Archive for May, 2013

Determining the Level of Employee Engagement is Only the First Step….

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An April 2, 2013 article in Forbes by Susan Adams surfaced a study by Leadership IQ that found that “More than a third of companies are so dysfunctional, the best people don’t really care about what they’re doing and the worst people don’t know that they are doing a lousy job…. Companies should be worried about these findings… because high performers tend to thrive on feeling involved and challenged.”

Wow, 42%!   That sounds like a big number, but since we don’t know the nature of the sample, other than that “leadership IQ’s research base includes thousands of companies and their employees” it is hard to tell how broadly these results should be applied.
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Filed under: Expert Perspective - Organization Development



Should JP Morgan Split the CEO and Chairman’s Role? Now That’s a Tempest in a Teapot!

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All the discussions about JP Morgan and whether Jamie Dimon should remain as the CEO and Chairman, or if those role should be separated, miss the key and critical issue that this just one point out of perhaps 80 or more variables that determine whether a company is or will be properly governed by its board.

Here are just two of the many important issues to examine with regard to JP Morgan:

1) What is the board culture? Is it participative? Are directors encouraged to be actively engaged, or is it compliant?
2) Why is there no succession plan in place for the CEO position at JP Morgan? Whether the CEO is 50 or 70 years or age, whether they are star performers or just average, every company (and especially every publicly traded company) must have a succession plan.

So as this story plays out, and the shareholders’ vote is revealed today (which we are predicting will be in favor of continuing to combine the roles of CEO and Chairman), we too will examine these and other important consideration around board governance.

At Grahall we do not over simplifying an issue. We will provide you with tangible, empirical evidence based on expansive and thoughtful research and our deep experience working with companies of all sizes, in all industries and at all levels of maturity. To access our Board of Director’s Research Series click here.

For a preview of our thinking see Michael Dennis Graham’s book Board of Directors Governance & Rewards or call Michael at 917.453.4341

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Ask Not How Much, Ask Why

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According to a March 31, 2013 article in the New York Times by Susanne Craig: “Since the financial crisis, compensation for the directors of the nation’s biggest banks has continued to rise even as the banks themselves, facing difficult markets and regulatory pressures, are reining in bonuses and pay.”

Well, “reining in” of executive pay might be a bit of an exaggeration, but there is no question that the Chairman’s role and other board members of Wall Street firms have lucrative pay packages. And over the past several months, or even years, with a growing portion of director pay made in stock (and with share prices for these firms soaring), director pay has increased. But the bigger question is not “how much” but “how and why”.

As Michael Graham shared in his recently published book Board of Directors Governance and Rewards, “We believe that boards don’t get the respect they deserve for the success of the businesses they oversee, but neither are they held much accountable when the businesses they oversee flounder… If the business strategies work, then the CEO should get credit for execution and the Board for foresightedness (not just the credit for hiring the right guy). If business strategies fail then the CEO should carry the blame for poor choice of strategy or poor implementation and the Board for failure to appropriately examine the plans (not just the blame for overpaying the CEO).”

And speaking of how CEO pay drives behaviors, the same is true for director pay, but for directors there is a different angle. Directors (much like US congressmen) set their own pay. It is part of their responsibilities for corporate governance. Therefore board governance and board pay cannot be decoupled. Further, the most important consideration for both governance and pay is the idea of contribution: how does the board contribute to the company and how does each director contribute to the work of the board, and how  these contributions drive board pay.

There is a wide spectrum of board contribution levels from “hands off” to “hands on.” In Grahall’s ground breaking Board of Directors Research Series we found that a board’s relationship with the company can be measured and arrayed to give a quantitative understanding of its “contribution” level. Grahall identified 40 variables which are gleaned from proxies to represent the degree of contribution of each board.

With this large number of variable, there is a nearly infinite number of combinations and permutations of the influencing factors that set the threshold conditions for board governance and reward program success. Board governance and reward program design needs to be an active, dynamic, adaptive, and “situational” effort. Where there are different levels of contribution, the board reward levels should also be different.

Pay must be equal to contribution, and contribution must be aligned with governance, and governance aligned with shareholder interest. So if director pay appears high it is only “too high” if the contribution is less than the pay should demand. The reward strategy needs to be consistent with the level of contribution. High contribution should generate high compensation and vice versa.


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