'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) American Express HR head on renaming her position 'chief colleague experience officer'/industry experts on the 4 skills CHROs must have today:?

? ? ? ? ? ? ? ? ?(a) Monique Herena is head of HR at American Express, now with the title of "chief colleague experience officer", as she explains in last Friday's Fortune CHRO Daily Newsletter, "American Express’s ‘chief colleague experience officer’ explains why the finance giant renamed its HR function":

? ? ? ? ? ? ? ? ? ? ? "HR leaders are known by many names: Chief human resources officer, chief people officer, chief administrative officer, just to name a few. But a few years ago, Amex?took it a step further when it gave Monique Herena the title of?chief colleague experience officer.?At a time when companies are adding a plethora of gimmicky titles?to the C-suite, American Express’s name change could come off as superficial. But Herena says it reflects a broader business pivot and reimagining of the HR function.

? ? ? ? ? ? ? ? ? ? ? "It wasn’t anything where we just wanted to come up with the next cool name,” Herena tells Fortune.?“For HR, it was a strategic decision related to the Amex vision and strategy.” The change came soon after Steve Squeri became chairman and CEO of American Express in early 2018. He established a new vision for the company to “provide the world’s best customer experience every day,” and hired Herena for the top HR role in early 2019. She worked with Squeri and the company’s management team to rethink the HR function as a kind of product team focused on the employee experience, to reflect alignment with Amex’s new vision. The title change for her and the heads of other major functions followed accordingly.......

? ? ? ? ? ? ? ? ? ? ? "To be sure, American Express’s HR function, now called the colleague experience group, still performs the same basic tasks any HR team does, like payroll and benefits administration. But that new emphasis on the employee as a customer led to new processes and programs. Those?include?streamlining the application process to go on leave, expanding benefits programs in areas like mental health and family medical care, more recognition from HR for milestone achievements like getting a promotion, and?other new?internal HR products. The “Career Growth Model,” for example, provides a leadership development framework available to all employees. Herena says it’s been a hit with both existing employees and prospective candidates.

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? ? ? ? ? ? ? ? ? ? "The model, as we built it, has really helped colleagues think through where they’ve been, how they want to grow, and what support they need from us to get there,” Herena says. “It’s been wildly successful as a recruiting tool as well, because I think people love having a plan and really reflecting and demystifying career growth, especially in any large company.”

? ? ? ? ? ? ? ? ?(b) Fortune recently spoke with a?number of industry experts on the skills CHROs need today,?including Steve Patscot, who leads Spencer Stuart’s North American human resources practice; Jennifer Wilson, the head of Heidrick & Struggles’s global human resources officers practice; Kyle Forrester, a principal at Deloitte’s U.S. human capital practice; Liana Passantino, a senior principal at Gartner’s human resources practice; and Tom Wilson, managing director at Gallagher’s executive search practice. They discuss the skill set of the CHRO role today in Monday's Fortune CHRO Daily Newsletter, "These are the new skills that every top CHRO needs to have", and this accompanying article, "The 4 new must-have skills for CHROs according to industry experts." below are excerpts from the latter:

? ? ? ? ? ? ? ? ? ? ? ? "The HR function has completely transformed in the last few years, and CHROs have gone from minor players to C-suite masterminds. But in order to stay on top, HR leaders will need to do more than just oversee day-to-day operations like administering payroll or managing disciplinary actions. “I firmly believe the job has gotten harder and bigger,” says Steve Patscot, who leads Spencer Stuart’s North American human resources practice. Fortune?spoke with industry experts to get their take on the modern HR industry. They said?these are the skills that top-level CHROs need to bring to the table.?

? ? ? ? ? ? ? ? ? ? ? ? "Data and analytics: ......

? ? ? ? ? ? ? ? ? ? ? ? "Design work with the employee in mind: .....

? ? ? ? ? ? ? ? ? ? ? ? "Business strategy: Any corporate executive worth their salt is involved in developing their company’s strategy. But HR often can get isolated from business strategy discussions, and branded as a cost center. “I think HR people have always been good at HR strategy. But it doesn’t matter if you’re not tied to what the business is doing,” Tom Wilson, managing director at Gallagher’s executive search practice says. “You can have great programs and all that, but if your company is evolving in a way that’s not what you’re looking at—that’s trouble.” HR leaders should be sitting in on strategy meetings with CEOs, CFOs, and other executives, Wilson says. And they should ensure they are deliberately building their HR strategy to support those broader business goals.

? ? ? ? ? ? ? ? ? ? ? ?"Building relationships with the C-suite, board, and investors: Multiple HR experts Fortune?spoke with stressed how crucial it is that HR leaders know how to build relationships with their fellow C-suite colleagues. Around 22% of HR leaders said they wish they’d known how to collaborate with the C-suite before starting their role, according to a survey of more than 100 CHROs conducted by HR consulting giant Mercer in fall of 2023. “A good HR leader is going to be a mix of hard and soft skills: The data, the analytics, the analytical pieces of the business strategy. The soft skills are coaching, conflict resolution, how to get the best out of individuals and teams,” says Tom Wilson at Gallagher. “That’s a hard skill to master and be very effective at.”.......

? ? ? ? ? ? ? ? ? ? ? ? ? "Learning how to work with the board is particularly critical—39% of CHROs in the same Mercer survey said they wished they knew how to work with directors before taking on their role. ?Many first-time chief people officers who work with Jennifer Wilson, the head of Heidrick & Struggles’s global human resources officers practice, say the biggest step for them when starting was earning credibility with the board?because they had little previous exposure, and underestimated the power of that relationship. “You’ve got one chance to prove yourself with the board: That first meeting,” she says. 'They don’t give you a second chance.'....."

? ? ? ? ? ? ? ? ? ? ? ? (ii) CEO of BNY (formerly the Bank of New York Mellon)?on the importance of the in-person office workplace (and more): (Note that last Tuesday, The Bank of New York Mellon Corporation announced in this news release?that it was "rebranding" itself as "BNY"; see also this FT article on Saturday, "Bank of New York rebranding cuts ties to a fading Wall Street era".) Robin Vince is CEO of BNY,?and he was recently interviewed by Fortune?in the latest episode of?its?"Leadership?Next" series of podcasts, discussing several topics, including the value he attributes to the office workplace. Below is from the interview appearing in this Fortune piece last Wednesday, "BNY’s CEO says staffers need to be in the office most of the time and managers? ‘Even more.’":

? ? ? ? ? ? ? ? ? ? ?"Fortune: There’s a great culture experiment going on here in downtown Manhattan as we speak. We still haven’t completely recovered from the pandemic and the effects of that and distributed work. Your former employer just down the road, Goldman Sachs, has been saying, by God, we want you in the office every day. Right across the street from them, American Express, another financial company, is saying it doesn’t have to be every day.?We could probably get by two or three days a week.?Where do you fall in the great debate about office work??How often if you work at Bank of New York Mellon in the office, how often do you have to be in?

? ? ? ? ? ? ? ? ? ? ??Vince:?So the short answer to the question is, more days than you’re not.?But let’s just step back for a second and remember, what are we trying to achieve? I would like our people to be here to be able to really serve our clients. It’s hard sometimes to fully serve clients when you’re actually not in the office because you may not be out with your clients as much as you otherwise would. What else are we asking our people to do? We’re asking them to pay it forward for the next generation. We’ve hired the largest analyst class of new incoming analysts that we’ve ever had as a company, which is double what it was the year before. And that was double what it was the year before that. We can’t have all of these new summer analysts close to 2,000 and new full time analysts close to 2,000 joining us and then not have people to learn from, not to have those hallway conversations. I want them to be able to come in here, observe and absorb the culture. And in order to do that, we need to have a lot of people here. So that’s what we’ve asked our people to do. Be here more than you aren’t. And for people who have management responsibilities, be here even more."

? ? ? ? ? ? ? ? ?On the subject of remote/hybrid/in-person work, note that last week this paper, "Hybrid working from home improves retention without damaging performance", was published in the prestigious scientific journal "Nature", co-authored by Nick Bloom, a Stanford?economist?and a widely recognized expert on remote and hybrid work (having advised a number of prominent U.S. corporations on the hybrid workplace, including Microsoft, Facebook, Google, Apple, Twitter). The paper is discussed in this Fortune article yesterday, "Major study from Stanford workplace guru reveals that hybrid work cuts attrition by 33% and has no negative impact on getting promoted."

? ? ? ? ? ? ? (iii) is CEO pay excessive? some commentary in the wake of Tesla stockholders re-approving Musk's pay package (including by a former compensation committee chair at Exxon): Several articles over the past view days, since Tesla stockholders last Thursday re-approved Musk's $56 billion or so pay package, commenting on the rising CEO pay. Below is a sampling. From this FT article on Sunday, "US executive pay rises at fastest rate in 14 years":

? ? ? ? ? ? ? ? ? ? ?"US bosses’ pay is increasing at the fastest rate for at least 14 years, according to new figures which critics say illustrate how ballooning reward packages such as Elon Musk’s risk exacerbating social inequality. So far in 2024, median chief executive pay at S&P 500 companies has risen by 12 per cent, according to ISS Corporate,?part of proxy adviser Institutional Shareholder Services. That compares with a 4.1 per cent year-on-year increase in US wage growth, according to official figures.?

? ? ? ? ? ? ? ? ? ? ? "Musk this week secured an emphatic victory in a shareholder vote on his $56bn package of stock options — the largest in US history. Musk’s win — the vote ratified a pay package first made in 2018 — sends executives a message that?“the sky’s the limit here?.?.?.?you can earn as much as you want to”, according to William George, a former compensation committee chair on Exxon’s board and former chief executive of Medtronic. Executive pay?“has gotten out of control”, George said. “This is going to cause a further split in our country between the haves and the have nots. This is a grave concern to me because I think there will be a loss of trust [in companies].”?

? ? ? ? ? ? ? ? ? ? ? "Robin Ferracone, chief executive of Farient advisers, a pay consultancy, saidburgeoning executive pay awards were largely being driven by?“companies wanting to keep their CEOs from taking phone calls from [rivals’] search committees”.......George said he was “disappointed” by major investors, such as BlackRock and Vanguard, which?“don’t step up” against excessive executive pay awards.......

? ? ? ? ? ? ? ? ? ? ? ? “There is a contagion effect with respect to executive pay. One big pay package seems to generate another,” said Jill Fisch, a professor at the University of Pennsylvania’s law school. But following the Musk vote, “I don’t think there is a big contagion effect here,” she said. “The shareholder vote inevitably is going to send a mixed message,” in part because it is looking backward at pay awarded in 2018 and that Musk is a chief executive who?“is in a class by himself”. “It would be really hard to look at whatever the vote is and say I know what that is going to mean for some other executive.”

? ? ? ? ? ? ? ? ? From this Monday's Fortune CEO Daily Newsletter, "Americans think CEOs make too much money, but investors have approved 99% of pay packages":

? ? ? ? ? ? ? ? ? ?"While most Americans think public-company CEOs are paid too much, investors have approved 99% of CEO pay packages brought to a vote this year. Approval for Elon Musk’s record-breaking pay package is the norm.....That U.S. public company CEOs now make nearly 200 times more than the average U.S. worker—and multiples more than peers in other countries—reflects this emphasis on equity-based incentives.......

? ? ? ? ? ? ? ? ? ? "There’s nothing wrong with incentivizing leaders to build long-term value. The question is whether it’s necessary to pay so much......There’s no easy answer here. Investors hate to rock the boat when their fortunes are rising, too, and they’re less inclined to begrudge leaders their billions when they founded the company. But it’s worth considering what motivates leaders to build great companies that have a lasting impact and sustainable profitability. When I first interviewed Elon Musk almost 15 years ago, his goal was to enable human habitation on Mars and solve tough technical problems. Money was simply a means to getting things done. Maybe that’s still the case, and it doesn’t matter how much he’s paid as long as his investors get rich along the way. But populist leaders thrive in environments where people think the system is unfair,?and employee engagement has long been tied to the same. People don’t work as hard when they feel their workplace is inequitable and too many of the rewards are being claimed by too few at the top."

? ? ? ? ? ? ? ? ?From the FT "Unhedged" column on Monday:

? ? ? ? ? ? ? ? ? "Inflation is still running out of control in at least one area: executive comp. The Financial Times reported yesterday that CEO pay at S&P 500 companies is up 12 per cent this year. I worry less about this from the point of view of equity than from the point of view of rationality. The relationship between executive skill and company performance is not very well understood. Faced with this, boards pay CEOs extravagantly in order to create the appearance of leadership excellence. The worry is that the CEOs start to believe their brains are as big as their pay cheques. Know a CEO who is worth every penny?"

? ? ? ? ? ? ? ? ? From this Fortune article on Monday, "Elon Musk and his fellow CEOs are outpacing their workers with fastest pay growth in 14 years—but some still justify massive pay packages by ‘fairness’":

? ? ? ? ? ? ? ? ? "......Despite more than a decade of controversy, median CEO compensation at the 500 largest S&P companies increased at its highest pace in at least 14 years in 2023 according to figures from Institutional Shareholder Services cited ?by the Financial Times?on Sunday. The debate over high CEO pay in America has raged for years, as proponents argue the free market sets the level while critics claim it is untethered from reality given that U.S. executives’ peers in fellow industrialized nations earn a fraction of what they take home......

? ? ? ? ? ? ? ? ? ?"This controversy has taken on new dimensions amid Elon Musk’s campaign to “restore Tesla's stockholder democracy” by ratifying his 2018 pay package.?Comprised of stock options with deeply discounted strike price, it’s worth on balance nearly $8 billion per year.?

? ? ? ? ? ? ? ? ? ?"A decade ago the late vice chairman of Berkshire Hathaway, Charlie Munger, pushed back against the idea that massive pay was sometimes justified in order to sufficiently incentivize executives. “Do you really think that a man who craves power and significance, likes decision-making and running a big company, has one of the important public ranks in America and makes $5 million a year—do you really think he would work a lot more effectively if you raise him to seven?” Munger told CNN in 2014. “I think the whole thing is insane.”........Munger argued the system had an inherent flaw: With high compensation for non-executive directors in exchange for their cushy and lucrative seats on corporate boards, these individuals were often happy to grant ever larger CEO compensation deals—“a daisy chain of reciprocity,” as he saw it........"

? ? ? ? ? ? ? ? ? And finally, from this FT article on Monday, "Business school teaching case study: executive pay and shareholder democracy":

? ? ? ? ? ? ? ? ? "Across the western world,?big pay rises for chief executives have triggered shareholder dissent......These debates about executive pay, on both sides of the Atlantic, raise questions about the checks and balances on remuneration. ISS research found that chief executive officers’ pay went up by 9 per cent in the US in the first part of 2024, even when company performance went down. And, in response to a widening pay gap between US CEOs and their European counterparts, many FTSE 100 companies have also proposed significant pay rises this year......

? ? ? ? ? ? ? ? ? ?"Research on the effects of CEO pay on performance is extensive but many questions remain. Some work suggests that long-term stock options most effectively align incentives between shareholders and executives, and that large differences between senior and junior employees may be associated with higher long-term profitability. Other studies warn that high pay and large differentials may undermine the extrinsic motivation of top executives and hurt employee morale.....To many critics, then, shareholder democracy is failing in arbitrating on fair executive pay."

? ? ? ? ? ? ? ?(iv) latest data on the say-on-pay vote during the 2014 proxy season (as of May 31)/trends in say-on-pay voting:?

? ? ? ? ? ? ? ? ? (a) For a list of failed say-on-pay votes during this proxy season at some prominent U.S, companies, as well as some where the support was very low, see item (ii)(b) from May 29/24. Some up-to-date data on the say-on pay vote during the 2024 proxy season,?current to May 31, appears in this article by executive compensation consulting firm Pay Governance, "Current Trends in Executive Compensation Based on the 2024 Proxy Season", posted last Thursday on the Harvard Law?School?corporate governance blog: 5

? ? ? ? ? ? ? ? ? ? "Year-to-Date SOP Voting Results for 2024: As of May 31, nearly 70% of the S&P 500 and 50% of the Russell 3000 have reported their SOP results for 2024. ?ISS continues to support the overwhelming number of those proposals, roughly 92% of proposals filed to date.?This level of support is a meaningful uptick from last year’s results (90.5% for the S&P 500 and 88% for the Russell 3000) and generally would be the highest in the past decade for both groups if it is sustained for the rest of the year.?

? ? ? ? ? ? ? ? ? ? "While the lack of ISS’s support does not mean automatic failure, it does make the difference between overwhelming (nearly 95%) and “weak” support (roughly 65%). Both ISS and Glass Lewis define “weak” support as being below 80%,?with the expectation such companies will conduct extensive shareholder outreach, appropriately respond to investor feedback and provide thorough disclosure of the process as well as views heard.?Only 3 S&P 500 and 11 Russell 3000 companies have failed SOP to date, averaging around 37% support.? These failure rates are <1% of proposals voted, which would be a marked decline, if maintained, from the 2-3% failure rate of the past six years."

? ? ? ? ? ? ? ? ?(b) Last Thursday, compensation consulting firm?Semler Brossy posted?on its website this client memorandum, "How Should Compensation Committees View 2024 Say on Pay Results?" Below is from the section, "On-The-Ground Trends in Say on Pay Voting":

? ? ? ? ? ? ? ? ? ? ? ? "As noted up-front,?the Say on Pay failure rate this year is at a historic low. Most of the interesting takeaways from this season are buried deeper in the results for companies receiving support below 75%. We interpret many of this season’s low vote examples as compensation committees exercising situational judgment in when and how to step outside of the well-established “rules” set forth by investors and proxy advisors. However, a subset of examples stands out to us where investor expectations may be slightly heightened relative to prior years.

? ? ? ? ? ? ? ? ? ? ? ? ? "The first interesting takeaway is the rate of “split” ISS and Glass Lewis recommendations among the group of companies receiving less than 75% support (i.e., one proxy advisor recommending “For” and the other “Against”). We identified 80 Russell 3000 companies that received Say on Pay vote support below 75% and had available ISS and Glass Lewis recommendations through May 21st. 40 of these cases (50%) had split recommendations between ISS and Glass Lewis (versus 33% in 2023, n=237). Further, a majority of companies (58%) receiving support below 75% thus far in 2024 received a “For” recommendation from at least one proxy advisor. These two data points from 2024 illustrate the nuanced differences in the assessments of ISS and Glass Lewis. Gone are the days when securing a “For” recommendation from at least one proxy advisor could put the compensation committee at ease.

? ? ? ? ? ? ? ? ? ? ? ? ?"On a more granular level, this year’s results include companies that received depressed votes (i.e., <75% support) due to one-time awards, non-rigorous incentive goals, adjustments to incentive plan outcomes, and the use of pay models employing “guided discretion.” Some key themes we have noticed this year are:

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?-- Heightened Scrutiny of Special Awards:?the proxy advisors appear more interested in the performance-based weighting, goal rigor, and vesting cadence of one-time awards than in prior years (in addition to their continued focus on the magnitude of these awards). The historical preferences for one-time awards were that they be 100% performance-based, vest over a timeframe of three or more years, and be sized at less than 1x an annual equity grant.?It may no longer be sufficient to expect a “For” recommendation for a majority performance-based one-time award with only a three-year performance period,?particularly if the performance hurdles are deemed non-rigorous. It is also no longer a safe bet to assume that a one-time award to a non-CEO officer will go without a critical evaluation.?

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? – Continued Emphasis on Goal Rigor:?this trend is a continuation of themes from prior proxy seasons, but ISS, in particular, appears to be looking closer at the rigor of incentive goals relative to prior year actual outcomes and whether proxy disclosure comprehensively describes the goal-setting process (and any relevant information or judgment companies use in setting performance targets). Investors and proxy advisors have historically commented unfavorably when target payouts are provided for median performance in relative Total Shareholder Return (TSR) incentive designs,?but it appears that this goal-setting approach may now be a stronger “swing factor” that sways a recommendation from a 'For' to an 'Against'......"

? ? ? ? ? ? ? (v) press releases/SEC filing of the day:?

? ? ? ? ? ? ? ? ? (a) The Bank of New York Mellon Corporation (now branded as "BNY": see (ii) above) announced yesterday in this?Current Report filed with the SEC the?appointment of a new Chief Information Officer, as follows:

? ? ? ? ? ? ? ? ? ? ? ?"On June?18, 2024, The Bank of New York Mellon Corporation announced that Leigh-Ann?Russell will join the Company as Chief Information Officer and Global Head of Engineering?with an expected effective start date of September?15, 2024.?Ms.?Russell will succeed Bridget Engle, Senior Executive Vice President, Chief Information Officer and Global Head of Engineering and a named executive officer of the Company.?On June?12, 2024, the Company determined the terms of Ms.?Engle’s departure consistent with the Company’s applicable policies";

? ? ? ? ? ? ? ? ? (b) Nasdaq-listed, online financial platform LendingTree, Inc. announced yesterday in this press release?the appointment of a new CFO from inside the company, as follows:

? ? ? ? ? ? ? ? ? ? ? ?"LendingTree, Inc. is the parent of LendingTree, LLC and several companies owned by LendingTree, LLC and the operator of LendingTree.com, the nation's leading online financial services marketplace, announces the promotion of?Jason Bengel?to Chief Financial Officer following the departure of?Trent Ziegler on?August 9, 2024. Along with this change, LendingTree is also announcing several leadership changes to further propel the Company's strategic initiatives and growth trajectory.

? ? ? ? ? ? ? ? ? ? ? ?"After 12 years of exceptional service,?Trent Ziegler?will be stepping down from his position to pursue a new opportunity outside the Company. Ziegler leaves behind a legacy of strong shareholder relationships, optimized cost structure and the successful execution of complex financing initiatives. Jason Bengel, an integral member of LendingTree's management team and a Chartered Financial Analyst, will step into the CFO role effective as of?August 9, 2024....."

? ? ? ? ? ? ? ? ? ? ??New compensation arrangements?with the new CFO?are disclosed in the related Current Report?filed with the SEC;

? ? ? ? ? ? ? ? ? ? ?(c) Nasdaq-listed Bumble Inc.,?the parent company of the global dating and social connection apps Bumble and Badoo, announced on Monday in this press release?the?appointment of a new Chief Legal Officer, as follows:

? ? ? ? ? ? ? ? ? ? ? ? ? ?"Bumble Inc., the parent company of Bumble, Bumble for Friends, Badoo, Fruitz and Official, has today announced that Elizabeth Monteleone has been promoted to Chief Legal Officer. Monteleone has been instrumental in shaping the company’s legal and compliance function into what it is today, alongside spearheading the company’s public policy initiatives, having worked to pass laws throughout the US focused on reducing digital harassment, as well as supporting the company in its reproductive rights initiatives. As Chief Legal Officer, Monteleone will work closely with the Bumble Inc. Board of Directors and Executive Leadership Team to strengthen the organization's legal and compliance teams across the world......"

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