to hear bad news or problems and they create a culture where employees are more likely to alert the SEC, law enforcement or other agencies, then they would be to share concerns with their superiors, Senior Management, or the Board. Bad behavior is rarely restricted to specific situations. Bad behavior tends to leak into many different aspects of leadership and employee functions.
“…we wouldn’t be so surprised if we paid more attention to what we know, and built our expectations from there”.

http://online.wsj.com/article/SB10001424052748704904604576333702189763560.html?mod=WSJ_hps_sections_opinion

Another civil/respectful message – Gov Daniels

What a classy message from Indiana Gov. Mitch Daniels.
“I was able to resolve every competing consideration but one, but that, the interests and wishes of my family, is the most important consideration of all”.
“If I have disappointed you, I will always be sorry,” Mr. Daniels wrote. “If you feel that this was a non-courageous or unpatriotic decision, I understand and will not attempt to persuade you otherwise. I only hope that you will accept my sincerity in the judgment I reached.”
I’m certain we’ll be hearing more from Gov. Daniels at another time. Maybe he stands out because of all the news reports of this past week that have ranged from disgusting to criminal. It’s good to have positive role models.

http://online.wsj.com/article/SB10001424052702304066504576338473611606448.html?mod=WSJ_hp_LEFTTopStories

Wireless electricity transmitters – invented by two women – UBeam

UBeam. There is a transmitter that plugs into an outlet and transmits wireless electricity to the receiver, flash drive size, attached to your mobile device. WOW!

http://online.wsj.com/video/d9-video-ubeam-demo/7332C7FB-8AEC-409D-9CA5-5A1DA2DBF0D1.html

They needed research to show women increased the intelligence of the group?

From HBR: “The finding: There’s little correlation between a group’s collective intelligence and the IQs of its individual members. But if a group includes more women, its collective intelligence rises.

The research: Professors Woolley and Malone, along with Christopher Chabris, Sandy Pentland, and Nada Hashmi, gave subjects aged 18 to 60 standard intelligence tests and assigned them randomly to teams. Each team was asked to complete several tasks—including brainstorming, decision making, and visual puzzles—and to solve one complex problem. Teams were given intelligence scores based on their performance. Though the teams that had members with higher IQs didn’t earn much higher scores, those that had more women did.”
“The standard argument is that diversity is good and you should have both men and women in a group. But so far, the data show, the more women, the better.”

http://hbr.org/2011/06/defend-your-research-what-makes-a-team-smarter-more-women/ar/1

As CEO, lying resulted in firing

Character matters. It really really does. Lying or lying by omission, causes priorities to be categorized differently, and potentially ineffectively. It has the potential to create a crisis of trust and reputation as well as making a small crisis much larger. There is usually both a short and long-term impact. At the very least, lying causes different actions to be taken than might otherwise be taken by knowing the real facts. Corporate board members have a fiduciary responsibility to “act in the best interest of the company” and not in our own self-interest. It’s a good reminder for all of us as we consider our actions and the results of our actions and how those actions impact our employees/constituents, company, our community, and/or our country. How we define standards of behavior in our companies is what “Tone at the Top is all about”. Every time a “leader” lies or cheats, people know and those people absorb the standards being set by the “leader”.

Lessons from family or controlling shareholder companies

I was surprised to hear at the Yale Governance Forum that the controlling shareholder of a public company thought the independent directors had enormous clout on the board. The company cannot afford for them to resign and risk losing the confidence and credibility of the market, so they actually have as much if not more influence than independent directors of a widely held public company. Very different take on the role of independent directors on a controlling shareholder company.

Can we ignore the risks of violent weather?

The violent weather we’ve been experiencing with hurricanes, tsunamis, tornadoes, earthquakes, drought, flooding, and volcanoes have exposed risks that we hadn’t previously considered. “Last week, the Chinese government estimated that more than four million people were having trouble finding drinking water, owing to a drought along the Yangtze River. In Columbia more than two million acres of land have been submerged after almost a year of nearly continuous rain.”*
We need to add the higher potential of devastating weather conditions to our list of risks companies will face in doing business. How do we communicate with employees and others if the headquarters is destroyed by a tornado or hurricane? Do we rely on a single vendor for any of our products? What happens if they are impacted? Do we have a product which can create a toxic result to the environment or the nearby population if impacted by severe weather? Are we addressing the probable increases in energy costs by implementing cost saving measures? What if violent weather impacts just one piece of the supply or transportation chain? What are the key pieces of our business that could cause a failure in our ability to deliver our service or product?

* The New Yorker, June 13, 2011

Great mistakes leaders can make

A great list of MISTAKES leaders make from HBR*: Acting in our own self-interest so “it’s all about ME”, betraying trust (there’s no where else to go when we’ve betrayed trust), being CERTAIN (“always wrong, but never in doubt” comes to mind), not living up to the values espoused (not walking the talk), being overly enamored with one’s own vision so a passion becomes an obsession (see “always wrong, but never in doubt”), personal arrogance and hubris (confusing being lucky with being smart and the enterprises’ long-term success with one’s own persona), acting before thinking through an issue (this is where advance crisis planning is critical when you don’t have TIME to thoroughly think through actions), lack of consistency (different management styles show up on different days), lack of self-relection (especially as it concerns our effect on others). What a great list to test our behavior against.

http://blogs.hbr.org/video/2010/08/the-biggest-mistake-a-leader-c.html?cm_sp=most_widget-_-videos-_-The%20Biggest%20Mistake%20a%20Leader%20Can%20Make

Wrong Criteria for Exec Comp?

David Miller from the Princeton Faith & Work Initiative interviews John Bogle*, founder of Vanguard. Bogle says we should be compensating executives for increasing shareholder value. The measurement criteria should be based on increasing the intrinsic value of the corporation by increasing year over year cash flow. Worthwhile interview on a range of topics including, “How do you stay ethically fresh?”
Bogle: “Leave everything you touch a little bit better than you found it.” Good words to live by.

*http://www.princeton.edu/faithandwork/media/ethics-in-the-executive-suite/bogle/

40% of the lgst 302 co’s – negative impact from water disruption

Let’s think about how many companies use water for critical business needs: utility companies, food and beverage products, pharma, manufacturing, agriculture, chemical companies. Discussions about water availability have now reached the board room as global droughts are becoming more common.
“In a water-constrained world, water is, in fact, the new frontier for forward-thinking business leaders who want to increase productivity and improve human prosperity.”
Agriculture has shown the greatest efficiencies with a 100% improvement in water productivity in the past 40 years. With agriculture using 70% of the world’s water, it has had the greatest incentives and impact on water.
A variety of technology improvements including reverse osmosis, innovative desalination, and water treatment processes have increased water productivity.

http://www.fastcompany.com/1766346/changing-how-businesses-think-about-water

The results of ignoring ethics & integrity…

Ethics was a gut course in college and that, by itself, carried a strong message. As we worry about businesses paying taxes, shouldn’t we be much more worried about a business approaching, for example, the City of Hartford under former convicted felon Mayor Perez, to do work for the city. The costs ranged from a $100,000 payoff to the Ward Boss, a $40,000 home renovation, or having to hire “no-show” workers. At least with taxes we know what the bill is. We can decide whether to submit a proposal and bid to do the work knowing what the costs are. In the environment just cited a business doesn’t know how much a project will cost, what it will take to get it done, and how many hands will be out along the way. No organization can be successful without strong ethical grounding and, even though we think the ramifications are only relevant to a small group, all the stakeholders are damaged in the process. Why would any legitimate business do business with an organization that requires bribes and political chicanery to get a job done? Why would a business stay in a community where bribes were commonplace? How does anybody know if the product and/or results will be satisfactory or if they’re accepted because of a payoff? At a corporate level, the lack of ethics and the lack of a strong Tone at the Top was instrumental in the death of 29 miners, the ecological devastation of the Gulf and 11 lives, the “news at any cost” culture at News Corp, and the landscape is littered with numerous companies having to file bankruptcy. These lapses weaken us all, either through higher taxes to pay off bribes or through denigrating our own culture and values by having those in leadership positions have low ethics, integrity, and values. As a board member it’s important to remember the results in these lapses and ask ourselves if we’re doing all we can to ensure high ethical standards and integrity and are we doing enough to ensure the employees will alert us of wrongdoing in the organization? Have we developed a culture of ethics and integrity? Is the CEO open to listening to different perceptions, points of view, and problems within the organization? If not, (s)he will be the last to know if there’s a serious issue and we’ll be the next BP or News Corp.

What happened to “news”

Ted Koppel was interviewed last week at the Mark Twain House in Hartford and was asked what happened to “news”. The explanation was unsettling and I’ll do my best at sharing his response. He reminded us that a democracy depends upon an informed electorate. TV channels apparently must have a “public good” purpose in order to maintain their license with the FCC, which he says has become a “paper tiger”. That public good was the news, which was never a profit-making venture…. until CBS created 60 Minutes and the “news” channels suddenly realized there was money to be made in reporting “news”. Since then, rather than the “news” reported on events we might not particularly have wanted to hear as in the past, they now report on what Charlie Sheen or Casey Anthony or Kim Kardashian are doing. ABC has only FIVE foreign correspondents so any hope of learning of something bubbling up internationally is not going to happen there. He says the major news networks should have been reporting on the Somalian humanitarian crisis long ago…Foreign correspondents on the ground there would have seen it unfolding. He also added that “news” no longer goes through the vetting process of prior times. Koppel complimented NPR for staying true to the mission of reporting the news. My takeaway was that we all have to work harder at defining what is important to us and our companies, and we must seek out the information that truly matters and is accurate as we work at defining strategy and the future of our companies. The risks of not doing so are great.

Reflecting on Crisis and Crisis Planning

Hurricane Irene followed a winter of blizzards, a tornado, and an earthquake and served as a reminder that crises don’t always announce when they’re coming or how they’ll leave you. Tornado warnings require quick decisions. Our top priority was our safety. If our building was hit, because we have nine 4′X 7′ windows, we knew all our personal belongings would be destroyed. Our second highest priority is our data. While we have 3 backup drives, with one in NH which we rotate about every 2 months, the two in the condo are with the computers they’re backing up… hmmmm.. so another one is on the way which will be rotated in the safe deposit box weekly. We’re also using the Cloud more. Next was a look around to see if there were other things that are truly important to us like 125+ year old family jewelry, which has been passed down through generations. That needs to be in a convenient but more secure location. Next, we need an emergency kit to grab on the way out the door with water, first aid kit, a few snack bars, and a few clothes and we need to grab the bag with cellphones and chargers so we can communicate.
When Irene knocked out power to WFSB, our local CBS affiliate, we watched our TV screens go blank as they lost power and their generator didn’t work. They had moved out of downtown Hartford, which has an underground grid and never loses power and were apparently unprepared for the ramifications of that decision.
Our companies need sober and thoughtful reflection on how effective emergency plans are in protecting lives and the company itself in a crisis. We have seen vivid examples of what happened with companies who didn’t focus sufficiently on safety and especially the safety of their employees in a crisis and the fatalities from that lack of diligence.
This is a good time to review both our corporate and our personal crisis plans.

A communication disaster during crisis

During a crisis, communications need to be clear and succinct and inspire confidence in the listener, who may be employees, customers, constituents, vendors, shareholders, government regulators, etc. Communications also must be accurate and consistent. Contrary points of view need to be settled and the organization needs to speak with one voice before communications are sent in order not to confuse an already worried constituency. Communicating through social media is powerful. I alerted my “friends” on Facebook to wrongdoing in the Registrar’s Office during a voter registration drive and was contacted by three reporters within 1/2 hour of posting the issue. The results: a front page article in the local newspaper and an interview on WNPR. That can work to a company’s advantage…. or disadvantage in distributing a message to a constituency.
There’s no better example of communications disasters right now than our two political parties who think that daily finger-pointing is a message we hear and side with the finger pointer. What we hear very clearly is: an inability to lead, dysfunction, lack of results, self-serving behavior, and individuals who are putting themselves first instead of acting in the best interest of the country. (Boards of Directors are required by law to act in the best interest of the organization). Each individual doing the finger-pointing thinks they’re scoring points instead of adding to the overall static and impression of dysfunction. Imagine how other countries are viewing us right now as we’re reduced to a daily series of slingshots. It’s a valuable lesson for us all in messaging and communications. Our constituents would be no less disgusted with the company we serve if that’s how we were communicating to them in a crisis.

R.E.M & Board Composition

The best board member is the one who knows when it’s time to leave. The question we all need to ask ourselves every year is “am I adding value to the board?” and “is there someone else with a different skill set and different background and experiences who could add greater value?” R.E.M. just decided to split up causing distress among their fans, but they decided it was their time to leave the stage.. As we look around the board room can we say the same for the individuals in the room. Will each of us know when it’s our time to leave and when someone with a different set of experiences and skills would add greater value to the company, the board, and the CEO? We’re seeing some very high-profile boards making some curious decisions today and it seems like a good time to ask ourselves these questions. If we had voted to hire a CEO, arguably our most important responsibility, without ever having met him, are we really adding value to the company? What is our understanding of our fiduciary duty to put the company first in all of our decisions? It’s a good time to think about how we add value….or not.

R.E.M & Board Composition

The best board member is the one who knows when it’s time to leave. The question we all need to ask ourselves every year is “am I adding value to the board?” and “is there someone else with a different skill set and different background and experiences who could add greater value?” R.E.M. just decided to split up causing distress among their fans, but they decided it was their time to leave the stage.. As we look around the board room can we say the same for the individuals in the room. Will each of us know when it’s our time to leave and when someone with a different set of experiences and skills would add greater value to the company, the board, and the CEO? We’re seeing some very high-profile boards making some curious decisions today and it seems like a good time to ask ourselves these questions. If we had voted to hire a CEO, arguably our most important responsibility, without ever having met him, are we really adding value to the company? What is our understanding of our fiduciary duty to put the company first in all of our decisions? It’s a good time to think about how we add value….or not.

Saudi Women Win Right to Vote

“RIYADH, Saudi Arabia—Saudi King Abdullah has given the kingdom’s women the right to vote for first time in nationwide local elections, due in 2015″

http://online.wsj.com/article/SB10001424052970204010604576592552009343940.html?mod=WSJ_hp_LEFTTopStories

The Wizard of Lies

I shared the stage with Diana Henriques, author of “The Wizard of Lies”, who shared her insights about Ponzi perps.  We’re hard-wired to trust people, so we need guiding principles to follow:  invest only with funds which have third-party consultants, know your risk tolerance (for directors this has a familiar ring), and understand the risk(s) we’re taking.  Diana is a senior financial writer for the New York Times and it is very easy to understand why she is so successful.  She interviewed Madoff in prison and she shares valuable insights.

Board term limits-CEO dream come true

I didn’t know how many CEO’s would love to have term limits for Directors on their company’s Board of Directors.  Term limits would solve numerous issues: 1.  Many boards have at least one problem director 2. Boards need “refreshing” in a world that is rapidly changing  3.  Companies constantly need new skills and experiences but that means directors need to resign or not be re-nominated  4.  Nom/Gov committees are reluctant to ask board members to leave the board so many board members who add little value stay on and on, and 5. Many board members have served for too long.

The CEO is the last person on the board to suggest it’s time for a board member to move along.  The CEO is only able to participate in meetings where one or more board members either don’t add value, distract from critical discussions, or consume too much time.  We all want our boards to be the best so considering term limits seems valid.

Isn’t it a mark of true leadership, integrity, and dedication to put the company first when a board member realizes they are adding less value than someone else would and they therefore announce their intention not to stand for re-election?  Two boards I’ve been on did exactly that and we replaced ourselves over a couple of years, recognizing that different skill sets were needed than when we joined the board.  In other words, we had resolved the crises and it was time for the company to move in a different direction, out of a crisis mode, and with a different set of skills.

2 CEO’s who are sisters – CPB & FTR

Congratulations for a great interview with Maggie Wilderotter, Chair & CEO, Frontier Communications Corp. and Denise Morrison, President & CEO, Campbell Soup Co.  The two CEO’s are sisters.

Wilderotter’s board/senior staff mentoring program is a great idea to promote a strong relationship between board members and senior staff.  The mentorship changes every 2 years.  Over time all board members will have a relationship with all senior officers.  When the time comes to decide on a CEO, the board has a strong familiarity with the senior staff.

Transparency and communications were frequently mentioned as high priorities in board/CEO/Chair relationships.

http://www.boardmember.com/this-week-10-20-11.aspx

200 major companies call for action on climate change

Leaders of nearly 200 major companies around the world have called for tougher action on climate change.

The 2C Challenge, co-ordinated by the Prince of WalesCorporate Leaders Group, says that climate change puts society’s future prosperity at risk.

But the window to keep global warming below 2C has “almost closed”, it warns.

Companies signing up include UK retailer Tesco, energy provider EDF, electronics company Philips, chemicals giant Unilever, eBay and Rolls-Royce.

‘Concerted effort’

The corporate leaders communique says that the scientific and economic case for tackling climate change remains clear.

“If we do not act, climate change risks seriously undermining future global prosperity and inflicting significant social, economic and environmental costs on the world,” it reads.

http://www.bbc.co.uk/news/science-environment-15352764

Women CEO’s/directors, a nod to diversity..or something else?

In July, USA Today reported “Fortune 500 companies that had a woman at the helm for all of 2009 were up an average 50%.” And according to Forbes: “as a group they outperformed the overall market–companies dominated by male chief executives–by 28%, on average, and topped their respective industries by 15% [in 2010].”

A 2007 research report by Catalyst Inc showed that among Fortune 500 companies, those with the greatest number of women on their boards performed significantly better financially than companies with fewer female board members.

http://community.nasdaq.com/News/2011-11/girl-power-list-of-companies-with-female-ceos.aspx?storyid=101171