Sep 042017
 

#HurricaneHarvey #HurricaneIrma: Can private business and philanthropy play a role in disaster recovery?

#BREAKING on #ABCNews (Sunday, September 10, 2017): Center of Hurricane #Irma made landfall in Marco Island at 3:35pm ET as a Category 3 hurricane. Monday 8pm ET #Irma has been downgraded to a dangerous tropical storm packing 45 mph winds.

“In Miami (shown below), winds whipped around high-rise buildings at speeds approaching 100 mph, the National Weather Service said. A 94 mph wind gust was recorded at Miami International Airport,” ABC News reports.

“#Irma is expected to bring heavy rainfall and flooding to much of Florida and portions of the southeast U.S. over the next few days @NWSWPC”

#BREAKING on #ABCNews: Florida governor Rick Scott to residents ahead of #HurricaneIrma: ‘You’ve got to get out’

“If Florida residents are unsure how to evacuate ahead of Irma, Florida Governor Rick Scott said to call the state emergency hotline or go online to www.floridadisaster.org.”

“With more than a million Florida residents ordered to evacuate ahead of Hurricane Irma, Gov. Rick Scott (shown in the photo below on ABC News’ “Good Morning America” Friday, September 9, 2017) urged people to leave without delay,” ABC News reports.

“If you’re in an evacuation zone, you’ve got to get out; you can’t wait,” Scott said in an interview today with ABC News’ “Good Morning America” co-anchor Robin Roberts.

“This thing’s coming,” he warned. “It looks like it’s going to go right through the middle of our state.”

It’s all about “Your dreams are my dreams.”

The biggest story of Hurricane Harvey is President Trump’s and First Lady Melania Trump’s phenomenal empathy, humility, and caring moments with the families still suffering in the Texas Gulf Coast region. 

Hurricane Harvey has killed 44 people and caused hundreds of thousands of people to flee their homes and businesses in the aftermath of the worst natural disaster event hitting Texas Gulf Coast since 1961. And, Hurricane Harvey is one of the most expensive natural disaster reconstructions in U.S. History, potentially reaching as high as $150-200 billion dollars when this recovery is all over!

We are all Federalists. We are all Republicans” – U.S. President Thomas Jefferson’s Inauguration Address, 1801, in unifying the nation after a most contentious Election 1800 campaign.

This natural disaster is a test of the ‪.@WhiteHouse Combined Geopolitics of #HurricaneHarvey and now #HurricaneIrma, emergent and growing as #HurricaneIrma rapidly approaches the Florida coast in a state of emergency, as a Category 5 storm on this Labor Day 2017. 

“Florida Governor Rick Scott has declared a state of emergency in the state as rapidly growing Hurricane Irma, now a Category 5 storm, is expected to make landfall later this week,” reports Fox News.

“The state of emergency has been issued for all of Florida’s 67 counties. Scott said that the state would “prepare for the worst and hope for the best” as Irma (shown below) is expected to hit the state around Friday.”

The governor tweeted on Labor Day that he urges “all Floridians to remain vigilant and stay alert to local weather and news and visit FLGetAPlan.com today to get prepared.”

So, we aren’t out of the woods yet in America’s long road to natural disaster recovery and relief!

Texans are in a fishbowl now, yet they’re staying dry with The President and Mrs. Trump recently hitting-on-the-ground-running by their side! 

What we are once again witnessing is an emerging “Humble Trump,” as his son Eric Trump fondly described his father, now President Trump, during his 2016 election campaign.

“Your dreams are my dreams. Your hopes are my hopes. Your future is what I’m fighting for EACH and EVERY day.” – .@POTUS .@realDonaldTrump

Here’s how you can help the victims of Hurricane Harvey.

The Geopolitics of Natural Disaster Relief and Recovery.

President Trump, his Cabinet, and his FEMA has been overwhelmingly successful in its business-like management discipline during its first White House test of “The Geopolitics of Natural Disaster Management, Relief and Recovery.” (cf, Natural Disaster Management,  Aniket Pingale, via LinkedIn SlideShare)

The heart of the heavy assets of the U.S. energy and oil industry has been hit by this storm. U.S. refineries have a huge amount of assets invested along the Texas Gulf Coast region, which has received a significant shock. 

In 2014, America became “the largest exporter and the largest net exporter of refined petroleum. As of January 2015, there were 137 operating refineries in the US, distributed among 30 states, according to Wikipedia.

However, oil prices currently seem to be weathering this storm and its associated recovery ongoing this Labor Day 2017!

Fortunately, President Trump is “a builder and a rebuilder of things!” So, he’s a natural fit for leadership in extreme-events and disaster management, recovery and reconstruction engineering.

Nonetheless, a public service notice is when you’re not in a specific flood zone (with or without a severe storm), folks always need flood insurance, who’s overall cost is extremely cheap. However, many Houston-metropolitan homeowners don’t have flood insurance, due to widespread public misconceptions that you have to be inside a flood zone to receive or even carry flood insurance. This has left many folks financially strapped and stranded by the flood disaster of Hurricane Harvey.

The most immediate need in the Texas Gulf Coast region is a million ounces of “bug spray” – as the huge swarms of “health-hazard” mosquitoes, as big as most State birds, are attacking human relief and recovery efforts in the Texas Gulf Coast flood zones. Also, toxic waste is seeping from sewers, causing a severe environmental impact on neighborhoods. More importantly, animals are roaming everywhere, not only trying to gain relief from the flood zones, but also adding to the growing bacteria contamination and contagious diseases potentially harmful and spreading rampantly that could possibly cause a public health concern, stressing local healthcare capacity.

Fortunately at this point, a million liters of clean bottled water has been placed on-hand in the Texas Gulf Coast region, a million meals has been provided to folks, and a half-million families have requested FEMA relief assistance online and on-the-ground. 

President Trump has ordered nearly $8B dollars of FEMA relief assistance – running through Congress this week (and approved by the U.S. House on Wednesday, September 6, 2017, as President Trump also worked behind the scenes today with Congressional deomcrats to raise the nation’s debt ceiling well into December) with an additional $7B getting Congressional approvals through continuing resolution of supplemental funding directed to FEMA for Hurricane Harvey relief and recovery. The federal legislation now goes to the Senate and “is expected to be sent to the White House by the end of the week” — just as the more powerful Category 5 Hurricane Irma, which has already left “a trail of chaos, wreckage and flooding from Barbuda to Puerto Rico,” is now expected to slam the Florida coast. “The Senate bill, introduced by Majority Leader Mitch McConnell late Wednesday night, extends Congressional aid to $15.25 billion, in anticipation of more federal funds needed to address disaster relief from Category 5 Hurricane Irma,” according to LinkedIn’s Daily Rundown reports.

President Trump legislatively and administratively achieved and did not want Hurricane Harvey disaster relief funds tied to the U.S. debt ceiling, since such Harvey relief funds are tied to a national emergency. On the ground already in the disaster zone are 30,000 Federal workers along with tens of thousands of veterans and volunteers, assisting recovery efforts in the Texas Gulf Coast region.

“If approved, the legislation is expected to set the stage for a bruising year-end fiscal battle,” The Washington Post opines.

Photo Credit: From #Washington to .@realDonaldTrump: “So Help Me God” .@POTUS signs proclamation .@WhiteHouse declaring September 3, 2017 #NationalDayofPrayer!

Texas Resilience as “Cowboys and Christians.”

A second big story of Hurricane Harvey is the resilience of Texans, who are “Cowboys and Christians,” and neighbors helping neighborhoods recover out of massive floods in the Texas Gulf Coast region. The Lone Star State of Texas is a Second Amendment protector of “Life, Liberty, and Property” in the philosophical spirit of John Locke in the growing wake of looting of homeowners and businesses rocked by huge piles of damaged property and goods lined along neighborhood street curbs.

Following in the tradition of Presidents Washington, Lincoln, and Reagan, President Trump and The White House Proclaims Sunday, September 3, 2017, a #NationalDayOfPrayer for #HurricaneHarvey National Relief and Recovery. This is also in the historical tradition of the presidency, as all presidential inaugurations – from Washington to Lincoln to FDR to Reagan to Trump – have promised Texas and all states across America to the best of their abilities, to keep us safe and protect us, under the Constitution, “So Help Me God!”

America is a generous nation.

Looking forward, billions of additional dollars will be required to completely rebuild the Texas Gulf Coast region, as was needed in the aftermath of Hurricanes Katrina and Sandy.

Photo Credit: Former Bush U.S. FEMA Director for Hurricane Katrina and I discussed the title question: Can private business and philanthropy play a role in disaster recovery? In the immediate aftermath of Hurricane Sandy 2012. 

What we learned from Hurricanes Katrina, Sandy, and now Harvey, is charitable individuals, and private business can play a significant role in disaster relief and recovery. Six American institutions of philanthropy and corporations have joined hands in partnership with government to provide Texas Gulf Coast disaster relief for our local institutions of families, churches and schools.

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Ellen Surprises Houston Texans Star J.J. Watt With Hurricane Harvey Relief Donation

From Walmart supplying clothes, to Pizza Hut and McDonald’s providing meals, to Bush Beer shipping in clean bottle water, to NFL’s J.J. Watt raising $18M in Hurricane Harvey relief, and finally, to President Trump – as an individual citizen – donating a million dollars of his own wealth, private business and government have played a huge role in partnership to assist Texans in shelters fleeing their flooded homes.

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J.J. Watt raises $12 million for flood relief

Remarkably, Americans are an extraordinarily generous people. Most of all, our generosity is not necessarily just tied to tax planning benefits of giving forward.

Alexis de Tocqueville in Democracy in America records the American citizenry gives forward “without reference to any bureaucracy, or any official agency.”

Inside the most recent Giving USA, Americans are indeed extremely generous in giving forward to charities and philanthropic organizations well over $300 billion dollars as of 2016-17. This is equivalent to the net income of about 20% of all corporations of the Fortune 500 today.

To achieve this exceptional $300 billion-dollar amount of charitable generosity experienced by our citizenry (including baby-boomer retirees, and the largest emerging millennial generation — which is about an 8% larger cohort than the baby-boomers), America invested an equivalency of nearly $4 trillion dollars in assets, sold about $6 trillion dollars in goods and services, and drew upon the combined productivity of more than 40 million employed workers.

That’s a lot of goodwill for all charitable Americans to feel good about giving forward, for sure!

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ABOUT THE AUTHOR

Oliver G. McGee III is a teacher, a researcher, an administrator, and an advisor to government, corporations and philanthropy. He is professor and chair of the department of mechanical engineering at Texas Tech University. He is formerly professor of mechanical engineering and former Vice President for Research and Compliance at Howard University. Dr. McGee is former Senior Vice President for Academic Affairs of the United Negro College Fund (UNCF), Inc. He was Professor and former Chair (2001-2005) of the Department of Civil & Environmental Engineering & Geodetic Science at Ohio State University. He is the first African-American to hold a professorship and a departmental chair leadership in the century-and-a-quarter history of Ohio State University’s engineering college. Dr. McGee has also held several professorships and research positions at Georgia Tech and MIT.

McGee is the former United States (U.S.) Deputy Assistant Secretary of Transportation for Technology Policy (1999-2001) at the U.S. Department of Transportation (DOT) and former Senior Policy Advisor (1997-1999) in The White House Office of Science and Technology Policy. He is a NASDAQ certified graduate of UCLA John E. Anderson Graduate School of Management’s 2013 Director Education and Certification Program, and NYSE Governance Services Guide to Corporate Board Education’s 2003 Directors’ Consortium (on corporate board governance).

McGee is a 2012-13 American Council on Education Fellow at UCLA Office of the Chancellor Gene Block. He is a 2013 University of California Berkeley Institutes on Higher Education (BIHE) graduate. He is also an Executive Leadership Academy Fellow of the University of California, Berkeley Center of Studies in Higher Education (CSHE) and the American Association of Hispanics in Higher Education (AAHHE), Inc. McGee is an American Association of State Colleges & Universities’ (AASCU) Millennium Leadership Initiative (MLI) Fellow – educational leadership and management development programs for prospective university chancellors and presidents.

Education Background: Ohio State University, Bachelor of Science (B.S.) in Civil Engineering, University of Arizona, Masters of Science (M.S.) in Civil Engineering, University of Arizona, Doctor of Philosophy (Ph.D.) in Engineering Mechanics, Aerospace Engineering (Minor), The University of Chicago, Booth School, Masters of Business Administration (M.B.A.), The Wharton School, University of Pennsylvania, Certificate of Professional Development (C.P.D.), Indiana University Lilly Family School of Philanthropy – Certificate of Fund Raising Management (C.F.R.M.).

Partnership Possibilities for America – Invested in STEEP Giving Forward, founded by McGee in 2010, is based in Washington, DC.

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Jul 172015
 

An artful business clinic at Chicago’s Booth School addresses board responsibility in strategic corporate leadership and management. What can be called a “Batts Strategic Board Management” clinic, taught by a corporate director extraordinaire, Warren L. Batts, this exceptional knowledge and learning experience has inspired many (including me) towards a calling in corporate governance, not only at the Booth School, but also at the Wharton School and UCLA Anderson School.

Inside his strategic board management clinic, Batts tosses his “kitchen cabinet” at us filled with an extensive amount of comprehensible concepts of strategic leadership at the highest levels of big business enterprises.

Below we discuss with you a brief taste of three fundamental ideas many have taken away from “Batts Strategic Board Management,” through insights he shared with us from his long-time colleague and friend, The Late John G. Smale, who also outlined eight essential business responsibilities for modern boards to excel in steering global corporations nowadays.

The single most important responsibility of the board is to establish a winning strategy for the corporation.” – Warren L. Batts

Mr. Warren L. Batts, 82, serves as the Chairman of Chicago Children’s Memorial Medical Center. He serves as the Chairman of the National Association of Manufacturers and the National Association of Corporate Directors.

Since 2001, he has been a Director of Methode Electronics Inc. (Mr. Batts is shown standing immediately right of the NYSE bell in the above photo of Methode Electronics’ ringing of the NYSE morning bell on Wednesday, October 17, 2014). He served as the Non-Executive Chairman at Methode Electronics Inc., since September 15, 2004 until September 13, 2012.

A member of the Advisory Board at CTPartners Board Consultants, Mr. Batts serves as a Director of Chicago Climate Exchange Inc.

In the past, Mr. Batts headed Mead Corporation from 1978 until 1980 and was chief executive of Premark Corporation from 1986 until 1996. He then led Tupperware Corporation from 1996 until 1997. Batts also served on the boards of Allstate, Sears, Roebuck and Co., Sprint Corporation, British Columbia Forest Products, Temple Inland, and International Minerals and Chemicals.

Mr. Batts is currently an adjunct professor of strategic management at the University of Chicago Booth School of Business. He is a graduate of Georgia Tech and he holds a Masters in Business Administration from Harvard Business School.

Inside the clinic of “Batts Strategic Board Management,” I felt as if I was sitting on the board of directors of a Fortune 50 company, flying at 38,000 feet, while simultaneously pulling all the value levers of strategic leadership – brokerage (creating value),cohesion (delivering value), reputation and trust (transferring value), and partnerships(sustaining value).

I also came away with understanding more fundamentally what constitutes a “great firm,” a term purposefully and deliberately used in the title of this piece. To briefly flush out why, probably what is appropriate at this point is a metaphorical sidebar illustration of the facts of such a “great firm.”

Her Majesty Queen Elizabeth II, Supreme Governor of The Church of England, and the Royal Legacy of the House of Windsor, is an institution of strategic leadership by right or privilege exclusive to The Royal Prerogative, but not of personage. For Her Majesty is a “great firm” of asset-richness in value, yet comparably limited in her cash spending on the endowment of her inherited Crown Estate.

The Queen in securing Her Royal Prerogative is given an annual allowance by her government amounting to nearly US$60 million plus US$20 million in private income from commercial rents. In 2014, she nearly over-spent her cash to a tune of US$75 million, nearly placing a slight deficit against her annual cash reserves of the firm.

Photo Credit: Britain’s Queen Elizabeth II, Prince William, the Duke of Cambridge (shown left), and her husband Prince Philip, the Duke of Edinburgh (shown right), and her son Prince Charles of Wales, known alternatively in Scotland as Duke of Rothesay and in South West England as Duke of Cornwall (shown just off photo far right), watch a Royal Air Force flypast to mark the 75th anniversary of the Battle of Britain from a balcony at Buckingham Palace, in London, Friday, July 10, 2015. On July 10, 1940, during World War II, the Battle of Britain began as the Luftwaffe started attacking southern England. (AP Photo/Matt Dunham)

According to financial experts, Her Majesty’s allowance comes from the Crown Estate, which holds property assets valued at over US$12 billion on behalf of the Monarch. These firm assets produce annually about US$428 million in earnings.

(One of the oldest trusts in America, Harvard University, in contrast to The Crown Estate, as a great firm, has invested holdings in 2014 valued at US$42.8 billion).

Note that The Queen does not own the firm assets (including the Royal Art Collection, the Crown Jewels, and the Palaces, such as Buckingham Palace and Windsor Castle), which altogether constitutes one of the largest property portfolios in the United Kingdom.

Rather, all of the asset holdings are held in trust for the reigning monarch, which is a “great firm” of tradition, reputation and trust, serving as a going concern since 1066. Continuing this ten century tradition of The Royal Prerogative, Her Majesty Queen Elizabeth II gets about 15 percent of the firm’s value as a beneficiary of The Crown Estate Trust.

An essential takeaway fully appreciated now in this tradition of the “great firm” is modern boards of great corporations (and their associated philanthropic charitable trusts, working in partnership for their beneficiaries) must focus on strategic integration simultaneously across two fronts: maximizing value to shareholders (the property owners), while at the same time, paying attention to the values of stakeholders (the keepers of the firm’s reputation and trust and its transferrable value through the corporation’s employees, customers, suppliers, and the communities where the company operates).

This focus on strategic integration of firm interests has become especially acute in the age of demography shift and heightened engagement of stakeholders and increased activism of shareholders.

There is one axiom that will remain true regardless of how fast the marketplace, technology and society itself may change. That axiom is that people, not physical assets, are any organization’s most valuable resource.” – John G. Smale, former Chairman of the Board of Directors, General Motors Corporation, October 21, 1993, also former member of the Board of Directors of Eastman Kodak, J.P. Morgan, and Procter & Gamble.

The Late John G. Smale, 84, “as chief executive led Procter & Gamble through a period of extraordinary growth, and then helped engineer a turnaround of General Motors as its chairman,” according to the New York Times.

Mr. Smale, the national newspaper wrote upon his passing, “ran Procter & Gamble from 1981 until 1990. During his tenure the company strengthened its position internationally, pushing aggressively into Eastern Europe and Asia. He also oversaw a series of major acquisitions, including the US$1.2 billion purchase of Richardson-Vicks in 1985. The largest deal in Procter & Gamble’s history at the time, it brought the company well-known brands, including Vicks cold medicine, Olay skin care products and Pantene shampoo.”

A 1949 graduate of Miami University in Oxford, Ohio, Mr. Smale started out his career expertise in brand management in 1952, managing Procter & Gamble’s new Cresttoothpaste brand. He eventually garnered a first-of-its-kind, prestigious and extremely lucrative in value transferred, American Dental Association endorsement of the toothpaste brand.

Rising up through the internal ranks of Procter & Gamble for nearly three decades, and eventually reaching his nine-year legacy, as chief executive through the “seven fat years” of the 1980’s, Mr. Smale oversaw a doubling of Procter & Gamble’s overall revenue to over US$24 billion with earnings to US$1.6 billion. In 1982, he was named to the board of directors of General Motors, eventually becoming the automobile manufacturer’s chairman in 1992.

Mr. Batts shared with us extremely valuable insights Mr. Smale gave to his audience at the Commonwealth and Commercial Clubs of Cincinnati, Ohio on October 21, 1993, in which Smale suggested the roots of failure of all organizations, including businesses, governments, nations, civilizations and societies, exists years before the result.

Mr. Smale said, “there are very few “Acts of God” behind these failures. The fault is not in the stars, it is in ourselves.”

Poignantly, Smale offered his practical view of industry leadership held by a firm along three threads: intellectual, capability, and results.

1. Intellectual Leadership

When a firm is an intellectual leader, it establishes the pace of innovation across the industry, be it establishing new untapped gaps in the market and/or creating new products that consumers can experience.

What first comes to mind here is the technology juggernaut, Apple, in which Steve Jobs has completely shifted how millennial consumers quickly experience and adopt a firm’s innovative products.

Procter & Gamble did the same in innovating brands in the consumer products industry in the 1930s; Alfred Sloan did the same in shifting consumer behavior for the auto industry in the 1950s; George Eastman did the same in shaping family experiences for the camera industry in the 1960s; Thomas Watson did the same in defining what it means to have high performance computing inside key punched IBM computers in the 1970s; Bill Gates did the same teaming up with IBM to produce revolutionized computer software for the banking industry in the 1990s.

Altogether, these mega-firms in their unique times, considered the trends but jumped at addressing the risks and uncertainties, to radically created a new paradigm and vision of their products in the marketplace. They also specifically addressed how a diverse group of consumers desire to engage their innovative products. This intellectual leadership and strategic vision forced established industry leaders to rethink how they were doing their businesses, and thus, leaving these industrial rivals with only two choices: “to either adapt or give up their leadership.”

In the final analysis of whose in front of the industry, an intellectual leader is aknowledge leader and an innovative leader.

2. Capability Leadership

Next, a firm being as a capability leader of an industry is all about doing things right to the best of their ability, as opposed to doing the right things, aligned to the vision of the intellectual leader of the industry.

Here, the capability leader of the industry “develops an edge in product design, manufacturing or marketing … an edge that becomes the standard by which all competitors are measured,” defined Smale. He further suggested the industry’s capability firm is the one you use, when you are benchmarking your own firm’s capabilities.

When Sears, Roebuck and Company shifted from its 1940s catalogs to its 1960s super mall retailing, they re-invented how retailers benchmark themselves on consumer shopping during the peak holiday season. Eventually, the “Softer Side of Sears” campaign in the 1990s refocused industry upscale specialty stores, deep-discounters, and “everyday low prices” retailing.

Complacency of the 1990s Sears campaign, ultimately, radically shifted the industry further up the supply chain to “absolutely the lowest prices always” of WalMart (and Meijer in the Cornbelt Midwest). The super inventory management approach of WalMart’s warehouses in shopping primarily shifted the retail industry towards the desires of millennial consumers living in the rural suburban “edge” cities.

Now, downtowns are no longer consumer shopping experiences of the huge department stores (Chicago’s Marshall Fields, Columbus’ Lazarus, Cincinnati’sShillito’s, Little Rock’s Dillard’s, Cincinnati’s H&S Pogue’s, New York’s Gimble’s, to name a few now gone by the wayside).

This fundamental quote on strategic leadership and management by an ‘American Salesman in London,’ a century ago, just about sums it all up about what this capability leader possessed in establishing the global retailer, London’s Selfridge

A boss says ‘Go!’ A leader says ‘Let’s Go!’ ” – Harry Gordon Selfridge (1909)

What was before Henry Ford’s mass production and “factory physics” operational capabilities in the 1930s, an automobile manufacturer being a capability leader nowadays is doing things right, differently. Such an auto firm capability leader has now shifted to lean manufacturing processes of “smart cars” leveraging information, touch computers, and advanced communications technologies, as the primal basis of automobile industry competition in the millennial age.

Have you been inside a General Motors Buick lately? It looks and feels like a BMW or Mercedes, but at half the price.

In the end, a capable leader is an able leader and the most competitive one in front of the industry.

3. Results Leadership

Finally, a firm being a results leader of an industry focus on “the art of putting all elements of vision and capability together to produce superior results on the bottom line in market share, profitability, cash flow, and return on investment,” counseled Smale.

He adds: “It is the most visible aspect of leadership and probably the most tangibly rewarding.”

Results leadership encompasses three perspectives:

  • Hindsight – Respect all aspects of the organizational mission and its history by motivating, acknowledging, and honoring the people that have shaped the results of the organization.
  • Oversight – Show the pathways for the organization to achieve its results goals and objectives through enrolling others using sound executive judgment.
  • Foresight – Craft a vision for a promising future of the organization’s mission that clearly establishes what’s possible as superior results.

‘Bridging the Trust Gap’ starts with ‘The End in Mind.’ That is, Being in the future of possibilities. Doing what enrolls others. Saying whatever acknowledges good results.”

Most of all, a results leader is the most visible leader shaping the future status and sustainability of the industry.

Role of the Board of Directors in Ensuring Industry Leadership

Smale believed, “the Board of Directors bears a unique responsibility and must play a unique role in trying to ensure that the company’s management and its culture are able to anticipate and adapt to change.”

A highly excelled board is where the buck stops on executive judgment, acting in empathy as “an independent auditor of management’s progress, and asking the tough questions that management might not ask itself.” And finally, adhering to an excelling board’s duty of service in care, trust, and loyalty, plus most of all, the board’s duty of independence.

Smale’s own view of the responsibility of a board is “to represent the owners’ interest in the successful perpetuation of the business.”

Competitively advantaged companies create a culture of competency by the nature of the board’s strategic questions and request for information from its strategic management, as the board monitors and oversees management’s responsibilities. Yet, the board stands apart from management’s daily engagement of the successful perpetuation of the corporation as a going concern.

Several principle procedures allow corporate directors to function in order to ensure the integrated intellectual, capability, and results leadership of the firm across their industry.

Smale outlined eight essential business responsibilities for modern boards to excel in steering global corporations nowadays.

  1. There clearly should be a majority of outside directors, and as a general safeguard, the Chairman and CEO should not be the same director.
  2. The independent directors should select a lead director, so the board of directors don’t move later than they should, and to help move up the timetable of board intervention when required.
  3. The independent directors should meet alone in executive session on a regularly scheduled basis … at least twice a year. Such meetings should be perceived as part of the board of director’s normal procedure in meeting its responsibilities, not as extraordinary or threatening events.
  4. The independent directors should take responsibility for all board procedures, create its own operating policies and committee structure, and review its own performance.
  5. The board of directors should have the basic responsibility of its own constituency, meaning selection of its own members based on the evaluation of the skills and characteristics required by the board at the time.
  6. The board of directors should conduct in executive session regularly scheduled reviews of the performance of the CEO and the key executives of the company, examining performance of the business, accomplishment of long-term strategic business objectives, development of management, just to name a few objective criteria.
  7. The board of directors must understand and fully endorse the company’s long-term strategies, as an independent business judgment of the soundness of the company’s strategy for the future.
  8. The board of directors must ensure that it spends an adequate amount of time and attention on its most important single responsibility: the selection of the CEO, where “proper fit” towards achieving the company’s strategy for the future is key.

As Aristotle said more than two millenniums ago, “Whom the gods want to destroy, they send forty years of success.” –– The challenge for the great companies that are the backbone of America’s competitiveness in today’s interdependent world is to escape that fate.” – John G. Smale

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Nov 182014
 

Ever wonder how many billionaires are produced inside the world’s top business schools? Seven of the ten top billionaire-producing business schools are in the United States.

By a wide margin, Harvard University tops the list. Harvard has produced 335 Rhodes scholars and 150 Nobel laureates. Nonetheless, few know about Harvard Business School’s stellar reputation, as the world’s top producer of billionaires.

According to the annual Wealth-X and UBS Billionaire Census of 2014, as charted below by Statista, Harvard Business School (U.S.) has created 64 billionaires, far outpacing the second runner-up, Stanford University (U.S.), producing 23 billionaires from its Graduate School of Business. Following at a highly respectable distanced third is Columbia Business School (U.S.) with 14 billionaire alumni.

Rounding out the top 10 list of the world’s business schools counting billionaires among their alumni are:

#4 University of Pennsylvania Wharton School of Business (U.S.) at 12;

#5 University of Chicago Booth School of Business (U.S.) at 10;

#6 INSEAD (France) at 9;

#7 New York University Stern School of Business (U.S.) at 7;

#8 International Institute for Management Development (Switzerland) at 5;

#9 University of Southern California Marshall School of Business (U.S.) at 5;

#10 London Business School (U.K.) at 4.

“Pursuing higher education is not a prerequisite for attaining billionaire status: 35% of the world’s billionaires do not have a bachelor’s degree and some even dropped out of high school,” the Wealth-X report reveals.

Most of these remaining 35% of the world’s billionaires, nonetheless, just attended high school, albeit perhaps, some pretty fine elite private primary/preparatory high schools, which a good friend of mine who did, recently told me is all one really needs for a good life, when such a “great books” liberal education is obtained early on in one’s life at the tender ages of 7-18 — The Wonder Years!

Notwithstanding, “great people make schools more than schools make great people,” Kwame Asamoah Kwarteng, a typical LinkedIn member engaging forthrightly offers today in the richness of commentary discussions below.

“Of the 65% who have been awarded a bachelor’s degree, many go on to pursue further studies. For example, 21% of “educated” billionaires have a Masters in Business Administration, and 11% of “educated” billionaires hold a Ph.D.,” the Wealth-X study reports.

Among these top 20 colleges and universities listed below (compiled by Wealth-X, including 16 inside the United States), having undergraduate alumni, who have gone on in life to become billionaires, only 16% of the world’s billionaires attended these schools; 84% did not, electing instead to attend among 700 alternative higher education institutions.

#1 University of Pennsylvania (U.S.) at 25 (billionaire undergraduate alumni)

#2 Harvard University (U.S.) at 22

#3 Yale University (U.S.) at 20

#4 University of Southern California (U.S.) at 16

#5 Princeton University (U.S.) at 14

#6 Cornell University (U.S.) at 14

#7 Stanford University (U.S.) at 14

#8 University of California Berkeley (U.S.) at 12

#9 University of Mumbai (India) at 12

#10 London School of Economics and Political Science (U.K.) at 11

#11 Lomonosov Moscow State University (Russia) at 11

#12 University of Texas (U.S.) at 10

#13 Dartmouth College (U.S.) at 10

#14 University of Michigan (U.S.) at 10

#15 New York University (U.S.) at 9

#16 Duke University (U.S.) at 9

#17 Columbia University (U.S.) at 8

#18 Brown University (U.S.) at 8

#19 Massachusetts Institute of Technology (U.S.) at 7

#20 ETH Zurich (Switzerland) at 6

How wealthy are these billionaire business clubbers in 2014?

The annual Wealth-X and UBS Billionaire Census, which provides the most in-depth accounting of the world’s wealthiest people, says:

  • The typical billionaire has a net worth of US$3.1 billion with mean cash-on-hand at US$600 million.
  • The typical billionaire is 63 years old.
  • The typical billionaire has nearly half of his or her wealth in ownership of privately-held businesses.
  • The typical billionaire owns four properties worth some US$94 million collectively.
  • There are a record 2,325 billionaires in the world today in 2014, up 7.1 percent from last year.
  • The largest share of 19.3% billionaires made their fortunes through finance, banking and investment, followed by industrialists at 12.1%, real estate moguls at 7.1%, charities and philanthropy at 5%, and textile, clothing and apparel, and luxury goods industries at 4.9%.
  • Four of five of these billionaires are men, of which 60% are “self-made” wealth owners (at US$3.2 billion in mean net worth), 26.9% collectively inherited and self-made their wealth (at US$2.9 billion in mean net worth), and 13.1% purely inherited their wealth status (at US$3.2 billion in mean net worth).
  • Men make up 2,039 of billionaires worldwide. They own 87.2 percent or US$6.4 trillion of the combined wealth of all billionaires, which increased by 12 percent in 2014 to US$7.3 trillion. Or better still, this amounts to about 4 percent of global wealth.
  • One in five billionaires are women, of which 65.4% are “self-made” wealth owners (at US$2.2 billion in mean net worth), 17.5% collectively inherited and self-made their wealth (at US$3.4 billion in mean net worth) and 17.1% purely inherited their wealth status (at US$3.5 billion in mean net worth).
  • Women make up just 286 of billionaires globally. These few remarkable women own just 12.8 percent or US$930 billion of the total wealth of all billionaires.
  • Just as astonishing, altogether, these billionaire’s total wealth at US$7.3 trillion is far more than the combined market capitalization of all listed firms on the Dow Jones Industrial Average, Slate reports.

Where do these billionaires reside around the world?

New York is home to the world’s most billionaires at 103 — far ahead of Moscow with 85 billionaire residents and Hong Kong with 82 billionaires calling The People’s Republic of China their homestead. Europe still has the largest number of billionaires, making the European Union (which includes several asset protection safe havens, including Lichtenstein, Austria, Luxembourg, Switzerland, and The Netherlands, to name just a few) as their permanent domicile, which one can see in the map from Statista below.

Eight of the 20 countries with the most billionaires are in Asia, says the 2014 Wealth-X and UBS Billionaire Census findings.

The Wealth-X record-breaking number of billionaires worldwide in 2014 (2013 shown in parenthesis) are as follows: North America is 609 (552); Latin America is 153 (111); Europe is 775 (766); Africa is 40 (42); Middle East is 154 (157); Asia is 560 (508); and finally The Southeast Asia Pacific is 34 (34).

How do these billionaire business school alumni maintain their capital reserves?

The Wealth-X data reveals 46.9% of billionaires’ wealth is concentrated in their ownership of privately-held businesses — these are companies whose stock is not publicly traded. This amounts to 47%, or US$3.4 trillion, of the wealth of billionaires being privately-held, one and a half times more than the US$2.1 trillion, or 29%, of billionaire wealth being publicly-held.

This leaves 5.1 percent of the remaining wealth (about US$160 million in net worth) of these billionaires invested in real estate and luxury items (including art), and 19.1% (or about $600 million), as cash-on-hand ready for furtherance of investments and philanthropy (including charitable giving back to the colleges and universities that made 65% of these super wealth owners), according to Wealth-X.

As a result, billionaires tend to have huge capital reserves, which creates high-cash yield investments through structured financial instruments, such as interest-rate swaps, credit default swaps or foreign exchange rate derivatives, according to Simon Smiles, Chief Investment Officer of UBS Wealth Management.

In his discussions with billionaire clients across the world, Smiles says three questions are on the minds of billionaires and the trustees of their wealth trusts, “They want to know what they should do with their cash balances in a zero rate world of — apparently, after many false starts — rising inflation; what investment themes they should focus on over the longer term; and how they can generate investment returns less correlated to movements in global equity markets.”

Smiles says inside the 2014 Wealth-X report, billionaires are constantly on the lookout for exotic investment strategies that not only protect, but also, substantially grow their wealth. Such wealth-creation means, especially attractive to billionaires, known as “alpha” strategies, involve investments that create cash out of risk advantages by selling derivatives and “exotic” financial instruments to structure low risk, higher cash yields, and greater returns on investments.

Billionaires are also interested in stakeholder management issues across global communities, involving what is termed as “secular” investments, involving rising standards of living, urbanization, and population growth, and their impact on heightened protein consumption, not only in developed countries, but especially in under-developed countries and emerging economies across Asia, writes Smiles.

“As a result, the investment opportunities offered by this long-term secular investment trend are varied: public equities, private equity, and direct investments, such as agricultural land and fisheries,” Smiles typically advises his global high-net billionaire clients.

The 2014 Wealth-X and UBS Billionaire Census presents a compelling case about how billionaires do make a difference along many institutional threads across our social fabric. The Wealth-X findings shed a more favorable light on how remarkable these men and women are as a co-hort, when viewed through a more rational prism of data and information to gain deeper knowledge and insights about what it takes to be a billionaire nowadays in terms of demographics, education, business and finance, and investments.

“The possession of goods, whether acquired aggressively by one’s own exertion or passively by transmission through inheritance from others, becomes a conventional basis of reputability. The possession of wealth, which was at the outset valued simply as an evidence of efficiency, becomes, in popular apprehension, itself a meritorious act. Wealth is now itself intrinsically honorable and confers honor on its possessor.” — Thorstein Veblen (1857-1929), American social scientist, economist, and author of “The Theory of the Leisure Class,” Macmillan (1899); Mentor, p. 37.

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