niri southwest ceo succession and shareholder activism
TRANSCRIPT
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EdwardFerris,PartnerHedgeFundSolutionsLLC
.
. .
CEOSUCCESSIONPLANNINGANDSHAREHOLDERACTIVISM
NationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010
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Wewillrunasearchasfastaswecan,butinsuringwegetthebest
August 6th at 6:00PM ETCNBC Special Report
possible
candidate.
We
will
look
at
both
internal
and
external
candidatesinthatprocess.
We ave ust orme acomm ttee,sowor w eg nont s
immediately.Butweregoingtodiverightintoit.
outstanding,whowecanpairupwithatrulygreatcompany.The
companyisingreatshape,itsextremelywellpositionedforthefuture.
Wereexecuting
on
the
strategy.
The
performance
is
strong,
so
were
lookatsomeonewhocanbothmaintainthatlevelofperformanceand
thenbuildonit.
NationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010
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NationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010
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42%ofcompanieshavenoCEOsuccessionplanCEOturnoveriscurrentlyrunnin at 14.4% er ear
46%of
successions
(in
2008)
were
unplanned
40%ofcompaniesarenotpreparedforanemergency
1,227CEOtransitionsin2009
48%ofdirectorscurrentlyseeCEOSuccessionasthesole
responsibilityof
the
CEO
Morethan60%ofcompaniesreportthattheCEO
recommendshis/hersuccessor
57%ofdirectorssaythattheydonotknowwhentheirCEO
plansto
step
down
Only16%ofdirectorsbelievetheirBoardiseffectiveatCEO
successionplanning
NationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010andTheRoleofTheBoardinTurbulentTimes,TheConferenceBoard,2009
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ExternalCEOsareoftenpaidsignificantlymorethaninternallygroomed
ones
(~75%+);
insiders
tend
to
deliver
better
results
40%ofCEOsarefiredorretiredwithin18months;64%nevermakeitto
t eir ourt anniversary
Itisestimatedthatthefaultyintegrationofaseniorexecutivecancosta
Theleadereffectcanaccountforupto40%ofvarianceinperformance
andvalue
CEOs tendtoachievemoreinthefirsthalfoftheirtenure
NationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010andTheRoleofTheBoardinTurbulentTimes,TheConferenceBoard,2009
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Executive Flameouts
Hurd
HP
Dunn
HP
Kozlowski
Tyco
Couglin
WalMart
Stonecipher
Boeing
Everson
RedCross
Albrecht
HBO
Heyer
Starwood
Brown
BP
Moffatt
IBM
Unplanned Transitions
uccess on ascos
NationalInvestor
Relations
Institute
(NIRI)
Regional
Conference,
New
Orleans;
August
19th,
2010
SeeAppendixfordetails
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A Fr n i r f r r rn n
TheOctober2009SECreleasereframesCEOsuccessionasariskmanagement
issueandplaceditsresponsibilityfirmlyintheBoardroom
NolongerwilltheSECconsiderCEOsuccessionanoperationalmatter.Insteaditis
companyisnotadverselyaffectedbyavacancyinleadership
Oneoftheboard'skeyfunctionsistoprovideforsuccessionplanning.
SecuritiesandExchangeCommission,StaffLegalBulletinNo.14E;October27,2009
NationalInvestor
Relations
Institute
(NIRI)
Regional
Conference,
New
Orleans;
August
19th,
2010
Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010
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Aboardsbiggestresponsibilityissuccessionplanning.Itstheoneareawheretheboard is com letel accountable and the choice has si nificant conse uences ood
andbad,
for
the
corporations
future.
TheRoleoftheBoardinCEOSuccession:ABestPracticesStudy,NationalAssociationofCorporateDirectors(NACD)2006
Theresponsibilityforsuccessionplanningbelongsintheboardroom,andnowhereelse.TheRoleoftheBoardinTurbulentTimes,TheConferenceBoard2009
2010ProxySeasonCEOSuccessionNationalInvestorRelationsInstitute(NIRI)RegionalConference,NewOrleans;August19th,2010
Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010
PlanningShareholderProposals
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A(corporate)boardshouldapproveandmaintainadetailedCEO
successionplanandpubliclydisclosetheessentialfeatures.
PoorCEOsuccessionplanningandinadequateinternaldevelopment
ofmanagerialtalentcouldresultinapanickedboardvastly
overpayingareplacementchiefexecutive.
Shareownerswould
be
able
to
assess
the
strength
and
suchpolicieswerepubliclydisclosed.
NationalInvestor
Relations
Institute
(NIRI)
Regional
Conference,
New
Orleans;
August
19th,
2010
Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010
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8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism
10/20
Connecticut Retirement Plans and Trust Funds CRTPF
Becausepoorlyplannedtransitionscanbehighlydisruptiveandmayputthecompanyatrisk,failure
toengageinsuccessionplanninghasrealconsequencesforshareholders.
Ananalysisoftheboardsroleinsuccessionplanningwouldbeusefulinenablinginvestorsto
en se . app er
ConnecticutStateTreasurerand
ConnecticutRetirementPlansandTrustFunds(CRPTF)PrincipalFiduciary
understandhowtheboardmanagesrisk.The(SEC)shouldrequirecompaniestodisclosewhetherit
hasapprovedandmaintainsaCEOsuccessionplanand,ifithas,todescribethekeytermsofthat
plan.Also
of
value
to
investors
would
be
disclosure
about
whether
CEO
succession
planning
has
Inadequatesuccessionplanningcancertainlyresultinhighlevelsofexternalhirestartingpay,but
canalsobeindicativeofBoardsthatarereticenttochallengesittingCEOsandthatinturncan
, , ,
manifestin
disproportionate
CEO
pay
slice,
over
generous
change
in
control/severance
provisions
andentrenchedmanagement.
CRPTFadvocatestyingsuccessionplanningtoCEOandboardperformancemetrics,and
NationalInvestor
Relations
Institute
(NIRI)
Regional
Conference,
New
Orleans;
August
19th,
2010
disclosingthesetoshareholders.Forcitations,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010
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ActivistHedgeFunds: 2009wasayearforactivistfundstorestructure,rebalance,rebuildandrefocus
Newmarketing
campaigns
to
raise
capital
and
create
awareness
are
underway
Recentexamplesofresurgence(JanaPartners,Ramius,SpotlightAdvisors,Barington
Capital,RileyInvestmentManagement,newactivists)
HybridFunds Private+PublicEquity:
Increasingnumberofprivateequityfundsfiling13Ds
ImprovedM&AenvironmentwillpositionPEaswhiteknightonceagain
TraditionallyPassiveFunds: Increasedlevelofactiveinvolvement:Governance,DirectorandManagement
NationalInvestor
Relations
Institute
(NIRI)
Regional
Conference,
New
Orleans;
August
19th,
2010
, , ,
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EconomicRecovery:
esp e ow , : rongcorpora e a ances ee san access ecre mar e sw
driveactivist
efforts
to
return
cash,
boost
dividend
payouts
and
examine
strategic
alternatives
o t ca egu atory an scape: Midtermelections;DoddFrankAct;andtheperceptionofcorporategreedand
malfeasancewill
continue
to
encourage
activism
SECiscontinuingtoshiftthebalanceofpoweroutoftheboardroomandtoward
shareholders
Levera eO ortunities: RiskoversightandCEOsuccessionplanningwillbeaddedtoshareholderproposals
Activistswillleveragegovernancedeficienciestosecureagendavotes
NationalInvestor
Relations
Institute
(NIRI)
Regional
Conference,
New
Orleans;
August
19th,
2010
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Wynnefield Group Proxy to Crown Crafts Inc.
July 2010
NationalInvestor
Relations
Institute
(NIRI)
Regional
Conference,
New
Orleans;
August
19th,
2010
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8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism
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Spotlight/Clinton Settlement Agreement with Red Robin
March 2010
NationalInvestor
Relations
Institute
(NIRI)
Regional
Conference,
New
Orleans;
August
19th,
2010
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8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism
15/20
CALSTRS/Relational Investors to Occidental
July 2010
NationalInvestor
Relations
Institute
(NIRI)
Regional
Conference,
New
Orleans;
August
19th,
2010
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8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism
16/20
Know(andinfluence)Providehighlevel
disclosureofyourCEO
ShareholderDisclosurewhattheBoardsrole
inCEO
succession
planningshouldbe
successionplanning
processto
reassure
shareholdersofthe
BoardOversightPractices
CEOSuccessionProcess
Understandwhy Knowthatthereisno
s are o ers
care
aboutCEOsuccession
planning
ot er
o
e
t e
andthatinternal
developmentisa
multi ear rocess
NationalInvestor
Relations
Institute
(NIRI)
Regional
Conference,
New
Orleans;
August
19th,
2010Forguidance,seeExaminingtheImpactofSECGuidanceChangesonCEOSuccessionPlanning,TheConferenceBoard,April2010
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8/9/2019 NIRI Southwest CEO Succession and Shareholder Activism
17/20
UnplannedTransitions
SuccessionFiascos
NationalInvestor
Relations
Institute
(NIRI)
Regional
Conference,
New
Orleans;
August
19th,
2010
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