2011 CORPORATE BOARD OF DIRECTORS SURVEY

Transcription

1 2011 CORPORATE BOARD OF DIRECTORS SURVEY Corporate Board of Directors Survey

2 Table of Contents Introduction 2 Executive Summary: Key Results and Recommendations 2 Survey Questions and Descriptive Statistics 4 About The Rock Center for Corporate Governance at Stanford University 21 About Heidrick & Struggles 21 Contact Information 24 Copyright 2011 by the Board of Trustees of the Leland Stanford Junior University and Heidrick & Struggles. All rights reserved

3 Executive Summary: Key Results and Recommendations Do Active CEOs Make the Best Board Members? New Survey from Stanford s Rock Center and Heidrick & Struggles Examines the Pros and Cons Active CEOs Might Be Too Busy to Be Effective CEOs also more tainted by ethics lapses than board directors A new survey from Stanford University s Rock Center for Corporate Governance and Heidrick & Struggles has uncovered surprises about who makes the best board directors: it s not necessarily the current CEOs that most companies seek out. The popular consensus is that active CEOs make the best board members because of their current strategic and leadership experience, says David Larcker, professor at the Stanford Graduate School of Business. In the 2011 Corporate Board of Directors Survey, when asked about potential problems a full 87 percent said that active CEOs are too busy with their own companies to be effective directors. A third of the respondents said that active CEOs were too bossy/used to having their own way. It s great to have sitting CEOs on a board, but companies need to be aware of the costs associated with having them, says Stephen A. Miles, Vice Chairman at leadership advisory firm Heidrick & Struggles. Because active CEOs are so busy, they might be unavailable during a crisis or have to cancel meeting attendance at the last minute. They also have less time to review materials. For some, the demands of their full-time job make it hard for them to consistently be as engaged as they need to be. Analyzing responses from 163 directors of public and private companies across rth America, the 2011 Corporate Board of Directors Survey reveals how directors think about the composition of the board and the effectiveness of various types of board members. Key findings include: n Despite the fact that sitting CEOs are highly sought-after for board seats, 79% of directors said that, in practice, active CEOs are no better than non-ceo board members. Companies need to differentiate between a CEO who brings caché to the board and one who will actively contribute real work as a director, says Mr. Miles. n CEOs of companies that have experienced public ethical lapses are seen as far more tainted by the scandal than their boards are. While only 37% of directors believe that an ex-ceo of a company that experienced substantial accounting or ethical problems can be a good board member, 67% believe a director of a similarly-plagued company can, says Professor Larcker. Some directors do see value in having a CEO who has experienced and hopefully learned from mistakes in judgment. But far more are concerned about the stigma and perception issues in bringing aboard a CEO like this. n Boards are struggling to evaluate whether prospective board members will be a good fit for the company. Fifty-one percent of directors see it as moderately difficult and 20% see it as extremely or very difficult to gauge whether a prospect will be a good addition to the board, says Mr. Miles. Boards are clearly finding it a challenge to determine someone s fit. A single person can ruin a great board, so boards need to spend considerable time evaluating this very subjective quality. n More than half of directors think that board turnover is too low. The challenge of getting rid of board members is that there is a widespread assumption of board tenure, says Professor Larcker. You may want to bring them on for three to five years, but they end up staying for ten. While egregious problems might be taken care of more quickly, it is much more difficult to get rid of an underperforming or irrelevant director who just happens to stay on too long. n Forty-six percent of companies do not engage in succession planning for their board of directors. Just as we found in our study last year that companies are seriously lagging in CEO succession planning, boards aren t doing a great job of planning for board succession either, said Mr. Miles. Sixtysix percent of directors do believe that board succession planning is an important best practice, but only 54% actually do it Corporate Board of Directors Survey

4 n Nearly 20% of lead directors are chosen by the CEO or chairman. For obvious reasons, CEOs should not choose the lead director, says Mr. Miles. The CEO should be asked for input, but the ultimate choice needs to be made by the board. Forty-seven percent of respondents said that their lead director was elected by the independent directors, but this number should be much higher. n More than 80% of board members are somewhat skeptical of the value of professional directors. Even though there has been a call among some for increased use of professional directors those who make it a full-time job to sit on boards most directors don t think that professional directors are any better than traditional board members, says Professor Larcker. While some respondents believe that this group s diversity of experience is an asset to a board, many are concerned that professional board members are too busy with other directorships to be effective. As companies think about who to bring onto the board that can deliver the greatest value, Professor Larcker and Mr. Miles offer the following suggestions: 1. Re-think appointing the name CEO to the board., a company gets great publicity when it recruits a big name onto the board, says Professor Larcker, but you really need to think about what this person will actually deliver in value. If they are too busy or if they don t fit the culture or have the right chemistry, it might not be worth it. 2. Weigh failure when evaluating a prospective board member. Obviously, personal ethical lapses should preclude someone from being chosen as a director, but there might be value in someone coming from a company that failed, says Professor Larcker. Boards need to understand what this person s contribution was to the failure. Did they learn important lessons, or are they likely to repeat past mistakes? 3. Tread carefully when evaluating professional directors as board candidates. It s important to remember that boards must have a good, working relationship with their CEO in order to build value, says Mr. Miles. Ideally, a professional director comes from a background of multiple leadership positions where he or she has a deep understanding for what the CEO is going through. For these reasons, retired CEOs have the potential to make great professional directors. They can have a constructive dialogue with the CEO and can really contribute strategically and operationally. 4. Take the lead director position much more seriously. You should conduct a succession process for your lead director just as you would for a CEO or board seat, says Mr. Miles. The lead director should be the most respected member on the board a first among equals. The nominating/ governance committee needs to run this process and make sure that the best director is in the position. It should never be rotational as not every director is suited for this leadership role. 5. Evaluate and refresh your board. Of course most board members think they are above average, says Professor Larcker. It s human nature. However, the evaluation process should be structured so that companies get a clear understanding of who is adding real value and who is not. It is time to move beyond check-the-box board reviews and start to seriously evaluate the board s effectiveness and its individual directors. Once you have this information, the chairman or lead director has to be ready to have the difficult conversation about how a director can improve, or whether it is better for them to step down. To speak with David Larcker or Stephen Miles about this research survey, please contact Helen Chang, Stanford Graduate School of Business, (650) or chang_helen@gsb.stanford.edu; or Jennifer Nelson, Heidrick & Struggles, (404) or jnelson@heidrick.com Corporate Board of Directors Survey

5 Survey Questions and Descriptive Statistics Total Number of Respondents = 163 responses (mostly complete) collected April to May, 2011 A. Background 1. What is your present position? (Please check all that apply.) Chief Executive Officer 15 Retired Chief Executive Officer 15 Chairman of the Board 17 Retired Chairman of the Board 5 Lead Director 10 Executive Officer 13 Retired Executive Officer 7 Outside Board Member 66 Other 9 Chief Executive Officer Retired Chief Executive Officer Chairman of the Board Retired Chairman of the Board Lead Director Executive Officer 2. What is the revenue for the company that you are most closely identified with? <$500 million 31 $500 million to $1 billion 14 $1 billion to $5 billion 25 $5 billion to $10 billion 14 $10 billion to $20 billion 7 >$20 billion 9 Total age 100 <$500 million $500 million to $1 billion $1 billion to $5 billion $5 billion to $10 billion $10 billion to $20 billion >$20 billion Retired Executive Officer Outside Board Member Other Corporate Board of Directors Survey

6 3. What is the industrial sector for the company that you are most closely identified with? Natural Resources 5 n-durables 12 Durables 21 Regulated Utility 2 Wholesale/Retail 7 Financials 13 Services 26 High Technology 14 Total age Age < to to to to > 70 9 Total age 100 < to 40 Natural Resources n-durables Durables Regulated Utility Wholesale/Retail Financials Services High Technology 4. Gender Female 26 Male 74 Total age to to to 70 > What is your present board service? 6.a. Number of public, for-profit boards Female Male Corporate Board of Directors Survey

7 6.b. Number of private, for-profit boards > > c. Number of not-for-profit boards >5 1 6.d. Total number of boards - this is computed from the above three questions > > Are you a professional board member or director (a director whose primary job is to serve on boards)? Total age > Corporate Board of Directors Survey

8 B. Planning for New Board Members 8. Who in your company is responsible for identifying new candidates to serve on the board of directors (Please check all that apply): CEO 18 Chairman 16 Lead Director 6 Other Directors 8 minating & Governance Committee 28 Full Board of Directors 15 External Consultants 6 Other (please specify 1 CEO Chairman Lead Director Other Directors minating & Governance Committee Full Board of Directors External Consultants Other CEO Chairman Lead Director minating & Governance Committee Full Board of Directors External Consultants Other When does your company typically begin the process of identifying candidates to serve on the board: (please check only one)? After an outgoing director has stepped down 6 While an outgoing director is in the process of stepping down 26 Before an outgoing director announces plans to step down 49 Other 19 Total age 100 After While Before 9. Who in your company has primary responsibility for identifying candidates to serve on the board (please check only one): CEO 11 Chairman 14 Lead Director 1 minating & Governance Committee 62 Full Board of Directors 7 External Consultants 2 Other 3 Total age 100 Other Selected other responses: Need new skills When a need for a particular skill set is identified or required (new expertise sought OR replacement) When someone that would add value to the board is identified Ongoing with assumed 1-2 year lead; ongoing review of potential candidates We are constantly looking to expand the Board When board assessments reveal the need for certain capabilities/ skills/insights that are not currently represented on the Board When modifications to the strategy are made Approaching mandatory retirement Well in advance of mandatory retirement dates When a director is approaching mandatory retirement or term limits Acquisition Acquisitions bring directors Corporate Board of Directors Survey

9 11. Does your company develop a formal written document that outlines the skills, competencies, and experiences required for the next board member ( skills and experience profile )? (please check only one) Total age (If to q11) How different is the skills and experiences profile for your next board member from the skills and experiences profile of the outgoing director (please check only one): Extremely different 4 Very different 21 Moderately different 46 Slightly different 20 t at all different 9 Total age 100 Extremely different Very different Moderately different Slightly different t at all different How difficult is it to evaluate whether a prospective board member will be a good choice (in terms of chemistry, experience, and knowledge) for the company? (please check only one) Extremely difficult 3 Very difficult 17 Moderately difficult 51 Slightly difficult 22 t at all difficult 7 Total age 100 Extremely difficult Very difficult Moderately difficult Slightly difficult t at all difficult Is the present turnover of board members on U.S. Corporate Boards (please check only one) Much too low 8 Low 47 About right 44 High 1 Much too high 0 Total age 100 Much too low Low About right High Much too high Corporate Board of Directors Survey

10 C. Board Succession Planning 15. Does your company engage in succession planning for the board of directors? (please check only one) Total age (If to q15) Where is board succession planning primarily discussed (please check only one): Meetings of the full board 21 Meetings of the nominating and governance committee 71 Informally among directors 4 Other (please specify) 4 Total age 100 Meetings of the full board Meetings of the nominating and governance committee Informally among directors Other (please specify) (If to q15) How often is board succession planning discussed in formal board or committee meetings (please check only one): One meeting per year 24 Two meetings per year 36 More than two meetings per year 33 Every few years 6 Never 1 Total age 100 One meeting per year Two meetings per year More than two meetings per year Every few years Never Which of the following statements best summarizes your opinion of board succession planning (please check only one): It is an important best practice 66 It is useful only when the board has critical directors whose loss would be very bad for the company 26 It is not useful at all 8 Total age Does your company have board members with an expertise in CEO succession planning (i.e., they have led or have participated in three or more succession processes in the past as a CEO or director): Total age Corporate Board of Directors Survey

11 20. (If to q19) Which of the following directors have expertise in succession planning (please check all that apply): Number Chairman 79 Lead Director 48 Chair of the minating and Governance Committee 69 Director(s) other than these 93 Chairman Lead Director Chair of the minating and Governance Committee Director(s) other than these When recruiting for an open board seat, does your company consider whether a candidate has previous experience in CEO succession planning? Total age What traits of active CEOs make them attractive board candidates (please check all that apply): Strategic expertise 77 Risk management expertise 45 Operational expertise 74 Experience responding to a crisis or failure 43 Leadership qualities 67 Extensive personal and/or professional networks 46 Other (please specify) 13 Strategic expertise Risk management expertise Operational expertise Experience responding Leadership qualities Extensive personal Other Selected other responses: D. CEOs as Board Members 22. Are directors who are active CEOs better than non-ceo board members? Total age 100 Current Knowledge Current industry knowledge Current issues, current issues experience External global market dynamics perspective Ability to identify with the CEO in terms of issues They are currently in the flow of business issues They are currently experiencing some of the same problems as our CEO Retired CEOs bring considerable perspective but not the immediacy of serving CEOs Corporate Board of Directors Survey

12 24. What traits of active CEOs make them unattractive board candidates (please check all that apply): Too busy with their company to be effective directors 87 Too interested in networking/promoting their own company to be effective directors 21 Too bossy/used to having their way 33 t good collaborators 28 Other (please specify) Are directors who are retired CEOs better than average board members? Total age 100 Too busy Too interested Too bossy t good collaborators Never Selected other responses: Big ego t good listeners 27. How many years before the experiences of a retired CEO become outdated and are no longer valuable to current board service? Less than 3 years 10 More than 3 but less than 5 years 16 More than 5 but less than 10 years 20 More than 10 years 16 CEO experience never becomes outdated 38 Total age 100 Too generous with compensation 25. Are directors who are retired CEOs better board members than active CEOs? Total age 100 Less than 3 years More than 3 but less than 5 years More than 5 but less than 10 years More than 10 years CEO experience never outdated Corporate Board of Directors Survey

13 28. Can an ex-ceo of a company that experienced substantial accounting and ethical problems be a good board member at another company? (please check only one) Total age 100 t a good fit as ability to assess risk may be deficient Assuming the problems occurred during his/her tenure, there is a reputational risk that may affect his/her ability to perform well If the issues arose on the CEO s watch they should have had the processes in place to see the risks and correct before they became problems for the company, the employees and shareholders Earnings experience may be a good teacher A good CEO learns why he missed the flaws, and does not drop the ball twice, though be careful of flawed characters. As long as the CEO was not involved (aware of or acting in) in personal egregious behavior and the CEO is able to openly speak to lessons learned so that Board can learn from his/her experience. However, there may always be a question mark around that person I would say yes depending on the situation if the CEO has learned from the mistake, he/she could be very valuable 29. Please briefly explain your answer to q28 Selected other responses: t a good fit due to credibility and ethical issues Directors need to be role models for ethical behavior Ethical problems are not caused by a lack of knowledge, they are caused by character flaws (and character doesn t change) I would have more problems with the ethical issues than the accounting ones, but both are problematic he/she was in charge. Although I think someone with this experience could be great, the stigma and perception issues would prevent them from being effective May have difficulty establishing credibility/trust, however depends on who caused them, but it does show a problem managing and controlling information and risk Tone at the top is a key driver of corporate culture and the CEO is the most influential person in setting tone at the top. Accounting and ethics issues at his / her company are usually the result of problems with CEO performance. t a good fit due to potential reputational and judgment issues Absolutely not. This concept smacks of reward for bad behavior thinking. Different if the CEO went in and reversed the problems. They may be a productive board member in a private company depending on their expertise in the segment or growth initiatives that do not track culture If the CEO recognized the deficiencies and tried to be transformational, then yes. But if the CEO accepted status quo, then no There either is or is not a culture of ethical behavior and compliance or not. The CEO sets the tone. HOWEVER, there are CEOs who have inherited problems they did not create and they should not be blanketed with the above statement These problems may have strengthened the CEOs ability to respond effectively and plan proactively 30. Can a board member (not the CEO) at a company that experienced substantial accounting and ethical problems be a good board member at another company? (please check only one) Total age 100 The risk to the new organization is too difficult to assess relative to the upside. Was it a failure in oversight, knowledge, other? How does the board assess whether the CEO has learned from the past problems adequately? How can the board assess this? Reputation risk outweigh[s] the experience Corporate Board of Directors Survey

14 31. Please briefly explain your answer to q30 Selected other responses: OK if not closely involved-is highly situation dependent As long as they are not too closely associated with the scandal and the perception is that this particular board member was not complicit in the problems Each circumstance can be different. A board member must rely on information supplied to him. You can question, but not get honest answers If this board member was part of the solution and not part of the problem, (s)he might make an outstanding board member t a good fit due to potential reputational, judgment and trust issues Although less strongly than the explanation to the preceding question (we may think of mitigation factors such as the behavior of the Board Member in trying to prevent or resolve the problem), there is also a potential reputational risk involved If it is not the CEO or the CFO - possibly. Even then you have to decide if it is worth the reputational risk to the company At the end of the day it is the Board that shareholders place trust in and they must have and show understanding of the company s accounts Most likely not since the level of the person being recruited to the Board is C Suite and they are responsible for running the Enterprise along with their peers and CEO, if they were brought in to solve the problem. if they were part of the problem. If they were part of ethical issues, NEVER! experience is a good teacher A good director learns why he missed the flaws, and does not drop the ball twice, though be careful of flawed characters. As long as the person was not the cause of the problem s/he must have high integrity and scrupulous ethics Assuming the Board member was not involved in the irregularities, he or she should have learned valuable lessons from the experience If the director was the person who uncovered the problems and led the investigation, he/she could be a great board member. In contrast, if he/she was there for a decade and never dug into issues that ultimately proved problematical This truly depends on the situation. For example, if a new board member was instrumental in discovering the problems, then this board member is hugely valuable to others! E. Separating the Chairman and CEO Positions 32. Does your company separate the Chairman and CEO roles? (please check only one) Total age (If to q32) How many years ago were the positions separated? to >10 8 Always 19 Total age to 10 > 10 Always Corporate Board of Directors Survey

15 34. (If to q32) What event or events caused the separation of CEO/Chairman positions? (please check all that apply) Pressure from large shareholders 4 Proxy advisor (ISS or Glass-Lewis) recommendation 4 Legislative action 2 Board members view this as a best practice 38 It has always been the case for our company 25 Other (If to q35) Is this separation expected to be permanent or temporary? Permanent 95 Temporary 5 Total age 100 Pressure from large shareholders Proxy advisor (ISS or Glass-Lewis) recommendation Legislative action Board members view this as a best practice It has always been the case Other F. Lead Independent Director 37. Does your company have a lead independent director? Total age 100 Selected other responses: Concern over leadership qualities of promoted CEO Part of implementation of succession plan. Needed transition period Retirement of the previous CEO and hiring of a new first time CEO who the board felt needed mentoring 35. (If to q32) Is the separation due to a CEO succession event? Total age Corporate Board of Directors Survey

16 38. (If to q37) How is the lead director selected? Chosen by the CEO or chairman 18 Chosen by the minating and Governance Committee 21 Elected by independent directors 47 Rotated among independent directors 7 Other reason 7 Total age 100 Chosen by the CEO or chairman Chosen by the minating and Governance Committee Elected by independent directors Rotated among independent directors Other reason (If Elected to q38) How frequently does the lead director election occur? 40. (If Rotated to q38) How frequently is the lead director position rotated? Every year 20 Every 2 years 60 Every 3 years 0 set schedule 20 Total age 100 Every year Every 2 years Every 3 years set schedule (If to q37) Is the lead independent director at your company the senior-most outside (nonexecutive) director? Total age 100 Every year 43 Every 2 years 12 Every 3 years 12 set schedule 33 Total age 100 Every year Every 2 years Every 3 years set schedule (If to q37) Is the lead independent director at your company the most highly respected nonexecutive director? Total age Corporate Board of Directors Survey

17 43. (If to q37) Does the lead independent director have personality attributes (such as the ability to build consensus) that specially equip this person to be effective in this position? Total age (If to q38) Does the lead independent director have prior board experience that is more extensive than the average director? G. Professional Board Members In the following questions, we refer to a professional board member as a director whose primary job is to serve on boards (i.e., these individuals have prior executive experience, but currently they have no other full-time job than to sit on boards). Traditional board members are individuals that either have a full-time job or other professional interests. Most of their annual income is not derived from compensation for board positions. 46. Do you have any professional directors on your board? Total age Total age Are professional directors better than traditional board members? Total age Which of the following statements best summarizes your opinion of the lead independent director position in your company (please check only one): It is an effective position that is a best practice 81 It is something that is done to simply satisfy exchange listing requirements 7 It is something that is simply window dressing for our shareholders 12 Total age 100 Effective position Exchange listing requirements Window dressing Corporate Board of Directors Survey

18 48. What traits about professional board members make them attractive board candidates (please check all that apply): Experience with multiple companies 86 Diversity of background 62 Experience with successful companies 58 Experience with failed companies 36 Experience managing a crisis 50 Extensive professional networks 40 Experience with multiple companies Diversity of background Experience with successful companies Experience with failed companies Experience managing a crisis Extensive professional networks What traits of professional board members make them unattractive board candidates (please check all that apply): Too busy with directorships Too interested in networking/ promoting Lack independence experience Doing this for the money Too old Other H. Board Observers In the following questions, we refer to a board observer as an individual who attends board meetings or committee meetings, but is neither a full-time board member nor a paid consultant. 50. Does your company have board observers? Total age 100 Too busy with other directorships to be effective 56 Too interested in networking/promoting their own career to be effective 27 Lack independence (because they rely on director fees as primary income) 24 current experience in executive position 31 They are simply doing this for the money 26 Too old 16 Other Corporate Board of Directors Survey

19 51. (If to q50) How many board observers are present in a typical meeting? >4 37 Total age If to q53 Do these positions rotate among internal managers of the company (e.g., a new person(s) every year or every other year)? Total age 100 > (If to q50) How are board observers compensated for their services? (please check all that apply) Cash 12 Options or stock 4 They are not compensated 84 Total age (If to q50) Are board observers ever (please check all that apply) Investors 21 Customers 1 Suppliers 0 Employee representatives 18 Other 25 Cash Options or stock They are not compensated (If to q50) Do any of your board observers include internal management employees that have high potential to become senior executives within the company? Investors Customers Suppliers Employee representatives Other Total age Corporate Board of Directors Survey

20 56. (If to q50) How are board observers identified and sourced? (please check all that apply): Management recommendation 46 Director recommendation 18 Recommendation by an investor 1 Recommendation by a consultant 4 Recommendation by an outside third party 0 Other 18 Management recommendation Director recommendation Recommendation by an investor Recommendation by a consultant Recommendation by an outside third party Other (If to q50) What value do board observers add to the company? (please check all that apply): Deeper company knowledge Deeper industry knowledge Deeper functional knowledge Scientific Knowledge Regulatory Knowledge Business Relationships Governmental Relationships Other (If to q50) Which of the following are most likely to have a board observer (please check all that apply): Meeting of the full board 79 Meeting of the audit committee 39 Meeting of the compensation committee 21 Meeting of the nominating and governance committee 11 Meeting of a specialized committee (such as finance, risk, technology, etc.) 14 Deeper company knowledge 61 Deeper industry knowledge 29 Deeper functional knowledge 29 Scientific Knowledge 4 Regulatory Knowledge 21 Business Relationships 25 Governmental Relationships 4 Other 11 Meeting of the full board Meeting of the audit committee Compensation committee minating and governance committee Specialized committee Corporate Board of Directors Survey

21 59. (If to q50) Does the presence of a board observer influence the discussion or level of candor in the formal boardroom? Total age (If to q50) Has a board observer ever been added to the board as a full voting member? Total age Corporate Board of Directors Survey

22 About Stanford University s Rock Center for Corporate Governance and Heidrick & Struggles About Stanford University s Rock Center for Corporate Governance The Arthur and Toni Rembe Rock Center for Corporate Governance is a joint initiative of Stanford Law School and the Stanford Graduate School of Business, created with the idea that advances in the understanding and practice of corporate governance are most likely to occur in a cross-disciplinary environment where leading academics, business leaders, policy makers, practitioners and regulators can meet and work together. The Rock Center s goal is to conduct research and tap this wealth of expertise to advance the practice and study of corporate governance. The Rock Center works closely with the Corporate Governance Research Program. About Heidrick & Struggles Heidrick & Struggles International, Inc., (Nasdaq:HSII) is the leadership advisory firm providing executive search and leadership consulting services, including succession planning, executive assessment, talent retention management, executive development, transition consulting for newly appointed executives, and M&A human capital integration consulting. For almost 60 years, we have focused on quality service and built strong leadership teams through our relationships with clients and individuals worldwide. Today, Heidrick & Struggles leadership experts operate from principal business centers globally.. For more information about Heidrick & Struggles, please visit Corporate Board of Directors Survey

23 David F. Larcker James Irvin Miller Professor of Accounting; Director of the Corporate Governance Research Program; Senior Faculty, Arthur and Toni Rembe Rock Center for Corporate Governance at Stanford University; Codirector of the Directors Consortium Executive Program Website Phone (650) Professor Larcker s research focuses on executive compensation, corporate governance, and managerial accounting. His work examines the choice of performance measures and compensation contracts in organizations. He has current research projects on the valuation implications of corporate governance, role of the business press in the debate on executive compensation, and modeling the cost of executive stock options. Professor Larcker presently holds the James Irvin Miller Professorship. He is the director of the Corporate Governance Research Program at the Stanford Graduate School of Business and senior faculty of the Arthur and Toni Rembe Rock Center for Corporate Governance at Stanford University. He recently co-authored the book Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences, published by FT Press-Pearson Prentice Hall in April, He has also authored numerous academic research papers, case studies, corporate governance closer look studies, and articles for the popular press including Do You Have A Plan For Finding Your Next CEO? The Corporate Board September/October 2010 with Stephen Miles of Heidrick & Struggles. Dave s research has been often cited by the WSJ, BloombergBusinessWeek, FT, Forbes, NY Times, Agenda, NACD Directorship, Corporate Board Member, SHRM and Corporate Secretary Magazine among others. Professor Larcker was previously the Ernst & Young Professor of accounting at the Wharton School of the University of Pennsylvania and Professor of accounting and information systems at the Kellogg Graduate School of Management at rthwestern University. He received his PhD in Business from the University of Kansas and his BS and MS in Engineering from the University of Missouri- Rolla. He is on the editorial boards of the Journal of Accounting and Economics, Journal of Accounting Research, Accounting, Organizations and Society, Journal of Accounting and Public Policy, Journal of Applied Corporate Finance. Professor Larcker received the table Contribution to Managerial Accounting Research in He is also a trustee of the Wells Fargo Advantage Funds Corporate Board of Directors Survey

24 Stephen A. Miles Vice Chairman, Heidrick & Struggles Phone (404) Stephen Miles is a vice chairman of Heidrick & Struggles. He runs Leadership Advisory Services within the Leadership Consulting Practice and oversees the firm s worldwide executive assessment and succession planning activities. He is also a key member of Heidrick & Struggles Chief Executive Officer & Board of Directors Practice. With more than 15 years of experience in assessment, top-level succession planning, organizational effectiveness and strategy consulting, Stephen specializes in CEO succession and has partnered with numerous boards of global Fortune 500 companies to ensure that a successful leadership selection and transition occurs. He also has led many chairman successions and board effectiveness reviews, partnering with boards of directors to help them with their overall effectiveness, committee effectiveness and individual director effectiveness. Additionally, he is a recognized expert on the role of the chief operating officer, and has consulted numerous companies on the establishment and the effectiveness of the position and supporting the transition from COO to effective CEO. Stephen is a coach to many CEOs and COOs around the world. He has built the Practice s coaching expertise by focusing on high-performance leadership competencies with a heavy emphasis on the business and cultural context. Stephen works extensively internationally, and his clients cut across all industry sectors. Stephen and his CEO advisory services were profiled in the BusinessWeek article The Rising Star of CEO Consulting. Prior to joining Heidrick & Struggles, Stephen held various positions at Andersen Consulting. Stephen is author and co-editor of the best-selling business book Leaders Talk Leadership. He also co-authored Riding Shotgun: The Role of the Chief Operating Officer, as well as the cover article in the May 2006 issue of Harvard Business Review* on the same topic. Stephen also co-authored the feature article in the April 2007 issue of Harvard Business Review titled: The Leadership Team Complementary Strengths or Conflicting Agendas? Great top teams work to their members disparate strengths but those differences can cause discord, too, especially during succession. His third book, Your Career Game: How Game Theory Can Help You Achieve Your Professional Goals, was released in April 2010 (Stanford University Press) and he has also recently completed a chapter on Assessing the Leader for Linkage Inc. s Best Practices in Leadership Development Handbook 2nd edition; Wiley Stephen is the author of the Stanford Graduate School of Business case study entitled Multimillionaire Matchmaker: An Inside Look at CEO Succession Planning. Stephen has also been featured in Forbes, BusinessWeek, Boardroom Intelligence, Strategy + Business, WSJ/MIT, Consulting Magazine, MIT Sloan, Ivey Business Journal, and CEO Magazine. He is a frequent speaker on the topics of CEO succession, coaching C-level executives, talent management and complementary leadership at the top (high performance teams). Stephen is a member of the Heidrick & Struggles Management Committee. He is an independent director for Overlay.TV and DNA13, and an advisory board member at Rypple and The Pythian Group. He has lived in Kenya, South Africa, Iraq, Argentina and Canada. * Second in Command: The Misunderstood Role of the COO was a McKinsey Award finalist for the best article in Harvard Business Review in Corporate Board of Directors Survey

25 Contact Information If you have any questions about this survey, please contact: Michelle E. Gutman Associate Director, Corporate Governance Research Programs Arthur and Toni Rembe Rock Center for Corporate Governance Stanford Graduate School of Business Knight Management Center 655 Knight Way, C222 Stanford, CA (USA) Phone: Copyright 2011 by the Board of Trustees of the Leland Stanford Junior University and Heidrick & Struggles. All rights reserved Corporate Board of Directors Survey

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