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.

http://www.yourpublicmedia.org/node/18824

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.

http://www.nytimes.com/2012/03/26/nyregion/at-ailing-brooklyn-hospital-insider-deals-and-lavish-perks.html?_r=1&scp=2&sq=hospital&st=cse

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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:

http://www.forbes.com/sites/women2/2012/02/21/5-lessons-learned-from-a-day-with-1000-women-entrepreneurs/

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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.

http://www.boardmember.com/this-week-03-01-12.aspx

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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.

http://www.hartfordbusiness.com/news22866.html?utm_source=enews&utm_medium=Default&utm_campaign=29+Feb+Wed+HBJ+today

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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.

http://smartblogs.com/leadership/2012/02/21/vip-corner-brian-robertson-on-how-riding-a-bike-is-like-managing-a-business/

http://online.wsj.com/article/SB10001424052970204909104577237152011781364.html?mod=WSJ_hp_mostpop_read

 

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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?

http://online.wsj.com/article/SB10001424052970203918304577238741243336510.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsForth

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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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