Blog > Category: Leadership

DealBook: Peltzís Attacks on DuPont Threaten Americaís Research Edge

From The New York Times DealBook, April 9, 2015

Since its founding in 1802, DuPont has been at the center of American scientific breakthroughs in chemistry. Among its research triumphs was the black powder that supplied 40 percent of the Allied needs in World War II.

In 1912, DuPont founded the first industrial science labs in the United States. Since then, the company has produced a remarkable number of innovations that have had wide-ranging and long-lasting effects on society. These include DuPont’s patented chemicals like rayon in 1924, Teflon in 1938, Kevlar in 1965 and Solamet solar cells in 2007.

Today, DuPont is facing an activist attack from Nelson Peltz. His Trian Fund seeks to replace four DuPont board members with Mr. Peltz and three other candidates.

Mr. Peltz has openly declared that his goal is to shut down DuPont’s central research labs and split the company into three parts — moves that would directly dilute scientific progress that DuPont has worked to develop.

DuPont is just the latest victim of Mr. Peltz’s boardroom assaults. In 2012, he persuaded Kraft’s chief executive at the time, Irene Rosenfeld, to abandon its global marketing by spinning off its North American food business and renaming the international company Mondelez. Since the separation, both companies have seen their revenues and profits largely decline or remain stagnant. In the wake of weak financial results, Kraft’s board agreed to sell the company last month to the Brazilian private equityfirm 3G to be merged into Heinz.

In mid-2013, Mr. Peltz attacked PepsiCo, trying to force it to buy Mondelez, combine it with PepsiCo’s Frito-Lay business, and break the company in two: beverages and foods. PepsiCo’s chief executive, Indra Nooyi, with the full support of her board, strongly opposed Mr. Peltz’s financially driven plan. Ms. Nooyi’s strategy flourished as she significantly outperformed archrival Coke. Gaining little traction, Mr. Peltz backed off this year.

Mr. Peltz’s latest attack on DuPont is especially peculiar given its current management. Since becoming chief executive in January 2009, Ellen Kullman has done everything an activist might propose. She has reshaped the company’s portfolio to focus on its high-growth, high-margin businesses.

First, DuPont sold its performance coatings business to the Carlyle Group. Now, it is spinning off its performance chemicals business as Chemours, providing DuPont shareholders a one-time cash dividend of $4 billion.

These moves provide a clear strategic focus in three high-tech businesses: advanced materials, bio-based industrials, and agriculture and nutrition. DuPont has used its central research labs to support all its businesses, providing the breakthroughs that have spurred their growth.

In 2014 alone, $9 billion of DuPont revenue, or 32 percent, came from internal innovations. Without the steady stream of scientific breakthroughs coming from its central research labs, where will DuPont’s future revenue come from?

The Peltz proposal is troubling because it mirrors a disturbing trend in which financiers are gutting American research labs that develop tomorrow’s innovations. In reality, they want to increase short-term earnings, see an uplift in the stock price and close out their positions. They are speculators, not investors.

When a hotel chain increases its short-run profit by neglecting to make necessary repairs, customers eventually stop coming to stay in dilapidated rooms. Similarly, for science-driven companies like DuPont, research and development is at the heart of their growth. Today’s investments lead to tomorrow’s breakthroughs and profits. Cutting R.&D. investments that create innovative new products will leave these companies lagging global competition in years to come.

From time to time, investors conveniently ignore this fundamental business law. Financial engineers convince managers that they can generate short-term gains and not worry about the future. Allergan, which increased shareholder value 29 times in 16 years, was forced by Valeant to sell to Actavis this year to avoid being dismantled.

The pharmaceutical giant Pfizer has openly declared it is moving away from basic science. IBM has cut R.&D. the last several years.

This rarely ends well. Without new products from R.&D., all of them will struggle.

DuPont currently has a strong, independent board that includes 10 current or former chief executives, chief financial officers or chief operating officers — many of whom have deep scientific and regulatory knowledge.

What then is the basis for replacing four of these directors with nominees loyal to Mr. Peltz? Among those Mr. Peltz seeks to replace is DuPont’s lead director, Alexander M. Cutler, who is chairman and chief executive of the Eaton Corporation and a highly regarded corporate leader.

In reality, all that seems to matter to Mr. Peltz is a higher stock price so he can make some money, close out his position and let others pick up the pieces.

In contrast, DuPont’s chief, Ms. Kullman, is making all the right moves for the company’s customers, employees and shareholders. During her first six years at the helm, DuPont provided a total return to shareholders of 266 percent with more than $13 billion in dividends and stock buybacks to its shareholders. Ms. Kullman’s results far exceed the Standard & Poor’s 500 index and Mr. Peltz’s own Trian Fund.

It’s time for DuPont shareholders to give Ms. Kullman a resounding vote of confidence at DuPont’s annual meeting, scheduled for May 13. If they don’t, one of America’s great science companies will be at risk.

Harvard Life Hack: 5 Steps to Authentic Leadership with Bill George

Recently, I had dinner with the Franklin Fellows at Harvard College, which led to a very stimulating discussion about life and the purpose of their leadership. Here is an interesting blog about authentic leadership written by one of the group's leaders, Stephan Turban:

From HarvardLifeHack.com, March 23, 2015

“Each day, as you are tested in the world, you yearn to look at yourself in the mirror and respect the person you see and the life you have chosen to lead.”

- Bill George, True North

Bill George is the uncle you wish you had. With his quick smile, bright blue eyes, and perpetually-tanned skin, he is cooler than any professor should be.

This week the Franklin Fellows had dinner with Bill. And, as we quickly realized, he’s much more than a pretty face. Within moments of meeting, he’d asked for each of our name, shook each member’s hand, and began inquiring about our life’s stories.

For reference, Bill George is a professor at the Harvard Business School, former CEO of Medtronic, and author of “True North”. Over the past decade, Bill dedicated his life to discovering the qualities of the world’s top leaders.

Bill joined us for a whirlwind dinner. During our talk, he focused on the lessons of his newest book. In particular, he pushed us to answer a number of questions.

How do you lead with heart? How do you become an authentic leader?  And finally, how do you find your true north?

We can’t cover it all. But, as a teaser, here are five lessons from his book, our talk, and his life-story.

1. Discover your leadership in your life story

“Asked what motivates them to lead, authentic leaders consistently say they find their motivation through understanding their own stories.”

How do you enter other’s life stories? You give your own first.

Bill George began dinner by talking about his childhood. Growing up, his father pushed him to become a CEO. So, as Bill admits, he grew up driven, but self-focused. Bill’s earlier years were characterized by success. He graduated with high honors from Georgia Tech and became Baker scholar at HBS. But, as he shared, there were many losses along the way. Weeks before his wedding, Bill learned his fiancé died from a malignant brain tumor.

Bill’s vulnerability set the foundation for other member’s to share their stories. Bill had told this story before. But, it hadn’t lost authenticity in retelling.  It was intentional, but not rehearsed. Logical, but not mechanic. His story contextualized who he was and how we fit into the story.

To become an authentic leader, you need to be vulnerable. Understanding your own narrative is the first step. Find your story in your life. Develop it. Then share it with others.

2. Embrace Your Greatest Crucible

“While many leaders have a deep-seated fear of failure, the irony is that they learn the most from their failures”

How do you respond in the face of crisis? When your true north is challenged, how do you change? Bill’s largest challenge came with an election for Georgia Tech’s student body president. He lost miserably.

Losing the school election setback his public confidence. But, Bill didn’t respond by moping. Instead, he took the defeat as an opportunity to improve. He met up with fraternity brothers, friends, and rivals to talk about why they didn’t elect him. In doing so, he began a journey of self-reflection.

During dinner, Bill pushed us to reexamine our life’s challenges. We can all pinpoint turning points in our lives. As he urged, there are many more to come. To find “True North” we shouldn’t avoid setbacks . Rather,  we should embrace them. Good leaders understand crises are just opportunities for growth.

3. Transform from “I” to “We”

“You have to realize it’s not about you”

- Jaime Irick

We all begin as heroes of our own story. But, to become an authentic leader, your mission must focus on elevating others.  As Bill George writes, “ Only when leaders stop focusing on their personal ego needs are they able to develop other leaders… how else can they unleash the power of their organizations unless they motivate people to reach their full potential?”.

As Adam Grant’s research shows, individuals who focus on elevating others  lead more effectively than individuals who focus on themselves. Reframing leadership as for others isn’t easy. But, it’s vital to becoming an authentic leader.

4. Practice your values and principles

“Leaders with principles are less likely to get bullied or pushed around because they can draw clear lines in the sand"

- Narayan Murthy, founder and former CEO, Infosys

As Bill George explains in True North “Those who develop a clear sense of their values before they get into a crisis are better prepared to keep their bearing and navigate through difficult decisions and dilemmas when the pressure mounts”.  The first step to prioritizing your values is to understand them. (link). But, only by practicing them, do they become real.

Bill George didn’t tell us this during dinner. He showed it. In True North, Professor George argues the third stage of life (60 – 90 years old) should focus on “wisdom and giving back”.  He didn’t need to have dinner with a group of undergraduates. But, because he values the growth of others, he did. In doing so, he became a mentor and an inspiration to many.

5. Hone your leadership effectiveness

“The final step in… (becoming) an authentic leader is to hone your leadership style.”

Bill George argues that great leaders work to find their authentic selves. But, this doesn’t happen all at once.  Reflect on your leadership style.  Develop your strengths.  And constantly seek feedback.

Here at LifeHack, we love 5 step lists. But, becoming an authentic leader is never that easy. Nonetheless, with grit, a dash of lifehacking, and dazzling blue eyes (link to Bill George). We have no doubt you can begin on this path.

To learn more deeply, I highly recommend purchasing (or checking-out) True North by Bill George.

As well, Bill provided a number of free exercises online. These are a great way to reflect and to learn more about his method. You can learn more by going to www.billgeorge.com

Until next time,

Stephen Turban

Speaking Out Against Discrimination

Laws being passed this past week by Indiana and Arkansas to make discrimination legal on basis of religious freedom have stirred up a hornet’s nest of protests across the country, causing the Republican governors of these two states to ask that the legislation be modified.

While LGBT obviously oppose these laws, many of the most criticism has come from CEOs of the nation’s leading companies. Last Sunday, Apple CEO Tim Cook led off the debate when he penned a powerful op-ed decrying Indiana’s religious freedom law. His decision to speak out was not without risk. Apple products exist in 76 countries where homosexuality is illegal. He wrote:

“On behalf of Apple, I’m standing up to oppose this new wave of legislation… regardless of what the law might allow in Indiana or Arkansas, Apple will never tolerate discrimination.” 

Other CEOs, wary of similar risk, might have avoided the debate. In the past they have been reluctant to engage in these discussions, for fear of being criticized by their customers and employees, especially those who are evangelical Christians. The business response could have begun and ended with Apple.

But not this time.

In the past week, CEOs Doug McMillon of Walmart, Arne Sorenson of Marriott (a Mormon-founded company), Marc Benioff of Salesforce, and John Lechleiter of Eli Lilly (based in Indiana) have come out vigorously against similar laws.  Walmart’s McMillon tweeted about a similar law being considered in Arkansas, 

“Every day, in our stores, we see firsthand the benefits diversity and inclusion have on our associates, customers and communities we serve. For these reasons, we are asking Governor Hutchinson to veto this legislation.”

A few years ago, such public protest would have been surprising. For five years, I sat next to Lord John Browne, then chief executive of British Petroleum (BP), as we served together on the Goldman Sachs board. Browne is gay, yet this was a subject we never discussed. As he wrote in his poignant 2014 book, The Glass Closet, “My refusal to acknowledge my sexual orientation publicly stemmed from a lack of confidence… It is difficult to feel good about yourself when you are embarrassed to show who you actually are.” 

Increasingly authenticity is seen as the gold standard for leadership. Fortunately, we see more courageous CEOs – willing to take stands for what they believe and for the diversity of their employees. Now, more than ever, it is essential our society treat everyone equally regardless of religion, national origin, race, or sexual preference.

Discrimination for any reason gives a rationale for all forms of discrimination.  If the law permits business owners to discriminate against gays based on their religious views, what prevents them from discriminating against Muslims or Indians?

I know firsthand that wading into these debates has its downsides. As CEO of Medtronic in 2000, I spoke out against the Boys Scouts’ decision to prevent gay scouts from joining their ranks. I also supported the Medtronic Foundation’s decision to withhold grants to the Scouts because the Foundation does not fund organizations that discriminate for any reason. I received a lot of criticism from evangelical Christians and former Scouts among Medtronic employees, but it was worth it. Eventually, the local chapters amended their policies to accept all boys regardless of sexual preference, and years later the national organization followed suit.

It is encouraging that CEOs have taken an active role in this debate. But they can’t do it alone. Leaders from all walks of life, from government officials to civic leaders, need to embrace diversity in all forms. Speaking publicly against discrimination is the first step in that process. 

As Tim Cook wrote in his op-ed, “Men and women have fought and died fighting to protect our country’s founding principles of freedom and equality. We owe it to them, to each other and to our future to continue to fight with our words and our actions to make sure we protect those ideals.”

To the CEOs who have already spoken out, thank you. Your voices are powerful, and have already forced the states of Indiana and Arkansas to amend their laws. As this national debate shows, there is much work left to do for Americans to accept all people as being equal under the law.

30 Questions to Help You Discover Your True North

If you follow my blog, Twitter feed, or Facebook page, you’ll notice a constant theme: Discover Your True North. Both leaders and corporations have to develop a True North that follows their unique principles. If you try to ‘fake it until you make it,’ you won’t just be unsuccessful; you’ll also be miserable.

How can you discover your True North so you can take steps to get where you want to go in life? You have to know what your values are and what’s important to you. To that end, I’ve come up with this list of 30 questions to help you find your True North. Don’t answer them all at once. Take a day to carefully think each one through. Remember, if you don’t know where you’re going, any road will take you there.  

  1. What do you want your legacy to be? 10, 20, 50 years from now, what will your name mean?
  2. What one word do you want people to use to describe you? What do you think they’d currently use?
  3. If money was no object, how would you spend your time? What would your day look like?
  4. Fill in the blank: My life is a quest for _______. What motivates you? Money? Love? Acceptance?
  5. If you were to donate everything you have to a cause or charity, which would it be?
  6. What is your biggest regret? If you could go back and have a ‘redo,’ what would you change?
  7. When was the last time you told a lie? Why? What would have happened if you had told the truth?
  8. If you accomplish one thing by the end of the year, what would make the biggest impact on your happiness?
  9. What do you think is the meaning of life? Do you live your life accordingly?
  10. What would others say is your biggest asset? What would they say is your biggest flaw? Be honest.
  11. What did you like to do when you were 10 years old? When was the last time you did that activity?
  12. What do you love most about your current job? What do you wish you could do more of?
  13. What do you think you were put on this earth to learn? What were you put here to teach?
  14. What keeps you awake at night when you should be sleeping? What gets you out of bed in the mornings?
  15. List your core values. Use your company’s mission statement to list its core values. Do they match up?
  16. What skills do people frequently compliment you on? These may not be what you think you’re best at.
  17. If you had the opportunity to get a message across to a large group of people, what would you say?
  18. What do you not want others to know about you? Use your answer to find and conquer insecurities.
  19. List the five people you interact with most frequently (not necessarily friends). How is each helping you to reach your goals (or not)?
  20. If yourself from ten years ago met you today, would he/she be impressed with where you’ve gotten? Why or why not?
  21. What bugs you? If it makes you mad, you’re passionate about it! Can you make your anger productive?
  22. Fast-forward ten or twenty years. What is the one thing that, if you never pursued, you’d always regret?
  23. When was the last time you embarrassed yourself? You have to be vulnerable to find your purpose.
  24. Who or what energizes you? What makes you feel depleted? Do you thrive on chaos, or prefer order?
  25. Who do you look up to? Who are your mentors, both those you know personally and those who inspire you from afar?
  26. Think about your talents, passions, and values. How can you use them to serve and contribute to society?
  27. Why do you want to find your purpose? Write the answer down and put it somewhere you can see it. The journey isn’t always easy.
  28. What in your life is ‘on hold’? Until you lose weight, until you retire, etc. What are you waiting for?
  29. What price would you take to give up on your dreams? What price would you be willing to pay to achieve them?
  30. Now that you’ve answered these questions, what is your action plan? What steps will you take today?

For more insight and exercises to help you find your True North, read Finding Your True North. It offers a full, comprehensive approach to identify and develop your own unique direction in life.  

Inc: Why You Need Emotional Intelligence to Succeed

The following is an outstanding article on the importance of EQ = Emotional Intelligence. 

While IQ has historically been thought of as the determining factor in the performance of leaders, new research from Dan Goleman and others demonstrates conclusively that for people with IQ above 120, EQ is the more important factor in predicting leadership effectiveness. This article shows that people with high EQ on average earn $29,000 more per year. The good news is that your EQ can be developed and improved, whereas IQ is relatively constant over your lifetime. By Discovering Your True North, you can begin to improve your EQ. Try it!

By Travis Bradberry for Inc., posted March 12, 2015

When the concept of emotional intelligence was introduced to the masses, it served as the missing link in a peculiar finding: people with average IQs outperform those with the highest IQs 70 percent of the time. This anomaly threw a massive wrench into what many people had always assumed was the sole source of success--IQ. Decades of research now point to emotional intelligence as the critical factor that sets star performers apart from the rest of the pack.

Emotional intelligence is the "something" in each of us that is a bit intangible. It affects how we manage behavior, navigate social complexities, and make personal decisions that achieve positive results. Emotional intelligence consists four core skills that pair up under two primary competencies: personal competence and social competence.

Personal competence comprises your self-awareness and self-management skills, which focus more on you individually than on your interactions with other people. Personal competence is your ability to stay aware of your emotions and manage your behavior and tendencies.

  • Self-awareness is your ability to accurately perceive your emotions and stay aware of them as they happen.
  • Self-management is your ability to use awareness of your emotions to stay flexible and positively direct your behavior.
  • Social competence is made up of your social awareness and relationship management skills; social competence is your ability to understand other people's moods, behavior, and motives to respond effectively and improve the quality of your relationships.
  • Social awareness is your ability to accurately pick up on emotions in other people and understand what is really going on.
  • Relationship management is your ability to use awareness of your emotions and the others' emotions to manage interactions successfully.

Emotional intelligence, IQ, and personality are different.

Emotional intelligence taps into a fundamental element of human behavior that is distinct from your intellect. There is no known connection between IQ and emotional intelligence; you simply can't predict emotional intelligence based on how smart someone is. Intelligence is your ability to learn, and it's the same at age 15 as it is at age 50. Emotional intelligence, on the other hand, is a flexible set of skills that can be acquired and improved with practice. Although some people are naturally more emotionally intelligent than others, you can develop high emotional intelligence even if you aren't born with it.

Personality is the final piece of the puzzle. It's the stable "style" that defines each of us. Personality is the result of hard-wired preferences, such as the inclination toward introversion or extroversion. However, like IQ, personality can't be used to predict emotional intelligence. Also, like IQ, personality is stable over a lifetime and doesn't change. IQ, emotional intelligence, and personality each cover unique ground and help to explain what makes a person tick.

Emotional intelligence predicts performance.

How much of an impact does emotional intelligence have on your professional success? The short answer is: A lot! It's a powerful way to focus your energy in one direction with a tremendous result. TalentSmart tested emotional intelligence alongside 33 other important workplace skills, and found that emotional intelligence is the strongest predictor of performance, explaining a full 58 percent of success in all types of jobs.

Your emotional intelligence is the foundation for a host of critical skills--it impacts most everything you do and say each day.

Of all the people we've studied at work, we've found that 90 percent of top performers are also high in emotional intelligence. On the flip side, just 20 percent of bottom performers are high in emotional intelligence. You can be a top performer without emotional intelligence, but the chances are slim.

Naturally, people with a high degree of emotional intelligence make more money--an average of $29,000 more per year than people with a low degree of emotional intelligence. The link between emotional intelligence and earnings is so direct that every point increase in emotional intelligence adds $1,300 to an annual salary. These findings hold true for people in all industries, at all levels, in every region of the world. We haven't yet been able to find a job in which performance and pay aren't tied closely to emotional intelligence.

You can increase your emotional intelligence.

The communication between your emotional and rational "brains" is the physical source of emotional intelligence. The pathway for emotional intelligence starts in the brain, at the spinal cord. Your primary senses enter here and must travel to the front of your brain before you can think rationally about your experience. However, first they travel through the limbic system, the place where emotions are generated. So, we have an emotional reaction to events before our rational mind is able to engage. Emotional intelligence requires effective communication between the rational and emotional centers of the brain.

Plasticity is the term neurologists use to describe the brain's ability to change. As you discover and practice new emotional intelligence skills, the billions of microscopic neurons lining the road between the rational and emotional centers of your brain branch off small "arms" (much like a tree) to reach out to the other cells. A single cell can grow 15,000 connections with its neighbors. This chain reaction of growth ensures it's easier to kick a new behavior into action in the future.

As you train your brain by repeatedly practicing new emotionally intelligent behaviors, your brain builds the pathways needed to make them into habits. Before long, you begin responding to your surroundings with emotional intelligence without even having to think about it. And just as your brain reinforces the use of new behaviors, the connections supporting old, destructive behaviors will die off as you learn to limit your use of them.

Jeff Sonnenfeld for WSJ: Activist Shareholders, Sluggish Performance

Here’s an important article from my former colleague Jeff Sonnenfeld, who demonstrates that returns from activist funds are less than 50% of the S&P 500, and result in dismantling some formerly great companies. DuPont, in particular, does not deserve the kind of activist proxy attack Nelson Peltz is waging. It is a great company that is well run by CEO Ellen Kullman.

From Wall Street Journal, “Activist Shareholders, Sluggish Performance,” posted April 1, 2015.

For all the talk about activist shareholders—usually large hedge funds—getting seats on company boards and pushing to make strategic, value-enhancing changes, these activists haven’t fared especially well. Investing in index funds would have yielded better returns over the past few years than most activist funds.

How much better? In 2013 the HFR Activist index posted a total return of 16%, less than half the S&P 500 Index’s total return of 32.4%. In 2014 the HFR Activist Index saw returns of 4.8%, far below the S&P 500’s 13.7%.

Contrary to their rhetoric, many activist investors lack the Midas touch. Their recent returns may exceed the performance of other hedge funds, but they still lag behind the broader market. Ironically, the major companies targeted today, including Apple, PepsiCo, Dell, Dow and DuPont, generally deliver returns that soar above that of activist funds.

Some funds, such as Third Point, Relational Investors, Starboard Value and TPG-Axon Capital, have driven constructive outcomes at Yahoo, Office Depot, Hewlett-Packard, Home Depot and SandRidge Energy. Yet too often activists pressure companies to cut costs, add debt, sell divisions and increase share repurchases, rather than invest in jobs, R&D and growth.

They do all this in the name of creating shareholder value. But that value is often short-lived and sometimes comes at the expense of long-term success, if not survival. Despite Carl Icahn’s successes—such as Chesapeake Energy (Netflix and Apple were great investments but they resisted his advice)—his overlooked failures include TWA, WCI Communities, Blockbuster and Dynegy, all of which are either out of business or have filed for bankruptcy.

Nelson Peltz’s Trian Fund Management and its activist assaults on the Bank of New York, PepsiCo and DuPont are an interesting case in point. Trian delivered only an 8.8% return in 2014, nearly five percentage points below the S&P 500. In 2012 Trian was up a scant 0.9% while the S&P 500 was up 15.9%. Clearly, this undermines Mr. Peltz’s argument that DuPont’s board needs Trian and Mr. Peltz to drive better returns.

Five of the 11 companies where Trian has a seat on the board underperformed the S&P 500 between the time Trian got its seat and the end of last year—Wendy’s, Legg Mason, Mondelez International, Family Dollar and Chemtura, which went bankrupt in 2009 after two years of Trian board involvement. Contrast these companies with State Street, which rejected Trian’s breakup and board-seat demands and has handsomely outperformed the S&P 500 (129.5% to 80.5%) over the past four years—without Trian’s help.

Even better returns were available to those who invested in companies that activists sought to topple. Suppose on Jan. 1, 2010, you put $100 each in DuPont, an S&P 500 mutual fund and Trian. Your investment in DuPont would be worth roughly $240 today. Your S&P 500 fund would be worth roughly $200. And your investment in Trian would we worth roughly $190. DuPont’s returns handily beat those of Trian in 2010, 2012 and 2014.

Mr. Peltz now is waging a costly, distracting proxy battle to break up DuPont to deliver short-term gains while demanding he personally have a seat on the company’s board. This despite Trian’s poor showing versus DuPont and the latter’s recent hiring of two new directors, Edward Breen and James Gallogly, two former CEOs and tough industrialists whom Mr. Peltz unsuccessfully solicited in 2014 to serve on Trian’s board of directors.

Given DuPont CEO Ellen Kullman’s success since taking the reins in 2009, it’s not surprising that Trian’s assault has been thwarted. Nevertheless, DuPont has offered to accept a current Trian board nominee—other than Mr. Peltz—out of respect for Trian’s 3% stake.

As Securities and Exchange Commission Chairman Mary Jo White said in a March 19 speech at Tulane University’s Corporate Law Institute: “Reflexively painting all activism negatively is... using too broad a brush and indeed is counterproductive.” Activists and their target companies, she said, should “step away from gamesmanship and inflammatory rhetoric that can harm companies and shareholders alike.”

But with activist funds now boasting $120 billion under management—up 30% in the past year—there is no harm in asking what their own investors are getting back. The most aggressive activists court governance advocates and state pension funds with costly media campaigns against target companies that, paradoxically, outperform them. Perhaps they should be more active in raising their own shareholder value.

Mr. Sonnenfeld is a professor of management and senior associate dean of leadership studies at the Yale School of Management.

Zach Clayton: Building Business the Right Way

From ZacharyClayton.com, posted March 31, 2015

Someone recently asked me if it was a disadvantage that Three Ships didn’t have venture capitalists. I laughed and thought about something Jim Goodnight, Founder of SAS, once told me. “I didn’t know what venture capital was when I started SAS,” he said and then paused dramatically. With a big grin, he then pronounced: “I’m sure glad I didn’t.”

Forty years and $3 billion in revenue run rate later, Goodnight is surely happy to be in control of his destiny. SAS constantly graces the Fortune 500 “Best Place to Work” list and has grown steadily, decade after decade. He doesn’t have to justify to external investors that making investments in employees leads to better results – he just knows that is the case. When managers think like investors (and investors think like managers), good things can happen.

There are entirely appropriate times to partner with institutional capital. Great companies such as Apple, Google, and Intel all had venture capitalists as backers. However, the wrong type of institutional capital can lead to many kinds of short-term pressures that distort management’s ability to create great long-term results (e.g. “cut R&D to increase margins,” “under-hire to show profit growth –  even if it burns everyone out”). In my own career, I’ve seen the destructive effects of how private equity or venture capital firms can let short-termism creep in, creating unnatural moments for the business.

Here are some principles I thought about when crafting the 3S trajectory:

  • We’re creating something that is built-to-last, not built-to-flip. Shareholders, customers, and employees are all better off if the company never needs to sell. If we’re truly building for the long-term, we don’t need an “exit strategy.” (And this increases the odds that if we ever do sell, it’s only for a great financial offer that is a fit.)
  • Sustainable success offers the luxury of an “infinite runway”. If we are working hard, delivering value to customers, having fun, and growing… we will have an attitude of “Hey, why would we want to sell?” Again, this mindset increases the odds of either great return from continued ownership or a great exit.
  • My goal is creating something great, not finance a great lifestyle. Our current approach of “no dividends/distributions” is a signal that everyone (management, investors, and me) are focused on building a company that has a long-term growth trajectory. The digital marketing transformation will accelerate over the next 10 years and we’re just scratching the surface of the market.

Marketing tech is a very hot space – not just because of high valuations, but because of high customer demand that is fueling growth. But the bigger and more exciting opportunity (in my view), is to build a business the right way.

ABC News - The Secret Weapon of CEOs, Basketball Pros to Get in the Zone

ABC News (NEW YORK) -- Basketball legend Michael Jordan’s weapon of choice early in his career was his slam dunk, but he also had a secret weapon in his arsenal: meditation.

George Mumford was Jordan’s meditation coach, and he said practicing mindfulness helped Jordan and his other clients -- including Los Angeles Laker Kobe Bryant -- get in the zone.

"If you really look at the elite athletes, you will find they have this ability to be in a moment and actually slow things down," Mumford told ABC News. "Mindful meditation helps them do that."

Meditation is a practice that’s more than 1,000 years old and involves pausing to focus on breathing and relaxation.

Off the basketball court, experts say meditation is becoming more common in the corporate board room as well.

Bill George, former CEO of medical device company Medtronic, said he used to meditate in secret behind a closed office door. Now a fellow at Harvard Business School, he meditates 20 minutes, twice a day with the door wide open.

Meditation "was the best thing that ever happened to me, in terms of staying grounded," he told ABC News. "It has helped me become a much better leader."

Leading companies such as Google, Aetna and General Mills have meditation programs for their employees. George teaches a Harvard course on leadership and requires students to do a reflective practice, in which they quiet down and either meditate or answer introspective questions in a journal.

“To be a successful leader you need to be authentic, grounded, and you need to be mindful," George said.

Meditation helps in the business world by helping people “get out of [their] own way," said Dr. Judson Brewer, a professor of medicine and psychiatry at the University of Massachusetts Medical School.

"Suddenly, you are in the zone," he said.

When a basketball player is caught thinking about the shot they just missed, they are more likely to miss the shot in the next moment, Brewer said. Meditation techniques help people train their minds to stay in the present without getting caught up thinking about other stressors.

"Don't believe me, just try it a little bit and see if it is actually helpful for you," Brewer said.


World News Videos | US News Videos

Huffington Post: How To Be A More Mindful Leader

Video from The Huffington Post, January 21, 2015

Professor Bill George of Harvard Business School spoke with HuffPost Live at Davos on Wednesday about mindfulness.

"There's a lot of interest right now in being a more mindful leader," George said, saying people want to "get out of this 24/7 stress-based world we're in."

George touted how some major companies like Google and General Mills are "really getting on board" and training employees in mindfulness practices.

George said the focus Google has on mindfulness is helping people realized the energizing benefits of practices like meditation, which he said he personally benefits from.

"I'm more energized after meditation, far more," George said, calling it the "best antidote to jet lag."

TRUST Magazine: Trust As The Essence Of Leadership

I am honored to receive a Lifetime Achievement Award from Trust Across America. Authenticity and trust go hand in hand. My full article on Trust as the Essence of Leadership can be viewed here and full text below. 

Trust is the essence of leadership – the coin of the realm. Unless people build trust with their colleagues, they cannot gain legitimacy to lead, nor can they empower others.

Recent studies have shown that only half of Americans trust their leaders. Since the 2008-09 global financial crisis, many Americans have lost trust in their leaders and the institutions they lead.

Gaining the trust of people is essential for every leader. Leaders cannot be effective without full confidence of the constituencies that grant their institution its legitimacy, nor can capitalism function without trust.

No matter how effective your strategy, your vision, or your communication, you will fail to achieve the desired results for your organization if you cannot inspire trust as a leader. Lack of trust in your leadership will cause your team to fear failure, resulting in less risk-taking, and therefore, less innovation. Building a culture of trust starts with you. You must quell fears of organizational power by exhibiting authentic behavior that inspires trust and fosters an open, safe environment.

To be worthy of trust, leaders must have a clear sense of their True North – the purpose of their leadership and the essence of their beliefs, their values and the principles by which they lead. If they stay on course of their True North and do not deviate under pressure, then they can build trust among colleagues and legitimacy among all their constituencies.

What’s required are new leaders who are grounded in authenticity, relationships, and emotional intelligence. To gain trust, they must be genuine, sincere, transparent, and true to their word. People sense who is authentic and who is not. Only when they are authentic will people grant them the support they need to lead organizations.

To strengthen the trust and confidence in America’s leaders, we need a new leadership mindset and a new breed of leaders, with five characteristics in common:

  1. They should be authentic leaders, focused on serving their clients and all the institution’s constituents, rather than charismatic leaders seeking money, fame, and power for themselves.
  2. They should place the interests of their institutions and society as a whole above their own interests.
  3. They should have the integrity to tell the whole truth, admit their mistakes, and acknowledge their shortcomings. Authentic leadership is not about being perfect. It is having the courage to admit when you’re wrong and to get on with solving problems, rather than covering them up.
  4. They need to adapt quickly to new realities, changing themselves as well as their institutions, rather than going into denial when things don’t go as intended. 
  5. They need the resilience to bounce back after devastating losses. Resilience enables leaders to restore trust by empowering people to create new solutions that build great institutions for the future.

Earning trust requires significant time and effort, and must come from a place of authenticity. Trust cannot be faked. You cannot become a trusted leader by trying to imitate someone else. You can learn from others’ experiences, but there is no way you can be successful when you are trying to be like them. People trust you when you are genuine and authentic, not a replica of someone else.

Don’t be afraid to show your vulnerability. Be transparent with your team, even when the truth may be unpopular or inconvenient. Don’t punish those who bring you bad news. Encourage risk-taking and celebrate “good failures” as opportunities to learn and move forward.

Remember: trust starts with you but it is a win-win for everyone.