CEO Corner

The CEO’s Guide to Giving: Building a Donor-Advised Fund

Chief Executive Magazine -

From creating a legacy and introducing family members to philanthropy to ensuring that donations are used effectively, there are lots of reasons that families associated with successful businesses are opting to take an active role in giving back. In this three-part series, Chief Executive spoke with philanthropic business leaders to gain their insights on supporting foundations, private foundations and donor-advised funds. This is Part III.

Michael Kay, former CEO of LSG Sky Chefs, walked away with a significant payout when his company was sold to private equity investors in 2000. Seeking to develop a more sophisticated estate plan, Kay met with his lawyer, who recommended that he consider a donor-advised fund (DAF) at the Community Foundation for Greater Atlanta.

An increasingly popular philanthropic vehicle in recent years, DAFs are philanthropic enterprises typically hosted by financial companies like Fidelity Investments or university and community foundations into which donors can deposit cash, appreciated securities or other assets to be distributed to charities over time.

Kay liked the relief from administrative tasks that the Atlanta community foundation DAF offered.

“One of the things we’ve found through the community foundation is that we can join arms with other philanthropists. Together our efforts make a bigger impact than just being individual donors.”

“There was someone else to do all the homework about potential beneficiaries,” he says, explaining that the DAF helped identify and screen potential causes that fit his family’s charitable goals. “My wife and I became interested in after-school programming for disaffected youth. I could say, ‘Surface three foundations that do a first-rate job in this regard and I would like to go meet them with my wife.’”

He was also able to involve his four children. As the name implies, DAFs place donors in an advisory role—they make recommendations but don’t have the absolute control over grant-making that a private foundation offers. Donors and family members, however, can serve in that advisory capacity, as is the case for the Kay’s children.

Barbara Bing Pliner, who got involved in philanthropy in a big way after selling her Southern lifestyle and media company in 2012, is another fan of the Atlanta community foundation.

“One of the things we have found through the community foundation is that we can join arms with other philanthropists,” says Pliner, whose particular passion is nonprofit programs that teach ballet skills to girls from low-income families. “Together our efforts make a bigger impact than just being individual donors.”

Because there are no distribution requirement for DAFs, the structure has come under fire from critics who view them as a place people seeking a tax deduction can park assets indefinitely. However, the overall distribution rate of DAFs was a healthy 21.5 percent in 2013, suggesting that most are serving their charitable purpose.

That figure doesn’t surprise Alicia Philipp, president of the Atlanta foundation, who says the structure has opened a gateway to the philanthropic world in her community.

“The beauty of a donor-advised fund is that if people create one and get engaged, they become raging philanthropists,” says Philipp. “They find out what’s happening in their communities. You not only get the money working in the community; you also get the people engaged in the community. That’s the secret sauce.”

Read more:
Part I: The CEO’s Guide to Giving: Working to Solve World Problems
Part II: The CEO’s Guide to Giving: How a Hotel Industry President Created a Private Foundation

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The CEO’s Guide to Giving: How a Hotel Industry President Created a Private Foundation

Chief Executive Magazine -

From creating a legacy and introducing family members to philanthropy to ensuring that donations are used effectively, there are lots of reasons that families associated with successful businesses are opting to take an active role in giving back. In this three-part series, Chief Executive spoke with philanthropic business leaders to gain their insights on supporting foundations, private foundations and donor-advised funds. This is Part II. 

Harris Rosen decided not to wait until retirement to start giving away the money he made as an owner and operator of a collection of seven convention and leisure hotels all in Orlando. He still holds his full-time job as president and COO of Rosen Hotels & Resorts, which he founded.

But in 1990, he set up a private grant-making foundation governed by a three-person board, including himself and his CFO, Frank Santos, and started giving away money. Lots of money. Rosen has given away $63.4 million for free pre-school and college tuition, room, board and books for children in Orlando, to Haitian hurricane victims, Japanese earthquake victims and to other causes.

Rosen’s foundation is as close to being a one-man band as it gets, with the hotelier using the autonomy a private foundation offers to make grant-making decisions and participate in every aspect of running the foundation, which reportedly has an endowment of about $17 million.

“About 25 years ago… it occurred to me I had been blessed beyond anything I had ever imagined and it was time for me to… offer a helping hand to people who need it.”

His foundation is fiscally efficient, curtailing operating expenses—which average .69% of assets across the universe of U.S. private foundations, according to IRS records—by outsourcing much of the machinery that most foundations build in-house. An outside lawyer handled filing for 501(c) tax status and an outside accountant prepares the annual tax return.

“About 25 years ago, sitting at my desk contemplating a fifth, sixth and seventh hotel, it occurred to me I had been blessed beyond anything I had ever imagined and it was time for me to acknowledge the presence of God and also to try to offer a helping hand to people who need it,” says Rosen, who was born and raised in New York City’s then-gritty Lower East Side.

Like all private foundations, the Harris Rosen Foundation must distribute 5% of its assets annually, although Rosen chooses to distribute significantly more. The heart of his giving has been the Tangelo Park Program. In 1993, he essentially adopted a run-down, drug-infested section of Orlando with a 90% minority population base. Working with the approval of county education officials, he started offering free preschool for all children in Tangelo Park from age two to four.

“The advantage stays with the child through high school and college,” says Rosen, who founded the program. The program offers counseling and support to the same kids in high school and pays for any public college or technical school enrolled in after graduation.
Today, the high school graduation rate is 100%, up from about 45% when Rosen started his program. College graduation rates are 80%, far higher than the national average. Crime in Tangelo Park is down and real estate values have soared. There are no case officers overseeing Rosen’s projects. He simply pays the bills.

Other causes have included offering scholarships to Cornell University, contributing approximately $8.8 million toward a new Jewish Community Center and endowing a hospitality school at the University of Central Florida. Rosen is about to “adopt” another tough section of Orlando called Parramore. At 77, he has no plans to slow down.

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Technology and the CEO Résumé: Instilling the Right Perspective on Tech

Chief Executive Magazine -

Not every CEO has technology experience—nor should they. But CEOs increasingly need to understand why technology is important, what it can do and to take steps to make sure they are factoring it into both their decisions and their company’s strategic direction. In this three-part series, CEOs and experts weigh in on the increasingly important role of technology in today’s business landscape. This is Part III.

When it comes to creating a tech-savvy business environment, CEOs first need to think in terms of educating their executive teams.

Stephanie Woerner, a research scientist at the MIT Sloan Center for Information Systems Research suggests “reverse mentoring”—establishing learning relationships where tech-savvy employees from lower in the organization help executives understand the potential impact of technology.

Some companies have executive meetings centered on technology-based case studies—led, perhaps by the CIO—that can provide insights into how technology can be used at the company.

One company, Woerner says, recently held a retreat where “they actually had all of their executive committee members write a description of where they thought the company was going and how technology would get them there.”

To a great extent, success with technology is a matter of mindset—of instilling the qualities often found in tech-industry CEOs. That means CEOs should remind themselves to be alert to disruptive possibilities and be willing to ask questions and take risks—and encourage those qualities in others.

“Woerner advocates a “digital first” attitude in organizations, where everyone is thinking constantly about how technology can change the business.”

Woerner advocates a “digital first” attitude in organizations, where everyone is thinking constantly about how technology can change the business. That starts at the top. “Does the CEO make sure that the investment patterns match being digital first?” she asks. “Does the CEO make sure that the organizational structure is in place and then use the board to back him or her up, so that the firm is actually able to become more digital?”

“Build technology topics and questions routinely into your management and leadership cadence,” urges Paul Winum, senior partner and practice leader, Board and CEO Services, at RHR International. “CEOs should be routinely asking: ‘How is technology that is now available being leveraged? What are the emerging technologies that we think will enable our business in the future—or that might enable our competitors to attack us—and how do we defend against that?’”

Staying on top of emerging technology “requires, as everything else does if you’re a busy CEO, that you deliberately allocate mindshare and timeshare to it—which means you have to consider it a priority,” according to Ron Cohen M.D., CEO of biotech company Acorda.

Read more:
Part I: Technology and the CEO Résumé: Why it Matters
Part II: Technology and the CEO Résumé: Climbing the Tech Learning Curve

The post Technology and the CEO Résumé: Instilling the Right Perspective on Tech appeared first on ChiefExecutive.net | Chief Executive magazine.

Technology and the CEO Résumé: Climbing the Tech Learning Curve

Chief Executive Magazine -

Not every CEO has technology experience—nor should they. But CEOs increasingly need to understand why technology is important, what it can do and to take steps to make sure they are factoring it into both their decisions and their company’s strategic direction. In this three-part series, CEOs and experts weigh in on the increasingly important role of technology in today’s business landscape. This is Part II. 

CEOs do not necessarily need to learn how to write code or understand the technical details behind the cloud to adapt to today’s technology environment. Instead, they just need to be comfortable and conversant with technology.

“The CEO needs to have enough proficiency and knowledge to be able to ask intelligent questions, to be prodding people to stay on the leading edge of what the technology can do, and to ultimately make resource-allocation decisions about where the company is going to make their investments,” says Paul Winum, senior partner and practice leader, Board and CEO Services, at RHR International, a leadership development firm.

“Most CEOs who grow up within an industry learn about the technologies that apply to that industry. The challenge is to stay current about how emerging technologies might apply in the future.”

When RHR assesses clients’ internal candidates for executive positions, “part of what we’re trying to gauge is their comfort level with technology and their attitude toward technology,” says Winum. “People who embrace technology, who have a certain fluency in talking about technology, will be better equipped to deal with the unforeseeable changes that will occur in the next five years.”

“People who embrace technology, who have a certain fluency in talking about technology, will be better equipped to deal with the unforeseeable changes that will occur in the next five years.”

CEOs can start raising their technological fluency with plain old-fashioned learning.

“Read up on it,” says Ron Cohen M.D., CEO of biotech company Acorda. “Make a determined effort to go online, go to conferences. If you hire a good head of digital strategy, go to a conference with them and have them introduce you around. Meet some of the people who are involved in that world.”

Sharing insights with executives at other firms also can help. “Spend time with peers in the market—not direct competitors, but companies that might be at a similar life stage and grappling with similar questions about technology,” says Margot McShane, executive director at the San Francisco office of executive search firm Russell Reynolds Associates. “Having good peer support is important.”

Spending time with companies that are driving disruption also can help. McShane says that some CEOs visit Silicon Valley firms, where “they are not just going in for a dog-and-pony show for an hour. They are sitting with the culture, they are sitting with the employees.” They learn “how we are doing business. This is how we make decisions. This is the language we use.”

For more formal input, Alan Guarino, vice chairman of CEO and Board Services at the Korn Ferry search firm, says his company has helped CEOs create technology advisory boards.

“They are made up of executives who have recently had tech leadership roles,” he says. “They serve as a sounding board and occasionally evaluate the organization’s technology decisions. The type of technology leaders who serve on these boards is dictated by the client based upon the company’s technology needs and its market.”

Read more:
Part I: Technology and the CEO Résumé: Why it Matters

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Chief Executive Group Acquires Corporate Board Member

Chief Executive Magazine -

STAMFORD, Conn., Aug. 28, 2017 /PRNewswire/ — Chief Executive Group, LLC has acquired Corporate Board Member magazine and related assets from Marlin Equity Partners. In June, Marlin acquired Corporate Board Member as part of its purchase of NYSE Governance Services, Inc. from Intercontinental Exchange, Inc.

“Business leaders face unprecedented challenges,” said Marshall Cooper, CEO of Chief Executive Group, the leading community for CEOs and publisher of Chief Executive magazine. “From trade issues and technological disruption to compensation controversies and ever-increasing pressure from activist shareholders, wise governance and strategic foresight by corporate directors has never been more critical—or more complex.”

“Over the last 40 years we have earned the trust of CEOs by helping them identify, evaluate and solve their biggest challenges, and will do the same for corporate directors,” added Cooper. “Although CEOs and Boards play separate and distinct roles, they work closely together to achieve organizational goals.”

“Along with CEOs, corporate board members shoulder responsibility for the success or failure of their organizations,” said Wayne Cooper, Executive Chairman of Chief Executive Group. “Like CEOs, corporate directors are a discriminating, hard-to-reach audience that values real-world, hard-won experience. This acquisition provides a significant opportunity for us to expand both communities, in collaboration with select partners who can add value.”

For brands looking to target the ultimate purchase decision makers, Chief Executive Group provides a unique, integrated media platform. “The fact that Chief Executive Group now offers marketers the top two decision-making groups in corporate America is very powerful,” said Chris Chalk, Publisher, Chief Executive Group. “These two communities can make big-ticket deals go fast, or go nowhere.”

Corporate Board Member magazine has been published quarterly since 1998. The company maintains the most comprehensive database of corporate directors in the world, provides ongoing Board training through its Board Leadership Program, and produces peer-driven conferences, including the Annual Boardroom Summit.

About Chief Executive Group
Chief Executive Group is the leading community for business leaders worldwide. It publishes Chief Executive magazine (published since 1977), chiefexecutive.net, Corporate Board Member and boardmember.com, as well as conferences and roundtables that enable CEOs to discuss key subjects and share their experiences with their peers. The Group also runs the Chief Executive Network, the leading CEO membership organization arranged by industry, and facilitates the annual “CEO of the Year,” a prestigious honor bestowed upon an outstanding corporate leader, nominated and selected by a group of peers. Visit www.chiefexecutive.net for more information.

Media Contact:
Scott Budd
Chief Operations Officer
203-889-4981
sbudd@chiefexecutive.net

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CVS CEO Larry Merlo is Trying to Make the World Healthy One Customer at a Time

Chief Executive Magazine -

Larry Merlo, CEO of CVS, No. 7 of the 1,000 Largest Public/Private Companies

Larry Merlo hasn’t had an easy tenure. Since announcing that CVS would stop selling cigarettes and change its name to CVS Health in February 2014, it’s a been a struggle for the pharmacy retailer. Shares are currently down 19%.

However, the company can probably withstand a blip in it’s bottom line. With $177.5 billion in net revenues in 2016, CVS reaches 100+ million people each year through nearly 9,700 retail pharmacies, 1,100 walk-in medical clinics, a pharmacy benefits management firm with nearly 90 million plan members, a provider of pharmacy services to long-term care facilities, and expanding specialty pharmacy services.

According to CVS.com, in states where CVS has greater than a 15% market share, cigarette sales overall are down by 1%, equating to 5 fewer packs per smoker.

The company continues to look for expansion and growth opportunities to catch up with and overcome competitors Walgreens and Amazon.

In early August, CVS announced it would expand its medical clinics program and data network to get more involved in helping people manage chronic diseases such as diabetes, high blood pressure and asthma.

However, its most recent acquisition of the Fagen chain, a small, 45-store chain in select parts of the midwest, will probably not do a lot to help the company achieve its growth goals.

Going forward, Merlo is focused on finding and securing strategic partnerships.

CEO Facts

President (since May 12, 2010) and CEO (since March 1, 2011), CVS Health

Previous Position: President, CVS Pharmacy

Company start date: 1990

First Position at Company: Pharmacist

Age: 61

Education: University of Pittsburgh School of Pharmacy

 

 

 

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Challenges Loom for Next Uber CEO

Chief Executive Magazine -

Now that Uber has chosen Expedia CEO Dara Khosrowshahi to fill its vacant CEO position, it’s time to focus on the huge challenges he will face as he comes on board.

The big-picture challenges lie in restoring the company’s credibility and figuring out ways to drive growth on a global scale, according to Jeffrey Cunningham, professor of leadership at Arizona State University’s Thunderbird School of Global Management.

“Uber’s primary problem is that they need to reestablish value and growth, and they have to do it right away,” Cunningham told Chief Executive. “The short-term answer is they need an IPO.” The larger issue here is that if Uber stumbles, it could damage the entire digital sector because of overvaluation.

“Uber has to grow globally, and if their cultural image and the problems that have already occurred is in any way embedded in the minds of people in, let’s just say Singapore, Uber’s got a real problem.”

The first step toward reestablishing value and growth is to fix Uber’s credibility in the minds of global decision-makers. The new CEO will need to immediately start re-establishing credibility with municipalities and nations around the world where Uber does business.

“Uber has to grow globally, and if their cultural image and the problems that have already occurred is in any way embedded in the minds of people in, let’s just say Singapore, Uber’s got a real problem,” Cunningham says.

Another issue Uber’s new CEO will have to deal with is the chaotic and caustic situation with the company’s board of directors, which has been going back and forth for the past two months on how best to proceed. The adversarial relationship between board members aligned with ousted CEO Travis Kalanick and those in line with venture capital investor Benchmark Capital, who pushed Kalanick to resign amid controversy, must be resolved.

Cunningham believes a strong leader would make cleaning house on the board a priority to avoid future problems—meaning that the Benchmark element would have a reduced role.

“The governance challenges [need to be fixed] right away.” The CEO needs to “build an A-list board, which it’s not now,” Cunningham says. “What the venture capitalists at Benchmark did was prove that as a company, Uber is close to being public. VCs have no business on a [public] board—they’re good incubators, they’re good at nursery school, but they’re not good at overseeing a major global organization.”

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“Murder Capital USA” Debunked: Chicago CEOs Pledge Their Allegiance to Their City

Chief Executive Magazine -

Fairly or unfairly, Chicago has become known as the modern-day “Murder Capital USA.” And the perception puts CEOs of Chicago-based companies on the spot in more ways than one.

First, they and their employees must do business in a city smattered with violent crime. Second, they must cope with the very real consequences of many outsiders’ view of Chicago as a scary place for business.

And, third, the depth of the Windy City’s violent-crime problem – plus other challenges such as the cratering fiscal situation in Illinois – is compelling many business leaders to step forward in unprecedented ways to try to shore up the city’s crumbling social foundations.

“I was in London and Paris earlier this year, and people there view the violence in Chicago like Belfast used to be,” said Greg Mutz, Chairman and CEO of AMLI Residential, a Chicago-based real-estate investment trust. “They ask you if you go around wearing an armored vest. People think we live in Beirut or Damascus.”

“It’s almost a tale of two cities–which is to say that some of the violence feels very separate from the city that we all know and love and the city that is great to do business in.”

Barbara Moran-Goodrich, CEO of the Moran Family of Brands, an aftermarket-automotive franchise operation based in Midlothian, Ill., a near southwestern suburb of Chicago, said that business associates from elsewhere often ask her, “Is it really that bad there?”

In dealing with people outside of Chicago, agreed Alan Reed, “There are concerns because of the amount we’re in the press.”

But in a comment typical of Chicago-area CEOs, the executive director of the Chicagoland Food & Beverage Network noted, “It’s almost a tale of two cities–which is to say that some of the violence feels very separate from the city that we all know and love and the city that is great to do business in.”

Chicago’s current struggles with the murder-capital moniker are strongly reminiscent of what ailed Detroit for decades. Chicago more recently has faced the kind of extreme population loss–especially on its toothsome south side–that sapped the Motor City for a half-century, the primary factor in long-term economic degradation that proved fertile territory for desperation and violent crime.

Rightly, Chicago-area CEOs rightly pointed out that many other major cities cope with high and rising murder rates and are battling pockets of depravation. In fact, Chicago is only in the middle of the pack among U.S. cities when it comes to murder rates. Last year, and through the first half of 2017, St. Louis, Baltimore and Detroit recorded the highest per capita homicide rates of major American cities.

Perceptually, one significant problem for Chicago is that it’s so big that the raw number of murders occurring on a regular basis produce stunning news reports that have the impact on the nation of the ceaseless tally of gun violence in New York City in the 1970s.

And some CEOs squarely blame President Donald Trump for making Chicago’s murder problem a partisan rhetorical whipping boy.

“The president likes to over-criticize Chicago, but violence exists in every single corner of the universe,” said Julie Smolyansky, CEO of Lifeway, maker of cultured dairy products called kefir, which has production, marketing and headquarters operations in the city and in suburban Morton Grove, Ill.

But while noting along with her peers that most of Chicago continues to thrive as a business location despite the violence, Smolyansky is one Chicago-area CEO who is trying to reverse the flood of crime and economic desperation that grips so much of the city.

So, for instance, Smolyansky was a major ally in last week’s passage of rape-kit tracking and survivor-notification legislation by the Illinois legislature. She believes that domestic violence is a huge and under-recognized contributor to the overall plague of brutality in Chicago. Lifeway also works closely with a variety of community organizations that use nutritious meals as a way to battle poverty.

For his part, AMLI Residential’s Mutz is a key player with the All Stars Project, a privately funded, not-for-profit organization that runs after-school programs, job internships and other programs that aim to give economic opportunity to Chicago’s troubled youth.

“There’s no silver bullet or quick fix,” he said. “The business community has to get involved, in part to make government work more efficiently. Long-term, this is a serious problem for business too, with a huge impact in lost revenues, lower local tax revenues and declining infrastructure.”

Many CEOs believe that Chicago needs to rebuild sectors of its economy that helped build it into the City of Broad Shoulders. The Chicagoland Food & Beverage Network, for instance, represents the effort of many major consumer packaged-goods companies to nurture startups and provide employment training in the food business that was foundational to the growth of the city.

“We have some very exciting businesses and terrific companies that aren’t startups anymore–they’re getting traction, and we’re starting to see them show up with much broader distribution,” Reed said. “And if you can make it in Chicago, it’s not just a trend–it’s a great business.”

Sure enough: Method, the startup that has become a popular brand with American consumers for its natural cleaning products, pushed back against a grim economic backdrop by opening a factory in Chicago’s South Side Pullman Park neighborhood in 2015. A handful more of such CPG factories would go a long way toward helping the city solve the jobs–and crime–problems that have made Chicago the object of national fear and sympathy.

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