CEO Daily Brief – Jan. 27, 2011
SEC Approves Non-binding Say on Pay Rule Shareholders will have more say on executive salary, bonuses and “golden parachutes” – [...]
January 27 2011 by ChiefExecutive.net
SEC Approves Non-binding Say on Pay Rule
Shareholders will have more say on executive salary, bonuses and “golden parachutes” – after the U.S. Securities and Exchange Commission narrowly approved new rules. Under the new rules, shareholders can vote on compensation of executives at publicly traded companies. The shareholders’ resolutions are not binding.
Interestingly, Commissioners Kathleen L. Casey and Troy A. Paredes opposed the changes. The two said the new regulations would be too expensive for smaller companies.
“I believe the say-on-pay rules … [are] unduly restrictive and impose unnecessary burdens, particularly on smaller reporting companies, with minimal corresponding benefits for investors,” The New York Times quoted Casey.
The new rules won’t become effective until 2013 for businesses where public investors own less than $75 million worth of shares, The Times said. Other public companies will vote on executive pay during annual meetings in 2011.
The new regulations came as a result of the Dodd-Frank Act, which has restricted executive pay – in the name of financial regulatory changes – and has led to new restrictions on business.
Shareholders now have to vote on executive pay once every three years, or more frequently, if they want, according to the new rule. There are also now nonbinding votes on golden parachutes. These are payments to executives if they lose jobs because of mergers.
It’s unlikely the new rules will create many benefits. If companies want CEOs who can effectively lead companies during these trying times, they need to adequately pay them. And if shareholders want decent return, they need to have CEOs who are capable. The new rules sound like they can be abused by a small group of shareholders who want to unjustly cause problems for the professionals who are running the organization.
For more about the new say on pay rules, as reported by The New York Times, please click here.
Gender Differences Apparent in the Boardroom
France recently decided that companies’ boards of directors must have at least 20 percent women. It’s highly unlikely that a similar quota would be imposed on the United States. But the move by France does bring attention to the number of women on corporate boards in the United States. The percentage of women on boards of companies listed on the Fortune 500 remains at about 15 percent.
There appear to be differences between how men and women see their jobs as directors, according to the Women Corporate Directors (WCD) association. The group says a recent survey shows:
• 40 percent of the female directors said that “enhanced risk management systems would serve to rebuild trust, but less than 1 percent of the male directors did.”
• 45 percent of the female directors said “that new executive compensation regulations would rebuild trust, but only 22 percent of the male directors did.”
• 38 percent of the female directors said that the “new proxy access rules (now on hold pending litigation by the U.S. Chamber of Commerce) would rebuild trust in corporate boards, vs. 17 percent of the male directors.”
WCD co-chair Susan Stautberg speculates that the numbers show that “women generally are a little less vested in the ‘status quo’ and more open to questioning traditional ways of doing things and trying new ideas.”
“Men, on the other hand, seem to have a little more faith in the concept that ‘this is the way things are done.’ … I have found men somewhat more resistant to adopting new practices than women [are],” Stautberg said. Women are more likely to ask for things to be explained and ask why something is done a certain way, she added. Stautberg also believes women directors are often sensitive to corporate culture and corporate values.
It’s not a good idea to stereotype based on gender or other grouping. But the WCD clearly points out that there are fewer women than men in the top executive roles in business, from where many corporations get their CEOs. It would be good to see an increased number of women in CEO offices or other top spots. That would lead to larger numbers of women on boards, and there may be less skepticism of the corporation as their numbers increase in the boardrooms.
For more about women and boards, as reported by Bloomberg Businessweek, please click here.
How Steve Jobs Achieved Success
Steve Jobs has been in the news recently. Many observers have been debating whether Apple can continue to succeed if Jobs does not return to the CEO’s post soon, after taking an extended medical leave. Though Apple has a lot of talent, what is it about Jobs that makes him so important to the company?
“He doesn't just develop new products; he changes games,” explain Bill Conaty and Ram Charan in a recent Fortune magazine article. “The iPod, iPhone, and iPad, along with iTunes, have created massive disruptions, forcing players in the music and telecom industries—among others—to change their business models.”
In addition, Jobs “understands what appeals to customers, and he acts decisively.” In past years, Jobs spent a lot of time with the company’s hundred or so “experts in software, hardware, design, and the technologies of metal, plastic, and glass,” the authors say. There was a weekly meeting where he assembled the best minds of the company “to review products” and consider “the challenges of designing and executing them.” The authors conclude Jobs is “disciplined” when it comes to “connecting the dots.”
Jobs is able to “discover” what consumers want, currently and in the future.
“He figures out trajectories of new opportunities. Then he conceives and executes not only differentiated products that yield high margin and high brand recognition, but also business models that will exploit them most profitably,” Conaty and Charan said.
Jobs has been a key part of Apple’s success. But he is not the only one who can use his approach to creating that success. He is a good model for other business leaders looking to excel at creating opportunity in their industries.
For more about Jobs, as reported by Fortune, please click here.