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:  http://www.businessinsider.com/americas-biggest-companies-are-intimately-interconnected-2015-7.

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: http://www.infowetrust.com/dowjones/ (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: http://www2.ucsc.edu/whorulesamerica/power/corporate_community.html. 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: http://www.forbes.com/sites/paulhodgson/2012/12/05/why-should-we-care-about-corporate-interlocks/

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: http://www.businesswire.com/news/home/20110907006762/en/GMI-Launches-%E2%80%9CGMI-Analyst%E2%80%9D-Product#.Vfc3DBFVhBc

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: https://www.msci.com/resources/factsheets/MSCI_ESG_GovernanceMetrics.pdf

For a "poor man's mapping" of interlocking relationships for over 40,000 people, take a look at NNDB Mapper: http://www.nndb.com/ 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: http://download.intel.com/newsroom/kits/education/pdfs/Intel_Education_FactSheet.pdf

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.