BRING ON THE APPLAUSE! 2015 GRC LEADERSHIP AWARDS

THE TEFLON BOARD: HOW DUPONT DEFLECTED TRIAN’S ATTACK

COMPENSATION PLANNING: IT ’S ALL ABOUT THE METRICS

PLUS: WHY BOARDS NEED A TECH COMMITTEE • 2015 SCCE COMPLIANCE STUDY • ANTICORRUPTION UPDATE

Third Quarter 2015Volume 18, Number 3

FIGHTING FIRE WITH FIRE

CYBERSECURITY

C O R P O R A T E B O A R D M E M B E R T H I R D Q U A R T E R 2 0 1 5 14

BRING ON THE SPECIAL REPORT

GOVERNANCE, RISK AND COMPLIANCE LEADERSHIP

In an exciting evening, the winners of NYSE Governance Services’second annual Governance, Risk and Compliance LeadershipAwards claimed their victories at this year’s red-carpet affair.

This year’s awards, open to all publiclytraded companies in the United Statesand individuals who work for thesecompanies, were divided into ninecategories designed to illuminatecompanies following best practices anddemonstrating strong leadership incorporate governance and compliance.

“NYSE Governance Services’Governance, Risk, and ComplianceLeadership Awards underscore the rolethat corporate governance plays in

C O R P O R A T E B O A R D M E M B E R T H I R D Q U A R T E R 2 0 1 515

BY KIMBERLY CROWE ANDDEBORAH SCALLY

RUDY ANTO

APPLAUSE!

shaping a company’ssuccess and a board’scontribution to long-termvalue. The outstandingcompanies and individualsrecognized by this year’sawards program representtruly exemplary leadershipin today’s evolving GRClandscape,” said NYSEGovernance Servicespresident, AdamSodowick.

Presiding over thedeliberation to determinethe 2015 winners wasa panel of judgeswhose reputations offerunequivocal integrity.This year’s judges wereStephen L. Brown, principal,Edgerton Group andformer president andCEO, Society of Corporate

Secretaries & Governance Professionals;William B. Chandler III, formerchancellor, Delaware Court of Chancery,and partner, Wilson Sonsini Goodrich& Rosati; Veta T. Richardson, presidentand CEO, Association of CorporateCounsel; Mary Schapiro, 29th chairpersonof the US Securities and ExchangeCommission; Anne Sheehan, director ofcorporate governance, California StateTeachers’ Retirement System (CalSTRS);F. Daniel Siciliano, professor and faculty

After months of waitingand an evening spent in anticipation, the nine winners of the 2015 NYSE GovernanceServices Governance,Risk, and ComplianceAwards wereenthusiasticallyannounced at the black-tie dinner andceremony at the NewYork Stock Exchange.

director, Arthur and Toni Rembe RockCenter for Corporate Governance, andassociate dean for Executive Educationand Special Programs, Stanford LawSchool; and Gretchen A. Winter,executive director, Center for ProfessionalResponsibility in Business and Society,College of Business, University of Illinoisat Urbana-Champaign.

Earlier in the evening, attendeesenjoyed a sparkling, red-carpet receptionon the New York Stock Exchange tradingfloor. After dinner, attendees were treatedto the entertaining reparteé of MeaganFlanigan and T.J. Shanoff from TheSecond City, who served as emcees for theevening. Leading firms known for theirexpertise in various aspects of governance,risk, and compliance served as categorysponsors and announced the list offinalists and winners for each award.Award sponsors included the Centerfor Audit Quality; D.F. King & Co., anAST One Co.; Diligent; Norton RoseFulbright; PwC; RSA; Semler BrossyConsulting Group; and Spencer Stuart.

NYSE Governance Services proudlyrecognizes all the finalists (see sidebar) fortheir strong credentials and participationin the program and offers its congratulationsto the nine winners in each category,whose stories are presented in the pagesthat follow.

2015 GOVERNANCE, RISK, AND COMPLIANCE AWARD CANDIDATES

The following companies all participated in the 2015 nomination process by submittingcandidates to one or more award categories. There were many fine submissions this year—making several categories very close competitions. NYSE Governance Services sincerelythanks all the companies listed here for taking part in this year’s program, which is des igned to shine a light on sound board, compliance, and risk practices across the publiccompany spectrum.

3M CO.ACUITY BRANDS, INC.AMN HEALTHCARE SERVICES, INC.APOLLO GROUPATLAS AIR WORLDWIDE HOLDINGS, INC.

ATMEL CORP.BMO FINANCIAL GROUPCATERPILLAR INC.CMS ENERGY CORP.CRACKER BARREL OLD COUNTRY STORE, INC.

DARDEN RESTAURANTSDELPHI AUTOMOTIVEDIPLOMAT PHARMACYENSCOEFREESCALE SEMICONDUCTOR HERSHA HOSPITALITY TRUSTHOLOGIC, INC.HUNTINGTON BANCSHARES INC.INGREDION INC.JACK IN THE BOX INC.

KEMET CORP.LAYNE CHRISTENSEN CO.LINCOLN FINANCIAL GROUPLOCKHEED MARTIN CORP.MACY'S, INC.MANPOWERGROUPMCKESSON CORP.MIDDLESEX WATER CO.MONSANTO CO.NAVIENTNETAPPNORTHWESTERN CORP.PEPSICO, INC.PROFIRE ENERGYPRUDENTIAL FINANCIAL RED HAT, INC.SEMPRA ENERGYSPECTRA ENERGY CORP.THE BANK OF NOVA SCOTIATHE HARTFORD FINANCI AL SERVICES GROUP, INC.

THE HERSHEY CO.VOYA FINANCIAL, INC.WELLS FARGO & CO.

C O R P O R A T E B O A R D M E M B E R T H I R D Q U A R T E R 2 0 1 5 16

GOVERNANCE, RISK AND COMPLIANCE LEADERSHIP

The executive summary, as in past years,continued with a concise, well-organizeddisclosure of compensation practicesthe company does and does not useand illustrations highlighting itspay-for-performance plan.

Two team members draft all of thenarrative, create the illustrations, anddesign the overall layout of the proxystatement without help from outsidevendors, consultants, or graphic artists.They cull SEC filings for the peercompensation data that forms the basisfor the CD&A comparisons that juxtaposethe company’s performance relative toits peers. Other internal groups, suchas employee benefits and accountingpersonnel, provide the data for thecompensation tables, and certainmembers of the executive team and board of directors offer editorialcomments. And though the compensationcommittee’s consultant and outside legalcounsel perform a compliance review,each contributes only minimally to thecontext and presentation of the material.

The creation of the CD&A by thesetwo individuals was supported by thework performed throughout the year by NorthWestern’s human resourcescommittee (i.e., compensationcommittee). Committee membersmonitor company performance against

short- and long-term incentive plans atevery meeting. They receive analysis froman independent compensation consultantat multiple points throughout the year.During the development of the proxystatement, the committee members, and particularly the chairman, areinstrumental in guiding and shaping theCD&A and challenging the team toimprove disclosure from prior years.

“I have to thank our compensationcommittee members—over the lastseveral years, they’ve really put a focus on aligning our executive compensationwith the performance we provide to our shareholders, and that makes it easyfor me to tell an effective story in theCD&A,” said Timothy Olson, corporatesecretary for NorthWestern.

And in a touching tribute Olsen notedthe passing of a close colleague whoplayed a key role with regard toNorthwestern’s CD&A. “I also want totake a moment to remember PhilMaslowe, the [former] chairman of ourcompensation committee, who diedunexpectedly in November. He was a very instrumental voice in the development of where our proxystatement is today, and we are alreadymissing his insights.”

C O R P O R A T E B O A R D M E M B E R T H I R D Q U A R T E R 2 0 1 523

Award presented by Blair Jones,managing director,Semler BrossyConsulting Group.

NORTHWESTERN CORP.

Exemplary CD&A for CompensationCommittee

Developed almost entirely by a two-person team in the corporate secretary’soffice, NorthWestern Corp.’s CD&A for2014 had one primary goal: to tell thecompany’s compensation story in a clear,concise manner and deliver readilyaccessible compensation information toshareholders.

To do so, the team utilized bulletedlists to delineate its compensationprograms and charts to illustrateexecutive compensation practices, thusallowing shareholders to efficientlyconduct a risk assessment of the entireportfolio of compensation practices. Asthe statement is filed early in the proxyseason, the team could not rely on CD&Adisclosure trends presented by other filers.

The team improved the CD&A for2014 by reorganizing and enhancing theexecutive summary to clearly convey toshareholders that, relative to peers,NorthWestern is delivering highperformance for low pay. It began theexecutive summary with a spotlight onexecutive compensation in relation topeers and the results achieved forshareholders by using new graphics toillustrate results and including thosesame graphics in its say-on-pay proposal.

Finalists aMn Healthcare

services, inc.; Jack in theBox, inc.; ManpowerGroup;

Prudential Financial