"Risk Tops Agenda for Boards" - Say Panelists at WomenCorporateDirectors' 2011 Global Institute

Executive Compensation, Corporate Crime, and Integrity in the Corporate Culture are on Boards' Risk Agenda

Jun 22, 2011, 13:05 ET from WomenCorporateDirectors

NEW YORK, June 22, 2011 /PRNewswire/ -- "Every year I speak with hundreds of board members – and we survey hundreds more around the country. For most, risk continues to be their top agenda item, and their biggest worry," states Mary Pat McCarthy, KPMG Vice Chair, Executive Director of KPMG's Audit Committee Institute, and member of WomenCorporateDirectors (WCD).

With this statement, Ms. McCarthy opened the lead session of the first-ever WCD Global Institute, a gathering of 200 women directors from around the world who convened in New York this May. WCD, a global organization of over 1,000 women directors representing 1,200 companies from 32 chapters around the world, developed the Global Institute for women directors to share ideas and strategies on the most pressing issues facing boards and companies today.

The opening panel, "Complexity and Risk," addressed how risk is affecting everything from executive compensation to the threat of some companies' violating laws and regulations to achieve sales growth.

Executive compensation and risk

While board audit committees were the "hot seats" post-Enron, today compensation committees have taken on that role, said panel members. Panelist Maria Elena Lagomasino, CEO of GenSpring Family Offices and chair of the board compensation committees for both Avon and Coca-Cola, explained how the comp committee drives corporate culture: "It is a very important place to be right now because I do think we can be the change we want to create, and compensation is a really important way to shape behavior."

Catherine Allen, the chairman and CEO of financial consultancy The Santa Fe Group, explained that in helping to work on financial reform in Washington, "what we heard over and over from risk managers is that they were not heard. At the management level, they were not allowed to go to the board, or the board was looking the other way because everyone was riding the high of growth." Pre-crisis, she said, "the common kind of risk parameters really weren't in place."

"The comp committee has the power to change that," she continued, since they not only can examine the compensation of CEOs but also comp practices throughout the organization.

"You can tell people to zig, but if you're paying for zagging, that's what's going to happen," said Ms. Lagomasino. "They're going to zag, zag, zag all day long, and so you have to have compensation practices that are totally aligned with the values that you're trying to create."

Risk-aversion and corporate crime

The other side of risk, however, is the danger of risk aversion, agreed the panelists. Palmina Fava, a partner in the litigation department at Paul Hastings and co-chair of the firm's global compliance and disputes practice, stated that when companies don't take risks in innovation and new products, they may fall victim to other risks that can be even more damaging.

Companies that rely heavily on sales partners around the world may resort to some tactics that "expand the risk of violating some local or international laws because they are still left with the obligation to hit their sales quotas," if they don't have new services and products to expand market share, said Ms. Fava.

Ms. Allen cited a survey finding that 84% of American employees are ready to leave their jobs, and an astonishing 17% of employees claim they are "doing harm" to their companies. "The financial crisis was the last thing that drove the disconnect between the employee and employer relationship, and it's particularly true in financial institutions. We're seeing a real uptick in financial crimes and internal fraud within financial institutions."

Integrity and corporate culture

Responding to a recent IBM survey citing that what CEOs see as most important in leadership for the future is, first, creativity, second, integrity, and third, global thinking, Ms. Lagomasino said "it should be integrity first, integrity second, and integrity third, then creativity and global thinking. Until that changes, we are going to have a lot of risk in the system.

"Boards have to be looking at 'What is the culture? What are the values? What kind of people are we hiring?' How do we make sure the messaging coming from the top is not just about creativity or innovation or growth? It also must be messaging about doing the right thing and about zero tolerance for not doing the right thing."

Echoing Herb Kelleher's "Culture is what people do when no one is looking," Ms. Lagomasino stated that this issue is particularly relevant when you have a large workforce spread out in many countries across many cultures. "I think the real question for boards is how to create a culture to make sure that when people are out there, they carry in their hearts and minds a set of values that says 'I have to do the right things first.'"

Doing the right thing may even require companies to threaten to shut down business in certain countries if corrupt local governments pose a risk in that market, said Ms. Fava. "It will take a very tough chief compliance officer, a very tough general counsel, a very tough CEO, or a very tough board to say 'We don't need that business.'"

For more information about WCD, the Global Institute, or the Complexity and Risk panel, please contact Davia Temin or Suzanne Oaks of Temin and Company at 212-588-8788 or news@teminandco.com.

About WomenCorporateDirectors (WCD)

WomenCorporateDirectors (WCD) is the only global membership organization and community of women corporate directors, comprised of more than 1,000 members serving on over 1,200 boards in 32 chapters around the world. In this new era of responsibility, WCD is committed not just to good governance, but to governance with global vision. Smart boards are going global in members and mindset. Our members share information and insights in order to ensure best practices in corporate governance around the world.

WCD's global chapters are located in Arizona, Atlanta, Beijing, Bogota, Boston, Charlotte, Chicago, Dallas/Fort Worth, Delhi, Denmark, Hong Kong, Israel, Lima, London, Mexico City, Minnesota, Mumbai, New York, Northern California, Northern/Central Europe (Berlin), Paris, Philadelphia, Sao Paulo, Seattle, Shanghai, Singapore, Southern California, South Florida, Switzerland, Tennessee, Toronto, and Washington, D.C. Chapters in Abu Dhabi, Australia, Cairo, Hanoi, Ho Chi Minh City, Houston, Iceland, Malaysia, and South Africa are in formation.

Our mission is to continue to expand the WCD community through leadership, diversity, education, best practices in corporate governance, and a focus on development and new board placement opportunities. WCD offers local, regional, national, and international forums, providing a platform for turning ideas into action. For more information, visit womencorporatedirectors.com.

About the WCD Global Institute

Held in May 2011, the WomenCorporateDirectors (WCD) 2011 Global Institute convened global women board directors to share corporate governance and business strategies in a private invitation-only setting.

The program included keynotes, panels, and discussion groups – as well as the WCD Visionary Awards Dinner – that facilitate informal peer exchanges. Panels include "Complexity/Risk," "Addressing Global Scarcities in Six Critical Areas Governing Economic Activity: Food, Commodities, Energy, Water, a Clean Environment, and Talent," "Boards with Three or More Women: What Differences this Makes," "Urbanization – the Future of the City is the Future for the World," "Changing Customers Around the World: From Niches to Global Mass Markets," and "Corporate Social Investing: Beyond Philanthropy."

The agenda featured more than 25 CEOs and board directors including Maggie Wilderotter, chairman and CEO, Frontier Communications, and director of Procter & Gamble and Xerox Corporation; Maria Livanos Cattaui, director of Petroplus Holdings, AG; Mouna Sepehri, managing director, Alliance CEO Office for Renault-Nissan; Naina Kidwai, CEO of HSBC India, director of Asia Pacific HSBC, and director of Nestlé; Doug Conant, president and CEO of Campbell Soup Company; Denise Morrison, EVP and COO of Campbell Soup Company; Elaine La Roche, director of China Construction Bank; Lulu Wang, chairman and CEO of Tupelo Capital Management, and director of MetLife; and Deborah Wince-Smith, president, Council on Competitiveness, and director of NASDAQ-OMX, Inc.

The WCD 2011 Global Institute was sponsored by KPMG, UPS, MetLife, Microsoft, Renault-Nissan, Paul Hastings, Baccarat, JPMorgan Chase, Pfizer, and Shell. Additional sponsors of the WCD Visionary Awards Dinner include American Express, The Coca-Cola Company, Gristedes/United Refining, Heidrick & Struggles, Kraft Foods, Procter & Gamble, and Toyota.

SOURCE WomenCorporateDirectors