Corporate Governance Ratings and Social Media Harvard University, Boston, MA August 7, 2012, 3:15 – 6:15 pm Richard Leblanc, PhD Associate Professor, Law,

Corporate Governance Ratings and Social MediaHarvard University, Boston, MAAugust 7, 2012, 3:15 – 6:15 pm

Richard Leblanc, PhDAssociate Professor, Law, Governance & Ethics, York University

MGMT 5018Corporate Governance

Copyright © 2011 Richard Leblanc.

All rights reserved.

Corporate Governance Ratings2

Third-party ratings and credit rating agencies as examples;

Governance ratings: RiskMetrics/ISS, GMI, TCL;

Concerns:

Lack of disclosure of methodology, weightings;

Governance quality;

Predictive validity;

Company circumstances and qualitative data;

http://www.yorku.ca/rleblanc



Corporate Governance Ratings, continued3

Concerns, continued:

Same company, different ratings - ?

Same rating agency, different proxy recommendations - ?

Market concentration

Conclusion: companies should not implement governance changes to increase their ranking (but they do);




Academic research4

Similar conclusions with “G” and “E” Indexes;

Anti-takeover and entrenchment focus;

Certain time periods, computations and industries;

Mixed empirical research;

Non-uniform standards; lack of qualitative approach, and context;

Publicly available data vs inside the boardroom, individuals, reporting, culture;




SM & Governance: “Power of a Single Tweet” 5

Exponentially interconnected;

Brand, reputation, ICs;

Email, press clippings slow, limiting, outdated;

Independent analytics (2 ex.);

“Communications, IR, public policy, SM”;

Gender/age effects (ex.);



Boardroom Technology – Trends & Touchpoints5

Browsers eclipsed by “ipads overwhelming winner, with no close second” – “86% of Fortune 500” (WSJ);

Paperless boardroom (example) 3-9 month hybrid;

Offline encrypted storage; Remote purging (browser cannot do);

To come: written consent, annotation of comments, highlighting of text; voice recognition; “gestures” (no mouse);

Director experience: interactive dashboard with collaboration, mobility, security, transparency;



http://www.yorku.ca/



SM & Governance: “Power of a Single Tweet” 6

Exponentially interconnected;

Brand, reputation, ICs;

Email, press clippings slow, limiting, outdated;

Independent analytics (2 ex.);

“Communications, IR, public policy, SM”;

Gender/age effects (ex.);




Social Media and Boards, continued (+reading)7

Analytics – leading indicators and early warning (two bank examples, Eli Lilly, Nestle, Qantus - Flora)

Risk management (operations, reputation, compliance, emerging risks);

Concerns: micro management?

Relying on management?

Accuracy of information?

Engaging directly with shareholders, other stakeholders?

Who is in administering social media (seniority)?




Social Media and Boards, continued (+reading)8

Passwords?

Who owns the connections?

Code of conduct and SM policy;

Crisis and response planning (Qantus example – $80M) and accuracy;

A picture can harm (FedEx, Comcast, TTC): immediacy and pervasiveness;

SM is two way (BP and blockage);




Board Dynamics Study: Boardrooms of the future9





Board Dynamics Study 10

100+ diverse directors – question / focus areas:

Board Dynamics

Board-Management Relationship

Undue Influence

IT & Reporting

Director Behaviour

CEO Posture

Chair Leadership

Recent Columbia/Delaware study


http://www.delawarecorporategovernance-blog.com/2011/04/bridging-boards-gaps-report-draws-upon-blue-ribbon-panel-from-business-investors-academia-regulatory-agencies-and-corporat.html



Red Flags 11

Bully CEO; Disengaged Directors; Cliques / factions; Weak Chair; Board denial; Body language; Undue influence over compensation; Inadequate risk, internal controls; Lack of / ineffective Internal Audit;




Red Flags, continued 12

Integrity and information/transparency issues;Stakeholder Directors;Micro-Managing Directors;Tone at top and ethical reporting;Poor CEO / executive succession planning;Non renewal of Directors;Happy face questionnaires; and

Lack of governance disclosure and transparency;




Emerging Themes ~ Enhancing Dynamics 13

Structured Engagement – GE Board / Canadian example;

“Office of the Board” – other NYSE Example;

Leadership skills and industry knowledge of the Chair;

Dominant CEOs;

Problematic directors;

Diversity considerations; “chemistry”;




“Comply or Explain” Regime 14

Source: Basel (May 10), Europe (Dec 10) and FDIC (Feb 11)

CSA Staff Notice 58-306 (Dec10): “unacceptable”;

EU Submission



Thank you and Good Luck on the Final! 14





Contact Information

Professor Richard LeblancFaculty of Liberal Arts & Professional StudiesYork Universitytel: (416) 736-2100 x 33744Email: [email protected]

Twitter: http://twitter.com/DrRLeblanc

Blog:

http://www.canadianbusiness.com/author/richardleblanc

http://ca.linkedin.com/in/rwleblanc

LinkedIn Group: Board Advisors

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Documents

Corporate Governance Ratings and Social Media Harvard University, Boston, MA August 7, 2012, 3:15 – 6:15 pm Richard Leblanc, PhD Associate Professor, Law,