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Annual Report 2016

Special roundup on what’s new and noteworthy in the boardroom

THE YEAR IN GOVERNANCE

What’s going on that no board can ignore?

Corporate director LAURIE ANN GOLDMAN

identifies an historic development.

2 Letter from the Chairman You Brexit … you fix it

4 Editor’s Note A tangible upgrade

8 Keynote: What’s going on that no board can ignore Boards must navigate one of history’s great transfers of knowledge. By Laurie Ann Goldman

10 What should the CEO expect from a board member today No sitting back: ‘We need to know what you are thinking.’ By Roger Kenny

13 Four possible futures for America@250 Starkly contrasting yet highly conceivable visions. By Daniel Mahler and Paul Laudicina

15 Seven steps for making your strategy sizzle A framework that works for achieving success in the 21st century. By Gerald Czarnecki

17 Growth: Value creation or value cremation Growth is not always the best way to create value. By Joe Rizzi

21 Board oversight of executive pay A fresh approach that builds from the traditional budget-based goals. By Casandra Rusti and Barry Sullivan

23 Governance Book of the Year The Compensation Handbook by Lance Berger and Dorothy Berger. A state of the art guide to compensation strategy and design.

25 Private companies need boards, too A hearty recommendation from a third-generation family-company CEO. By Cindi Bigelow

28 New guidance on handling disruptive directors The Delaware Supreme Court weighs in on the tactic of sidelining a board member. By Doug Raymond

30 The Year in Review A month-by-month timeline of notable corporate governance developments in 2015. By James Kristie

46 Directors to Watch New issues and old confront the class of 2016. Heightened attention to skill sets and future requirements. Edited by Scott Chase

54 Recruiting for a ‘visionary board’ How to evaluate your next board slate. By Susan Angele and Susan Stautberg

70 Heidrick & Struggles Governance Letter Getting board diversity out of the doldrums. By Ron Lumbra and Victoria Reese

73 Who’s on Board Directors Roster review of those joining boards in 2015.

79 Article Index 2015 The top of the agenda items that our authors addressed.

84 Endnote: Short term vs. long term A skeptical view . . . and an alternative. What the main problem is. By R. Edward Freeman

ANNUAL REPORT 2016 1

®

Governance Year in Review Special Issue

CONTENTS

46

70

Vol. 40 No. 4 • Annual Report 2016

8

46 DIRECTORS & BOARDS

New issues and old confront our 2016Directors to WatchRecurring themes for today’s board members include enhanced expertise in executive compensation and CEO and board succession planning and heightened attention to the board’s existing skill set and future requirements. ‘Corporate directors must excel at both the sprint and the marathon.’

Edited by Scott Chase

As the Directors & Boards team put the finishing touches on this year’s class of Directors to Watch, a mid-July headline from Smithsonian.com caught our collective eye: “It’s Easy to Forget that Just Fifty Years Ago, Equality for Women Was a Strange Concept.” The subhead, “The 50th anniversary of the National

Organization of Women is at hand and it’s still personal — and political,” in many ways sums up the challenges facing women on boards as they strive to reflect the broader so-ciety in which they operate while bringing diversity, definable value, and insight to the boardroom.

For the 20 women directors profiled in the following pages, nearly every day brings a new facet to the execution of effective director service and governance best practices. We changed Directors to Watch 2016 a bit for this, our 40th anniversary year — shortening professional profiles while asking our respondents to weigh in on what drives their pas-sion to serve and what it takes to be a public company director these days.

Responses included relatively new issues, including accelerated change and marketplace disruption, however derived, across all sectors; the advent of technological shifts such as artificial intelligence and widespread introduction of robotics; and a growing sense of the requirement for directors to educate themselves on the core threats and opportunities resident in the companies they guide and the worlds they traverse.

Enhanced expertise in executive compensation, CEO and board succession planning, and attention to the board’s existing skill set and future requirements, made up part of the list of recurring themes for today’s Directors to Watch.

In the category of evolving concerns for directors and boards, the relentless pressure of cybersecurity was joined by ever-changing regulatory and legal requirements defining director service and the creeping realization that the deep pool of talented Baby Boomer executive men and women of all backgrounds is slowly being supplanted by a younger but smaller generation of future board leaders and CEOs who will bring new ideas and approaches to director service while possibly limiting the numbers and choices available to nominating committees and the C-suite.

Statistics continue to illustrate the incremental increase in gender diversity on boards, too slow for some and maybe too fast for others. For the 2016 class of Directors to Watch, going beyond “seeing around corners” is integral to their shared vision of what it means to be effective 21st century board and business leaders.

DIRECTORS TO WATCH

DIRECTORS TO WATCH


Sandra E. PetersonGroup Worldwide Chairman, Johnson & Johnson Director, Microsoft Corp.

Sandra (Sandi) E. Peterson is playing a leading role in transforming the world’s largest health care company. She is responsible for Johnson & Johnson’s global op-

erating infrastructure and consumer-facing businesses that generate over $20 billion in revenue and include iconic brands such as Johnson’s Baby, Neutrogena, Listerine, Tylenol, Clean & Clear, Acuvue, OneTouch and Band-Aid. She is leading key enterprise initiatives to spur innovation and accelerate growth, and is driving J&J’s efforts to transform health care using technology and design-thinking to create breakthrough solutions for patients, consumers and providers.

Sandi is a board member of Microsoft, and was formerly on the board of directors of Dun & Bradstreet Corp., where she chaired the innovation and technology committee. She was a founding member of WomenCorporateDirectors, and is a member of Women’s Forum and C200. Sandi has been named to Fortune magazine’s list of The Most Pow-erful Women three times. She holds a B.A. from Cornell University and an M.P.A. from Princeton University.

Supporting a Transformation Agenda: “In today’s world, the most enduring companies will be those that continuous-

ly reinvent them-selves. Economic conditions, com-petitive environ-ments and mar-kets evolve rapidly, and technological disruption is ren-dering established business models irrelevant and in-effective in many industries. It’s crit-ical for directors to embrace their role as partners and advisors to leader-ship in setting the strategic — and often the transfor-mation — agenda. Their diverse ex-periences provide valuable input and perspective when transformation is required. Direc-tors are responsi-ble for ensuring

that the company asks the tough questions, looks around corners, and has the capabilities, talent and culture required to successfully execute its reinvention. Compensation com-mittees must ensure that incentives are aligned to reward the behaviors and achievement of milestones to effect business model and cultural change.”

Grace LiebleinDirector, Honeywell International Inc., Southwest Airlines Co.

Grace Lieblein has over 20 years of experience in se-nior executive positions in the automotive industry. She retired as vice president of Global Quality for

General Motors in 2015 after a career that spanned 37 years. Among the highlights, she was chief engineer for the very successful mid-size crossover vehicles that include the award-winning Buick Enclave. She was the first woman to be named as president and man-aging director of GM Mexico, and f rom there she became president a n d m a n a g i n g director of GM Brazil. Prior to her Quality position, she was vice pres-ident of Global Purchasing and Supply Chain for the company.

L i e b l e i n h a s been a director on the board of Hon-eywell since 2012, and has served on several nonprofit boards as well. She joined the board of Southwest Airlines in January 2016.

She has been recognized numerous times for her busi-ness and technical achievements, including the Michigan Women’s Foundation 2015 Women of Achievement and Courage award, the 2014 Engineer of the Year by Great Minds in STEM, and 2013 Fortune magazine’s 10 Most Powerful Women in Automotive.

Sandra E. Peterson: Directors must look around corners and ask the tough questions.

Grace Lieblein: Incorporating shareholder views is a delicate balancing act.

DIRECTORS TO WATCH


Balancing Act: “A top issue facing board members today is the need to balance the views and perspectives of large institutional shareholders and organizations with the spe-cific needs of the corporations on whose boards they serve. Dodd-Frank reforms and increased participation of large institutional investors add a new dimension to what board members must consider as part of their oversight and policy-setting responsibilities. Incorporating sharehold-er views into board-level decision making in a way that contributes to long-term value creation for shareholders and other constituencies is a delicate balancing act. It re-quires board members to have a deep understanding of the needs of the corporation and a finely tuned ear to emerg-ing trends in corporate governance.”

Eileen KamerickDirector, Associated Banc-Corp, Legg Mason Closed End Mutual Funds, Westell Technologies Inc.

Eileen Kamerick is known as a strategic and collabora-tive executive who drives profitable growth and en-hances shareholder value. She is a leader in finance and

corporate governance, an SEC Audit Committee Financial Expert, and an adjunct professor at leading law schools. She

holds an MBA, with honors, in Finance and Inter-national Business and a JD from The University of Chi-cago. She serves a s a u d i t c h a i r a t Le g g Ma s o n Closed End Mu-tual Funds and Westell Technolo-gies. She chairs the nominating and governance com-mittee at Associat-ed Banc-Corp. She is an NACD Board Leadership Fellow.

K a m e r i c k served as CFO for major global cor-porations includ-ing Leo Burnett, Heidrick & Strug-gles International, Houlihan Lokey, a n d B P Am o co Americas. She also

chaired several of those corporations' foundations. She has spoken on corporate governance to numerous national or-ganizations and law schools.

She serves as vice chairman of Eckerd Kids, a nation-al child welfare charity, and is on the boards of Cristo Rey’s Tampa Bay High School and Christ the King High School in Chicago. She is profiled in The Board Game: How Smart Women Become Corporate Directors (Angel City Press, 2013). She is a member of the Chicago Net-work, the Economic Club of Chicago, and the Chicago Finance Exchange.

Balancing Three Critical Areas: “The three critical areas that boards must focus on to fulfill their duty to sharehold-ers are strategy, performance management, and succession planning. The board needs to balance these responsibilities with ever-increasing regulatory and compliance require-ments. Directors need to ensure that the board and man-agement set aside the time to fully debate and discuss the strategic and competitive landscape. In this way, the board sets the tone for a rigorous compliance culture while also fostering innovation and nurturing growth.”

Jan BabiakDirector, Walgreens Boots Alliance Inc., Bank of Montreal

Be f o r e h e r portfolio ca-reer, Jan Ba-

biak spent 28 years in global leader-ship at EY, based in London for two decades, leading information se-curity/cyber risk, c l imate change and sustainabili-ty, and regulatory and public policy practices.

As a U.S. CPA and British Char-tered Accountant, s h e c h a i r s t h e Walgreens Boots A l l i a n c e a u d i t commit tee . On the Bank of Mon-treal board she sits on the audit and risk committees, and on the finance

Eileen Kamerick: Boards need to set the tone for a rigorous compliance culture.

Jan Babiak: Respect the threat of technology but proactively identify the opportunities.

© 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name and logo are registered trademarks or trademarks of KPMG International. NDPPS 536142

How do you

provide long

term vision?

Today’s boards face an array of complex issues, when preparing for the future. The best way to understand these issues—and provide proper oversight—is to take advantage of a broader range of perspectives. As global lead sponsor of the WomenCorporateDirectors Foundation, and a supporter of many other diverse organizations, KPMG LLP is an advocate for the growth of diversity in corporate boardrooms. We’re proud to salute all of the directors who are being honored as a Director to Watch, especially those who are WCD members. All of whom can be considered directors with vision.

You view possibilities through a diverse set of eyes.

kpmg.com

KPMG_DBAR16.indd 2 7/7/16 9:31 AM

DIRECTORS TO WATCH


committee of GHD Group, a private Australian-based engineering firm. She is past audit chair for Logica PLC, a then-FTSE 150 technology company, and a past board member for the Royal Mail during its successful IPO from government ownership directly into the UK’s FTSE 100.

Her career focus on ‘digital’ provided sector experi-ence working in financial services, technology, chemical, energy, media, transportation, government, retail, enter-tainment, health care, and more. She co-authored a de-finitive book on IT security governance, Defending the Digital Frontier: Practical Security for Management (Wiley, 2004). Agenda, a Financial Times publication for board members, named her in the International 100: Top Board Candidates with Global Skills.

Don’t Let Fear Prevent Action: “Most companies finally and rightly consider cybersecurity threats a top risk (Dar-winism will likely deal with the rest). But, time allotted to technology is now often disproportionately focused on fear and uncertainty, creating a hesitation to explore fully the strategic opportunities available from digital revolutions advancing from block chain, the Internet of things, ‘big data,’ etc. As board members, we must ensure management and board agendas include a balance that re-spects the threat but proactively identifies and invests in digital opportunities on the horizon. This may even mean preemptively seeking to be a sector disruptor rather than being disrupted.”

Irene Chang BrittCEO, ICB Enterprises LLC

Irene Chang Britt is a former Fortune 500 C-suite ex-ecutive with 30 years of experience in the consumer packaged goods industry. She has a distinguished track

record at companies such as Campbell Soup, Kraft Foods, Nabisco, and Kimberly-Clark, and most recently she was president of Pepperidge Farm. She has led many businesses to transformational success and also held key positions in strategy, including chief strategy officer for Campbell Soup Co. globally.

She serves as an independent director on three public company boards: Dunkin’ Brands Group Inc., Tailored Brands Inc., and TerraVia Inc. She formerly served as a director of Sunoco Inc. Her not-for-profit service in-cludes the NACD board of directors, the Catalyst board of advisors, and the board of the American Bakers As-sociation.

She has been honored with many awards for her busi-ness and community accomplishments, including Top Women in Grocery, NJ Business Hall of Fame, and Pink Magazine’s Top 15 Innovators. She earned her B.A. de-gree from the University of Toronto and her M.B.A., with

honors, from the R i c h a r d I v e y School of Busi-ness at the Uni-versity of West-ern Ontario.

B o a r d s a n d Strategic Leader-ship: “Technical p la t for ms have spawned an in-credible environ-ment for business and industry dis-ruption at an un-precedented pace. In this new era, it has never been more important for the board’s role to be overs ight and also insight and foresight. The best directors have moved from in-telligent, but pas-sive, consumers of management in-formation to pro-active seekers of information from multiple sources. Strategy is not a once a year event, and dis-ruption and growth opportunities don’t wait for quarterly board meetings. Our obligation, as leading-edge directors, is to be the extra antennae and well-read sounding board for the CEO.”

Gerri ElliottDirector, Whirlpool Corp., Bed Bath & Beyond Inc., Imperva Inc.

Gerri Elliott is the founder of Broadrooms.com, a website serving executive women who serve or want to serve on corporate boards. In addition to

her corporate boards, she is also on the advisory boards of BoardList, a Silicon Valley effort to increase the diver-sity of technology boards, and the Center for Executive Women at Kellogg School of Management. As executive vice president, chief customer officer for Juniper Net-works, she led the 4,000 person Go-to-Market Organi-zation consisting of sales, system engineering, advanced technologies, marketing, services, support, partners, and field operations.

Irene Chang Britt: The best directors are proactive seekers of information from multiple sources.

Congratulations, Grace!

© 2016 Honeywell International. All rights reserved.

Honeywell and its Board of Directors

congratulate Grace Lieblein on her selection

as a “Director to Watch.” Her dedication to

Honeywell’s Board and the Corporate

Governance & Responsibility and Management

Development & Compensation committees

makes a difference in helping Honeywell build

a world that is cleaner and more sustainable,

more secure, connected, energy effi cient, and

productive. www.honeywell.com

Honeywell_DBAR16.indd 2 7/12/16 11:00 AM

DIRECTORS TO WATCH


Elliott is as expert in technology companies, given her three-decade history with Juniper, Microsoft and IBM. She was one of the most senior women at Microsoft as cor-

porate vice presi-dent (CVP) of the Global Industry Solutions Group, Worldwide Pub-l i c S e c to r, a n d co-president of Microsoft’s North American Enter-prise Sales region. At IBM, she held execut ive pos i-t i o n s i n No r t h America and Asia Pacific in sales, services, consult-ing, strategy de-velopment, and product manage-ment.

B u i l d i n g a Board for the Fu-ture: “Over the l a s t f e w y e a r s , discussions in the boardroom have changed dramat-i c a l l y — c y b e r s e c u r i t y, r a p i d changes in tech-nology, big data, c loud , pr ivacy, the impact of so-

cial media and, of course, activism are just a few agenda items. The broad diversity of these topics makes it increas-ingly important to build boards which not only mirror the markets they serve, but who can also bring different perspectives based upon skills, experiences, cultures, geographies, race, and gender. Just as boards spend considerable time discussing CEO succession plans, a conversation around a board succession plan is equally important to ensure you're building the best board for your company's future.”

Robin Peppe SterneckDirector, EPR Properties, Alterra Bank

Robin Peppe Sterneck is a high-energy business leader, speaker and corporate director. She is the human capital and compensation chairperson for

the EPR Properties board, as well as director for the Al-terra Bank of First Business Financial Services and NA-CD-Heartland boards.

She is president of Sterneck Capital Management, and speaks frequently to academic institutions and corpora-tions. She leverages her 30-year financial services career at Swiss Re, GE and Lehman Brothers, and her passion for teaching through experience-based storytelling, as a platform for educating others on the importance of good governance and developing diverse talent.

As a founding member of Kansas City’s WomenCorpo-rateDirectors and NACD Fellow, Sterneck models continu-ous learning, data-based decision making, and a belief that people make the numbers. Her inquisitive nature, inclina-tion to push beyond status quo, and blending of financial, risk-focused and human analytics have generated value for stakeholders during times of change, challenge, growth and strategic expansion.

Human Capital a Key Focus: “A war on talent has been ig-nited by a seismic shi f t in human analytics as baby boomers exit the workforce and a smaller genera-tion follows. It’s t ime for bo ard directors to enter the game through agg res s ive co l -laboration with com p a ny l e a d -ers. Developing competencies and confidence in di-verse leaders is a proven science. Boards must cata-lyze management to be accountable for methods to counterac t un-conscious bias , o p e r a t i o n a l i z e meaningful on-the-job training, a n d f o r d e e p succession plan-n i n g . H u m a n capital strategies are key to foster-ing shareholder value. It’s critical that directors embrace this responsibility and assure its sustainability through performance-based compensation and HR investment priorities.”

Robin Peppe Sterneck: Human capital strategies are key to fostering shareholder value.

Gerri Elliott: A board succession plan ensures you are building the best board for your company's future.

PennMutual_DBAR16.indd 2 7/18/16 2:38 PM

DIRECTORS TO WATCH


Tara Marling AbrahamChairman and Co-CEO, Accel Inc.

Tara Marling Abraham is one of the

nation’s leading exper ts in con-tract manufactur-ing. A strategist and experienced entrepreneur, she is an innovator. She is active with WBENC, Wom-enCorporateDi-rectors , NACD, Young Presidents O r g a n i z a t i o n , Wo m e n P r e s i -dents Organiza-tion, and Inter-national Women's Forum. She serves as director of Peo-ples Bancorp Inc. and Peoples Bank, NA. Her commit-tees include audit & risk; nominat-ing & governance; and trust. Abra-ham was the first female chair of

YPO (Columbus Chapter) and the international chair of the Women's Forum. She represented WBENC in the National Women's Business Council reporting to the United States President, Congress, and SBA.

Her dedication led to investing in new companies: Cin-say, an online video smart store; in biotech with Safe White teeth whitening; in food and beverage with Avitae caffein-ated water; and in health and beauty with Scarlett Kitty bath fizzies.

Harmony and Trust: “Creating harmony by aligning the mission of the institution to the mission of the shareholders is a critical role of a director. As a director, I am privileged to work on behalf of the shareholders. They trust me to ensure the information they (and their advisors) receive accurately reflects the business they own; to advise their management team on issues affecting their best interests; and to collab-orate with their management team on setting a strategic direction. These basic responsibilities guide me in my own business(es) and my work on not-for-profits, start-up companies, and public company boards.”

Angela Brock-KyleFounder and CEO, B.O.A.R.D.S.

Angela Brock-Kyle launched B.O.A.R.D.S., a privately held governance, strategy and risk advisory firm, in 2013. In addition, she chairs the audit committee and

serves on the nominating and governance committee of Infin-ity Property and Casualty Corp. She is an independent trust-ee of the Guggenheim/Rydex Funds, the YMCA Retirement Fund board, and sits on the board of the Executive Women’s Golf Association Foundation.

For 25 years she was a senior leader at TIAA, where she man-aged a $9 billion global portfolio, launched the $400 billion end-to-end asset management business, and deployed risk management culture and systems across the enterprise. She as-sumed responsibility for cross-functional teams engaging with the Federal Reserve Board and other regulators. She was recog-nized by the National Association of Corporate Directors as one of its 100 influential directors in 2015. She received her J.D. and M.B.A. degrees from the University of California, Los Angeles.

Integrity is the Bedrock: “The best governance practic-es have integrity at their core. Leadership through integrity should permeate every aspect of board activity, with itself, management, owners and other stakeholders, to drive long-term value creation. Integrity manifests in transparent com-munication with mult iple s take-holders, includ-ing establishing a culture where employees are en-couraged to share both their best ideas and concerns about question-able activities. The board must spend appropriate time setting goals for itself and evalu-ating its effective-ness in addition to overseeing the firm’s succession planning, strate-gy and risk man-agement. These integr ity-based governance prac-tices, among oth-ers , s t rengthen the board’s ability to enhance long-term value.”

Tara Marling Abraham: Mission alignment with the shareholders is a critical role of a director.

Angela Brock-Kyle: The best governance practices have integrity at their core.

Search for candidates from leading diversity organizations all in one place.

CONGRATULATIONS KATHERINE AUGUST-DEWILDEEquilar congratulates Katherine August-deWilde, Board Member at Sunrun, TriNet, First Republic Bank, EventBrite and Equilar, and all of the 2016 Directors to Watch honorees for their efforts to improve board diversity.

The Equilar Diversity Network

Discover more at www.equilar.com/boardedge

Equilar_DBAR16.indd 2 7/11/16 10:37 AM

DIRECTORS TO WATCH


Sheila HoodaDirector, Mutual of Omaha Insurance Company

Sheila Hooda is an independent board director, C-suite advi-sor and former C-level operating executive with more than 30 years of experience. She has provided strategic direction,

driven growth, and transformed leading companies across global financial services; information and professional services; financial technology; education; and consumer sectors. Her experience in-cludes Asia/India; finance, M&A, capital markets; long-term strat-egy development; transformation from B2B to B2B2C; P&L man-agement; sales, marketing and data analytics; customer centricity; institutional investors; digital technology and disruptive innovation.

Hooda serves on the board of directors of Mutual of Omaha Insurance Co. and is a member of the investment committee. She is also on the advisory council of Genpact, a digitally pow-ered business process and technology leader. She is the CEO of Alpha Advisory Partners, providing growth strategy, M&A, cus-tomer centricity and transformation advisory services. A former McKinsey consultant, she has held successive senior leadership positions at TIAA, Credit Suisse, and Thomson Reuters.

Forward-Looking Boards Are Critical: “Very rapidly evolv-ing economic, political, demographic and technological trends are changing customer needs and reshaping how business-

es operate. More specifically, digiti-zation and work-place automation, including the rise of artificial intel-l igence and ad-vanced robotics, is radically altering business models. This makes it nec-essary that boards w o r k w i t h t h e C-suite and CEO to create appropri-ate business sce-narios to dynami-cally test and reset their strategies. Boards need to focus much further ahead to ensure their companies are well prepared for disruption so as to successfully con-vert these chang-es and challenges into strengths and opportunities.”

Jean M. BirchDirector, Darden Restaurants Inc., Papa Murphy’s Holdings Inc., Cosi Inc.

Jean Birch is a retired C-level operating ex-

ecutive, an expe-rienced corporate b o a rd m e m b e r a n d a n N A C D Board Leadership Fellow. She is a dy-namic consumer brand leader who has dedicated her career to driving transformational performance across employee intensive operations.

B i r c h s e r v e s on the boards of Darden Restau-rants, Papa Mur-phy’s Holdings, and Cosi Inc. She is an experienced audit, compensa-tion, nom/gov and finance commit-tee member and has chaired both compensation and nominating and governance committees. She holds a B.A. in economics and oriental studies from the University of Arizona and an M.B.A. from Southern Methodist University. She recent-ly served as a Blue Ribbon Commissioner for NACD.

Birch spent her career in the consumer sector with an em-phasis in food service. She has been the president of IHOP Restaurants Inc., Romano’s Macaroni Grill and Corner Bakery Café. In addition, she had significant operating roles at Yum Brands in both the Pizza Hut and Taco Bell divisions.

Boards As Strategic Assets: “The role of a board member is evolving from primarily oversight and risk management to one of strategic engagement. Successful organizations need every board member to be a strategic asset. That means board members who engage actively, bring relevant skill sets, knowledge and wisdom and ask the tough ques-tions that will drive the business forward today and tomor-row. This should also mean board members who willingly step down when their strategic value is no longer relevant to the company. There is a right time, right skills, and right fit for board service.”

Sheila Hooda: Boards must ensure their companies are prepared for disruption.

Jean Birch: Organizations need every board member to be a strategic asset.

7-12-2016 12:14 PM Wailun Ku / Wailun Ku

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J&J CorpDirectors to WatchJJXCORP-65745_RT3662Directors to Watch2016None

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The common denominator is talent.

At Johnson & Johnson, we believe in the opportunity for women to perform at the highest levels.

Because that has a direct impact on our success. We are honored to recognize the talents of every

woman on Directors & Boards 2016 Directors to Watch.

Congratulations to our own Sandi Peterson for being on this impressive list.

J&J_DBAR16.indd 2 7/13/16 10:40 AM

DIRECTORS TO WATCH


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Microsoft_DBAR16.indd 2 7/18/16 7:48 AM

By Susan Angele and Susan Stautberg

Directors, if your company isn’t the one that’s disrupting its industry today, you are the one who is being disrupted.

In 1960, the average age of an S&P 500 com-pany was 60 years; today it’s less than 15. And of the nearly 1,300 CEOs who participated in KPMG’s 2015 Global CEO Survey, almost one-third said they expected their companies to be transformed into a significant-ly different entity within the next three years. The pace of change is less evolution than it is revolution.

Staying ahead of these changes — in markets, supply chains, customer expectations, geopolitical realities, and more — requires corporate directors to excel at both the sprint and the marathon. While boards need to be nimble and respon-sive to immediate concerns and meet quarterly demands, the true test of a board is how well it performs in the long term. What does it take to meet the endurance test, and guide the company into the future? How does a board develop the for-ward-thinking “muscle” to set up the company for unforeseen challenges down the road?

The best boards today aim to be not just responsive, but visionary. To identify what a visionary board looks like and how to become one, the WomenCorporateDirectors (WCD) Foundation teamed up with KPMG’s Board Leadership Center to study the practices of boards that are providing not only oversight and insight, but foresight. Drawing from a diverse, global group of corporate directors and board advisors serving on the WCD Thought Leadership Commission, WCD and KPMG developed their findings into a report, Seeing Far and Seeing Wide: Moving Toward a Visionary Board. This

report captures insights from the Commissioners’ decades of experience in board service across continents, industries, and company types.

One of the key themes that emerged from the Thought Leadership Commission’s discus-sions was the call for greater diversity in director slates. A visionary board is by definition a diverse board — and this means diversity in expertise, industry, geography, gender, ethnicity, and age. Board nominating committees have an important

role in opening the board to the different perspectives needed to govern the company’s strate-gic direction and face pressing business realities.

As institutional and activist investors grow in influence, for example, would the company benefit from a director who looks at the company from this point of view? Will someone who understands government, or someone with a background in health care, bring a valuable perspective? Depending on

the existing board and its needs going forward, adding any or all of these areas of expertise can open the collective eyes of the board and move the discussion forward in previously unanticipat-ed ways.

Currently, directors are recruited for their experience and often interviewed to assess how well they will fit in with the boardroom culture. As an additional step toward building a visionary board, directors can consider a new component of the skills matrix and interview process: taking a hard look at prospective directors to assess the degree to which they are future-focused and broad in perspective.

As Commissioner Tshidi Mokgabudi said, “It’s very important — visionary board members are strategic thinkers by nature.” Maggie Wilderotter, a fellow Commissioner, said, “You need visionary leadership on a board — individuals who can

see not only what’s happening now, but can see around corners to anticipate what’s coming.”

Recruiting board members through this lens, either independently or with the assistance of a search firm, can bring fresh thinking and a new dynamic to the board. So when directors are hav-ing initial conversations with a prospective board member, they can try to develop an understand-ing of not only their experience and congeniality, but also their natural inclinations when it comes to tackling new challenges.

Some questions to consider:• Does this candidate have a broad intellectual

curiosity?• Does the candidate stay on top of trends in

the world as well as in the industry?• How does this candidate approach change?• Does the candidate have a proven ability to

raise tough questions and express unpopular opinions in a constructive way?

• Does the candidate have strong emotional intelligence?

Obviously, putting together even the “ideal” slate of directors isn’t going to prevent things from going wrong. Even a group of the smart-est, most informed directors can make miscal-culations: even good boards may misjudge the challenges of entering a new market, or overes-timate the value of an acquisition, or miss a shift in customer trends. But while not every board can be right all the time, especially in a time when “black swan” events seem to be the new normal, a visionary board — and a boardroom atmosphere that encourages diverse viewpoints and open discussion — dramatically increases the odds of getting it right.

Susan Angele is senior advisor, Board Governance, for KPMG’s Board Leadership Center. Susan Stautberg is CEO and chair-man of WomenCorporateDirectors Foundation.

Recruiting for a ‘visionary board’: How to evaluate your next board slate

Susan Angele Susan Stautberg

Take a hard look at prospective

directors to assess the degree to

which they are future-focused and broad in perspective.

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DIRECTORS TO WATCH


Sandra Beach LinDirector, American Electric Power Co., WESCO International Inc., PolyOne Corp., Interface Biologics Inc.

Sandra Beach Lin is leveraging 30 years of C-suite and global company operating credentials, a history of busi-ness achievement, and a commitment to technology and

innovation as an independent board member. She is a mem-ber of the board of American Electric Power, WESCO Inter-national, PolyOne Corp. and Interface Biologics. She devoted her career to the growth and use of specialty materials. She is the retired president and CEO of Calisolar Inc. (now Silicor Materials). She previously served as corporate executive vice president of Celanese Corp., where she led a group of specialty materials businesses. Prior to Celanese, Beach Lin held senior executive positions at Avery Dennison Corp., Alcoa, and Hon-eywell International.

In 2013 she was named to the National Association of Cor-porate Directors (NACD) Directorship 100. She is an NACD Board Leadership Fellow, a board member of Junior Achieve-ment USA, and a member of the Committee of 200.

Boards Need Continuous Improvement: “The velocity of change present in every industry today demands that manage-ment and boards continue to develop and evolve. Rapid change requires board members to invest in their own education on

current develop-ments in their in-dustries and, more importantly, to include time spent on where things are going. With dis-ruption all around us, directors along with management need to be looking around corners for change. Continu-ous improvement also includes en-hancing corporate governance skills. The board eval-uation process is evolving for the better, setting high standards for open, useful discussions o n h o w w e , a s board members, can grow and im-prove individually and as a board.”

Carol P. SandersDirector, Alliant Energy Corp., RenaissanceRe Holdings Ltd.

Carol Sanders has served on the Alliant Energy board for over 10 years. She chairs the compensation and person-nel committee and is a member of the executive and

nominating and governance committees. She previously served as chair of the audit committee for six years. Sanders also serves on the board of RenaissanceRe, a global reinsur-ance and insur-ance company, and is a member of the audit committee.

Sanders enjoyed a successful 25-year corporate financial career, primarily in the insurance in-dustry, serving in EVP, CFO, COO and treasurer roles. Most recently, she served as EVP, CFO and treasurer for Sentry Insurance. She s i t s on the Chancellor’s Advi-sory Board for the University of Wis-consin Oshkosh. Her professional certifications in-clude CPA, CPCU, CMA, and CFM, and she has been designated as an SEC audit committee financial expert in her work with public company audit committees.

Higher Expectations for Exec Comp Expertise: “Every year brings higher expectations for directors as we address the increasingly visible and public nature of executive com-pensation practices. To be effective, we must stay abreast of emerging trends in executive compensation, ever-changing regulatory and legal requirements, and increasingly influential proxy advisor policies. Finding the right balance of experience and expertise of independent directors to serve on the com-pensation committee is key. An effective and well-informed committee will be able to manage the dynamic tension be-tween motivating and rewarding executives appropriately while ensuring that the reward system evolves with today’s changing governance landscape.”

Sandra Beach Lin: The board evaluation process is evolving for the better.

Carol P. Sanders: Every year brings higher expectations for boards.

Congratulations Alliant Energy and its board of directors congratulate Singleton McAllister and Carol Sanders

for being selected as a “Director to Watch.” Alliant Energy was also recognized at the Women’s

Forum Breakfast of Corporate Champions for achieving 50% female representation

on the company’s board of directors.

a l l iantenergy.com • 1-800-ALLIANT

Singleton McAllister Carol Sanders

© 2016 Alliant Energy 265779 7/16 JS

AlliantEnergy_DBAR16.indd 2 7/18/16 7:30 AM

DIRECTORS TO WATCH


Mary Beth VitaleDirector, CoBiz Financial Inc.

Mary Beth Vitale is a sitting public company director and former CEO. She was CEO/chair of Westwind Media, president/COO of Rocky Mountain Inter-

net, and president/corporate officer for AT&T. Most recently, she served on the board of Zynex Inc., a publically traded medical device company, as audit committee member and compensation chair. She serves on the board of CoBiz Finan-cial Inc., a $3.6 billion financial holding company. She was the SEC expert and audit committee chair for five years, and currently is the cyber expert and nominating and governance committee chair.

She was a commissioner for Colorado Governor Bill Owens’ Commission on Science and Technology for nine years. She is an NACD Leadership Fellow, and served as president and chair for NACD’s Colorado Chapter. Vitale launched the WomenCorporateDirectors Colorado Chapter. She is an author and frequent speaker on cyber and board gov-ernance topics around the world.

Board Composition a Key to Value Creation: “As a director, a key responsi-

bility is approval of the strategic plan to ensure value creation for the shareholders. A critical aspect of having the “right” strategy is having the appropriate board composition to pro-vide advice. With the advent of disruptive technologies, do you have the skills and industry background on your board that has the fore-s ight to under-stand what could disrupt your busi-ness? If M&A is your growth strat-egy, do you have the expertise to ask the difficult ques-tions when deals are presented? As cybersecurity risk rises, do you have

© 2016 Legg Mason Investor Services, LLC. Member FINRA, SIPC. Legg Mason Investor Services is a subsidiary of Legg Mason, Inc. 633472 ADVR282361 6/16

Investment affiliates:Brandywine Global Clarion Partners ClearBridge Investments EnTrustPermal Martin Currie QS Investors RARE Infrastructure Royce & Associates Western Asset

DIRECTORS TO WATCH 2016We take great pride in congratulating Eileen on her achievements and recognition.

Eileen Kamerick

Mary Beth Vitale: The expertise needed on a board will evolve.

DIRECTORS TO WATCH


SHARE WHAT MATTERS TO YOU.@WhirlpoolCorp #WhatMatters

LinkedIn.com/company/Whirlpool-Corporation

WhirlpoolCorp.com

We proudly congratulate Gerri Elliott and the other honorees who support the power of diversity while adding business value through outstanding corporate governance.

2016 DIRECTORS & BOARDS DIRECTORS TO WATCH

CONGRATULATIONS GERRI ELLIOTT

the talent to help mitigate the risk? The expertise needed on a board will evolve as the strategic plan adjusts to the compet-itive environment.”

Stephanie SonnabendCo-Founder and Chair, 2020 Women on Boards

Stephanie Sonnabend is a change agent who is passionate about making the world a better place. She is a direc-tor, speaker, executive coach and consultant, with a spe-

cial focus on family businesses and succession planning for boards, CEOs, senior executives and organizations.

As CEO and president of Sonesta International Hotels Corp., Sonnabend led a publicly held global hospitality com-pany through numerous business cycles. She built a strong corporate culture applauded by the industry and spearhead-ed significant growth, both interna-tionally and domestically. In 2010, she co-founded 2020 Women on Boards, a national campaign to increase the per-centage of women on U.S. company boards to 20% or greater by 2020. She currenty serves on the board of SVN, a

commercial real estate franchisor. Previous board experience includes Sonesta Hotels and Century Bank.

Succession and Diversity: “In this age of major focus on regulatory and compliance issues, two topics tend to be side-lined in the boardroom — succession planning and diversity. A well-articulated succession plan would encompass four elements: the board, the CEO, senior executives, and rising stars. A succession plan would also help address diversity. Studies consis-tently show that g e n d e r d ive r s e

Stephanie Sonnabend: A diverse board contributes to a company's success.

DIRECTORS TO WATCH


boards outperform all-male boards. Women and minority leaders provide diversity of thought and send an important message to all stakeholders. A diverse board and executive team along with a robust succession plan will contribute to a company’s success for years to come.”

Sheila G. TaltonPresident and Chief Executive Officer, Gray Matter Analytics

Sheila Talton is an innovative global leader and Big Data strategist experienced in governance in corpo-rate, civic and not-for-profit arenas. She serves on

the boards of Deere & Co., Wintrust Financial Corp., OGE Energy Corp., Chicago’s Northwestern Memorial Hospi-tal Foundation, The Chicago Network, Chicago Shake-speare Theater and the Chicago Urban League. She served for 10 years on the board of the Rensselaer Polytech-nic Institute and for five years on the board of Acco Brand Corp. She was a founding member and chairperson of the Information Technology Senior

Management Forum and continues to serve on its advisory board.

Talton began her career by identifying technology as the key area of future business growth, working at several information technology companies before forming Unisource Network Ser-vices in 1987. She is CEO and president of Gray Matter Ana-lytics, a consultancy she formed in 2013 to offer data ana-lytics and predictive modeling services and solutions to organizations in the financial ser-vices and health-care industries.

Member FDIC. Equal Opportunity Employer. (6/16) 8967

EILEEN KAMERICK2016 DIRECTORS TO WATCH HONOREEAssociated Bank proudly congratulates our board member, Eileen Kamerick, on her many contributions and this very well-deserved recognition. Her leadership supports the power of diversity and promotes a truly inclusive culture that respects people of all backgrounds.

At Associated Bank, our colleagues are building a customer-centric culture where every day we deliver on our Brand and Customer Promise.

Visit AssociatedBank.com/Careers to learn more.

Recognized by 2020 Women on Boards.

CONGRATULATIONS

Sheila G. Talton: Boards need more technology expertise.

DIRECTORS TO WATCH


What makes Grace Lieblein one of Directors & Boards Magazine’s Directors to Watch? Heart.

At Southwest Airlines®, we believe diversity and innovation go

hand in hand. The decisions our Board Members make are fueled

by the Heart and help connect People to what’s important in their

lives. We are inspired by Grace Lieblein and extremely proud of

her acheivements. Congratulations, Grace, on this great honor!

Technology Executives on Boards: “There is not an in-dustry that technology has not disrupted. A company’s technology infrastructure is critical to its operations and it is important for companies to think about what types of ‘technology disrupters’ are out there that could possibly transform their business. Boards are not putting technology executives on their boards as quickly as they should. Most boards relegate technology oversight to the audit committee, but rarely are there people on the audit committees that have a technology background. Ask yourself: Who on the board understands how an app on a mobile device like Uber can affect the sale of automobiles?”

Karen M. BohnDirector, Ameriprise Certificate Co., Alerus Financial Corp., Otter Tail Corp.

As president of Galeo Group, Karen Bohn provides strategic management counsel for CEOs, manage-ment teams and corporate boards on governance,

strategy and implementation as well as interim executive services. Clients include public and private firms from start-ups to Fortune 500 companies. Prior to establishing

her consulting practice, she spent 22 years as an investment banker and corporate executive at Piper Jaffray Companies, serving as CAO and a member of the board of directors as well as CEO of Piper Trust Co.

A distinguished governance counselor, Bohn chairs the

Diversity in Boardrooms is a board consulting firm that helps companies better represent American strengths through their board composition (www.diversityin-boardrooms.com).

Both SEC-mandated disclosures in proxy statements and academic studies have demonstrated that ethnic, cultural, and gender diversity of board directors translates into value creation and improved performance. A strong corporate governance ethic entails setting high standards for the board’s moral compass as well as ensuring fiscal responsibility.

To increase diversity in corporate boards, Cindy Burrell creat-ed Diversity in Boardrooms in 2011 to identify and refer diverse board candidates who add excellent value and capability to a company and who make decisions that consider all stakeholders — employees, investors, and the community.

DIRECTORS TO WATCH


Ameriprise Cer-tificate Co. board and is a director for Alerus Finan-cial and Otter Tail Corp. Prior board service includes financial and re-tail organizations, including Piper Ja f fray, Gander Mountain, Blue Cross Blue Shield of Minnesota, and

Universal Hospital. Throughout her career, she has steered companies through game-changing business decisions, spanning critical investments, M&A, private versus public holding, leveraged buyouts, succession planning, and more.

Accountability and Talent: “As with executive management, boards must invest in and be accountable for their own performance. Learning from rigorous self-assessment at both the group (board and committee) as well as individual level, directors

must demonstrate commitment to professional develop-ment by keeping abreast of market, technology and com-petitive forces, financial/regulatory challenges, and risk management practices, to deliver a solid ROG (return on governance). As companies grow and evolve over time, the boards’ needs also change. Board leadership and directors need the courage to address board composition, getting the right talent at the right time to ensure the success of the organization.”

Singleton McAllisterDirector, Alliant Energy Corp., United Rentals Inc.

Singleton McAllister is an attorney with Husch Blackwell and has been a leader in regulatory and public policy law for over 25 years, serving with the

Karen M. Bohn: Look to deliver a solid ROG (return on governance).

DIRECTORS TO WATCH


U.S. House of Representatives, in-cluding senior counsel to the House Budget Committee. She was ap-pointed general counsel to the Unit-ed States Agency for International Development.

McAllister’s experience with pub-licly traded companies include legal, legislative, regulato-ry, public affairs, human resources, customer perspectives, environmental and diversity matters. She is a director of Alliant Energy and United Rentals, where she has served as chair of the compensation and personal committee. She is on the board of Securitas Critical Infrastructure Services Inc. and is a member of the NACD Compensa-tion Advisory Council. She has served on a number of civic and charitable boards, including Port Discovery Children’s Museum, the University of Maryland Visitors Boards, and as Secretary of the Commonwealth of Virgin-ia State Board of Elections. She also is a past chair of the National Women Business Center.

Lawyers Can Be Valuable: “Trends show that there is an in-crease in the number of lawyers on boards. The Cornell Law-yer-Director Study suggests that the percentage of large U.S. public corporation boards with lawyer-directors rose from 24.5% to 43.9% between 2000 and 2009. Companies that have

compliance and regulatory issues should consider lawyers for their boards. Lawyers who understand Dodd-Frank and the Sarbanes-Ox-ley Act are help-ful. Lawyers bring j u d g m e n t t h a t comes from expe-rience and train-ing as well as an understanding for legal and regulatory risk. Lawyers have been trained to build consensus using their analytical skills, knowledge of regula-tions, and risk-management experience.”

The law firm of Quarles & Brady is proud to sponsor this year’s edition of Directors & Boards’ Directors to Watch and

their gender diversity efforts.

We congratulate Eileen Kamerick on being a 2016 Director to Watch.

quarles.com

Singleton McAllister: Consider bringing a lawyer onto your board.

DIRECTORS TO WATCH


Suzanne Paquin NimocksDirector, Encana Corp., Rowan Companies PLC, ArcelorMittal, Owens Corning

Suzanne Paquin Nimocks is a director for Encana, a nat-ural gas exploration and production company based in Calgary, Canada; London-domiciled drilling contractor

Rowan Companies; ArcelorMittal, the world’s largest steel com-pany, based in Luxembourg; and Owens Corning, a Fortune 500 building products company based in Toledo, Ohio. She chairs the compensation committee for the Encana board, the health environment and safety committee for the Rowan board, and the finance committee for the Owens Corning board. She also serves as a faculty member for McKinsey & Company Partner Learning.

She retired in July 2010 as a senior partner in McKinsey’s Hous-ton office. In addition to client work in a broad range of industries and functional areas, she was a leader in the firm’s Global Petro-leum Practice, Electric Power & Natural Gas Practice, as well as the Global Orga-nization Practice. She served on the firm’s worldwide personnel committees and as the Houston office manager. She chairs the board of the Houston Zoo and is a trustee for Texas Children’s Hospital. She

co-chairs the Houston Chapter of WomenCorporateDirectors.Bringing Perspective and Context to the Boardroom: “Share-

holders expect management teams and boards to create winning business strategies. At the core of strategy is selecting in which businesses, segments, and geographies to compete as well as how to play in each of those arenas. Boards that bring wisdom, judg-ment, discipline, deep industry knowledge, and global experience provide enormous value to management teams as they debate strategic alternatives, shape strategy, and periodically reas-sess positioning.”

TAILORED BRANDS is proud to congratulate

Irene Britt ChangA 2016 Director to Watch

Suzanne Paquin Nimocks: Shareholders expect winning strategies.

DIRECTORS TO WATCH


Laurie Ann GoldmanDirector, ServiceMaster Global Holdings Inc., Francesca’s Holdings Corp.

A leading global chief executive, board director, in-vestor, and advisor, Laurie Ann Goldman has over three decades of management and operating expe-

rience in building consumer and fashion businesses.She is on the boards of ServiceMaster and Francesca’s

Holdings and advisory boards for SunTrust Bank Atlanta, Enviroscent, and Insightpool. Named CEO of Spanx Inc. at age 39, in 12 years she grew the company from a startup with a few innovative products into an international brand with thousands of products across multiple product lines. In that time, Spanx made the transition from brand name to household name. Prior to SPANX, Goldman had pro-gressively responsible marketing and operational roles at the Coca-Cola Co. and R.H. Macy. Her leadership resulted in numerous honors, including AJC National Human Rela-tions and Leadership Award, JWI's Top Ten Women to Watch, and Ad Age Top 50 Marketing Executives.

Listen, Learn, and Ask: “If good gov-

ernance was a matter of setting and conforming to rules, it would be a straightforward job. But as anyone who has taken on the responsibility of board membership knows, it is infinitely more nuanced than compliance. It is fluid, personal, and demands the ability to listen in ways that do not always come naturally to the kinds of Type-A people who reach a point in their c a r e e r s w h e r e their guidance has value. The key to providing the best advice is the abili-ty to listen, learn and ask the right questions. ■

Laurie Ann Goldman: What's key is the ability to listen and learn.

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it’s not just about cyber


TECHNOLOGY —

JANE CHWICK has action steps for boards to go beyond the focus on cybersecurity.

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Ray Zinn's view from Silicon Valley

SELECTING BOARDS FOR

THE LONG TERM

The longest-serving CEO of a

publicly traded

Silicon Valley company reviews

his recruiting criteria

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