'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) WSJ interview with IKEA's chief sustainability officer/Teneo report on 'what chief sustainability officers are thinking'/reporting lines and compensation of sustainability heads:?

? ? ? ? ? ? ? ? ? (a) Karen Pflug is the Chief Sustainability Officer of privately-held?IKEA, and she recently spoke to the WSJ. The interview appears in this recent WSJ article, "Your Billy Bookcase Should Have Multiple Lives, Says IKEA Sustainability Chief", and below are excerpts:

? ? ? ? ? ? ? ? ? ? ? "Some 99.6% of your climate footprint in 2023 came from Scope 3 emissions, including those from your suppliers. How are you planning to reduce these?

? ? ? ? ? ? ? ? ? ? ? It’s a big challenge for everybody. But, of course, one company’s Scope 3 is another’s Scope 1 and 2. We can use the power of our value chain and our size and scale as a force for good and hopefully drive industrywide change.

? ? ? ? ? ? ? ? ? ? ? "Would IKEA drop a supplier if they didn’t adhere to your own sustainability goals?

? ? ? ? ? ? ? ? ? ? ? ?We prefer the carrot to the stick. It takes a long time to become an IKEA supplier, it’s not something we chop and change. All our suppliers must go through our code of conduct, which sets clear expectations and ways of working for environmental, social and working conditions, as well as animal welfare.....

? ? ? ? ? ? ? ? ? ? ? ?"Do you have any best practices for other chief sustainability officers?

? ? ? ? ? ? ? ? ? ? ?One thing we’ve done is make all the country CEOs, chief sustainability officer too. So they are CEO and CSO. They have a portfolio of [key performance indicators]. Not just the usual financials on growth, sales, visitation, everything else, but also CO2 emissions and gender parity, skills for employment for refugees, all sorts of things. So I think empowering leaders throughout the organization and not centralizing it too much is key advice."

? ? ? ? ? ? ? ? ? (b) In Oct., global?CEO consulting and advisory firm Teneo posted on its website this?report,?"What Chief Sustainability Officers Are Thinking", being a "summarized collection of insights that we have heard from Chief Sustainability Officers (CSOs) recently." Below are excerpts:

? ? ? ? ? ? ? ? ? ? ? "The Changing Role of CSOs: Sustainability is a collaborative effort and the role of CSOs has evolved from operational to systemic leadership, requiring the integration of ESG strategies across the enterprise. CSOs have highlighted challenges in collaborating with other corporate functions, particularly as resource constraints hinder progress further down the value chain.

? ? ? ? ? ? ? ? ? ? ? ? "The Increasing Importance of an Effective Narrative: Despite the contentiousness surrounding the term “ESG” in recent years, S&P 500 companies continue to include the term an average of 62 times in their most recent sustainability reports.....However, given the term’s divisiveness, CSOs have come to recognize the importance of crafting a strong ESG narrative that does not alienate stakeholders. Some organizations are leaning more towards alternative phrases like “sustainability” and “resilience” to drive action instead.

? ? ? ? ? ? ? ? ? ? ? ?"Interconnectedness: The “E” = The “S”: At times, CSOs have expressed that key constituents often isolate environmental and social challenges when in reality, an environmental issue is a social issue and, ultimately, a human issue. The increasing frequency and severity of natural disasters threaten human health globally by directly endangering lives and limiting access to clean air, water and shelter. In short, everything is interconnected."

? ? ? ? ? ? ? ? ? ?(c) Trellis?released last month its biennial report on the sustainability profession, “The State of the Sustainability Profession 2024”, based on responses to a survey "conducted in late 2023 from 1,185 sustainability professionals primarily at the manager or senior manager levels, 75% of whom were employed by large organizations (revenue greater than $1 billion), and 84% of whom live and work in the United States."?Compensation trends are discussed in section 4 of the report. Reporting lines are discussed in section 1 (on p.9), as follows:

? ? ? ? ? ? ? ? ? ? ? ? ? ? "......Changes in the corporate sustainability field are also apparent when you look at how sustainability is structured within a corporation. The increase in pending regulations has caused several companies to shift their reporting structures to the general?counsel’s office.?As recently as two years ago, just 7 percent of survey respondents indicated their team reported to the legal department. That has since doubled and this trend will likely continue.......

? ? ? ? ? ? ? ? ? ? ? ? ? ? "Sustainability executives are also rising in seniority within their organizations. The number of high-ranking sustainability executives who report directly to the CEO has risen from 22 percent to 30 percent in the past two years......Forty-nine percent of sustainability leaders report to an executive who reports to the CEO, while only 4 percent of respondents can count several layers between them and the CEO.

? ? ? ? ? ? ? ? ? ? ? ? ? ?"The elevated role of the sustainability leader doesn’t stop with the chief executive. Thirty- one percent of respondents report that the board of directors is briefed on an annual basis about the sustainability program’s risks and achievements. Thirty percent brief the board quarterly."

? ? ? ? ? ? ? (ii) DEI roundup: Nike names new chief DEI officer/Boeing dismantles DEI team/Hewlett Packard increases DEI initiatives/retailers are concerned about DEI blowback/more on anti-DEI activist Robby Starbuck (and more):?

? ? ? ? ? ? ? ? ? ? (a) Below is from this Bloomberg article this month, "Nike Names New Diversity Leader as CEO Continues Shuffling Ranks":

? ? ? ? ? ? ? ? ? ? ? ? ?"Nike Inc. has selected a new top diversity, equity and inclusion executive as the new chief executive officer continues to reorganize the senior ranks of the world’s largest sportswear company.?Kizmet Mills will become Nike’s chief DEI officer and vice president starting Nov. 11, the company confirmed Thursday. She was previously a senior director in the division and previously worked at Coca-Cola Co.

? ? ? ? ? ? ? ? ? ? ? ? ? "Having held senior leadership roles within the company for more than eight years, Kizmet is well positioned to continue advancing Nike’s goals of championing all athletes,”?a representative for Nike said in a statement.Mills replaces James Loduca, who said in a post?on LinkedIn Thursday that he’s leaving the company to spend more time with his family.?The former Twitter executive had been at Nike less than two years......

? ? ? ? ? ? ? ? ? ? (b) Below is from this Bloomberg article earlier this month, "Boeing Dismantles DEI Team as Pressure Builds on New CEO":

? ? ? ? ? ? ? ? ? ? ? ? "Boeing Co. has dismantled its global diversity, equity and inclusion department, making it the latest high-profile corporation to make changes to its DEI policy?as its new top leader oversees a broader revamp of the company’s workforce.?Staff from Boeing’s DEI office will be combined with another human resources team focused on talent and employee experience,?according to people familiar with the matter. Sara Liang Bowen, a Boeing vice president who led the now-defunct department, left the company on Thursday.......

? ? ? ? ? ? ? ? ? ? ? ? ? "The shift....comes as large US companies face increasing pressure from conservative activists to dismantle or downplay their efforts on diversity, equity and inclusion.....Anti-DEI activist?Robby Starbuck, who claims credit for convincing Toyota Motor Corp.?and Harley-Davidson Inc.?to scale back DEI, said he had reached out to Ortberg (Boeing’s new CEO Kelly Ortberg) and board chair?Steve Mollenkopf?by e-mail earlier this month to alert them he was considering an online campaign against their diversity programs.

? ? ? ? ? ? ? ? ? ? ? ? ? "Boeing remains committed to recruiting and retaining top talent and creating an inclusive work environment where every teammate around the world can perform at their best while supporting the company’s mission,” the planemaker said in a statement. The company added that it prohibits discriminatory hiring practices and maintains?'a merit-based performance system with procedures aimed at encouraging an equality of opportunity, not of outcomes'......."

? ? ? ? ? ? ? ? ? ? ? ?(c) Below is from this Business Insider article last Monday, "HPE CEO tells BI why he's redoubling DEI initiatives as some companies waver":

? ? ? ? ? ? ? ? ? ? ? ? ? ? "Hewlett Packard Enterprise CEO Antonio Neri started his career at the company as a "Customer Service Engineer"?in a call center nearly 30 years ago. Today, that experience informs his commitment to diversity, equity, and inclusion.?"Intentionality is important," Neri said in a recent interview with Business Insider......

? ? ? ? ? ? ? ? ? ? ? ? ? ? ?"Focusing on company culture was number two on Neri's list of top three priorities?across the company this year, he told BI,?and diversity plays a big part. (Innovation was number one). That sets him apart in the fast-shifting climate for corporate DEI. The list of companies ranking DEI that high may be shrinking......

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? "Neri said he addresses DEI initiatives at the company in internal quarterly leadership discussions and company surveys multiple times a year. He's received no pushback on the company's efforts in this area, he said....HPE measures and rewards managers based on the diversity of their hiring, retention, and promotion of employees?— especially at higher levels......The 57-year-old CEO wants a diverse workforce that stays with the company and moves up the ranks. And those goals are baked into managers' performance metrics.?"Ultimately it's a part of succession planning. Who's going to be the next CEO down the road? It could be somebody from inside," Neri said......

? ? ? ? ? ? ? ? ? ? ? ?(d) Below is from this CNBC article last week, "Retailers brace for DEI blowback in lead-up to election, holiday shopping season":

? ? ? ? ? ? ? ? ? ? ? ? ? ?"Retailers are facing a tough equation as they head into the all-important holiday shopping season — this time over DEI initiatives.?Companies are bracing for blowback related to policies around diversity, equity and inclusion and are hoping to avoid alienating customers who may deem the brands too woke – or not woke enough.?Some are tapping outside advisors for advice on how to avoid criticism, while others are opting out of public events on the topic as backlash against equity and inclusion programs grows?in the lead-up to the 2024 presidential election.

? ? ? ? ? ? ? ? ? ? ? ? ? ?"CNBC spoke with a number of retail industry insiders, strategists and staffers who spoke on the condition of anonymity to do so candidly. "There’s a clear sentiment in the retail community that nobody wants to get?Tractor Supply ’d," said one retail industry insider,?referring to that company’s decision to walk back a series of DEI initiatives after conservative activist Robby Starbuck criticized the policies online.?“Retailers left to their own devices would like to be very proactive on DEI,” said the person. “But now they don’t want any of their views to be public because they want to be able to sell stuff to everybody, and it’s become such a stupid political issue.”?

? ? ? ? ? ? ? ? ? ? ? ? ? ? "The retail industry’s concerns over DEI come after a number of high-profile, consumer-facing companies – including Lowe’s, Tractor Supply, Ford and Molson Coors –?walked back some of their equity and inclusion policies in recent months. The changes included ending sponsorships for Pride festivals and cutting ties with the Human Rights Campaign, an LGBTQ+ advocacy group. Across industries, some companies have also cut positions for DEI roles. Between 2019 and 2022, new jobs for chief diversity and inclusion officers spiked nearly 170%, according to a LinkedIn study,?but over the last year, new jobs for such roles have fallen, while companies like Google??and Meta ?have cut staffers and downsized programs that fell under DEI......."

? ? ? ? ? ? ? ? ? ? ? ? (e) There have been a number of recent articles profiling?anti-DEI activist?Robby Starbuck (who is referred to (b) and (c) above), including: this FT?article, "Robby Starbuck: the activist pushing US companies to ditch their DEI vows"; this feature Fortune article, "Who’s afraid of?Robby Starbuck? The conservative activist claims credit for DEI rollbacks but critics argue his influence is overestimated"; and this Bloomberg article, "From Megadeth to MAGA:?Robby Starbuck?Is Having a Moment" (see item (i)(c) from Sept. 24/24). Now add to the list this feature article this month in the NY Times, "The Anti-D.E.I. Agitator That Big Companies Fear Most."

? ? ? ? ? ? ? ? ? ? ? ? ?(f) The Society for Corporate Governance released last week the latest in it series of?Board Practices Quarterly reports, "Corporate engagement on diversity and other social and public policy matters", based on an August 2024 survey of "primarily corporate secretaries, in-house counsel, and other in-house governance professionals, representing 99 public companies of varying sizes and industries." Some key takeaways from the report?appear in this Society for Corporate Governance?blog post?last Wednesday, including these on DEI matters:

? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? "-- DEI activism: While nearly two-thirds of companies represented by respondents have not received a shareholder, activist, or other call for instituting, modifying, or repealing their DEI initiatives in the past year,?18% were asked to modify DEI initiatives; 16% were asked to repeal DEI initiatives; and 11% were asked to institute DEI initiatives.?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?— DEI-related board reporting: Over the past year,?more than half of respondent management teams have provided information to the board regarding the company’s overall DEI strategy and progress?against that strategy, as well as diversity metrics (e.g., leadership and workforce representation), equity metrics (e.g., pay and benefits), and inclusion metrics (e.g., engagement survey results) metrics, as detailed here......

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?-- DEI-related practices: Since 2022, more than half of companies have: (i) consulted legal counsel on company DEI-related initiatives and reviewed DEI programs and initiatives for compliance with applicable law, and (ii) established or enhanced company-wide DEI strategy and practices, while nearly half have enhanced and/or expanded workforce DEI-related disclosures.?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? -- DEI backlash: More than one-third of respondents indicated that their DEI-related actions or changes since 2022 were responsive to their company’s evaluation of the legal environment and/or DEI-related backlash."

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

? ? ? ? ? ? ? ? ? ? ?(a) NYSE-listed, automotive and e-mobility supplier BorgWarner Inc.?announced last Thursday in?this press release?a "CEO Succession Plan", with the COO being promoted to the position of CEO and?the current CEO to retire, as follows:

? ? ? ? ? ? ? ? ? ? ? ? ?"BorgWarner Inc.?today announced that its Board of Directors approved a leadership succession plan whereby?Joseph Fadool, BorgWarner's Executive Vice President and Chief Operating Officer, has been appointed President and Chief Executive Officer and a member of BorgWarner's Board of Directors effective at the close of business on?February 6, 2025. At that time, Frédéric Lissalde will retire from his role as President and CEO?and step down from the Board of Directors. To support a seamless transition, Mr. Lissalde will serve in an advisory role until?August 30, 2025.

? ? ? ? ? ? ? ? ? ? ? ? ? "Alexis P. Michas, Non-Executive Chairman of the Board of Directors, said......"Today's announcement reflects the Board's thoughtful approach to succession planning. Joe has been a trusted member of our leadership team for 14 years, and we are excited to name him as BorgWarner's next President and CEO......."

? ? ? ? ? ? ? ? ?? ? ? ? ?Compensation arrangements with the new CEO are disclosed in the related Current Report?filed with the SEC, which also discloses the following arrangements with the retiring CEO,?as follows:

? ? ? ? ? ? ? ? ? ? ? ? ? ?"...Mr. Lissalde will continue to serve the Company as a consultant to the Board and support the transition of his duties, as reasonably requested by Mr. Fadool or by the Board from time to time, to ensure an orderly transition of such duties?effective on the effective date of the appointment of Mr. Fadool (the “Transition Date”) and through August 30, 2025 (the “Transition Period”). Further, during the Transition Period, Mr. Lissalde’s annual base salary will be reduced to sixty-seven percent (67%) of his annual base salary as in effect immediately prior to the Transition Date, and he will not be entitled to participate in the Company’s Management Incentive Plan (“MIP) for any performance periods beginning on or after the Transition Date, but he will be entitled to a pro rata MIP payment, if otherwise earned, for the 2025 performance period based on the length of time he serves as President and Chief Executive Officer during such performance period. During the Transition Period,?Mr. Lissalde will remain eligible to receive awards under the Company’s Stock Incentive Plan as determined by the Compensation Committee of the Board at a level commensurate with the position of Chief Executive Officer and a base salary rate equal to his most recent base salary rate as Chief Executive Officer."

? ? ? ? ? ? ? ? ? ? ?(b) Nasdaq-listed News Corp.?announced last Thursday in this press release?the appointment of a new CFO from outside the company,?as follows:

? ? ? ? ? ? ? ? ? ? ? ? ?"News Corp announced today that Susan Panuccio will step down from her role as Chief Financial Officer on January 1, 2025, and will be succeeded by Lavanya Chandrashekar. Ms. Panuccio will continue in an advisory capacity for six months to help ensure a smooth transition and to support Ms. Chandrashekar. Ms. Panuccio has been a key leader during a period of rapid expansion and transformation for News Corp since becoming Chief Financial Officer in March 2017.......

? ? ? ? ? ? ? ? ? ? ? ? "The Board of Directors, in consultation with Ms. Panuccio, has executed a well planned succession process to identify and transition responsibility to her successor.?Ms. Chandrashekar has nearly 30 years of experience in international finance and investor relations, and has held senior positions at blue chip consumer facing companies, including Procter & Gamble, Mondelēz and Diageo, where she?was Chief Financial Officer from 2021 to September of 2024....."

? ? ? ? ? ? ? ? ? ? ? ? ?As disclosed in the related Current Report?filed with the SEC, the departing CFO and the company entered into a Separation Agreement, and the new CFO and the company entered into an Employment Agreement, the terms of both of which are summarized in the said Current Report.

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