Roll Out The Red Carpet!

At a sparkling black-tie affair, winners of the NYSE Governance Services’ inaugural Governance, Risk, and Compliance Leadership Awards were celebrated with a gala dinner and ceremony.

Late last year, NYSE Governance Services launched its award program with a call for nominations of the top leaders in governance, risk, and compliance (GRC). The awards were open to all publicly traded companies in the United States
and individuals who work for these companies. Specifically, awards were divided into seven categories recognizing best GRC (large and small/mid-cap), best in-house legal team, exemplary CD&A, exemplary shareholder engagement, best IT governance, and nonexecutive chairman of the year.

 

Presiding over the selection of our 2014 winners was an esteemed group of judges whose reputations and experience provided unequivocal integrity in their decisions. The judges for the

2014 awards were Kenneth Bertsch, former president, Society of Corporate Secretaries & Governance Professionals and partner, CamberView Partners LLC; William B. Chandler III, former chancellor, Delaware Court of Chancery, and partner, Wilson Sonsini

Goodrich & Rosati; Jean-Marc Levy, senior vice president and head of Global Issuer Services, NYSE, an Intercontinental Exchange company; Veta T. Richardson, president and CEO, Association of Corporate Counsel; Mary Schapiro, 29th chairperson of the U.S. Securities and Exchange Commission; Brian A. Rice, portfolio manager, Corporate Governance, California State Teachers’ Retirement System (CalSTRS); F. Daniel Siciliano, professor and faculty director, Arthur and Toni Rembe Rock Center for Corporate Governance, and associate dean for Executive Education and Special Programs, Stanford Law School.

“We developed these awards to underscore the role that corporate governance plays in dictating a company’s success and a board’s contribution to long-term value,” explains NYSE’s Levy. “We wanted to celebrate and recognize exemplary companies and individuals who go beyond the basic requirements of governance, regulation, and compliance, aiming for and obtaining excellence in their respective fields and serving as models for others to emulate.”

Following an Oscar-style, red-carpet reception on the trading floor of the New York Stock Exchange, the award
announcements were hosted by Fox news reporter Lauren Simonetti, who served as mistress of ceremonies during the evening’s formal dinner. Leading firms known for their expertise in various aspects of governance, risk, and compliance served as category sponsors and took part in the ceremony by announcing the list of finalists and winners for each award. Award sponsors included AST Phoenix Advisors, Computershare Georgeson, Diligent, Norton Rose Fulbright, PwC, RSA, Semler Brossy, and Spencer Stuart.

During the deliberation period of these awards, one thing became abundantly clear: There are many companies demonstrating exemplary leadership qualities each and every day within their organizations, and NYSE Governance Services proudly recognizes and salutes all the finalists for their worthy credentials. (For a complete list of 2014 candidates
and finalists, see the sidebar.) To learn more about each of this year’s seven deserving winners, we hope you’ll read on in the pages that follow.

Nonexecutive Chairman of the Year
For her stellar work as a leader, mentor, and decision maker, Marge Magner has been named NYSE Governance Services’ Nonexecutive Chairman of the Year.

“I am thrilled and delighted with this recognition, because it means the Gannett company is being recognized, and what Gannett has accomplished in the last few years has just been tremendous,” said Magner, moments after receiving the award.

Since being named board chair in 2011, Marge Magner has brought board members—as well as senior leadership— together in a purposeful yet open and collegial manner to advance the company’s strategy and position Gannett for growth at a time when it requires a strong strategic focus. She has encouraged both the board and senior leadership to take bold action andis guiding the way as the company embraces transformative

of good governance throughout the company. During the last three pivotal years, Magner has proven herself to be a natural mentor as well as a skilled leader who has fostered the execution of the company’s game-changing strategic initiatives and capital allocations strategy with “vision, courage, and an affinity for innovation.” Her retail and management expertise as a former global consumer banking executive, her vast corporate board experience, and her entrepreneurial outlook as the head of a private equity firm have all combined to bring great leadership ability to Gannett’s board. She has been described as “humbly confident” and as one who  “brings out the best in both management and board members.”

“The Gannett board—working with management, our leadership, and the whole company—really focuses on what is important to our shareholders, to our employees, to our customers, and to the communities we serve. We care about those things in every decision we make, and we are as concerned with how we do  growth. As Gannett faces both challenges and opportunities, she offers sound guidance and deep insight while approaching each task with independent thought paired with measured action. Magner doesn’t predetermine what the answers should be but instead asks insightful questions that focus attention on key considerations. She respects the distinctive roles of management and the board.

From the board’s perspective, Magner fosters team and individual relationships on the board and with management, allowing ample time for interaction with the CEO and executive team. She has done an outstanding job of developing relationships on the board, holding

one-on-one meetings with each director to ensure she understands everyone’s point of view. Magner also prepares the board well in advance of a specific opportunity by organizing small-group discussions and by allocating significant time for the board to focus on strategi change, shifting its focus from being an established newspaper and broadcasting company to becoming a multiplatform media leader. 2013  was a remarkable year for Gannett, and Magner clearly set the tone at the top while advancing the principles things as we are with what we do,” Magner stated.

From management’s perspective, Magner gives the company’s top leaders space to take risks while still maintaining accountability as management executes the company blueprint for change and transformation not just quarterly performance.
Best Governance, Risk, and Compliance Program at a Large-Cap Company

The winning company in this category clearly demonstrates that governance,

risk, and compliance issues are top of mind and that industry and regulatory best practices permeate the organization. At PepsiCo, that focus is embedded in the business strategy through a program the company calls “Performance with Purpose.”

Performance with Purpose keys on the company’s goal to deliver sustained, high-level financial results while finding innovative ways to reduce costs, minimize environmental impact, and provide a premier workplace within an integrated framework that supports local communities.

An underlying principle of its governance policy is the idea that a strong corporate governance program is the foundation for financial integrity, investor confidence, and superior performance. PepsiCo Chairman and CEO Indra Nooyi, who joined the advisory board of the John L. Weinberg Center for Corporate Governance in 2012, consistently emphasizes the importance of  maintaining top-tier governance practices embodied by directors, executives, and employees alike. This collaborative approach is carried out by multiple teams, including legal, compliance and ethics, and public policy/government affairs, all overseen by General Counsel Larry Thompson, along with the risk and executive compensation departments.

Associates on the legal team work on corporate governance matters with more than 80 additional associates across multiple departments. Cynthia Nastanski, senior vice president, Corporate Law, is secretary of the audit committee and its disclosure committee and is a member of the advisory council of the Sustainability Accounting Standards Board. Her team works closely with the board and senior management to facilitate the implementation of corporate governance best practices and is responsible for overseeing all aspects of securities law compliance, advising on executive compensation requirements, and collaborating on the development and enforcement of key policies.

PepsiCo’s Global Compliance and Ethics team has nearly doubled in size since 2011. The chief compliance and ethics officer is a member of senior management and meets regularly with the CEO, CFO, general counsel, and other senior business leaders and also has direct access to the audit committee of the board of directors. PepsiCo’s resources have steadily increased over the past several years to ensure the compliance and ethics program remains effective in the face of increasing global complexity, significant business acquisitions, and regulatory changes such as Sarbanes- Oxley and Dodd-Frank.

Its public policy/government affairs team keeps current through significant involvement in the corporate governance and sustainability community, while its global risk management office provides tools and analytical support, identifying and assessing potential risks and facilitating ongoing communication among the various teams as well as with the board and audit committee.

As a result of its sound policies and training methods, PepsiCo’s governance, risk, and compliance programs were deemed best in class by the judges and worthy of recognition. “We’re thrilled— it’s such an honor to receive this award from NYSE Governance Services. It’s a testament to the leadership of our board of directors, which cascades throughout the organization. It’s a team effort, and all of our associates across the company live these values every day, which is why we won this said Nastanski, accepting the award on behalf of Pepsico Co.

Best Governance, Risk, and Compliance Program at a Small- to Mid-Cap Company

AES Corp. impressed the judges primarily due to its response to a set of complex challenges it faced in 2013 while implementing a change  in strategy and a management and operations reorganization. The stellar performance of the legal, risk management, and ethics and compliance teams, along with the company’s best-in-class programs, procedures, and processes, allowed AES to meet each challenge and successfully implement the strategic shift and reorganization.

Said Brian Miller, executive vice president, general counsel, and corporate secretary for AES, “This is a fantastic honor, especially coming from the New York Stock Exchange.” Miller was quick to give credit to all those throughout the organization that made AES a standout candidate. “I would like to attribute the award to the 21,000 people of AES around the globe, highest level, I wouldn’t be here today,” he said upon accepting the award.

AES, a $42 billion company founded in 1981, owns and operates a diverse and growing portfolio of electricity generation and distribution businesses across the globe from São Paulo, Brazil, to Doula, Cameroon, to Indianapolis, Indiana.

In 2013, it executed a strategy to unlock shareholder value and improve profitability by narrowing its geographic focus to countries and regions where it has a competitive advantage and by optimizing capital allocation. The efforts were complemented by significant cost savings and efficiencies that resulted from multiple companywide process improvements. These improvements were based on a reorganization of the global operating business into six strategic business units.

A principal element of AES’s 2013 strategy was to narrow its geographic focus via portfolio management activities. The intended result was to reduce the markets where AES operated in order to businesses that were not considered core to the business strategy or where it did not believe it was maintaining a competitive advantage. These portfolio management efforts resulted in more than $800 million in benefit for AES shareholders.

The hurdles to implementing the strategy shift and management reorganization required all AES teams, including the Global Legal team, to resolve a myriad of legal, governance, risk management, and ethics and compliance challenges. To meet such challenges, the board and management at AES not only ensured that rigorous policies and training methods were in place for governance, risk management, and ethics and compliance, but they continued to demand that industry and regulatory best practices be central to the company’s operating culture.

In making their decision, the judges ultimately cited AES’s sound governance, risk, and compliance processes, which have located in 21 different countries, on five separate continents. If they didn’t have a commitment to following regulatory, legal, and governance practices at the simplify its story and governance needs, as well as reduce portfolio risk. During 2013, in connection with this strategy, AES successfully exited multiple upheld regulatory best practices, while supporting strategic leadership objectives.

Best In-House Legal Team for Corporate Governance

 

Keeping pace with regulations and innovation in the pharmaceutical industry requires a sharp group of legal professionals. Since taking the reins of her legal team in 2006, Bristol-Myers Squibb Co. General Counsel and Corporate Secretary Sandra Leung has restructured her department to meet and surpass expectations for in-house legal counsel. Under Leung’s leadership, the legal team now enjoys a greater level of collaboration—including forums

for sharing knowledge within the department and extended interaction with Bristol-Myers Squibb (BMS) scientists and outside counsel. Her efforts have resulted in a nimble team, one that has increased patent applications and managed the litigation that often follows new products and increased regulation. Accepting the award on behalf of the legal team was Kate Kelly, vice president and assistant general counsel. “This is

Myers Squibb—with a great leader and general counsel, and we are all just so excited to be a part of this,” said Kelly.

Companywide, BMS has undergone unprecedented changes, and in many ways 2013  was a key turning point. A number of negative events in 2006 led to the naming of a new CEO and general counsel. At that time, management realized the company would be facing major challenges, including the patent expiration for its largest product. BMS has addressed those challenges with a unique strategy that combines the best aspects of a pharmaceutical company with the entrepreneurial spirit and agility of a successful biotech firm. The legal team not only guided BMS and its board through this period of transformation, it continues to be actively engaged with stockholders and the corporate governance community at large, listening to shareholders’ views, sharing learning outcomes, and shaping future policie and best practices.

Within the legal department itself, the maintains enhanced connectivity and cross training via six-week assignments that include sending attorneys to regional offices; with teams that discuss new product launches globally; and through an initiative called Reinforcing Excellence, Alignment, Cooperation, and Harmony (REACH) that involves cross-functional work.

The criteria the judges referenced in making their decision noted that the winner of this award has stood the test of time and met every legal, ethical, and compliance challenge with the utmost integrity and know-how. In the judge’s estimation, BMS most closely upheld that description. In a supporting statement, BMS noted that its legal team has established best practices, enhanced dialogue on corporate governance matters, and shepherded the company through significant change. Furthermore, it noted, as a law department, the BMS legal team has transformed its practice to reflect new business really wonderful,” she said, “especially to be part of this in the inaugural year of these awards.” Kelly attributed the win to the collegial work  and the collective effort of every member of the company’s legal team. “We have a real team at Bristol Career Path Development Framework was launched in 2012 to clarify expectations across attorney levels, to focus development on the most critical areas for a law department of the future, and to recognize expanded roles and expertise. The team realities, operational innovations, and investments in its people.

Best IT Governance at the Board Level

AOL is committed to continuously innovating, growing, and investing in brands and experiences that inform, entertain, and connect the world. With technology as the basis for its business, cybersecurity has emerged as a top strategic priority for AOL’s board of directors. The AOL board has undergone multiple sessions devoted to understanding the details of the security challenges encountered by most companies, as well as those more specific to AOL and its peers.

While data security has emerged as a board issue among many companies, AOL’s business has been linked with cyber issues since its inception. “We are on the forefront of all the cybersecurity risks and data security threats, so it’s a very, very high priority for our industry and our company,” explained senior vice president and deputy general counsel Damien Atkins. “Our board of directors stays on top of all the issues surrounding IT risk and security. It’s probably one of the most discussed topics for our board,” he stated.

On an annual basis, the board reviews training and awareness plans, white-hat penetration tests, involvement with law enforcement efforts, and a cybersecurity road map. The board also endorses and funds investments to provide additional protections for customers and partners. In short, AOL has recognized the necessity of proactively addressing cyber risk in the company’s overall governance program, making a robust effort to ensure it anticipates and prepares for IT risks and cyber threats.

In 2013, the operations of the AOL board moved to an entirely electronic process using state-of-the-art technology. The board agreed to go completely virtual, relying only on the materials sent via Board Books by Diligent, after an RFP process that included 12 electronic board portal solutions. AOL believes the strategic use of a board portal has improved board governance procedures by facilitating communications and enabling a timely view of current and historic company information; by providing stringent security through data encryption and a high standard of information security controls; and by eliminating paper, which drastically cuts the time needed to prepare for board and committee meetings and eliminates printing, shipping, and physical security for paper-based information. AOL provides its directors access to the electronic board portal using iPads.

Not only do directors have the information they need, they are able to easily access the information whenever and wherever they choose. Furthermore, to simplify the process of obtaining signatures on unanimous written consents and other filings, AOL implemented the use of electronic signatures. Now, whenever a board member needs to sign a document, he or she can do so electronically and the scanned signature on file appears on the signature page, significantly reducing the time involved in obtaining signatures while creating a much  simpler and more efficient process. Finally, AOL has implemented an Internet calendar tool for time management and meeting coordination as well as desktop video conferencing for directors who are traveling or cannot be physically present at the meeting location.

Using technologies such as these has not only assisted directors with their board duties but also helped them understand how the company’s business processes could benefit from similar technologies, all of which collectively received kudos from the judging panel who found AOL’s IT governance initiatives worthy of recognition.

Exemplary CD&A for

Compensation Committee

Mindful that expectations regarding full disclosure are constantly rising, Cameco Corp. has justifiably demonstrated how an exemplary compensation discussion and analysis (CD&A) can provide a clear and concise explanation of how executive compensation must link strategy and compensation to the promotion of a company’s growth over the long term.

Cameco, one of the world’s largest uranium producers, has been recognized by both the Canadian Coalition for Good Governance for best disclosure of approach to executive compensation and best disclosure of board governance practices and director qualifications and also by GMI Ratings, which noted: “Unusually strong disclosure is provided by uranium miner Cameco, which details a wide range of ESG metrics used in its annual incentive and discusses their application in the context of particular projects it is developing.”

Cameco’s management proxy circular offers well-written content and uses graphics to explain more complex concepts and processes. Since 2009, company has strived to streamline and improve its disclosure, and its CD&A is used as a reference for companies trying to improve the quality of their disclosures. A letter from the human resources and compensation committee chair presents a holistic view of the company and assesses the previous year in terms of strategy, performance, market context, and the direct impact corporate performance had on executive compensation. The CD&A goes on to describe how target compensation is set, detail specific corporate performance objectives and weightings, review actual performance against those objectives, and provide a compensation timeline and performance thresholds. It also includes an outline of the company’s formal approach to governance and risk management.

Cameco‘s executive compensation framework is designed to encourage management to focus on increasing long-term shareholder value. Responsibility for compensation at Cameco rests with the board and the human resources and compensation committee, which consists entirely of independent directors and receives advice from an independent, third-party compensation expert. An important part of the committee’s mandate is to ensure that it attracts, engages, motivates, and retains the talent it needs to achieve its strategic objectives.

Cameco‘s executive compensation program is built on the following six principles that drive related policy and program decisions: promote executive teamwork by using incentive-based compensation that emphasizes corporate over individual performance; base compensation decisions on corporate and individual performance, using a combination of financial, nonfinancial, internal, and external measures; focus part of the program on absolute and controllable performance measures to retain skilled executives; use share ownership requirements and equity-based compensation to align the interests of executives and shareholders; benchmark corporate performance and the compensation program against a peer group of companies; and target executive compensation at the market median to ensure the company can attract and retain executive talent.

Upon receiving the award, James Curtiss, chair of Cameco’s human resources and compensation committee, summed up the company’s exhilaration over winning the award: “On behalf of our entire team and everyone who works so hard to ensure such outstanding efforts in this regard, we are very, very proud to be involved and honored in this effort.”

 

Exemplary ShareholdeEngagement

Prudential Financial places a high value on investor relations, and its actions prove it has a management team and board that understand the importance of actively engaging shareholders on a continuous, year-round basis. Through its communication with retail and institutional investors alike, Prudential has shown its commitment to building long-term relationships based on integrity, transparency, and trust, along with a willingness to participate in meaningful dialogue with shareholders via accessible venues and channels. The efficacy of these endeavors is reflected in a company that has been able to successfully work through shareholder engagement challenges in a manner that satisfies all parties.

“Shareholder engagement is part of Prudential’s culture. It starts with the top down with our Chairman and CEO John Strangfeld, as well as our entire board of directors,” said Theresa Molloy, a director of Governance and Shareholder Services at many years. So we are thrilled that we have this opportunity, and we appreciate the recognition.”

The Prudential team’s goal is to meet with a majority of its investors annually; however, with approximately 1.6 million retail shareholders and 13,000 institutional shareholders, management understands that one engagement model cannot meet the needs of such a diverse body. For example, retail investors are loyal, but as a group  they tend not to vote in high numbers. So Prudential creatively reaches out to these shareholders by appealing to their sense of community. Since 2010, the company has offered its registered shareholders an incentive: Vote and you will receive either an environmentally friendly tote bag or a tree planted in your name. “Totes for Votes” has enticed nearly 250,000 registered shareholders to vote over the last four years. The enthusiastic support has also led to the planting of more than 500,000 trees. As a result, the company has achieved an average quorum of 70%—further signifying the initiative’s impact on Prudential’s shareholder engagement success.

communicate by writing their comments on the proxy, others use the company’s governance website to share their views. Mindful that a new generation of stakeholders prefer to access content via tablets and other technology platforms, Prudential produced a specially designed interactive version of its proxy last year. During the 2013 proxy season, the company received nearly 2,500 proxy comments. Regardless of the medium, every communication received a response. The board uses these comments to understand the issues that are most important to shareholders.

But Prudential doesn’t just rely on submitted comments. A number of its larger institutional shareholders prefer to meet directly or speak via phone to discuss governance policies. To maintain an open dialogue, the company has hosted roundtables with investors and proxy advisers to meet with and educate the board about shareholder engagement.

In light of these and other multipronged efforts proving a sustained commitment to investor relations, Prudential Prudential Financial, who described the values the company has been recognized for as ingrained in the Prudential culture. “It’s been part of our philosophy for many, Overall, Prudential provides multiple touchpoints for investors to communicate with the company and board. For example, while some shareholders prefer to Financial was named the inaugural winner of the Exemplary Shareholder Engagement award. ®