The Korn/Ferry Market Cap 100

The Korn/Ferry Market Cap 100

Board leadership at America's most valuable public companies

About the 2010 Korn/Ferry Market Cap 100

The Korn/Ferry Market Cap 100 (KFMC100) comprises the U.S. companies traded on the NYSE or NASDAQ , excluding public investment firms, with the largest market capitalization as of the close of market on May 3, 2010, after reporting for the 2009 fiscal year. Data about the companies' boards, compiled from proxies related to fiscal year 2009, provide the baseline for this report.

B

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Board leadership in an era of change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

What's in a name? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Portrait of a lead director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Interview with Mark Ketchum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Lead director, Kraft Foods

Adding value to the board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Interview with Irv Hockaday . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Presiding director, Ford Motor Co. and Est?e Lauder Companies Inc.

Committee membership and leadership . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Leadership succession on the board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Assessing the need for terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Interview with Bonnie G. Hill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Lead director, The Home Depot, Inc.

Compensating for time and value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Final thoughts and best practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Appendix A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Board data

Appendix B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 List of the KFMC100 companies

Appendix C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 List of the KFMC100 non-executive board leaders

Introducing the Korn/Ferry Market Cap 100

The Korn/Ferry Market Cap 100 (KFMC100) marks a new approach to the governance research our firm has undertaken for thirty-five years. We've chosen to examine the United States' one hundred most valuable companies, working from the assumption that leadership models represented on these boards are worth observing and emulating.

In this first KFMC100 report, we focus on non-executive board leadership in this elite subset of boards. Among our top-line findings:

There is no rush to split the role of chairman and CEO. Non-executive chairmen remain rare, leading only 9 percent of boards in the KFMC100. By comparison, 19 percent of S&P 500 boards have non-executive chairmen.

Current or former CEOs are the most sought-after group for the role of non-executive board leader. About three-quarters of non-executive board leaders have held one or more top corporate title (chairman, president, or CEO) and 8 percent are active CEOs at public companies.

Thirteen percent of companies rotate the role of non-executive board leader. This model clearly works well for some companies, but poses additional challenges, including maintaining available talent and ensuring continuity in the board's important work.

Outside of these boardrooms, the bigger corporate governance picture continues to develop. The dramatic economic hemorrhaging of 2008 led to additional scrutiny of boards, with shareholder groups and the news media criticizing boards for any perceived lack of independence. While the causes of our economic woes have proven far more complex and widespread than the actions of some boards, the result has been a raft of new regulations from Washington addressing "say on pay," proxy access, and CEO succession plans.

At the same time, the role of the of non-executive board leader is growing. The non-executive board leader position began as a means of meeting an independence requirement, but today the role increasingly is being leveraged to create efficiency and additional value in the boardroom. The role must be tailored to the culture of individual boards, of course, but some best practices are beginning to crystallize.

2

To determine what top boards are doing in the area of non-executive board leadership, we engaged in a two-step process. First, we examined the KFMC100 to get a clear picture of non-executive board leaders, including their backgrounds and experience, their responsibilities on the board, and their compensation. We also looked at similar data for all directors in this group. Second, we interviewed three non-executive board leaders to get a closer look at how this evolving role is changing the face of governance. Specifically, we probed for the board's role in shaping strategy, managing risk, and leadership succession.

The following report provides both statistical and anecdotal insights. In addition, we have folded in our own views, developed over the course of hundreds of board-level search and consulting engagements for the largest companies in the United States. We hope the practices we've highlighted will help boards determine how to select, evaluate, compensate, and establish a succession planning process for the non-executive board leader.

Finally, we would like to thank Bonnie Hill, lead director of The Home Depot, Irv Hockaday, presiding director of Ford Motor Company and Est?e Lauder, and Mark Ketchum, lead director of Kraft Foods for generously sharing their time and valuable perspectives.

We welcome your comments and queries, whether regarding this report or any of the challenges your board may be facing.

Dennis Carey Vice Chairman

Stephen P. Mader Vice Chairman

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download