Thursday, January 28, 2010

Outstanding WITB

Monday’s Women in the Boardroom (WITB) event in San Francisco, CA (actually Redwood Shores, near Silicon Valley) was the second stop on the 15-city tour which began November 30, 2009 in the Twin Cities, MN. It has been a privilege to attend both of these events where Sheila Ronning of Sharp UpSwing and her team have gathered an impressive panel of women corporate directors to address between 200 and 500 top level women executives about what it really takes to prepare for a corporate board role.

Unlike other events on the subject, Women in the Boardroom addresses the fundamentals: what women, themselves, need to do to prepare board-worthy careers.

WITB describes its work as,

"an executive leadership event designed to assist in the preparation of board service -– better qualifying you and connecting you with the right people and resources."

The January 25th San Francisco’s panel was especially practical and clear-headed, with the following outstanding directors:

     Barb Allen (Retired President, Proactive Partners)
     Erika Williams (Board Member, VPEP Technologies, Inc.)
     Nora Denzel (Intuit’s Employee Management Solutions)
     Maria Sainz (CEO & President, Concentric Medical)

with questions from Panel Moderator, Wendy Beecham (CEO, Forum for Women Entrepreneurs & Executives).

Tune into Women in the Boardroom when it comes to your city if you want to learn what it truly takes to build your career toward a company director candidacy.

Tuesday, January 19, 2010

A Chill in the Air?

On December 16, 2009, the SEC enhanced its rules regarding disclosure of the backgrounds and qualifications of directors and director nominees.

As of January 2010, already we are seeing the chilling effect that enhanced director disclosure is having on the number of nominations of women directors.

Why? Because boards essentially are staring like deer caught in the headlights of oncoming proxy demands from a host of one-issue advocates. Boards are trying to figure out what they need to do next, beginning with proxy statements after February 28, 2010:

    What do the new diversity disclosure requirements "mean?"
    What procedural changes do companies and boards need to make?
    What do Nominating/Governance Committees need to do differently?
    Where do companies/boards look for diversity candidates?
    What skills relate to diversity?
    How does the company define "diversity?"
    How much can the company legally say about "diversity?"

The specific SEC enhanced requirements now require companies to make the following additional disclosures in the proxy statements:

A. In light of the company’s business, for
    each sitting director and
    any director nominee:

  1. What are the particular experience, qualifications, attributes or skills that qualify:
    that person to serve as a director of the company?
    that person to serve as a member of any committee?

  2. What public company or registered investment company directorships did that person hold at any time during the past five (5) years?

B. In light of the company’s business, for
    each sitting director,
    any director nominee, and
    every executive officer:

  3. In what legal proceedings was the person "involved" at any time during the past ten (10) years?

C. Companies are also required to disclose (1) whether, and if so (2) how, a Nominating Committee considers diversity in identifying nominees for director. The SEC avoided defining diversity, per se, allowing companies to define it anyway they consider appropriate. Some companies could be "expansive" and include "differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that contribute to board heterogeneity." Other companies could be "focused" and include "concepts such as race, gender and national origin."

D. Finally, if the Nominating Committee (or the board) has a policy on diversity in identifying director nominees, they would be required to disclose:

  1. how the diversity policy is implemented and
  2. how the nominating committee (or the board) assesses the effectiveness of its diversity policy.

These are not simple statements. Companies first will have to go to every sitting director and every new director nominee and document the board positions held during the past five years. They will have to identify and document any legal proceeding in which directors, nominees, and executives have been "involved" at any time in the past decade. Just defining what is meant by "involved" could be overwhelming.

Companies will need to assess (somehow, before their deadlines for printing proxy statements in the first/second quarter) the legal consequences of public statements regarding whether they do or do not have a diversity policy at the board level. Everyone has read the pabulum pages about corporate diversity on their web sites, but the new disclosure requirements state that if the company does have a board diversity policy, they must also provide affirmations that the company is implementing and measuring the effectiveness of those diversity policies. I doubt that any company has ever tracked the effectiveness of their "women’s professional networks," let alone was even aware of what goes on in most of those gatherings. It may be smarter for a corporate board to state that they choose not to define a separate policy for diversity outside of what they established internally as a corporation.

Companies will have to state what they mean by diversity -– an endeavor that risks offending any subgroups not explicitly named or included in the umbrella phraseology. Companies probably will do better to consider "expansive" rather than "focused" definitions. One-issue diversity advocates may not be happy with the new "vanilla" reporting they find.

Why the chill in the air? Because proxy advocates also will have to follow these guidelines should they desire to nominate a diversity candidate. They, too, will have to provide extensive information about background and prior directorships; ensure they know and document any and all legal proceedings in which their candidate was "involved" any time in the past 10 years. Proxy advocates will also have to match their candidate’s skills and qualifications to the new enhanced specifications that will be forthcoming from Nominating Committees.

It’s not getting easier to be a board candidate. The SEC just raised the bar for entry qualifications for each and every public company director candidate. And it is not entirely clear if the SEC accomplished its objective of increasing the intellectual variety and competency of different board candidates. Let’s keep an eye on the January 2010 number of women added to corporate boards. The SEC can’t say it wasn’t warned.

For another interesting view of the prospective impact of the SEC's disclosure requirements, see This Week in the Boardroom (January 14, 2010), sponsored by Corporate Board Member magazine. The suggestion here is that boards may want to avoid describing a specific diversity policy in order to avoid having to comment on its effectiveness.

Saturday, January 9, 2010

Outstanding in 2009!

It was fun to see the New Year’s Day Rose Parade led by U.S. Airway Captain Chesley B. "Sully" Sullenberger III who saved 150 passengers plus a crew of 5 by performing his job excellently.

I would give another person, RN Lori Singleton-Clarke of Bryantown, MD, an award for Outstanding Woman in Her Field because she took on the IRS, single-handedly (pro se, meaning for herself and without a lawyer or an accountant) and won the right to deduct her educational expenses for an M.B.A. By performing that job excellently, she thereby made it possible for thousands of women to understand how they might also recover at least part of the costs required to advance themselves in a business career by getting an MBA degree in their field of specialization.

Ms. Singleton-Clarke's inspirational story of preparation and persistence is told by WSJ tax reporter Laura Saunders in the January 9, 2010 WSJ articles entitled: "Nurse Outduels IRS Over M.B.A. Tuition: How One Woman Went to Tax Court and Won Deducation" by Laura Saunders in WSJ: Education, January 9, 2010, p. B1 and also "Win Raises Hopes for Other Students" WSJ: Education, January 9, 2010, p. B2.

Ms. Singleton-Clarke is a registered nurse and quality improvement coordinator at St. Mary's Hospital (Leonardtown, Maryland) who sought to deduct her education expenses related to her getting an MBA from University of Phoenix. She brought the same gutsiness to the Tax Court that she had exhibited at hospitals where she faced off against doctors.

"As Ms. Singleton-Clarke held fast to her conviction that she deserved the deduction, she drew on skills she developed as a nurse responsible for dealing with doctors who may have infringed hospital rules. That was why she studied for her M.B.A., she says: 'I didn't want to feel outmatched by surgeons who didn't want to talk to me.'"

Read the original decision summarized at: "Lori A. Singleton-Clarke v. Commissioner., U.S. Tax Court, T.C. Summary Opinion 2009-182, (Dec. 2, 2009)" .

The decision by women to pursue an MBA degree represents one of the most crucial choices in their advancement toward a financially-satisfying career. The choice may determine whether or not they are prepared for top level leadership roles and responsibilities. When women opt out of a job and "change course," that decision might have a serious impact on whether they can recoup some or all of their outlay for an MBA degree.

UCLA Anderson School of Business costs about $43,000 for in-state residents and about $48,000 for out-of-state residents. Do our university business degree programs help women candidates understand the tax-deductibility of those expenditures? Not simply advise the women once they have already entered the program and made the crucial decision to change work or to stop work, but do we advise the candidates who are trying to determine IF and HOW they will be able to afford these fees?

IRS regulations provide that a taxpayer may deduct education expenses as ordinary and necessary business expenses if the education -—

(1) Maintains or improves skills required by the individual in his employment or other trade or business, or

(2) Meets the express requirements of the individual's employer, or the requirements of applicable law or regulations, imposed as a condition to the retention by the individual of an established employment relationship, status, or rate of compensation.

Taxpayer may NOT deduct the expenses if the education

- qualifies the individual for a new trade or business, because at that time the education is a personal expense or constitutes an accumulation of personal capital.

An essential consideration for deductibility is the continuity of employment before and after the MBA degree:

"The decisive factor generally is whether the taxpayer was already established in their trade or business."

If women decide to quit their existing job and then pursue an MBA degree, it will become much more difficult to argue the tax deductibility of the very high expenses required to obtain an MBA degree. These and a host of other accounting details require guidance by tax professionals. There certainly are enough women in accounting who could be providing this quality of advice/mentorship to the next generation of young women rising in their corporate ranks.

We should also recognize the outstanding journalist talents of Laura Saunders who is now a tax reporter for the Wall Street Journal. Since the mid-1980s, Ms. Saunders was a Senior Editor at Forbes Magazine, writing about tax and investments. Noteworthy were her July 1 and 2, 2009 Forbes.com "Net Worth" column articles about the lessons she learned as a part-time investor:

"Can A Part-Time Investor And Mother Of Two Find Investment Winners?" Part One - July 1, 2009 and Part Two - July 2, 2009.

Ms. Saunders holds a B.A. from Sewanee: the University of the South, and an M.A. from Columbia University. She also was a Chancellor's Fellow at CUNY's Graduate Center, studying literature and business in a Ph.D. program.

Compare the impact of the Singleton-Clarke tax court decision with Dukes v. Wal-Mart: it has now been more than 10 months (March 2009) since the class action status of that case was reviewed (en banc or before all members of the Ninth Circuit Court), 4 years (February 2007) since the district court entered its class certification order, 9 years since the underlying litigation was first filed (June 2001), and 10 years (2000) since Betty Dukes filed her first claim.

Perhaps that is the difference between what one can accomplish with a business degree compared to a law degree.