Welcome to your corporate governance briefing. There’s plenty to stimulate the grey matter this week – from corporate jets to succession and sustainability disclosure standards. As always, the latest stories and resources are on ft.com/board-network-members. If you have any membership queries, email [email protected]. Feel free to forward this newsletter to other directors. They can join FT Board Network via ft.com/board-network. And don’t forget to get in touch about our AOB section. Overheard any nuggets of wisdom or wit in the boardroom that you might like to share? Email me your offering and I will consider it for inclusion (anonymised where appropriate, of course). Thanks for reading. Execs and their jets
Many companies had justified increased use of private jets as a Covid safety measure © Kevin Dietsch/Getty Images Directors reviewing chief executives’ perks should bear in mind that when outside scrutiny intensifies, it is always the corporate jets that attract attention. In the 1980s, Ross Johnson of RJR Nabisco sent his dog on the company jets - recording the canine passenger as “G Shepherd” on the flight register, as memorably chronicled in Barbarians at the Gate. Jeff Immelt is unlikely ever to live down the fact that he flew with two jets, as insurance against mechanical failure, when he was chief executive of General Electric. When cost-cutting leaders take over from extravagant bosses, it is usually the jets that are the first to go. Yet for the most part, chief executives who have them want to keep them. That is why news that US corporate spending on jet travel has increased for a second year in succession – and is now at its highest for 10 years – is so unsurprising. It turns out that having justified private plane travel for safety reasons during the coronavirus pandemic, chief executives are reluctant to let go of their toys. In 2001, I interviewed the manager of the tiny airport used by CEOs attending meetings of the exclusive US Business Council at a luxury resort in deepest West Virginia. They always bring their smartest, newest aircraft, he told me: “These corporations can’t afford to have a $2m-a-year executive carrying his own bags to a turboprop.” These days, executives earn five or 10 times as much, but the observation remains true. There are only two vaguely sensible reasons to consider keeping a Gulfstream on the tarmac: one is security (hence the valid Covid exemption) and the other is efficiency. A US chief executive can criss-cross the continent for multiple meetings while rivals are checking in for a scheduled flight. But even those considerations are increasingly undermined by concerns about the reputational and environmental risks of running a jet at a time of belt-tightening and climate change. Warren Buffett eventually discovered the (relative) virtues of fractional jet ownership, and bought NetJets, the company he used and still uses. But there was a reason why Buffett used to call his private plane “The Indefensible”. Chart of the weekEarlier this week HSBC announced it will move its global headquarters out of Canary Wharf, and instead occupy a smaller office in central London. This is part of a wider trend where many companies are looking to scale back offices and take up more central locations as they adapt to hybrid working and try to reduce their carbon footprint.
It’s interesting to note that valuations for top notch offices have fallen less steeply in the past year compared with lower-grade premises. Landlords are now scrambling to refurbish their stock, so they aren’t left with stranded assets.
| End of the line? Italy’s fashion houses face succession dilemmas | Succession: A number of brands are still dominated by their visionary founders. The question of who replaces them has industry-wide implications as experts warn they could be bagged by French giants. | | | Private credit finds its next big target: investment-grade debt | The bottom line: Alternative asset managers typically financed smaller, riskier companies. Now they are looking to help big businesses bypass banks and bond markets | | | Ageing executives should ‘move out of the way’, says endowment boss | Recruitment and retention: Allowing more space for younger employees is vital for investment firms, as demographic and generational shifts increasingly make markets unrecognisable, said Britt Harris | | | Managed by Macquarie: the Australian group with a grip on global infrastructure | Strategy: The company has become quietly ubiquitous in global infrastructure. But critics are beginning to question whether using private finance in essential state monopolies is in the public interest | | | | Best from elsewhereCapital allocation starts with governance—and should be led by the CEO | McKinsey This article argues that chief executives should lead capital allocation as part of a number of steps to ensure that initiatives and business areas with potential for growth are given the resources they need. “Companies that keep allocating capital to the same core businesses will inevitably be surpassed by more committed innovators,” the authors warn. Navigating the climate disclosure landscape | Climate Governance Initiative This week the ISSB released its first global sustainability disclosure standards. If all the acronyms have you confused, this guide provides an overview of reporting standards and frameworks, alongside other useful insights such as questions directors should ask. Startup boards are still a boys’ club | Sifted Nearly half (45 per cent) of European startups have no female board members, according to new research reported by Sifted. One angel investor pointed to the lack of female founders reaching Series A rounds, alongside the low share of female partners in venture capital, as a reason why building a diverse boards is challenging.
From FT Specialist’s AgendaRisk or opportunity? Pandemic leavers boomerang back to old employers Many workers who switched jobs during the pandemic are dissatisfied with their new roles, presenting both a retention risk and hiring opportunity for companies operating in tight labour markets. Any other businessThomas, a managing director at Lazard, comments on how companies are rewriting bylaws to strengthen their defences against activist investors who have been emboldened by the SEC’s new “universal proxy” rule. Have words of wisdom to share? Email me. |