freseconsulting

Corporate Governance: Are We Really Making Progress Toward Truly Independent Boards?

imre — Thu, 07 Jun 2007 20:27:24 +0000

In the 1970s, chief executives of major corporations (and we have to say, mainly American) were paid around 40 times as much as the average worker. By the late 1990s, that figure had risen (driven mainly through stock options) to a heady 360 times the average workers’ pay.

Then came a meltdown. Or did it? Despite much breast beating, government commissions and, so called, self policing, 21st Century compensation is still on the rise. And while Europe may not have seen quite so many fat corporate cats getting stuck with fingers jammed into the cookie jar of greed, there is little doubt that there’s a long way to go for corporate governance to meet its selfstyled aims.

A few things have caused this:

The runaway success of many businesses over the last two years, leading to ongoing, massive compensation pay-outs, notably in the IT and financial services industries
A host of high-profile, highvalue mergers and acquisitions (especially from acquisitive French, German and Spanish firms), which have dramatically changed the composition of the top executive suite in many companies and the consequent reward model.
The increasing trend for supersmart high-performers to seek the relative – or complete – anonymity of private equity businesses
Difficulty to find really independent board members willing to serve on boards, either through concerns about legal action or lack of time to do the job right.

“Across Europe, my view is that the majority of boards of directors are still highly incestuous and I don’t think members can be called truly independent,” says a organisational consultant in London. He adds, “rewards for top executives are – I feel – still on the increase and, while not at the level of U.S. compensation, are still accelerating ahead, leaving average workers’ pay lagging behind.”

“…the majority of boards of directors
are still highly incestuous…”

He’s right. Bosses in Europe now earn close to 100 percent more than average workers’ wages in their countries. And it has accelerated hugely this century. Consider this. In 2000, CEOs of the top 100 UK companies earned (in salary and bonus) an average of 39 times that of a worker. By the end of 2006, that figure had risen to 98 times the average wage. Indeed the 21st Century is turning out to be pretty good for those at the top. Since 2000, average earnings have risen by 102 percent, while those of full-time staff have moved just over a quarter of that (28.6%). [1]

Comments a human resources director of a major French company in the transportation business, “Yes, I do see that some senior executives – those at the very top – are getting much bigger rewards than before. Much of that because there have been significant changes in the make-up of the industrial landscape in Europe, due to acquisitions and other activities.” They add, “however I think that there are some sectors – and that includes our own – where rewards are not as hugely different from the average shopfloor worker.”

“…getting towards a model like
that of football players…”

Adds a finance director, recently involved in a merger in Germany. “My view is that there are a lot more casualties at top management level, either due to poor performance or to being in the wrong place at the wrong time.” She continues, “It seems to me we are getting towards a model like that of football players, where you need to make a lot of money in a short space of time because there aren’t many long-term guarantees.”

Certainly if Europe begins to mirror the U.S. (and history shows that it usually does) the casualty count in used-up CEOs is set to rise.

In 2006, around 1,400 CEOs of major U.S. corporations got booted out of the top job, up from just 600 in 2004. Observers put that down to the increased independence and vigilance of boards of directors. Others are not that sure and feel other dynamics are also in the mix.

“These high-profile CEOs may lose their jobs, but they don’t exactly leave with nothing,” explains a Boston based compensation consultant. “On average, those departing CEOs had a payoff of $16million, that’s not a bad return for doing a poor job, making you wonder just how “independent” boards really are.”

And it does seem that poor performance is quickly punished. “Learning from your mistakes and having a long-term plan just doesn’t cut it anymore,” points out a recruiter for a finance house in New York. They go on, “The results have to be immediate, strong and consistent and as long as U.S. managers continue to pay homage to quarterly results and their consequent impact on stock prices we aren’t going to see much incentive for a change.”

Top Talent Seeks Refuge in Private Equity Firms

Increasing public scrutiny and the clamorous demands for accountability have sent a growing number of top executives scurrying for the relative anonymity of private equity firms. According to Global Recruiters’ research, senior managers quitting the spotlight of public corporations can expect a threefold jump in earnings and the added bonus of a less stressful life, safe from the scrutiny of shareholders, regulators and the media.

Our investigations show that there are hundreds of private equity firms in Europe, the Americas and Asia sitting on vast mountains of cash who are not averse to using that wealth to tempt the very best out of the public eye and into the calmer and more richly rewarded waters of the private business elite.

Not only are they able to manage any way they want and get compensated by huge earnings for their results without having to declare it on annual returns, they are also instantly part of the get-richer-quicker school of money-making.

Free of the shackles of corporate accountability these “chosen ones” have an even greater pay-day in the pipeline when the business gets sold or goes public again. It is certainly a trend of the times that greater scrutiny, more independent boards and tougher legislation has had the effect of driving top talent away from the public corporations it was trained and schooled to serve. The toughest, hardest, meanest operators know a good thing when they see it, ostensibly leaving the “B” list in charge of many of the major public corporations. And, we would add, contributing to the growing global talent shortage.

The recent media circuses, pillorying highly successful, longserving chief executives and other senior managers on both sides of the Atlantic, have added to the notion that a quiet life in a private equity firm beats hands-down the adrenalin rush of captaining a public company, open to the vagaries of the market and the poisoned pens of media jealousy.

Outrageous Payments

And in Europe – which lags the U.S. in much of these outrageous payments - there are other issues at work. “My experience shows me that there are boards that lack any real teeth, “says a Zurich based management consultant.

“…too many boards that
lack any real teeth…”

“There are still too many organisations across Europe where senior executives serve on each other’s boards.” And while there are some genuine moves to really shake up corporate governance, recent scandals in France, Germany and the UK, show that all is not yet cleaned up – far from it. In fact, in our discussions with senior executives it is clear that market pressures are at their peak. And with rising share prices and the smell of massive bonuses in the air a CEO can perhaps be forgiven for looking particularly cheerful.

Until, of course they don’t perform, or step out of line. And that points to another trend in Europe that has gone largely unreported. While traditionally a company’s board composition was based on the nationality of the firm, there is a strong trend to bring in outsiders. Although this may look like an intelligent move to bring more diversity and the best possible experience to the organisation, some view it differently.

Cosy Clubs

“I think that the cosy clubs of senior managers who took turns serving on each others boards realised that it was time to do some house cleaning, “says a Frankfurt based human resource manager. “So they bring in some outsider as a senior player of even as CEO. But then if they don’t come up to expectations there is no compunction in firing them, because they were never really part of the system.”

And then, of course there is the difficulty of getting really good, experienced candidates for board service. Consider this view from our Zurich based management consultant, “I think it is more and more difficult to appoint independent board members in Europe, because the risks involved – personal liability, loss of reputation – are not to be underestimated. And in many places too, the financial rewards are limited when compared with the risk factor.”

“…more and more difficult to appoint independent board members…”

At Global Recruiters we have our own experiences of this. Indeed, it is one of the growing challenges for professional search firms who, tasked with finding independent board members, have to cast the net very wide to produce experienced and knowledgeable candidates. [2]

Dead Reckoning

The spirit of a well-loved business leader can linger in the corridors of power long after they have passed away. But getting paid after you are dead and gone makes a nonsense of the phrase “you can’t take it with you.” Why? Because in corporate America at least, you can keep getting profits after you have passed on. As the scandals of backdating stock options to hugely increase their value prove, you can take it with you beyond the grave.

At one firm, active in the TV cable industry, not only did at least one executive get his stock backdated to a time when the price was languishing at an all time low, they went back far enough to make it appear that he had received them while he was still alive – he had, in fact, been dead for months. By awarding options to an already dead executive, his heirs were able to cash in as the share price had sky-rocketed after his demise.

But if you are going down this road and there is a real determination to have a fully independent board – with real teeth to act in the interests of the shareholders and employees – what do you need to look for? Here’s our list to get you started (or at least thinking).

Independent board members need to:

show visible evidence of having the very highest ethical standards (this means scrutinising their professional history and credentials in some detail: ideally by an independent “auditor” with no stake in the business)
have a deep interest in the industry the company is in
possess a deep knowledge of at least one core aspect of that industry (i.e. functional, geographical)
be fearless (and we mean that word) in terms of wanting to deal with the truth, whatever it is
have an ability to “check their ego at the door” and exhibit strong team-player skills
bring with them a global mindset with strong cross-cultural sensitivities …and a few others…
be able to seek out information from non-company sources to make more informed, independent judgements on the business
have the drive to influence other board members and directly challenge/confront executives if need be.

A board composed of business professionals possessing these criteria might be a nightmare for a CEO to manage, but it will be independent and ultimately good for the long-term health, reputation and direction of the business.

Global Recruiters say that…

it is getting tougher to find good professionals who want to serve on boards
no doubt that rewards for top executives are still on the increase
there will be increasing casualties at senior levels as today’s performance becomes the only thing that matters
pay-outs to exiting managers will stay high
creating a truly independent board requires a strong focus on the qualities that candidates need to possess

Global Recruiters – Human Capital Solutions

Global Recruiters are a human resources and consulting firm, offering senior and mid level executive search services to a select group of corporate customers around the world. Clients are leading-edge, world-class performers in their respective industry sectors and recognised for their high professional and ethical standards. The firm specialises in focused, cross-border search providing international candidates for clients with a broad range of needs across the entire management spectrum. Global Recruiters bring to our clients the unique possibilities of combined skills, professional knowledge and geographic and industry coverage.

Global Recruiters offer the skills of:

A global boutique firm with no geographic or industry boundaries
Consistency in speed, quality, service and communication
Hands-on work by consultants : no “assistants” involved
Entrepreneurial flair, combined with a rigorous, process-driven methodology
A network of 23 “owned” offices around the globe that is set to expand in the coming months

For more information contact:
Global Recruiters
Avenue de Tervuren 412
B-1150 Brussels, Belgium
Tel +32 (0) 2 777 0380
Fax +32 (0) 2 777 0389

e-mail: info@globalrecruiters.org
www.globalrecruiters.org

Brussels • Bratislava • Budapest • Cologne • Dubai • Frankfurt
Hamburg • Hong Kong • London Los Angeles • Madrid • Miami
Mexico City • Munich • New Delhi • New York • Paris • Prague
Salzburg • Shanghai • Stuttgart • Vienna • Warsaw

[1]
Based on a study of FTSE companies by Income Data Services in the UK

[2]
Global Recruiters can advise and assist in the creation of independent boards and the search and interview of candidates

Contact Frese Consulting

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Keep the faith

frese — Sun, 25 Feb 2007 08:23:56 +0000

22 February 2007

Trust is something of a woolly concept for organisations, which is why many have found it difficult to get to grips with. It’s always easier to talk about more concrete topics, such as leadership or performance. But being woolly does not make trust unimportant.

Over the past year, a consortium of business leaders has been working on leadership and trust. Participants in the work, led by Tosca Consulting Group, include Manpower and the United Nations Refugee Agency (UNHCR), while those who worked with the group include HR guru Dave Ulrich, mountaineer Cathy O’Dowd and research company Pharos International’s Banu Golesorkhi, an expert in trust across cultures.The group, whose thoughts can be found below, came to several conclusions, with arguably the most important being that trust is akin to a currency and building up a healthy deposit account is essential so that withdrawals can be made when something goes wrong.

Workplace trust needs to endure beyond the personalities of the individuals within it, who will inevitably come and go. It needs to be embedded in the organisation as “the way things are done around here”. This is because trust creates three types of value for an organisation. First, that stock price is influenced by investor/analyst trust in the management team; second, that customers trust the organisation’s brand and reputation; and third, that employees are willing to offer discretionary effort if they trust that the organisation will reciprocate.

And the bottom line, according to the participants, is that trust encourages co-operative behaviour, information sharing and personal risk-taking – all essential for the modern organisation as it strives for greater efficiency. As Tosca’s managing director, Pam Hurley, says: “The consortium started by being about leadership and trust. But trust soon became more important. The big take-away is that trust is not something soft and fluffy.

The absence of trust has a direct impact on the bottom line. It affects financials and the business performance. You ignore it at your peril.”

This is what the group had to say:

The HR guru
Dave Ulrich, professor of business administration, University of Michigan:

Organisations don’t think, act or behave: people do. And, in any collective of people, common ground is needed. Trust allows us to work together with differences in skills, opinions and orientations, but to know that we will each sacrifice personal gain for the collective good. When organisations help individuals to create trust, the organisations are more likely to succeed over time.

Trust allows for actions to occur. Inevitably, trust must occur for people to act on anything. Trust is an act of faith: “If I do A, I will get B.” This cause-effect relationship is the inherent power by which all things are done or actions taken.

Individuals have a limited number of people that they fully trust or know that their interest will be taken care of by someone else. Organisations create trust among their employees when they act like a clan or a community of common values.

Trust also requires equity. If there is an imbalance of what we get for what we give, trust will not continue. At an organisational level, leaders build trust by doing things that are credible and then building on those things.

The practitioner
Jemma Fitzgerald, learning and development manager, EMEA, Manpower:

Trust is at the core of all relationships – and not just the personal ones. It needs to exist between an individual and their colleagues, between an individual and their boss, between the employee and the organisation and between the client and the supplier/service provider.

It’s like a currency. Every time you meet your commitments, effectively manage expectations, keep people informed or give people an opportunity to have their say, you make another deposit into the “trust bank”.

I’m a realist, and we all know that, particularly in large organisations, things change – you can’t always tell everyone everything and sometimes have to take decisions that people can’t understand or don’t like. In short, sometimes you have to make a withdrawal. But if you’ve saved enough up, it doesn’t have to be a deal-breaker.

The mountain climber
Cathy O’Dowd, the first woman to climb Mount Everest from both south and north sides:

When you climb Mount Everest there are two key statistics: the failure rate, which is 75 per cent, and the death rate, which is one in a hundred. People always assume that the reasons for this lie in the spectacular external obstacles, such as avalanches and blizzards. In reality, most teams never encounter such dramatic events. They have been defeated long before by the intangible obstacles that exist within their own team structure.

One of the biggest challenges on a climb is establishing trust within the group. Team members are likely to be talented climbers and, in keeping with their chosen activity, are accomplished, driven, ambitious individuals. They are putting their lives on the line. They may not compromise easily. They may not take orders readily. The ability of a leader to take difficult decisions quickly can be crucial in the rapidly changing environment, but uncooperative team members always have at hand the ultimate response: to refuse to carry out such decisions, or more often to carry them out without conviction.

For team members to be prepared to follow tough decisions without question requires the leadership to have built up a bank of trust on which to draw in difficult times. Trust is as important a tool on a mountain as tents, ropes or oxygen, and it is equally important in business.

This is not a process that occurs quickly, nor can it be easily faked. Trust does not require friendship between the individuals concerned but it is, crucially, founded in mutual respect. The most important point is that trust is not a quick-fix; it can’t be created in a hurry. Every action, every attitude, every conversation, builds up or whittles away at trust. It is not a tack-on to the business of a company; it is an integral part of the way it interacts with the world.

The cross-cultural researcher
Banu Golesorkhi, director, Research Centre for Pharos International, Brussels:

Trust appears on many corporate value statements and it has been shown to have many benefits in organisations. When there is trust, employees collaborate more willingly and more fully, they are more motivated to perform and are more loyal to their organisations. In large, globally dispersed organisations, trust is critical for collaborating to get work done.

The problem is that in cross-cultural situations, particularly in multi-cultural organisations, people behave according to their own values and beliefs of right and wrong; not according to ours. So, when there are several cultures working together, the chances of misunderstanding and mistrust are higher.

Trustworthiness can be in the eye of the beholder. For example, Asian managers expect their colleagues to show benevolence towards others. A co-worker who is not benevolent is not trusted, regardless of their level of expertise or power. By contrast, northern Europeans tend to distinguish between work and personal life, so they don’t expect their co-workers to behave like their friends. Such cultural differences in the willingness to trust others, and in judgments of trustworthiness, have real implications for building trusting relationships at work.

The legal counsel
Helmut Buss, chief of legal affairs, United Nations Refugee Agency (UNHCR):

Trust is already embedded in our management and leadership training. It’s there in security training when we send emergency teams to Sudan, Chad or Afghanistan… But, at the same time, UNHCR has changed dramatically over the past 10 years. The world is a lot more risky and the UN isn’t as respected as it once was.

The UN expects its people to uphold the highest standards of integrity, competence and efficiency. We require the highest levels of impartiality, fairness, honesty and truthfulness. Unfortunately, we don’t always live up to it.

I’m involved in management training and part of my role is to build a better organisation. The consortium helped me to have more informed internal discussions on ethics, our code of conduct and managerial/leadership issues. We now have a better understanding of why things happen, and the environment and context they’ve come from.

I’ve tried to feed it back into the development of our learning materials and management training. It’s given us a language and a vocabulary to talk to non-HR specialists – to pin down the notion of trust. It can be an empty word – but for us, trust is life and death. More than 50 per cent of our positions are in non-family duty stations. If we cannot trust each, we become a liability to the organisation. When we’re attacked, when people are taken hostage – things that happen every day in our work environment – if we don’t know each other and don’t have the trust to open up to see the implications, then it becomes a lifeand-death security issue.

Further Information

Previous consortia have tackled the future of work (PM 27 January 2005) and what it takes to be a great employer (PM 4 May 2006).
Tosca’s next consortium is on human capital metrics – measuring what knowledge workers are doing and ensuring they are delivering organisational goals while staying fully engaged.
It is also rolling out a series of mini projects on topics such as global talent management, future leaders and leveraging learning.

www.toscagroup.com

Human Resources Business Process Outsourcing: Transforming How HR Gets Its Work Done

frese — Mon, 30 Oct 2006 14:30:42 +0000

Human Resources Business Process Outsourcing: Transforming How HR Gets Its Work Done (Jossey Bass Business and Management Series) (Hardcover)
by Edward E. Lawler, Dave Ulrich, Jac Fitz-enz, James Madden, Regina Maruca

Review
“In the next few years, most HR departments will outsource some or all HR administration. In this book, the foremost thought leaders in HR have put it all together for us. This book explores the evolutionary change our profession is experiencing, gives an envisioned future, and shows how to transform once and for all into a strategic role that adds value and delivers results.”
–Libby Sartain, senior vice president, human resources, and chief people Yahoo, Yahoo! Inc.; former vice president of people, Southwest Airlines, and coauthor, HR From the Heart: Stories and Strategies for Building the People Side of Great Business

“This book describes the keys to reinventing the HR organization from administrative to strategic and upgrading the HR team to becoming a true strategic business partner in the process.”
–Susan Bowick, former head of human resources, Hewlett-Packard

“This book provides excellent insight into the exciting new thinking behind the creation of one of the most successful business process outsourcer (BPO) companies that has been created in the last five years.”
–Bill Pade, partner, Oak Hill Capital

“This is a really good book! I recommend it as a must-read for anyone considering HR outsourcing as well as any venture capital firm considering a BPO investment.”
–Dennis McGuire, founder and CEO, Technology Partners

“Faced with a real threat of living in the past, this is a collection of stories about creating a new HR future with innovation, spirit, and focus. Every HR leader can see themselves, learn from the events, and test their convictions. Whether you believe in HR outsourcing or not, the journey is compelling.”
–Don Packham, senior vice president of human resources, BP America

“HR can only excel if it is able to balance the strategic and the transactional agenda. Without transactional excellence HR does not deserve its seat at the table; without offering strategic value the job is less than half done. The HR profession as well as the line managers, who understand the role HR can play, can be grateful to the authors, who are holding up the mirror so that we can reflect on how to make the work of HR more supportive of the business agenda.”
–Hanneke C. Frese, head of group capabilities, Zurich Financial Services

Book Description
In Human Resources Business Process Outsourcing, Edward E. Lawler III, Dave Ulrich, Jac Fitz-enz (the foremost experts in the human resource field) and James C. Madden V (the CEO of the top HR outsourcing firm), clearly show how outsourcing offers an effective, low-cost alternative to traditional administration and provides HR managers with new opportunities to contribute directly to their companies’ overall strategy and business performance. Step by step, the authors explore how the HR function in corporations is structured and include a template for analyzing a HR department’s value, value added, and cost-to-serve. In this important resource, the authors explain new approaches organizations can take to improve HR administration and demonstrate how HR functions can be best organized.

Download Description
In Human Resources Business Process Outsourcing, Edward E. Lawler III, Dave Ulrich, Jac Fitz-enz (the foremost experts in the human resource field) and James C. Madden V (the CEO of the top HR outsourcing firm), clearly show how outsourcing offers an effective, low-cost alternative to traditional administration and provides HR managers with new opportunities to contribute directly to their companies’ overall strategy and business performance. Step by step, the authors explore how the HR function in corporations is structured and include a template for analyzing a HR department’s value, value added, and cost-to-serve. In this important resource, the authors explain new approaches organizations can take to improve HR administration and demonstrate how HR functions can be best organized.

From the Inside Flap
Today’s highly competitive marketplace demands that human resources departments emerge from under their administrative workloads and become full partners in determining their organizations’ winning strategies.

In Human Resources Business Process Outsourcing, Edward E. Lawler III, Dave Ulrich, Jac Fitz-enz (the foremost experts in the human resources field), and James C. Madden V (the CEO of the top HR outsourcing firm) clearly show how outsourcing offers an effective, low-cost alternative to traditional administration and provides HR managers with new opportunities to contribute directly to their companies’ overall strategy and business performance. Step by step, the authors explore how the HR function in corporations is structured and include a template for analyzing an HR department’s value, value added, and cost-to-serve. In this important resource, the authors explain new approaches organizations can take to improve HR administration and demonstrate how HR functions can be best organized.

To demonstrate the effectiveness of outsourcing HR administration, the book contains an in-depth study of Exult, Inc., the leading HR business process outsourcer (BPO). This detailed study offers an insider’s look at an effective BPO start-up and is filled with valuable lessons for managers who are on the brink of a significant change effort. Human Resources Business Process Outsourcing also examines four companies–British Petroleum, Bank of America, International Paper, and Prudential–that contracted with Exult for a range of HR BPO services. Each company’s “report card” reveals the substantive successes and significant challenges encountered in the transition process.

In addition to providing a hands-on resource for making the HR BPO transition, the authors look to the future and identify the key issues that will affect the long-term development and effectiveness of human resources business process outsourcing.

Talent Management & Nachfolgeplanung

frese — Mon, 30 Oct 2006 08:50:50 +0000

Top-Leistungsträger bestimmen Wachstum und Marktleistung Ihres Unternehmens. Das Fehlen, der falsche Einsatz oder der Verlust dieser Mitarbeiter führt zum Engpass für Strategieumsetzung und Unternehmenserfolg. Um dies zu vermeiden, sind strukturierte und integrierte Programme notwendig. Wie Sie High Potentials zu zukünftigen Leistungsträgern in Ihrem Unternehmen machen, erfahren Sie in diesem Intensiv-Seminar.

Zielgruppe

Geschäftsleiter und Führungskräfte im oberen Management
Personalentwickler, Ausbildungsleiter, Management Development-Verantwortliche
Human Resources Manager, Personalleiter, Personalreferenten, Personalfachkräfte

Einstiegs- und Zielniveau

Sie haben die Aufgabe, Leistungsträger zukunftsgerichtet für Ihren Unternehmenserfolg zu entwickeln. Sie sind nach der Weiterbildung in der Lage, einen professionellen Talent Management-Prozess zu implementieren.

Arbeitsmethodik

Referate, Lehrgespräche und Workshops
Diskussionen & Networking
Ideenaustausch und Benchmarking

Teilnehmerzahl

Die Teilnehmerzahl ist auf 20 Personen beschränkt, damit Sie optimal von Inhalt und Austausch profitieren.

Katalog

Prospekt ZFU Nachfolgeplanung

Anmeldung

http://www.fzu.ch

Protected: Photos

frese — Mon, 30 Oct 2006 06:08:59 +0000

Location

frese — Mon, 30 Oct 2006 04:22:11 +0000

Download Location Map

The logo of Hanneke C. Frese

frese — Mon, 30 Oct 2006 04:21:11 +0000

I drew my little “logo” myself. I write like that when I am in meetings with people and it is symbolic for:

		what is the issue / challenge we need to work on
		what are the other thoughts so that we can complete the articulation of the issue
		we both agree that we have articulated the issue as best as possible
		ideas for a solution
		we have arrived at a solution and close the issue (for now)
		there is always a future, and we may need to come back to this issue / challenge at a later point of time again as circumstances have changed.