Thursday, December 24, 2015

What Are You Reading?

America's Bank: The Epic Struggle to Create the Federal Reserve (October 20, 2015)
Roger Lowenstein
This tells the story of the fourth founding of the Bank of the United States, this time called the Federal Reserve System.  It tells how Sen. Nelson W. Aldrich (R-RI) organized a surreptitious meeting on Jekyl Island (Brunswick, GA) to launch the U.S. central bank after having studied counterparts in Europe and realizing how far behand the times the American economy remained.
America’s Bank by Roger Lowenstein October 2013 New York Times:
The Hush-Hush Founding of the Fed by Roger Lowenstein LA Times November 2, 2014

The End of Wall Street (March 29, 2011) Roger Lowenstein
A blow-by-blow account of the 2007-2008 collapse precipitated by the subprime lending market.
Panoramic Hindsight on Wall St. Disaster by Janet Maslin New York Times March 31, 2010

Origins of the Crash: The Great Bubble and Its Undoing (December 28, 2004) Roger Lowenstein
Story of the events leading up to the doc-com bubble and its bursting.

When Genius Failed: The Rise and Fall of Long-Term Capital Management (October 9, 2001)
Roger Lowenstein

Alexander Hamilton (March 29, 2005) Ron Chernow 
Story of the life of America’s financial founder, among many other institutions.

The Death of the Banker: The Decline and Fall of the Great Financial Dynasties and the Triumph of the Small Investor (Vintage: July 14, 1997) Ron Chernow 

Wall Street Under Oath: The Story of Our Modern Money Changers (Library of Money and Banking History) (A. M. Kelley reissue – 1973) Ferdinand Pecora
Personal memoir of Ferdinand Pecora, chief counsel of the U.S. Senate Banking and Currency Committee. His private retelling of the Senate investigation into the causes and cures of the Great Depression. The book sells for $500 on Amazon, $1,000 for a used copy.

The Pecora Report: The 1934 Report on the Practices of Stock Exchanges from the "Pecora Commission" (September 1, 2009)
Report of the U.S. Senate Committee on Banking and Currency. Available for $41.00 on Amazon.

The History of the Standard Oil Company by Ida Tarbell (1904) which appeared originally in McClure Magazine in a serialized version from 1902 through 1904.

Monday, November 30, 2015

This is Why We Need Tough Regulators

There actually IS a book called This Time is Different: Eight Centuries of Financial Folly by Carmen M. Reinhart and Kenneth Rogoff (October 2009):

I just finished reading Roger Lowenstein’s book, The End of Wall St. (April 2010) which tells the story of the subprime mortgage meltdown, the collapse of Wall Street’s storied firms, and the bailout that saved the banks, the thrifts, and the last of the mortgage market.

For those who REALLY DO believe that “this time is different,” take a very brief look at all the dregs that were left after the combined stupidity of the subprime market fiasco of 2007-2010.  And this does not include all of the economic collapse that has persisted to date.

In 2004, the U.S. housing market peaked with homeownership at 70%. By the 4th quarter of 2005, housing prices had fallen by 40%.

During February and March 2007, more than 25 subprime lenders filed for bankruptcy. In April, well-known New Century Financial also filed for bankruptcy.

July 17, 2007 - Bear Stearns High-Grade Structured Credit Fund had lost more than 90% of its $1 billion value, while the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund had lost virtually all of its $600 million investor capital.

July 31, 2007 – The two Bear Stearns hedge funds filed for Chapter 15 bankruptcy. Bear Stearns effectively wound down the funds and liquidated all of its holdings. Bear Stearns, an investment bank and brokerage firm, was acquired by JPMorgan Chase in March 2008.

September 6, 2008: Fannie Mae and Freddie Mac were in financial trouble, and the Federal Housing Finance Agency (FHFA) put the companies into “conservatorship”

September 15, 2008, Lehman Brothers filed for the largest bankruptcy in US history: $639 billion in assets and $619 billion in debt; 25,000 people lost their jobs. From 2003 to 2004, Lehman Brothers acquired 5 mortgage lending companies including two subprime lenders specializing in “Alt-A” loans (low documentation).

July 11, 2008 – IndyMac bank collapsed: taken over by the Office of Thrift Supervision and transferred to the Federal Deposit Insurance Corp.; the largest thrift to fail since Continental Illinois in 1984

September 14, 2008 - Merrill Lynch was sold to Bank of America

September 16, 2008 – US Federal Reserve Bank gave American Investment Group (AIG), the world’s largest insurance company, a bailout of $85 billion in exchange for nearly 80% of the firm's equity. Ultimately the Fed and the US Treasury invested over $150 billion to save AIG.

Other bailouts:

September 21, 2008: Goldman Sachs and Morgan Stanley, the last two of the major investment banks still standing, convert from investment banks to bank holding companies in order to gain bailout funding from the Federal Reserve.

September 25, 2008: After a 10-day bank run, the Federal Deposit Insurance Corporation (FDIC) seized Washington Mutual, then the nation's largest savings and loan, which had been heavily exposed to subprime mortgage debt. Its assets were transferred to JPMorgan Chase 

September 29, 2008:  Mitsubishi UFJ Financial Group, Japan's largest bank, invested $9 billion in Morgan Stanley for a 21% share of the company; Morgan Stanley borrowed $107.3 billion from the Federal Reserve – the most of any US bank.

October 3, 2008 – National Economic Stabilization Act of 2008 (a reworked TARP bailout plan) was passed by Congress, creating a pool of $700 billion authorizing the US Secretary of the Treasury to purchase distressed assets, especially mortgage-backed securities.

January 2008, Bank of America acquired Countrywide for $4 billion
All the Devils Are Here: The Hidden History of the Financial Crisis by Bethany McLean and Joe Nocera (November 2010).

May 7, 2006, Herb and Marion Sandler sold Golden West Financial and its thrift, World Savings, to Wachovia Bank
December 31, 2008 – Wachovia was acquired by Wells Fargo

In 2000, J.P. Morgan & Co. Incorporated merged with The Chase Manhattan Corp., effectively combining four of the largest and oldest money center banking institutions in New York City (J.P. Morgan, Chase, Chemical and Manufacturers Hanover) into one firm under the name of J.P. Morgan Chase & Co.

In 2008, JPMorgan Chase & Co. acquired The Bear Stearns Companies Inc.
In 2008, JPMorgan Chase & Co. acquired the deposits, assets and certain liabilities of Washington Mutual's banking operations.

Citibank received $25 billion bailout from the TARP

Goldman Sachs received $10 billion from Warren Buffet plus $10 billion from TARP; including Federal Reserve loans, Goldman Sachs received $782 billion 

September 11, 2015 - Credit default swaps lawsuit brought by the Los Angeles County Employees Retirement Association, hedge funds, university endowments and others.
Twelve defendant banks are: Bank of America Corp., Barclays PLCBNP Paribas SA, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings PLC, J.P. Morgan Chase & Co., Morgan Stanley, Royal Bank of Scotland Group PLC, and UBS Group AG.

Plus two industry groups: the International Swaps and Derivatives Association and data provider Markit Group Ltd. 

Agreed to $1.87 billion settlement, one of the largest antitrust settlements, over allegations that they conspired to rig the market for credit derivatives.

So, please don't point to the brilliant quants in the remaining companies or to the incredibly naive regulators who were asleep at the wheel.  These are not very bright people -- none of them.  The smartest guys/gals in the room actually are the authors of the books that tell the real story after the second shoe dropped.  This is why we need Dodd-Frank, Sarbanes-Oxley, and a Federal Reserve System that is not strangled by political hacks.

This Time Will Be Different?

What is the MATTER with you people?  Why can’t the regulators get this straight – easy sub-prime loans to poor credit home buyers is risky business?

Today’s Los Angeles Times reports that sub-prime lenders, graduates of Countrywide Financial, are rearing their ugly heads and once again providing low down payment loans to low credit record buyers. “After subprime collapse, nonbank lenders again dominate riskier mortgages” by James Koren.

In 2014, nonbank lenders produced 42% of all mortgages, up from just under 30% in 2013 and 20% in 2012.  For the previous three years, nonbank lenders represented about 10% of the market.  They are providing what is now called “AltQM" loans, as in “alternative to qualified mortgages.” FHA borrowers can put down as little as 3.5% of the loan amount and have a credit score as low as 580, which could signal a past bankruptcy or debts sent to collection.

Navigating the Digital Age

Navigating the Digital Age: The Definitive Cybersecurity Guide for Directors and Officers published by Caxton Business & Legal Inc. (Chicago, IL: October 2015) available for download as either PDF or a Kindle file:

This 369 page compendium brings together the insights of some of the most knowledgeable people in the field of cybersecurity. It is an essential reference for corporate board members.

The introductory seven contributors describe cyber threats in the digital age, providing a high level perspective on global security risks.

The first section, cyber risk and the board of directors, focuses on the legal duties and obligations of directors and is written almost entirely by lawyers with the exception of Ken Daly, writing on the NACD’s Action Plan for directors.

The second section describes building a corporate structure with the authority and capabilities to process cybersecurity information and responses.

Third is the regulatory considerations of cybersecurity legal risks, with ten contributions by major lawyers in the field.

Fourth is entitled “a comprehensive approach to cybersecurity” which includes strategy design, a “fusion center” to unify security responses.

Fifth focuses on designing best practices of breach prevention.

Sixth is cybersecurity beyond your network, looking at the supply chain, third-party outsourcing, insider hacks, and the internet of things.

Seventh looks at planning, preparing, and testing incident response practices, including forensic remediation and working with law enforcement investigators.

Eight is cyber risk management investment decisions, including consideration of cyber insurance.

Ninth is cyber risk and workforce development concerned with cyber education, collaboration/communication between technical and non-technical staff and qualifying the Chief Information Security Officer.

The final chapter contains contributor profiles of the almost 80 authors, with a fair number of women specialists in the cyber security field.

Thursday, November 26, 2015

Decline in U.S. Domestic Firms?

The decline in the number of domestic U.S. corporate listings on public exchanges has been a concern for governance professionals because it implies a shrinkage in the number of public company boards and opportunities for board service.

The trend has been noted  by  others since 2011,  including  “Wall  Street’s  Dead  End” by Felix Salmon in  The  New  York  Times  (February  13, 2011),

“Missing:  Public  Companies  –  Why  is  the  Number  of  Publicly  Traded  Companies  in  the  US  Declining?” by Alix Stuart in CFO  Magazine (March  22,  2011), 

“The  Endangered  Public  Company:  The  Big  Engine  that  Couldn’t” in  The  Economist  (May  19,  2012),

and  “The State  of  the  Public  Corporation:  Not  So  Much  an  Eclipse  as an  Evolution” by Conrad S. Ciccotello in the Journal of Applied Corporate Finance (Fall  2014)

The most recent report is “The U.S. Listing Gap” by Craig Doidge, G. Andrew Karolyi, and RenĂ© M. Stulz in their NBER Working Paper No. 21181 (Issued May 2015).

In all of the above instances, the data only goes as far as the S&P Factbook and the World Bank data reports up to 2012.  At that time S&P discontinued reporting on U.S. domestic exchange listed firms.

The World Exchange Federation took over the reporting and included foreign exchange listed companies in the totals.  Their data is as of January of each year and currently includes 2015 data.  What is interesting is that the shrinkage of U.S. domestic listed firms appears to have bottomed out in 2013 and showed a slight upswing in 2014 and 2015.  This slight uptick was also evident among foreign listed firms.

So, any analysis of the U.S. Listing Gap now needs to include an assessment of this most recent change in direction.  We shall see what January 2016 has to offer very soon.

Women Directors in 2016

In the November 15, 2015 issue of Fortune, the magazine forecast the 2016 projected number of women directors at Fortune 500 firms.  In an online article, Erika Fry detailed the number for 2015 as well.  The latest data from Catalyst was only to 2013, so we extrapolated the figures in an estimate for 2014.

Fortune and Ms. Fry continue to focus on the increase in women directors.  As we have reported on multiple occasions, we ought to be looking also at the overall decline in both total number of directors and the number of male directors.  While Fortune reports that 1,057 women represented 19.5% of the total of 5,415 directors in 2015 and 1,130 women will represent 21% of the total of 5,381 directors in 2016, this represents an increase of 6.9% in women directors at the expense of a decline of 3.9% for men and an overall decline in total number of directors of 1.8%.

Why has there been no focus on this trend which has continued without interruption since the early 1990s when Catalyst began reporting women directors at the Fortune 500 firms?  Why is this happening?  Is it because of increased turnover and attention to tenure of existing board members? Is it an indication of heightened risk due to cybersecurity concerns, activist shareholder suits, or the increased hourly demands on director time?

Even more fundamentally, do women understand what is happening in these long term boardroom changes?

Saturday, October 31, 2015

An Update From Howard Sherman of MSCI ESG Research Inc.

The latest memo (October 30, 2015) from Howard Sherman, Executive Director of MSCI ESG Research Inc., is a welcome update from MSCI regarding their Diverse Director DataSource, MSCI’s database of women and minority board of director candidates.

Mr. Sherman begins by saying that “As you know, the issue of board diversity continues to attract investor and company attention.” That’s like saying, shareholder activism is on the rise.  Or, we read a lot in the media about Black Lives Matter.

The 3D database issued a press release announcing they were in business July 19, 2012, starting with 400 profiles in place and another 300 profiles in the queue.  That’s the last data we’ve heard from Mr. Sherman and his folk.

"Diverse Director DataSource (3D) Opens for Business"

A bit earlier, on October 4, 2011, I posted an entry on the 3D (Diversity Director DataSource) blog which challenged us all to begin to put performance metrics behind our efforts to increase the numbers of diverse candidates actually sitting on corporate boards of directors.

"To Ensure That We Succeed"

I challenged the leaders of the then-GMI 3D Registry in three specific ways:
  1. How would you know if your 3D Registry were succeeding?
Is success defined by a significant increase in qualified candidates listing themselves on the Registry or by a significant increase in the number of qualified candidates selected from the Registry to serve on public or private company boards per year?

     2.  Would another measure of success be based on who is using the 3D Registry?

Would success be defined by the number of boards that inquired of the Registry per month? Or would it matter if board executive search professionals accessed the Registry on a regular basis?

     3.  What would the leaders at the 3D Registry offer by way of metrics to measure their own success?

Is the 3D Registry an innovation with creative talent at the helm or is this just another fly by night database that sits on the electronic shelf rather than the physical shelf?

We have on October 30, 2015 – four years later – an UPdate that tells us nothing with regard to the hoped-for metrics above.  Instead, we get more of the same ol’ same ol’: 
  • MSCI ESG Research teams “made an effort” to include the 3D in their presentations “when board diversity was on the agenda.”
  • They gave “background briefings” to reporters.
  • They referenced the 3D in the MSCI ESG Research’s 2014 Women on Boards survey. (A search of the report revealed no references whatsoever in the text, located at
  • They “engaged” with other board diversity activist organizations.
  • In the summer of 2015, they mailed a communication to their 23,000 contact list to tell them how they might use the 3D Registry.
  • They “set up a number of logins for firms and individuals” to search the 3D Registry.
  • In 2014, CalPERS/CalSTRS wrote to 130 of the largest California headquartered-firms with ZERO women directors; over 30% responded; at total of 27 appointed at least one woman to their board. (it is not clear if these 27 were companies appointing their FIRST woman to their board.)

The people at MSCI don’t seem to be able to distinguish efforts from results.  Even the 2014 Women on Boards survey is a mish-mash of global economy comparisons that tells us little about whether progress is occurring or not.

It reminds me of the people who keep trying to sell me t-shirts “to raise awareness” about an issue.  I’m perfectly AWARE.  But, so far, I am not impressed by any of the databases that pretend to be able to actually advance the specific number of diversity candidates on boards. 

Tell me how many diversity candidates are now in the Registry? How many were added each year since we started playing this game? How many candidates have become disenchanted and left the Registry each year?  How many companies have used the Registry to search and how many executive search inquiries have been posted on the Registry monthly? How many of these talented candidates have actually been placed on a company board of directors?

Why has it taken you this long to even UPDATE the marketplace?

Why Did Catalyst Change Its Survey?

In December 2015, we can expect another report from Catalyst about the percentage of women corporate directors - at S&P Index companies. We will have two years of comparative data, rather than the 10 years of data we used to have with the old Catalyst surveys. Why did Catalyst change?

The clearest benefit is the big jump in percentages. The S&P had a 19.2% share of women directors in 2014, while the last Catalyst report using Fortune 500 was 16.9% in 2013. That's a nice 2.3% bump without having to do any heavy lifting at all!

Fortune 500 is an annual list of the 500 largest companies using the most recent revenue figures and includes public and private companies. The S&P 500 is an index of (actually) 505 public companies that are selected by the S&P Index Committee based on their assessment of liquidity, risk, and industry and market capitalization.

Another difference is that the S&P Index Committee announces adds or deletes to its list five days before publication, so investors typically purchase shares and sell deletes in the soon to be published company before the S&P announces its index. As a result, share price changes can result from mere publication of the list, distorting the market value of the list itself.

The Catalyst 2014 report also fails to report on the total number of board seats included in the 2014 survey. The biggest loss in the Catalyst change is the historic value of being able to track board make-up, compare the average size of boards, and the mix of men to women over that timeframe. We will not be able to assess whether male-occupied seats are continuing to decline as we were able to do with the Fortune 500 firms over the past decade. 

Now, we have the ability to compare US companies with those in other nations, regardless of the size or complexity of their economies. The new Catalyst survey proudly compares the US to a host of other nations, only a token few of whom have comparable sample sizes:  Australia S&P/ASX 200, the India BSE 200, the United Kingdom’s FTSE 100 and the Canada S&P/TSX 60.  Most of the other exchanges include only 20 to 30 companies.

Catalyst especially likes to compare the US economy with that of Norway because of the quotas mandating 40% women on their boards, implemented in Norway in 2003.  That means Catalyst thinks it is appropriate to compare the U.S. with its $18.1 TRILLION GDP engine, 319 million population and a labor force of 158 million with Norway, a country with a GDP of $345 B in a heavily state-owned economy, a 5.1 M population, and a 2.8 M labor force.

However, Catalyst totally ignores the reality that Norwegian companies were so resistant to the idea of appointing women to their boards that 384 of the 563 publicly traded companies subject to the requirement went private to avoid having to comply. That means only 32% of the pre-quota companies remained public. That is comparable to cutting 341 companies out of the Fortune 500 or the S&P 500.

“Women on the Board Quotas Have Limited Success”, by Claire Cain Miller, New York Times, June 20, 2014

If you know your statistics, you know that cutting out a third of the sample, especially if those companies had zero women on their boards, inevitably should raise the final percentage share of women directors in the revised sample.  Wow! What a great way to inflate a country’s share of women directors!  Maybe we should try that!

Friday, October 30, 2015

The Offshore Tax Shell Game

A study of Fortune 500 public company documents was released October 6, 2015 by the Public Interest Research Group and Citizens for Tax Justice. The study was entitled, Offshore Shell Games – 2015 - The Use of Offshore Tax Havens by Fortune 500 Companies.

The study concluded that “Nearly three-quarters of Fortune 500 companies booked profits to tax havens in 2014, with just 30 companies accounting for 62 percent of earnings stashed offshore.”

The study reported that $2.1 Billion in cash is being hoarded at overseas tax havens by top US  companies intent upon avoiding US 35% corporate tax rate. Over 38% of the total amount ($807) is being hoarded by the top ten firms, five of whom are high technology firms while three are big pharma companies.

Apple -                                 $181 B
GE -                                      $119 B
Microsoft -                          $108 B
Pfizer –                                  $74 B
IBM -                                     $61 B
Merck -                                  $60 B
Johnson & Johnson -         $53 B
Cisco -                                   $53 B
Exxon/Mobil -                     $51 B
Google -                                $47 B

For comparison, the 2015 US budget deficit is $426 Billion.

One major aspect of the “offshore shell game” is the “tax inversion” - a merger/acquisition by a U.S. company of a company located in a lower tax haven country in order to be able to incorporate overseas and save on taxes.  There have been 54 completed or announced “tax inversions” since last fall, according to Dealogic.  The latest example is Pfizer’s proposed acquisition of Dublin, Ireland based Allergan.

In September, the U.S. Treasury passed a new rule in an attempt to discourage “tax inversion” acquisitions.  Before September, 20% of the resulting company had to be owned by a foreign entity in order to take full tax advantage of the overseas relocation (i.e., avoidance of US taxes).  After September, Treasury raised the threshold to 40%. 

The decision that a U.S. company must make is: how much would they pay in U.S. taxes vs how much of a premium would they be willing to pay to acquire the foreign company in order to elevate the foreign company’s market valuation?

The Pfizer-Allergan example looks like this. Currently Pfizer has $74 B in cash overseas, thereby avoiding U.S. taxes at 35% or roughly $25.9 B. Pfizer’s current market cap is $220 B while Allergan’s is $120 B for a combined market cap after acquisition of $340 B. But, at that valuation the foreign company would equal only 35.3%.  In order for Allergan’s foreign share to beat the 40% threshold, its acquisition price would have to equal $147 B (meaning that Pfizer would have to be willing to pay a premium of $27 B to avoid taxes of $25.9 B).

The Organization for Economic Co-operation and Development (OECD) recently proposed “Reforms to the international tax system for curbing avoidance by multinational enterprises” – a set of recommendations that were strongly endorse at the October 8, 2015 G20 Finance Ministers’ meeting in Lima, Peru.

Implementation will, of course, determine effectiveness.

Friday, October 9, 2015

Which Story Will You Believe?

Today’s LA Times reports on a Korn Ferry survey of UCLA Anderson School faculty that concludes that women are underrepresented, underappreciated, and less respected at the graduate school of management in Westwood. 

“Women Faculty Face Bias at UCLA Business School, Study Says” by Larry Gordon.  The study was commissioned by Dean Olian (first female dean of the school in place since 2006) and a faculty committee.  The report concluded that, “Anderson leaders 'have not demonstrated the focused intention and proactive behavior required to increase diversity.'”  And “many faculty do not trust the dean and do not believe she is serious about gender equality.”

A separate study reported in Fortune Magazine in January 2015 found that UCLA under Dean Olian had made tremendous strides in moving the graduate school of management toward closer connections with the burgeoning technology field.  “UCLA's Business School Embraces the Tech Boom” by John Byrne. Other studies cite Dean Olian’s progress in bringing a more diverse international and national student body into the Anderson School.

What appears to be happening is better described in the article, “Harassment vs. the Gender Gap” by psychologist and author Kim Elsesser in today’s LA Times:

Ten years of diversity training has produced little measurable success in reducing the gender gap, according to the author’s research, because diversity training has focused overly on protecting the entity from harassment lawsuits and failed to provide guidance on how the genders can collaborate effectively without suspicions. “Employees generally perceive that the training is provided for the protection of female employees, which carries with it the image of weak women who can’t fend for themselves. … training video[s] left viewers with the impression that women were emotionally weak.” The author suggests that diversity training has resulted in the unintended consequence of creating “gender partitions” that keep men and women operating in separate cultural and social circles in the workforce, rather than fostering genuine collaboration.

Elsewhere, an August 2015 Korn Ferry survey of Senior Human Resources Executives found that “Companies Lack Experiential and Intellectual Diversity.” See:

Korn Ferry reported specifically that “the large majority of [Chief Human Resource Officers] CHROs say finding HR talent with business acumen is the biggest barrier to making strong hires.”  [Emphasis added.] So, if the people behind hiring for diversity and providing diversity training are themselves not intellectua

Thursday, October 1, 2015

Who ARE These People?

Herbert, Marc, Michael, J. Michael, George and John?  They are the directors at McKinsey & Company, the management consulting firm that co-authored the study with  The study is: Women in the Workplace.

McKinsey has only one woman in leadership, Claudia Funke, the Director at McKinsey’s German High Tech Sector area. She also is a member of McKinsey’s global High Tech Sector leadership group. Brava! Even so, McKinsey at least has presented a balanced perspective on the true causes of women’s under- representation in corporate leadership. The underlying issues truly are complex:  it IS complicated.

The Wall Street Journal presented the research with a slightly more depressing tone: What’sHolding Women Back in the Workplace? by Nikki Waller and Joann Lublin   You know it’s a Wall Street Journal article because it starts with the word “Despite….” is equally depressing in its coverage of the research: Corporate America Not on a Pathto Gender Equality. begins their article with “Women are STILL UNDER-REPRESENTED….” Surprise! Surprise!

What is really different about this study is how balanced are the conclusions. The WSJ and point to everything that men in corporations are doing to “keep women out” of leadership. At least this study itself is beginning to include some of the decisions that women are making that “keep themselves out” of leadership paths and potentials.

Women are finally admitting that many of them (NO, NOT ALL!) do not aspire to leadership roles because they ASSUME that they cannot handle the stress or that they cannot change the environment that existed before.  That is a big assumption and a major deterrent to personal advancement.  If you believe you will fail, you will.  What are we doing to convince women that the only and inevitable result of leadership advancement is the same world that men operated before we arrived on the scene? 

Smart women, like Claudia Funke for example, wait until they reach leadership positions to decide how they will define those roles and relationships.  Brava!

Women are finally recognizing that staff/supportive roles do not provide the same experiences that line/P&L responsibilities do on the way to leadership.  If women really PREFER to stay in the helper mode, then that is where those career decisions inevitably will lead – always helping someone else succeed, rather than helping herself or other women succeed as leaders.

Smart women take on leadership responsibilities all along their career path – learning how to be a leader at every possible opportunity.

Did anyone besides me notice that 98% of the comments on the WSJ article were by men?  Where are the women with an opinion on this subject?  Are we all hiding in the background - afraid of the consequences of holding an opinion?   Well, maybe that’s part of the problem as well.

McKinsey’s web site is trying to make a difference by offering management courses, at McKinsey Academy, that will help women learn the basics they need to take on greater responsibility, negotiate and communicate better, and advance in their careers.  Brava! Every woman worth her leadership potential should sign up for those courses.  Even so, McKinsey could do a better job of presenting those courses. All but one of them has men in the principle role of instructor. I can learn a lot from men – I have and always will. But, when it comes time for me to acquire the specific skills of a woman in leadership, I would be more inclined to sign up to hear a woman who actually IS in leadership tell me what I need to know.

Also, it’s time we talked to women about the alternative to the corporate path – and I do not mean the NON-profit, charity path.  I mean the entrepreneurial path.  If women believe that they know a better way to build a business, then come on out into the entrepreneurial space, build the teams and the companies we need for next generation opportunities.  Hire the talent and pay them the decent wages we need to grow this economy again.  Don’t just sit back and whine about how bad corporations are.  Stand up, speak up, stand out, and put up the money and all of the other resources we need to build a better economy. And I don’t mean YET ANOTHER jeans store, a shoe store, or a muffin shop.  I mean serious businesses that solve real and substantive problems that we face as a nation.

There is a lot that women can do to make change happen – to change the frame through which we view business, corporations, and leadership.  This is not your mother’s world.  It is your world.  What are YOU doing to make a difference here and now?

Monday, September 14, 2015

Interlocking Directorships

Surprise, surprise.  Donald Trump describes high salaries paid to chief executives a “joke” and a “disgrace” because compensation packages typically are approved by company boards stacked with friends of the CEOs.  Not only are they friends of the CEO, but board members generate comparisons of compensation packages to justify excessive compensation packages by looking at peer companies.  And guess what, those peer companies may have interconnected directorships.

A July 30, 2015 article in Business Insider by Jonathan Marino reported on “How America’s Biggest Companies are Intimately Interconnected.” See:

The research presented in this article was conducted by R.J. Andrews, an engineering graduate of Northeastern University and MIT. His blog, Info We Trust, had the original posting titled, “Board Member Overlap” at: (July 28, 2015). Of the top 30 companies listed on the Dow Jones Industrial Average, only three companies did not have interlocking directorships: The Home Depot, Verizon, and UnitedHealthcare.

An earlier and more comprehensive research document on interlocking directors was written by Prof. G. William Dormhoff of UC Santa Cruz (first posted August 2005; most recently updated October 2013): “Interlocking Directorates in the Corporate Community” by Professor G. William Domhoff, Sociology Dept. at the University of California at Santa Cruz.  See: A quick scan of the footnotes for his research indicate that interconnected directorships has been a problem long before the emergence4 of excessive compensation, which is a more recent phenomenon.

Even before the meltdown of the financial marketplace, The Corporate Library’s governance database (Board Analyst) provided one of the most comprehensive data analytic tools for assessing director interconnectedness. The Corporate Library was the first to examine the relationship between director interlocks and the backdating of stock options – “Backdating Stock Options: Are There Common Characteristics Among the Companies Implicated?” See:

In September 2011, GMI Ratings (which had taken over The Corporate Library and its Board Analytics tool and is now owned by MSCI) launched its own GMI Analyst tool as a subscriber-only online research and data-visualization tool designed to deepen the analysis of corporate governance practices and a comprehensive evaluation of public company Environmental, Social and Governance (ESG) risks. See the launch press release at:

Since October 2014, MSCI’s Governance Metrics tool is used to map complex board relationship patterns at the individual, organizational, industry and regional levels. See:

For a "poor man's mapping" of interlocking relationships for over 40,000 people, take a look at NNDB Mapper: where you can simply enter a director's name and discover everything about him/her.

Change - The Only Constant

On September 9, 2015, the Society for Science & the Public (SSP) announced their search for a new sponsor of the Science Talent Search, the nation’s oldest and most prestigious high school science competition. Westinghouse Corporation was the first exclusive title sponsor of the Science Talent Search from 1942 to 1998. Intel Corporation has served as exclusive title sponsor since the 1999 program year, a role it will relinquish in March of 2017.

The Society annually rewards the achievements of the top 300 Science Talent Search students and their schools, thereby promoting a strong commitment to STEM (science, technology, engineering and math) research and education. In 2015, this totaled more than $1.6 million in awards, including three top awards of $150,000.

The new sponsor will assume sole title sponsorship of this premier competition beginning in April 2017 for a minimum support of $6 million and a period of 5 years.

Intel will continue to partner with SSP and dozens of other corporate, academic, government and science-focused sponsors in the support and awards for Intel’s International Science and Engineering Fair (ISEF).

Intel ISEF is hosted each year in a different city (Los Angeles, Pittsburgh and Phoenix through 2019).  The Local Arrangements Committees from each city partner with SSP and Intel to provide support for the event including the recruitment of 100s of volunteers and judges and in organizing an education outreach day in which more than 3,000 middle and high school students visit. 

Intel also has released a fact sheet about all of the support Intel provides to the advancement of STEM-related activities. See:

The substance of the change is that Intel’s support will be broadened to scan the international marketplace for top tier science, technology, engineering, and mathematics talent at the high school levels, leaving the U.S. market to the support of some other corporation.    

What does this mean for U.S. students and schools?  Conversations about prospective future sponsors of the STS have focused on Google and Facebook. Full proposals are due November 25, 2015, with selection of finalists in winter 2015 and the title sponsor early in 2016.

Monday, August 17, 2015

STEM Resources

A number of associates have asked about STEM resources, especially for women interested in Science, Technology, Engineering, and Math fields. Here's my current list.  Your updates appreciated.

White House: Women in Stem initiative

American Association for University Women: Building a STEM Pipeline for Girls and Women

National Geographic: Why It's Crucial to Get More Women Into Science

The Atlantic: The Female Pioneers Who Changed STEM Forever

CISCO: IoT World Forum Young Women's Innovation Grand Challenge

PBS NewsHour: How outstanding women in STEM fields overcame obstacles – Lesson Plan

PBS Learning Media – STEM resources

STEMconnector® is "The one-stop for STEM Information." With an innovative product-line, STEMconnector® works closely with corporations and other organizations to provide them with a set of tools and resources that support their corporate development, corporate structure and smart STEM investments.

STEMconnector: One hundred women leaders in STEM

Monday, August 10, 2015

Lessons from the Target Corp. Cyber Breach

Target Corp. Customer Data Security Breach Litigation was a class action lawsuit alleging that the third largest retail company in the U.S. failed to protect customers’ financial data from thieves who stole credit and debit card information from 40 million customers who shopped at Target stores between Nov. 27 and Dec. 18, 2013. Early in 2014, the company revealed that additional personal information, including email and home mailing addresses, also had been stolen from between 70 million to 110 million other Target customers.  

The text of the class action filing by financial institutions, describing in detail, the extent of Target’s inaction and hesitance, is located at:

The biggest and most obvious problem was that Target ignored explicit warning from inside and outside the company.  Employees and security firms told Target that the breach had happened and was getting worse.  The primary culprit was a vendor whose computer system was a sieve, allowing Russian-based hackers free entry.

Target’s $10 million settlement proposal was approved by a federal judge in March 2015. The settlement also required Target to hire a chief information security officer and maintain a written information security program to incorporate new data security measures. The settlement amount is a travesty given the scale of the financial impact.  Target already had invested in an extensive revamp of their security systems by FireEye Inc., a well-regarded cybersecurity firm.  The real problem was how deeply Target’s management and board buried their heads in the sand.

A recent white paper advised corporate directors how to defend against class action lawsuits, such as the Target “wrist-tap”. The white paper listed “three practices that boards should adopt to defend themselves” against such lawsuits.  Unfortunately, the recommendations sounded much more like instructions on “How to close the barn door after the horse was stolen.”

The recommendations focused on reactive measures designed by corporate counsel to limit adverse PR for the company or to draft corporate PR as a strategy to ward off stakeholder lawsuits.  The recommendations are simplistic, at best, and inadequate, at worst.

Cyber-savvy firms know that a much more effective strategy would include a clear company focus on identifying – before hacks happen – the high value information at risk in the company and appropriate high value measures to protect that data.
  • What data is valuable to the company, shareholders, and stakeholders? Why?
  • Where does the data reside?
  • How much data (e.g., emails) is archived to encrypted storage away from online access?
  • How many individuals/computers have access to the data? Who are they?
  • How much access is provided to vendors and suppliers? How protected are their systems?
  • What levels of access are permitted? Who manages that access?
  • How frequently are security protections applied?
  • How are payment systems secured?
  • Should more limitations be applied commensurate with the data’s value?
  • Are shareholders at risk?
  • Are stakeholders at risk? Which ones?
The next most important action would be to evaluate the potential and likely sources of incursions faced by the company and how well the company protects itself:
  • Is competitive espionage likely? National or international?
  • What are the company’s vendor or supplier vulnerabilities?
  • What are the known incident histories for software products at the company?
  • Where does the company have technology risk:  at the cloud, network, systems software, application software, outdated or legacy software/systems, data retention, mobile or remote device access, social media?
  • What are the known protections available? Are they current?
  • What monitoring tools are available?
  • Who is responsible for review and tracking?
  • How frequently are senior management and the board informed?
  • How will they respond and how quickly?
Finally, how well is the company preparing employees to be part of the solution rather than a source of problems in the area of cybersecurity? Companies rely upon extensive training to mitigate potential health and safety risks.  They must take a comparable approach to ensuring that employees are aware of cybersecurity hazards and act responsibly in any situation where hackers or intrusions could harm the company and any of its assets.
  • Have all employees been given basic cybersecurity training?
  • How often is that updated to reflect the constantly emerging risks?
  • Do employees know what data, what devices, and what services require extra cautions?
  • Are high value employee accesses limited and closely monitored?
  • Do employees’ terminate computer access when they leave their station?
  • Do employees know proper safety protections carrying mobile devices away from the office?
  • Are appropriate employee background checks undertaken?
  • Are terminated employees’ access properly cleansed?
Kimberly Pease, CISSP, co-founder and Vice President of Citadel Information Group, Inc., a prominent Los Angeles-based information security management firm, sums it up this way:

“Policies and training on the people side and patching on the technology side will address most common problems and incidents. Studies show upwards of 80% of breaches are preventable.”
Only if technology and cybersecurity risks are known and only if effective measures are being taken to prevent their intrusion into a company’s affairs will it be possible to invest in insurance and other measures to “cover” known risks.

According to the lawsuit, there were countless warnings given to Target about multiple breaches, but management, security personnel, and the board sat on their hands, probably conversing with internal legal counsel.  Today’s business demands heightened responsibility and resilience in the face of an extensive network of hackers and cyber espionage agents. A $10 million settlement is meaningless in view of the extent of personal and business losses allowed by this ignominious breach.

Monday, July 27, 2015

Thomas on Data Breach

We have read a bit about the legal consequences of corporate data hacks, but nobody covers this topic more thoroughly than Liisa M. Thomas, partner at the Chicago offices of Winston & Strawn LLP and Chair of the firm's Privacy and Data Security Practice.

Thomas has updated the first edition of her comprehensive legal guide, Thomas on Data Breach: A Practical Guide to Handling Data Breach Notifications Worldwide, 2015 ed., with the February 2015 release of this must-have reference. In the marketing brochure Thomson Reuters announced the availability of the new release at and offered a 20% promotional discount (promotional code WPD20) making the $249 tome available at just under $200. 

This resource provides a comprehensive legal guide and roadmap for corporations and boards:
  • evaluate what breach laws govern
  • identify what information may have been breached
  • determine if there was really a "breach"
  • analyze if n exception applies
  • determine who needs to be notified
  • draft the notice
  • figure out how and when to give notice
  • prepare a public relations strategy
  • create a plan for follow-up inquiries
  • take steps to stop another breach
Thomas has a unique "ability to create clarity in a sea of confusing legal requirements" through her comprehensive analysis of U.S. Federal and state breach notification laws in addition to international requirements. There is no better compendium of prevailing requirements and no clearer guide to addressing this side of the cybersecurity challenge.

In addition to Thomson Reuters, the reference is available from

Wednesday, July 22, 2015

Weber Shandwick Research

When asked, “Would you personally ever want to be CEO of a large company”

Women who said “No” to the question:

68 percent of North American women
39 percent of European women
22 percent of Asia Pacific women
17 percent of Latin American women

Women who said “Yes” to the question:

9 percent of North American executive women
22 percent of European women executives
27 percent of Asia Pacific women executives
34 percent of Latin American women executives.

Men who said “No” to the question:

51 percent of North American male
39 percent of European male executives
23 percent of Asia Pacific male executives
11 percent of Latin American male executives.

Men who said “Yes” to the question:

22 percent of North American executive men
25 percent of European executive men
37 percent of Asia Pacific executive men
46 percent of Latin American executive men.

Sponsored by Weber Shandwick, one of the world’s leading global public-relations firms, the survey was based on responses from 1,750 executives (excluding CEOs) who worked for companies with revenues of $500 million in 19 countries across North America, Europe, Asia Pacific and Latin America. Globally, male executives represented 62 percent of the sample, and female executives 38 percent.

Reprinted in The Norman Transcript July 12, 2015, “Survey: Many women execs don't want to be large-company CEO” posted by Julie Jason

See also, additional insight from another Weber Shandwick survey:

Sunday, July 12, 2015

The Power of a Screen and a Carpet

Since the mid-1970s, musicians perform the preliminary auditions for available orchestra positions from behind a screen, so that gender and race are not obvious selection criteria. Auditioners walk on a long strip of carpet, so the clacking of women's high-heeled shoes wont give anything away. The result is merit hiring - talent rises to the opportunity.

Polly Kahn, vice president for learning and leadership development at the League of American Orchestras, says that change began in the 1960's and that at least as of 2013, about 50 percent of the league member orchestras, the countrys top 250 orchestras, have got 50 percent women, including executive directors and musicians. I think we are close to 50 percent (overall) at this point.

"In Orchestras, A Sea Change in Gender Proportions," St. Louis Post-Dispatch, March 30, 2014 by Sarah Bryan Miller

However, women are not represented equally across all instruments or sections of the top 20 orchestras. And there are just a few women directors and conductors - the true leadership positions.

"Graphing Gender in America's Top Orchestras," November 18, 2014 by Suby Raman

"Ethnic diversity remains a troublesome question for American orchestras. Just over four percent of their musicians are African-American and Latino, according to the League of American Orchestras, and when it comes to orchestra boards and CEOs, the numbers are even starker: only one percent. Ethnic diversity is also a rare sight among guest soloists and conductors."

"American Orchestras Grapple with a Lack of Diversity," WQXR Host February 06, 2015 by Brian Wise and Naomi Lewin

It would appear that, in order to accomplish the goal of greater diversity and inclusion in orchestras and their leadership, there needs to be objectivity enforced at the selection stage, but also a certain critical mass of talent in the pipeline, pushing for or demanding  opportunities to perform and to lead. Are these lessons pertinent to corporate boardrooms?