'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) Spencer Stuart HBR post on an effective CEO/chair relationship: This Aug. 23 HBR post, "5 Moments That Make or Break a CEO-Board Chair Relationship" , the four authors of which are all from Spencer Stuart,?includes comments from former PayPal?chair John Donahoe; eBay chair Paul Pressler; MetLife Chair Glenn Hubbard; MetLife CEO Michel Khalaf;, and The Hartford?CEO and chairman Christopher Swift. Below is the post's headnote summary:

? ? ? ? ? ? ? ? ? ? "Summary: What distinguishes an effective CEO-board chair relationship? According to a Spencer Stuart survey of nearly 200 directors and 30 CEOs of S&P 500 companies, trust is the most critical factor.?Chairs and CEOs build trust over time by being vulnerable, open, and transparent about their expectations and challenges — particularly in five moments: 1) when negotiating CEO compensation; 2) during the annual CEO evaluation; 3) when giving feedback from executive sessions of the board; 4) when boards consider their own composition and succession; and 5) in moments of adversity."

? ? ? ? ? ? ? ? ? ?As the post notes:

? ? ? ? ? ? ? ? ? ?".... (W)hat distinguishes an effective chair-CEO relationship??It’s not?role clarity or the chair’s knowledge of the business and quality of advice. Nor is it the alignment of goals, performance measures, and board processes. While these are important, based on our experience, conversations with numerous CEOs and chairs, and a survey of nearly 200 directors and 30 CEOs of S&P 500 companies, we identified trust as the critical factor driving an effective relationship between the chair and CEO......Our work has also identified five critical moments that can build — or destroy — trust between chairs and CEOs."

? ? ? ? ? ? ? ? ? Below is form the third one of these moments discussed in the post:

? ? ? ? ? ? ? ? ? "3. Executive sessions of the board: Independent directors ideally meet in executive session without the CEO at every single board meeting. These sessions can make CEOs uncomfortable because they’re not in the room to hear what’s on directors’ minds. And since these director-only sessions are typically unstructured, the conversations tend to move organically and expand in time spent, often making a CEO back in their office or in a conference room anxious.?Board chairs can build trust in this uncomfortable situation by quickly, honestly, and empathetically delivering director feedback to the CEO. We found 43% of CEOs and 39% of directors said an important way to build trust is ensuring the chair effectively — and immediately — communicates the board’s feedback to the CEO following executive sessions.

? ? ? ? ? ? ? ? ? ? ? ? ? ?"I prioritize conveying feedback in a constructive way; synthesizing what the board members want to see, are concerned about, and want to encourage,”?eBay chair Paul Pressler said. “Allow the CEO time to digest the information so you can have a robust, open, and honest conversation. Asking the CEO to translate the feedback ensures clarity and understanding.”

? ? ? ? ? ? ? ? ? ? ? ? ? ?During an executive session, chairs should focus the board on the most important issues and ensure all voices are heard,?but prevent “piling on” or veering too far off topic. The chair needs to know how to read the room and manage the clock. (Executive sessions are typically at the end of board meetings and director travel logistics are often a forcing device for finishing the meeting on time.) It’s equally important that the chair encourages the board to be as open as possible when the CEO is in the room, particularly when the board has concerns about performance. If directors are grumbling to one another or sharing sideways glances, the CEO will pick up on it."

? ? ? ? ? ? ? (ii) PwC comparing board and C-suite perspectives on board effectiveness: On July 29, PwC posted on its Governance Insights Center webpage this memorandum, "Bridging the gap: Comparing board and C-suite perspectives" , which notes that, based on prior PwC surveys, "directors and executives have different views on topics such as board effectiveness, composition, refreshment, board understanding and knowledge of key business risks, and the ability of boards to guide their companies through a time of crisis." The memorandum then identifies and discusses "five areas where directors’ views differ substantially from those in the C-suite", in each case providing a "takeaway". Below are excerpts from two of these areas:

? ? ? ? ? ? ? ? ? ? ? "Does my board have the right expertise to provide future-ready governance?: The roles and responsibilities of today’s board members look different from those of their predecessors. The modern director’s oversight role has greatly expanded?as corporate strategies quickly pivot to address competitive pressures, acquisitions and new technologies. In this environment, boards need a different roster of skills and experience to lead the organization. But our C-suite survey on board effectiveness found that only 28% of executives feel their boards are armed with the right combination of skills and experience. There was also a wide disparity between the importance of having specific competencies on their board. While executives prioritized industry, regulatory/public policy and environmental expertise as their top three competencies, directors prioritized more of the traditional board oversight areas like finance, risk management and operations. Interestingly, the very areas that are on executives’ wish list in the near term — environmental/sustainability, AI/ GenAI and IT/digital — are the same areas executives say are getting too little board attention. Directors view these areas of expertise as less important to have on their boards than core areas like financial and risk management expertise.

? ? ? ? ? ? ? ? ? ? ? "The takeaway: Closing the gap between these views is a two-way street. Executives can drive the upskilling agenda by championing subject matter education and providing clearer and richer reporting.?Boards, on the other hand, can increase their focus on high-risk areas and lean on external experts to gain deeper insights into these topics. They can also cultivate deeper, more meaningful relationships with the entire C-suite, not just CEOs and CFOs.?To that end, many board and committee chairs are now in the habit of holding periodic calls with relevant executives in advance of — and even apart from — board and committee meeting schedules......

? ? ? ? ? ? ? ? ? ? ? "Is my board providing effective oversight of emerging risks?: Executives continue to express confidence in their boards in traditional areas such as strategy and knowledge of key business risks,?but they are less confident about areas such as digital transformation and sustainability.?Executives and directors tend to disagree on how much time to spend on these issues and how important it is for the board to have expertise on these subjects. Half of the executives surveyed are looking for an infusion of new AI/GenAI expertise on the board in the next 3-5 years, and 40% want directors with IT/digital expertise.?But just 22% and 28% of directors believe it is very important for the board to have IT/digital and cyber risk expertise, respectively. It’s a similar story with sustainability — 57% of executives believe it is very important to have environmental/sustainability expertise on the board compared with just 11% of directors.

? ? ? ? ? ? ? ? ? ? ? ?"The takeaway: Boards should acknowledge and act on the fact that executives are looking to them for greater leadership and guidance in these key areas.?The survey findings are also a recognition of AI/GenAI’s transformative potential, as well as the risks.?Boards should discuss using refreshment to add deeper digital knowledge and expertise, educating their current directors on emerging technology or doing a combination of both. On sustainability, we have begun to see a shift in sentiment.?Fewer executives (48%, down from 65% in 2022) believe it’s not getting the board attention it deserves. That’s likely due to a wave of new sustainability disclosure regulations in the US, Europe and other regions. Boards should discuss whether oversight of these issues should fall to the full board or a specific committee. And to better understand what is happening on the ground, the board should regularly hear from the management team overseeing both the opportunities and risks related to sustainability."

? ? ? ? ? ? ? (iii) CEO pay at the largest U.S., Canadian and U.K. companies: ?For?CEO pay at the S&P 500 companies,?see item (ii) from June 23/23; for CEO pay at the largest 100 companies in the S&P/TSX composite index,?see item (i) from June 25/24; and for CEO pay at the FTSE 100 companies, see item (ii) from July 8. More data below:

? ? ? ? ? ? ? ? ? ? ?(a) On Aug. 13, proxy advisory firm Glass Lewis released?this report? which inter alia contains data on CEO pay at the S&P/TSX 60 companies. The report is discussed in this Aug. 14 Investment Executive (IE) blog post, "CEO pay rises this proxy season ":

? ? ? ? ? ? ? ? ? ? ? ? ? "Pay for CEOs of Canada’s largest companies has soared, according to a report from U.S. proxy advisory firm Glass Lewis & Co.?The report, which reviewed the initial results of the 2024 proxy voting season, said chief executives with S&P/TSX 60 firms received a 16% raise from the previous year.?“Median total CEO pay for the S&P/TSX 60 in 2024 was $11.5 million,” Glass Lewis?stated.

? ? ? ? ? ? ? ? ? ? ? ? ? ?"Median CEO pay went up in the U.S. too, but more modestly than in Canada. The report stated that CEO compensation rose by 6.2% for S&P 500 companies,?and was up by 3.3% for constituents of the Russell 3000 index....."

? ? ? ? ? ? ? ? ? ? ?(b) On Aug. 11, the High Pay Centre?(a U.K. think tank generally critical of existing top pay practices) released its annual report on CEO pay at the FTSE 100 companies,?"Analysis of UK CEO Pay in 2023 ", with highlights appearing in the related press release , as well as in this FT article, "FTSE 100 chief executives’ pay rebounds to 2017 levels. " Below are excerpts from the article:

? ? ? ? ? ? ? ? ? ? ? ? ? "The pay of FTSE 100 chief executives surged by ￡560,000 to an average of almost ￡5mn last year,?rebounding to levels not seen since 2017.? The figures come as UK executives push for higher payouts to compete with international rivals, particularly in the US, where company bosses are paid significantly more.? The rise in average pay was driven by?“a small number of companies making really large pay awards rather than big increases across the board”, said Luke Hildyard, director at the High Pay Centre think-tank, which compiled the data. ?

? ? ? ? ? ? ? ? ? ? ? ? ? ?"The number of companies on the blue-chip index paying their bosses more than ￡10mn rose from four in 2022 to nine in 2023. Median pay rose more modestly from ￡4.1mn to ￡4.19mn,?according to the High Pay Centre’s analysis of company disclosures, though this was still the highest since 2009, the earliest year for which it has collected the data......The analysis covers chief executives’ entire pay packages, including salary, bonuses, pension and incentive plans. Companies argue that the majority of executives’ pay comes from bonuses and share awards linked to performance......"

? ? ? ? ? ? ? (iv) chief compliance officer and chief legal officer/GC compensation: BarkerGilmore's 2024 report on chief compliance officer compensation/Major, Lindsey & Africa's 2024 report on the compensation of general counsel, chief legal officers and chief compliance officers (and CCO reporting lines)/Corporate Counsel's 2024 General Counsel Compensation Report (including Meta chief legal officer's employment offer letter):?

? ? ? ? ? ? ? ? ? ?(a) On Aug. 12, legal and compliance executive search BarkerGilmore released its "2024 Chief Compliance Officer Compensation Report ." Key findings are summarized in the related press release, ?as well as in this Aug. 13 WSJ article, "Chief Compliance Officer Pay Rises, but at a Slower Pace ." Below are excerpts from the WSJ article:

? ? ? ? ? ? ? ? ? ? ? ?"Chief compliance officers continue to rake in more money, but increases in most sectors have slowed, according to a new survey. Median compensation—which includes base salary plus bonus—for compliance chiefs at public companies rose 7% to $419,000 in 2024......according to a March survey of compliance heads conducted by boutique executive search firm BarkerGilmore......

? ? ? ? ? ? ? ? ? ? ? ? ?"BarkerGilmore pointed to a number of factors contributing to a slowdown in salary increases, including tighter hiring budgets following the Covid-19 pandemic and economic and political uncertainty. BarkerGilmore Managing Partner John Gilmore added that slowing salary increases are in line with what is happening across executive teams. “The real money comes on the back end, when the company does extremely well,” said Gilmore. “Needless to say, the cash bonuses and equity awards pay off.”

? ? ? ? ? ? ? ? ? ? ? ? ? "Factors that also could be contributing to a slowdown in pay bumps include the increased use of technology and automation, which in some cases reduces the number of compliance staff under their supervision, said Ash Athawale, a senior vice president with executive search firm Robert Half.?Tighter overall budgets also have had an effect.?“With budget constraints, some companies are looking at ways to consolidate that compliance leadership role under the legal department and that impacts compensation,” Athawale added.

? ? ? ? ? ? ? ? ? ? ? ? ? "One big element that boosted salaries was a law degree,?according to the survey. At public companies, compliance chiefs with a law degree commanded median total compensation, including base salary, bonus and other long-term incentives, of nearly $529,000 in 2024,?versus $234,000 for those without......“A lot of that is because of the way that they interpret regulations, the way they view risk, the way they’re able to come up with different solutions,” Gilmore said about why compliance chiefs with law degrees command higher salaries. 'There’s plenty of CCOs out there without a JD (Juris Doctor) that do a remarkable job…but one thing when you’re hiring a CCO is that you don’t want to make a bad hire. You want to make a hire that is guaranteed to work'......." ?

? ? ? ? ? ? ? ? ? ? ? ? ? For good summaries of the BarkerGilmore?report, see the Aug.14 WSJ Risk & Compliance Newsletter ; this Aug. 13 Law360 blog post, "JDs Linked To Higher Pay For Chief Compliance Officers "; and this Aug. 14 Compliance Week blog post, "Compensation survey pegs annual pay at $419K for public company CCOs ."

? ? ? ? ? ? ? ? ? ? ? (b) On July 24, Major, Lindsey & Africa, (MLA)?(the "world’s largest legal search firm"), released its "2024 Global In-House Counsel Compensation Survey ", which, note, also includes the compensation of Chief Compliance Officers. Below is from the press release? announcing the release of the report, and which includes some of the key findings of the survey:

? ? ? ? ? ? ? ? ? ? ? ? ?"For the first time since its survey began in 2012, General Counsel and Chief Legal Officers in the U.S. reported that their total actual cash (TAC) compensation has decreased, by 4% since 2021, to an average of $556,794,?according to the?2024 Global In-House Counsel Compensation Survey released today by Major, Lindsey & Africa.....

? ? ? ? ? ? ? ? ? ? ? ? "(M)uch of the decline in pay is attributable to precipitous drops in bonuses:?GCs and CLOs collectively saw their bonuses fall by 15%, while their base pay increased just slightly,?up by less than 1% in the past two years. Despite the role of the GC expanding significantly in scope and responsibility, economic headwinds have forced many in-house legal departments to instead rely more on non-cash incentives,?like flexible scheduling and work-from-home opportunities, to attract and retain their top talent......

? ? ? ? ? ? ? ? ? ? ? ?"(L)egal departments are....placing a premium on grooming the next generation of leadership. Globally, higher-level managing counsel like Deputy General Counsel (DGCs) and Associate General Counsel (AGCs) together saw their TAC increase by 8% between 2021 and 2023.?Similarly, Counsel – responsible for executing the crucial day-to-day work of an in-house legal department – were rewarded for their contributions with a 19% increase in TAC.....

? ? ? ? ? ? ? ? ? ? ? ?"Compensation for CCOs across all industries has also increased substantially in the past two years. In the U.S., CCOs saw their base pay jump by 36% since 2021, to an average of $403,510, while their total cash compensation soared by 72%, from an average of $430,191 to $740,707. Much of these increases have been driven by bonuses, which increased by a staggering 181% for CCOs from 2021 to 2023, to an average of $484,235....."

? ? ? ? ? ? ? ? ? ? ? ? The MLA survey, as well as some others, are discussed in this July 25 Compliance Week blog post, "Compensation survey finds average annual CCO pay jumped above $400K ", with particular reference to the compensation of CCOs, as well as their reporting lines:

? ? ? ? ? ? ? ? ? ? ? ? ?"The 2024 “In-House Counsel Compensation Survey,”?published Wednesday by legal search firm Major, Lindsey & Africa (MLA), also found that total annual cash compensation for CCOs jumped an average of 72 percent to $740,707 over that same period. “The market is reflecting the increased emphasis on culture and compliance–and the expanding role this is creating for CCOs,” said Jeannine Lemker, managing director in MLA’s In-House Counsel and Board Services groups and survey co-author.....Compliance has been “asked to flex and expand to absorb new requirements in ESG (environmental, social, and governance), partner to push employee culture forward, and bring invaluable expertise and leadership,” she added.......

? ? ? ? ? ? ? ? ? ? ? ?"The survey found that the increased compensation of CCOs was being driven by bonuses, which increased “by a staggering 181 percent for CCOs from 2021 to 2023, to an average of $484,235".......Compliance Week’s Inside the Mind of the CCO survey, in results released in December, found that chief compliance practitioners averaged a $335,000 yearly salary......Another CCO compensation survey of 500 compliance professionals, released by executive search firm BarkerGilmore?in May 2023,?pegged average annual compensation for CCOs at around $345,000.

? ? ? ? ? ? ? ? ? ? ? "Among new and emerging responsibilities for CCOs, the MLA survey noted that in addition to increased participation in the development of a firm’s ESG initiatives, CCOs were also being asked to provide advice to their firm’s operations division in areas like monitoring and “proactive” controls.?

? ? ? ? ? ? ? ? ? ? ? "The MLA survey signaled a possible trend leading to increased pay for compliance officers: independence. While many CCOs report to a firm’s chief legal officer, the MLA survey noted that companies?“have increasingly trended toward moving the compliance function to an independent organization, sitting as a peer to the legal function.” The survey referenced that some regulators,?including the U.S. Department of Health and Human Services, have [https://The survey referenced that some regulators, including the U.S. Department of Health and Human Services, have issued guidance recommending that CCOs should report “directly to the CEO or the board” and not legal or finance.]issued guidance[https://The survey referenced that some regulators, including the U.S. Department of Health and Human Services, have issued guidance recommending that CCOs should report “directly to the CEO or the board” and not legal or finance.] recommending that CCOs should report?“directly to the CEO or the board” and not legal or finance......"

? ? ? ? ? ? ? ? ? ?(c) Note also Corporate Counsel's 2024 General Counsel Pay Report ?released on Aug. 15 with this list? of the 526 GCs or CLOs at Fortune 1000 companies whose compensation was disclosed under SEC rules in their company's proxy statement filed with the SEC. Noteworthy in particular is the reference to the compensation of Meta?(Facebook) Chief Legal Officer, Jennifer Newstead, with a link to her Employment Offer Letter . Commentary on the report, including on internal v. external hiring of chief legal officers and GCs?appears in this Corporate Counsel?blog post yesterday, "2024 GC Pay Report: Signing Bonuses Swell in Size as Companies Shy Away From Internal Hires ", with inter alia reference to this report by executive search firm Russell Reynolds Associates, "The Expanding Remit of the Fortune 500 General Counsel ":

? ? ? ? ? ? ? ? ? ? ? ?"The cost of luring a well-regarded legal chief from another company is spiraling like an arms race between nations,?as big public companies increasingly dole out eye-watering signing bonuses on top of?alluring pay packages. Intended to offset cash payouts and unvested grants of stock and stock options legal chiefs forfeit when they leave their employers, the welcome packages are likely to continue to swell in size as companies scratch and claw for top talent.?“General counsel at the very large corporations are getting a significant portion of their compensation package in equity. To move to another company, they’re going to want to be made whole,” said?Deborah Ben-Canaan, partner and global practice leader of in-house counsel recruiting at Major Lindsey & Africa.......

? ? ? ? ? ? ? ? ? ? ? ? ?"Also elevating payouts is the?increasingly common sentiment among companies that the legal chief job has?grown so?complicated, and the consequences of making the wrong hire so dire, that hiring a legal chief who’s never done the job before is too risky. The search firm Russell Reynolds Associates doesn’t advise companies to rule out internal hires.?But in it a March 2024 report ?does warn against compromising?on the full range of skills?a GC needs to succeed. “Traits such as adaptability, horizon scanning, and the ability to build relationships with peers, regulators, and external advisors are all increasingly important,” the report said. “Ensure selection processes explore these expanded skills with all potential candidates.” That prevailing mindset helps explain why 61% of Fortune 500 companies?filled GC openings externally last year,?a big shift from the 50% who did so in 2020. The spiraling signing bonuses jumped out as one of the most striking trends in Corporate Counsel and ALM Intelligence 2024 General Counsel Compensation Report,?which went live last month......."

? ? ? ? ? ? ? (v) press release of the day:?Honeywell International Inc.?announced today in this press release the appointment of a new CFO from inside the company, with the current CFO to serve as a Senior Advisor to the Chairman and CEO, as follows:?

? ? ? ? ? ? ? ? ? ?"Honeywell International Inc. today announced that?Mike Stepniak, who currently serves as Vice President and Chief Financial Officer for Honeywell Aerospace Technologies, will succeed?Greg Lewis?as Senior Vice President and Chief Financial Officer following the company's announcement of its fourth quarter and full-year financial results for fiscal year 2024.?

? ? ? ? ? ? ? ? ? ?"Until the transition is complete, Stepniak will serve as Vice President, Corporate Finance.?Upon completion of the transition, Lewis, who has been Honeywell's CFO since 2018 and served the company for nearly two decades, will become Senior Vice President of Honeywell Accelerator and serve as a Senior Advisor to Chairman and CEO?Vimal Kapur.

? ? ? ? ? ? ? ? ? ?"Stepniak brings over two decades of deep finance experience -- across financial planning and analysis, corporate audit, business transformation and operations in the industrial sector......In the coming months, Stepniak will work closely with Lewis and others across the leadership team to facilitate a seamless transition....."

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