Episode 16 of The Corporate Director Podcast
Listen to Episode 16 on Apple Podcasts
  GUESTS:
  • Cindy Moehring, Founder and Executive Chair of the Business Integrity Leadership Initiative, Sam M. Walton College of Business, University of Arkansas, and she is the Former SVP, US Chief Ethics and Compliance Officer for Walmart
  • Adam Berger, Managing Director, Insight Partners
HOSTS:
  • Dottie Schindlinger, VP of Thought Leadership, Diligent
  • Meghan Day, Director of Directors' Experience, Diligent

IN THIS EPISODE:

  1. What Can Boards Do About CEOs' Ethical Lapses? As more CEOs are being dismissed for ethical reasons, boards should take an active role in setting the culture of a company.
  2. How Can Boards Establish the Right Ethics Policies'and Ensure They're Followed Accordingly? To ensure accountability, directors should ask probing questions that expose inconsistencies in repercussions for senior leaders vs. junior employees.
  3. Can Public Boards Approach Value Creation Like Private Equity Boards Do? The key to long-term value creation is aligning goals among shareholders, management and boards.

SUMMARY:

Boards are constantly rethinking how they're engaging employees and influencing company culture. Now, as more CEOs are being dismissed for ethical reasons, boards are under pressure to fundamentally change their approach to ethics. Trends in value creation are further fueling discussions around structure, leaving boards to consider adopting a new model altogether. In this podcast episode, Cindy Moehring discusses how boards can create a transparent, accountable company culture. Later on, special guest Adam Berger elaborates on what public company boards can learn from the private equity approach to value creation and working with entrepreneurial CEOs.

1. What Can Boards Do About CEOs' Ethical Lapses?

Strategy&, part of the PwC network, recently shared its annual analysis of CEO turnover, reporting that for the first time in the study's history, more CEOs were dismissed for ethical lapses than for financial performance or board struggles. What is fueling this trend? Moehring says it's all about transparency. 'What happens in this moment can be broadcast around the world within milliseconds. I think there's less tolerance for certain behaviors because there's an understanding that we live in an inherently transparent world,' she said. 'With that transparency comes better governance, and boards are recognizing that accountability is required.' As for how boards can reverse the trend, Moehring says they should set the culture for a company above the CEO level''being vocal and visible to stakeholders so they know the board is taking an active role.' One way to get the company, including the CEO, to align with the board's established standards is to ensure the board has ongoing ethics and compliance training, Moehring recommends. 'They need to set a time on their agendas to talk about upcoming issues that involve ethics, like whether or not AI can be done in an ethical way for the company,' she says. 'They also need to talk about ethical missteps they see other companies have taken and talk with management to make sure their own company has the right controls in place.' Overall, embrace the transparency, Moehring says. 'Make sure ethics initiatives are visible to employees. Directors can get involved with the company in different ways and engage with employees on the lower level.'
'What happens in this moment can be broadcast around the world within milliseconds. I think there's less tolerance for certain behaviors because there's an understanding that we live in an inherently transparent world.' ' Cindy Moehring, Former SVP, US Chief Ethics & Compliance Officer for Walmart

How Can Boards Establish the Right Ethics Policies'and Ensure They're Followed Accordingly?

If a senior leader experiences an allegation that turns out to be true, board members should ask if the repercussions would be the same for a lower level or junior employee, Moehring advises. 'Ask the probing questions,' she explains. 'You don't want to see the hierarchy getting just a slap on the wrist.' To ensure boards are being proactive about ethics, 'the Chief Compliance Officer (CCO) should be a regular in the boardroom because it doesn't always mean bad news. If they're only seen when there's a problem, that doesn't set the right culture at a company,' Moehring says. At the very least, CCOs should have a role in the committee meetings in order to establish an environment where ethics is a framework for all decisions. When the CCO works within the environment of the company, they establish good relationships with the CEO, general counsel, and Chief HR Officer, she adds. 'Make sure conversations are candid and transparent and clear and thorough. Make sure everyone is having private sessions with the CCO,' Moehring explains. In general, she says, boards should 'make sure the culture of the company is what they want it to be, and make sure people are held accountable.'
'The Chief Compliance Officer should be a regular in the boardroom because it doesn't always mean bad news. If they're only seen when there's a problem, that doesn't set the right culture at a company.' ' Cindy Moehring, Former SVP, US Chief Ethics & Compliance Officer for Walmart

3. Can Public Boards Approach Value Creation Like Private Equity Boards Do?

Ronald J. Gilson and Jeffrey N. Gordon, both law professors, recently published their recommendations for a new board structure among public company boards. What they refer to as Board 3.0 maintains active engagement in value creation by drawing from multiple data sources and asking tough questions. Berger, who has served on both public and private equity company boards, says this may be a challenge. 'When you have diversity and quantity of investors, it's hard for a public company board to have a clear mission and align a set goal that everyone marches toward,' Berger explains, comparing that to a private equity board with one or two stakeholders. Further, 'Private equity boards take a long-term view,' he says. 'We run marathons with finish lines. Public company boards run a series of sprints, and the finish line keeps moving. It's difficult for public board directors and CEOs to align goals that way.' Day explains it's becoming more natural for public company boards to establish long-term goals. 'I think structurally we're seeing a shift at public companies that is not necessarily just about compliance anymore. It's about the holistic view of where the company is going in that three-, five-, or seven-year period because the future is not so certain for them anymore,' she says. 'You have to balance quarterly reporting with longer outlook that considers the changing, dynamic world we live in,' Day concludes.
'Public company boards run a series of sprints, and the finish line keeps moving. It's difficult for public board directors and CEOs to align goals that way.' ' Adam Berger, Chairman of the Board of Directors for Diligent
EPISODE RESOURCES:
Listen to Episode 16 on Apple Podcasts
 

CEOs & Boards: Private Equity vs. Public Company Perspectives

11/27/2019
Dottie Schindlinger

CEOs & Boards: Private Equity vs. Public Company Perspectives

Listen
Listen to Episode 16 on Apple Podcasts

GUESTS:

  • Cindy Moehring, Founder and Executive Chair of the Business Integrity Leadership Initiative, Sam M. Walton College of Business, University of Arkansas, and she is the Former SVP, US Chief Ethics and Compliance Officer for Walmart
  • Adam Berger, Managing Director, Insight Partners

HOSTS:

  • Dottie Schindlinger, VP of Thought Leadership, Diligent
  • Meghan Day, Director of Directors’ Experience, Diligent

IN THIS EPISODE:

  1. What Can Boards Do About CEOs’ Ethical Lapses? As more CEOs are being dismissed for ethical reasons, boards should take an active role in setting the culture of a company.
  2. How Can Boards Establish the Right Ethics Policies—and Ensure They’re Followed Accordingly? To ensure accountability, directors should ask probing questions that expose inconsistencies in repercussions for senior leaders vs. junior employees.
  3. Can Public Boards Approach Value Creation Like Private Equity Boards Do? The key to long-term value creation is aligning goals among shareholders, management and boards.

SUMMARY:

Boards are constantly rethinking how they’re engaging employees and influencing company culture. Now, as more CEOs are being dismissed for ethical reasons, boards are under pressure to fundamentally change their approach to ethics. Trends in value creation are further fueling discussions around structure, leaving boards to consider adopting a new model altogether.

In this podcast episode, Cindy Moehring discusses how boards can create a transparent, accountable company culture. Later on, special guest Adam Berger elaborates on what public company boards can learn from the private equity approach to value creation and working with entrepreneurial CEOs.

1. What Can Boards Do About CEOs’ Ethical Lapses?

Strategy&, part of the PwC network, recently shared its annual analysis of CEO turnover, reporting that for the first time in the study’s history, more CEOs were dismissed for ethical lapses than for financial performance or board struggles.

What is fueling this trend? Moehring says it’s all about transparency. “What happens in this moment can be broadcast around the world within milliseconds. I think there’s less tolerance for certain behaviors because there’s an understanding that we live in an inherently transparent world,” she said. “With that transparency comes better governance, and boards are recognizing that accountability is required.”

As for how boards can reverse the trend, Moehring says they should set the culture for a company above the CEO level—“being vocal and visible to stakeholders so they know the board is taking an active role.”

One way to get the company, including the CEO, to align with the board’s established standards is to ensure the board has ongoing ethics and compliance training, Moehring recommends. “They need to set a time on their agendas to talk about upcoming issues that involve ethics, like whether or not AI can be done in an ethical way for the company,” she says. “They also need to talk about ethical missteps they see other companies have taken and talk with management to make sure their own company has the right controls in place.”

Overall, embrace the transparency, Moehring says. “Make sure ethics initiatives are visible to employees. Directors can get involved with the company in different ways and engage with employees on the lower level.”

“What happens in this moment can be broadcast around the world within milliseconds. I think there’s less tolerance for certain behaviors because there’s an understanding that we live in an inherently transparent world.”

— Cindy Moehring, Former SVP, US Chief Ethics & Compliance Officer for Walmart

How Can Boards Establish the Right Ethics Policies—and Ensure They’re Followed Accordingly?

If a senior leader experiences an allegation that turns out to be true, board members should ask if the repercussions would be the same for a lower level or junior employee, Moehring advises. “Ask the probing questions,” she explains. “You don’t want to see the hierarchy getting just a slap on the wrist.”

To ensure boards are being proactive about ethics, “the Chief Compliance Officer (CCO) should be a regular in the boardroom because it doesn’t always mean bad news. If they’re only seen when there’s a problem, that doesn’t set the right culture at a company,” Moehring says.

At the very least, CCOs should have a role in the committee meetings in order to establish an environment where ethics is a framework for all decisions. When the CCO works within the environment of the company, they establish good relationships with the CEO, general counsel, and Chief HR Officer, she adds. “Make sure conversations are candid and transparent and clear and thorough. Make sure everyone is having private sessions with the CCO,” Moehring explains.

In general, she says, boards should “make sure the culture of the company is what they want it to be, and make sure people are held accountable.”

“The Chief Compliance Officer should be a regular in the boardroom because it doesn’t always mean bad news. If they’re only seen when there’s a problem, that doesn’t set the right culture at a company.”

— Cindy Moehring, Former SVP, US Chief Ethics & Compliance Officer for Walmart

3. Can Public Boards Approach Value Creation Like Private Equity Boards Do?

Ronald J. Gilson and Jeffrey N. Gordon, both law professors, recently published their recommendations for a new board structure among public company boards. What they refer to as Board 3.0 maintains active engagement in value creation by drawing from multiple data sources and asking tough questions.

Berger, who has served on both public and private equity company boards, says this may be a challenge. “When you have diversity and quantity of investors, it’s hard for a public company board to have a clear mission and align a set goal that everyone marches toward,” Berger explains, comparing that to a private equity board with one or two stakeholders.

Further, “Private equity boards take a long-term view,” he says. “We run marathons with finish lines. Public company boards run a series of sprints, and the finish line keeps moving. It’s difficult for public board directors and CEOs to align goals that way.”

Day explains it’s becoming more natural for public company boards to establish long-term goals. “I think structurally we’re seeing a shift at public companies that is not necessarily just about compliance anymore. It’s about the holistic view of where the company is going in that three-, five-, or seven-year period because the future is not so certain for them anymore,” she says.

“You have to balance quarterly reporting with longer outlook that considers the changing, dynamic world we live in,” Day concludes.

“Public company boards run a series of sprints, and the finish line keeps moving. It’s difficult for public board directors and CEOs to align goals that way.”

— Adam Berger, Chairman of the Board of Directors for Diligent

EPISODE RESOURCES:

Listen to Episode 16 on Apple Podcasts