governance

Andrew Hill

No matter how good Total’s preparations, the death of its chief executive Christophe de Margerie in a plane crash late on Monday will have plunged the senior ranks of the French oil group into an emotional, logistical and governance nightmare.

When boards discuss succession planning, they often talk about it in jocular-morbid terms, typically debating “what happens if the CEO is run over by a bus?”. But when such sudden deaths occur, it often exposes just how poorly they have prepared for this type of emergency.

The US-based Conference Board, in a useful note for directors issued last year, pointed out that while three-quarters of S&P 500 companies surveyed in 2011 had succession plans in place, only 83 per cent of those had put in place an emergency succession component. Given that between 7 and 15 US public companies are hit by the sudden death of their chief executive in any given year, the group suggested the fact that a third of large companies had not considered emergency succession was simply not good enough. Read more

Andrew Hill

Stephen Elop, ex-Nokia, soon-to-be ex-husband

I firmly believe boards need to be less squeamish about prying into their senior executives’ private lives, particularly when divorce is looming, because the corporate consequences can be grave. Now researchers at Stanford’s Graduate School of Business have broadened the debate to suggest that shareholders should worry about chief executives’ marital disharmony, too.

Divorce, they write, could undermine CEOs’ control and influence, affect their “productivity, concentration and energy levels”, and have an impact on their attitude to risk. They cite Rupert Murdoch’s split from Wendi Deng and the divorce of Harold Hamm, CEO of Continental Resources, from his wife. News of the first, thanks to a pre-nuptial agreement, left News Corp shares unmoved; news of the second, with no pre-nup, knocked 2.9 per cent off Continental Resources’ stock price as investors worried about the fate of Mr Hamm’s 68 per cent stake in the group. Read more

Andrew Hill

The controlling Jack Ma

Well done, Hong Kong. By sticking to its principles and not bending to Alibaba’s pressure for an unusual board control structure, the city’s stock exchange has struck a blow for investor rights over the increasing demands of technology executives.

Not that it will make a jot of difference. Read more

Andrew Hill

Pope Benedict XVI. Getty Images

How does the Pope’s decision to step down measure up against best practice in corporate succession planning?

Luckily, the Association of British Insurers – which issues regular guidance on governance issues – has recently, ahem, pontificated on this matter, recommending that companies improve their succession planning and have strong candidates ready to take over as chief executive. Read more

Andrew Hill

Adam Posen’s attack on the management and culture of the Bank of England may be the strongest yet, but it is by no means the first – and won’t be the last – criticism of a persistent and dismaying lack of robust governance at the UK central bank.

What is astonishing is that despite countless warnings – three independent reviews, several newspaper editorials and sundry MPs’ warnings – the central charge that the governor is over-mighty and under-governed still stands. Read more

Andrew Hill

Research for the latest Harvard Business Review ranking of the best-performing chief executives since 1995 – topped by Steve Jobs, as it was in 2010 – also yields some interesting new insights about whether to pick insiders or outsiders to run the company.

The study points out that, overall, insider CEOs do better, ranking on average 154 places higher than outsiders on long-term measures of total shareholder return and increase in market capitalisation. But there was little difference between the performance of insiders and outsiders in continental Europe, China and India. Read more

Andrew Hill

Are networks both good and bad? Getty Images

The assumption that “it’s not what you know, it’s who you know” has informed business and politics for decades, even centuries. But the benefits of strong networks – and networking – are shadowed by threats. When is a network too cosy, and, if you’re outside the network, how would you know?

The Corporate Library – now part of GMI Ratings, the governance research group – has for years been developing tools to answer this question, particularly in the US. In 2002, researchers there did some bespoke research for the Financial Times looking at cross-company links among directors of the FT 500 list of the world’s largest listed companies. It revealed that because of multi-tier boards in continental Europe, the most closely connected directors oversaw French and German companies, such as BNP Paribas and Allianz. Read more

Andrew Hill

Entrepreneurs should take a look at the video of Groupon founder Andrew Mason being interviewed at Wednesday’s Business Insider conference. It could be the last time you see him as the internet company’s chief executive. The board is due to meet later on Thursday to discuss his future, in the wake of the sharp fall in the stock since its IPO. A series of brutal leaks suggests his job is on the line.

Mr Mason evinces an odd and contradictory mixture of arrogance and humility. For example, he told Business Insider CEO Henry Blodget: Read more

Andrew Hill

Anglo American’s Cynthia Carroll would quite justifiably like to be assessed for her performance as a chief executive, not as a female chief executive. The same goes for two other prominent chief executives of UK companies who have announced their departure this month: Marjorie Scardino at Pearson (which owns the FT) and Kate Swann at WH Smith.

But the continued scarcity of female CEOs worldwide, the fact that two of this trio will be replaced by men (Ms Carroll’s successor has yet to be named), and the coincidence with a heated debate about gender quotas in European Union boardrooms make this a legitimate theme.

Specifically, it draws attention to the only element of the gender quota debate that pro-quota and anti-quota camps agree on (apart from the ultimate objective of achieving greater balance): that it is more important to fill the pipeline of female executives than it is to stock the board with female non-executives. Read more

Andrew Hill

US national security concerns apart, China’s Huawei has one of the strangest governance structures of any multinational company: a “panel” of three chief executives each of whom rotates into the top executive role every six months.

On the issue of Huawei’s links with the Chinese military, the telecommunications equipment company has proved the equal of any western counterpart when it comes to using spin-doctors to push out a strong and consistent message that it has been maligned. But when it comes to the rotating CEOs, its founder, Ren Zhengfei (who is one of the trio), is remarkably frank that the arrangement is a bold experiment. “Even if we fail, we will not regret our choice because we have blazed a new trail,” he said in the most recent annual reportRead more

Andrew Hill

In the annals of odd academic tasks, trawling through nearly six decades of obituaries for chief executives ranks highly. But, in doing so, Timothy Quigley of Lehigh University has disinterred interesting evidence that the all-powerful CEO is alive and well.

For a paper to be presented to next month’s Academy of Management annual meeting in Boston, Prof Quigley looked at the market’s response to 193 sudden CEO deaths (with causes from plane crash to cerebral haemorrhage) between 1950 and 2009. The magnitude of investors’ reaction, whether negative or positive, was greater in recent years than in the early part of the period. In fact, the share price rise (or fall) for deaths announced between 1990 and 2009 was more than double the reaction in the 1950s and 1960s. Read more

Andrew Hill

Corporate governance can be dull. But Nomura’s annual meeting on June 27 will be livened up no end if the Japanese bank’s chairman allows any discussion of shareholder proposal 12, “regarding overhaul of basic daily movements”. Here it is in full:

Details of Proposal: It should be stipulated in the Articles of Incorporation that all toilets within the Company’s offices shall be Japanese-style toilets, thereby toughening the legs and loins and hunkering down on a daily basis, aiming at achieving 4-digit stock prices.

Reasons for Proposal: The Company is on the verge of bankruptcy. In other words, it is the time to hunker down. The Company cannot avoid bankruptcy if it merely adopts a spiritual approach such as encouraging sales persons to speak in a loud voice, but the Company can surely avoid failure if they straddle over a Japanese-style toilet every day and strengthen their lower body. If it cannot, it can only be accepted as a bad luck.

 Read more

Andrew Hill

Rupert Murdoch

Rupert Murdoch

It will be a shame if bitter and partisan debate over whether Rupert Murdoch is “a fit person to exercise the stewardship of a major international company” obscures the more important conclusion of the UK parliament’s culture, media and sport committee on phone-hacking: that he and his son James were wilfully blind to what was going on.

Whether BSkyB, controlled by the Murdoch-owned News Corp, is a “fit and proper” owner of a broadcasting licence is a question for Ofcom, the regulator, which has now entered an “evidence-gathering” phase of its probe.

But as even the dissenting members of the committee said on Tuesday, if the “fit person” line had been omitted from the report, they would have voted unanimously to back it, including the charge that the Murdochs oversaw a culture of wilful blindness. Read more

Andrew Hill

The greenest job applicants know that to make any sort of impression on their prospective employer they must at least know something about the company where they wish to work and the position for which they’re pitching. That lesson appears to have been lost, however, on many of the experienced hands seeking to join the boards of Britain’s financial companies.

Hector Sants – outgoing chief executive of Britain’s Financial Services Authority – used his valedictory speech on Tuesday to underline how would-be directors are failing even the most basic examination of their credentials for high office. Read more

Andrew Hill

The problem with conventional wisdom is that academics will insist on testing whether it is truly wise.

So the popular assumption that Lehman Brothers would not have collapsed if it had been Lehman Sisters (to quote, among others, European commissioner Viviane Reding and former UK minister Harriet Harman) seems to take a knock from a new discussion paper published by Germany’s Bundesbank. It concludes:

Board changes that result in a higher proportion of female executives also lead to a more risky conduct of business.

 Read more