Explorez tous les épisodes du podcast Boardroom Governance with Evan Epstein
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Titre
Date
Durée
Yvonne Wassenaar: On Boardroom Dynamics and Trends from Silicon Valley
(5:49) Her executive career starting with Accenture, and later with VMware, New Relic, and CEO of Airware and Puppet.
(9:03) On her board journey. Distinctions between private and public company service. Plus non-profits.
(17:43) Explaining board composition and dynamics in VC-backed companies.
(23:23) Explaining board composition and dynamics in PE-backed companies. "It's much more straightforward, structured, and contained."
(27:39) On the 'Stay Private vs Go Public' debate and other considerations on private markets.
(34:29) On the AI boom and how to think about it from a board's perspective: "how do you experiment and lean in without committing?"
(39:06) On the increasing relevance of cybersecurity in the age of digitization. "Cyber attacks are like earthquakes in California. They're going to happen."
(42:33) On geopolitics and the boardroom. "How you think about it really depends on what type of company you're in, how big it is, and what you're trying to achieve."
(54:44) Quotes that she thinks of often or lives her life by: "Be the change you want to see in the world" by Mahatma Gandhi,
(55:15) An unusual habit or absurd thing that she loves: misting plants.
(56:35) The living person she most admires: MacKenzie Scott.
Yvonne Wassenaar is a seasoned Silicon Valley C-level executive and board member with experience across public, private equity-backed, and venture-backed companies. She currently serves on the boards of Forrester, Rubrik, Arista Networks, JFrog, Alation, Braze, and InfoBlox. She also serves on the boards of Harvey Mudd College and UCLA Anderson's Easton Technology Management Center.
(57:42) Quotes that he thinks of often or lives her life by: "Deal with it"
(57:53) An unusual habit or absurd thing that he loves.
(58:11) The living person he most admires.
Javier Saade is Managing Partner of Impact Master Holdings, Venture Partner at Fenway Summer, Operating Partner at Presidio Investors, Chairman of the Board at GP Funding, Inc., Board Member of VCheck and Global Tech Acquisition Corp. (NASDAQ: GTAC), CNBC Contributor, Executive Fellow at Harvard Business School, and host of the podcast Top of the Game.
(22:30) Recommendations for handling the increasing politicization in the boardroom.
(26:42) On geopolitics in the boardroom. Supply-chain vs consumer market.
(31:30) On the solar and battery industry geopolitical landscape.
(38:23) How should directors think about AI in the boardroom. "Everyday AI" vs "Game-changing AI". Use cases: 1) Back-office capabilities, 2) core capabilities, 3) front office, 4) New products and services. AI code of conduct. Use of data. Cybersecurity.
(43:51) On the impact of AI in the workplace. *reference to study by Erik Brynjolfsson
(47:09) Books that have greatly influenced her life:
(49:22) Quotes that she thinks of often or lives her life by.
(50:44) An unusual habit or absurd thing that she loves.
(51:30) The living person she most admires.
Sonita Lontoh is a public company board director, strategic advisor, and former Fortune 100 senior executive who focuses on digital innovation, artificial intelligence (AI), and sustainability — contributing positive impact to businesses, consumers, and society.
Jackie Cook: On the "Investor Stewardship Movement"
13 Dec 2021
00:53:17
Intro.
(1:19) - Start of interview.
(2:03) - Jackie's "origin story". She grew up in South Africa where she studied psychology and later got her bachelor’s degree in economics and management from Oxford, where she studied as a Rhodes Scholar. Her focus on corporate governance research started in 1998 after taking a research fellowship position at the Center for Business Research at Cambridge University under Professor Simon Deakin, that included a series of reviews of the UK company law.
(5:10) - How she continued her corporate governance research from Cambridge to Seattle, where she joined the Corporate Library in 2001.
(6:29) - On why she started Fund Votes in 2007, that focused on a new disclosure that had been required by the SEC in 2003 for the first time, on mutual-fund and exchange-traded fund proxy voting data. Her personal interest veered towards the environmental and social issues, where she did some early work with AFLCME and AFL-CIO (labor groups focused on compensation and pay disparity), Ceres (focused on sustainability) and other advocacy groups like IEHN, CPA, and others. She focused on shareholder resolution campaigns using the mutual fund and ETF voting data to evaluate how asset managers were thinking about these longer term ESG matters.
(8:35) - On Fund Votes acquisition by Morningstar in 2018. "For a long time Fund Votes was more of a lifestyle company for me, but around 2012 when say-on-pay got mandated by Dodd Frank, the data became more relevant and I invested more time and resources to build the company."
(10:13) -Her current focus at Morningstar as Director, Stewardship, Product Strategy & Development, producing some thought leadership with proxy voting data. She worked a lot with Jon Hale, head of sustainability research for the Americas at Morningstar, to integrate the systems and IP that Fund Votes brought into the platform.
(12:33) - Her latest article on how Say-on-Pay has failed to rein in CEO compensation, and how it could be used to bind climate targets to executive pay. Say-on-pay is an "untapped source of strategic influence for investors". Two positives from say-on-pay: it created more engagement between companies and investors (shining a light on pay practices), and created "new real estate" in the proxy ballot "and that's valuable."
(22:17) - On the rising prominence of ESG in corporate governance. "The big shift has been to realize that the 'E' and the 'S' factors present systemic risks. On climate change, it was the ‘unburnable carbon’ report published by Carbon Tracker (2007) that first put the issue in the mainstream for investors. The Paris Climate Agreement (2015) solidified these systemic risk matters."
(26:05) - On the increasing influence and concentration of voting power in a few large asset managers.
(29:56) - On the Exxon Mobil Proxy Contest with Engine No.1. and other strategic voting campaigns. "On the Exxon vote, the key was the support of the pension funds. Asset owners move the dial ('they are the real opinion leaders on corporate governance proxy voting'). The asset managers take their cue from asset owners."
(31:49) - On the role of insiders and dual-class shares in proxy voting, and "hidden control preventing resolutions from passing". From her article: the 2021 Proxy Voting in 7 Charts. Examples include Larry Ellison (Oracle), Mark Zuckerberg (Meta), Warren Buffett (Berkshire Hathaway), Walmart, Alphabet, Tyson Foods, etc.
(36:46) - On the rise of the Investor Stewardship Movement. "How stewardship codes, ordinary investors, investor advocacy organizations and collaborative investor initiatives have become a much more powerful force in the market."
(40:43) - On the role of directors, ESG board committees, board composition and diversity.
(44:12) - What are the issues to look out for the next Proxy Season in 2022:
There will be a lot of pre-season engagements and perhaps a record proportion of withdrawals. Directors will be busy!
(48:47) - Quotes that she thinks of often, or lives her life by:
"Wat jou nie doodmaak nie, maak jou sterker" (what doesn't kill you makes you stronger, in Afrikaans)
"Perfect is the enemy of the good" (perfection is a self-indulgence)
(49:52) - An unusual habit that she loves: reading Afrikaans police thrillers (particularly by Deon Meyer).
(51:25) - The living person she most admires: Kumi Naidoo (a South African human rights and environmental activist).
Jackie Cook is Director, Stewardship, Product Strategy & Development in Sustainalytics’ Stewardship services team at Morningstar. Follow Jackie on Twitter: @FundVotes
If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media.
Aaron Wright: On The Rise of DAOs and Blockchain Governance.
08 Nov 2021
01:02:04
(0:00) Intro
(2:22) Start of interview
(3:04) Aaron's "origin story". He got interested in Bitcoin early on, and collaborated on the launch of Ethereum. He co-authored a book called The Rule of Code, Blockchain and the Law (2018). He's been constantly playing around with the technology itself and he co-founded OpenLaw, which makes it easy to create legal agreements that work with Ethereum. Most recently he's been spending a lot of time pulling together a bunch of DAOs.
(5:13) How blockchain can disrupt corporate governance.
(6:35) The history of DAOs (6:35). Dan Larimer's Decentralized Autonomous Companies (DACs) article (2013). The concept of DAOs picked up with the Ethereum blockchain. Beyond just corporations, to organizations generally. A lot of people think about blockchain as a system to transfer value in a fast way (~12 mins for Bitcoin and ~12 secs for Ethereum). But beyond this transfer of value, blockchain can also be understood as a system to coordinate disparate people with a set of smart contracts. This allows a new way to structure organizations.
(12:13) The story of The DAO (2016). "It was pretty revolutionary in terms of its objective." After the project got hacked, it led to "quite a dramatic (governance-related) decision to fork the Ethereum network." For a number of years, people had "PTSDAO", they were afraid of other hacks. "But about 2-2.5 years ago that started to change, PTSDAO began to wear off and developers began to look at this problem again." New DAO platforms and tooling emerged, the most notable example of them was Moloch DAO (it provided grants to Ethereum projects). More innovation followed, and DAOs were capable of not only giving grants but also making investments. "There has been a sort of explosion of DAOs." To put some numbers to it, "In Feb 2019 there was ~$10m in these DAO like structures with ~2,000 users, today depending on the numbers you look at, it's north of $10bn with several hundreds of thousands of users."
(20:30) His article "The Rise of DAOs: Opportunities and Challenges" (Stanford Journal of Blockchain, Law & Policy, 2021). Questions on legal frameworks for DAOs: partnerships, LLCs, new state DAO LLC laws: Vermont and Wyoming. Unincorporated Non-Profit Associations (UNAs). Wrapped and unwrapped DAOs. How to think about interests in DAOs (securities or something different like member-managed partnerships). Separating economic and governance rights. Are tradable governance rights securities? Grey zone.
(29:58) His take on The LAO (the DAO that he co-founded focused on venture investments). "This was an effort to reboot the original The DAO concept but in a compliant US law format." It's structured as a Delaware LLC, with changes in its operating agreement that waived fiduciary duties and conflicts of interests. Core decision-making was delegated to a smart contract (code). They pooled capital (in Ether), members were only permitted to purchase up to 9% of the LAO (most purchased between 1-2%). There are about 75 members, scattered around the world, chatting via discord, all decisions are made via blockchain-based voting. "It's created a hive-mind." "Instead of having a few people in charge like in a VC fund, you have a collective group." "The decision-making has been pretty great." "The members of the DAO have been able to move faster than traditional VC funds, generating a higher rate of return (still early so TBD) and better at predicting the future of the market, such as with NFTs." "A network of capital deployers"
(37:21) On DAOs' decision making (7 day voting period), rough consensus (no quorum requirement) and internal mechanisms. Faster and better decision-making (time will tell if the latter is true). Each member is provided with "ragequit" rights (automatic redemption rights). "[I]t usually happens at the beginning, when they join a DAO and they either don't have the time to participate and they feel they should, or they decide they didn't like the opportunity as much."
(41:20) - On FlamingoDAO and Non-Fungible Tokens (NFTs). Inside The LAO many members wanted to back NFT projects. A question emerged internally to either invest in the projects or buy the art. They decided to do both. In Oct 2020 Flamingo DAO was born. Now they have 9 different DAOs ("about $200m in ETH has been contributed to these DAOs", over 200 people):
The LAO (VC investments, it can invest in equity or tokens, could lead a round, draft a term sheet, nominate a board member who could be any member of the DAO - it hasn't done so yet). How people can become members (accredited investors).
Flamingo DAO (NFT projects and art). "It started with a contribution of about 6,000 ETH ($6M at the time) and now if new members want to join they are valuing Flamingo DAO's interests at over $1 billion." (in just a year of existence!)
Neon DAO (Metaverse). "It was opened up last week, it took 40mins to close. It's a $20 million vehicle." ("that process for a VC fund or hedge fund would take 3-6 months.").
(52:33) On Sequoia's move to a permanent fund, "[I]t mirrors the structure of our DAO network." The LAO operates like a DAO of DAOs (like Sequoia's permanent fund).
(53:59) His fascination with DAOs: "a lot of it is corporate governance theory at its core." "Blockchain technology is providing a laboratory to play around and geek out on corporate governance." "Maybe [in a digital world] it's better: 1) to have rough consensus voting instead of quorum voting, 2) to have a broader base of decision makers for investing instead of a few people [like in a traditional VC fund], 3) to have more flexible redemption rights instead of lock-up windows or capital calls, 4) to have people provide more capital upfront, 5) to delegate voting rights to other members (different ways to provide proxy voting).
Jeff Thomas: "Private Companies Have Never Had More Options and Better Access to Capital and Liquidity."
28 Oct 2021
00:42:42
Intro.
(1:22) - Start of interview.
(1:51) - Jeff's "origin story". He grew up in Dayton, Ohio. He went to Carnegie Mellon University for undergrad "to study engineering and play football." He graduated with electrical and computer engineering degrees, and took off to Silicon Valley. He first worked in the semiconductor industry with Altera. He later got into financial services, first with Gehrson Lehrman Group, then with SecondMarket (early player in the secondary markets for private shares, later acquired by Nasdaq) and Owler (crowdsourcing data on private companies). He joined Nasdaq in 2014 to help launch the Nasdaq Private Market. In 2016 he got promoted to run the listings team for Nasdaq in the west coast.
(4:39) - Jeff's take on Nasdaq's role and vision: "In the last 5-6 years our approach has been to create a lifecycle approach to supporting our corporate clients: 1) Nasdaq Entrepreneurial Center (early stage), 2) Nasdaq Private Market (as companies scale and need to provide liquidity to their shareholders), 3) Listings Business (for companies going public), 4) Once companies are public, we offer a number of products and services to empower their IR, corporate governance and ESG disclosure practices." Beyond this work with corporate clients, Nasdaq also operates exchanges in the US and EU, it has an investment intelligence business (indexes, sell market data) and it's a technology provider to capital markets (including market surveillance technology, AML/KYC solutions, and others).
(7:38) - Jeff's take on growth of IPOs during the pandemic (~250 operating companies have gone public in Nasdaq this year) and SPACs (there have been 495 IPOs in 2021 raising ~$138bn). "As a private company you've never had more options and better access to capital and liquidity." Private companies can raise: 1) Late stage venture capital rounds ("there seems to be $100m rounds everyday"), 2) IPOs, 3) SPACs and 4) Direct listings.
(10:13) - His take on the impact of government actions on the economy (and how they impact markets). The acceleration of digital transformation during COVID-19.
(12:39) - His take on the Nasdaq Private Market (facilitated ~$36 billion in transaction volume for ~500+ private companies) and why they decided to spin-off NPM as s stand-alone company, receiving investments from a group of banks including Citigroup, Goldman Sachs, Morgan Stanley, and SVB Financial Group.
(16:05) - The "stay private or go public" decision per Jeff: "It all boils down to the company's goals and objectives in different phases of its lifecycle." Companies go public for a variety of reasons, but some of the primary ones are: 1) to raise capital, 2) to provide liquidity, 3) brand enhancement (prestige) of being a public company, and 4) to leverage its equity as an acquisition currency.
(23:24) - On the rise of retail investing and "meme stocks". Zero commissions took down the cost of trading, it made trading more accessible to people. The advent and impact of social media (from social message boards to Reddit). The dissemination of information has changed the nature of trading. The SEC report on equity and options market structure conditions (October 2021).
(26:08) - On growth of ESG. "It all starts with the generational shift that is going on, from Baby Boomers to Millennials." "The new generation thinks beyond the bottom line." "People and investors are focusing on non-financial metrics for public companies (more and better disclosures)."
(29:52) - History and nature of Nasdaq's Boardroom Diversity Rule (approved by the SEC on August 6, 2021). Standard disclosure matrix and minimum diversity standards (gender and minorities) with long phaseout periods. "We received 200+ comment letters to the rule, 80% was positive. From the 20% that was negative comments, 10% said that we shouldn't implement the rule, and the other 10% said we didn't go far enough."
(34:10) - His take on crypto and blockchain technology. "We were thrilled to welcome Coinbase to Nasdaq via their direct listing." "It's really an interesting and dynamic time for the crypto markets." "It's still early innings in terms of the regulatory framework (from SEC and CFTC)."
(37:05) - His mentor Bruce Aust (retired Vice Chairman of Nasdaq)
(38:29) - On Nasdaq's approach to technology in the boardroom: their board portal Nasdaq Boardvantage, critical for security. The Nasdaq Center for Board Excellence "offers the latest governance insights and actionable intelligence for board members and executives (board evaluations and questionnaires". The topic of ESG is very relevant for boards, and they have an advisory team that consults with boards on ESG, Nasdaq OneReport (to simplify the process of ESG data capture, engagement, oversight, and disclosure).
(40:05) - An unusual or absurd habit that he loves: From the book Extreme Ownership (Jocko Willing and Leif Babin): "The first thing I do in the morning is to make my bed." This way everyday you start by accomplishing something.
Jeff Thomas is a Senior Vice President of Nasdaq’s Corporate Services business unit. Based in San Francisco, Jeff oversees Nasdaq’s new Listings and Capital Markets businesses. He also oversees business development and relationship management for Nasdaq’s listed companies and Investor Relations Solutions' clients in the Western United States. Previously, he served as President of Liquidity Solutions at Nasdaq Private Market, where he worked closely with private companies to help them provide shareholder liquidity prior to an IPO.
If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media.
Manny Alvarez: On Regulatory Challenges in Fintech, Crypto and Boardroom Diversity
18 Oct 2021
00:51:40
Intro.
(1:18) - Start of interview.
(1:51) - Manny's "origin story". He grew up in Oxnard, CA. He went to Cornell University for undergrad and "that's probably the first time he realized that the rest of the world did not look like Oxnard." His foray into film studies, including at Université de la Sorbonne Nouvelle, also known as Paris III.
(8:05) - His decision to go to law school.
(9:34) - His start with Sonnenschein Nath & Rosenthal's (now Denton's) SF litigation practice. Later, his experience at the California Department of Justice (Consumer Law Section). His time with the Consumer Financial Protection Bureau (he was an enforcement attorney between 2011-2014). That was his first experience "building something."
(14:38) - His time with Affirm (31st employee and first attorney). He was there between 2014 and 2019.
(15:19) - His decision to leave Affirm to be appointed as the new Commissioner of the California Department of Business Oversight (now Department of Financial Protection and Innovation). The Department oversees the operations of state-licensed financial institutions, including banks, credit unions, money transmitters, issuers of payment instruments and travelers checks, and premium finance companies.
(20:30) - His take on "fintech": "A lot of people use this term [fintech] as a noun, but I think of it more as an adjective that describes an ethos that embraces the democratization of financial services." Fintech also encompasses ubiquity ("meeting the customers where they are"), the increased computing decision-making power (larger data-sets), and interoperability.
(26:49) - His take on the rise of Buy Now, Pay Later (BNPL). "In the early days of Affirm that term did not even exist, what was used was point of sale."
(32:07) - His take on the rise of crypto through a regulatory lens. "Think about functional regulation." e.g. Store of value ≠ money transmission ≠ smart contract features, etc. "It's important to articulate what function you're worried about, define the activity and figure out who has the authority to regulate that specific activity."
(37:27) - His take on how some in the private sector have proposed new regulatory frameworks, e.g. Coinbase's "Digital Asset Policy Proposal" or Andreessen Horowitz's "How to Win the Future" housed in their new web3 policy hub: "I think the self-regulatory approach and proposals put forward by private actors is smart and practical." "If for no other reason it forces a conversation between the company and the regulator." "It ought to be adopted by more companies in newly emerging spaces." "It shows a modicum of good faith [and transparency] by companies."
(49:08) - Quote that he thinks of often, or lives his life by: "I love mankind... it's people I can't stand." (Linus Van Pelt of Peanuts)
(49:45) - An unusual or absurd habit that he loves: he wakes up at absurd hours but he relishes those early morning hours.
Manny Alvarez is a financial services executive and former regulator committed to increasing access to financial literacy and technology, protecting consumers from harmful practices, and engaging under-served communities.
If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media.
Kendrick Nguyen: "There is No Question in my Mind that Retail Capital is Coming to the Private Markets."
27 Sep 2021
00:58:33
Intro.
(1:11) - Start of interview.
(3:04) - Kendrick's "origin story". He was born in Vietnam and grew up in the Bay Area. After law school he worked at Goodwin Procter for a couple of years before taking a position in-house for a large fund-of-funds (Permal Group) in NYC. He then worked at the Stanford Rock Center with Joe Grunfdest. After Stanford, he joined AngelList as the GC, and launched Republic in 2016.
(4:37) - On the origin and mission statement of Republic. In 2016, Reg CF allowed equity crowdfunding from unaccredited investors for the first time. The vision is that "there will be a seismic shift of consumers wanting to be investors." "We call this the ownership economy." "This will become the dominant driving force in changing VC and PE, and broadly speaking, the financial markets in the coming years."
(7:58) - The evolution of equity crowdfunding in the last 5 years. "It took the SEC 5 years to increase the cap from $1 million to $5 million in Reg CF, and $75 million in Reg A, effective since March 2021. "The first 5 years was slow, but now Republic has deployed $700 million in capital and much of it (over $600 million) came in the last 18 months."
(10:13) - International crowdfunding. The UK allowed equity crowdfunding before the US, it has been a very successful model, the cap is $15 million and there are tax advantages to invest via crowdfunding. "About 20% of all early fundraising in UK tech startups comes from equity crowdfunding."
(11:30) - Equity crowdfunding in the U.S. in 2020.
(12:28) - Republic's different platforms. "Republic is as much a legal tech company as it is a just a tech company."
(14:43) - His take on the evolution and growth of private markets: "There is no question in my mind that retail capital is coming to the private markets." "There will be many changes, mimicking changes in society." "This will give rise to a new multi-trillion market that will probably eclipse the size of VC and PE if you're just looking at tech."
(18:17) - How "retail capital" will impact corporate governance (where institutional investors has reigned in both public and private markets). "Private companies will soon have a lot more stakeholders, including thousands investors from the customer base."
(21:57) - How will venture capital change with the rise of retail capital. "The very top VCs (those with real value add) will remain important players, but the next cohort of VCs will need to be nimble to adjust to 1) the new forces of retail capital; and 2) other sources of capital that will enter the space." "The flow of capital will be more robust (from retail capital and high net worth capital) and it will challenge the VC market."
(26:11) - How will VC-backed companies (or retail-backed companies) change the composition of their board or their corporate governance? "One of the advantages of raising $5 million in crowdfunding from tens of thousands of investors is that it is very founder-friendly, it does not come with a board seat." "It's still very early in the evolution of retail capital to work out these details." "Retail investors (tens of thousands of customers that may only invest $10 or $20 each in the company) may care more about the social narrative, liability or image of the company than their return on investment."
(29:00) - Crowdfunding stories from Gumroad (raised $5 million from thousands of investors in 12 hours), Backstage Capital (raised $5m in exchange for 10% of the management fees and carried interest in the VC firm), Bucket List (raised ~$3m from ~30,000 investors), Robot Cache (a gaming company that raised ~$30m in a Reg A fundraising over 2 weeks) in the Republic platform.
(31:21) - Some corporate governance implications of having retail investors in the cap table in private companies.
(38:13) - How crypto has impacted the fundraising scene. Republic itself has raised ~$70 million since its founding, ~$50 million in equity and about $20 million in a token offering. Since 2018, Republicy Crypto has been on the forefront of the U.S. regulated securities fundraising in the blockchain space.
(44:44) - On the governance of Blockchains, could it disrupt corporate governance itself and thoughts on Decentralized Autonomous Organizations ("DAOs"). "[One issue] is that organizations [in my subjective experience] tend to have a group of people that have superior knowledge, dedication and drive [so the idea] of consensus decision-making is challenging. It sounds good in theory but in practice is it compatible with building a complicated organization?" "Institutional investors are still not 100% on board with crypto."
(54:15) - Quote that he thinks of often, or lives his life by: "Happiness is success."
(55:35) - An unusual or absurd habit that he loves: Sleeping in sofas, even when there is a comfortable bed!
(56:17) - The living person he most admires: there isn't one person (other than his parents). There is something to learn from everyone.
Kendrick Nguyen is the Founder and CEO of Republic, a private investing platform launched in 2016 for investors seeking high growth potential across startups, gaming, real estate, and crypto.
If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media.
Abe Friedman: "Investors Don't Care As Much About The Messenger As They Do About The Message."
13 Sep 2021
00:56:50
Intro.
(1:30) - Start of interview.
(2:12) - Abe's "origin story". He grew up in L.A and moved up to the Bay Area where he attended Berkeley for college and law school. After law school he went to Seattle and worked in-house for US West Communications (now Qwest Corporation). Back in northern California he joined another telecom before joining the founding team at Glass Lewis in 2003 ("the market was ripe for disruption").
(5:37) - His time as the Global Head of Corporate Governance at Barclays Global Investors (2005-2009).
(7:38) - His time as the Managing Director and Global Head of Corporate Governance and Responsible Investment at BlackRock (2009-2011). "The focus and attention to corporate governance was ramping up at that time and BlackRock was an incredible spot to be in a moment of so much change in the space."
(9:39) - On why he decided to start Camberview Partners in 2012. "Most of the people thought I was crazy. It was a big decision to take that leap." "Maybe the hardest decision that I've had to make professionally but probably the best decision in terms of what it has created in the market."
(11:45) - He started the firm because he believed that they were at a moment in the evolution of governance where companies would have to care a lot more about the institutions and people voting their shares. Two drivers: Say-on-Pay (after Dodd-Frank) and the rise of Shareholder Activism. Companies were not doing much engagement with voting teams at the big institutional investors. They needed better advice.
(19:38) - On the rise of institutional investors and their growing influence in corporate governance.
(24:28) - On the rise of stakeholder capitalism and ESG. "I think it's definitely here to stay."
(26:53) - The current state of play in shareholder activism.
(31:20) - Two issues to consider in the current market:
"It's very common for public companies to underestimate the extent to which investors don't care so much about the messenger as they do about the message. They care about the substance."
"The need for companies to change how they manage their IR strategy has never been stronger." "Most companies are still operating in an old and outdated IR model [still tailored mostly to fundamental investors, when it should address a much broader set of constituencies]."
(36:53) - On board diversity and social changes. "This has impacted the investor dialogue, including human capital management."
(41:42) - On the rise of private markets and startup governance issues. How PJT Partners has allowed them to expand their governance footprint beyond only voting (in public companies). Now they tap all investor issues (their team has about ~70 people now).
(47:28) - The books that have greatly influenced his life:
(48:48) - His mentors: his scout master (Marty Burger), his grandmother, and his former his boss at BGI (Naozer Dadachanji, who became a board member and investor in Camberview Partners).
(51:42) - Quote that he thinks of often, or lives his life by: "The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy." (Martin Luther King).
(52:54) - An unusual or absurd habit that he loves: family tradition of watching "the price is right" (while they're home sick).
(55:06) - The living person he most admires: his wife.
Abe M. Friedman is a Partner and Head of PJT Camberview, based in San Francisco. Mr. Friedman joined PJT Partners through the acquisition of CamberView Partners in 2018. Mr. Friedman founded CamberView in 2012 and served as its Chief Executive Officer through 2018. Before founding CamberView, Mr. Friedman was Managing Director and Global Head of Corporate Governance and Responsible Investment at BlackRock. Prior to that role, he served in leadership positions, including Global Head of Corporate Governance, at Barclays Global Investors from 2005 until the company merged with BlackRock in 2009. In 2003, Mr. Friedman helped found Glass, Lewis & Co. and served as Chief Policy Officer and General Counsel.
If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media.
Priya Cherian Huskins: On SPACs, D&O Insurance and Federal Forum Charter Provisions.
07 Sep 2021
00:54:08
Intro.
(1:24) - Start of interview.
(1:54) - Priya's "origin story". She was born in India and grew up in Louisville, Kentucky. She went to Harvard college and studied law at Chicago Law School. After graduation she clerked for Judge Frank Magill (U.S. Court of Appeals for the Eighth Circuit, in North Dakota). She later joined WSGR as a corporate securities attorney during the dot com boom in Silicon Valley. In 2003, she joined Woodruff Sawyer to specialize in D&O insurance.
(5:42) - On why she joined Woodruff Sawyer in 2003.
(11:26) - Priya's take on the evolution of the D&O insurance market since she started working in this industry in 2003. Current costs for IPOs, and SPACs ("the cost has gone up 4-5x in the last year or two").
(16:58) - Her response to the increasing cost of D&O insurance (particularly for public offerings).
(19:51) - On D&O insurance for private companies: "There is a cohort of carriers that will underwrite D&O insurance for smaller private companies almost on a fully automated basis, but firms come to see us when they reach ~$100 million in revenues (or typically at or after series C and D VC financings)." "Private companies do need D&O insurance, particularly if they want to attract good directors. It's important to highlight that private companies are also subject to the fraud provisions of the federal securities laws." [Note: last week, the Department of Justice announced the arrest of Manish Lachwani, co-founder and former CEO of HeadSpin Inc., a Silicon Valley-based private technology company, on charges of securities fraud and wire fraud perpetrated to raise money from investors. The SEC separately charged Lachwani with defrauding investors.] Litigation risks arise both from public enforcement (such as from the DOJ and SEC) and private enforcement (such as from shareholder litigation).
(27:44) - Her take on the evolving litigation risks with SPACs (from regulators and plaintiff attorneys). "The SEC has been abundantly clear that they expect directors and officers of SPACs to do a lot of diligence." She highlights the SEC enforcement action in Ability Inc (2019). The number of securities class actions in SPACs is also on the rise. "There have been around ~110 De-SPAC transactions, and about 17% of them have been sued ["that seems high until you note that about 27% of the IPO cohort of 2018 has been sued."] There is also new litigation such as the complaint against Bill Ackman's SPAC alleging violations against the Investment Company Act of 1940 and the Investment Adviser Act of 1940, to which a group of over 60 law firms have responded ("[these complaints] are highly opportunistic, there is no question in my mind that they are hoping for a quick settlement to setup a cottage industry, and I sincerely hope that doesn't happen.")
(35:40) - Her story on the Sciabacucchi case, Federal Forum Charter provisions and what's the latest on this front ("very few IPO claims were filed in state courts in 2021: only foreign filers or some that didn't get the memo to include federal forum charter provisions"). "This is the most important thing that [I've ever done] for corporate America."
(44:07) - The books that have greatly influenced her life:
(47:34) - Her mentors: she would like to particularly mention her partner at Woodruff Sawyer: Denise Amantea.
(49:13) - Quote that she thinks of often, or lives her life by:
"If you're not humble, life will visit humbleness upon you" (Mike Tyson).
"Pride goes before the fall" (favorite of her mom)
(50:15) - An unusual or absurd habit that she loves: watching Alaskan sled dog racing!
(51:11) - The living person she most admires: her parents.
Priya Cherian Huskins is a partner and board member at Woodruff Sawyer, a commercial insurance brokerage. She is a leading expert on D&O insurance. In addition to serving as a board member at Woodruff Sawyer, Priya serves on the board of directors of Realty Income Corporation, NMI Holdings, and Anzu Special Acquisition Corp I.
She can be reached via email at Priya@woodruffsawyer.com.
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Maureen Farrell: "The Cult of We", WeWork, and Startup Governance Shortcomings.
23 Aug 2021
00:53:42
Intro.
(1:25) - Start of interview.
(2:14) - Maureen's "origin story".
(3:00) - Why she focused on WeWork as the subject of her book "The Cult of We" with her WSJ colleague Eliot Brown. She took over the IPO beat at the WSJ in 2016, "when there were almost no IPOs." Tech companies were staying private for longer with a ton of capital flowing into the private markets. That's when she started following high flying unicorns such as Uber, Airbnb, Lyft and WeWork. "But I always heard things that were a little crazier about WeWork, a little more confusing, a lot of crazy stories about Adam Neumann, so it was always high in my radar, and then in 2019 came the IPO that wasn't."
(4:39) - Discussion around the concept of "growth at all costs." "It's the driver of this story."
(7:23) - Discussion around the concept of "the cult of the founder." How Adam Neumann was able to cash out around ~$500 million throughout the financing rounds (pre-exit), in addition to getting another ~$500 million in loans from banks. Her original article from July of 2019 uncovering "how Adam Neumann cashed out at least ~$700 million in sales and loans (from JPM, Credit Suisse and UBS)."
(13:21) - The unusual co-founder arrangement between Adam Neumann (getting 83%) and Miguel McKelvey via WeHoldings LLC.
(14:59) - Discussion around the ethos of Silicon Valley, culture mantra, corporate purpose, mission statements such as WeWork's "to elevate the world's consciousness", sustainability and ESG, and how WeWork co-opted many of these concepts.
(19:33) - Discussion around the failure of gatekeepers and how mutual funds (such as T Rowe Price and Fidelity) and other sophisticated investors had FOMO and "aped" into WeWork at record high valuations.
(23:52) - Discussion around Masoyoshi Son, Softbank's Vision Fund and how Masa invested and influenced the outcome of Adam Neumann and WeWork.
(23:33) - How she and her co-author came up with a shorthand to think about Adam Neumann: a magician.
(26:28) - Discussion around the board of directors of WeWork.
(30:28) - Discussion around dual-class share structures and founder control. How WeWork's IPO decision was a way to clean up the company's corporate governance.
(36:49) - WeWork's failed IPO, the fall of Adam Neumann (walking away with ~$2 billion...). Litigation outcome and Adam's current status.
(43:31) - The books that have greatly influenced her life:
(47:46) - Her mentors: "In terms of journalism, it's important to have mentors but you also need to forge bonds with peers who can also become lifelong mentors."
(49:15) - An unusual or absurd habit that she loves: watching bad TV with her daughters! (Hey Dude, Nickelodeon).
(49:57) - The living person she most admires: (politics aside) Jimmy Carter.
(52:14) - The WeWork movie (Jared Leto and Anne Hathaway will play Adam Neumann and Rebecca Neumann)
Maureen Farrell is one of the co-authors of the bestselling book "The Cult of We: WeWork, Adam Neumann and the Great Startup Delusion", the definitive inside story of WeWork and Adam Neumann. Maureen is a reporter that covers capital markets and IPOs at The Wall Street Journal, where she has worked since 2013. She previously worked at CNN, Forbes, Debtwire, and Mergermarket.
She can be reached via email at Maureen.Farrell@wsj.com. Follow her on Twitter: @Maureenmfarrell.
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Robin Ferracone: "The U.S. Lags Other Regions In Terms of Using Stakeholder Measures in Executive Compensation"
05 Aug 2021
00:47:26
Intro.
(1:08) - Start of interview.
(1:42) - Robin's "origin story": she grew up in Indiana, "sought warmer weather" so she headed to Duke for college. She later got an MBA at Harvard and started her consulting career at Booz Allen in SF. Five years later she started her own firm, SCA Consulting, focusing on executive compensation and strategy, based out of L.A. She sold that firm to Mercer in 2001, stayed on with the firm until 2007 when she left to start her current firm Farient Advisors.
(5:50) - "In the SCA days, executive compensation was commissioned by management, very rarely by boards of directors."
(7:20) - Her take on the evolution of executive compensation since the '80s.
(15:16) - Her experience on how to link stakeholder goals in executive compensation, particularly in connection to climate change, social matters and DEI.
(24:37) - Her take on "moon shot equity grants" ("I am not in favor of them") and founder top-up grants.
(28:43) - Her take on SPACs.
(32:40) - Her take on the Exxon Mobil proxy fight with Engine No.1. "It's a watershed moment for corporate boards."
(36:37) - Her take on human capital "it's time has come." "It's much more about people than it's ever been before." There are four areas of disclosure: 1) number of employees, 2) diversity, 3) profile of the workforce, and 4) retention of workforce.
(39:34) - The book that has greatly influenced his life:
Aesop Fables. Collection of fables credited to Aesop, a slave and storyteller believed to have lived in ancient Greece.
(42:03) - Her mentors: "I have a view that you can literally learn for anybody."
(44:29) - Her favorite quotes: "my favorite sayings have to do luck." Her father-in-law: "Luck is where you look for it."
(45:04) - An unusual or absurd habit that she loves: fro-yo!
(45:29) - The living person she most admires: Misty Copeland.
Robin Ferracone is the Founder and CEO of Farient Advisors. She is the author of the book “Fair Pay, Fair Play: Aligning Executive Performance and Pay” and is a frequent presenter for well-known organizations including Council of Institutional Investors, Society for Corporate Secretaries and Governance Professionals, the National Association of Corporate Directors (NACD), and The Conference Board, among others. Robin has written extensively on the topics of performance management, incentive plan design, goal setting, and corporate governance.
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Christopher Young: "After the Exxon Proxy Fight, Directors Realize That They May Be Taken Out By Sub 1% Shareholders."
19 Jul 2021
01:04:00
Intro.
(1:40) - Start of interview.
(2:08) - Chris's "origin story": he grew up in East Greenwich, Rhode Island, but has spent most of his adult life in NY or outside of DC. He started out as a derivatives trader right out of college. Then he went to law school. After law school, he joined White & Case and later Sullivan & Cromwell to focus on M&A transactions. In the late 1990s (during the "dot com" era), he joined Bear Sterns as an investment banker in the tech group.
(7:40) - On his move to join ISS in a newly created role as director of M&A research, in the midst of the HP-Compaq merger. "I think I was hired originally as a CYA sort of process." "But I happened to arrive at the onset of what I think was the beginning of the modern age of hedge fund activism in 2004 (Bill Ackman had just formed Pershing Square, Nelson Peltz started Trian, Jeff Smith with Starboard Value, etc.). It was perfect timing and fortuitous."
(10:54) - On how ISS makes its voting recommendations on contested M&A and activist campaigns, and how the first thing he did at ISS was to create a framework to deal with contested M&A situations and proxy fights for board seats. The framework is still being used today by the ISS Special Situations Team. Institutional investors needed this guidance.
(15:53) - On how he grew the ISS Special Situations Team over time, with people experienced on public companies. Very different team than those of say-on-pay proposals or other more junior analysts. "The way I thought about it was the moment I pressed the button of recommendation, if I had all my retirement money on that one specific stock, how would I vote after I had the inside look."
(20:34) - On the importance of the ISS vote: "Depending on the make-up of the share register, between 20-30% of the share register is going to be at least influenced by the ISS vote, in particular if Glass Lewis has the same recommendation."
(21:52) - On his transition from ISS to Credit Suisse ("after 7 proxy seasons at ISS"). He joined CS to start a dedicated contested situations team on the corporate advisory side: "Today almost every bank has a dedicated team but back then it was only Goldman Sachs." "Banks do not represent activists, the market has dictated that. If you cross that Rubicon, the competition will use that against you. I personally think that is shortsighted, it may change over time. Just like banks did not represent hostile bidders in M&A, until they did."
(27:19) - On his current role at Jefferies. "It's a growing platform seeking to capture market share for public company M&A." We have a team of 5 people dedicated solely on hostile M&A, contested "friendly" M&A transactions and activism defense.
(30:00) - His take on the current proxy season, including Engine No.1's successful proxy fight with Exxon Mobil: "I've seen a lot of events that were deemed landmark, and Exxon could indeed be deemed a landmark situation. I know Charlie Penner (from his time at Jana Partners) and I knew that Engine No.1 wouldn't wage a proxy fight based on [Jana's 3Vs template], where one of those Vs is having the necessary votes...In addition, Exxon Mobil had been considered a pariah at least since the mid-2000s, due to its refusal to engage with major investors and proxy advisors. These factors plus a period of under-performance by Exxon meant that Engine No.1 picked the right target [and they ran a very good campaign]."
(34:33) - But for Chris, the hard part for Engine No.1 is what's next: now that they have 3 board members at Exxon Mobil, will they deliver on their promises? Chris is reminded of the case when he supported Nelson Peltz at Heinz (at the time a landmark proxy fight on a board election contest). Jeff Smith gave an interview about the Engine No.1 proxy fight and he brought up the Darden case, the first time an activist had succeeded in replacing an entire board of a Fortune 500 company (and they performed fairly well thereafter). "Let's see what we will be saying three years from now about the Exxon proxy fight, will Exxon change and if they do, will the results be good and driven by Engine No.1?"
(37:00) - On the rise of global M&A and PE. "There hasn't been a ton of messy M&A, but we are starting to see more." On companies going private: "it's an inventory problem, more and more companies are leaving the public markets." In the UK, there is a national angst over the raiding of their companies (it's easy to take-over companies in the UK).
(39:59) - On public vs private markets. "The private market is growing much faster than the public markets." On dual-class stock. On the different cultures in Silicon Valley and Wall St: "it depends on your story, if there is a story of value creation and people believe in the management and the board, they may sacrifice their own rights [to get a piece of the action]. The problems will arise as the company matures and under-performs with those structures [such as with dual class shares], but then you can always get rid of them later." The question he asks of his capital market colleagues: "Do people love this company? Is it oversubscribed? To what level? To some degree you don't have to give public investors anything. Money talks." Just like with shareholder activism: "It's where people have lost money, or money has been 'dead money' is when they start to get anxious and agitated about the people running the company." "Share price performance is the best defense, it's the first thing that I have in the book for boards of directors." "But almost every company at some point, even the great companies, will have something hit them and that's when they are vulnerable. If they can fix it quickly then they're out, but if it sits there for 2-3 years [in the case of Exxon it was multiple years], then they become vulnerable."
(45:56) - On the positive and negative sides the SPAC trend: "The real reckoning will only be known in 2023 when a huge number of these SPACs will have to deliver on their acquisitions." "The future of this market will depend upon will there be more success stories than failures and how they will be covered in the media and other outlets. The jury is still out."
(49:41) - On the sustainability and ESG trend: "I don't know if it will maintain its current level of importance." "[It reminds me] of the overcrowded trade from back in my day as a derivative trader in the dot com mania peak. With ESG it seems like the same thing: the buzz over the last few years has created a tremendous flow into ESG focused funds. But there is a difference between saying that ESG creates outperformance or if it mitigates risk (the latter almost everyone agrees)." "What's interesting to me is that there are already three hedge funds that are focused on ESG strategies: Engine No.1, Impactive Capital (founded by Lauren Taylor Wolfe) and Inclusive Capital Partners (Jeff Ubben)." "There are also more companies supporting shareholder proposals (instead of opposing them)." "After the Exxon proxy fight, directors realize that they may be taken out by sub 1% shareholders."
(57:48) - The book that has greatly influenced his life:
For Whom the Bell Tolls (1940), by Ernest Hemingway. "It mostly taught me about the economy of language, and the power of simple, stark, declarative sentences in the active voice."
(58:56) - His mentor: his father.
(59:52) - His favorite quotes: a mish mash of 'carpe diem', 'we're not promised tomorrow', 'live in the moment', don't stress over the past or obsess over the future', [they are all kinda the same thing] "but I try to wake up every day and live that way, not only in the difficult times."
(1:00:41) - An unusual or absurd habit that he loves: he's still a die-hard metal head. In college he had radio show and his moniker was "Dr Metal"!
(1:01:37): The living person he most admires: "To me it's the group of people that sacrifice for a greater good, whether it's the military, first responders, and particularly (most recently) essential workers, healthcare workers and others that let others live their lives (often under duress). To me that's inspiring."
Christopher Young is the Global Head of Contested Situations at Jefferies, an investment banking firm headquartered in New York, with offices in over 30 cities around the world. Chris is an expert advisor to public company directors and senior management teams with respect to contested situations, including hostile M&A bids and responses, contested "friendly" M&A transactions and shareholder activism, including proxy contests for Board seats.
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(4:32) Her professional background with HR, comp and IT.
(6:32) Her time at Taos, a professional services business in IT consulting (17yrs). Ultimately acquired by IBM in 2021.
(8:35) The origin story of her founding Athena Alliance (2016) as a non-profit.
(11:00) Three core issues with board placements: 1) access to opportunities, 2) positioning for the role, and 3) how to compete to win. *They have placed ~500 women to boards.
(13:52) On the business model of Athena Alliance.
(16:50) On transitioning from a non-profit to a for-profit model.
(20:56) Distinguishing board service between companies with different capital structures (ie. public, PE, VC, ESOPs, etc).
(22:18) The landscape for independent director board opportunities (~30,000 companies). On ESOP companies and closed corporations and/or family businesses.
(44:20) Quotes that she thinks of often or lives her life by.
(44:41) An unusual habit or absurd thing that she loves.
(45:12) The living person she most admires. Toni Townes-Whitley (CEO of SAIC)
Coco Brown is the Founder and CEO of Athena Alliance, a company helping to position top 10% of executive women for advancement and board opportunities.
(5:10) - Jared's "origin story": he grew up in Michigan, attended the U. of Michigan (BA political science) and Columbia Law School (JD). A book on the bankruptcy of Marvel Comics led him to bankruptcy law and practice. After graduation he joined Brown Rudnick in NYC (’07-’11). He later joined academia as a Teaching Fellow and Lecturer in Law in Corporate Governance & Practice at Stanford Law School ('11-'14). He joined the UC Hastings Faculty in 2014.
(9:38) - Start of discussion about his latest article The Rise of Bankruptcy Directors: "Traditionally bankruptcy is about a court process, not a board process." But his research shows that the boardroom increased its prominence in bankruptcy starting in about 2012-2013, where many distressed companies, especially those controlled by private equity sponsors, prepared for bankruptcy by appointing independent directors (which they call "bankruptcy directors") to their boards of directors with the power to make key bankruptcy decisions.
(13:03) - On the new cohort of "bankruptcy directors" and the parallels with venture capital and Silicon Valley [Their dataset consists of the boards of directors of 528 firms and the 2,895 individuals who collectively hold 3,038 directorships at firms in bankruptcies from 2004-2019]: "The change is that a practice that was once relatively uncommon has become ubiquitous and a central and standard part of the process of preparing for a Chapter 11 bankruptcy filing, leading to the growth of an industry of professional bankruptcy directors who fill this new demand for bankruptcy experts on the board of distressed firms."
(15:08) - On the question of fiduciary duty of loyalty and conflicts of interests of bankruptcy directors (particularly regarding the private equity controlling owners) and the emergence of "super-repeater directors".
(21:34) - Whether bankruptcy judges will incorporate some standards such as those used (for example) by the Delaware Chancery Court on the independence of directors, board conflicts and the decision-making process of the board.
(23:02) - On his finding that unsecured creditors recovered 21% less when a bankruptcy director is appointed. On the lucrative new bankruptcy director role.
(26:04) - On his proposal that the court regard bankruptcy directors as independent only if creditors support their appointment.
(29:03) - "The elevation of the board is an important (new) trend in the bankruptcy process." "The Board is going to play a more central part in bankruptcies."
(31:52) - On the current growth of the economy and deal-making despite pandemic, and projected bankruptcies. "It's caught all of us by surprise." "It just shows you that Washington can change the rules on Wall Street on they want to." On the Hertz bankruptcy.
(34:49) - His thoughts on the next trends in bankruptcies: "I think we are going to continue to see the democratization of the bankruptcy process." "Bankruptcy is less of a black box today and retail investors are becoming bigger players (the participation of normal people in Chapter 11 is a trend that we are going to see continue."
(36:46) - On bankruptcy forum shopping. "This issue goes back to the 1990s, and we will continue to see a concentration of bankruptcy cases in the hands of a few judges."
Donna Anderson, Head of Corporate Governance at T. Rowe Price: "This Has Been A Very Surprising Proxy Season"
28 Jun 2021
00:50:43
Intro.
(1:30) - Start of interview.
(2:14) - Donna's "origin story": She grew up moving a lot since her dad was a Navy pilot. She attended Trinity University (started at 16). After college she worked as a newspaper reporter at a small daily in Washington State and then worked in the PR office for the State Department in Brussels. She later got an MBA at the University of Texas at Austin with the objective of becoming an investment analyst. After graduation she joined Dyer, Robertson & Lamme (’96-’98) in Houston as an equities analyst. She then joined Invesco (’98- ‘07) as director of equity research, including responsibility for voting the proxies. She joined T. Rowe Price (’07- Present) with a specialty in corporate governance.
(6:34) - Her description of T. Rowe Price (NASDAQ:TROW), a global investment management firm with ~$1.59 Trillion of AUM. "This firm is virtually all active management (95%)." It's pure play asset management, deeply rooted in fundamental investment research. Corporate governance became more relevant around the time of the financial crisis (2007), so a decision was made to create a corporate governance specialty group.
(10:42) - How does T. Rowe Price think about its corporate governance function? "I think that our corporate governance approach is complementary to the passive investors." "We have a set of guidelines but nobody gets wedded to that, we approach each situation case-by-case." "This year brought so many exceptions, such as compensation during the pandemic." They look at every single vote. The proxy team is comprised of 3 people. They have a separate responsible investment team that covers ESG matters.
(17:21) - On ESG and its impact on corporate governance: T. Rowe Price had 1,002 engagements with companies in 2020: 53% dealt with ESG matters. The job of the ESG folks is still centered around getting the information they need (disclosure of relevant data is still an issue with ESG). "We have a very disproportionately large footprint in small and mid cap companies, plus private companies, and they need a lot of coaching on ESG, DEI or corporate governance matters."
(20:11) - On corporate governance of private companies (pre-IPO). We are early in the life-cycle of these companies so we can show them what are the corporate governance trade-offs (particularly from the shareholder side).
(24:14) - Her take on dual-class share structures (enlightened by her role in the private investments valuation committee at T. Rowe Price). They plan to be long term investors, so they make sure that the companies that they have invested in understand the trade-offs involved in decisions such as having dual-class shares (for example, exclusions from S&P500 index if dual class shares don't expire). "It's reasonable to start with a classified board and graduate to an annually elected board later." On dual-class shares: "over time we have concluded based on years of experience that [the dual-class share structure] is not aligned with our interests... but...we are perfectly comfortable with a time-based sunset provision of 7 to 10 years." "This is a market where dual-class stock is accepted, so we think that a road-map idea and compromises like time-based sunset provisions are the right pragmatic solutions" "I think a lot of investors view that sunset provisions are the perfect compromise in this market, where there are not many alternatives."
(29:39) - Her take on the current proxy season: "This was a very surprising year but I would not put [the Exxon proxy fight] on that bucket. Anyone that was surprised by that outcome was not playing close enough attention." "We don't see [the Exxon case] as a watershed event where investors will push E & S directors into boardrooms." "I think the conditions were very Exxon specific and that same fund with those same directors brought at any other company would have had a different outcome."
(30:46) - On compensation issues in this proxy season. "We've been really surprised at how investors had their pitchforks out over companies that made comp changes in the heat of the moment in Q2 last year."
(31:32) - On how some large shareholders flipped their views in favor of E&S shareholder proposals. "Those results were surprising to me and to a lot of companies."
(32:31) - On the shareholder proposal process: "I think that shareholders have yet to reckon with the fact that the shareholder proposal process in this market has been taken over by non-shareholders [such as advocacy groups including E&S activist groups 'harnessing the power of shareholders' to foster social change]" "I think it's really questionable whether some of these activists actually want [companies such as] Amazon, Exxon, Chevron or Kroger to exist in 10 years." It's questionable whether these groups are aligned with shareholders interests.
(34:04) - On companies arm twisting to bullying on vote outcomes this proxy season: "The Sunday night late calls that we've gotten, the votes put on hold for some time, this kind of thing is not allowed in other markets but it is allowed here. I thought this year they were particularly aggressive. I hope it's not a trend but I've been pretty alarmed by the lengths that the companies went through to engineer an outcome that is not real."
(36:35) - On board diversity: "This is an area where the pace of progress is pretty surprising, and what it took to get there was shareholders coalescing around board diversity." T. Rowe Price wrote a letter to support the Nasdaq board diversity proposal. "Our take on board diversity is that [there must be a target], whether you want to call it a quota or not. If it's only aspirational guess what, the progress is very, very slow."
The editor at the newspaper where she worked post college that taught her how to write, in a week.
Brian Rogers (former Chairman and CIO at T. Rowe Price).
(47:21) - Her favorite quotes:
"You can get so much farther with a kind word and a gun than with a kind word alone" by Al Capone.
"A man who carries a cat by the tail learns something he can learn no other way" by Mark Twain.
(48:08) - Her "unusual habit": searching weird rocks!
(59:04) - The living person she most admires: "women crushing it in a male dominated field" (ie Angela Merkel, Oprah, etc.) but she's fascinated by Mellody Hobson, co-CEO and President of Ariel Investments.
Donna Anderson, the Head of Corporate Governance at T. Rowe Price (NASDAQ:TROW), a global investment management firm with ~$1.5 Trillion of AUM. Donna leads the policy-formation process for proxy voting, chairs the firm’s Proxy Committee and leads the firm’s engagement efforts with portfolio companies. She serves as a specialist for incorporating ESG considerations into the firm’s investment-research process. She is also a member of the firm’s Valuation Committee and the Women’s Roundtable Advisory Council.
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Lawrence Cunningham: Quality Shareholders, Governance and Warren Buffett.
21 Jun 2021
01:01:01
Intro.
(1:32) - Start of interview.
(2:10) - Larry's "origin story." He grew up in Wilmington, Delaware ("which explains why I have corporate governance in my blood.") He attended Girard College in Philadelphia, then went to the University of Delaware (BA Economics) and Cardozo School of Law (JD). After graduation he worked as an associate at Cravath for 6 years and then joined academia with Cardozo (10 years) moving later to Boston College Law School. He later switched to George Washington University Law School where he's been for the past 10 years.
(6:04) - He is the founding faculty director of GW in NY (now in its 6th year).
(8:46) - His experience serving on boards of directors. Currently with Constellation Software. In the nonprofit sector, he is a Trustee of the Museum of American Finance, a Smithsonian affiliate; Member of the Dean's Council of Lerner College of Business of the University of Delaware; a Member of the Editorial Board of Financial History, the magazine of the Museum of American Finance; and a Member of the Advisory Board of the Ben Graham Centre for Value Investing at the Ivey Business School, University of Western Ontario.
Choose Well. Warren adds these qualifications that make for high-quality directors: 1) business savvy, 2) a strong interest in the specific company, and 3) an owner-orientation.
(32:12) - Origin and scope of the "Quality Shareholder Initiative" focused on long-term concentrated shareholders. Dubbed "high quality shareholders" by Warren Buffett in 1978, the initiative takes its title from that designation.
(38:42) - His take on the meme stock phenomenon: "I'm concerned about it, particularly its form of 'grievance capital' (there is a political aspect to it, for some it's not only about money)."
(41:34) - His take on ESG. Two different aspects:
Why indexers choose ESG: 'they have a systemic business model.' They need a universal set of principles.
Quality shareholders have been seeking 'doing good' for ever.
(48:12) - His take on dual-class share structures. There is no correlation between dual-class shares on quality shareholders. There is no particular preference for dual class shares one way or another. ["Given the wide variety of approaches to shareholder voting, quality shareholders examine dual class structures on a case-by-case basis. Among companies with dual class structures are a substantial cohort with high quality shareholder density."]
(52:67) - The books that have greatly influenced his life:
Joe Grundfest: On Capital Markets, Crypto Regulations, Board Diversity & Corporate Electoral Innovation.
15 Jun 2021
00:40:01
(0:00) Intro.
(1:42) Start of interview.
(3:11) Joe's take on the rise of IPOs and SPACs since 2020. "There is a level where it is all entirely rational."
(4:16) Staying private vs going public in this environment. "In today's world, companies have three alternatives: do another VC round, a SPAC or an IPO."
(6:43) On the fundraising environment: "This is historically unprecedented... due to fiscal and monetary stimulus throughout the U.S. and global economies." "But you have to combine that with the observation that we really do have some fundamental technological and economic changes going on."
(8:47) Are you bullish or bearish on the economy and markets? "I'm confused-ish"
(10:46) On Bitcoin, and the new Bitcoin Law from El Salvador (making it legal tender in that country): It has serious repercussions for US law (currency vs security, money transmission, tax implications, etc).
(12:56) On US public corporations adding Bitcoin to the corporate treasuries. On bitcoin mining ("dirty, dirty, dirty") and the distinctions between "proof of work" and "proof of stake" cryptos. On Elon's decision to not accept Bitcoin to purchase Teslas.
(16:12) On DeFi: "Once regulators figure out what's going on here, they are going to try to crush it." "You know, the SEC has no idea what to do with crypto. The SEC is asking for legislation, they're actually begging for legislation, because if you get legislation, then it's not their job. Unless (the SEC's nightmare) Congress gives the SEC all the authority it needs to regulate crypto and says to the SEC: here you go, do it."
(19:30) On DAOs: "They can lead to chaos. I mean, what is the governance structure? Each one of these has a very different governance structure. And one of the things that we know is that there's no perfect governance structure, right? If you want to over intellectualize this, go back to Ken Arrow's Impossibility Theorem where he demonstrated that there are lots of criteria we would like to see in a society and you can't simultaneously have them all. Well, you know, that's a super brainiac way of saying that governments are always going to fail to one degree or another. Putting the problem of social organization on the blockchain does not solve the problem of social organization. It simply replicates the problem on the blockchain, right? So why do people think that putting an insoluble problem on the blockchain solves the insoluble problem is an insoluble problem to me."
(21:13) On the different approach to blockchain by computer scientists and lawyers. The Stanford Center for Blockchain Research. "What can I say? The computer science people don't get sued 25 times... you know, in computer science, your equations are generally fairly well behaved. And if you write a system, you know how it's going to operate. We're lawyers, we deal with people. Not only deal with people, we deal with plaintiffs. It's a very different problem. I mean look, in engineering you're often dealing with fairly well behaved systems. If systems were well-behaved, you wouldn't need lawyers. So what can I say? I only go where there's chaos and mayhem."
(22:57) On SB-826 (gender) board diversity quota in CA: "the data suggests pretty strongly, almost conclusively, that SB-826 has worked. The number of women on corporate boards in California has increased significantly. The majority of corporations in CA are now in compliance with SB-826."
(24:23) On AB-979 (minorities) board diversity quota in CA: "figuring out the effect of the AB 979 is more difficult. It's very hard to separate that out from what I call the George Floyd effect."
(25:21) On the constitutionality of these laws: "there's a deeper mystery here. And something that I think is really more profound. If you look objectively at both pieces of legislation, and if you ask yourself, what's the probability that the U.S. Supreme court as currently composed (a 6-3 conservative majority) would find either one of these pieces of legislation is constitutional? The answer would be a resounding no." "The fascinating thing is typically when legislation is potentially unconstitutional, everybody's jumping up and down and they're suing to get it invalidated. Here, not only is that not happening, but the vast majority of corporations are complying with legislation."
(27:33) "These bills are what I would call The Miracle of Unconstitutional Legislation: "These are the most effective unconstitutional pieces of legislation that I've ever seen in American history. And I think the answer for why they've been so successful is that at least when it comes to legislating the composition of corporate boards, the majority of America is out of tune with Supreme court doctrine regarding the existence of quotas." "Diversity on corporate boards is being treated very differently to diversity in other areas of society and the parties most directly affected aren't complaining about it. It's a remarkable situation."
(31:08) On stakeholder capitalism and the BRT restatement of 2019: "This is nothing new. You always had to consider all of the constituencies, otherwise you're out of business."
(34:45) On Engine No. 1 proxy fight with Exxon Mobil: "This is huge. I think going forward, every proxy contest is going to be measured as either before Exxon or after Exxon. What it demonstrates is that in today's world, you don't need a large equity position. What you really need to understand is the story that is going to resonate with the large institutional investors. Engine No. 1 had a terrific story that resonated extraordinarily well. They had the perfect target because Exxon had built up a reputation over decades as being the most arrogant corporation in the United States. They'd basically refused to listen to institutional investors. You combine that with the big push towards ESG investing, and the fact that many institutions now feel they can't afford to be on the wrong side of ESG momentum. You know, it created a situation where if you were economically and politically smart, and these guys I think are, you would be able to leverage your position by a factor of 2,500 and grab three seats on the Exxon board of directors. They did something that people thought would have been impossible. And I think it's highly innovative and you're going to see many forums of what I would call corporate electoral innovation over the next year or two. And a lot of it will wind up pushing the ESG direction."
(38:04) "Look, my joke line about ESG is that given the current state of the art, it stands for Extremely Subjective Guessing"!
Joseph A. Grundfest is Stanford Law School Professor and an expert on capital markets, corporate governance, and securities litigation.
Nell Minow: "You Can Get 90% of Governance by Looking at CEO Pay"
24 May 2021
00:58:41
Intro.
(1:42) - Start of interview.
(2:28) - Nell's "origin story." She's the oldest of three girls, including former Harvard Law School Dean and current Professor Martha Minow. Her father, Newton Minow, was the Chairman of the FCC under JFK and authored a famous speech on the "vast wasteland" of TV (that still resonates 60 years later). She was influenced to speak out from an early age when she saw problems. Her ambition was to become a prosecutor but she moved to D.C., where she worked at the EPA and later at the White House OMB.
(4:24) - On meeting Bob Monks, and being asked to join his "new startup" ISS in the mid 1980s (now the largest proxy advisory firm) to advise institutional investors on corporate governance. She didn't know much about corporate governance before joining ISS. "I arrived at the best possible time: the whole field was just beginning so I feel like George Washington or D.W.Griffith because I was there right at the start, out of pure luck." Since then, "Bob Monks and I have built and sold four different [corporate governance related] businesses."
(6:57) - On working as a shareholder activist with LENS ($100m fund) from 1990-2000: "All my career experiences have converged on system analysis: why things don't work as they are supposed to." "ISS had originally been conceived with an activist business plan, but it pivoted to focus instead on independent research for institutional investors. It was at Lens where we focused on activism."
(10:23) - Strategy at Lens: "We bought stock in companies that were not living up to their potential." "About a third of companies would say that that they were already way ahead of us and had a plan in place, a third would say that the ideas were pretty good, and a third would fight us." "We did not have much AUM but we knew a lot of the institutional investors, and sometimes they would ask us to look at specific companies because they trusted us." "We sold Lens to Europe's largest institutional investor, however we kept the part we liked which was the in-house research, that became the Corporate Library."
(12:43) - On starting The Corporate Library ("we called it intentionally the most non-controversial name because we had a reputation for being very provocative.") "We started by publishing reports on employment contracts of CEOs in S&P500." "My dream was to rate corporate boards like (AAA-to-junk) bonds, and that was the product that we developed, which we hoped to sell to investors [who did not buy it] but we sold them instead to D&O insurers [they loved it.]" "We later acquired GovernanceMetrics International (GMI) and took their name, and sold the whole shebang to MSCI."
(17:44) - The history and focus of her current firm, ValueEdge Advisors: "We put on a conference every year for institutional investors, we prepare reports on various corporate governance issues for clients - it's sort of private label research."
(18:48) - Her other focus as a movie critic. "The governance life is the frolic and detour, the movie life goes back as far as I can remember." Her favorite corporate governance movies: The Big Short, Owning Mahowny (featuring Philip Seymour Hoffman and involving the biggest bank embezzlement in Canada).
(22:48) - Her take on politics in the boardroom. Discussion around her article "The Choice for CEOs on Political Issues is Not “Yes or No”, It’s “Helps the Brand or Hurts the Brand.” "If the people listening to this podcast take-away one recommendation from me it would be the following: subscribe immediately to Judd Legum'snewsletter called Popular Information. He keeps track of companies that stated in January that they would not make any political contributions to candidates that would not certify the elections [and failed to live up to those promises.]" "It's no longer possible for a CEO to remain neutral."
(29:04) - Her take on the rise of ESG: "It's a bit the best of times and worst of times scenario":
Best of times: ESG is supplemental to GAAP (which does not measure human capital well). "The difference between CSR and ESG is that the former had the implication of being sort of a trade-off (limiting profits for some kind of a balancing test) while ESG makes no concession of any kind, it's 100% financial and 100% about assessing risk." "So any claim that ESG is against shareholder value is not well founded." The second point is that ESG is a huge issue for Millennials and the next generation... they care tremendously about this topic (relevant for employers and employees)." This has led to a significant amount of capital pouring into ESG.
Worst of times: "It's such a nascent field that there is no consistency, and the ambitions are in excess of the data that's available." "There are a lot of carpetbaggers coming in and labeling themselves as ESG who don't know what they are talking about."
(34:12) - Her take on the BRT corporate purpose restatement (2019) and stakeholder capitalism: "Six Reasons We Don’t Trust the New “Stakeholder” Promise from the Business Roundtable." (her article from Sept 2019). "The last thing I want is for CEOs to be making public policy and deciding how much pollutants they can put out in the air." If we had to rate general knowledge on ESG: on the "E" I would give us B- on our understanding of the relevant factors, on the "G" we could get a B+ on our understanding of governance risks, "S" is the big messy category where who knows what we are talking about." There are groups like SASB that are doing excellent work.
(39:21) - Her take on boardroom diversity: "I am very supportive of the Nasdaq and Goldman Sachs approaches that are ultimately market based approaches." "I am not in favor of quotas." "I think we still have a long long way to go." "I would prefer that instead of a quota system we had a rebuttable presumption, for example: if you do not have at least a third of diverse directors in your board you should explain why not and what steps you're taking to improve." "I feel very strongly that if the CEO package is a disgrace, then you should vote no on pay, and on the members of the compensation committee - no matter if they are diverse directors." "If they can't get it right on pay, they should not be on comp committee or the board."
(43:15) - Her take on private company governance and dual class shares: "I'm in favor of the market [letting the people create whatever governance and capital structures they want] but personally I would never buy limited voting stock [via dual class shares] in companies." "I am not in favor of prohibiting dual class shares but I think it's a bad idea." "I support CII's position of adding sunset provisions." "The important thing about governance is to have performance standards not design standards." "When we were grading boards of directors, the areas with most conflicts of interests [between boards and shareholders] were CEO pay [CEOs wanted less variability and shareholders want more variability] and M&A [most acquisitions don't add any value]." "Does the board make good decisions? That's the ultimate test, it's not because somebody is someone's second cousin or if there is diversity or if they put or not their governance policies on their website" "This is why I would always vote in favor of Berkshire Hathaway's board, they make good decisions."
(48:08) - Her final take-away for public company directors: "We were very good at predicting what was wrong, never that good in predicting what was right. We were better at finding evidence of terrible rather than evidence of greatness, and that's why insurers loved our product because it was about risk." "You can get 90% of your way to governance by looking at CEO pay."
(49:35) - The books that have greatly influenced her life:
"It is not your responsibility to finish the work [of perfecting the world], but you are not free to desist from it either" Pirkei Avot ("you don't have to do everything, but you have to do something")
"The funniest mortals and the kindest are those who are most aware of the baffle of being, don't kid themselves our care is consolable but believe a laugh is less heartless than tears.” by W.H. Auden in a poem called “Tonight at Seven-Thirty." ("when corporate misbehavior is so outrageous it helps if I can laugh at it, and then get angry...")
"Always take the high road, it will either shame the other side into good behavior or it will drive them crazy" Her mom.
(56:08) - Her "unusual habit" that she loves: San Diego's Comi Con (she never misses it, and calls it the "Iowa Caucus of popular culture"). "The people there are the most passionate and independent minded fans."
(56:55) - The living person she most admires: her parents. They exemplify what is to have a full life: "Speak truth to power, to be part of the solution, and to be always there for your family."
Nell Minow is the Vice Chair of ValueEdge Advisors. She was Co-founder and Director of GMI Ratings from 2010 to 2014, and was Editor and Co-founder of its predecessor firm, The Corporate Library, from 2000 to 2010. Prior to co-founding The Corporate Library, Ms. Minow was a Principal of Lens, a $100 million investment firm that took positions in underperforming companies and used shareholder activism to increase their value. Her other professional experience includes serving as a Principal of Lens Investment Management, as President of Institutional Shareholder Services, Inc., and as an attorney at the U.S. Environmental Protection Agency, the Office of Management and Budget, and the Department of Justice.
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Jon Lukomnik: Moving Beyond Modern Portfolio Theory and the Evolution of Corporate Governance.
21 Apr 2021
00:55:38
Intro.
(1:37) - Start of interview
(2:19) - Jon's "origin story." He started as a sports journalist, later became press secretary to then NYC Comptroller Jay Goldin. His transition to asset management, founding his firm Sinclair Capital and leading the Investor Responsibility Research Center Institute (IRRCi) (succeeded by the Weinberg Center) focused on ESG and capital market issues.
(4:48) - His experience with the NYC pension funds, CII and how he addresses the different "stages of governance" described in his book "Moving Beyond Modern Portfolio Theory: Investing That Matters." His historical perspective on corporate governance from the Dutch East India Company (1602). HBS Professors Myles Mace: "Boards are ornaments on a corporate Christmas tree" and Peter Drucker: "The one thing that all boards have in common is that they do not work." His experience with Creditors Committee at WorldCom. Corporate governance in the 1980s changed for two reasons:
In a capitalist society whoever has capital, has power. By the 1980s, institutional investors became very influential with more assets under management.
This was prompted in part by the greenmail scandals. In one year (1983-1984) this practice extracted $4bn from US corporations
(13:04) - The disagreement is not over corporate governance, but rather over "optimal" corporate governance. This is so because capital is changing. "75%-94% of your returns is due to the systematic nature of the markets." The problem with MPT.
(19:54) - The focus of his book "Moving Beyond MPT": "This is not a modest book: we are trying to redefine what investing is." "Stewardship for the benefit of the marketplace as a whole, to deal with systematic risk issues that that we can't deal with mere diversification." More holistic and long term vision of how to improve the risk return of the market as a whole.
(21:41) - Shareholder activism on ESG and sustainability ("Beta Activism"). Examples: Engine No.1 on Exxon, Climate Change. "There will also be changes on how shareholder resolutions will be crafted." For example: Yum Brands on the systemic effects of the use of antibiotics in its supply chain by the end of 2021 (proposed by Paul Rissman and the Shareholder Commons). From individual companies to global/industry levels. Another example, new safety standards after the Vale scandals. "The problem is that somehow in the 1990s/2000s the shareholders figured out how to be first and last in the line."
(26:16) - Debate on corporate purpose (shareholder primacy / stakeholder capitalism / benefit corporations). "I think the person who jumpstarted this discussion was Lynn Stout with her book the shareholder value myth." "You have to care about how companies are dealing with the health of the system as a whole." "But I still think that the governance of a company needs a final decision: that's the shareholders [on how to maximize the residual benefit but taking care of everyone else to do that." "I've always thought it was a false dichotomy [to think about shareholder primacy vs stakeholder capitalism.]" Alex Edman's book "Grow the Pie": shareholder value as a subset of societal value. Shareholders are at the back of the line.
(30:30) - His perspective on international corporate governance trends. Cross-influence between the US and Europe. Asia. Taking into accounts culture. The last US administration tampered down ESG in the last 4 years.
(35:29) - His take on public vs private companies (Wall Street vs Silicon Valley). The advent of dual class shares in Silicon Valley: "founder syndrome." There are different risk desires and appetites for smaller growth companies vs larger mature companies.
(39:43) - His thoughts on western vs authoritarian vs the next dominant economic paradigm. "Confucian curse of living through interesting times."
(43:15) - His favorite book: Fifth Business, by Robertson Davies (1970)
(43:41) - His favorite play:As You Like It, by William Shakespeare
(47:38) - His favorite quote: "It's better to be approximately right than precisely wrong" and "Work hard and be nice to people" (new Michael Franti song)
(48:30) - His "unusual habit": He loves to cook.
(49:26) - The living person he most admires: his wife.
(49:56) - His views on the future of NY post pandemic.
Jon Lukomnik is the Founder of Sinclair Capital. Jon chairs the audit committee of the Van Eck mutual funds, is a core member of the Funston Advisory team, and serves on the Deloitte Audit Quality Advisory Committee. He has a long track record in corporate governance having served as an investment advisor for the New York City’s pension funds, a managing director of a top ten hedge fund and a director for public and private companies, non-profit corporations and litigation trusts. His new book, co-authored with Professor James Hawley, is “Moving Beyond Modern Portfolio Theory: Investing That Matters”.
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Janine Yancey: "Boards Have To Address Social Issues"
12 Apr 2021
00:54:37
Intro.
(1:12) - Start of interview
(1:54) - Janine's "origin story."
(2:25) - Her path from law school to plaintiff litigation work, representing and training employers, and the founding of Emtrain.
(5:40) - Her thoughts on lawyers transitioning to entrepreneurship, and her personal story with Emtrain: "I had this day job that was pretty directionally consistent with what I wanted to do in a technology aided fashion." "It was a big deal when I quit my day job in 2006 and all of a sudden there were five of us employed by Emtrain."
(7:02) - "The real transitioning point was in 2016-2017, after watching the SF trial of Ellen Pao v. Kleiner Perkins (2015), that seemed to me a seminal point. The beginning of harassment law as we know it began with another huge SF trial, the Baker Mackenzie case (1994). I watched both trials so I thought this would become another inflection point."
(7:40) - I predicted the #MeToo movement in an article that I published on Medium. "Women everywhere are going to be so upset. The law is not an adequate channel to address these issues in real time, and social media is going to become the avenue to bring more accountability."
(8:20) - "This is when I decided to take some outside capital for Emtrain." Her vision of Emtrain, and their new technology approach with predictive analytics and benchmarks.
(13:03) - How technology has impacted her business offerings. Scaling from a one-dimensional compliance training program to two-way communication and multi-stakeholder engagement.
(18:44) - Her take on the impact of COVID-19 and WFH policies in the workplace: "We have to be more intentional in virtual settings." We will have to navigate the "in-group / out-group" challenges and dynamics.
(21:16) - The role of the board on ethics, respect and inclusion. "Laws follow people, people don't follow laws." "Younger generations are social justice warriors." Reputation impacts the corporate brand.
(24:33) - The impact of ESG in her industry. "We are a tool in the tool chest to support and manage the corporate brand and how they're perceived by stakeholders."
(31:02) - Her take on corporate boardroom diversity. "If Theranos would've had any woman on its board, maybe she would've called b*%&t on Elizabeth Holmes". "Different people see different things." "What about the Purdue case, the social consequences are huge." "Compiling diversity metrics is a start, but that's like crawling. Where we need to go is understanding the KPIs and dynamics to reach a better trajectory."
(38:19) - How she came up with the framework used by Emtrain. It's all about organizational behavior. Her take on the difference between US and European corporate approach to social issues.
(40:48) - Her take on the recent exodus of people and companies from SF/Bay Area/CA and why she thinks CA will be fine.
(48:52) - Her favorite quote: "Our strengths are our weaknesses and our weaknesses are our strengths"
(49:33) - Her "unusual habit": I twirl my hair when I'm thinking! She loves reading ("that's what winds me down")
(50:24) - The living person she most admires right now: Bill Gates.
(52:45) - Her parting thoughts for directors on how to deal with social issues: "Every board member should think about their ethics, respect and inclusion as part of their reputation. They need to start operationalizing these matters within the organization."
Janine Yancey is the Founder & CEO of Emtrain, a California based online workplace culture platform that helps companies diagnose, benchmark and prevent bad workplace culture outcomes. Prior to founding Emtrain, Janine was a partner at Employment Law Partners where she specialized in solving labor and employment problems for high tech firms including Google, Intuit and a variety of start-ups. Janine also worked as counsel at Liebert Cassidy Whitmore, served as Board Member of the Northern California Human Resources Association, and authored The HR Handbook, designed to help young tech companies navigate workplace laws.
Janine earned her JD at University of California Hastings School of Law and a BA in English and Political Science at the University of California Berkeley.
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(9:02) - How did "ESG" become a core topic of corporate governance? "There has been tremendous pressure on organizations to perform better, to be better corporate citizens." "It coalesced gravitationally in large part because of social media." "The investment community needed an organizing force."
(16:22) - His take on the "purpose of the corporation" debate (shareholder capitalism vs stakeholder capitalism). "Companies are being held to account for their promises and obligations." "You can't make empty statements anymore." "The pressure shift is severe from a reputational risk." "I don't know of a non-financial consequence at a corporation, everything has a financial consequence." "We need to bring the legal community up to speed to where the business community is." "I call this phenomenon the Super Law: How ethical obligations can shape business and your practice."
(22:28) - His take on board diversity. "It's the best example of Super Law." "The genie is out of the bottle on this issue." Nasdaq diversity proposal to the SEC. "One of the dirty little secrets of ESG is that the numbers are not audited, for the most part." "This will be the decade of reckoning... companies will be re-reporting."
(30:08) - His take on the roundtables that he's led for the past 20 years (started when he was at Thomson Reuters, FiscalNote, etc). The idea is to convene cross-functional people to talk off-the-record about issues in a real way (private settings). In ESG, every company according to the FT can both a sinner and a saint.
(37:13) - His take on the Biden's Administration approach to ESG. Re-signed to Paris Accord (climate change is key) and will deal with a lot of the "S" in the ESG. The EU and UK regulators have been active, and have been regulating US companies. He counsels clients that they have to own ESG programs (consistent policies and procedures).
(42:39) - His parting thoughts for directors on ESG matters: 1) Education (learn non-legal components of ESG), 2) They can't rely on D&O insurance in this era. Board members are working really hard now. They can't just rely on management on these matters.
Any book by Robert Caro ("a master at understanding power")
(49:02) - His mentors:
Brad Karp (Chairman of Paul Weiss) "a true beacon of the legal profession"
"I take the good and leave the rest from anybody I know" "I've learned some the best things in my life from some of the worst people that I've encountered."
(51:22) - His favorite quotes:
"You can't plan for the future until you predict the present" (everybody wants to move forward, very few people want to do the hard work of self-evaluation -- where you are now relative where you should be)
"That's arrogance without portfolio" (in reference to arrogant people!)
(53:21) - His "unusual habit": "open to everything and attached to nothing." You should be open to experiences that you don't think will help you. Example: he's a professional chocolate taster.
(55:09) - Which living person does he most admire: As a group, healthcare and essential workers.
David Curran is Chief Sustainability and Environmental, Social and Governance (ESG) Officer at Paul, Weiss. In this role, Dave has dual responsibilities – to work with the firm’s lawyers to lead its Sustainability and ESG Advisory Practice Group, and also to develop and promote the firm’s internal ESG practices.
Dave is a recognized leader in helping complex organizations build resilience. In addition to his work in the ESG space, he has more than 30 years of experience in legal, technology, compliance, risk and ethics roles. Dave has led many popular Thought Leadership conversations with senior executives on a variety of topics where business and technology intersect with the legal, compliance and risk ecosystems, including Transforming Law, Big Data, #MeToo and many others.
Dave serves as co-chair of the New York State Bar Association’s ESG Committee, which aims to educate and engage New York lawyers, law students and faculty on ESG practices and developments through thought leadership and robust educational programs.
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Amy Borrus: The Council of Institutional Investors' Voice of Corporate Governance.
22 Feb 2021
00:59:51
Intro.
(1:22) - Start of interview
(2:23) - Amy's "origin story"
(3:41) - Her time as a journalist at Businessweek (US, UK and Japan).
(5:02) - Her return to the US in 1990, where her last beat was to cover the SEC and corporate governance (including corporate scandals from the early 2000s and SOX).
(7:52) - The history of CII, founded in 1985 "at a time of corporate takeovers, imperial CEOs and insulated boards of directors."
(9:23) - The three founding principles of CII:
Investors benefit when corporate boards provide robust and effective oversight of management (directors are accountable to shareowners);
Investors are more powerful when they speak with one voice; and
Investors are not monolithic so CII focuses on "big tent issues" where there is consensus.
(10:31) - Members of CII: asset owners, asset managers and other investors - combined AUM: $40T.
(12:31) - The evolution of governance since SOX in 2002. "When I joined CII, corporate governance was kind of a backwater." "Since then it has gone mainstream."
(22:14) - Her take on how Say-on-Pay was a catalyst for more engagement between companies & shareholders.
(24:06) - The evolution of engagement by CII: it used to be done directly, now not so much because CII members are engaging directly.
(26:15) - Her take on ESG. "We focus primarily on the G." "We think that strong governance standards and practices are the linchpin for appropriate attention to the E and the S issues." "We put governance first."
(30:03) - "CII's policies on board diversity have always adopted a broad view of diversity including background, experience, age, gender, ethnicity and culture." "It's a bulwark against clubbiness, against having blinders on." "We believe diverse boards can be achieved without quotas."
(32:44) - CII's policies on dual class stock. "We've evolved into a compromise position [with sunset provisions]." "If you want to stay private fine, but if you want to tap the public markets you need to treat your public shareholders appropriately - there is a certain baseline expectation." "We have an international race to the bottom with London, HK, Singapore, etc allowing dual class share listings."
(48:06) - Her take on the GameStop saga, "the real danger there is that it undercuts public confidence and integrity of the markets, and that is not good. It's long term problem."
(56:30) - Her "unusual habit": she loves architecture and city/urban planning.
Amy Borrus became executive director of the Council of Institutional Investors (CII) in July 2020. She joined CII in 2006 as deputy director, and was interim executive director in 2015-2016. She serves on the boards of the CII Research and Education Fund and the Sinai Assisted Housing Foundation. She also serves on the Best Practice Principles Oversight Committee, which will monitor principles underpinning services of leading proxy advisory firms. Prior to CII, she was a correspondent for Businessweek magazine for more than 20 years. Her journalism career included multi-year assignments in London, Tokyo and Washington, D.C. She earned an MSc. in International Relations from the London School of Economics and a B.A. in History and English from the University of Pennsylvania
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(4:32) - What is the proxy advisory business? What was the origin of Glass Lewis? Founded by Greg Taxin and Kevin Cameron in 2003.
(7:17) - The evolution of the proxy advisory business. "Now we've become more of a trusted partner to institutional investors to navigate all [the corporate governance] issues."
(16:21) - The evolution of engagement with issuers ("Glass Lewis has about 1,500 engagements per year with issuers, across 40 countries in 20+ languages"). There are free and paid engagements.
(22:00) - The regulatory landscape of proxy advisors. Heightened focus in last 5 years, and new regulations were passed in 2020 from the SEC and DoL.
(32:14) - How they set their corporate governance principles and policy guidelines. They follow what matters to institutional investors (their clients). They also have a research advisory council from industry (that meets once a year). They look at regulations in different markets.
(35:08) - Glass Lewis boardroom diversity efforts: starting in this proxy season they will be rating the level of disclosure on boardroom diversity.
(38:15) - On corporate purpose. Stakeholder capitalism.
(39:46) - On ESG and sustainability activism. "People [and institutional investors] are more aware."
(41:17) - On shareholder activism.
(43:25) - Her recommendations to US public company directors:
Be engaged.
Know your shareholder base.
Have a plan.
In terms of proxy advisors: stop viewing them as a threat. She encourages directors to engage with Glass Lewis, in its capacity as a trusted advisor to institutional investors. "Use us as a way to connect with investors."
(45:00) - Prediction on regulatory changes with new incoming Administration in the US, Canada, India, EU, etc.
(49:21) - Her favorite quote: "Don't put off until tomorrow what you can do today." (Benjamin Franklin)
(49:51) - Her "unusual habit": Singing.
(50:49) - The living person she most admires: Lots of women, including Kamala Harris, Nancy Pelosi and Michelle Obama. But the person she admires is her father.
Nichol Garzon-Mitchell is a Senior Vice President and the General Counsel at Glass Lewis, one of the leading proxy advisory firms in the world. Glass Lewis has over 1,300 clients, including the majority of the world’s largest pension plans, mutual funds and asset managers, who collectively manage more than $40 trillion in assets.
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(10:50) The start of his entrepreneurial journey in 1992 with his first company.
(13:03) The boom and bust cyclical nature of Silicon Valley. "[M]y father used to say that the stock market has predicted nine of the last three recessions. And, you know, I think in Silicon Valley, the investor and entrepreneurial class has predicted nine of the last three technology waves."
(17:24) His first foray with startup boards. The role and influence of Don Lucas, and Bob Frick (former CFO of BoA), on his board.
(21:49) On the shiftingpower dynamics in founder-investor relationships (ascendance of "founder ethos").
(29:02) On the differences between private equity (PE) and venture capital (VC). "Control investors"
(31:29) His experience as a director of public companies: Responsys, acquired by Oracle (2013), and Upwork (IPO in 2018).
(34:57) On equity comp (stock options and RSUs) in tech companies. *Reference to BG2 podcast episode.
(47:35) IPOs, private markets and secondary markets. *You can check out my newsletter #52 on this topic.
(1:07:00) Quotes that he thinks of often or lives her life by: "Experience is what you get when you don't get what you want."
(1:07:47) An unusual habit or absurd thing that he loves.
(1:08:28) The living person he most admires.
Greg Gretsch is a Founding Partner and Managing Director of Jackson Square Ventures, an early stage venture capital firm that invests in software businesses.
Aeisha Mastagni: CalSTRS Corporate Governance Principles and Activist Stewardship.
01 Feb 2021
00:56:20
Intro of episode.
(1:18) - Start of interview
(1:52) - Aeisha's "origin story"
(2:31) - Her beginnings with Salomon Smith Barney and Morgan Stanley in the "dot com" era.
(3:40) - Her corporate governance beginnings with CalPERS.
(6:50) - How pension funds manage their proxy voting and stewardship. At CalSTRS they manage 9,000+ equities. Role of Proxy Advisors: they help triage proxy voting, allowing to focus on the most relevant issues.
(9:17) - She would like to see more competition in the proxy advisory market (ISS and Glass Lewis). She would like to see as many inputs as possible (most informed decision).
(10:39) - On growth of corporate governance groups at CalSTRS (~15 people, "we call it our beehive") and CalPERS.
(11:26) - On structure of corporate governance group at CalSTRS: Sustainable investment and stewardship strategies group ("SISS" team). Out of $285 billion of CalSTRS, the SISS team manages ~$8B in a portfolio of public equities (three basic strategies: 1) Passive around a low carbon index, 2) Activist managers, 3) Sustainability focus managers). They want to expand this strategy to private markets. They also have a team that works on strategic relations teams.
(18:09) - History and focus of CalSTRS: $285B of assets under management. ~975,000 beneficiaries.
(21:21) - Stewardship and engagement tools of CalSTRS, "The tools have grown over the last 15 years": 1) Proxy voting, 2) Private engagements, 3) Shareholder proposals, 4) Collaborative engagements (ie. Climate Action 100+, Human Capital Management Coalition, etc), 5) Public engagements.
(23:27) - The CalSTRS' "Activist Stewardship" Model. This new form of stewardship is "one more tool in our tool chest"... "to be used in very limited circumstances". One of the first examples: the ExxonMobil campaign (with Engine No.1 and D.E.Shaw Group). "It's not about the size of investment, it's about credibility of the argument"
(29:02) - The value of engagements. On number of CalSTRS' shareholder proposals (down significantly, from 25-50 per year to 3-4 per year) and private interactions with companies. They have a variety of initiatives:
Diversity efforts.
Climate Action.
Human capital management.
Pandemic Resilient 50.
(34:53) - CalSTRS boardroom diversity efforts. The Diverse Director DataSource (3D) (now transitioned to Equilar). Her thoughts on CA's SB-826 and AB-979.
(37:57) - CalSTRS' ESG Focus. They want to expand the sustainability investment approach to private assets including infrastructure, PE and real estate.
(41:36) - On CalSTRS' Corporate Governance Principles. "I like to think that at CalSTRS we are progressive in terms of our principles." Independence first and foremost. On Chair/CEO role and overboarding. "There are some issues that we are unwilling to waiver."
(48:25) - On corporate purpose.
(50:18) - Her favorite books:
Freakonomics, by Steven Levitt and Stephen Dubbner (2005)
(51:16) - Her mentors (her father). Professionally:
Ted White (former head of corporate governance at CalPERS)
Anne Sheehan (former director of corporate governance at CalSTRS)
(52:55) - Her favorite quote: "If you can’t explain it to a six-year-old, you probably don’t understand it yourself." (Albert Einstein).
(53:48) - Her "unusual habit": anything to do with dance.
(46:35) - Her parting thoughts to directors: "Remember who you're representing when you're sitting inside that boardroom. You're there to represent the interest of a broad shareholder group and your responsibility to them is to ensure a risk-adjusted return (considering all long term ESG risks, doing it in a responsible and ethical manner)."
Aeisha Mastagni is a Portfolio Manager in the Sustainable Investment & Stewardship Strategies Unit at the California State Teachers’ Retirement System (CalSTRS), the second largest public pension fund in the United States with $285 billion dollars in assets under management. Aeisha also serves as a director of Golden 1 Credit Union, California's leading credit union and one of the largest in the United States with over 1 million members and assets over $16 billion.
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(12:31) - Her transition to serving on boards (previously with the MONY Ground, MONY Life Insurance Company and Occidental Petroleum Corporation. Currently with the Orion Group Holdings).
(16:36) - On the history and focus of Prudential Financial. "It's a company with a purpose, 146 years old, with an incredible partnership and commitment to Newark, NJ."
(19:18) - Her take on the purpose of the corporation and the new BRT statement (2019). "It's nothing new, it was the same at Pfizer, it's a balance."
(23:45) - Her take on b-corps, benefit corporations and public benefit corporations. "We just don't have a robust law and precedent, yet"
(25:05) - Managing the "tone from the top" at the board level. "The culture is ingrained at Prudential."
(28:00) - Her take on ESG. "I think it's always been there." Now it's just gone mainstream. On the environmental side, people like Tim Smith (Boston Trust Walden) and institutions such as CERES have been active for decades on these topics.
(29:23) - On board diversity. "It's really more important to have broader diversity than just gender." This has gone mainstream too.
(33:13) - Her take on climate change and sustainability.
(35:07) - Her take on board education. "It depends: you need a tool box. For some boards it could be writing a memo, for other boards it's inviting outside expertise, and for others it's one of their own who has a specific background." More boards are adding experts in sustainability.
(39:52) - Her thoughts on blockchain technology in corporate governance.
(40:44) - Her recommendation to directors on shareholder activism. "You have to be your own activists." Duty to ask for questions, alternatives and seek long term value. "You're not there for the pastries."
Elise Walter (ex Chair of the SEC, and director of Occidental Petroleum Corporation)
Peggy Foran is the Chief Governance Officer, SVP and Corporate Secretary of Prudential Financial. Peggy has been a corporate governance leader throughout her career at Sara Lee Corporation, Pfizer and JP Morgan. She also serves as a director of Orion Group Holdings, and previously served on the boards of Occidental Petroleum Corporation, The MONY Group, and MONY Life Insurance Company.
She currently serves as an active member of many influential advisory boards including the Council of Institutional Investors, the American College of Governance Counsel, the American Bar Association, Catalyst, the Weinberg Center for Corporate Governance, NACD, the Center for Audit Quality (CAQ), the International Integrated Reporting Council, ICGN, and the Society for Corporate Governance.
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(6:50) - Her boardroom experience (J Crew Group, StichFix, TripAdvisor, Ericsson, Urban Outfitters, Upstart...). "Your job is one of influence, and one of bringing specialization - in my case I brought e-commerce and digital [to my first board]." "Boardrooms are increasingly open to the idea of non-CEO specialists - allowing the possibility to bring more modern and diverse skill-sets into the boardroom."
(9:35) - The boardroom diversity problem, and why she founded TheBoardlist in 2015.
Bring more equity to the table.
Bring all the talent to boardrooms.
(11:50) - Why diversity is a bigger problem in private (venture-backed) companies than in public companies.
(13:40) - The evolution of TheBoardlist since 2015. Started as a crowdsourced list of people who could serve on boards, first tapping a group of 30 executives/founders/entrepreneurs such as Reid Hoffman, Michael Dearing and Joanne Bradford - resulting in 600 names added in an excel spreadsheet and a very simple website. Today TheBoardlist has about 17,000-18,000 members, divided in the following categories:
Nominated director candidates.
Nominators
Companies that are searching for board members.
(16:29) - Since then, there have been ~2,000 board searches in TheBoardList. There has been a 4x increase in board searches since the MeToo and BLM cultural crisis. 75% of board searches are for private companies, 25% for public companies. Within the private companies: equally divided between early, mid and late stage. It's a "discovery platform" (curated list with recommended board candidates) it's not a "placement platform."
(19:09) - Her take on the evolution of venture-backed company boards (and independent directors). "Often the independent board seat goes unfilled after the Series A or B."
(22:28) - Choosing between a private and public company board position. "People want the experience they don't have in their day job." (board allows not only to contribute, but also to learn). Her advice to founders: "Often, you might be able rent unto the board the experience you can't afford to hire yet as a day job." You can craft a board seat for 1 or 2 years.
(26:06) - Attracting more experienced directors to startup boards (as chairs or lead independent directors). Distinction with coaches. CEO reviews. "Every team needs a coach."
(31:24) - Her take on SB-826 and AB-979 (California board diversity laws). "SB-826 has moved the needle." "Tokenism is about how you treat somebody once they get there."
(35:25) - "The one thing that we need and that is missing is a conversation about board terms." Board Refreshment is critical for board diversity.
(36:27) - Her take on dual-class share structures and other control structures.
(39:46) - Her take on the shareholder primacy vs stakeholder debate. "Customer activism and employee activism are real and enduring trends."
(43:41) - Her take on shareholder activism. Conflict between short term results vs long term strategy. "Directors need more courage than ever before." "You need to be both hopeful and paranoid as a director (and willing to put in the work) to help create a company with that bifocal lens."
As a board member, you have to be really attuned to this issue because there are proven financial returns to activists.
It forces companies to confront issues that they would otherwise not confront in a reasonable time frame.
(48:48) - Her mentors (her dad was her absolute mentor). Group of mentors in Silicon Valley including founders of Junglee, Omid Kordestani (Google), different board members.
(50:49) - Her favorite quote: "You don't know if you don't try"
(51:00) - Her "unusual habit": shopping, knitting.
(51:38) - The living person she most admires: her Sikh spiritual leader.
(53:14) - Her parting thoughts for directors.
Ms. Singh Cassidy is currently the Founder and Chairman of theBoardlist, and most recently served as the President of StubHub Inc, the leading global consumer ticketing marketplace for live entertainment. In February 2020, StubHub was acquired by Viagogo for $4bn, in a transaction led by Sukhinder and her team. She is currently a director of Upstart and Urban Outfitters. Ms. Singh Cassidy previously served on the board of Tripadvisor and Ericsson until 2018. Ms. Singh Cassidy holds a B.A. in Business Administration from the Ivey Business School at Western University.
The modern "corporate governance" era started after the corporate scandals of the early 2000s (Enron, Tyco, Adelphia, WorldCom, etc.) and the passage of SOX in 2002.
"Very few people talked about corporate governance in the 1990s"
With this new focus on corporate governance, there was a lot of attention given to exec comp.
(9:56) - The Board's role in setting compensation for the CEO: "It's a very tricky decision, and there is no right answer." "Compensation is a very emotional and difficult decision, with many different stakeholders involved."
(11:33) - Their work on the investors' side (Calpers, Vanguard, Blackrock, etc).
(12:11) - They made a conscious decision from day one to track the trajectories of executives and directors from SEC data, which has resulted in the development of their BoardEdge Product.
(13:59) - His take on Say on Pay regulation: it increased significantly the amount of shareholder engagement.
Equilar's Diversity Network (36 Partner Institutions, 5,158 Member Profiles, 2,044 board appointments) "Registry of registries"
(30:53) - The challenge of meeting the new boardroom diversity requirements set by SB-826, AB-979 and Nasdaq. "There is a need for more candidates who are not on boards." "The demand will go up exponentially in the next 12-24 months, and Equilar is working to help on the supply side."
(35:09) - His take on the current state of private and public capital markets (the "window is wide open for going public, but when the market shuts down - it will shut down hard")
(37:03) - His thoughts on the latest trend of companies and executives leaving SF/Bay Area/CA to TX, FL, etc.
(39:30) - His take on the stakeholder vs shareholder debate as a CEO and executive compensation expert.
(43:11) - His mentors (his dad, and his best friend's dad in high school).
(44:30) - His favorite quote: "Skate to where the puck is going to be, not where it is today" (Wayne Gretsky)
(45:42) - His "unusual habit": a classic multitasker.
(47:00) - The living person he most admires: Warren Buffett.
(48:00) - His final thought on where the puck is going on governance: boardroom diversity beyond public companies: private companies, PE, VC, non-profits, etc. Human capital metrics will become increasingly more relevant.
David Chun is the founder & CEO of Equilar, a Silicon Valley based leading provider of corporate leadership data solutions. Companies of all sizes rely on Equilar for business development, recruiting, executive compensation and shareholder engagement, including 70% of the Fortune 500 and institutional investors representing over $20 trillion in assets.
In addition, David is a Trustee of the Committee for Economic Development (CED) and serves on the boards of the Silicon Valley Leadership Group (SVLG) and the Asian Pacific Fund Community Foundation of San Francisco. He is on Catalyst’s Women on Board Advisory Council, the Silicon Valley Advisory Council of the Commonwealth Club of California, the Women on Boards Advisory Council of the California Partners Project and the Advisory Council of the Angel Island Immigration Station Foundation.
David is a also a member of the Young Presidents’ Organization (YPO), Past Chair of the SF Bay Chapter, a founding member of the Council of Korean Americans (CKA) and a former advisory board member of the Wharton Center for Entrepreneurship.
(6:11) - His experience serving as a board member, and why he thinks corporate America has lost out on having lawyers as directors. His for corporate boards have included California Culinary Academy, and currently LTSE.
(28:52) - His take on duties of directors in VC-backed companies in conflicted situations, since the Trados case.
(32:14) - The governance risks that he sees with the emergence of SPACs in 2020.
(34:53) - His take on the soaring stock market and the current tech boom.
(36:34) - His thoughts on WFH after pandemic and how it has impacted law firms and other sectors.
(37:47) - His take on shareholder activism this year, and what's next (activity will pick up in spring 2021). His advice for companies and boards is to think about long term plans:
Economic message: growth plan for the long term must be communicated early and often to stockholders.
Governance message: focus on diversity at all levels, especially at the board level.
Public message: stakeholder and ESG concerns.
(44:06) - His take on California's SB-876 and AB-979 laws and the future of boardroom diversity.
(46:49) - Next big issues for boards and directors:
Globalization
Measuring externalities (such as carbon emissions).
David Berger specializes in corporate governance and M&A litigation as well as rapid response shareholder activism and corporate governance risk oversight. David’s practice is an unusual blend of corporate governance advisory work and litigation, and he is nationally recognized for his expertise in both the boardroom and the courtroom. David also represents directors and companies in internal investigations and public companies on disclosure and SEC proceedings.
(25:09) - Her take on the increasing importance of institutional investors' voice on corporate governance, particularly the top 3-5 asset managers. Any antitrust risks on cross-holdings by institutional investors?
(29:39) - Her predictions on how some of these regulations may change during a Biden Administration.
(35:56) - Her take on the Boardroom Accountability Project 2.0 (2017) focused on board diversity, matrix and refreshment.
(39:03) - Her take on the Boardroom Accountability Project 3.0 (2019) calling on publicly-traded companies to adopt a policy requiring the consideration of both women and people of color for every open board seat and for CEO appointments, a version of the “Rooney Rule” pioneered by the NFL. ("at least 20 companies have adopted this practice, and this will continue.")
(40:12) - Push on EEO-1 Reports (it's a type of CEO accountability project, "the majority of Fortune 100 companies currently disclose these reports or have committed to disclose them.")
(42:59) - Her take on California's SB-876 and AB-979 laws on boardroom diversity.
What are the quantitative measures or data that can analyze these metrics on corporate purpose?
(48:10) - Her thoughts on whether we will ever see employees elect corporate directors per Elizabeth Warren's proposed Accountable Capitalism Act (2018)
(50:43) - Her mentor was her late grandmother who taught her that "as a woman, you can always take care of yourself and you should ensure your own financial stability, if possible."
(51:29) - Lessons from 2020: "You have to live your life today - time is more important than money."
(52:36) - The experience of living in NYC under COVID-19.
(54:51) - The living person she most admires: Laura Nader. "You have to dress conservatively if you're going to have extremely revolutionary ideas."
Yumi Narita is the Executive Director of Corporate Governance at the Comptroller's Office of New York City. The Comptroller serves as investment advisor, custodian, and a trustee to the New York City Pension Funds, which hold approximately $228 billion in assets. In her role as Executive Director, Ms. Narita is responsible for developing and implementing active ownership programs for public equities, including voting proxies, engaging portfolio companies on their ESG policies and practices, and advocating for regulatory reforms to protect investors and strengthen investor rights. Ms. Narita has 16 years of experience in the ESG industry. Prior to this role, she was the Global Head of Corporate Governance at Alliance Bernstein, and Vice President on the BlackRock Stewardship team.
The impact of the corporate scandals in the early 2000s and the Martha Stewart story.
Building a reputation as long term thinkers with board members that add value, plus network.
(11:21) How they built their "board toolkit" for each function of the board with lessons learned from their board experience (starting ~2010s)
(12:49) "Our thesis is different to other activist investors who have built their businesses upon campaigns of intimidation, litigation and electioneering"
(14:01) Framing ValueAct's activism style within the historical arch of shareholder activism.
"Engineers think in terms of optimization and equations, lawyers think in terms of rules, and liberal arts people think in terms of psychology, sociology, literature, etc - I think you need to take into account these three types of thinking for problems [involving corporations}"
What happened after SOX (2002) was that the zeitgeist for boardrooms changed in terms of openness to receiving outside opinions.
(15:56) The Say on Pay (2011) rules forced greater interaction between directors and shareholders.
(18:00) His thoughts on "systematic" boardroom design issues: "we should all have empathy for independent directors, because they're entrusted to make the most consequential decisions around the corporation and yet [they do it part-time and generally lack information]. It's a tough job to do." "We can bring "peripheral" vision to the boardroom, which is supplemental to what the board sees through their own hierarchy."
(20:11) The problem with board committee structures and their independent consultants/advisors: "it drives to the balkanization of work." "There is an under-investment in terms of time devoted to strategy [in the boardroom]"
(23:33) "Thinking like an investor with an investment thesis is a very crystallizing thought exercise. It will lead you to have a point of view about what the strategy should be." "It's an important ingredient to being a good director."
(24:51) How should boards approach strategy, and why the job of the director is so hard (i.e. lack of time and information)
(27:49) How does he respond to criticism of activist investors as a class "some of these criticisms are fair." He thinks that it's important to note that shareholder activism (during his career) has had two big bubbles that popped:
Surge of activism after SOX, popping after the financial crisis because they didn't perform very well.
Resurgence after credit crisis, popping in the mid 2010s.
(29:50) How advisors (lawyers, bankers, and others) impacted the activism landscape "activist vulnerability assessments"
(30:45) How he distinguishes transactional vs transformational activism
Transactional: Traditional break-up, recap and selling of companies.
Transformational: reimagining the value proposition of the product of the company. Best in class people and operational performance. It requires a lot more work (they started this practice in the mid-2000s).
(33:16) The mission statement of ValueAct since he took over as CEO is "to be the shareholder of choice for great companies navigating change." Examples:
Adobe, Microsoft (from client service era to cloud era in software industry)
21st Century Fox (streaming in media companies)
KKR (alternative asset management industry)
(34:46) What he loves about his job
(35:29) Advice for independent directors:
Activism is everywhere (not just from activist investors)
Peripheral vision can be helpful, and thinking critically with an investment thesis adds value.
We live in an era of extreme disruption in the economy.
Transformation is a critical journey for every company.
(42:45) His take on the purpose of the corporation, ESG and sustainability
They have observed that the businesses that they invest in have a "license to operate": to be held in high regard by their stakeholders, regulators, media, politicians and other relevant constituencies.
When they invest in a company they spend time with the "citizenship officers" of the company.
Example of investments in financial institutions.
(51:28) The principles by which ValueAct Capital invests: "We have to have a unique insight into every company we invest in that begets a meaningful relationship." (power politics is secondary)
Good ideas pique curiosity, engagement and conversation.
It doesn't matter if the corporation is a controlled corporation (for example, Martha Stewart, KKR, 21st Century Fox are controlled corporations)
(53:39) Their international investments:
UK: Reuters, Misys, Rolls-Royce.
Japan: Olympus, JSR Corporation, Nintendo. "There is a graveyard of activists that have tried to take on Japanese companies at the ballot box and at the courthouse, and that type of high conflict transactional -in your face- approach does not work."
(57:50) How does he see the future of shareholder activism and his recommendations
(01:02:42) His favorite quote: "In the long run, the learn-it-all always beats the know-it-all " (Satya Nadella)
Mason Morfit is a Partner, CEO and CIO of ValueAct Capital and is a member of the firm’s Management Committee. Prior to joining ValueAct Capital at inception, Mr. Morfit worked in equity research for Credit Suisse First Boston’s health care group where he focused on the managed care industry. Mr. Morfit is a member of the Advisory Council for Princeton University’s Woodrow Wilson School of Public and International Affairs and serves on the Board of Directors of the Tipping Point Community. He has a B.A. from Princeton University and is a CFA charterholder.
His initial interest in the field of venture capital [7:56] "These days my major problem is that there are so many research projects, and I have to juggle 10 different (amazing) research projects at the same time."
Why governance of venture-backed companies has been historically under researched by finance scholars (it has to do with the "quantification revolution" from the 70s-80s). [12:08]
"This is important to mention: venture capital is an American phenomenon, since 2016 every single day the top 5 U.S. public companies by market cap were venture-backed, and from the top 100 there is a significant proportion. But most importantly they are young companies that grow very fast."
It is difficult to apply traditional financial methodology (such as DCF or CAPM) to early stage startups.
Whenever the valuation of venture-backed companies was reported in the press or in commercial datasets, it did not make sense to him (not the price, but the way it was reported).
They used the example of Square's post money valuation pre-IPO.
They created a new valuation model for startups (they found that the average unicorn in their sample had 8 classes of shares).
His current research on governance of venture-backed companies [41:12]
In venture-backed companies boards are very "unstable" due to staged financing.
Board control, voting rights and protective provisions.
His father: "maybe the most important lesson that I learned from him is that you have to be calm, even when life throws at you a ball that that you don't necessarily want." "He taught me how to live and behave in life."
On the difference between theory and practice. "It is very difficult to tell people: learn how to swim, but only when you learn how to swim we're going to fill the water in the swimming pool"
His unusual habit [58:48]
These days, the fact that he reads (his goal in life is to devote one hour per day some physical book, usually on topics unrelated to finance).
His experience as a corporate director of Yandex [01:00:57]
History and mission of ICGN [11:56]. It was established in 1995, it has grow to over 800 members from 43 countries, (~70% of members are based in North America and Europe, ~20% in Asia). These members represent ~US$54 trillion of AUM.
On the rise of ESG [26:47] "[I think] ESG has grown from a deeper understanding of stewardship since 2008... I would take away the G [since we've always been focused on governance] so really what we have witnessed is the rise of E and S... and this year COVID has shifted the narrative particularly around the S." For example, ICGN members have focused on "human capital management":
Boards should disclose skills matrix. "For me, one of the biggest barriers of board diversity is director tenure, 'zombie directors', we need to have a policy of board refreshment and board evaluation." "There is still a problem surrounding the 'old boys network', the 'male, pale and stale crew.'"
Her take on Big Tech [39:14]
She's worried about the "covert behavioral manipulative algorithms that are gradually changing the way we think, feel and act." (for example, as described in The Social Dilemma documentary)
ICGN has not weighed into this issue. From a governance perspective many ICGN members cannot influence these companies due to dual-class share structures that make them less accountable to shareholders (ICGN advocates for a "one share one vote" structure).
"The U.S. also has weaker data privacy regulations than Europe, and that's a problem."
Her parting thoughts for directors "investors are your allies" [44:34]
His experience with Barclays Investment Bank covering public sector infrastructure (2010-2020) [7:41]
Led Barclays’ California and Silicon Valley regional municipal banking team.
Led Barclays' public sector coverage of social impact engagements in the 13 western U.S. states.
Served as a lead banker on several innovative transactions, most notably executing the first ever Social Bonds issue for a non-profit in the U.S. municipal bond market.
Membership of the SVLG: about 360 companies. [13:39] "That's where the juice comes from. When we speak on behalf of these Silicon Valley companies, there is a real opportunity to impact positive change not only in Silicon Valley but also in corporate America."
Board of SVLG "represents some of the best and brightest of Silicon Valley" [15:15]
The new AB-979 California Board Diversity Legislation [16:27]
On September 30, 2020, Governor Newsom signed AB 979, which requires publicly held corporations headquartered in CA to diversify their boards of directors with directors from “underrepresented communities” by December 31, 2021.
AB 979 defines “director from an underrepresented community” as “an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.”
"What's so significant [for SVLG] is that we made a decision to stand on the side of progress" [18:35]
"I'm just so proud to stand with our executives and member companies to drive some serious change in a smart and responsible manner." [20:26]
What piqued his interest in corporate board diversity: "some of this is very personal" [21:29]
"The statement being made [with AB-979] was one that we [SVLG] wanted to stand in line with" [24:20]
"The shareholder oversight questions are extremely serious and significant for public companies, especially for tech companies" [27:30]
SVLG is developing tools to help on diversity initiatives (such as a database/repository of resumes) [29:09]
Impact of Black Lives Matter movement in corporate America and SVLG [30:26]
"There is overwhelming research that demonstrates a clear tie between increased profitability, increased market leadership, and more innovation with diverse executive leadership teams" "There is a business imperative to act, and also a moral imperative." [32:30]
SVLG Is working on a pledge to improve diversity numbers in both public and private companies [35:56]
Shareholder primacy vs stakeholder capitalism [43:44]: "What I would hope is that a business association like ours might be a proponent of tying social responsibility in every way, shape and form, and very strategically, to the business and to the bottom line."
What's next for SVLG [46:40]: In terms of racial justice and equity: "It is about hiring, it's about funding, and it's about measuring results."
(13:39) On ESG activism, and the impact of Exxon Mobil case ("[I]t was more of a capital allocation campaign, rather than ESG"). Distinguishing the Starbucks ESG campaign (targeting Starbucks' labor relations).
(18:29) Separating E, S, and G activist campaigns. "The 'S' is inherently political"
(49:00) Quotes that he thinks of often or lives her life by.
(49:55) An unusual habit or absurd thing that he loves.
(50:35) The living person he most admires.
Patrick Gadson is the Co-Head of Vinson & Elkins’ Shareholder Activism practice, which advises public companies in competitive proxy solicitations, strategic investor relations, and corporate governance.
The Mission of LCDA is to 1) develop, 2) support & 3) increase the number of Latinos on Corporate Boards [8:56]
LCDA Pillars [9:06]: 1) Increase supply (Latinos hold less than 3% of Fortune 1000 company board seats) 2) Increase demand, 3) Research and Raising Awareness, 4) Engage with Companies.
Corporate Directors (as of 2019, Latino directors held 275 board seats in F1000 companies for a total of only 209 individuals)
CA's Women on Boards Legislation (2018): SB-826 (Gender) [21:16]
LCDA found that out of 511 seats filled by women on California public company boards since SB 826 was enacted, just 17 (3.3%) are Latina, compared to 77.9% white women.
LCDA found that out of 662 California companiesregistered on the NYSE, NASDAQ, and AMEX, 35%, or 233 companies have all white boards of directors.
LCDA also found that out of these 662 CA companies, only 13% had at least one Latino on their board.
"What ends up happening is that you're setting up winners and losers: if there is only a focus on gender, Latinos and African-American lose out." [24:50]
LCDA's Latino Voices for Boardroom Equity Initiative in partnership with leading business and civic leaders [28:41] The Latino Voices initiative asserts that diversity without the inclusion of Latinos is not acceptable:
Call to triple Latino representation on public company boards by 2023 (currently Latinos hold only 2.2% of Russell 3000 companies per ISS)
Bernard Tyson (former Chair and CEO of Kaiser Permanente): "When Corporate America lets us Into the room, our contributions are going to be massive when we're given a shot and a chance."
No certification required to be a director in the UK "this is why I think we're still a little bit in the Dark Ages or the Medieval period in terms of directorships and what the pre-requisites for directorship should be" [8:32]
"I think in 20-30 years from now it will be taken for granted that before you step into any significant directorship role you will have to have some type of professional credentials or pre-requisites like in any other profession" "there will be a proper professional structure" [9:12]
Three stages to the current qualification process offered by the IoD: [10:42]
Director education in Europe [15:44]. "It's been a real patchwork of approaches per country" Examples: ecoDa (Confederation of European Institutes of Directors), IFA (France), etc.
How has the role of directors changed in the UK [17:14] "It has hugely expanded in scope and complexity" (including technology/disruption, sustainability, etc)
The effect of Brexit in Corporate Governance [22:00]
Top priorities for boards in the UK per Roger: [24:33]
Corporate purpose as an organizing principle for corporations (example: British Academy)
Technological change, what does it mean for their companies (beyond cybersecurity and data protection).
Climate change and sustainability.
More on the purpose of the corporation from the UK's perspective. "The UK is now in a middle ground, between the strong EU "stakeholder" perspective (with significant employee representation) and the Anglo-Saxon tradition of shareholder primacy. The duty of the UK director is to promote the success of the company in the interest of shareholders while paying due regard to a range of other stakeholders" [28:32]
The role of institutional investors in shaping the corporate governance agenda in the UK and the rise of ESG [34:20]
How does Roger see the surge of benefit corporations and B corps [37:43]
The impact of COVID-19 in corporate governance in the UK [47:01]
There was a policy to keep companies going as long as possible (abandoning "any creative destruction" by market dynamics). Measures to support employees, changes in insolvency laws, etc.
Shareholders took the back seat. Stopped paying dividends, particularly for banks and financial institutions.
Boards have had to switch to virtual meetings. Many pros/cons around the effect of these measures.
His current practice focusing on corporate governance cases [5:03]
His opinion on current state of corporate governance in public companies:
Increased focus on diversity on boards [7:27]
Data Breaches, Privacy and Cybersecurity "one of the hottest areas" [10:03]
His take on the current TikTok situation (forced sale by US President) [12:08]
"The CISO is the most important executive after the CEO [in IT companies]" [13:27]
In 20 years of practice, he sees the same familiar patterns: "there seems to be [when things go wrong] an inability to react properly by directors in times of crisis. A failure of the board to have some type of process in place to deal with something that was unforeseen." [15:30]
His take on dual-class shares and the WeWork case. How going public puts the company at "a whole other level in terms of scrutiny of governance practices." "The dual-class is a red flag." [17:15]
They are looking for "an imbalance in voting power", questionable transactions, inspections demands (books and records), conflicts of interest, self-dealing, insider-trading [21:29]
How they investigate their cases: books and records requests, private investigators, disgruntled employees, experts in the field. [24:21]
Litigation in private companies, including venture-backed companies: "there has been an uptick in the last year or two" [27:14]
"If you think it's difficult to get information [for litigation purposes] from a public company (with shareholder inspection demands), it's 10x worse in the case of private companies." [33:11]
His experience deposing directors of private venture-backed companies [36:12]
His opinion around the debate of the purpose of the corporation [38:40]
How he sees the future of shareholder litigation: more cybersecurity litigation (companies should have specific cybersecurity committees) and board committees litigation. [40:20]
His take on exclusive federal forum provisions (bylaw amendments) [42:12]
His take on trend of California companies and employees leaving the state [47:40]
James McRitchie: The Gadfly Seeking Corporate Change Via Shareholder Proposals
19 Aug 2020
00:51:29
Start of interview [1:30]
Jim's "origin story" [2:12]
How his experience at CalEPA led him to become a shareholder advocate [6:07]
His experience with Mark Latham, a former Berkeley Prof and Salomon Brothers banker on developing and promoting a new shareholder proposal method [8:03]
His efforts to get elected to the CalPERS board [11:33]
CalPERS and the increasing influence of institutional investors in corporate governance [12:53]
"Thirty years ago no shareholder proposal had ever passed." Last year [McRitchie] filed 50 proposals and in 26 of them he got majority vote or else he worked an agreement with the company. [14:21]
Pax World Funds was the first socially responsible investment fund. "Later on, SRI funds started engagement campaigns." [18:55]
"ISS and Glass Lewis don't set the agenda, it's the public opinion that sets the agenda." "ISS is not driving the vote, they simply hold up a mirror to its customers" [20:28]
Jim's shareholder proposals at BlackRock: His "hypocrisy proposal." [23:46]
Jim's approach for his shareholder proposals, and why he's getting majority support. How he compares with John Chevedden and the Steiners. He keeps a spreadsheet with 150 target companies. [25:27]
Why he does what he does: "I am really pissed off with all these injustices" [27:20]
Jim is taking a page from Elizabeth Warren. He'd like companies to elect a director who can serve as a liaison to employees ("Rooney rule but including employees"). [32:33]
Frederick Alexander: Benefit Corporations, B-Corps and the Shareholder Commons.
10 Aug 2020
01:05:43
Start of interview [1:38]
Rick's "origin story" [1:55]
His "traditional" corporate law practice for 25 years with Morris Nichols in Delaware ("the core of our advice followed two simple rules: shareholders get to elect the directors, and directors run the company for the benefit of those shareholders... all the rest is commentary") [3:45]
How his focus changed in 2010 with B Lab's effort to push legislation in DE on benefit corporations [5:45]
How B Lab's benefit corporations proposal differed from "constituency statutes" [07:50]
Three sets of cases worth thinking about: 1) Pre-constituency statutes (shareholder primacy); 2) Constituency statutes ("it's a may, not a shall"); 3) Benefit corporations (only one case has been filed, in Virginia, and it quickly settled) [10:41]
The first benefit corporation statute was enacted in Maryland in 2010 [12:59]
B Lab's push in Delaware, and how Rick joined B Lab. Some influence from Lynn Stout's "The Shareholder Value Myth." [13:50]
Although originally shunned by VCs, public benefit corporations incorporated in Delaware have raised ~$2.5bn between 2013 and 2019 per a recent study (based on 275 early-stage financings). Per Rick, total US fundraising by benefit corporations is in the order of $4 billion. [15:54]
Accounting for social value "what gets measured, gets managed": SASB (sustainability metrics), GRI Standards,B Impact Assessment (score and certification). Pressure on the SEC and EU's metrics [26:16]
Distinguishing benefit corporations (generic term, ~10,000 companies around the world), public benefit corporations (Delaware form, ~2,000 companies) and B-corps (certification by B Lab, ~3,500 internationally, of which only ~300 are benefit corporations). Danone's conversion to "Entreprise à Mission." [29:57]
Traditional VC investors are investing in benefit corporations (not only impact investors) [34:20]
How does Rick respond to criticism of the benefit corporation model and the need to get support from institutional investors to succeed [40:43]
How to reconcile the current debate of the purpose of the corporation, plus ESG trends, with the benefit corporation movement [45:51]
The focus of Rick's new project The Shareholder Commons (2019), with initial funding from the Ford Foundation. "We want to change the paradigm for institutional investors (through advocacy, guardrails, policy and litigation)" [50:03]
IDB Invest's corporate governance framework: "The art is always trying to separate the essential from the desirable, the must-have from the nice-to-have." [25:45]
How to coordinate the investment focus from the governance focus (time-management) [28:47]
The state of corporate governance and some common issues in Latin America: lack of diversity, smaller capital markets, predominance of controlling shareholders, SOEs, and reliance on bank financing [33:24]
The challenges for foreign investors in Latin American listed companies: protection of minority shareholder rights, transparency and related-party transactions [39:41]
Controlling shareholders in Latin America have an incentive to improve corporate governance to attract investment in order to compete in a globalized market: "those are the winners in the market." [44:24]
IDB Invest has a special focus on small countries and islands ("S&I countries") [47:12]
Her favorite quotes: "The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy." Martin Luther King Jr. [1:00:01]
Working with Medtronic in Sao Paulo, Brazil. [12:07]
Her work founding the Biomedical Zone in 2015 (Ryerson University & St. Michael's Hospital) [14:30]
Her take and experience with non-profit boards (Medic Alert Canada, CEE Centre for Young Black Professionals, Gardiner Museum): "one of my important philosophies to be on a board is that I want to be able to contribute, but I also want to learn." "Non-profit board service is very diverse, it is driven by passion and it requires a lot of work, if you do it right." [22:21]
Her take on startup boards. [27:05]
Her take on med tech / biotech public company boards. [28:21]
Her take on the Canadian ICD.D certification "it was transformational." [29:45]
Her experience getting into her first public board: Profound Medical (TSX: PRN) [33:01]
The cross-listing process (TSX-NASDAQ) [35:46]
Her take on social unrest and lack of diversity in boards (her experience in healthcare) [38:39]
"When I'm involved in a board recruiting process, I always ask why do you want me in this Board" [42:13]
The lack of inclusion for the Black community in tech (opportunity in biotech) [45:08]
"The role of the board is critical to support underrepresented minority CEOs" [46:13]
Her take on mentors: "I am not a huge believer or fan of mentorship, I am a fan of mentorship plus sponsorship, ie. champions that open doors." "It's the saying of your name, when you are not in the room, to people who matter and that make the decisions." [48:13]
Her favorite quotes: "You will face many defeats in life, but never let yourself be defeated" by Maya Angelou [53:24]
Her unusual habit: "I eat the same thing for breakfast everyday, the same thing for lunch everyday, and the same thing for dinner everyday." [55:33]
The living person she most admires: Barack Obama. [01:00:00]
Why Japan needed a corporate governance code (to enhance corporate disclosure) [32:20]
Japan's change in board composition (now one third are independent directors) [34:52]
His take on executive pay, particularly around the approval of "Say-on-Pay" in the US and distinctions with exec comp in Japan [36:51]
His take on ESG and "stakeholder capitalism" [39:50]
Nick's opinion of dual class share structures: "I dislike them vehemently, I think they make a mockery of the concept of shareholder democracy" [45:34]
"We've passed on companies that [at the seed stage] are commanding dual class shares." [27:43]
"At Google, Larry Page brought on E. Schmidt even though he knew he wanted to be CEO ultimately" [30:13]
Her response to concerns by founders/entrepreneurs of potential bad behavior by VCs. Mention of Prof Ilya Strebulaev article "Squaring VC Valuations with Reality" [31:52]
Miriam's take on diversity in Silicon Valley. "In the early days, Google was a relatively diverse team and I think it was under-reported how Google's diversity (at the top) lead to the success of the company." "Almost every leader at the company had a right hand woman" [38:31]
Her favorite quotes: "Your children are not your children" by Khalil Gibran [51:09]
Goat yoga! [53:40]
The living person she most admires: Brian Stevenson, founder of the Equal Justice Initiative, a human rights organization in Montgomery, Alabama. [54:55]
Suzanne Vautrinot: From the Military to the Corporate Boardroom, with a Focus on Cybersecurity.
29 Jun 2020
01:04:20
Start of Interview [1:33]
Suzanne's start in the U.S. Air Force [2:50]
Her transition to cyber operations [4:25]
Suzanne's take on transitioning from the Military to corporate boardrooms [7:25]
Adding former military leaders in the boardroom adds to "diversity of thought": "[Board composition] should seek concinnity, rather than falling into the lowest common denominator which would be consensus" [09:07]
At the time of Suzanne's transition to the private sector, "the Government had recognized that [cyber] was an area where there was going to be significant change and significant attention was needed" [11:15]
Collaboration in the Cybersecurity field: "The private sector wants to protect who they are, the Government wants to protect how they know" [13:19]
How to think about offensive and defensive capabilities in cybersecurity: "On the offensive side of cybersecurity you only have to succeed once, on the defensive side you have to protect everything, all the time." [15:42]
General Alexander: "the difference between bolting it in on and baking it in" [16:00]
"In 2020 we are in the half-way point, we still have an architecture that relies on technology that is fundamentally at risk but technology is getting better and more secure" [17:58]
"The people in your organization are the greatest risk vector because that's the easiest path in" [38:56]
How COVID-19 has impacted cybersecurity risks [39:30]
The increase in cyber risks, particularly with "work from home" trend. "the vectors have increased for ransomware attacks involving health professionals. Sans "Work from Home" Guide. [42:45]
Her take on greatest cyber challenges moving forward: [46:12]
Her favorite quotes: early in life "Here is Edward Bear coming downstairs now, bump bump bump..." Later: Colin Powell's "Eternal optimism is a force multiplier." John Schofied: "The discipline which makes the soldiers of a free country reliable in battle is not to be gained by harsh or tyrannical treatment..." [59:40]
The living person she most admires: Condoleeza Rice [01:02:25]
(52:25) Quotes that she thinks of often or lives her life by.
(52:50) An unusual habit or absurd thing that she loves.
(54:15) The living person she most admires.
Leah Solivan is a General Partner at Fuel Capital, a Silicon Valley-based seed stage venture capital firm. Prior to that, she was the founder, CEO and Executive Chair at TaskRabbit.
How King framed the role of the corporation in the first King I Report in 1992 [12:10]
"Decisions by the Board need to be made in the best long term interest of the company, this incapacitated artificial person that has no mind, no heart, no soul and no conscience." "The directors must make a decision in the long term interest of the health of the company, rather than just in the wealth of the shareholders" [13:10]
"The 20th century became the century of unsustainable development" [14:02]
Joining the U.N. by invitation of Kofi Annan to review governance of U.N. agencies: "that's where I started learning about sustainability" [16:15]
The premise of the King II Report: to address sustainability reporting in South Africa (2002) [17:22]
"Boards have to spend more time understanding financials, including the three critical dimensions for sustainable development in a resource constrained world: 1) Economy, 2) Environment and 3) Society." [30:05]
The premise of the King IV Report: reporting should be outcome based. [32:00] Focus on four outcomes:
Value creation in a sustainable manner in a resource constrained world.
Effective Controls (with informed oversight by the Board).
Trust and confidence of the community in which the company operates (legitimacy).
Effective Leadership.
King on race, inter-generational ("add millenials on your board") and gender diversity on boards [35:44]
"The first thing on the minds of Gen Z is climate change. That's the elephant in the room" [39:12]
"The mindset of boards has to be collaborative, compromising, with a long term outlook (particularly on climate change)" [41:13]
The lessons from South Africa on racial diversity in boards [42:53]
Governments should amend corporate laws to reflect that being a director is a very important profession.[44:24]
King has tried to persuade governments to create apprenticeship programs for directorships "the U.S. should do this to help young African American professionals get into boards, creating a wider pool of candidates" [46:00]
"I don't want CEOs to solve society's problems, I want the Government to solve them." Premise of the Corporations and Society Initiative at the GSB [33:47]
Anat's take on ESG: "It's all nice and well, but it has its limits" [36:24]
Anat's take on the current push-back against stock buybacks and dividends. Her article: "The Leverage Ratchet Effect." [48:03]
"Where you see financialized corporate governance at its worst is paying shareholders in a crisis." "Bank regulators have to put a complete and utter ban on payouts for all the banks." [51:15]
"We must abolish the corporate tax interest deductibility" ("we shouldn't prefer debt over equity for funding for tax reasons") [54:17]
Her experience with foreign boards (UK, Canada) and take on transnational directors [16:21]
Re-entering the VC market with DFJ and Threshold Ventures [23:25]
Private tech company board governance challenges [25:36]
Startups staying private for longer, and getting bigger [25:48]
Change of terms based on cyclical nature of the market ("dual class shares is a grey area") [26:31]
Founder-friendly terms [29:55]
To be a good investor or board member "you have to be willing to speak truth even when unpopular" [31:48]
Dealing with "dual fiduciary duties": be clear about what hats you wear (investor vs company) [32:08]
There will be a "flight to quality" in venture investing [37:06]
Director Independence in Silicon Valley, social ties and networks [38:56]
Distinctions between serving on public and private venture-backed boards [42:27]
Her joke-caution to entrepreneurs: "be careful what VC you pick, because it's harder to divorce your VC than your spouse!" [45:34]
Board self-evaluation. "Collegiality doesn't mean that you're only nice and friendly to each other, but it also means that you have to have a working relationship where you can be honest with each other." [46:16]
Heidi's views on stakeholder capitalism or ESG: "I think that companies earn the right to satisfy a broader stakeholder base by also remaining viable." Big difference between private and public companies in this regard [51:47]
Her favorite quote is The Shirley MacLaine 20/40/60 Rule: “At 20, you care what everyone is thinking about you. At 40, you don't give a damn what people are thinking about you. At 60, you realize no one is thinking about you." [58:38]
Her "unusual habit": she's a glass artist [01:00:15]
The living person she most admires: Bill and Melinda Gates "In 100 years from now, when people look back to Bill and Melinda, Microsoft is only going to be a footnote. What they do as philanthropists is really what people will talk about." [01:01:05]