Helping public companies and their suppliers deliver better and more cost-effective programs since 1994

We Ask Some Of The Smartest And Most Interesting People We Know, “What’s At The Top Of Your Mind As You Look Toward 2010?

What Do You Plan To Focus On Most Intently, And What Advice, If Any, Do You Have For Readers?

Howard Christensen, CPA, Chairman, Capital Markets Board and the Founder and Managing Director, Directors Intelligence Resources:

“As we look toward 2010, all the elements for a perfect storm in board, management and investor relationships seem to be in place. Overzealous politicians - fueled by daily media attention to corporate governance issues – and further fueled by the economy - are creating an atmosphere that’s full of turbulence and instability. Investors are demanding more director accountability. They want direct access to directors and to the director election machinery itself.

Board directors want and need help: They recognize their vulnerability. They don’t want to be featured in front page newspaper articles, or end up with a lot of negative votes at the next shareholder meeting. But there is very limited dialogue in most companies, if any, between investors and board directors. And generally, there is not an effective process in place for such engagement.

My advice? Management and boards must work in concert to take charge of the restoration and rebuilding of corporate credibility. They must know and understand how their actions are perceived. They need to initiate positive actions to cause engagement and a meaningful and ongoing two way dialogue with investors and other important constituents. Management - and boards - must ask the right questions, listen to the answers… and respond. They must connect and “Stay Connected”: DOING NOTHING IS NOT AN OPTION.”

Margaret (Peggy) Foran, Chief Governance Officer and Secretary, Prudential Financial, who, as usual, takes her own advice by communicating crisply and effectively, herself:

“2010 is perhaps ‘the year of communication and engagement.’ We have to find better, crisper and more effective ways of communicating with our share owners and engaging with them. This goes for both the Company and the Board.”

Amy Goodman, a partner in Gibson, Dunn & Crutcher's Washington, D.C. office, is co-chair of the firm's Securities Regulation and Corporate Governance practice group and a member of the firm's Executive Compensation and Corporate Transactions groups. She has held a variety of senior level positions with the SEC and has authored of numerous publications.

“Companies, their boards and management need to be sensitive to the changing role of shareholders. Whether they like it or not, shareholders’ power has increased in recent years, and is likely to do so exponentially over the next several years if some proposals, such as say on pay and proxy access, are adopted/enacted.

As a result, companies need to engage in greater shareholder engagement, which should involve not only institutional shareholders, but also, for companies with significant retail shareholder bases, retail shareholders as well. New technologies not only make this feasible, but are essential as shareholder activists already are reaching out to retail shareholders through innovative websites. The recently announced SEC review of the proxy "plumbing" systems will hopefully produce changes in the system that will make shareholder communications easier and less expensive. Directors also need to be involved, both overseeing companies' shareholder communication efforts, and directly meeting with shareholders in appropriate circumstances.”

Rich Ferlauto, currently Director, Corporate Governance and Public Pension Programs at the American Federation of State, County and Municipal Employees, and a former Managing Director at Institutional Shareholder Services, who will join the SEC’s Office of Investor Education and Advocacy in January:

“With the strong likelihood of Direct Access and universal Say-On-Pay in 2010 we are moving from a period of struggle for investor rights to an era of implementation. We need to give investors better tools to evaluate performance and improve boards – and to determine whether directors are appropriately creating pay packages and risk management systems.

Another major goal for 2010 is to help expand the voice of investors at the SEC, and to be sure that their input is integrated into the rulemaking process.”

Craig Mallick, Corporate Secretary and Assistant General Counsel of United States Steel Corporation:

“My primary worry is if the SEC adopts and Congress enacts all the things that are currently on the table – like Say-On-Pay, Proxy Access, mandated separation of the Chairman and CEO positions – I don’t expect the governance activists to fold their tents. This will just ratchet up their activities I think.

We need to ask, ‘What’s going to be next?’ and ‘What should we be doing to get ready?’ If I had only one piece of advice to offer readers, it would be to join the Society if you are not already a member – and if you are, to ratchet up your own attention to and participation in Society initiatives, activities, educational programs and advocacy efforts.”

Dannette Smith, Secretary to the Board and Deputy General Counsel, United Health Group:

“Staying connected with our shareholders is more important than ever for 2010. It appears certain that we will see significant and wide-ranging changes to corporate governance regulations over the course of the year ahead. Currently, we are actively planning for our 2010 annual shareholders’ meeting and related disclosures in our proxy statement. We are making changes to respond to the pending SEC disclosure rule proposal, which everyone believes will be effective for the 2010 season. We are also making changes to our 2010 proxy statement disclosure as a result of feedback we solicited from shareholders.

During the fall, we met with a number of our shareholders, either in person or over the phone, as well as certain proxy advisory firms. In those meetings, we discussed the clarity of disclosure in our 2009 proxy statement and emerging and best corporate governance practices. These conversations were summarized and the broad themes were discussed with our board at its most recent meeting. This information helps the board to determine focus areas for 2010. One significant “pointer” we picked up from these shareholder meetings: It is important that your proxy statement disclose the absence of certain practices. For example, not all of our shareholders were aware that we do not have any 280G change-in-control gross-up payments and we do not pay dividend equivalents on unvested RSUs.

One of our “top issues” for 2010 is disclosure changes regarding the board’s oversight of risk. Our board participated in a director education session to help directors understand best practices with respect to risk oversight. We are now in the process of conducting a formal risk assessment of the design of all of our enterprise-wide sales incentive plans. This is being done by a cross-functional team, of internal audit, human capital, legal and finance personnel. They are reviewing both qualitative and quantitative risks. We will report the results of the risk assessment to our compensation and human resources committee at their meeting in the first quarter of 2010.

Kathleen Salmas, Corporate Secretary and Governance Officer at Northrop Grumman, and Chair of the Society’s upcoming Essentials Program:

“In January we will have a new Independent Chairman. He comes most recently from the entertainment industry – but he has a banking-industry background as well – and has been a strong individual director too. As Independent Chairman he will be replacing the former lead-director – a former four-star general. Plus, we have a new CFO.

So 2010 will be a major learning experience for all of us…with many new styles and ideas – lots of discussion and decisions, I expect, as to who will do what, many fresh approaches and some challenging information-transfer needs. The Corporate Secretary and Governance Officer positions have always been interesting…there’s never a dull moment really. But the pace of

change – and the degree of involvement a Corporate Secretary and Governance Officer has in facilitating change, and assuring smooth transitions, has never been greater in my experience. My advice? Stay cool and calm, and do your best to enjoy it!”