Executive Insight

What Shareholders Should Know about CEO Succession Plans, and Why.

A copy of my presentation yesterday at the 2013 Activist Investor Conference in New York City.

 

What shareholders should know about ceo succession plans, and why. from Charlesmore Partners International

Released: Fortune Magazine’s Best Companies to Work For, 2013

The list of good employers on Fortune’s prestigious annual list stays consistent this year with Google retaining the top spot and just a couple of newcomers to the top 10.

Rank	Company	Job Growth	# of Employees
1	Google, Inc.	N.A.	53,546
2	SAS	5.6%	6,373
3	CHG Healthcare Services	4.7%	1,378
4	The Boston Consulting Group, Inc.	18.6%	2,314
5	Wegmans Food Markets, Inc.	8.3%	43,927
6	NetApp	7.8%	7,426
7	Hilcorp Energy Company	47.7%	1,012
8	Edward Jones	-0.9%	35,114
9	Ultimate Software	18.7%	1,440
10	Camden Property Trust	13%	1,896

See Full List

Source: CNNMoney

The Activist Investor Conference 2013

The Latest on Activist Campaigns, Corporate Defenses, Legal & Regulatory Issues

The Activist Investor Conference is an annual gathering of the most important group of activist investors, corporate governance specialists, advisory firms, proxy solicitors, and corporate board members. The agenda features a full day of technical education on the latest activist investment strategies, their impact on corporate performance, legal and regulatory changes, and studies of effective proxy campaigns and successful corporate defenses.

Conference Topics

• The Activist Toolkit: What Methods are Activists Using to Successfully Influence Reforms
• The Impact of Governance and Activist Investing on Equity Returns
• The Current Proxy Activism Landscape
• Proxy Fights in Canada: Activism North of the Border
• Different Types of Activism: Operational, Boardroom, Governance and Takeover Activism
• Successful Public Relations Strategies for Activism Campaigns
• When to Use a Vote No / Withhold Campaign
• How to Determine When a Company is an Attractive Target for an Activism Campaign
• Negotiating the Proxy Contest Settlement Agreement
• Successful Strategies for Engaging with the Board and Management
• What Shareholders Should Know about CEO Succession Plans
• Changing Trends in Corporate Governance: Elections and Advisory Votes
• The New Breed of Activist Investors: What is their Impact on Policy, Governance and Executive Pay?
• Multi-Constituency Directors and Issues Surrounding Shareholder Representation on the Board
• The SEC's latest requirements for 13D filings
• Activism in Closed-End Funds
• Examining Advance Notification Bylaws

Agenda

Register

Venue

W New York - Union Square
201 Park Avenue South
New York, NY 10003
Phone: (212) 253-9119

In the heart of Silicon Alley, where cutting edge technology and international business thrives, stands W New York - Union Square. Step outside and head in any direction, and within walking distance you will find the very best of New York waiting for you.

A limited number of discounted rooms have been reserved for conference attendees. Book your room early because after the room block sells out the special rate may not be available. Click here to book your room online or call The W Hotel directly at (212) 253-9119 and mention "The Activist Investor Conference."

Globalization Not as Prevalent as Many Believe, a New Report on Global Connectivity Asserts

Globalization continues to feature prominently in political debates, business strategy deliberations, and in everyday life. The dialogue, however, is seldom backed up with hard data, the authors of a new report on global connectivity assert.

The new report from logistics giant DHL finds that the world is less globally connected today than it was in 2007, and global connectedness also falls far short of the levels commonly assumed by business executives and the general public.

Increasing global connectedness can be a powerful lever for improving prosperity, the report suggests and that limited and faltering global connectedness imply that strengthening countries’ connectedness offers large untapped potential to help accelerate economic recovery.

Global Connectedness is defined in the report as the depth and breadth of a country’s integration with the rest of the world as manifest by its participation in international flows of products and services, capital, information, and people.

Depth measures how much of a country’s activities or flows are international versus domestic by comparing the size of its international flows with relevant measures of its domestic economy. For example, to assess the depth of Hong  Kong SAR (China)’s merchandise exports, its exports are compared to its GDP: Hong Kong’s merchandise exports-to-GDP ratio is 187%, the highest in the world and 37 times higher than Nepal’s (the lowest – only 5%).

Breadth complements depth by looking at how broadly the international component of a given type of activity is distributed across countries. To illustrate the importance of incorporating breadth into assessments of global connectedness, consider inbound tourism in the Bahamas. While the Bahamas ranks first in terms of the number of inbound tourists per capita (a depth metric), more than 80% of those tourists come from the United States. Thus, while depth of inbound tourism in the Bahamas is high, its breadth is limited, especially when one notes that less than 15% of outbound international tourists worldwide come from the United States.

The 2012 DHL Global Connectedness Index measures and analyzes the global connectedness of 140 countries, covering 99% of the world’s GDP and 95% of its population.

Source: DHL

Read the Report

Education to Employment: Designing a System That Works

• Globally, seventy-five million youth are unemployed and young people are three times more likely than their parents to be out of work.
• Half of youth are not sure that their postsecondary education has improved their chances of finding a job
• Only 43 percent of employers can find enough skilled entry-level workers and estimates suggest that by 2020 there will be a global shortfall of 85 million high- and middle-skilled workers

Around the world, governments and businesses face a conundrum: high levels of youth unemployment and a shortage of job seekers with critical skills. How can a country successfully move its young people from education to employment? What are the challenges? Which interventions work? How can these be scaled up? These are the crucial questions.

A new report from McKinsey attempts to answer them. To do so, it developed two unique fact bases. The first is an analysis of more than 100 education-to-employment initiatives from 25 countries, selected on the basis of their innovation and effectiveness. The second is a survey of youth, education providers, and employers in nine countries that are diverse in geography and socioeconomic context: Brazil, Germany, India, Mexico, Morocco, Saudi Arabia, Turkey, the United Kingdom, and the United States.

The report’s findings include the following six highlights:

• Employers, education providers, and youth live in parallel universes – or to put it another way, they have fundamentally different understandings of the same situation.
• The education-to-employment journey is fraught with obstacles - not least of which are cost, work relevancy and job access.
• The education-to-employment system fails for most employers and young people – positive outcomes are the exception rather than the rule.
• Innovative and effective programs around the world have important elements in common – most particularly when education providers and employers step into each others’ worlds.
• Creating a successful education-to-employment system requires new incentives and structures – distributed information, collaborative endeavor and systems integration.
• Education-to-employment solutions need to scale up – leveraging interactive technologies and employer-valuable curricula.

McKinsey started this research recognizing the twin crises of a shortage of jobs and a shortage of skills. In the course of it, though, it realized the need to take into account another key shortage: the lack of hard data. This deficiency makes it difficult to even begin to understand which skills are required for employment, what practices are the most promising in training youth to become productive citizens and employees, and how to identify the programs that do this best.

The authors conclude, “The journey from education to employment is a complicated one, and it is natural that there will be different routes. But too many young people are getting lost along the way”.

Read the report

Source: McKinsey Center for Government

Navigating the “Big Data” Challenge

A new report from Bain & Company  – good insights for those chasing the “big data” monster.

Important: “As with any technological innovation, the question of how to use it is ultimately a business question. No big data product or service can substitute for the rigorous and demanding process of figuring out what questions to ask."

Read the report

Why America Is Losing the Race for Entrepreneurial Talent

In 2005, immigrant entrepreneurs launched 52% of all startups in Silicon Valley. Today, the number has dropped to 44%, and America is not only losing the opportunity to create new jobs but also losing its competitive edge, argues Vivek Wadhwa in his short, passionately argued book, The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent. Unlike during the 1980s, when skilled immigrants could get green cards (that let them become permanent residents of the U.S.) in as little as 18 months, today it can take as long as 17 years. Failure to fix this problem, says Wadhwa in an interview with Knowledge@Wharton, is killing American innovation and entrepreneurship.

Source: Knowledge@Wharton

Additional Reading

BusinessWeek: Why More Immigration, Not Less, Is the Key to Economic Growth

Financial Times: U.S. Immigration Policy is Killing Innovation

The Economist: People Power -- America Needs to Rethink Its Immigration Policy

The Rise of the African Consumer

The single-largest business opportunity in Africa will be its rising consumer market. A new McKinsey report offers a detailed profile of African consumers, including their demographics, behavior, and needs.

The continent’s consumer-facing industries are expected to grow by $400 billion, representing its single-largest business opportunity, by 2020. In one of the first studies of its kind, McKinsey’s Africa Consumer Insights Center surveyed 13,000 consumers in ten African countries, with a focus on the largest cities. Five categories of consumption were covered: apparel, financial services, groceries, the Internet, and telecommunications.

Here are some highlights from the research.

• Cities offer the best opportunity: urban Africa is forecast to contribute nearly 40 percent of GDP growth. But companies may be wise to bypass high-profile megacities, such as Cairo, Johannesburg, and Lagos, for midtier cities, like Abidjan and Rabat, which are more accessible, have less competition, and offer better profit margins.
• Companies can better tailor products to local markets if they understand what quality means for African customers and know their preferences, lifestyles, and daily needs.
• Since affordability is critical, companies may have to reengineer products to hit a specific price point. The necessary moves may include offering lower-cost versions, smaller sizes, or alternative payment models.

Read the Report

Source: McKinsey & Company

The State of Human Capital

A new report by The Conference Board and McKinsey & Company concludes that human capital professionals are struggling to meet the needs of an-ever changing global business landscape. Specifically, as global markets and technology evolve, “people processes are failing to keep pace”. The authors go on to report that “while tremendous strides have been made over the past decade in areas like workplace diversity and flexibility, the human capital function has largely lagged behind in effecting organizational success. As a consequence, human capital leaders must work harder — and smarter — to cement their place as a key business partner on decisions central to the present and future success of their organizations”.

The State of Human Capital 2012 report examines four specific opportunities that HC executives must seize if they are to effectively manage the global talent pool in an unpredictable business environment. These include:

1. Look ahead: anticipate and plan for the human capital of tomorrow– From the increased presence of the highly connected millennial generation to the proliferation of the virtual office, tomorrow’s workplace will look very different from today’s.
2. Secure a steady, reliable pipeline for today’s skilled workers, and tomorrow’s leaders – The war for talent continues, spurred by relatively high growth in emerging markets and the mismatch between worker skills and jobs in most regions of the world.
3. Develop strategies to reenergize your employees about what they do, and about what the organization stands for – An engaged workforce can drive financial performance. Studies have shown that employees who are truly engaged are more likely to stay and contribute to the organization.
4. Ensure that the HR/HC function becomes more agile than the organization as a whole – Organizational agility is an essential response to the volatility of today’s business environment. An MIT study shows that agile organizations grow revenue 37 percent faster and generate 30 percent higher profits than non-agile organizations.

With many human capital departments today paralyzed in the face of seemingly monumental challenges — such as accelerating leadership development, acquiring talent, and retaining  key players  in a world of constant change across borders, cultures and challenges — the report offers a way forward.   Based on a survey of hundreds of practitioners as well as focus groups with senior leaders in human capital around the world, the report offers an overview of the current state of the human capital function, key strategies and approaches executives can implement immediately to reach the summit.

Source: The Conference Board, McKinsey & Company

Download the report

Strengthening the Global Leadership Pipeline

By 2030 more than one-half of the world’s GDP will be generated in what are currently classified as “emerging markets.”

In a new study of its membership base, CEB (previously the Corporate Executive Board) examined the leadership challenge of this intensifying reconfiguration of the global business marketplace. It found that 60% of its member companies plan on significantly increasing their global footprint during the next three years but that a lack of globally capable leaders was likely to become a significant impediment to growth and sustaining success.

In the study CEB analyzed the business performance of more than 12,000 senior global leaders at 90 companies and discovered a striking difference between businesses with what it termed “Great Global Leaders”—those who can successfully operate across multiple and diverse geographies—and those without. It reports that Great Global Leaders are almost three times more likely than their peers to be guiding a business that is achieving its performance objectives three years in a row. “Unfortunately, Great Global Leaders are rare, as fewer than one in five senior leaders in the organizations surveyed qualify as Great Global Leaders. Without an adequate pipeline of effective global leaders, most organizations will struggle to be successful—and many will ultimately fail,” the study concludes.

We are told that “understandably” organizations are rethinking, retooling, and (in some cases) reinventing their leadership development programs to create more and better leaders. Yet the review of organizations’ strategies for strengthening their global leader pipeline shows that most approaches are “deeply flawed”. CEB report that some organizations “mistakenly” assume global leadership is the same as other forms of leadership and produce leaders who lack the special skills required for cross-market management. “Others make the opposite mistake”—assuming global leadership is an entirely unique set of skills and capabilities— “producing leaders with profiles inconsistent with the organization’s overall leadership needs.” The survey found that the best companies build Great Global Leaders by striking a balance between these two extremes—identifying, improving, and building leaders’ important core skills and capabilities while also enabling them to be more effective in complex global environments.

Key findings include:

• Many great leaders do not want global roles. CEB finds that only 35% of successful global leaders aspired to be in global roles. Global leadership roles may be unattractive to many leaders for two reasons. First, the link between most global assignments and the long-term career opportunities for leaders is frequently unclear. Second, the relocation, travel, and personal disruption costs of taking on global roles are often significant deterrents, especially for rising leaders.
• Executives should challenge the long-held assumption that to be successful, leaders need to live in the markets they manage. A review of leader performance shows that relocation is not always necessary for success.
• With global leaders likely having responsibility for individuals and teams over which they lack direct authority, the leader’s success or failure often hinges on his or her ability to work through others. A leader’s capacity to influence—being a compelling force or producing effects on the actions, behavior, and opinions of others— increases the probability that someone is a Great Global Leader by 27%.
• Being a successful global leader does not require increasing time spent working; rather, it requires working in a different way. Great Global Leaders spend more time networking with two important groups—clients and peers.

Read the report

Source: CEB