'THE DAILY CORPORATE GOVERNANCE REPORT’ (for public company boards, the C-suite and GCs)

? ? ? ? ?Please see the items below with the related links (NOTE: access to link content may be metered, require a no-charge registration or require a paid digital subscription)?

? ? ? ? ? ? ? (i) * ISS publishes its proxy voting guidelines updates for 2024: As announced and discussed in this ISS press release ?yesterday, ISS published yesterday its?"Global Proxy Voting Guidelines Updates for 2024 " effective for AGMs held on or after Feb.1/24, and which will be incorporated into the final ISS Proxy Voting Guidelines for both Canada and the U.S. when they are released, likely sometime in the coming weeks. The "main policy updates" are summarized at pp. 6-7 and (as was the case for the proposed changes that were released for comment in November: see item (ii) from Nov. 23), there is, most unusually, no "main policy update" this year for the U.S., and only one relatively minor one for Canada,?namely on Board Diversity in order to "align the ISS policy for Canadian S&P/TSX Composite Index more closely with the ISS US policy guidelines for Russell 3000 and/or S&P 1500 indices’ on racial/ethnic diversity." Note that "a number of minor changes and policy clarifications" are contained in Appendix B.

? ? ? ? ? ? ? (ii) BlackRock and the ESG backlash: As widely reported in the business media, including in this FT article, "BlackRock sued by Tennessee over ESG strategies ", on Monday the US State of Tennessee announced ?that it was suing BlackRock for "misusing environmental, social and governance factors in its investment strategy." For an interesting discussion of?BlackRock and the ESG backlash, with reference inter alia to the State of Tennessee?lawsuit, note John Authers Bloomberg ' Points of Return' column ?today.

? ? ? ? ?(iii) the 'archetype of CFO' companies are seeking today/the attributes of 'the modern CFO'':?

? ? ? ? ? ? ? ? (a) Jenna Fisher is managing director and head of the CFO practice at global leadership advisory and executive search firm Russell Reynolds,?and she discussed with Fortune the "the archetype of CFO that companies are seeking today" in last Monday's Fortune CFO Daily Newsletter, "What the sudden exit of Spotify’s CFO says about the skills companies want in 2024 ", with reference to the CFO transition last week at Spotify where the CEO, in ?this press release ?announcing the transition,?explicitly acknowledged that the company had?"come to the conclusion that Spotify is entering a new phase and needs a CFO with a different mix of experiences" (see item (iv)(c) from last Monday):

? ? ? ? ? ? ? ? ? ? "What is the archetype of CFO that many companies are currently seeking?: Spotify isn’t alone in its finance chief transition as CFO turnover persists this year amid a macroenvironment. “In general, over the last 18 to 24 months, we have seen a real shift away from CFOs with capital markets expertise to favoring those instead with a strong operational bias,”?said Jenna Fisher, managing director and head of the CFO practice at the global firm Russell Reynolds Associates (RRA). “While 2021 was the year of the IPO, we have now moved into a more cost-conscious, cost-cutting milieu where analytical and operational excellence are paramount.”

? ? ? ? ? ? ? ? ? "In addition to operational expertise, does Fisher think there are any other skill sets CFOs should enhance going into 2024??“Two things come to mind,” she said. “On the technical side, AI continues to dominate the conversation, and CFOs will be wise to assess what tasks their current teams are engaged in that can be outsourced to AI to make people’s jobs more enjoyable and ultimately more productive.”

? ? ? ? ? ? ? ? ? ?"Secondly,?on the “softer“ side of the equation,?“the demand for leadership authenticity has never been more profound,” Fisher said. There is “a relentless demand for C-suite leaders to show up as real human beings, offering empathy and humanity to their teams,” Fisher said. “This is one way to help engender loyalty and to bolster retention,” she said....."

? ? ? ? ? ? ? ? ? (b) Hewlett Packard Enterprise (HPE) announced last Friday in?this press release ?that Marie Myers was joining the company as CFO from HP Inc. where she had been serving as CFO since 2021 (see items (iv)(a) and (b) from this Monday). Below is from Monday's Fortune CFO Daily Newsletter, "Hewlett Packard Enterprise’s new finance chief has two ‘modern CFO’ traits big companies desperately need, says a recruiting expert ",?with reference to HPE's appointment of Marie Myers?as its new CFO, and inter alia quoting her and Clem Johnson, president of ?executive search firm, Crist Kolder Associates, on 'the modern CFO':

? ? ? ? ? ? ? ? ? ? ? ? "Marie Myers will join Hewlett Packard Enterprise, HPE as EVP and CFO, effective Jan. 15, the company announced Dec. 15. Since 2021, Myers has served as CFO of the PC maker HP Inc.....Antonio Neri, HPE president and CEO.....?gave his assessment of Myers’ skill sets and characteristics: “Marie is a strategic and visionary CFO known for making financial decisions that fuel innovation and performance”.......

? ? ? ? ? ? ? ? ? ? ? ? ? ?"Neri’s assessment of Myers coincides with attributes of “a modern CFO,” Clem Johnson, president of Crist Kolder Associates, an executive search firm, told me. “Our large public clients continue to prioritize ‘range,’ someone who can alternate between granular operational issues and big-picture strategic ones, as an essential attribute in our CFO searches,” Johnson said.......

? ? ? ? ? ? ? ? ? ? ? ? ? ? "In a May interview, I asked Myers advice for CFOs when forging a relationship with the board. “I think it’s important to establish a direct and collaborative relationship with board members,” Myers told me. She added, “Today’s CFOs need to be knowledgeable about all aspects of the business, have a broad and informed view of the company, and share their unique insights with the board, not just financials.”

? ? ? ? ? ? ? (iv) (more) data on the attributes of C-suite members of the Fortune 100 companies: Earlier this month,?Spencer Stuart released this "snapshot" report, "Fortune 500 C-Suite?Snapshot: Profiles in Functional Leadership ", on the?tenure, backgrounds (external v. internal hires) and diversity at 11?different C-suite positions of the?Fortune 500 companies (see item (ii) from last Thursday). More data on the C-suite in this WSJ article last Thursday, "Who Gets Promoted to the C-Suite—and How That Has Changed Over the Decades" , by Peter Cappelli, a professor of management at the Wharton School of the University of Pennsylvania, and based on the findings of the author and two co-researchers who "have been tracking the attributes of the leaders of the world’s biggest corporations, the Fortune 100, since 1980, when many of the key forces shaping business today began." The article discusses the 13 key findings of the research, and below are six of them:

? ? ? ? ? ? ? ? ? ??"Here is a closer look at our key findings": ............

? ? ? ? ? ? ? ? ? ? ? ? -- They (executives) have broader experience.?Executives used to get training in-house in various aspects of the business: operations, finance, logistics and so forth. It was a way for companies to train potential leaders from within, especially important since there weren’t a lot of outside hires for executive roles. Now companies are seeking people from outside who have experience in different niches, and putting them in roles that fill those niches. In 1980, the average top executive had worked in 1.4 different industries. Now that figure is 2.3......?

? ? ? ? ? ? ? ? ? ? ? ? --?More executives come from finance.?Financial markets and investor interests took on a greater role after the 1980s, and that change is reflected in the proportion of executives with a finance background: The figure has been above 30% since 2001, up from 19% in 1980.?

? ? ? ? ? ? ? ? ? ? ? ? -- More executives have law degrees.?The proportion of executives with a law degree has risen,?going to 17% in 2001 from 11% in 1980, and staying near that higher level in 2021. This may be a response to increased corporate regulations?like Sarbanes-Oxley and Dodd-Frank?that drive the need for more legal expertise in the C-suite.?

? ? ? ? ? ? ? ? ? ? ? ? -- Business degrees aren’t as prevalent as you would think.?For years, there was huge growth in M.B.A. graduates in the overall population—63% from 2001 to 2011. But the growth rate of M.B.A.s in Fortune 100 C-suites was considerably lower: just 6%. The period from 2011 to 2021 had even less upward movement. The number of M.B.A.s in the C-suite rose by just 4% over those years, as M.B.A. graduates in general rose by 8% during that time.?

? ? ? ? ? ? ? ? ? ? ? ?-- Women are landing more executive jobs.?The proportion of women in Fortune 100 top executive ranks?rose from roughly zero in 1980 to 12% in 2001 and 18% in 2011, by about the same percentage as the proportion of women in all management jobs. After that, the proportion of women in these top executive ranks rose to 28% of jobs in 2021—while women executives in the overall ranks of management rose to just 18% of jobs from 17%, according to the Bureau of Labor Statistics. This indicates that it did not take an increase in the pipeline of women managers to add more to the executive suite. ?

? ? ? ? ? ? ? ? ? ? ? ??-- Women are also advancing quicker than men.?Women executives got to executive jobs faster than their male counterparts—four years faster into their careers in 2001, slowing to 1.5 years faster in 2021......"

? ? ? ? ? ? ? (v) Deloitte report on the CEO succession planning process: Earlier this month, Deloitte posted on its website the latest edition of its Board Practices Quarterly, "CEO succession planning processes ", based on a survey of "primarily corporate secretaries, in-house counsel, and other in-house governance professionals, representing 102 public companies of varying sizes and industries." Below are excerpts from the findings:

? ? ? ? ? ? ? ? ? ?"Is the CEO succession plan formalized/documented??A majority of companies have formalized/documented plans. The greatest variation across market caps pertains to having a formalized/ documented plan for an unplanned departure—reported by 72% of large-caps and 90% of mid-caps. In contrast, companies having formalized/documented succession plans for planned departures was 53% and 55%, respectively.

? ? ? ? ? ? ? ? ? ? "Which of the following is included in your planned (not emergency) CEO succession plan??A majority of respondents reported the following being included in their plans: named individual(s) internal to the company as potential CEO successors and procedures for the board and/or responsible board committee. Nearly half of respondents reported that their plans include professional development and readiness plans for internal candidates and candidate criteria (e.g., qualitative and quantitative skills and other attributes); however, candidate criteria varies significantly across market caps (34% of large-caps and 56% of mid-caps). Further, 24% of large-caps reported their plans include onboarding and orientation procedures for an incoming CEO compared to 6% of mid-caps.

? ? ? ? ? ? ? ? ? ?"How often and/or in what circumstances is the CEO succession plan (in any form) reviewed and, if necessary, updated by the full board and/or the responsible board committee? 72% reported CEO succession planning is on the full board agenda on an annual basis.?Full board ?

? ? ? ? ? ? ? ? ? ? ? ? ? -- Annually—79% large-cap; 66% mid-cap....

? ? ? ? ? ? ? ? ? ??"Who has primary responsibility for CEO succession planning in your company??56% of respondents identify the full board as primarily responsible for CEO succession planning....Across market caps, there is some variation in CEO succession planning responsibility—in particular:?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?-- Full board—71% large-cap; 50% mid-cap?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?-- Nominating/Governance committee (or similar)—8% large-cap; 29% mid-cap?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?-- CHRO (or similar)—36% large-cap; 16% mid-cap

? ? ? ? ? ? ? ? ? ?"Describe the involvement of your CEO, board, and/or board committee in the CEO succession planning process. Level of involvement across the CEO, full board, and/or responsible committee, or other management varies across market caps:

? ? ? ? ? ? ? ? ? ? ? ? - CEO:

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?-- Review of the plan—54% large-cap; 71% mid-cap?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?-- Approval of the plan—11% large-cap; 29% mid-cap?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?-- Development of the candidate profile—39% large-cap; 60% mid-cap

? ? ? ? ? ? ? ? ? ? ? ? ?- Full board and/or responsible board committee:?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? -- Development of the candidate profile—54% large-cap; 69% mid-cap?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? -- Interviewing candidates—57% large-cap; 77% mid-cap?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Selection of search firm—54% large-cap; 71% mid-cap

? ? ? ? ? ? ? ? ? ? ? ? ?- Other member of management:

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? -- Development of the candidate profile—50% large-cap; 31% mid-cap

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? -- Identification of candidates—57% large-cap; 29% mid-cap....."

? ? ? ? ? ? ? (vi) publicly disclosing a cybersecurity incident?(for the first time under the SEC's new cybersecurity disclosure rules)/SEC filing of the day/Bloomberg?recap of major cyber incidents in 2023:?

? ? ? ? ? ? ? ? (a) As reported in yesterday's WSJ Cybersecurity Newsletter , V.F. Corporation,?the parent company of apparel brands such as North Face, publicly disclosed yesterday in this Current Report ?filed with the SEC that it had experienced a cybersecurity incident on the same day that the SEC's new cybersecurity disclosure rules took effect.?Below is how the cyber incident is described in the Current Report:

? ? ? ? ? ? ? ? ? ? ? ?"On December?13, 2023, VF Corporation detected unauthorized occurrences on a portion of its information technology (IT) systems. Upon detecting the unauthorized occurrences, the Company immediately began taking steps to contain, assess and remediate the incident, including beginning an investigation with leading external cybersecurity experts, activating its incident response plan, and shutting down some systems. The threat actor disrupted the Company’s business operations by encrypting some IT systems, and stole data from the Company, including personal data.?

? ? ? ? ? ? ? ? ? ? ? ? "The Company is working to bring the impacted portions of its IT systems back online and implement workarounds for certain offline operations with the aim of reducing disruption to its ability to serve its retail and brand?e-commerce?consumers and wholesale customers. VF-operated retail stores globally are open, and consumers can purchase available merchandise, but VF is experiencing certain operational disruptions. Consumers are able to place orders on most of the brand e-commerce sites globally, however, the Company’s ability to fulfill orders is currently impacted. The Company, along with its external cybersecurity experts, continues to work diligently to respond to and mitigate the impact from the incident, and has notified and is cooperating with federal law enforcement.

? ? ? ? ? ? ? ? ? ? ? "As the investigation of the incident is ongoing, the full scope, nature and impact of the incident are not yet known. As of the date of this filing, the incident has had and is reasonably likely to continue to have a material impact on the Company’s business operations until recovery efforts are completed. The Company has not yet determined whether the incident is reasonably likely to materially impact the Company’s financial condition or results of operations."

? ? ? ? ? ? ? ? ? ? ?Some commentary on this disclosure from the WSJ Cybersecurity Newsletter:

? ? ? ? ? ? ? ? ? ? ? "....What strikes me is the level of detail in the company's disclosure, as well as how VF put a fine point on what it doesn't yet know.?VF said some IT was encrypted, data was stolen and the company is working on offline workarounds. The disclosure?also addressed two aspects of materiality: "As of the date of this filing, the incident has had and is reasonably likely to continue to have a material impact on the Company’s business operations until recovery efforts are completed. The Company has not yet determined whether the incident is reasonably likely to materially impact the Company’s financial condition or results of operations."

? ? ? ? ? ? ? ? ? (b) For a discussion of the increase in major cyberattacks this year, note this Bloomberg article earlier this week, "Clorox, Boeing, MGM and More: Why Big Hacks Have Surged in 2023 ", which inter alia contains a useful table with a list of major companies that suffered cyber incidents this year, describing the nature of the incident, identifying the hacker group responsible, and how incident were resolved. Among the companies: Target; Boeing; MGM Resorts; Clorox; and Shell.

? ? ? ? ? ? ? (vii) Glass Lewis report on the 2023 say-on-pay vote results and executive compensation trends in Canada and the U.S.: Glass Lewis?recently posted on its website this report on the?say-on-pay voting results in Canada (see the table on p.6) and in the U.S.?(see the table on p.5), and other executive compensation trends, during the 2023 proxy season. Below is from the "Key Trends" section for Canada:

? ? ? ? ? ? ? ? ? "-- While the number of failed say-on-pay proposals in Canada dropped slightly from last year, the number that received less than 75% support increased slightly, with average support down across the market.

? ? ? ? ? ? ? ? ? ? ? ? ? -?7.5% of companies received less than 75% support from shareholders for their say-on-pay votes?(as compared to 6.7% in 2022 and 7.5% in 2021).

? ? ? ? ? ? ? ? ? ? -- There was a sharp rise in the rate of Glass Lewis against recommendations for say-on-pay, with 18.1% of companies receiving against recommendations from Glass Lewis in 2023 (up from 10.1% in 2022).

? ? ? ? ? ? ? ? ? ? --?The highest total compensation figure we saw in any Canadian summary compensation table?this year was C$36,398,662 (converted from U.S. dollars) for the CEO of Magna International Inc., mainly?composed of a “transformational grant” using rolling absolute stock price hurdles.

? ? ? ? ? ? ? ? ? ?-- Total median and average compensation of CEOs in the S&P/TSX Composite remained slightly below amounts reported in 2022, though the maximum pay for blue-chip companies “pushing the envelope”?did spike upwards. The largest individual grant was a US$117 million?award to Restaurant Brand’s new?executive chair."

? ? ? ? ? ? ? ? ? ? ?The Glass Lewis report is discussed in this FT article last Thursday, "Shareholders raise heat on US companies over executive pay ":

? ? ? ? ? ? ? ? ? ? ? "Investors are rattling more US companies over executive pay, attacking bonuses and other changes to remuneration while shying away from supporting highly politicised environmental and social measures. Dozens of US-listed companies that proposed to change their pay plans struggled to win support from shareholders this year, according to research from Glass Lewis, a proxy adviser. These included 17 where pay proposals failed to receive a majority vote, more than doubling from seven in 2022 and the highest in at least five years.?

? ? ? ? ? ? ? ? ? ? ? "Companies that received less than 75 per cent support for bonus plans jumped to 159 this year from 112 in 2022, Glass Lewis said.?Shareholders’ increased vigilance over executive pay comes as they cut back support for resolutions on environmental and social matters in the face of criticism from politicians, even as those proposals have proliferated......", and,

? ? ? ? ? ? ? (viii) press releases of the day:?

? ? ? ? ? ? ? ? ? ? ?(a) NYSE-listed RTX Corp.?("the world's largest aerospace and defense company", formed in 2020 from the merger of Raytheon and United Technologies) announced yesterday in this press release the retirement and replacement of its chief technology officer,?as follows:

? ? ? ? ? ? ? ? ? ? ? ? ? "RTX today announced?Mark E. Russell, chief technology officer and senior vice president, will retire from his role effective?Jan. 1, 2024. He will continue in an advisory role with the company.....Juan de Bedout?was named RTX Chief Technology Officer and senior vice president, overseeing the company's Technology & Global Engineering team, including management of its leading research centers:?RTX Technology Research Center and RTX BBN Technologies. De Bedout is charged with progressing RTX's technology roadmaps and the company's commercial and defense technology strategies......Juan de Bedout?leads Aerospace Technology at RTX......";

? ? ? ? ? ? ? ? ? ? ?(b) The Boeing Company announced last Thursday in this press release ?the appointment of "key senior leaders", including a new chief sustainability officer,?reporting to the CEO and the Governance & Public Policy committee of the Boeing Board, as follows:

? ? ? ? ? ? ? ? ? ? ? ? ???"Boeing today announced?Chris Raymond?as president and chief executive officer of Boeing Global Services (BGS). Raymond will succeed?Stephanie Pope, who was recently named Boeing chief operating officer. Brian Moran?has been named Boeing's chief sustainability officer, succeeding Raymond. The appointments are effective?Jan. 1, 2024......

? ? ? ? ? ? ? ? ? ? ? ? ??? "As Boeing's chief sustainability officer, Moran will be responsible for advancing Boeing's sustainability efforts, focused on aerospace sustainability priorities, stakeholder-oriented reporting, industry-wide partnerships and company performance to achieve key sustainability goals. Based in Boeing's?Amsterdam?office,?Moran will report to?Dave Calhoun, Boeing president and CEO, as well as to the Governance & Public Policy committee of the Boeing Board of Directors. He will also serve on Boeing's Executive Council.....Brian Moran?has been serving as vice president, Global Sustainability Policy & Partnerships for Boeing.....";

? ? ? ? ? ? ? ? ? ? (c) Nasdaq-listed, energy technology company?Baker Hughes Co.?announced last Tuesday in this press release ?the appointment of a new chief legal officer, as follows:

? ? ? ? ? ? ? ? ? ? ? ? ?"Baker Hughes announced Georgia Magno as chief legal officer (CLO) effective Jan. 1, 2024. She will be responsible for the Company’s legal and regulatory affairs, corporate governance, and compliance functions. Magno brings 20 years of management and legal experience to the role, previously serving as vice president and general counsel for Baker Hughes’ Industrial & Energy Technology (IET) business segment......."

---------------------------------------------

Please contact me if you would like to be on the distribution list and receive every issue of this newsletter directly in your inbox.