Correcting Founder’s Syndrome: Executive Compensation Practices at Ralph Lauren

Ahead of the Ralph Lauren AGM, CGLytics looks at how CEO pay has changed since the founder’s exit, and how the nominations change the board composition.

Ralph Lauren Corporation, a global leader of premium lifestyle products, is scheduled to hold its 2019 Annual General Meeting of Shareholders (AGM) on August 1, 2019. Shareholders attending the AGM will vote on the following resolutions:

  • The election of 4 directors to serve until the 2020 Annual General Meeting of Shareholders;
  • The ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending March 28, 2020;
  • The approval, on an advisory basis, the compensation of the Company’s named executive officers and the Company’s compensation philosophy, policies, and practices;
  • The adoption of the Company’s 2019 Long-Term Stock Incentive Plan.

 

Election of Directors:

Ralph Lauren has two classes of directors, Class A and Class B. At the upcoming AGM, four Class A directors will be proposed for election: Frank A. Bennack, Joel L. Fleishman, Michael A. George, and Hubert Joly. We note that in 2018, Ralph Lauren increased the size of its Board with the appointment of three new directors, namely Michael A. George, Angela Ahrendts, and Linda Findley Kozlowski, ostensibly to expand the Board’s “diversity of skills and experiences”. These three directors bring to the Board Leadership, Executive, and Industry/Sector expertise, with Michael A. George and Linda Findley Kozlowski being active CEOs in two retail companies and Angela Ahrendts being a former executive of Apple, Burberry Group plc and Kate Spade & Company. In terms of skills, the three individuals bring about Marketing, Sales and Operations knowledge. Nevertheless, the Board still appears to lack Technology and Financial expertise.

However, in addition to the diversity of skills that the addition of the new directors has brought to the board, the company also now maintains a gender diversity level of 50%, well above the market standard for the United States.

Source: CGLytics Data and Analytics

Executive Compensation:

The third resolution in the agenda is a shareholders’ advisory vote to approve the Company’s executive compensation.

After the Founder, Ralph Lauren, stepped down from his position as CEO, Ralph Lauren has gone through two CEO changes, with Stefan Larsson serving from November 2015 to May 2017, and Patrice Louvet serving since July 2017. As can be seen from the absolute comparison chart generated by CGLytics’ Pay for Performance module, there appears to be a misalignment between CEO compensation and one-year total shareholder return between 2008 and 2015. However, it appears that this misalignment has reduced since Mr. Lauren left the position of CEO. Furthermore, we also see that the total realized compensation for the CEO thereafter has been reduced significantly.

Source: CGLytics' P4P Modeler

CGLytics’ data and analytics are trusted and used worldwide by Glass Lewis, the leading independent proxy advisor, as a basis for their research on companies

CEO Compensation Package Breakdown

Historically, the CEO’s compensation package has primarily focused on his STI opportunity (between 2009 and 2012). However, since then, the CEOs compensation package breakdown has shifted towards long-terms incentives, which now form a greater component of the CEO’s compensation package.

Additionally, in 2017 the performance measures of LTI grants shifted from 3-year Cumulative Operating Margin and Operating Margin to 3-year Cumulative Return on Invested Capital (ROIC) and 3-year Relative Total Shareholder Return (TSR) in 2018. Ralph Lauren also added Global digital revenue as a new measure for STI grants, a modifying KPI that could result in an “adjustment of bonuses upwards or downwards by 10%.”

Source: CGLytics' P4P Modeler

Relative Positioning

In comparison to Ralph Lauren’s own disclosed peer goup, the Company’s CEO pay appears now to be line with its peers. Additionally, when reviewing the company’s relative positioning among its peers, there also appears to be a pay for performance alignment between Ralph Lauren’s 3-year TSR and compensation paid to its CEO.

RalphLauren4
Source: CGLytics' P4P Modeler

Ralph Lauren also proposes adopting a 2019 Long-Term Stock Incentive Plan, under which the Company awards equity compensation to executive officers, to replace the current Ralph Lauren Corporation 2010 Amended and Restated Long-Term Stock Incentive Plan. Under the new plan, LTI awards will be determined based on 3-year Cumulative Return on Invested Capital (ROIC) and 3-year Relative Total Shareholder Return (TSR).

Overall, we find that although the company has seen shifts in executive leadership over the past few years after Mr. Lauren left the reigns of the company to his successor, we also find that the company’s executive compensation programs have fallen more in line with market norms, correcting a former pay for performance misalignment that extended under Mr. Lauren’s leadership.

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Sources

CGLYTICS DATA AND ANALYTICS   RALPH LAUREN 2019 PROXY STATEMENT

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CSR Limited: Strike One on Remuneration Report

At the CSR Limited AGM in June 2019, the remuneration report received 34% of votes cast against which constitutes a first strike for the purposes of the corporations ACT 2001. CGLytics looks at the alignment of pay against performance and some of the key drivers behind the investor response.

CSR Limited, a major Australian industrial company held its Annual General Meeting on June 26, 2019. The board presented three ordinary resolutions and one special resolution to its shareholders. Included in the ordinary business proposal was to consider the re-election of non-executive director, Matthew Quinn, this year. The company also sought to receive shareholders’ support for the financial report, the director’s report and the auditor’s report for the financial year. Another ordinary resolution that was proposed by the board was to approve and adopt the remuneration report for the financial year ended March 31, 2019.

For the special resolution, the board advised shareholders to consider the granting of long-term incentives for Julie Coates, who will be taking up the position of managing director this September 2019.

The board’s expertise ahead of the AGM

CSR’s corporate governance states that the company seeks to maintain a board composed of directors that have a range of collective skills and experience to ensure corporate development. CSR also elaborates that it considers individuals that are highly-experienced in manufacturing, finance, law and other sectors that the company seeks to pursue in the future.

CSR Board Skills Matrix
Source: CGLytics Data and Analytics

Using the Board Expertise functionality of CGLytics’ platform, we were able to gain insight on the current skills of the members of the board. The Skills Matrix functionality also aids companies to identify any skills gaps in its current matrix. For CSR, of the six directors currently sitting on the board, the graph shows that CSR’s strongest expertise is Finance. The second strongest suits of expertise include Corporate Development, Operations, Project Management and Sales. One area where the company is missing a director with specific expertise is in Governance. The company also lacks directors that have any relevant company Industry and Sector experience. However, the upcoming appointment of a new managing director on September 2019, Julie Coates, may be able to alleviate this missing element to the board’s skill set.

Julie Coates’ Expertise from the CGLytics platform

Board Expertise

Pay for Performance

Another board resolution the company was seeking approval on was the remuneration report and financial report. CSR promotes consistency in the remuneration of senior executives by ensuring that the company and individual performance are aligned with their incentives. The company focuses on compensation that generates long-term value for senior executives. The company only uses two performance criteria in the determination of executive compensation: Total Shareholder Return (TSR) and Earnings Per Share (EPS) for the long-term incentive plan in which both have equal weight of 50 percent.

The board states that absolute TSR instead of relative TSR helps align shareholder interests by keeping senior executives focused on increasing earnings and share price. On the other hand, the EPS helps measure the continued growth in earnings of the company and is parallel to the interests of the shareholders.

The CGlytics Absolute Positioning tool allows insight into the relationship between the two performance conditions and the Managing Director’s granted compensation from 2013 to 2018. As indicated in the graph below, there exists significant volatility in the movements of all performance criteria used in the determination of executive pay: TSR and EPS. From 2015 to 2016, CEO pay, EPS and TSR increased. The latter especially increased by 91.6%. From 2017 to 2018, CEO pay increased by 48% and TSR fell by 46.5%.

CSR CEO pay vs EPS and TSR
Source: CGLytics Data and Analytics

CGLytics’ data and analytics are trusted and used worldwide by Glass Lewis, the leading independent proxy advisor, as a basis for their research on companies. Find out more.

The CGLytics Relative Positioning Pay for Performance Evaluation tool compares CSR’s CEO compensation with that of the company’s own peer group against the peer group’s three-year TSR. The Pay for Performance evaluation demonstrates that CSR’s Total Realized Compensation appears misaligned compared to its peers. The company’s Total Realized Pay ranks above median at 69th percentile while three-year TSR ranks in the 15th percentile.

Source: CGLytics Data and Analytics

Granting of Rights

In the Annual report for the financial year ended March 31, 2019, CSR disclosed that it developed a performance-related pay which includes both the Short-Term Incentive (STI) and Long-Term Incentive (LTI) plans, both of which are measured against performance conditions.

The plan would utilize the same performance criteria as mentioned above: TSR and Earning Per Share (EPS) over a three-year performance period (April 1, 2019- March 31, 2022) in financial year-end 2020. The two performance conditions will be weighted at 50 per cent of the overall grant.

The board uses an annual growth rate of 14 percent for 75 percent vesting and an 18 percent stretch for a full vesting of rights for the TSR condition. The board also uses a compound growth rate of 5 percent target for a 50 percent vesting and 10 percent stretch for a 100 percent vesting for EPS condition. There was no change in the hurdles applied in 2017, 2018 and 2019.

The board is seeking for the granting of 360,241 performance rights for Julie Coates, the newly appointed managing director. The amount is pro-rata of her one-year long-term incentive remuneration based on her date of appointment on September 2, 2019. The board also proposes that Ms. Coates is entitled to a maximum LTI award of up to 120 percent of her total fixed remuneration.

Highlights of the AGM

At the AGM which took place on June 26, 2019, all the resolutions were passed as ordinary resolutions. However, as suggest in the potential Pay For Performance misalignment demonstrated above, the remuneration report received 34% of votes cast against which constitutes a first strike for the purposes of the corporations ACT 2001.

CGLytics offers the broadest, up to date global data set and powerful benchmarking tools to conduct comprehensive analysis for executive compensation decisions and risk oversight. CGLytics is Glass Lewis’ source for global compensation data and analytics. These analytics power Glass Lewis’ voting recommendations in both their proxy papers and their custom policy engine service.

For more information on how CGLytics’ can support modern governance decision-making and potentially identify any areas of risk, click here.

 

Sources:

CGLYTICS DATA AND ANALYTICS

CSR LTD 2019 NOTICE OF MEETING

CSR LIMITED ANNUAL REPORT

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Facebook: Increasing Shareholder Pressure Exerted on Zuckerberg’s Role as Chairman

In this article, CGLytics examines the increasing pressure on Facebook to split the roles of Chair and CEO from founder Mark Zuckerberg and the implications on the company’s future.

Mark Zuckerberg has been Chief Executive Officer of Facebook, Inc. since he founded the company in 2004 and has held the combined position of CEO/Chair since the Company’s IPO in 2012. Shareholders have increasingly voiced their concerns regarding the combination of both roles. Those opposing the combined CEO/Chair position state that it gives Zuckerberg too much control over the company, where minority shareholders already have very little influence. Founder Mark Zuckerberg controls over 51% of the vote although he owns only 13% of the economic value of the firm. Additionally, headlines surround the billionaire founder, as Zuckerberg again failed to address a committee of international lawmakers who are amid an investigation into Facebook’s disinformation, antitrust, and privacy scandals.

Shareholders Try to Force Zuckerberg’s Hand…Again

In light of the above, several investors have banded together and filed multiple shareholder proposals for consideration at the company’s 2019 AGM, which took place on May 30th, 2019, aimed to alleviate their concerns over Zuckerberg’s influence and lack of oversight of the company. Of interest were proposal five and six filed.

Proposal Five: Proposed primarily by NorthStar Asset Management, in conjunction with other groups of shareholders, requesting that each share be given an equal vote. Currently, Class B shares (controlled by Zuckerberg and a small group of others) have 10 times the voting power of Class A shares. They continued in their supporting statement noting “since July 2018, Facebook value dropped as much as 40% due to Management and Board decisions that have not protected shareholder value. By allowing unequal voting power, our company takes public shareholder money but does not provide us an equal voice in our company’s governance…”

Proposal Six: Recommended that the Chair of the Board of Directors operates as an Independent Member of the Board. The supporting statement offers that there exists no form of checks and balances in order to limit Mr. Zuckerberg’s power. The statement continues, “we believe this weakens Facebook’s governance and oversight of management. Selecting an independent Chair would free the CEO to focus on managing the Company and enable the Chairperson to focus on oversight and strategic guidance.” It’s of importance to note that nearly 60% of the S&P 1500 has separated the roles of Chief Executive Officer and Chairperson as of April 2018. This proposal received the public support of both the Council of Institutional Investors (CII), as well as Trillium Asset Management.

Unsurprisingly, the Board of Directors has concluded with a recommendation to vote against all stockholder proposals mentioned above. However, the requests made through these proposals heavily resemble several that have been proposed in past years.

CGLytics has taken a deeper look into Facebook’s board composition and effectiveness when compared to all other companies in the US market. Utilizing CGLytics’ governance data and analytics in the specialized platform it was discovered that the key area where the company is underperforming, compared to the sector average, lies primarily in the combination of the role of CEO and Chairman.

Facebook Effectiveness Attributes
Source: CGLytics’ board effectiveness data and analysis

The zero score for the CEO/Chair criterion is in sync with the concerns of the shareholders who are seeking the dissolution of the combined position. This is also supported from the NYSE Stewardship guidelines, where the separation of the CEO/Chair position is required. However, taking all other factors into consideration, Facebook’s board composition and effectiveness is rated ‘Very Good’ and higher than the sector average. Even though the CEO/Chair combination has a score of 0, the majority of the other effectiveness attributes rank above the sector average.

The effectiveness attributes in the chart above are based on the company in question’s governance practices compared to the corporate governance code of the market in which it is primarily based (in this instance, the NYSE stewardship guidelines). The thresholds above are set by empirical research performed by CGLytics. Each attribute receives a score from 0 to 100, with a score of 100 reflecting the best governance practices.

The health score of Facebook and of the market is calculated as the average scoring of all of the effectiveness attributes, respectively. Facebook has an average score of 76, with three effectiveness attributes (Nationality Dispersion, Board Independence and CEO/Chair combined) falling under 60, two effectiveness attribute (Gender Equality, Director Interlocks) at 60 points, and the rest of the effectiveness attributes at 100 points.

Source: CGLytics’

Given the repeated failure of such proposals at the company’s most recent AGM, the future of Facebook seems to remain in the hands of Mark Zuckerberg. It comes as no surprise that these proposals would have similar results as those at previous AGMs, given Zuckerberg’s voting power at the firm. However, the increasing regularity of these types of proposals have been making headlines around the company’s governance structure and posing serious questions to the general public regarding Zuckerberg’s current and future role at the company.

Corporate boards and executive teams increasingly require a broader range of analytical tools to identify potential areas of reputational risk, even for controlled companies, which could make them the object of activist campaigns. For more information regarding how CGLytics’ deep, global data set and unparalleled analytical screening tools can potentially help you identify these areas of risk, click here.

CGLytics offers the broadest, up to date global data set and powerful benchmarking tools to conduct comprehensive analysis for executive compensation decisions and risk oversight. CGLytics is Glass Lewis’ source for global compensation data and analytics. These analytics power Glass Lewis’ voting recommendations in both their proxy papers and their custom policy engine service.

Sources

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Debenhams: The Fall of a High Street Chain

Following the entry into administration of Debenhams, CGLytics takes a look at some of the key governance analytics, and how they could have been indicators that change was needed

Debenhams is a well-known British multinational retailer which operates primarily through its numerous department stores in the United Kingdom and Ireland with franchise stores in other countries. The company was founded in the eighteenth century as a single store in London. On April 9, 2019, Debenhams went into a pre-pack administration deal in which the company was handed over to hedge fund lenders. As a result, equity holders like SportsDirect, the company’s biggest shareholder, saw their value wiped out.

Timeline of a Potential Takeover

In January 2014, Mike Ashley surprised the market by acquiring a 4.63% stake in the then struggling retailer. Despite the value of his equity dropping by 8% in January 2015, Ashley increased his stake in the company to 21% in August 2017. Two months later in October Debenhams announced that their profit dropped 44%. This decrease was largely due to the costs incurred from the implementation of a new turnaround strategy. In January 2018, the woes of the company continued when they issued a shock profit warning after weak Christmas sales and a failure to entice shoppers with cut-price goods. The market responded, and the company’s share price decreased by as much as 20%, wiping almost GBP 70m off its market value. In March 2018, Mike Ashley increased his stake to 29.7%. The move sparked takeover conjecture as a stake of more than 30% requires the launch a formal takeover bid.

Debenhams announced another profit warning in June 2018 (the third in a row for the year 2018) and then announced plans to shut down up to 50 of its of its under-performing stores over the next three to five years, putting around 4,000 jobs at risk.

With this turn of events, then-CEO Sergio Bucher and Chairman Ian Cheshire would be forced to step down from their respective offices following an activist campaign led by Michael Ashley. At the company’s AGM on December 10, 2018, the CEO had only 44.15% of support for his re-election, while the re-election of the Chairman received a similarly low level of support at 43%. The Board however asked Sergio to stay on as CEO but not as a director, serving as a blow to shareholders expectations.  In response Ashley launched a formal takeover bid which was designed to install himself as Debenham’s CEO. Most interestingly, his efforts were warded off by bondholders who handed the firm a GBP 40m lifeline. The overdraft facility from its banks and bondholders proved useful to pay its onerous quarterly rent bill and give it some much needed breathing space.

Financials sourced from CGLytics performance data

The company and its directors went into advanced talks with its lenders over a GBP 150m bailout, as a move to fend off Ashley’s offers. SportsDirect offered Debenhams an alternate GBP 150m deal if the fashion house would issue five percent of new shares to the company and appoint Mr. Ashley as director and CEO.

The company however rejected the deal, putting itself into administration on April 9, 2019.

Possible reasons for entry into administration

Lack of a clear strategy: Debenhams had about 165 stores in the United Kingdom, a seemingly large number at a time when its sales were falling and costs were rising. The company had previously outlined plans to close 10 loss-making stores within five years as its finances continued to deteriorate. Increasing consumer preference for online shopping also dealt a huge blow to the company’s overall strategy.

Aging Product Line: The retailer is best known for the Designers at Debenhams collections created over the past two decades by designers including Jasper Conran and Julien Macdonald. Some brands, including Betty Jackson, have been discontinued because they had become dated; however, replacement fashion ranges have so far lacked pulling power as shoppers take a cautious approach to spending as the uncertainty created by Brexit continued. Other factors that led to the Company’s demise include being outsmarted by more agile competitors, failure to embrace change, and their tarnished brand image. This naturally raises the questions of how and why the company’s business strategy was allowed to deteriorate to such a detrimental degree.

Conflicts of Interest on Board: Utilizing CGlytics interlocks tool, it can be noted that before the shareholder rebellion at the 2018 AGM that witnessed significant opposition against the CEO and Chairman, there were two independent directors who sat on the boards of companies in competition with Debenhams. These individuals included Ian Cheshire and David Adams. Cheshire serves as the current chairman of Maisons Du Monde while David Adams also remains the current Senior Independent Director of Halfords Group Plc.

Source: CGLytics Data and Analytics

Using the skills matrix functionality available on the CGLytics platform, we see that in December 2018, the majority of company directors lacked Technology expertise. Only one member of the Board out of nine members held technology expertise. This reaffirms the previous notion that the company has failed to catch up with market trends, especially when tracking changes in consumer preference has become so heavily reliant on technology. Moreover, board members with key positions such as the Chairman, CEO, and the Senior Independent Director all lacked financial expertise, potentially suggesting that the company’s top leadership were unable to provide sufficient oversight of the company’s accounting procedures and financial health.

Source: CGLytics Data and Analytics

Lessons Learnt

The fall of Debenhams has shed light on how having the right skills set on the board can influence the strategy and ultimate direction and of a company. Corporate boards increasingly require a broader range of analytical tools to identify the skills gap of their members, potential overboarding and competing directorships. For more information regarding how CGLytics’ deep, global data set and unparalleled analytical screening tools can potentially help you identify these areas of risk, click here.

Sources:

CGLYTICS DATA AND ANALYTICS  FT  MSN

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Growing Expectations of Director Responsibilities and Evolving Attitudes Towards Overboarding

CGLytics takes a look at how the role of the board is changing, and how directors are having to rapidly become experts in a range of topics in which they have little to no previous experience.

Overboarding has been recognised as a potential governance issue for some time, with questions over the ability of directors to discharge their duties effectively if they are over-committed to more responsibilities than they have the capacity to manage. As scrutiny increases, this issue has become a greater focus for investors as directors face an ever-increasing set of new responsibilities for which they are expected to provide oversight.

Historically, the responsibilities of board members included participation in regularly scheduled management strategy reviews, often followed by robust debate of such strategy, reviewing of financial statements, assessments of enterprise and industry-specific risks, facing the companies at which they serve, as well as legal compliance issues. However, new threats from a variety of vectors are requiring directors to rapidly become experts in a range of topics in which they have little to no previous experience. Among these new areas of potential risk that boards are increasingly expected to address, we find the most pertinent topics to be:

  1. cybersecurity risks,
  2. the impact of disruptive technologies,
  3. board members’ increasing role in investor relations,
  4. competitive intelligence, and
  5. international business experience.

The ensemble of these new responsibilities requires corporate boards to assess the skills set requisite for its own composition in order to remain competitive in an increasingly fierce global environment. The expectations of this type of board accountability, known as “supergovernance”, assumes that board members are capable of peering around every corner in order to counter all possible threats to their company.

Balancing Act 

While investor-specific policies towards the maximum number of public boards on which a director should serve are not new, increasing responsibilities for board members are leading investors to re-evaluate their previous thresholds of overboarding. Most prominently, Vanguard, the world’s second largest asset manager, has recently publicly disclosed that its voting policy stipulates to vote against an executive director (defined as a Named Executive Officer who serves on the board at which they hold the role of executive) at any outside board at which they serve. Moreover, their updated overboarding voting policy also states that they will vote against any non-executive director who sits on more than four boards in total at all boards on which they serve.

Blackrock has taken a similar position in its 2019 U.S. voting policy, allowing non-CEO directors to hold a maximum of four directorships in total at public companies. However, Blackrock will still allow a public company CEO to serve on a total of two public boards, and currently makes no distinction in the U.S. between executive directors (other than the CEO) and non-executive directors in the total number of boards on which they may serve.

Taking Vanguard’s holdings of 4,861 companies across the U.S., Europe, Canada, Japan and Australia, the CGLytics research team performance an exercise utilizing CGLytics’ data and analytics platform to assess the potential impact of this new overboarding policy on Vanguard’s proxy voting activities. We find that, globally, the implementation of Vanguard’s new guidelines would potentially lead to fairly high levels of opposition, upwards of 23%, for NEO director nominees, who sit on boards outside of the company at which they currently serve as an executive.

Source: CGLytics Data and Analytics

An examination of the current composition of Vanguard’s top 25 holdings also reveals that the implementation of their new guidelines will have an even sharper increase in potential votes against NEOs due to overboarding than during the hypothetical exercise across the full universe of Vanguard’s holdings.

Source: CGLytics Data and Analytics

Not Such a Hard Line

While such an approach may appear rather restrictive for corporate directors and many institutional investors alike, some investors mitigate the perceived severity of this approach by indicating that they will evaluate director appointees who fall outside their overboarding thresholds on a case-by-case basis. Moreover, the language included in their voting policies also makes certain exceptions should the director nominee indicate that she/he will step down from one of the outside boards on which he/she serves within a certain period after their election. Investor engagement also provides corporate directors some leeway, as the issuer-investor dialogue may allow one-off exceptions from opposition to a potentially overboarded director’s election based on the outcome of the engagement.

Finally, the question is raised as to whether these lowered thresholds might benefit corporate board members? Long gone are the days when the expectations for the role of corporate director would be to approve management’s agenda for the company, with cursory corporate oversight capacity. Due to the increasing pressure that board members face in their oversight duties, reducing the number of acceptable directorships from the investor community might provide some breathing room for directors to fully engage in their responsibilities as director. This extra breathing room could potentially allow them to better educate themselves about emerging threats facing the companies on which they serve.

Conversely, the increasing expectations and responsibilities placed on corporate boards often spring directly from the investor community itself. The growing momentum within the investor community implies and often explicitly expects directors to be fully educated on enterprise and material industry risks, as well fully focused on their responsibilities as board members in order to maximize the value of their investments.

As the balancing act between these two perspectives plays out, the issue of potential overboarding for any individual director may prove not to be black or white, but a distinction between various levels of grey. In order to help investors, corporate boards, and executive alike to distinguish between these various shades, CGLytics offers an extensive database with smart analytical tools, to easily screen for potentially overboarded directors. Being able to instantly view the board composition, and that of peers, provides insights into areas of governance practices that may pose a potential risk. In addition, CGLytics’ provides skills matrices to highlight skills and expertise strengths and shortages, director interlocks and smart relationship mapping tools to leverage networking opportunities: all in the one system.

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Corporate Governance Risk Report

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Tesla: a lesson in lion taming

In this article, CGLytics takes a look at the governance of Tesla and the measures in place to ensure consistent shareholder engagement.

Tesla’s IPO in June 2010, focused primarily on the variety of visions offered by founder, current CEO, and largest shareholder, Elon Musk. However, over the previous few years Musk’s vision has increasingly become overshadowed by the growing tensions regarding his comments on social media and mounting frustration among Tesla’s investor base.

In August 2018 Mr. Musk proposed via Twitter to take the company private at a volatile stock price of USD 420 after growing frustration with his shareholders, primarily those engaged in short-selling Tesla stock. Following this tweet, the Securities and Exchange Commission (SEC) then accused Musk of misleading shareholders, an action that eventually cost Musk USD 20 million in fines, as well as his position as Chairman of the Board.

During the first quarter of 2019, the SEC claimed Musk violated the court settlement via his statements on Twitter, which required him to receive board approval before making any public statements that may potentially effect Tesla’s stock price. This drama played out over March and into May 2019. However, a U.S. Federal judge recently held that Musk was not in contempt of court following the tweet, and approved a settlement between Musk and the SEC. The details of this settlement outline that Musk must now seek pre-approval from a securities lawyer for the content presented by Musk in social media, as well as his communications during investor calls.

Turnaround

Earlier in 2019, Musk informed reporters that he did not expect Tesla to post a profit in Q1 2019, even though the company has only experienced two profitable quarters since going public. In a potential reaction to this, Tesla has switched its market strategy and is repositioning itself to appeal to mass affordability, dropping prices on certain models to as low as USD 30,000. The company is also planning to raise funding through both debt and equity issuances, with plans to sell 3.1 million shares, with Musk himself buying 102,880 shares at a total of USD 25m.

In addition to the change in business strategy and fundraising efforts, Tesla recently announced a reduction in the size of its board from 11 members to seven. Consequently, Brad Buss, Antonio Gracias, Stephen Jurvetson, and Linda Johnson Rice will not seek re-election at the 2019 and 2020 AGMs. The reduction has been positioned as a measure to increase the board’s agility and efficiency.

A re-orientation of the company’s executive compensation practices also might have had an impact on the change in the company’s business strategy. According to CGLytics corporate governance data, since going public in 2010, Musk only received stock-based awards, with the first such award taking place in 2012. In 2012 the Board of Directors okayed the “2012 CEO Grant” to Musk, approving the purchase of five percent of the outstanding common stock, or more than five million shares. These shares consisted of ten vesting periods, implemented in order to incentivize Mr. Musk’s future performance. However, the performance criteria for this plan were limited to increases in market capitalisation and developmental milestones for the company’s Model X and Model 3 production. Diving further into the company’s 2017 financials shows Mr. Musk’s approximately 6.7 million shares realised a value of USD 1.34 billion.

The most recent equity award to Mr. Musk, the “2018 CEO Performance Award”, parallels the 2012 grant in many ways. The award is structured with a 10-year maximum term stock option to purchase 20,264,042 shares of common stock, divided equally among 12 separate tranches that are each equivalent to one percent of the issued and outstanding shares of Tesla’s common stock at the time of grant. However, this grant has several new twists to greater align Musk’s varieties of vision and investors’ expectations of economic returns from Tesla. Performance criteria for the grant continue to require increases in the company’s market capitalisation, but the company has also added concrete measures of increasing Revenue and Adjusted EBITDA for the awards to fully vest.

CGLytics’ executive compensation data and relative pay for performance modeler (chart displayed below) shows that, following the redesign of the company’s CEO performance-based awards in January 2018, growth in Tesla’s EBITDA appears to be steeply on the rise compared to  the change in the median EBITDA of S&P 500 companies.

Source: CGLytics Data and Analytics
Year Total realised pay
[Tesla, Inc.] (USD)
Total realised pay
(median) [S&P 500] (USD)
2012 10.620.552
2013 33.280 10.385.744
2014 52.138 12.862.746
2015 37.584 11.746.158
2016 1.340.149.856 11.340.365
2017 49.920 13.658.883
2018 56.380 11.829.150

We also see an almost identical positioning of Tesla’s growth in Revenue and EBITDA when compared to its sector peers with market caps between USD 25 and 100b.

Selected Comparator Peer Group for Tesla
Bayerische Motoren Werke Aktiengesellschaft (BMW)
Bridgestone Corporation
Continental Aktiengesellschaft
Daimler AG
DENSO Corporation
Ford Motor Company
General Motors Company
Honda Motor Co., Ltd.
Nissan Motor Co., Ltd.
Volkswagen Aktiengesellschaft
Year Total realised pay 
[Tesla, Inc.] (USD)
Total realised pay (median) 
[Tesla Peers] (USD)
2012 0 11.079.766
2013 33.280 9.918.984
2014 52.138 8.927.229
2015 37.584 10.021.969
2016 1.340.149.856 12.071.052
2017 49.920 10.845.296
2018 56.380 7.062.198

Despite the recent turnaround instituted at Tesla, questions do remain regarding Musk’s ability to mollify his investor base, remain in good standing with the SEC, give Tesla his full focus, and ultimately to meet the expectations of running a public corporation: economic and otherwise. Shareholders and board members alike have been on a wild ride with Tesla, and the future seems to appear just as wild, but with (hopefully) fewer bumps in the road.

Sources:  CGLytics, CNBC    THE WASHINGTON POST    TESLA COMPANY WEBSITE    FOX BUSINESS

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The case of Superdry: The dynamics of corporate governance and equity control

CGLytics reviews the recent upheaval of the Superdry board, and how these developments have set an unprecedented case in Corporate Governance.

Superdry was founded from a creative partnership between entrepreneurs Julian Dunkerton and James Holder in Cheltenham, UK in 2003. From an initial collection of five t-shirts, which included the iconic Osaka 6 worn by British superstar David Beckham, the company has grown to offer seasonal collections comprising thousands of items and over 500 distinctive logos. Currently, they represent a global community and have developed a cult celebrity following. It is currently a constituent of the FTSE 250, becoming one of the biggest fashion retail success stories in recent times.

2014 – Change for Growth

In October 2014, the company announced the appointment of Euan Sutherland as their new CEO, replacing founder of the company Julian Dunkerton. Julian stayed on as a Brand Director of Superdry. At the time, the company said that as a business with huge growth opportunities, the need for an experienced CEO was paramount. Euan became the preferred choice as he knew the business well, having been a Non-Executive Director since 2012, and was instrumental in implementing and driving a five-year global strategy that delivered more of the incredible growth that Superdry has become renowned for.  The company’s financial success is well documented. From 2012 to 2019, the company’s revenue grew from GBP 329M to GBP 886M while net income grew from GBP 31M to GBP 63M. For share price growth however, the company experienced a sharp dip from GBP 19.03 in 2017 to GBP 4.68 in 2018. (Year-end)

In March 2018, it was announced that Julian was to step down as a director from the Board. In January 2018, Mr. Dunkerton took advantage of Superdry’s impressive stock market performance as shares rose to a five-year high in December and sold part of his stake, making almost GBP 18m. However, he remained the largest shareholder, with control of about 19% in the company. After his departure, the Board comprised of 9 members including 2 women forming about 22% of the Board composition. Just before the General Meeting, the Board comprised of 8 directors and proportion of women of the Board therefore increased to 25%.

2018 – Tensions Surface

In December 2018, Julian censured the business model of the company he cofounded and launched a campaign to return to the company. In an unusual intrusion, Dunkerton disapproved the firm’s business model in comments to the Liberum analyst Wayne Brown, a former head of investor relations at Superdry. The retail entrepreneur stated in the note that he quit the company’s board in March 2018 because he could not “put his name to the strategy”. In another comment to the BBC, Dunkerton said that he’s willing to return to the company “in any capacity” to turn the company around.

Following growing tension between Julian and the Board, the Board announced a general meeting for April 2, 2019 to decide whether the former should be reinstated to the Board. The Board unanimously asked Shareholders to vote against the return of Julian Dunkerton and against the appointment of Boohoo Chairman Peter Williams, which Julian was seeking to bring to the Board as a chairman to overthrow the current. The Board listed various reasons for their decision among which they stated that Mr. Dunkerton’s return would have damaging business impacts because his views have not evolved with the needs of an increasingly international multi-channel brand business. The Board also added that his return will be divisive and distract from the delivery of the Global Digital Brand strategy. For Mr. Williams, the Board said that though he is being nominated as an Independent Director, they cannot trust the transparency of the action because it is not clear if he’s being nominated to serve the interests of Mr. Dunkerton and James Holder; and (ii) is NOT INDEPENDENT and does not represent the interests of all shareholders equally. Again, his appointment will be in a manner that which circumvents good corporate governance and the established policies and procedures of the Company.

2019 – Dunkerton Returns

The outcome of the meeting was quite different from the Board’s recommendation as shareholders voted to elect Julian to the Board by 51.15%. Peter Williams was also elected to the Board by 51.15%. This subsequently led to the resignation of then Chairman Peter Bamford, CEO Euan Sutherland, Chief Financial Officer Edward Barker and Independent Director Penelope Hughes. Subsequently, Peter Williams was appointed Chairman and Dunkerton, interim CEO. With the current composition of the Board, women form only 14% of the Board, a drop from the initial female composition of 25% before the disruptions. Dennis Millard, Minnow Powell, Sarah Wood and John Smith who are all Non-Executive Directors have also given three months’ notice and will stand down as Directors on July 1, 2019.

The board expertise diagrams, produced directly from data and analytics in CGLytics’ platform, show Superdry’s board expertise matrix before and after the mass resignations that happened after the April 2nd 2019 General Meeting. The information used for producing CGLytics’ expertise and skills matrices in the SaaS offering is standardized and applied consistency to more than 5,500 companies globally for easy comparison, analysis and benchmarking of boards composition.

It is evident, from CGLytics’ Board Expertise matrix, that the expertise of the board has reduced since the resignations of Directors. Before their General Meeting in April 2019, 25% of the Board had Technology expertise; with the current Board composition, approximately 14% of the Board has Technology expertise. With today’s retail business climate, the connection and interaction between traditional stores and the internet is fundamental to the growth of businesses in this sector. With the company’s struggling performance over the years, having directors with technology expertise could bring another dimension to the company’s strategy with adapting to changing customer needs and preferences as the it solidify itself as a “global digital brand”.

Another interesting insight is that after the resignations there is now no Executive board member who has financial expertise, however some of the non-Executive board members do including the new Chairman, Peter Williams. Previously Superdry’s CFO had a seat on the board, which may have an impact on the financial decision-making.

The board expertise diagrams, produced directly from data and analytics in CGLytics’ platform, show Superdry’s board expertise matrix before and after the mass resignations that happened after the April 2nd 2019 General Meeting. The information used for producing CGLytics’ expertise and skills matrices in the SaaS offering is standardized and applied consistency to more than 5,500 companies globally for easy comparison, analysis and benchmarking of boards composition.

Before the General Meeting of the company, approximately 75% of the Board served on 8 other listed companies’ Boards in total, compared to 57% of the current Board members holding 6 other seats on listed Boards. Again, of these, the new Chairman of the Board, Peter Williams, serves on three other listed Boards including one other chairmanship position. Though he is not considered overboarded according to the UK corporate Governance code, there may be some reservations over his ability to discharge his duties given his other time commitments. The composition of the Board before the General Meeting also had directors who served on two other Boards; these includes the former chairman of the Board Peter Bamford and Penelope Hughes, who is also the current chair of Aston Martin Lagonda Global Holding Plc.


Lessons learnt and key takeaways from Superdry:

The Superdry development has shed light on how large shareholders influence voting outcomes. Specifically, Julian Dunkerton and his co-founder who owns about 28.1% between them could influence the resolution to change the direction of the company. According to the statement released by the company after the general meeting, 74% of shareholders other than Julian and James have voted against the resolutions. Two big institutional shareholders – Investec and Schroders, which together control about 10% of the shares also supported Mr. Dunkerton’s return.

But the company’s second largest shareholder, Aberdeen Asset Management, sided with Superdry management, and influential investor advisory firms PIRC and Institutional Shareholder Services (ISS) had both recommended that shareholders should reject Mr. Dunkerton’s re-election. What cannot be ignored is that this development has set an unprecedented case in Corporate Governance.

CGLytics: Identify the gaps, manage the risk

Would you like to learn more about how, you too, can have instant insights into more than 5,500 globally listed companies’ board composition, diversity, expertise and skills? Click here to find out about CGLytics’ boardroom intelligence capabilities and obtain the same insights used by investors and advisors.

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Disney, 21st Century Fox, Bob Iger, and the Search For His Successor

CGLytics uses its Executive Pay and Pay for Performance Modelling Tools to look at the recent merger with 21st Century Fox, the value Disney’s CEO has bought to the company’s shareholders and how he has been compensated, and some of the challenges potential successors face.

CGLytics uses its Executive Pay and Pay for Performance Modelling Tools to look at the recent merger with 21st Century Fox, the value Disney’s CEO has bought to the company’s shareholders and how he has been compensated, and some of the challenges facing a potential successor.

In an age where on-demand, direct-to-customer streaming services such as Netflix, Amazon Prime and Hulu are increasingly replacing traditional media such as TV and cinemas, film producers such as Disney have been exploring ways to tap into the same on-demand content delivery channels in order to remain competitive. In this vein, in August 2017 Disney announced that it would pull all of Disney’s content out of Netflix and launch its own streaming service, Disney+, starting in late 2019. Following this announcement, Disney made its next big bet: acquiring 21st Century Fox, the owner of one of the “Big Five” film studios.

In June 2018 Disney announced that it was going to acquire 21st Century Fox (21CF)’s businesses including but not limited to Twentieth Century Fox, Fox Searchlight Pictures, Fox 2000 Pictures and Fox’s interests in Hulu, Sky plc, and Tata Sky. The USD 73 billion acquisition has recently closed, and with it, Disney has brought to the company more than just a portfolio of film production businesses and delivery channels. Clearly, the acquisition of the film and TV production businesses from 21CF was a strategic move, as it will expand Disney’s already impressive library with even more content. Moreover, the 60% controlling stake in the TV streaming service Hulu will further strengthenDisney’s strategy to provide general streaming services, although Hulu will be kept separate from the all-ages friendly Disney+.

In order to support Disney’s direct-to-customer focused strategy and to guarantee the success of the Disney-21CF marriage, Disney has brought with its acquisition a group of important executives from 21CF.

Instrumental to the success of this merger was Bob Iger, CEO/Chair of The Walt Disney Company. Mr. Iger, who has previously planned to retire from Disney at least four times, has recently again extended his contract with the company until 2021. Ostensibly the extension of his contract was implemented so that Mr. Iger could aid in the oversight of the integration of 21CF into Disney, as well as oversee the company’s transition toward a direct-to-consumer business model. In his 14-year tenure at Disney, Mr. Iger has made three very successful purchases: Pixar (2006), Marvel (2009), and Lucasfilm (2012) – which have all paid off handsomely, particularly for Mr. Iger.

Utilising CGLytics’ proprietary corporate governance global dataset and analytics tools, we are able to see exactly to what extent these acquisitions have paid off for Mr. Iger. During the period that the above-mentioned acquisitions were made by Disney, we see a steep increase in TSR, corresponding to a reciprocal increase in total granted compensation to Mr. Iger. However in late 2013/early 2014 we begin to see a decline in TSR.

Figure 1: CEO Bob Iger’s total granted compensation versus TSR over five years following the acquisition of Pixar, Marvel and Lucasfilm

Year CEO Total
granted
remuneration ($)
TSR (5-year)
2008 51.229.341 4,6%
2009 23.921.614 25,1%
2010 29.617.964 68,9%
2011 33.434.398 19%
2012 40.227.848 65,3%
2013 34.321.055 259,9%
2014 46.497.018 212,5%

Source: CGLytics

Utilising CGLytics’ proprietary corporate governance global dataset and analytics tools, we are able to see exactly to what extent these acquisitions have paid off for Mr. Iger. During the period that the above-mentioned acquisitions were made by Disney, we see a steep increase in TSR, corresponding to a reciprocal increase in total granted compensation to Mr. Iger. However in late 2013/early 2014 we begin to see a decline in TSR.

Figure 2: CEO Bob Iger’s total granted compensation versus average five-year TSR

Year CEO Total
granted remuneration ($)
TSR (5-year)
2014 46.497.018 212,5%
2015 44.913.614 200,1%
2016 43.882.396 197,3%
2017 36.283.680 131%
2018 65.645.214 54,1%

Source: CGLytics

Utilising CGLytics’ proprietary corporate governance global dataset and analytics tools, we are able to see exactly to what extent these acquisitions have paid off for Mr. Iger. During the period that the above-mentioned acquisitions were made by Disney, we see a steep increase in TSR, corresponding to a reciprocal increase in total granted compensation to Mr. Iger. However in late 2013/early 2014 we begin to see a decline in TSR.

Figure 3: Bob Iger’s total granted compensation and TSR versus the S&P 500 average

Year Total
granted
remuneration –

The
Walt Disney

Company
($)

Total
granted
remuneration (average)
[S&P 500] ($)
TSR
(5-year)

The
Walt Disney
Company]
TSR
(5-year (average)
for S&P 500]
2014 46.497.01 13.044.754 212,5% 162,3%
2015 44.913.614 12.332.918 200,1% 118,4%
2016 43.882.396 14.024.662 197,3% 134,6%
2017 36.283.680 15.059.437 131% 144,4%
2018 65.645.214 16.890.131 54,1% 62,6%

Source: CGLytics

Even though Disney’s performance may not be on balance with Mr. Iger’s paycheck in recent years, it appears that Disney is struggling to find someone to succeed him. This struggle is evidenced by the recent extension of his contract. Finding a successor with as outstanding a track record and strategic vision for the company’s future like Bob Iger must be a daunting feat. Nevertheless, the company announced that its board of directors actively discusses his succession plan at every board meeting, with the goal to find potential internal candidates qualified to succeed him. Perhaps with the addition of executives from Fox, including Peter Rice, the new Chairman of Walt Disney Television, Disney will have a larger “internal pool” of candidates to fill Mr. Iger’s shoes at the end of his contract in 2021.

Even with the closing date of its acquisition of 21st Century Fox behind, Disney is still not yet close to making this integration complete. Bob Iger now has three more years to prove his final megabet at Disney a win. During this same time, Disney will finally have to seek for a fitting successor to reign in the “Magical Kingdom”.

While the search for a successor to Mr. Iger will undoubtedly prove difficult, there are tools available to companies and their nomination committees to ease the burden of such search. In addition to the comprehensive global remuneration data and analytics that CGLytics offers, our executive and director network tool can help you find that next ingenue to lead your company to the next level.

Visit the CGlytics website for more information regarding the proprietary Pay for Performance Modelling Tools and Executive and Director Network, or reach out to: getintouch@cglytics.com

Aniel Mahabier

CGLytics

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Swedbank CFO Back At the Wheel

A Case Study in the Need for Active Succession Planning. CGLytics looks at how the impact of scandal and the departure of the CEO has caused turmoil at Swedbank

A Case Study in the Need for Active Succession Planning

In the beginning of February 2019, following statements from Swedbank to U.S.-based regulators, the financial authorities in Sweden and Estonia announced the opening of an investigation into suspicions of money laundering concerning Swedbank. These investigations began following revelations that Danske Bank had been channeling money through its Estonian subsidiary. In all, Swedbank may have channeled up to EUR 20 billion in questionable funds through its Estonian unit each year between 2010 and 2016, according to the Swedish public television channel (SVT). However, most damningly, SVT revealed that many of these transactions actually passed between Swedbank and Danske Bank.

In the beginning of February 2019, following statements from Swedbank to U.S.-based regulators, the financial authorities in Sweden and Estonia announced the opening of an investigation into suspicions of money laundering concerning Swedbank. These investigations began following revelations that Danske Bank had been channeling money through its Estonian subsidiary. In all, Swedbank may have channeled up to EUR 20 billion in questionable funds through its Estonian unit each year between 2010 and 2016, according to the Swedish public television channel (SVT).  However, most damningly, SVT revealed that many of these transactions actually passed between Swedbank and Danske Bank.

On Wednesday, March 27, 2019, Swedbank stock plunged by 11.9% following a raid at Swedbank’s headquarters by Swedish authorities, with Swedbank losing more than a fifth of its value since the revelation of the connections between Swedbank and Danske Bank.

Subsequently, three of Swedbank’s top five shareholders, including AP1 and Alecta, announced their decision to vote against the resolution granting the CEO discharge at the company’s upcoming AGM. However, the decision of the Swedish Authority Against Economic Crime to extend its investigation of money laundering allegations and to also address allegations of fraud by the bank proved to be the coup de grace. Following these announcements, CEO Birgitte Bonnesen faced the shareholders of Swedbank on March 28, 2019 in a pre-AGM meeting in which at least three of them made it clear they have lost total confidence in her due to this scandal. As a result, Swedbank dismissed Ms. Bonnesen just one hour before its AGM of March 28, 2019.

While many companies have seen a revolving door of CEOs following a series of scandals and controversies, the linkages between the two banks, as well as the regulatory agencies in charge of their oversight, begs the question of who is really monitoring the executives at the largest banks in Scandinavia? This decision also brings echoes of ex-CEO Michael Wolf being asked to step down from his position in 2016, after a Swedish newspaper exposed the involvement of two senior members of its management team in a conflict-of-interest case surrounding property dealings. Most strikingly, however, may be that, as most of the transactions took place during the tenure of Michael Wolf, Ms. Bonnesen has paid the price for a lack of oversight more rightly attributed to Mr. Wolf.

Source: CGLytics’ Data and Analytics

Most concerningly, however, is that the ramifications of this scandal and the resignation of Ms. Bonnesen leads to another blow in the efforts to seek greater gender equality not just in the boardroom, but also in the C-suite. Utilising CGLytics’ proprietary database and analytics of executives and directors for the largest-cap companies in the Scandinavian region, we find that Ms. Bonnesen’s departure leads to a drop of almost an entire percentage point among Scandinavian female CEOs, a number that was already low to begin with (five female CEOs in 2018 versus 110 male CEOs) in 2018.

Having a pro-active succession plan in place, with a queue of candidates with the necessary qualifications and skills required of such a high-level position, is already a daunting task. At Swedbank, in both recent scandals where the CEO stepped down, this position was taken by the CFO on an interim basis because the board seemingly had no other candidates at hand. Companies seeking to increase their gender diversity at the board and C-suite level, as well as to assure stability during executive leadership transitions, require the tools to find highly-qualified candidates. This proves particularly true when unforeseen circumstances like the Swedbank scandal knock one of the already few such candidates out of their position.

For more information about how CGLytics’ is empowering companies to instantly review their board’s composition and build a diverse board with access to 125,000+ executive profiles (including 20,000+ women) and their relational paths, contact us at getintouch@cglytics.com.

Jonathan Nelson

CGLytics

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AI in the Boardroom: Fantasy or Reality?

While the exact role of AI in the boardroom in up for debate, the question remains: has the Robo Director come of age?

Artificial intelligence (AI) is everywhere even as a member of the board of a private equity firm based in Hong Kong. While the exact role of AI in the boardroom is up for debate, the question remains: has the Robo Director come of age?

Enter the Robo Director

On the face of it, the case for an AI-based director is powerful: machines can pull together vast amounts of information and make decisions based on complex algorithms. Moreover, certain technological advancements have given certain algorithms the ability to learn: cognitive technologies – such as machine learning and deep learning – are becoming more reliable and accessible day by day.

However, even the smartest machines are only as clever as the data they have at their disposal. Although this may also be said of humans, in practice people have unique intuition that operates and combines old and new variables at a different level than machines are currently capable of. This capacity enables the human director, or an entire board of directors, to change direction more quickly than a machine can when faced with new, unforeseen situations. Machine learning is based on repeated behaviours to extract data and then create an output based on that data extraction. Regular corrections to the algorithm are made based on human interpretations of the output, increasing the algorithm’s output accuracy over time. Machine-learning however does not currently provide the capacity to solve new problems when externalities comes into play. Often we hear of great business decisions made on the fly based on instinct or business nous, which are uniquely human traits…so far.

AI as the Assistant

AI works best in situations where large volumes of data must be processed and the logic that drives predictions and decisions can be easily expressed. Just as doctors and other medical professionals harness the power of AI to make better diagnoses, AI can support boards to make better decisions. However, the quality of the data plays a critical role in the algorithm’s capacity to identify trends, as it is reliant on “five-star data” for optimal recommendations.

Corporate Governance

AI can now improve problem-solving by assessing governance risks on a macro-level, and subsequently analyse structural deficiencies in a company’s governance policies and practices when compared to its peers faster than previously possible. Parameters can be set and certain aspects of governance can become data-driven rather than model-driven. This means better decisions and, more importantly, fewer wrong decisions that could lead to reputational and financial risk.

Competitive Landscape

With access to large volumes of data, AI can be harnessed to position a company in its competitive landscape. Models and methods can be developed to pinpoint a company’s competitiveness against competitors and to assess its performance trajectory.

Decision-Support Tools

AI can facilitate better strategic decisions based on real-time data and advanced analytics. Customer marketing journeys can be mapped more accurately, generating more positive outcomes. With better information at their disposal the board can focus on strategy rather than operations.

Unalterable Past, Perfidious Future

In business, many decisions are made using a combination of historical data, modelling and conjecture. But the truth is that the business environment is inherently uncertain: there are no control experiments or reruns. What worked in the past might not necessarily work in future, as evidenced in the classic case of the failure of the firm Long Term Capital Management. However, AI programs and technologies, when supplemented by governance data of the highest quality, can augment a board’s decision-making.

Getting ready for the boardroom of the future

Boards need to be fully prepared with the latest information and insights to make the right decisions, which support their long-term strategy. CGLytics has the deepest global governance data set in the market to date, and if combined with AI, the potential opportunities for boardroom intelligence really are endless.

Jonathan Nelson

CGLytics

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