Good to Great to Gone: The 60 Year Rise and Fall of Circuit City

Conference Board Review has an informative interview with Alan Wurtzel, former CEO of Circuit City, about the role of the Board, CEO, Strategy, those with dissenting opinions, and how the glacial demise of the company happened.  I thought the most telling comment was “management gradually became more interested in what investors thought than in what the customer thought.”  This points out even more strongly how very important it is to have diversity of thought/experience on a board.  Vice Chancellor Travis Laster suggested in a speech to Corporate Secretaries and Governance Professionals that boards should always appoint a specific person on the board to present a contrary opinion to major decisions so the board always hears, as he does, opposing opinions.  That would go a long way to removing the stigma sometimes attached to not “going along” and being certain both sides of an argument are heard and considered.

This is an article we should all read, especially as we face today’s challenges.

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8 Attributes of Successful People

Ideas from worth sharing:  1.  Back-up plans tend to build in excuses  2. Put in an incredible focused effort 3. Work a LOT more 4. Avoid joining the crowd 5.  Decide what results you want and set the goal. 6. Achieving one goal is the launching pad for the next goal. 7. Explain the logic and benefits of a decision or position.  Sell  8. Admit mistakes and apologize.  Recognize others contributions.  Ask for help.  Fail…..and try again.

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Strategy – Focus, Simplify, Adapt

What gets in the way of success?  Complexity.  What has made it more difficult to execute a plan? Complexity.  Only 9% of companies worldwide have been able to sustain a 5.5% growth rate over the past 10 years.  15 of 20 airlines are gone from the top 20 of 10 years ago.  Only 12 of 20 banks are still in the top 20.  Does the company have a clear point of differentiation? (Nike and Ikea for example).  Does the company have a clear insight into customer preferences and habits like Apple does? TK Kerstetter’s interview with Chris Zook, Head of Global Strategy for Bain, Board Member, and Author is a remarkable 14 minutes of key information for board members.   He focuses on:  Focus, Simplify, and Adapt. Focusing on external drivers is key.  Internal focus may lead to a defensive strategy.  Women on boards moderate excessive hubris.  Companies are successful based on what America has provided and they should be investing more in the country. Valuable information for us all.

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7 Ways to Disrupt

“Massive disruption is coming, and the only question is whether your firm is going to cause it or fall victim to it.”

Fast Company has a great article on ways to disrupt our businesses and make them more customer friendly & create greater loyalty.  See #6 about culture and transparency!  Below are some bullet points from the article.  The whole article is worth reading.

1) Totally eliminate your industry’s persistent customer pain points.  Think: can we turn our process or perspective around, to look through the customer’s eyes as though they were the company and we were the customers?

2) Dramatically reduce complexity. Simple, formerly known as BankSimple–is trying to take a machete to the insanely complex and confusing world of consumer banking.

3) Cut prices 90 percent (or more).  Incremental change doesn’t disrupt an industry; radical change does. Radical price reductions require radical new processes and business models.

4) Make stupid objects smart. Take every product you sell, and make it smart…or accept the fact that you must forever more compete on price and accept low margins.

5) Teach your company to talk.  No one owns the customer, and you either do what’s best for the customer or you will lose him. But the real question we want to put forward is this: what happens if your competitors’ companies talk, but yours doesn’t?

6) Be utterly transparent.  

Think: not just no secrets, but also no spin.

The concepts of social influence and pervasive memory will make it increasingly difficult for companies to hide from dissatisfied customers, negative reviews, and faulty products.

What if your company didn’t simply try to stop hiding, but instead radically embraced the truth? How might it impact your culture to decide that your firm would be the most powerful force in your industry making certain that every speck of the truth was obvious to every customer, analyst, and reviewer?

Would it change your reward systems? Would it impact employee motivation? Might it cause changes in the kind of employees you attract and retain?

We’re pretty opinionated in this regard. The truth is coming, and there’s nothing you can do about it. But most firms won’t recognize this until it happens. Better to get far out in front while confusion reigns.

 7) Make loyalty dramatically easier than disloyalty.  Think about every major purchase decision your customers face in your industry. How can you make it easier for customers to remain with your firm? Now, think even bigger. Can it be five or ten times easier? Subtlety can be lost on today’s customers.

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Key Benchmarks

In Paul Washington’s interview on This Week in the Boardroom, he briefly discussed benchmark considerations they use at Time Warner: Does it make Business Sense, is it consistent with the legal/regulatory framework, is it consistent with the company’s culture and strategy, what do shareholders think, how does it impact the pubic? It’s a short, concise, thorough list of measurements to put any discussion up against.
The board’s role is to be certain management has the mechanisms in place to provide this information to the board.

Paul Washington is the Senior Vice President, Deputy General Counsel & Corporate Secretary, Time Warner Inc.

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Google on men and women differences

This is a must see interview:!16A9B911-E7D9-4E1D-99E1-979CB1B0F35C

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CEO Denise Morrison WSJ interview

Denise Morrison also participated in the WCD Global Institute in NYC last week.  She focused on the role and importance of building relationships and advice from a mentor.  When I was with Aetna Realty Investors, the Department Head, Bill Russell, signed me up for an all-guy annual golf tournament to be held in Sept. It was April. I didn’t play golf. He said, “You have the summer. We have a membership at TPC. You’ll learn.” I par’d the first hole in the tournament. It was invaluable in my business career, including when I was on the board of the CT Business and Industry Association and won the Long Ball Contest. 🙂  4 hours on the golf course teaches you a lot about a person.  I played in a match sponsored by a construction company and watched their future ($50 million) client cheat his way through the entire day.  Invaluable.   Having mentors who nudge/advise you in the right direction is critical. The Chair of the PE company which owned Houlihan’s always kept the focus on building the business as we were facing very difficult workout decisions. I’ve watched mentors change the playing field, rather than argue head to head. Changing the conversation and/or the rules, rather than engaging in a direct conflict is a tremendously valuable skill.  In another situation, a mentor asked what my conversation was about that was consistently leading nowhere.  Through that discussion, I realized the person I was working with only wanted to hear everything was going well, and not about issues I was delivering.   Lastly, when I was CEO of Houlihan’s, the highly popular and very productive former (several times back) CEO of Houlihan’s, Fred Hipp, told me, “The employees have decided to follow you”. It was the first time I understood “leadership”. CEO is only a title. It doesn’t mean anyone will follow you. Leadership is team building and having people believe in you enough to follow you. That’s trust that’s earned.

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We can create a crisis!!!

When we give a key employee a 2% raise and the CEO a 25% raise, aren’t we building in employee dissatisfaction and maybe even a culture of unfairness and haven’t we just CREATED a risk to the organization?  While we’re all focused on Executive Pay in the Comp Committee, shouldn’t we also be focused on how the employees are being compensated and if it’s fair, especially in relation to Executive compensation?  The distance between a 2% increase and a 25% increase is material and not unnoticed by the employees.  I have heard from two key employees this past week that they have no incentive to work harder, or even as hard as they’ve been working.  They now know they won’t be compensated for their efforts or results so they’re figuring out to work less and therefore improve their quality of life by having more time.  When these decisions are being made about employee compensation in the organization, are we, as directors, aware of the unintended consequences of our decisions throughout the organization?  We’ve just been through a very difficult time when employees were asked to work harder/longer for no additional pay, or in some cases for less pay.  Now we generously reward the CEO and not recognize the employees?  What is the message we just sent to every employee in the organization?  And doesn’t that create an extraordinary level of risk?

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Avatars & Corporate Strategy or Crisis

Working through strategies, including crisis planning, can use video games and Avatars to work through the roles of the key participants, the variations in decisions and results, and the experience of the key participants working together, even if they’re on different continents.  What a valuable use of technology!! I will have more on changing uses of technology.

This was discussed today at the Women Corporte Directors Global Institute.

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Companies in Crisis: Walmart & CRT

Two stories concerning federal investigations hit the news this week. The New York Times outlined in detail Walmart’s alleged actions after being notified by a former executive at Walmart’s largest foreign subsidiary, Wal-Mart de Mexico, of rampant and widespread bribery with payments totaling more than $24 million. The allegations state that the then CEO, now board member, H. Lee Scott, Jr effectively shut down the investigation in 2005 and Wal-Mart de Mexico CEO, Eduardo Castro-Wright, who is alleged to be central to the bribery, was promoted.
In a very different situation, a Hartford-based non-profit, CRT, with $100 million in revenue from a variety of government grants, was raided by 55 agents representing four federal agencies: Health & Human Services, VA, Energy, and HUD. The Hartford Courant had questioned in Feb why the former CEO has been receiving $85,000+ since 1985 for unspecified work from his Florida home, where he is a resident. The CRT Chief Operating Officer, a former Army Major, was fired in 2012 and she wrote to the board claiming she was fired in retaliation for cooperating with state auditors, who started an investigation in 2011. The board chair has denied those allegations in a letter to the Hartford Courant stating, “nothing more than the views of a disgruntled former employee who resigned after confirming she had taken inappropriate action…” Other whistleblower complaints allege that federal funds were improperly diverted. After a year long state investigation, being raided by 55 government agents suggests major criminal wrongdoing.,0,4562027.story
What do these two have in common? In both cases the people at the top did not take seriously the “whistleblower” information they were given. They chose not to act on information given them by high-ranking executives and we’re seeing the results.
I co-authored the award-winning, Board Leadership for the Company in Crisis ( The very first step is to determine if the CEO and or Chair are part of the problem or part of the solution. In both of these cases, it might be a very good place to start. Another good reminder is when someone says, “You have the right to remain silent. Anything you say can and will be held against you.” it’s a really good time to listen and call a criminal defense lawyer. They really mean it.  The board should now be asking for all information the CEO/Chair received and should be asking what other employee complaints have been made.  A serious issue for both companies is what has happened to the culture in the company as employees have witnessed wrongdoing a the top.  The Tone at the Top ripples throughout the organization.  All employees will be watching the next steps in both organizations.  Those actions will define the culture for many years to come.

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Employee vote against Exec Comp?

A VP friend at a F-200 company just had his review:  Great job, valuable employee, greater responsibilities, very pleased with having solved major customer dissatisfaction issues …….. 2% raise.  The CEO is getting a 25% raise.  My friend voted against Exec Comp and Say On Pay.   I think this is worth paying attention to as board members and Comp Committee members.  He has effectively lost ground the past five years with his raises not keeping pace with inflation in spite of being a highly valued IT employee, while he has seen the CEO pay skyrocket…… And therein lies the widening income gap issue.

We also talked about the relationship bond that previously existed between employees and companies that doesn’t any more for exactly these reasons.  Is this good for companies?  For consumer products companies, what is the cost of a work force with low morale who keep losing ground?  Aren’t they conveying that low morale to the customer rather than an enthusiasm and excitement about their job & their employer?  When we encounter employees “who don’t care”, aren’t we really saying we’ve encountered a COMPANY that doesn’t care about their employees and that attitude has rippled down to the employees and now to the customer?  Isn’t that why we love eating at some restaurants with really good food and and not others with equally as good food?  Are we thinking about the cost of this income  gap to the company and to the future of the company?

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50% Americans single..from 22% in 1950

Changing demographics are the most important consideration in residential housing. The fastest growing sector are 18-34 year olds, 5 million of who live alone.  31 million people live alone, mostly clustered in metropolitan areas.  In Manhatten 1/2 of all residences are one-person dwellings.  15 million are 35-64, 10 million are 64+, and 5 million are 18-34.

For any company marketing to “households” and consumer buying, these demographic changes are especially relevant.  The city of Hartford is adding apartment housing and the demand is all in the studio and one-bedroom sector, which speaks to this changing demographics.  Single households look for different housing, buy different furniture, live in different locations, and spend their money differently.  These are all important considerations for real estate developers, cities, and consumer products companies.  As corporate board members, we need to understand the trends and how they impact our products and the future direction of the company.

Going Solo, The Extraordinary Rise and Surprise of Living Alone by Eric Klinenberg sites the above statistics and the trends in the US today.


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“There’s no intention to waste money.Sometimes it just happens.”

Wyckoff Heights Medical Center in Brooklyn, NY has experienced interesting interpretations/actions of Duty of Loyalty and Duty of Care from the board.

One member of the hospital’s board obtained for the pharmacy that he owned the exclusive right to market prescription drugs to hospital patients. Mr. Goffner had three conflicts, more than any board member. He had the exclusive contract to dispense drugs.  And Mr. Goffner was the landlord of a building being rented by the hospital. In the recent shakeup at the hospital that led to the ouster of Mr. Garg as chief executive, Mr. Goffner is now chairman of the board.   Another board member lent $2.4 million to the ailing Wyckoff at 12 percent interest, with the hospital required to put up several of its buildings as security. Yet another trustee, Andrew Boisselle, president of Cebco check cashing, provided on-site check cashing for Wyckoff employees.

When the chief executive lost his license after an accident, hospital security guards chauffeured him and his wife around the clock in a Cadillac Escalade or a Lincoln Town Car. Mr. Garg said in the interview that he suspected that the drivers of the Town Car and the Escalade were eavesdropping on his conversations. So he had the hospital purchase a used stretch limousine for about $33,000. The hospital recently sold the stretch limousine for $18,000; it had cost $33,000 eight months ago. It sold the Lincoln Town Car for $9,000 and hopes to get $18,000 for the Escalade.

The hospital all but defaulted on its $109 million in state-secured bonds, forcing the taxpayers to cover $10 million due to bondholders before the state agreed in May to defer the hospital’s overdue payments.

Mr. Garg became CEO in 2008. “The optics definitely don’t look right,” Mr. Garg conceded in an interview. “There’s no intention to waste money. Sometimes it just happens.” His attitude, he said, was that “if you can save a couple of million here and there, and manage to spend $500 on dinner, it doesn’t really matter.” Wyckoff paid for numerous meals at expensive restaurants for Mr. Garg, as well as his trips to Sutton Stogies for drinks and cigars.

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Lessons Learned from 1000 Women Entrepreneurs

What AngelPad founder, Korte learned from women to share with men:  Collaborate, People in the room have as much to offer as speakers, manners matter, know what you’re “asking for”, it’s not ALWAYS business.  From Forbes guest blogger, Thomas Korte.   Isn’t it interesting what you can learn from people, in this case women entrepreneurs, with different perspectives and styles?  And wouldn’t our boards/companies all be more successful with a wider group of perspectives, backgrounds, and styles so we too can learn to think differently?

Korte’s experiences at the Women 2.0 PITCH Competition mirrored my experiences at the Women Corporate Directors conferences where conversations are respectful, friendly, collaborative, focused, and helpful.

The link to his blog follows:

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Term Limits or Age Limits in “Refreshing the board”???

NYSE Euronext Scott Cutler and Corporate Board Member TK Kerstetter discuss term limits, age limits, refreshing the board, creating turnover, and board evaluations.  Excellent insights.  As corporate board members we all need to remember that we need to always put the best interest of the company first and we should ask ourselves regularly if we are the best person to fill that seat on the board.  In every role there’s a time where we each excel and also a time where someone else would be better.  I think we all hope that we’ll be the first to recognize that it’s time for someone else who has a better skill set to fill our seat and it’s our responsibility to always be thinking about that.  I’ve been privileged to work with people of the highest integrity who have informed the board that their value had diminished as circumstances changed and someone who added more relevant value to the current environment needs to replace them.  That’s a true board member.

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Damage control ALERT for TicketNetwork!!!

“TicketNetwork CEO Don Vaccaro’s Monday morning arrest has cost the company as much as $8 million, as the South Windsor ticket re-sale firm announced Wednesday that is withdrawing from the state’s “First Five,” program.

In a statement the company said “Due to the personal incident involving our CEO Don Vaccaro, we feel that it is necessary to respectfully withdraw from the FirstFive program in an earnest attempt at preserving our future relationship with the state.

The withdrawal from “First Five,” came one day after Vaccaro announced he was taking an indefinite leave of absence from the company, and following Gov. Dannel Malloy’s statements earlier Tuesday that the state and the company needed to re-examine their relationship.

In July, TicketNetwork, which serves as an exchange for ticket buyers and sellers, was designated to receive $8 million from the state’s “First Five,” program, in exchange for adding 200 jobs in Connecticut over the next two years. The state’s incentive package includes a $4.5 million loan at 2 percent interest with $1 million forgivable, a $1.8 million loan at 3.5 percent and a $250,000 training grant for software engineering.

“While I need to work through the legal process first, I hope to publicly discuss this issue more openly in the future,” Vaccaro said in a released statement. “I am seeking personal counseling and treatment for alcohol abuse.”

Long-time TicketNetwork executives Doug Kruse and Jeff Scheman assumed responsibility for running the company as co-CEOs.

Vaccaro, 49 of Glastonbury, was attending an Academy Awards party in Hartford on Sunday night, where police say an apparently drunken Vaccaro allegedly groped a woman and yelled racial slurs at a bouncer trying to escort him from the party.”

Where does a company start in repairing the damage their CEO has done to the company’s reputation?  There previously had been an incident in October, 2009 resulting in a lawsuit claiming the CEO ” made sexual advancements … including unwanted touching of the plaintiff’s body in a sexual manner.” The woman was fired two days after she complained to the company’s “legal representatives”.  What is the current culture at the company?  And where do they start repairing the damage?  Is it with employees, customers, vendors, media, or the state of CT?  What actions does the company have to take to convince us all, especially their own employees, that they’re serious about a culture of integrity after this highly publicized event?  Will he and should Vaccaro be allowed to return as CEO of the company?  How much damage has he done to the company AND his own reputation and is it repairable?  No company can anticipate this type of crisis inflicted by the CEO, but having a crisis team identified and in place can quickly mitigate the magnitude of the long-term damage.  That’s the value in having a well thought out crisis plan.

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Biking as a leadership model!!

Riding a bicycle is more relevant to better leadership models through a “sense and respond” focus, rather than “predict and control” from a Financial Services Roundtable article and a WSJ article focuses on changing the way restaurants serve customers.  Both speak to a rapidly changing environment we all need to be addressing as customers, employees, and all stakeholders expectations have changed.  I, of course, love both articles because they hit my passions dead on:  Leadership, culture, change, bicycling, and hospitality.  Growing up waiting on table was the best experience in learning:  1.  immediate feedback for efforts expended.  The tip was, at most, two hours away, so every shift resulted in direct rewards for efforts.  2. The harder you worked, the greater the reward, 3. Organization was key.  Every trip to the kitchen for a forgotten item took time away from serving customers and earning more money  4.  Each group of assigned tables represented its own little business  5.  Working as a team helping each other out when others needed help so they would help when you were buried was critical 6.  The chef had a choice as to whose orders he put up first… or last… being helpful mattered 7. Being able to read a customer from across the room was critical.  By the time they starting waving, it was too late.  Terrific life lessons.  And from biking:  You’re either in the lead, which means you’re always checking to see that everyone is in sight (FOLLOWING) and that the pace is right for everyone.  If you’re following, you need to be checking the person in front of you to see that all is right with their bike and if they’re struggling what you can do to help.  You need to yell out danger (CAR RIGHT, CAR BACK, STOPPING) so that everyone stays safe.  As Brian Robertson shares:  it is “sense and respond”.  Every bike ride is different and every one requires constant focus with all of our senses.


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So hard to tell….”a naked prostitute from a naked worldly woman”

Today’s WSJ story on Dominique Strauss-Kahn reported that he spent the night in police custody in Paris “over allegations related to a prostitution ring which operated out of the northern French city of Lille”.  Mr. Strauss-Kahn allegedly attended parties in the US where prostitutes were brought from France for the parties. “Paying prostitutes isn’t illegal in France, but encouraging prostitution by offering them to others and using corporate funds to pay for them is.”  (Did the IMF pay for prostitutes the article did not say?)  Mr. Strauss-Kahn reportedly said he wasn’t aware the women were prostitutes, which led to the comment, ” “He could well have not realized it, because you see, in these parties, one is not necessarily clothed and I challenge you to tell a naked prostitute from a naked worldly woman,”.  This might be a funny story if he were not a world LEADER at the time, using his position of authority for (alleged) egregious behavior.  How many people who reported to him looked upon this behavior as a pass to misbehave as well since he set the Tone at the Top?  How wide was the circle of people who saw this as acceptable behavior and acted accordingly?

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To regulate or not to regulate???

Shouldn’t we, as business people, be applying sound business ethics to the way we do business and steering clear of the gray areas?  Shouldn’t we have a bar that’s higher than the minimum required of us legally?  As a small business owner I too am against excessive regulation, but I am always curious to see what took us to the regulation.  In Tom Brokaw’s book, “The Time of Our Lives” he quotes Indra Nooyi, CEO of Pepsi, who explained that “companies became simply instruments to make money, lots of money, as swiftly as possible.”  “We live in an age when trust has to be earned, not demanded.  Institutions, public and private, now relate to individuals in a wholly new way”.  “Today, the public are the golden globe at the center of the system.  We, politicians and corporations, encircle them, trying to gain their attention and win their trust.”

What brought this to mind was Congress having to pass a bill making insider trading illegal for Congress.  Really??? REALLY???  With almost single digit approval ratings, wouldn’t we be thinking about passing legislation ensuring that ALL the same rules that apply to us that apply to everyone else, if we were Congress?  That would include social security, healthcare, financial regulations, and most importantly, a responsibility to put the country first in all of our deliberations.  Isn’t that what restoring trust is all about?  Doing the right thing?  And isn’t that true for corporations as well?

I’ve experienced much fraudulent activity as a consumer of late, and I wonder if we’ve lost the whole idea of “doing the right thing”.  Who on the board asks that question as we’re debating important issues in the boardroom?  Who asks during the discussion and before the vote, is this the right thing to do?  Isn’t that where our moral compass is and not in meeting the bare minimum of regulatory requirements like Congress….. our leaders (?) is doing?  Don’t we want to be leading the way with our actions, not listening to our lawyers tell us what the minimum is we have to do to “pass”.  Isn’t that what Congress is doing and getting near single digit approvals?  Don’t we want to have a reputation for serving our customers, employees and shareholders to the best of our ability in doing the right thing?  Isn’t that what leadership is all about and not meeting the minimum requirement, then finding the loophole to fit through.  Wouldn’t regulations be increasingly unnecessary if that was the guiding light we followed.

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Stunning Failure of Duty of Loyalty

I attended a board meeting last week that I wish every board member could have experienced. The President of the Board is a senior officer of the company responsible for managing the funds of the organization and there is a voluminous list of “accounting errors”, “mis-codings”, and “mis-allocations”, which are to the benefit of XYZ, the board president’s company. The organization has repeatedly requested both an accounting of the mis-directed funds and proper oversight of the funds. A series of resolutions were presented to address those requests. Here’s the dialogue that ensued:

Member: As has been acknowledged by the president and at other meetings, there are significant accounting issues related to XYZ and its management of these funds or mismanagement of the funds and let’s hope it’s not worse than just mis-management. Because of those issues and the resolutions that are being contemplated tonight I guess I want to know if you, President, are going to be recusing yourself from the discussion of this? You are an officer of XYZ, right? President: Yes.   Member: So given your fiduciary responsibilities and legal responsibilities to XYZ, do you see yourself in any conflicted position as the President of the organization to discuss and vote upon any issues relating to the performance, mismanagement and perhaps illegal conduct of XYZ with respect to the organization. President: I do not.   Member: So you are prepared to vote tonight, as a Senior Officer of XYZ? President: correct. Member: The question is are you going to recuse yourself from a discussion of your company’s management of this facility or are you going to vote the interest of XYZ?   That’s the question.   President: I’m not prepared to answer that. Owner: Ok. Well hopefully other members of the board will be moving the resolution to have the accounting done by XYZ for it’s acknowledged mismanagement of organization funds.
Move and seconded resolution: “XYZ is to provide a full accounting of all funds owed the organization..
President: That’s a no. Member: So you’re participating in the vote? President: yes.

It was a stunning example of a board member breaching their fiduciary duties…. and it is not a case study.  It’s real life.   There was a tape recording made of the meeting and I expect we will be hearing more about this.  This also addresses issues of culture  and Tone at the Top emanating from the top leadership of XYZ….. and this is real life.

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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 (, 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 or


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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.,0,6170563.story

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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?


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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:

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. “
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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.

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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.

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“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.”

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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: and  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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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”

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.


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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.

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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

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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.

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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”.

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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.”

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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!

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