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Weekly  November 16, 2012


 bigger
 than        Libor
 Major Banks at Risk for Energy Manipulation
03 Contents
  04   Bigger than Libor
       Major Banks at Risk for Energy Manipulation




  08   Will The Consumer Financial
       Protection Bureau Grow Stronger
       Or Die After The Election?

  13   Social Media Influence
       with Fay Feeney




  14   Decision 2012
       It Was About The Technology, Stupid




  18   Board Evaluations
       Getting it Right




  22   NACD Boardvision
       Tone at the Top




  24   the Future of Financial Communications
       with Candi Wolff




  25   Blogs
       Worth Following




  26   LEVICK
       In the News
Bigger than
Libor
                                                      ajor banks have another fight on      historically quicker-to-settle postures vis-à-vis


                                          M           their hands.

                                                      This set-to is not with inveterate
                                                                                            the financial regulators. While Barclays says it
                                                                                            will “rigorously defend” itself, Deutsche Bank
                                                                                            is a most interesting case in point as that bank
                                        antagonists like the SEC or the Department of
                                                                                            has vowed to fight even though its exposure is
                                        Justice but with the Federal Energy Regula-
                                                                                            only $1.5 million. Such a “not-one-penny-for
                                        tory Commission (FERC), which oversees the
                                                                                            tribute” position suggests that these banks are

  Major Banks at Risk                   oil, natural gas, and electricity industries. The
                                        tough part is figuring out how to size up and
                                                                                            likely fearful of the interminable litigation that
                                                                                            might arise should they settle too docilely. If it
           ― for ―                      respond to this relatively unfamiliar inquisitor.
                                                                                            can also be established that the trading strate-

  Energy Manipulation                   FERC has thus far gone after JPMorgan Chase,        gy was ill-advised but not illegal, the banks will
                                        Deutsche Bank, and Barclays for alleged ma-         be spared significant future pain.
                                        nipulation of energy prices—and the stakes
           Richard S. Levick, Esq.                                                          Perhaps the banks are also a mite territorial
                                        are potentially as high, at least in terms of
   Originally Published on Forbes.com                                                       in their perceptions, as if FERC should not be
                                        the penalty amounts sought, as any numbers
                                                                                            playing sheriff in their town. Such territoriality
                                        splashed across the front-page stories of recent
                                                                                            might actually be understandable as past regu-
                                        years. The action against Barclays is especially
                                                                                            latory oversight typically focused on either the
                                        conspicuous. Here the agency is seeking $470
                                                                                            physical markets or derivatives. Importantly,
                                        million, which is not just the largest fine in
                                                                                            though, the general lesson—of which these
                                        FERC history but $20 million more than what
                                                                                            present energy cases are just one example—is
                                        Barclays got hit for in June, 2012 over the Libor
                                                                                            that government regulation overall is increas-
                                        bid-rigging scandal.
                                                                                            ingly de-compartmentalized. Any sound cor-
                                        The cases against the big banks culminate a         porate strategy must assume an almost bound-
                                        regulatory initiative by FERC that has so far re-   lessly multifaceted regulatory landscape.
                                        sulted in 19 actions over the last two years. The   There’s more to life than the SEC.
                                        core issue involves a trading strategy that in-
                                                                                            At the same time, the agencies are by no means
                                        dustry veterans say has actually been globally
                                                                                            homogenous. In any regulatory challenge or
                                        commonplace: an artificial depression of next-
                                                                                            crisis, businesses have to make separate assess-
                                        day physical energy prices in order to increase
                                                                                            ments of each public entity with which they
                                        the value of separate financial contracts. They
                                                                                            must deal. Each has its own character, its own
                                        lose a few million in the physical market; they
                                                                                            agenda. What motives drive the regulator?
                                        make tens of millions in derivative positions.
                                                                                            What can be gained or lost through appease-
                                        Reportedly, the banks have been relatively          ment? What can be gained or lost by circling
                                        feisty in their response to FERC compared to        the wagons?




                                                                                                                                                 05
Weekly




          “             It is a bureaucratic opportunity; it is a
                        political opportunity.”


     FERC may be a particularly difficult read for
     those caught in its crosshairs. Comments by
                                                           tunity quite unequivocally, even before these
                                                           current investigations, when it levied a $245
     observers like Tyson Slocum, the director of the      million penalty on Constellation Energy in
     energy program at Public Citizen, suggest an          March for purported manipulation.
     ambiguous prognosis. “It’s the most powerful
                                                           “Since 2005, FERC has been taking baby steps
     agency that no one knows about,” he says, but
                                                           into the enforcement process. Now they’ve
     he also observes that FERC continues to rely
                                                           found their sea legs,” says Mark Ruddy of the
     on private companies to ferret out instances of
                                                           Ruddy Law Office, PLLC, which assists alterna-
     manipulation. In that sense, he suggests, the
                                                           tive investment clients in their interactions
     current bank cases are anomalous because of
                                                           with regulatory entities, including FERC.
     their unique magnitude and not necessarily
     indicative of an invigorated regulator.               In formulating a strategic response, any bank
                                                           targeted by FERC should consider the likeli-
     Yet energy industry members and investors are
                                                           hood that the agency does indeed see itself at
     well-advised to err on the side of great caution.
                                                           a turning point in its own history. Both a wary
     Here’s a government entity that’s taken some-                                                             evidence that it had not violated market rules      ing strategically at this moment. Nor is it likely
                                                           assessment of the longer-term consequences
     thing of a back seat in terms of public awareness,                                                        or risk losing its license to sell power at mar-    lost on FERC that oil and other energy sectors
                                                           of appeasement, combined with some thinking
     despite the 2005 expansion of its powers to in-                                                           ket rates. In October, JP Morgan relinquished       may likewise be worth a look for similarly al-
                                                           about how to work more collaboratively with
     vestigate manipulations after the Enron scandal.                                                          some documents with an apology and less-            leged patterned manipulations. It’s time now
                                                           this nascent regulator, are therefore all the
     Then, just this year, a special division was formed                                                       then-compelling excuse.                             for industry companies and investors alike
                                                           more in order.
     that includes members with data-analysis exper-                                                                                                               to assess potential liability and gather profes-
                                                                                                               But even if FERC ultimately falls far short of
     tise as well as criminal investigators.               “The banks’ attitude toward FERC has always                                                             sional resources for what may well be a very
                                                                                                               the full recoveries it seeks, the warning shot
                                                           been, ‘You just don’t get it,’ observes Ruddy.                                                          tough fight ahead.
     Now that they’ve got some raw meat in the                                                                 has sounded across the proverbial bow. “I
                                                           “That is still their attitude.”
     form of the very financial institutions that have                                                         would wager that any firm that traded both          The ghost of Enron looms over these proceed-
     been so effectively vilified since 2008, it would     Yet it does seem so far that FERC is now a match    physical and financial power is at risk of a sim-   ings. That will only make the fight tougher. L
     seem that all signals are go for an increasingly      for a stubborn counter-offensive, and that it has   ilar FERC action,” energy expert Craig Pirrong
                                                                                                                                                                   Richard S. Levick, Esq., President and CEO of LEVICK, repre-
     decisive and far-reaching regulatory agenda.          won some early rounds against the big banks.        of the University of Houston told the media.        sents countries and companies in the highest-stakes global
     It is a bureaucratic opportunity; it is a political   When JPMorgan refused to turn over docu-                                                                communications matters—from the Wall Street crisis and the
                                                                                                               Amen to that. It’s not just Barclays and JPMor-
     opportunity. FERC, in fact, seized such oppor-        ments, FERC countered that it must provide                                                              Gulf oil spill to Guantanamo Bay and the Catholic Church.
                                                                                                               gan and Deutsche Bank that need to be think-




06                                                                                                                                                                                                                                07
Will The Consumer Financial
Protection Bureau Grow Stronger
Or Die After The Election?
Kathleen Wailes & Kate D’Amico
Originally Published on Seekingalpha.com
Weekly




     The Consumer Financial Protection Bureau:          Is The CFPB Protecting or Provoking?                 Bureau also gained supervisory responsibility       card company practices and working toward a
     The name alone makes banks, lenders and                                                                 for the credit reporting industry.                  global mortgage industry settlement.
                                                        The Consumer Financial Protection Bureau, or
     other financial institutions around the country
     cringe because it has tremendous and wide-
                                                        CFPB as it is more commonly known, was cre-          The Bureau’s creation was mandated by the           An Easy Ride or an Uphill Battle
                                                        ated in the wake of the financial crisis to act as   Dodd-Frank Wall Street Reform and Consumer
     ranging power. It is a source of consternation                                                                                                              Regardless of Republican and financial industry
                                                        a regulator for any consumer-facing financial        Protection Act, which was signed into law by
     for the financial services industry because they                                                                                                            opposition, the CFPB has put significant funds
                                                        institutions, including banks, credit unions,        President Obama in July 2010. Still in its infan-
     not only must meet new requirements, but also                                                                                                               back into the pockets of consumers and estab-
                                                        securities firms, payday lenders, mortgage           cy, the CFPB began operation and immediately
     have no history with the Bureau to guide regu-                                                                                                              lished many rules and regulations with the goal
                                                        servicers, and debt collectors. Recently, the        sparked controversy. From the get-go, the
     latory expectations.                                                                                                                                        of preventing a repeat of the financial crisis that
                                                                                                             CFPB, especially the consultant in charge of its    caused the Great Recession. But, with the coun-
                                                                                                             creation, Elizabeth Warren, faced Republican        try on the brink of a historically close presiden-
                                                                                                             opposition. President Obama exacerbated this        tial election, the CFPB may hit a wall.
                                                                                                             tension when he bypassed Congress and ap-
                                                                                                             pointed Democrat Richard Cordray as CFPB            If President Obama wins the election, the CFPB

                                                                                                             Director during a recess—a move House Speak-        is likely to continue to grow and thrive un-

                                                                                                             er John Boehner described as “an extraordi-         der the administration that created it. CFPB’s

                                                                                                             nary and entirely unprecedented power grab.”        enforcement actions, which kicked off with

                                                                                                             Cordray, a former Ohio Attorney General with        a hefty $210 million settlement charge from

                                                                                                             reported future political aspirations, vowed an     Capital One in July, will likely increase in

                                                                                                             ambitious agenda.                                   scope and frequency. The Bureau will more
                                                                                                                                                                 aggressively target unfair consumer financial
                                                                                                             On the horizon for the CFPB are companies           practices while continuing to support financial
                                                                                                             involved in debt collection and credit report-      literacy among the public―and, in turn, con-
                                                                                                             ing. These companies have earned scrutiny           tinue to establish and solidify its presence as a
                                                                                                             from state regulators and consumer protection       regulator of the financial industry.
                                                                                                             groups because of their aggressive tactics. The
                                                                                                             CFPB also will begin monitoring those agen-         If Mitt Romney wins, however, the Bureau

                                                                                                             cies that work with the Education Department        could face new headwinds. The Republican

                                                                                                             on overdue student loans, of which more than        nominee has made his disapproval for the

                                                                                                             $850 billion are outstanding. Debt collection       CFPB and the Dodd-Frank Act that created it

                                                                                                             companies are understandably unhappy about          abundantly clear. His argument against the

                                                                                                             this development, and claim that the rise in for-   Bureau asserts that the actions of the CFPB are

                                                                                                             mal complaints against them is due to greater       strangling our country’s economic recovery

                                                                                                             ease of reporting online. Recently, the Bureau      by restricting credit and lending, and that the

                                                                                                             has also focused largely on overseeing credit       Bureau has too much power and is protected




10                                                                                                                                                                                                                     11
Weekly




     “          Investors in financial services companies
                should take note of these developments
                because they will significantly affect
                the industry."
                                                                                                                            Social Media Influence
                                                                                                                                                                                             with Fay Feeney




     from Congressional oversight (it gets its fund-       Disclosure: I have no positions in any stocks mentioned, and
                                                           no plans to initiate any positions within the next 72 hours. I
     ing from the Federal Reserve).
                                                           wrote this article myself, and it expresses my own opinions.

     Romney proposes to revise or repeal Dodd-Frank,       I am not receiving compensation for it. I have no business
                                                           relationship with any company whose stock is mentioned in
     saying the legislation has “gone beyond what was
                                                           this article.
     appropriate.” Moreover, Romney’s running mate,
     Paul Ryan, led the House Financial Services Com-      Kathleen Wailes is a Senior Vice President & Chair, Financial
                                                           Communications Practice at LEVICK and a contributing
     mittee when it proposed to cut the CFPB’s 2013
                                                           author at Seeking Alpha.
     budget by more than half. Despite his party’s
     opposition, many analysts believe Romney has          Kate D’Amico is a Corporate & Public Affairs Fellow at LEVICK.

     bigger fish to fry―i.e., jobs, healthcare, reducing
     the deficit―and that restricting the CFPB may not
                                                                                                                            In this LEVICK Daily video interview, Fay Feeney, CEO of Risk for Good, discusses the critical issues
     be high on his to-do list.
                                                                                                                            at the crossroads of social media and corporate outreach. Consumer-to-consumer communications
     Like many other issues, the two candidates -                                                                           facilitated by social networking are impacting purchasing decisions like never before. Companies
     and their respective parties―don’t see eye to                                                                          must identify ways to influence conversations they simply cannot control.
     eye when it comes to the CFPB. Come Novem-
     ber 6, the CFPB may find itself with a clear path
     forward, sharp curtailment of its power, or the
     end of the line. Investors in financial services
     companies should take note of these develop-
     ments because they will significantly affect
     the industry. L




12
decision
            2012
                                                  I
                                                         In the wake of Mitt Romney’s loss last       sonal computers, laptops, tablets, and perhaps
                                                         week, big Republican donors are won-         even mobile phones. Consider that Sharp has
                                                         dering why they saw little to no return      “material doubts” about the future of its busi-
                                                         on the billion dollars they invested         ness; that Panasonic has reported an $8 billion
                                                         during the 2012 election cycle. The an-      loss for the first half of this fiscal year; and that



       It Was About                               swer not only provides insight into President
                                                  Obama’s victories in key swing states such as
                                                  Ohio, Pennsylvania, Florida, and Virginia; it’s
                                                                                                      media buying networks have slashed their TV
                                                                                                      advertising revenue growth forecasts. Those
                                                                                                      indicators alone should have given pause to



      the Technology,                             an omen that foreshadows the future of media
                                                  utility in an era where familiarity, credibility,
                                                  and the ability to forge personal connections
                                                                                                      any campaign that put all of its eggs in the TV
                                                                                                      basket. The fact that 2.7 million people viewed
                                                                                                      President Obama’s “You Didn’t Build That”



          Stupid                                  trump traditional advertising at every turn.

                                                  To be clear, the professionals running the Rom-
                                                  ney campaign are far more adept than my head-
                                                                                                      comment on YouTube ought to do the same
                                                                                                      moving forward.

                                                                                                      Then, there is the DVR technology that is now

                   Richard S. Levick, Esq.        line might infer. But they did make one crucial     a staple in the majority of voting households.

        Originally Published on Fastcompany.com   mistake in underestimating how technology has       What good is a TV ad blitz when even those
                                                  fundamentally changed voter outreach.               that comprise TV’s declining audience can
                                                                                                      simply record their favorite shows and fast-
                                                  For instance, take Karl Rove’s super PAC
                                                                                                      forward past the deluge of political messaging?
                                                  American Crossroads. It spent $180 million on
                                                  television advertising alone. That media buy        Second is the polarization of the electorate.
                                                  represents only a drop in the bucket when we        Exit poll analysts are reporting that as many as
                                                  consider the fortune that the Romney campaign       91 percent of voters made up their minds well
                                                  and independent Republican groups spent on          in advance of the campaign’s final days. If that
                                                  TV. Twenty years ago, that spending advantage       figure holds up, it means only nine percent
                                                  would have likely had a tremendous impact on        of voters were susceptible to the influence-
                                                  electoral outcomes. Today, however, three fac-      oriented TV advertising that made up the lion’s
                                                  tors have converged that significantly diminish     share of Republican resource allocation in the
                                                  the air war’s effect. As a result, studies show     campaign’s final month.
                                                  that groups such as Rove’s saw only a one per-
                                                                                                      That’s an important audience to be sure; but as
                                                  cent return on their investment.
                                                                                                      the Obama campaign amply demonstrated, the
                                                  The first factor is the general decline of TV.      last days of a polarized presidential campaign
                                                  Republicans pinned their hopes to the TV at a       are more about action than influence, as the
                                                  time when it is falling to at least fourth place    need to ensure that solid supporters actually
                                                  in the small screen hierarchy—behind per-           get to the polls trumps all other considerations.




014                                                                                                                                                           15
Weekly




                                                                                                            Mr. Fenn shares an anecdote that is particu-      it comes from a family member, friend, or ac-
                                                                                                            larly telling. “For instance, Obama supporters    quaintance who is depending on you to make
                                                                                                            could download a mobile application in the        a responsible decision. That kind of outreach
                                                                                                            final weeks of the campaign that enabled them     infuses emotion into the equation—and it’s
                                                                                                            to reach out to Facebook friends in swing         emotion, not logic, that ultimately gets a voter to
                                                                                                            states to ensure they got to the polls. The       the polls—or a consumer to the point of sale.




                                                                                                                Voters weren’t just being contacted by campaign personnel; they
                                                                                                                were being influenced by their friends. In the end, that made all
                                                                                                                the difference in getting out the vote and aptly demonstrated the
                                                                                                                declining value of traditional advertising.

                                                                                                                                                              We will no doubt see more political TV adver-
                                                                                                            campaign found that when five of a poten-
                                                                                                                                                              tising in the future, for no other reason than
                                                                                                            tial voter’s friends reached out, that poten-
                                                                                                                                                              that campaigns feel they need to do it to run
     As we will see below, TV may influence, but        works are those that achieve the dual goals of      tial voter was transformed into a real voter
                                                                                                                                                              a truly credible and authoritative campaign.
     other media are far more effective when it         influence and action simultaneously. Insights       because he or she was contacted by someone
                                                                                                                                                              But as TV plays a smaller role in our lives and
     comes time to translate influence into action.     provided by Democratic media strategist Peter       familiar, rather than via TV or an anonymous
                                                                                                                                                              social media continue to redefine the ways that
                                                        Fenn for a recent Election Edition of LEVICK        email address.”
     Third, and most important, is the ascendency                                                                                                             credibility and authority are both communi-
                                                        Weekly illustrate the point.
     of social media. In 2008, we learned about its                                                         Simply put, Mr. Fenn’s outlook crystalizes the    cated and perceived, we will no doubt see less
     importance. In 2012, we bore witness to its        “The Obama Campaign did a tremendous job            wisdom that, today, the messenger is just as      and less of it in 2014, 2016, and every election
     dominance. Today’s voters are flocking to social   of leveraging social media to connect with vot-     important as the message itself. Mass com-        to come.
     media in droves because they provide a more        ers in ways that were genuine, authentic, and       munications may be expansive in reach; but
                                                                                                                                                              If there is one lesson that the business commu-
     personalized and controlled political messaging    exceedingly likely to establish strong personal     they are often too easily ignored because the
                                                                                                                                                              nity should take to heart from the 2012 presiden-
     experience. Voters no longer have to settle for    relationships,” says Mr. Fenn, who heads up         audience has no skin in the game. There is no
                                                                                                                                                              tial election, it’s that they might be very wise to
     static, one-way communications from sources        Fenn Communications Group, a political media        feeling that the message is intended solely for
                                                                                                                                                              follow suit. After all, consumers are consumers—
     they don’t know and don’t implicitly trust.        operation that has advised more than 300            the recipient. As such, the audience is cloaked
                                                                                                                                                              whether they are considering questions of public
                                                        national, statewide, and local campaigns. “Vot-     in a form of anonymity that creates no real
     They now have the freedom to engage in two-way                                                                                                           policy or which products are most deserving of
                                                        ers weren’t just being contacted by campaign        consequences for inaction.
     conversations with familiar and credible connec-                                                                                                         their hard-earned dollars. L
                                                        personnel; they were being influenced by their
     tions that share their unique points of view and                                                       Conversely, there is no ignoring the intensely
                                                        friends. In the end, that made all the difference                                                     Richard S. Levick, Esq., President and CEO of LEVICK, repre-
     outlooks on life—whatever they may be.                                                                 personal, micro-targeted messages that social     sents countries and companies in the highest-stakes global
                                                        in getting out the vote and aptly demonstrated
                                                                                                            media facilitate. There is no question that the   communications matters—from the Wall Street crisis and the
     As a result, campaigns that dominate the           the declining value of traditional advertising.”
                                                                                                            message is meant just for the recipient, and      Gulf oil spill to Guantanamo Bay and the Catholic Church.
     ground war fought primarily on social net-




16                                                                                                                                                                                                                           17
n a noted move towards corpo-       boards in many countries, with nearly all listed


                                                 I           rate transparency, a recent study
                                                             group of public company direc-
                                                             tors and a few academics identi-
                                                                                                 companies in Canada, France, the U.K., and the
                                                                                                 U.S. conducting some sort of evaluation each
                                                                                                 year. The practice is also widespread in Italy
                                             fied seven gaps on their own board room turf:       and Spain, and is gaining attention in many
                                             purpose, culture, leadership, information,          Asia-Pacific markets. Even if a company is not
                                             advice, debate, and self-renewal. The report        subject to any listing requirements, sharehold-
                                             goes on to state boards should “develop poli-       ers and stakeholders are asking questions and
                                             cies and practices to ensure ongoing evalua-        evaluating the company as though it is subject
                                             tion and education of current directors, using      to the same requirements. Shareholders, com-
                                             the services of independent third-party facili-     munity, and employees are expecting and even
                                             tators when needed.” With this focus in mind,       presuming the board is using an objective ap-
                                             corporate counsel can provide guidance for          proach to hold themselves and the company to
                                             boards desiring a more robust board evalua-         the “best business practices.”
                                             tion process.
                                                                                                 Key Point: The progressive board looks for the
                                             Fundamentally, a board evaluation is an op-         time and resources spent on board evaluation to
                                             portunity for boards as a collective body to        align with their philosophy of continuous im-
                                             increase their effectiveness based on feedback      provement and reflective intelligence.
                                             the evaluation provides. Continuous improve-
                                                                                                 At the very least, a board evaluation will
                                             ment and development of board and board
                                                                                                 focus on key functions of the board, provide
                                             committee processes and procedures is key to
                                                                                                 a “gap” analysis that draws weak areas to the
                                             ensuring board effectiveness. In today’s world,
                                                                                                 surface, provide disbursement of responses,
                                             it is vital that a board of directors can measure
                                                                                                 and identify the “tone” of the responses. Board
                                             its strengths and its opportunities for improve-
                                                                                                 evaluation is most meaningful as a produc-
                                             ment. Board evaluation sets the foundation
                                                                                                 tive activity for the board when it focuses on
                                             to purposefully identify and surmount barri-
                                                                                                 board development rather than compliance.
                                             ers that impede effectiveness. The goal is to
                                                                                                 This requires knowledge not only of board
                                             receive solid, actionable input.



Board Evaluations
                                                                                                 functions, roles, and responsibilities, but also
                                             In addition, it is a NYSE listing requirement       how all this information links to the current
                                             that boards, along with their nominating/           business/industry trends and market changes.




Getting it Right
                                             governance, compensation, and audit com-            In addition, a dynamic board evaluation moves
                                             mittees, perform annual evaluations. NASDAQ         the board to a higher level of performance on
                                             highly recommends board evaluation. Annual          business issues while enhancing group dynam-
                                             board evaluations have become the norm for          ics. Overall, a board evaluation can transform

Tracy E. Houston, M.A.,
President of Board Resources Services, LLC

                                                                                                                                                    19
Weekly




     a group of strong individuals to a collective         one of the committees, to become more familiar
     body of focused board members who become              with the consultant and process. After a trust                              Risks of Engaging in a Board Evaluation
     invaluable to the CEO, senior management              level is established, the board can increase the
     team, and all stakeholders. A skillful board          engagement level.
                                                                                                                              Some examples of risks that I have seen from board evaluations, and ways to alleviate
     evaluation can cause directors to say “I’m glad
                                                           A board may not need a consultant for every                        those risks, include:
     we did that.” This kind of skillful evaluation is
                                                           annual evaluation, or while the board’s agreed-                    Risk: Consultant misuse of data.
     produced from:
                                                           upon action items from previous board evalua-                      Remedy: Ask how and where data is stored, and for how long. If answers are unacceptable,
     •	 Clear board objectives;                            tions are still in process. The board would prob-                  consider using the third-party facilitator just to analyze data and provide feedback.
                                                           ably not use a facilitator when the board chair                    Risk: Loss of collegiality and negativity as a result of candidate feedback.
     •	 Reports and feedback from a knowledge-
                                                           has only been in the position for a short period                   Remedy Review the past methods of board evaluation and assess the level of feedback
        able third-party facilitator where needed;
                                                           of time, or when the board has just recruited,                     given to the board. Consider a hybrid methodology that includes a questionnaire
     •	 Facilitated follow-up discussions with the         or is in the process of recruiting, a number of                    accompanied by a self-evaluation for each director.
        board to identify board development actions;       new directors.                                                     Risk: Directors’ perception of performance is not in line with evidence that suggests otherwise.
     •	 Integration of the board evaluation into           To choose the right methodology and provide                        Remedy Consider hiring a third-party facilitator to provide feedback and possible coaching
                                                                                                                              sessions with the board.
        strategic leadership and planning; and             a balanced approach, the board and corporate
                                                           counsel should understand the risks and
     •	 Insights that lead to greater team
                                                           rewards of a board evaluation. L
        effectiveness.
                                                           For more information and/or studies with board evaluation               Rewards of Engaging in a Board Evaluation
                                                           data, see:
     Deciding Whether to Use a Third
                                                           Board Evaluation: Creating Strategic Performance and
     Party Facilitator                                     Effectiveness
                                                                                                                              Examples of rewards that I have seen from board evaluations include:

     As the board embarks on the evaluation pro-                                                                              •	 Provides a timely platform for directors to voluntarily resign, and sharpens the
                                                           Tracy E. Houston, M.A., is the President of Board Resources
     cess, it is important to decide whether to use a                                                                            discussion of the experience, expertise, diversity, independence, leadership ability and
                                                           Services, LLC. She is a refined specialist in board of directors
                                                                                                                                 character needed by the new directors;
     third party facilitator. Employing a third-party      consulting and executive leadership with a heartfelt passion

     consultant usually allows for greater objectiv-       for rethinking performance, teams, and the boardroom. She          •	 Identification of new or refined actions for risk reporting to the board, including crisis
     ity and credibility, not least as a means of satis-   is the creator of the only digital series for corporate gover-        and reputational management;
                                                           nance—Board Guru™ eBooks.
     fying shareholders that an independent review                                                                            •	 Clarity and enhancement of management reporting practices that affect the board; and
     has been carried out. The board can choose                                                                               •	 Enhanced board effectiveness with identification of board dynamics and facilitation of
     the level and the areas of engagement for any                                                                               discussion to ‘clear the air.’
     board consultant. At times the third-party                                                                               In today’s world, corporations are establishing processes that have an emphasis on collective
     facilitator may only help with question de-                                                                              wisdom for competitive advantage. This concept can be actualized at the board level through
     velopment, or simply analyze the data, or the                                                                            the board evaluation process, even though evaluation techniques are still in their infancy.
                                                                                                                              The process can result in high-level thinking in a structured, organized manner, and lay the
     facilitator may be assigned to run all aspects
                                                                                                                              foundation for continuous improvement.
     of the board evaluation. The board may want
     to start with a small project, such as evaluating



20                                                                                                                                                                                                                               21
Weekly




NACD BoardVision: Tone at the Top                                                                Reputation,
                                                                                                 Stock Price,
                                                                                                 and You:
                                                                                                         Why the Market
                                                                                                         Rewards Some
                                                                                                         Companies and
                                                                                                         Punishes Others
                                                                                                         by Dr. Nir Kossovsky/Apress
In this episode of BoardVision, shot on location at the 2012 NACD Board Leadership Conference,
we discuss how boards can ensure that company leadership sets the right tone at the top. Join
Peter Gleason, Managing Director and CFO at the National Association of Corporate Directors,
and Mary Ann Cloyd, a Leader in the PwC Center for Board Governance, for an examination
of the ways that directors and executives can align their internal communications with the
organization’s culture, purpose, and mission.
                                                                                                          Click here
                                                                                                          to Order now!
the Future of Financial
 Communications with Candi Wolff
                                                                                                        BLOGS worth following
                                                                                                        Thought leaders                                        Industry blogs
                                                                                                        Amber Naslund                                          Holmes Report
                                                                                                        brasstackthinking.com                                  holmesreport.com
                                                                                                        Amber Naslund is a coauthor of The Now Revolution.     A source of news, knowledge, and career
                                                                                                        The book discusses the impact of the social web        information for public relations professionals.
                                                                                                        and how businesses need to “adapt to the new era
                                                                                                        of instantaneous business.                             NACD Blog
                                                                                                                                                               blog.nacdonline.org
                                                                                                        Brian Halligan                                         The National Association of Corporate Directors
                                                                                                        hubspot.com/company/management/brian-halligan          (NACD) blog provides insight on corporate
                                                                                                        HubSpot CEO and Founder.                               governanceand leading board practices.

                                                                                                        Chris Brogan                                           PR Week
                                                                                                        Chrisbrogan.com                                        prweekus.com
                                                                                                        Chris Brogan is an American author, journalist,        PRWeek is a vital part of the PR and communications
                                                                                                        marketing consultant, and frequent speaker about       industries in the US, providing timely news, reviews,
                                                                                                        social media marketing.                                profiles, techniques, and ground-breaking research.

                                                                                                        David Meerman Scott                                    PR Daily News
                                                                                                        davidmeermanscott.com                                  prdaily.com
                                                                                                        David Meerman Scott is an American online              PR Daily provides public relations professionals,
                                                                                                        marketing strategist, and author of several books      social media specialists and marketing
                                                                                                        on marketing, most notably The New Rules of            communicators with a daily news feed.
                                                                                                        Marketing and PR with over 250,000 copies in
                                                                                                        print in more than 25 languages.
 In this LEVICK Daily video interview, we discuss the future of financial communications with
 Candi Wolff, Executive Vice President for Global Government Affairs with Citi. From the trust          Guy Kawasaki
                                                                                                                                                               BUSINESS Related
                                                                                                        guykawasaki.com                                        FastCompany
 deficit to the sea change called Dodd-Frank, financial service providers are persistently challenged
                                                                                                        Guy Kawasaki is a Silicon Valley venture capitalist,   fastcompany.com
 to maintain positive client relationships. Those institutions that keep a keen eye on compliance       bestselling author, and Apple Fellow. He was one       Fast Company is the world’s leading progressive
                                                                                                        of the Apple employees originally responsible for      business media brand, with a unique editorial
 will ultimately restore confidence.                                                                    marketing the Macintosh in 1984.                       focus on business, design, and technology.

                                                                                                         Jay Baer                                              Forbes
                                                                                                        jaybaer.com                                            Forbes.com
                                                                                                        Jay Baer is coauthor of, “The Now Revolution: 7        Forbes is a leading source for reliable business
                                                                                                        Shifts to Make Your Business Faster, Smarter and       news and financial information for the Worlds
                                                                                                        More Social.                                           business leaders.


Financial Communications                                                                                Rachel Botsman
                                                                                                        rachelbotsman.com
                                                                                                                                                               Mashable
                                                                                                                                                               mashable.com
Litigation                                                                                              Rachel Botsman is a social innovator who writes,
                                                                                                        consults and speaks on the power of collaboration
                                                                                                                                                               Social Media news blog covering cool new websites
                                                                                                                                                               and social networks.

Corporate & Reputation                                                                                  and sharing through network technologies.


Public Affairs                                                                                          Seth Godin
                                                                                                        sethgodin.typepad.com

Crisis                                                                                                  Seth Godin is an American entrepreneur, author
                                                                                                        and public speaker. Godin popularized the topic
                                                                                                        of permission marketing.

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IN THE NEWS


      Articles
The Daily Beast | November 14, 2012
Crisis-Management Experts Weigh In on How to Handle Petraeus Scandal

Nonprofit Quarterly | November 14, 2012
Komen’s Continuing Saga: What Should It Do Now?

FCS Interactive | November 14, 2012
Leading Experts Discuss the Future of Financial Communications - Highlights from FCS Luncheon
in Washington, DC with Citi, GE Capital, LEVICK, T. Rowe Price

Mashable | November 14, 2012
Macy’s Twitter and Facebook Pages Overrun With Anti-Trump Comments

Buisness 2 Community | November 11, 2012
Interview with Crisis Communications Expert Richard Levick – Part 2




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Levick Weekly Nov 16 2012

  • 1. EDITION 17 Weekly November 16, 2012 bigger than Libor Major Banks at Risk for Energy Manipulation
  • 2. 03 Contents 04 Bigger than Libor Major Banks at Risk for Energy Manipulation 08 Will The Consumer Financial Protection Bureau Grow Stronger Or Die After The Election? 13 Social Media Influence with Fay Feeney 14 Decision 2012 It Was About The Technology, Stupid 18 Board Evaluations Getting it Right 22 NACD Boardvision Tone at the Top 24 the Future of Financial Communications with Candi Wolff 25 Blogs Worth Following 26 LEVICK In the News
  • 3. Bigger than Libor ajor banks have another fight on historically quicker-to-settle postures vis-à-vis M their hands. This set-to is not with inveterate the financial regulators. While Barclays says it will “rigorously defend” itself, Deutsche Bank is a most interesting case in point as that bank antagonists like the SEC or the Department of has vowed to fight even though its exposure is Justice but with the Federal Energy Regula- only $1.5 million. Such a “not-one-penny-for tory Commission (FERC), which oversees the tribute” position suggests that these banks are Major Banks at Risk oil, natural gas, and electricity industries. The tough part is figuring out how to size up and likely fearful of the interminable litigation that might arise should they settle too docilely. If it ― for ― respond to this relatively unfamiliar inquisitor. can also be established that the trading strate- Energy Manipulation FERC has thus far gone after JPMorgan Chase, gy was ill-advised but not illegal, the banks will Deutsche Bank, and Barclays for alleged ma- be spared significant future pain. nipulation of energy prices—and the stakes Richard S. Levick, Esq. Perhaps the banks are also a mite territorial are potentially as high, at least in terms of Originally Published on Forbes.com in their perceptions, as if FERC should not be the penalty amounts sought, as any numbers playing sheriff in their town. Such territoriality splashed across the front-page stories of recent might actually be understandable as past regu- years. The action against Barclays is especially latory oversight typically focused on either the conspicuous. Here the agency is seeking $470 physical markets or derivatives. Importantly, million, which is not just the largest fine in though, the general lesson—of which these FERC history but $20 million more than what present energy cases are just one example—is Barclays got hit for in June, 2012 over the Libor that government regulation overall is increas- bid-rigging scandal. ingly de-compartmentalized. Any sound cor- The cases against the big banks culminate a porate strategy must assume an almost bound- regulatory initiative by FERC that has so far re- lessly multifaceted regulatory landscape. sulted in 19 actions over the last two years. The There’s more to life than the SEC. core issue involves a trading strategy that in- At the same time, the agencies are by no means dustry veterans say has actually been globally homogenous. In any regulatory challenge or commonplace: an artificial depression of next- crisis, businesses have to make separate assess- day physical energy prices in order to increase ments of each public entity with which they the value of separate financial contracts. They must deal. Each has its own character, its own lose a few million in the physical market; they agenda. What motives drive the regulator? make tens of millions in derivative positions. What can be gained or lost through appease- Reportedly, the banks have been relatively ment? What can be gained or lost by circling feisty in their response to FERC compared to the wagons? 05
  • 4. Weekly “ It is a bureaucratic opportunity; it is a political opportunity.” FERC may be a particularly difficult read for those caught in its crosshairs. Comments by tunity quite unequivocally, even before these current investigations, when it levied a $245 observers like Tyson Slocum, the director of the million penalty on Constellation Energy in energy program at Public Citizen, suggest an March for purported manipulation. ambiguous prognosis. “It’s the most powerful “Since 2005, FERC has been taking baby steps agency that no one knows about,” he says, but into the enforcement process. Now they’ve he also observes that FERC continues to rely found their sea legs,” says Mark Ruddy of the on private companies to ferret out instances of Ruddy Law Office, PLLC, which assists alterna- manipulation. In that sense, he suggests, the tive investment clients in their interactions current bank cases are anomalous because of with regulatory entities, including FERC. their unique magnitude and not necessarily indicative of an invigorated regulator. In formulating a strategic response, any bank targeted by FERC should consider the likeli- Yet energy industry members and investors are hood that the agency does indeed see itself at well-advised to err on the side of great caution. a turning point in its own history. Both a wary Here’s a government entity that’s taken some- evidence that it had not violated market rules ing strategically at this moment. Nor is it likely assessment of the longer-term consequences thing of a back seat in terms of public awareness, or risk losing its license to sell power at mar- lost on FERC that oil and other energy sectors of appeasement, combined with some thinking despite the 2005 expansion of its powers to in- ket rates. In October, JP Morgan relinquished may likewise be worth a look for similarly al- about how to work more collaboratively with vestigate manipulations after the Enron scandal. some documents with an apology and less- leged patterned manipulations. It’s time now this nascent regulator, are therefore all the Then, just this year, a special division was formed then-compelling excuse. for industry companies and investors alike more in order. that includes members with data-analysis exper- to assess potential liability and gather profes- But even if FERC ultimately falls far short of tise as well as criminal investigators. “The banks’ attitude toward FERC has always sional resources for what may well be a very the full recoveries it seeks, the warning shot been, ‘You just don’t get it,’ observes Ruddy. tough fight ahead. Now that they’ve got some raw meat in the has sounded across the proverbial bow. “I “That is still their attitude.” form of the very financial institutions that have would wager that any firm that traded both The ghost of Enron looms over these proceed- been so effectively vilified since 2008, it would Yet it does seem so far that FERC is now a match physical and financial power is at risk of a sim- ings. That will only make the fight tougher. L seem that all signals are go for an increasingly for a stubborn counter-offensive, and that it has ilar FERC action,” energy expert Craig Pirrong Richard S. Levick, Esq., President and CEO of LEVICK, repre- decisive and far-reaching regulatory agenda. won some early rounds against the big banks. of the University of Houston told the media. sents countries and companies in the highest-stakes global It is a bureaucratic opportunity; it is a political When JPMorgan refused to turn over docu- communications matters—from the Wall Street crisis and the Amen to that. It’s not just Barclays and JPMor- opportunity. FERC, in fact, seized such oppor- ments, FERC countered that it must provide Gulf oil spill to Guantanamo Bay and the Catholic Church. gan and Deutsche Bank that need to be think- 06 07
  • 5. Will The Consumer Financial Protection Bureau Grow Stronger Or Die After The Election? Kathleen Wailes & Kate D’Amico Originally Published on Seekingalpha.com
  • 6. Weekly The Consumer Financial Protection Bureau: Is The CFPB Protecting or Provoking? Bureau also gained supervisory responsibility card company practices and working toward a The name alone makes banks, lenders and for the credit reporting industry. global mortgage industry settlement. The Consumer Financial Protection Bureau, or other financial institutions around the country cringe because it has tremendous and wide- CFPB as it is more commonly known, was cre- The Bureau’s creation was mandated by the An Easy Ride or an Uphill Battle ated in the wake of the financial crisis to act as Dodd-Frank Wall Street Reform and Consumer ranging power. It is a source of consternation Regardless of Republican and financial industry a regulator for any consumer-facing financial Protection Act, which was signed into law by for the financial services industry because they opposition, the CFPB has put significant funds institutions, including banks, credit unions, President Obama in July 2010. Still in its infan- not only must meet new requirements, but also back into the pockets of consumers and estab- securities firms, payday lenders, mortgage cy, the CFPB began operation and immediately have no history with the Bureau to guide regu- lished many rules and regulations with the goal servicers, and debt collectors. Recently, the sparked controversy. From the get-go, the latory expectations. of preventing a repeat of the financial crisis that CFPB, especially the consultant in charge of its caused the Great Recession. But, with the coun- creation, Elizabeth Warren, faced Republican try on the brink of a historically close presiden- opposition. President Obama exacerbated this tial election, the CFPB may hit a wall. tension when he bypassed Congress and ap- pointed Democrat Richard Cordray as CFPB If President Obama wins the election, the CFPB Director during a recess—a move House Speak- is likely to continue to grow and thrive un- er John Boehner described as “an extraordi- der the administration that created it. CFPB’s nary and entirely unprecedented power grab.” enforcement actions, which kicked off with Cordray, a former Ohio Attorney General with a hefty $210 million settlement charge from reported future political aspirations, vowed an Capital One in July, will likely increase in ambitious agenda. scope and frequency. The Bureau will more aggressively target unfair consumer financial On the horizon for the CFPB are companies practices while continuing to support financial involved in debt collection and credit report- literacy among the public―and, in turn, con- ing. These companies have earned scrutiny tinue to establish and solidify its presence as a from state regulators and consumer protection regulator of the financial industry. groups because of their aggressive tactics. The CFPB also will begin monitoring those agen- If Mitt Romney wins, however, the Bureau cies that work with the Education Department could face new headwinds. The Republican on overdue student loans, of which more than nominee has made his disapproval for the $850 billion are outstanding. Debt collection CFPB and the Dodd-Frank Act that created it companies are understandably unhappy about abundantly clear. His argument against the this development, and claim that the rise in for- Bureau asserts that the actions of the CFPB are mal complaints against them is due to greater strangling our country’s economic recovery ease of reporting online. Recently, the Bureau by restricting credit and lending, and that the has also focused largely on overseeing credit Bureau has too much power and is protected 10 11
  • 7. Weekly “ Investors in financial services companies should take note of these developments because they will significantly affect the industry." Social Media Influence with Fay Feeney from Congressional oversight (it gets its fund- Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I ing from the Federal Reserve). wrote this article myself, and it expresses my own opinions. Romney proposes to revise or repeal Dodd-Frank, I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in saying the legislation has “gone beyond what was this article. appropriate.” Moreover, Romney’s running mate, Paul Ryan, led the House Financial Services Com- Kathleen Wailes is a Senior Vice President & Chair, Financial Communications Practice at LEVICK and a contributing mittee when it proposed to cut the CFPB’s 2013 author at Seeking Alpha. budget by more than half. Despite his party’s opposition, many analysts believe Romney has Kate D’Amico is a Corporate & Public Affairs Fellow at LEVICK. bigger fish to fry―i.e., jobs, healthcare, reducing the deficit―and that restricting the CFPB may not In this LEVICK Daily video interview, Fay Feeney, CEO of Risk for Good, discusses the critical issues be high on his to-do list. at the crossroads of social media and corporate outreach. Consumer-to-consumer communications Like many other issues, the two candidates - facilitated by social networking are impacting purchasing decisions like never before. Companies and their respective parties―don’t see eye to must identify ways to influence conversations they simply cannot control. eye when it comes to the CFPB. Come Novem- ber 6, the CFPB may find itself with a clear path forward, sharp curtailment of its power, or the end of the line. Investors in financial services companies should take note of these develop- ments because they will significantly affect the industry. L 12
  • 8. decision 2012 I In the wake of Mitt Romney’s loss last sonal computers, laptops, tablets, and perhaps week, big Republican donors are won- even mobile phones. Consider that Sharp has dering why they saw little to no return “material doubts” about the future of its busi- on the billion dollars they invested ness; that Panasonic has reported an $8 billion during the 2012 election cycle. The an- loss for the first half of this fiscal year; and that It Was About swer not only provides insight into President Obama’s victories in key swing states such as Ohio, Pennsylvania, Florida, and Virginia; it’s media buying networks have slashed their TV advertising revenue growth forecasts. Those indicators alone should have given pause to the Technology, an omen that foreshadows the future of media utility in an era where familiarity, credibility, and the ability to forge personal connections any campaign that put all of its eggs in the TV basket. The fact that 2.7 million people viewed President Obama’s “You Didn’t Build That” Stupid trump traditional advertising at every turn. To be clear, the professionals running the Rom- ney campaign are far more adept than my head- comment on YouTube ought to do the same moving forward. Then, there is the DVR technology that is now Richard S. Levick, Esq. line might infer. But they did make one crucial a staple in the majority of voting households. Originally Published on Fastcompany.com mistake in underestimating how technology has What good is a TV ad blitz when even those fundamentally changed voter outreach. that comprise TV’s declining audience can simply record their favorite shows and fast- For instance, take Karl Rove’s super PAC forward past the deluge of political messaging? American Crossroads. It spent $180 million on television advertising alone. That media buy Second is the polarization of the electorate. represents only a drop in the bucket when we Exit poll analysts are reporting that as many as consider the fortune that the Romney campaign 91 percent of voters made up their minds well and independent Republican groups spent on in advance of the campaign’s final days. If that TV. Twenty years ago, that spending advantage figure holds up, it means only nine percent would have likely had a tremendous impact on of voters were susceptible to the influence- electoral outcomes. Today, however, three fac- oriented TV advertising that made up the lion’s tors have converged that significantly diminish share of Republican resource allocation in the the air war’s effect. As a result, studies show campaign’s final month. that groups such as Rove’s saw only a one per- That’s an important audience to be sure; but as cent return on their investment. the Obama campaign amply demonstrated, the The first factor is the general decline of TV. last days of a polarized presidential campaign Republicans pinned their hopes to the TV at a are more about action than influence, as the time when it is falling to at least fourth place need to ensure that solid supporters actually in the small screen hierarchy—behind per- get to the polls trumps all other considerations. 014 15
  • 9. Weekly Mr. Fenn shares an anecdote that is particu- it comes from a family member, friend, or ac- larly telling. “For instance, Obama supporters quaintance who is depending on you to make could download a mobile application in the a responsible decision. That kind of outreach final weeks of the campaign that enabled them infuses emotion into the equation—and it’s to reach out to Facebook friends in swing emotion, not logic, that ultimately gets a voter to states to ensure they got to the polls. The the polls—or a consumer to the point of sale. Voters weren’t just being contacted by campaign personnel; they were being influenced by their friends. In the end, that made all the difference in getting out the vote and aptly demonstrated the declining value of traditional advertising. We will no doubt see more political TV adver- campaign found that when five of a poten- tising in the future, for no other reason than tial voter’s friends reached out, that poten- that campaigns feel they need to do it to run As we will see below, TV may influence, but works are those that achieve the dual goals of tial voter was transformed into a real voter a truly credible and authoritative campaign. other media are far more effective when it influence and action simultaneously. Insights because he or she was contacted by someone But as TV plays a smaller role in our lives and comes time to translate influence into action. provided by Democratic media strategist Peter familiar, rather than via TV or an anonymous social media continue to redefine the ways that Fenn for a recent Election Edition of LEVICK email address.” Third, and most important, is the ascendency credibility and authority are both communi- Weekly illustrate the point. of social media. In 2008, we learned about its Simply put, Mr. Fenn’s outlook crystalizes the cated and perceived, we will no doubt see less importance. In 2012, we bore witness to its “The Obama Campaign did a tremendous job wisdom that, today, the messenger is just as and less of it in 2014, 2016, and every election dominance. Today’s voters are flocking to social of leveraging social media to connect with vot- important as the message itself. Mass com- to come. media in droves because they provide a more ers in ways that were genuine, authentic, and munications may be expansive in reach; but If there is one lesson that the business commu- personalized and controlled political messaging exceedingly likely to establish strong personal they are often too easily ignored because the nity should take to heart from the 2012 presiden- experience. Voters no longer have to settle for relationships,” says Mr. Fenn, who heads up audience has no skin in the game. There is no tial election, it’s that they might be very wise to static, one-way communications from sources Fenn Communications Group, a political media feeling that the message is intended solely for follow suit. After all, consumers are consumers— they don’t know and don’t implicitly trust. operation that has advised more than 300 the recipient. As such, the audience is cloaked whether they are considering questions of public national, statewide, and local campaigns. “Vot- in a form of anonymity that creates no real They now have the freedom to engage in two-way policy or which products are most deserving of ers weren’t just being contacted by campaign consequences for inaction. conversations with familiar and credible connec- their hard-earned dollars. L personnel; they were being influenced by their tions that share their unique points of view and Conversely, there is no ignoring the intensely friends. In the end, that made all the difference Richard S. Levick, Esq., President and CEO of LEVICK, repre- outlooks on life—whatever they may be. personal, micro-targeted messages that social sents countries and companies in the highest-stakes global in getting out the vote and aptly demonstrated media facilitate. There is no question that the communications matters—from the Wall Street crisis and the As a result, campaigns that dominate the the declining value of traditional advertising.” message is meant just for the recipient, and Gulf oil spill to Guantanamo Bay and the Catholic Church. ground war fought primarily on social net- 16 17
  • 10. n a noted move towards corpo- boards in many countries, with nearly all listed I rate transparency, a recent study group of public company direc- tors and a few academics identi- companies in Canada, France, the U.K., and the U.S. conducting some sort of evaluation each year. The practice is also widespread in Italy fied seven gaps on their own board room turf: and Spain, and is gaining attention in many purpose, culture, leadership, information, Asia-Pacific markets. Even if a company is not advice, debate, and self-renewal. The report subject to any listing requirements, sharehold- goes on to state boards should “develop poli- ers and stakeholders are asking questions and cies and practices to ensure ongoing evalua- evaluating the company as though it is subject tion and education of current directors, using to the same requirements. Shareholders, com- the services of independent third-party facili- munity, and employees are expecting and even tators when needed.” With this focus in mind, presuming the board is using an objective ap- corporate counsel can provide guidance for proach to hold themselves and the company to boards desiring a more robust board evalua- the “best business practices.” tion process. Key Point: The progressive board looks for the Fundamentally, a board evaluation is an op- time and resources spent on board evaluation to portunity for boards as a collective body to align with their philosophy of continuous im- increase their effectiveness based on feedback provement and reflective intelligence. the evaluation provides. Continuous improve- At the very least, a board evaluation will ment and development of board and board focus on key functions of the board, provide committee processes and procedures is key to a “gap” analysis that draws weak areas to the ensuring board effectiveness. In today’s world, surface, provide disbursement of responses, it is vital that a board of directors can measure and identify the “tone” of the responses. Board its strengths and its opportunities for improve- evaluation is most meaningful as a produc- ment. Board evaluation sets the foundation tive activity for the board when it focuses on to purposefully identify and surmount barri- board development rather than compliance. ers that impede effectiveness. The goal is to This requires knowledge not only of board receive solid, actionable input. Board Evaluations functions, roles, and responsibilities, but also In addition, it is a NYSE listing requirement how all this information links to the current that boards, along with their nominating/ business/industry trends and market changes. Getting it Right governance, compensation, and audit com- In addition, a dynamic board evaluation moves mittees, perform annual evaluations. NASDAQ the board to a higher level of performance on highly recommends board evaluation. Annual business issues while enhancing group dynam- board evaluations have become the norm for ics. Overall, a board evaluation can transform Tracy E. Houston, M.A., President of Board Resources Services, LLC 19
  • 11. Weekly a group of strong individuals to a collective one of the committees, to become more familiar body of focused board members who become with the consultant and process. After a trust Risks of Engaging in a Board Evaluation invaluable to the CEO, senior management level is established, the board can increase the team, and all stakeholders. A skillful board engagement level. Some examples of risks that I have seen from board evaluations, and ways to alleviate evaluation can cause directors to say “I’m glad A board may not need a consultant for every those risks, include: we did that.” This kind of skillful evaluation is annual evaluation, or while the board’s agreed- Risk: Consultant misuse of data. produced from: upon action items from previous board evalua- Remedy: Ask how and where data is stored, and for how long. If answers are unacceptable, • Clear board objectives; tions are still in process. The board would prob- consider using the third-party facilitator just to analyze data and provide feedback. ably not use a facilitator when the board chair Risk: Loss of collegiality and negativity as a result of candidate feedback. • Reports and feedback from a knowledge- has only been in the position for a short period Remedy Review the past methods of board evaluation and assess the level of feedback able third-party facilitator where needed; of time, or when the board has just recruited, given to the board. Consider a hybrid methodology that includes a questionnaire • Facilitated follow-up discussions with the or is in the process of recruiting, a number of accompanied by a self-evaluation for each director. board to identify board development actions; new directors. Risk: Directors’ perception of performance is not in line with evidence that suggests otherwise. • Integration of the board evaluation into To choose the right methodology and provide Remedy Consider hiring a third-party facilitator to provide feedback and possible coaching sessions with the board. strategic leadership and planning; and a balanced approach, the board and corporate counsel should understand the risks and • Insights that lead to greater team rewards of a board evaluation. L effectiveness. For more information and/or studies with board evaluation Rewards of Engaging in a Board Evaluation data, see: Deciding Whether to Use a Third Board Evaluation: Creating Strategic Performance and Party Facilitator Effectiveness Examples of rewards that I have seen from board evaluations include: As the board embarks on the evaluation pro- • Provides a timely platform for directors to voluntarily resign, and sharpens the Tracy E. Houston, M.A., is the President of Board Resources cess, it is important to decide whether to use a discussion of the experience, expertise, diversity, independence, leadership ability and Services, LLC. She is a refined specialist in board of directors character needed by the new directors; third party facilitator. Employing a third-party consulting and executive leadership with a heartfelt passion consultant usually allows for greater objectiv- for rethinking performance, teams, and the boardroom. She • Identification of new or refined actions for risk reporting to the board, including crisis ity and credibility, not least as a means of satis- is the creator of the only digital series for corporate gover- and reputational management; nance—Board Guru™ eBooks. fying shareholders that an independent review • Clarity and enhancement of management reporting practices that affect the board; and has been carried out. The board can choose • Enhanced board effectiveness with identification of board dynamics and facilitation of the level and the areas of engagement for any discussion to ‘clear the air.’ board consultant. At times the third-party In today’s world, corporations are establishing processes that have an emphasis on collective facilitator may only help with question de- wisdom for competitive advantage. This concept can be actualized at the board level through velopment, or simply analyze the data, or the the board evaluation process, even though evaluation techniques are still in their infancy. The process can result in high-level thinking in a structured, organized manner, and lay the facilitator may be assigned to run all aspects foundation for continuous improvement. of the board evaluation. The board may want to start with a small project, such as evaluating 20 21
  • 12. Weekly NACD BoardVision: Tone at the Top Reputation, Stock Price, and You: Why the Market Rewards Some Companies and Punishes Others by Dr. Nir Kossovsky/Apress In this episode of BoardVision, shot on location at the 2012 NACD Board Leadership Conference, we discuss how boards can ensure that company leadership sets the right tone at the top. Join Peter Gleason, Managing Director and CFO at the National Association of Corporate Directors, and Mary Ann Cloyd, a Leader in the PwC Center for Board Governance, for an examination of the ways that directors and executives can align their internal communications with the organization’s culture, purpose, and mission. Click here to Order now!
  • 13. the Future of Financial Communications with Candi Wolff BLOGS worth following Thought leaders Industry blogs Amber Naslund Holmes Report brasstackthinking.com holmesreport.com Amber Naslund is a coauthor of The Now Revolution. A source of news, knowledge, and career The book discusses the impact of the social web information for public relations professionals. and how businesses need to “adapt to the new era of instantaneous business. NACD Blog blog.nacdonline.org Brian Halligan The National Association of Corporate Directors hubspot.com/company/management/brian-halligan (NACD) blog provides insight on corporate HubSpot CEO and Founder. governanceand leading board practices. Chris Brogan PR Week Chrisbrogan.com prweekus.com Chris Brogan is an American author, journalist, PRWeek is a vital part of the PR and communications marketing consultant, and frequent speaker about industries in the US, providing timely news, reviews, social media marketing. profiles, techniques, and ground-breaking research. David Meerman Scott PR Daily News davidmeermanscott.com prdaily.com David Meerman Scott is an American online PR Daily provides public relations professionals, marketing strategist, and author of several books social media specialists and marketing on marketing, most notably The New Rules of communicators with a daily news feed. Marketing and PR with over 250,000 copies in print in more than 25 languages. In this LEVICK Daily video interview, we discuss the future of financial communications with Candi Wolff, Executive Vice President for Global Government Affairs with Citi. From the trust Guy Kawasaki BUSINESS Related guykawasaki.com FastCompany deficit to the sea change called Dodd-Frank, financial service providers are persistently challenged Guy Kawasaki is a Silicon Valley venture capitalist, fastcompany.com to maintain positive client relationships. Those institutions that keep a keen eye on compliance bestselling author, and Apple Fellow. He was one Fast Company is the world’s leading progressive of the Apple employees originally responsible for business media brand, with a unique editorial will ultimately restore confidence. marketing the Macintosh in 1984. focus on business, design, and technology. Jay Baer Forbes jaybaer.com Forbes.com Jay Baer is coauthor of, “The Now Revolution: 7 Forbes is a leading source for reliable business Shifts to Make Your Business Faster, Smarter and news and financial information for the Worlds More Social. business leaders. Financial Communications Rachel Botsman rachelbotsman.com Mashable mashable.com Litigation Rachel Botsman is a social innovator who writes, consults and speaks on the power of collaboration Social Media news blog covering cool new websites and social networks. Corporate & Reputation and sharing through network technologies. Public Affairs Seth Godin sethgodin.typepad.com Crisis Seth Godin is an American entrepreneur, author and public speaker. Godin popularized the topic of permission marketing. Sign Up Today
  • 14. IN THE NEWS Articles The Daily Beast | November 14, 2012 Crisis-Management Experts Weigh In on How to Handle Petraeus Scandal Nonprofit Quarterly | November 14, 2012 Komen’s Continuing Saga: What Should It Do Now? FCS Interactive | November 14, 2012 Leading Experts Discuss the Future of Financial Communications - Highlights from FCS Luncheon in Washington, DC with Citi, GE Capital, LEVICK, T. Rowe Price Mashable | November 14, 2012 Macy’s Twitter and Facebook Pages Overrun With Anti-Trump Comments Buisness 2 Community | November 11, 2012 Interview with Crisis Communications Expert Richard Levick – Part 2 THE URGENCY OF NOW.