Wednesday, November 01, 2006

What’s Next for Boards? Ten Landscape-Altering Trends

What’s Next for Boards? Ten Landscape-Altering TrendsUp ahead: shifting governance spotlights and CEO role models.
By John C. Wilcox

Here is an optimist’s view of 10 trends that will shape boardrooms and the governance landscape in the years ahead:
1. Majority voting and the right of shareholders to vote against directors will become the norm, replacing the plurality vote standard in U.S. director elections.
2. Executive compensation will be brought into line by a combination of factors: enhanced SEC disclosure requirements, an advisory shareholder vote on compensation committee reports, and recognition of the need for internal pay equity.
3. Separating the roles of chairman and CEO will become more common at U.S. companies, encouraging boards to worry less about preserving power and more about developing and incentivizing the best executive talent.
4. The model of the imperial, celebrity CEO will be replaced by the stewardship model, with Reginald Jones unseating Jack Welch as the role model.
5. Sustainability and corporate social responsibility, formerly relegated to gadflies and special interest groups, will be recognized as key corporate governance responsibilities for which directors should be held accountable.
6. Shareholder communications and proxy voting systems will be revamped by the SEC to make better use of technology, reduce costs, increase efficiency, and improve a board’s ability to identify and communicate with shareholders.
7. Shareholder resolutions will be overtaken by other forms of constructive engagement, and shareholder activism will become less confrontational, more responsible--and more effective.
8. The definition of beneficial ownership will become more complicated and problematic as stock lending and derivative investment strategies enable investors to separate voting rights from any economic interest in the underlying stock.
9. The spotlight will shift from the governance of companies to the governance of institutional investors, with a focus on how institutions should best fulfill their conflicting duties to maximize returns while acting as responsible owners.
10. Companies will come to recognize that corporate governance is not just a matter of regulatory compliance and accountability but a strategic means to lower the cost of capital, reduce risk, create value, and strengthen the long-term performance of the corporate enterprise.

John C. Wilcox is senior vice president, head of corporate governance, at TIAA-CREF, one of America’s largest institutional investors and a leading advocate for sound principles of corporate governance ( He formerly spent 31 years with Georgeson Shareholder Communications Inc., where he specialized in corporate governance, takeovers and control contests, and investor communications. He can be contacted at

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