Editor: Tell us about your background and experience.
Gleason: I have been at NACD for over 11 years. The organization was much smaller when I started – just over 1,100 members. My prior experience includes working with Ernst & Young as a consultant and running the U.S. Research group for Institutional Shareholder Services (ISS).
Editor: Please talk about the mission and objectives of NACD.
Gleason: Created by and for directors, NACD’s mission is to advance exemplary board leadership, which we accomplish through research, education programs and advisory work. Our main objective is to keep our nearly 12,000 members – mostly public company directors – informed about leading practices in the boardroom and the latest legislative and regulatory developments that may impact their board service.
While as a 501(c)(3) NACD does not lobby, we serve as an important resource during the legislative process. For instance, NACD’s research and publications are regularly sent to Capitol Hill. We have also testified and conferred with key committees as they prepare for hearings. Our research is well cited in the legislative and regulatory arenas, providing statistics regarding boards as well as leading practices addressing key issues, such as compensation.
Our work in the field involves conducting annual surveys of public and private companies and nonprofit organizations – capturing quantitative information and confidence levels from the boardroom – and we often survey audit committee members to cover the full spectrum of issues. Survey results are then analyzed to issue recommendations about the practices that work and those that are best avoided. This research also forms the basis for our benchmarking tool that compares individual boardroom practices to peers.
We also conduct primary research through our Blue Ribbon Commissions, which are formed and meet annually in Washington, DC. This year’s topic is “the power of the diverse board,” which will explore not only the well-known benefits of diversity, but also the persistent barriers that corporations face in moving toward a positive result.
Editor: What criteria figure into NACD’s efforts to expand diversity protocols?
Gleason: Traditionally, boards have sought active CEOs to fill open seats, a tactic which may or may not align with the company’s goals. For example, if a company has an objective to increase market share, it should consider recruiting directors who bring marketing, media or finance expertise. If international expansion is on the agenda, then board members might be selected based on relevant global experience with other companies. While this is not necessarily new thinking, it does take a broader perspective that encourages the direct alignment of board composition with corporate strategy.
Editor: How should board evaluations be performed?
Gleason: To be listed on the New York Stock Exchange, companies are required to perform annual evaluations at the board and committee levels; however, these rarely delve into the performance of individual members. For a board to serve as an asset to the company, it is important to assess the current boardroom composition in light of the skill sets that will be needed to achieve the long-term strategy.
Another barrier to an effective evaluation involves the stigma attached to resigning from a board. For instance, a certain individual may be a great director for a $300 million company but less qualified to serve for a $3 billion company. It is important for everyone to feel comfortable with turnover and for individual resignations, when warranted, to be viewed as a more positive, evolutionary board development.
Editor: Does your experience at ISS enhance your role at NACD?
Gleason: The corporate governance world can be viewed as a triangle consisting of shareholders, management and the board. Having worked on all three sides gives me a unique perspective when addressing shareholder issues. Our ability to respond to institutional investors has increased their participation in our programs, thus facilitating open dialogue.
In addition to speaking at events, I present on behalf of NACD’s Board Advisory Services, which brings our educational programs directly into boardrooms. When I perceive negative sentiment about institutional investors, I am able to provide substantive information and speak to the position of the other side. I often find there has been a genuine misperception; thus, my role involves educating both directors and investors on how to approach differences and to create better results for the company.
Editor: What are the current and emerging issues that boards should prioritize?
Gleason: Topping the list is the tremendous uncertainty around compliance with regulations as required by Dodd-Frank, which will persist until the SEC and other agencies complete the rulemaking process. In the meantime, our recommendation is to focus on board composition and more effective corporate disclosures, both in proxy statements and on company websites.
The number-two concern pertains to these disclosures and applies to fundamental issues, such as compensation, the nomination process and the administration of audit and governance committees. Many companies are too focused on compliance and not enough on telling their stories to shareholders.
For example, executive compensation is often determined with a complex decision-making process that is bound by proxy rules and disclosure requirements. The board then has the difficult task of clearly explaining the process: what are the thresholds and targets that define the logic behind board decisions regarding compensation, including why specific decisions may be outside the norm. At the same time, corporate disclosures are legal, filed documents that should be generated with sensitivity to appropriate limits while still including all important information for the shareholder. It is time for boards to rethink this process.
Editor: What are some NACD programs that help directors become aware of and stay current with these issues?
Gleason: I’ll start with our fellowship designation program, which is a great way to demonstrate commitment to continuous learning in the boardroom. The Governance Fellow credential requires completion of our Director Professionalism educational program, and the Board Leadership designation is designed for experienced directors who additionally have completed one of our Master Class Programs.
Directors can take pride in achieving these designations, and we make sure that every class agenda both covers the basics and is continuously updated to reflect the current environment. We just finished a four-day event in Charlotte, North Carolina where we taught both classes in two-day modules, i.e., the Director Professionalism class and the Master Class for more experienced directors. These credentials are maintained by completing formal requirements for continuing education, which we offer on a regular basis.
NACD’s media services include our Directors Daily, which is a daily news feed that we custom create and deliver via email at 7:15 a.m. We scan 1,300 publications, including the New York Times and the Wall Street Journal, and cull the top 10 to 12 stories on a variety of topics, including governance, audit, compensation and the economy. Directors are extremely busy, and they appreciate an early-morning update that cuts through the media clutter, is compiled and summarized by our editors and provides links back to the original content. Finally our bi-monthly magazine NACD Directorship presents the viewpoints of various directors, including interviews covering their experiences and industry-specific comments about key issues.
Editor: Tell us about some of the events that NACD hosts.
Our Annual Board Leadership Conference in October features over 100 speakers from boards and corporate leadership positions, plus economists and governance experts. Last year’s conference attendance was an impressive 850 members. The 2011 Conference took a global look at the future of corporate governance, featuring a presentation by futurist Edie Weiner on the importance of long-term vision and how to ensure a productive and profitable future in light of a rapidly-changing society.
Our Spring Forum this year will include roundtable discussions and expansive peer exchanges. Our Fall Forum will be keynoted by DuPont CEO Ellen Kullman, and it will include our NACD Directorship 100 honories as well as our Director-of-the-Year award ceremony in addition to peer exchanges and other presenters
Editor: What are some additional resources for your members? Please talk about the Board Confidence Index and NACD’s advisory councils.
Gleason: The Board Confidence Index (BCI) – now two years in existence – is a quarterly survey of directors from publicly traded companies. It mirrors the CEO and consumer confidence indices, though it is not always directly in sync. The survey covers economic developments and hiring practices, and it reflects how board members are reacting to these issues over time. When we depict these results graphically, it is very interesting to see how directors generally view the next three months or specifically react to labor statistics and anticipate hiring practices for the coming year.
We have an advisory council for each of the three key committees – audit, compensation and nominating/governance – which are composed of prominent committee chairs from the Fortune 250 and Fortune 500 companies. These advisory councils meet annually in Washington, DC, at which time they exchange ideas with representatives from investor groups and regulatory agencies. The most recent Audit Committee Advisory Council, for example, included participation from the Financial Accounting Standards Board (FASB), institutional investors and ISS.
Currently, the Audit Committee Advisory Council is looking at the Public Company Accounting Oversight Board’s recommendation for mandatory auditor rotation, and we’ve convened several conference calls to talk through ideas, survey the members and come up with approaches to different issues.
The three key NACD Advisory Councils soon will be supplemented by an additional Council on risk, not just as an audit concern but also as a full board topic. We will bring in chief risk officers and members of Fortune 250 company risk committees – maybe extending into the Fortune 500 – and really start focusing in on IT and cyber risk and on how companies are overseeing enterprise risk management (ERM). As always, the idea is to develop leading practices and guidance around these issues.
Editor: What is the role of general counsel on today’s boards? Has this role evolved in recent years?
Gleason: It has definitely evolved. The general counsel (GC) and/or corporate secretary is a central player on the board – performing core tasks, such as disclosures and filings, and serving as a trusted advisor. It has always been the case that compliance around board decisions often fall to the GC; however, with so many new legislative and regulatory requirements from Dodd-Frank (and even back ten years to Sarbanes-Oxley), the GC role has grown in prominence. When you add in the competitive and international factors, such as compliance with the Foreign Corrupt Practices Act, the GC role further increases in complexity.
Staying abreast of and keeping the board informed about developments in the legal and regulatory arena is absolutely critical, and GCs and corporate secretaries are often the primary interface for NACD’s education efforts within the company. They help us generate custom education programs and work directly with the Nomination/Governance Committee to establish processes and identify key issues.
Editor: Do you have any closing thoughts for our readers?
Gleason: NACD’s work is about helping companies make better decisions. Assembling the best boards possible involves gathering people with optimal skill sets and varied experience – not only in their corporate lives but also in their lives as consumers, leaders and intellectuals. NACD’s motto is Advancing Exemplary Board Leadership, which further reflects our objective to translate success stories – finding the best of the best for a specific company – into strategies that help other companies and the corporate community as a whole.