Opinion

Lucy P. Marcus

In the Boardroom with early-stage companies

Lucy P. Marcus
May 16, 2012 17:54 UTC

In this edition of “In the Boardroom with Lucy Marcus,” Lucy Marcus and Axel Threlfall are joined by the CEO of technology startup PeerIndex, Azeem Azhar, to talk about what the boards of early-stage companies should look like and do.

Early-stage companies anywhere in the world need to think about integrating good board principles from the start. If an entrepreneur plans to expand the business into a strong entity with real longevity, then it is more important than ever to get the foundations of that business right and build best practices into the very DNA of the company. One crucial area that will pay real dividends is ensuring that the company has a strong, committed, well-functioning board.

Even at an early stage, the discipline that comes with following the skeleton of corporate governance – having regular board meetings, putting together the documents for board meetings, having people around the table who ask challenging questions about both “grounding” and “stargazing” issues, and having independent, non-invested, non-aligned directors involved – sets important precedents for the future of fast-growth companies and helps build strong organizations for the long term. Boards composed of truly active, engaged and interested directors bring benefits, no matter the size of the organization.

In the Boardroom with the Shareholder Spring

Lucy P. Marcus
May 4, 2012 15:14 UTC

In this edition of “In the Boardroom with Lucy Marcus,” Axel Threlfall talks to Lucy about the “Shareholder Spring.”

If the past couple of weeks of annual general meetings (AGMs) around the world haven’t sent a strong signal to boards about the way investors and other stakeholders are feeling, it is hard to know what will.

Remuneration levels for CEOs and members of the C-suite have been a hot button issue for Barclays, AvivaUBS, Citigroup, AstraZeneca, Shell and other companies. In meeting after meeting, investors stood up to challenge remuneration committees about their decisions and decision-making process. Stakeholders also asked some pointed questions about corporate social responsibility. With Apple and Foxconn on their mind, they asked about a wide spectrum of areas from global working practices to wages to conflict minerals.

Greg Mortenson’s lessons for non-profit boards

Lucy P. Marcus
Apr 13, 2012 16:31 UTC

Last year 60 Minutes and Jon Krakauer investigated Greg Mortenson, the executive director of the Central Asia Institute (CAI) and author of the best-selling, and, it seems, largely fabricated, Three Cups of Tea. They discovered that he had violated the trust of the people who donated money to the CAI and of those he was claiming to help. This past week Montana’s attorney general said Mortenson must repay $1 million to the CAI. He is allowed to remain with the charity, but can no longer serve as a board member, nor is he allowed to hold a position of financial responsibility.

This case offers some lessons about the role and responsibilities of boards of non-profits that are too important to ignore.

A good board can be hugely beneficial to the stability, growth and effectiveness of a non-profit. On the other hand, a bad or self-indulgent board can be a time-consuming distraction or a drag on scarce resources. In the worst cases, it can allow the abuse of funds and trust on a large scale, as seen with the CAI.

How executive pay gets so out of control

Lucy P. Marcus
Apr 3, 2012 19:42 UTC

Boards are tone-deaf in a soundproof room

Why is it that executive pay continues to seem so out of line with what common sense would tell us is justified?

We’ve seen a number of striking examples over the past several months of compensation packages that, when exposed to the light of public scrutiny, evoke a range of negative reactions, making people anywhere from mildly annoyed to genuinely appalled. The packages seem out of line with results, and pay ratios are striking. Recent cases are unbounded by sector or location and include AstraZeneca, Barclays Bank and Shell. So what happens in the boardroom that lets such a package emerge?

In most board structures, a remunerations committee is assigned to set the level of compensation and determine the components of the pay package that senior executives receive, including base pay, bonus, stock and privileges such as use of the company jet. In recent years this committee assignment has gone from fairly light to as time-consuming as the audit committee.

The secrets of winning startups

Lucy P. Marcus
Mar 29, 2012 15:30 UTC

In a video produced by The Wall Street Journal, Lucy Marcus explains what she looks for in a new startup and what makes some succeed where others fail.

Boards behaving badly

Lucy P. Marcus
Mar 29, 2012 14:40 UTC

In the boardroom with Lucy Marcus

Lucy P. Marcus
Mar 15, 2012 14:29 UTC

In a new video, Lucy Marcus explains the basic functions and importance of boards of directors.

Why Facebook – and every company – needs a diverse board

Lucy P. Marcus
Feb 8, 2012 23:49 UTC

On Tuesday, the California State Teachers’ Retirement System (CalSTRS), the second-largest pension fund in the United States, wrote to Facebook to address the fact that the company has an unusually small, insular board with no women. With this bold and public step, CalSTRS brought to the fore an issue of genuine concern: diversity in the boardroom.

Most of the press will pick up the part about the absence of women board members, and that is vital — there is no doubt that women are severely underrepresented in the boardroom. The lack of women on boards, however, is a reflection of a wider problem with diversity: It is one of color, age, international perspective and more. The Facebook boardroom has virtually no variety, and that is a serious issue. Boards that don’t represent the stakeholders of the business and the environment in which companies operate are not able to do their jobs as capably.

A lack of diversity is not simply a problem of “optics.” In the modern world, it does look odd not to have it, but does diversity make a difference in real economic terms? Does it actually affect the bottom line? To my mind the answer is a resounding yes. We do not need diversity for diversity’s sake, but because diversity on the board contributes to the profitability of the business. Diversity of thought, experience, knowledge, understanding, perspective and age means that a board is more capable of seeing and understanding risks and coming up with robust solutions to address them. Businesses led by diverse boards that reflect the whole breadth of their stakeholders and their business environment will be more successful businesses. They are more in touch with their customers’ demands, their investors’ expectations, their staffs’ concerns, and they have a forum in the boardroom where these different perspectives come together and successful business strategies can be devised.

You’ve got to know when to go

Lucy P. Marcus
Jan 31, 2012 16:26 UTC

Hewlett-Packard has announced that Lawrence Babbio will be stepping off its board, and this comes hot on the heels of the news that Sari Baldauf would also not be standing for re-election. GlaxoSmithKline Pharmaceuticals has announced that James Murdoch will not continue to serve on its board. He has served on GSK’s board since 2009, on its Ethics Committee. Murdoch has been embroiled in controversy this year, which led to loud rumblings as to whether it was prudent for him to remain on the board.

This news brings to mind an issue that comes up time and again when independent board directors gather: inactive, unproductive, distracting or simply “dead wood” board members. It is often discussed in hushed tones, but it is time to address it openly and frankly, and to look upon it as the responsibility of each of us as individual board members, rather than simply an issue for the board or the board chair to tackle.

There are a number of reasons that you should consider stepping off a board:

You’ve served too long.

There is a finite amount of time that anyone can serve on a board in a truly independent manner, yet a surprising number of “independent” directors have served for 30-plus years. The UK Corporate Governance Code‘s guideline on this issue sets out nine years as best practice. It seems hard to fathom that independence would stretch to 36 years, the tenure of Coca-Cola board director James D. Robinson, or 41 years, as is the case with Douglas G. Houser, a director on Nike’s board. Questioning their length of service is not a reflection on their abilities as board members, but rather stating the obvious: It is impossible to remain independent and to serve for that long.

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