The Exchange

The Exchange is a linked section within The Directors Letter. Here individuals involved in and knowledgeable of board activities can exchange ideas, experiences and comments on related news items or presentations on a confidential and anonymous basis. We encourage our subscribers to share these with their peers.

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Submitted on 06/02/2010 at 1:51pm

Re: The Full Story (TDLs 6/1/10 and 5/11/10)

The series of Wall Street lawyer discussions of Risk Metrics and reform legislation shows how defensive big corporations are about “reform” and accountability. There is no shame, no hint of accepting greater responsibility for what almost became a great depression fueled by toxic instruments and corporate greed using customer money to enrich the managers.

Submitted on 06/01/2010 at 5:16pm

Re: Good Deal, Bad Deal (TDL, 6/1/10)

GM: Leaving aside the fact that the Big Three ceded effective management control to the unions 30 years ago, the Chapter 11 filings of GM and Chrysler undid close to 200 years of federal bankruptcy legal evolution. The protection of the union contracts due to political dictate places all boards in proverbially uncharted waters. If the feds move in on another ‘sensitive’ (from their point of view) filing, that entity may have to push for a Chapter 7. This is a critical subject, one on which you can probably follow up via a judicious link to a web posting by one of the larger bankruptcy specialist law firms. Since federal involvement was not by legislation, but by ‘friendly persuasion,’ boards are faced with a “here be monsters” place on the map.
Re: Good Deal, Bad Deal (TDL, 6/1/10) GM: Leaving aside the fact that the Big Three ceded effective management control to the unions 30 years ago, the Chapter 11 filings of GM and Chrysler undid close to 200 years of federal bankruptcy legal evolution. The protection of the union contracts due to political dictate places all boards in proverbially uncharted waters. If the feds move in on another ‘sensitive’ (from their point of view) filing, that entity may have to push for a Chapter 7. This is a critical subject, one on which you can probably follow up via a judicious link to a web posting by one of the larger bankruptcy specialist law firms. Since federal involvement was not by legislation, but by ‘friendly persuasion,’ boards are faced with a “here be monsters” place on the map.

Submitted on 06/01/2010 at 5:15pm

Re: Social Media (TDL, 6/1/10)

Social Media: Critical subject. Firms should have Face Book pages linked back and forth to their websites. Marketing folks should be using Twitter to tap into ‘opinion leaders.’ A firm as sophisticated as P&G shouldn’t have made such a stumble. Boards have to grasp the market research potential of social media and marketing executives have to realize that the days of market control are over regardless of how well your overall system works (and P&G’s is one of the best on the globe). Had social media been available when Coke made its disastrous formula change, perhaps they might have caught what their focus groups didn’t
Re: Social Media (TDL, 6/1/10) Social Media: Critical subject. Firms should have Face Book pages linked back and forth to their websites. Marketing folks should be using Twitter to tap into ‘opinion leaders.’ A firm as sophisticated as P&G shouldn’t have made such a stumble. Boards have to grasp the market research potential of social media and marketing executives have to realize that the days of market control are over regardless of how well your overall system works (and P&G’s is one of the best on the globe). Had social media been available when Coke made its disastrous formula change, perhaps they might have caught what their focus groups didn’t

Submitted on 06/01/2010 at 5:15pm

Re: You’re on the Board at BP (TDL 6/1/10)

Subcontracting: It would be worth revisiting this subject in greater detail as the BP saga unfolds. Exploration and development firms in the petroleum industry generally contract out all phases of the development of a producing well from “dry hole” drilling through completion. This practice was long established on a global basis prior to the coining of the phrase “supply chain.” As the “operator,” the Ex & Dev firm turns over each phase of the well‘s development to a highly experienced oil field service firm. The operator has a detailed contract with each contractee which allows the operator to overrule the contractee. However, in so doing, the operator ‘takes back’ responsibility. The legal side of such practices in the petroleum industry is very well defined and is memorialized in specialized legislation at both the state and federal levels. As supply chains have proliferated globally, the general law has fallen behind, particularly in regard to Asia – recall recent instances of lead in paints and adulterated fillers in Chinese products sent to the US. It would be interesting to follow this subject up by engaging Boeing which is currently managing one of the most pervasive and sophisticated global supply systems for both engineering services as well as subcontracted parts manufacturing
Re: You’re on the Board at BP (TDL 6/1/10) Subcontracting: It would be worth revisiting this subject in greater detail as the BP saga unfolds. Exploration and development firms in the petroleum industry generally contract out all phases of the development of a producing well from “dry hole” drilling through completion. This practice was long established on a global basis prior to the coining of the phrase “supply chain.” As the “operator,” the Ex & Dev firm turns over each phase of the well‘s development to a highly experienced oil field service firm. The operator has a detailed contract with each contractee which allows the operator to overrule the contractee. However, in so doing, the operator ‘takes back’ responsibility. The legal side of such practices in the petroleum industry is very well defined and is memorialized in specialized legislation at both the state and federal levels. As supply chains have proliferated globally, the general law has fallen behind, particularly in regard to Asia – recall recent instances of lead in paints and adulterated fillers in Chinese products sent to the US. It would be interesting to follow this subject up by engaging Boeing which is currently managing one of the most pervasive and sophisticated global supply systems for both engineering services as well as subcontracted parts manufacturing

Submitted on 05/11/2010 at 3:37pm

Re: You’re on the Board at Massey Energy (TDL 5/11/10)

Massey Energy Inc. I think the board totally missed the ball on the safety violations. They have mines and there have been significant safety violations and deaths around the world. A responsible board member should have asked years ago, how are we doing and what does our safety record look like? This behavior could have changed company perspective on safety. I know of a major automobile manufacturer who responded in this way to a board request for data.
Re: You’re on the Board at Massey Energy (TDL 5/11/10) Massey Energy Inc. I think the board totally missed the ball on the safety violations. They have mines and there have been significant safety violations and deaths around the world. A responsible board member should have asked years ago, how are we doing and what does our safety record look like? This behavior could have changed company perspective on safety. I know of a major automobile manufacturer who responded in this way to a board request for data.