As IBM’s “Watson” serves up recipes at South by Southwest, Chair and CEO Ginny Rometty is mixing things up on IBM’s board of directors with the naming of a “presiding director.” Will this change help Rometty deliver a winning formula?
Interestingly, IBM issued no announcement about the change.
Contacted by WRALTechWire early Tuesday, an IBM spokesperson declined comment other than to acknowledge the SEC filing.
IBM (NYSE: IBM) disclosed the board change Monday while its Jeopardy champion supercomputer “Watson” was displaying its cognitive computing abilities in Austin, Texas.
Rometty is betting big on Watson with more than $1 billion in investments (including a venture capital fund and a new headquarters for a Watson business team in New York). She is well aware that Big Blue is in trouble with revenue declining 5 percent in 2013. Her letter to shareholders in IBM’s annual report acknowledges shortcomings but also defends her strategy, such as selling the low-margin x86 server business to Lenovo for $2.3 billion.
IBM also is in the process of laying off workers worldwide as part of a $1 billion “rebalancing” plan, and it is facing protests from workers in China over their proposed transfer to Lenovo.
What Does Board Change Mean?
In the midst of all this, Watson offers some levity. The Associated Press reported on Watson’s show in Austin:
“What happens when you ask a computer to analyze thousands of recipes and match chemical flavor compounds that are most likely to surprise people —but also taste good? Recipes a human would have never dreamed up, says Carly DeFilippo of the Institute of Culinary Education, whose chefs created the recipes inspired by Watson. Input a region — be that Russia, Kansas or Ecuador — a main ingredient or two and a type of food, such as soup or pie. The output: Creations such as a creamy Czech pork belly moussaka with peas, parsley root, cottage cheese and dill, or Kenyan Brussels sprouts with sweet potato puree, ginger and almonds.”
So a similar approach to the board change might be:
“What happens when IBM asks former UPS chair and CEO Michael Eskew to take on a new role? Will he help Rometty find a winning strategy?”
The AP noted about Watson: “IBM is quick to point out that Watson is not meant to replace chefs. Rather, the project is meant to get people thinking about real-life applications for cognitive computing.”
In the SEC filing, IBM pointed out that the new position was created at Rometty’s suggestion.
The SEC Filing Language
What follows is the passage from the IBM filing that focuses on the Eskew appointment.
Note the responsibilities given Eskew. What does this mean for Rometty as the company leader? What does it mean for IBM?
Only time will tell.
“As noted below, the Directors and Corporate Governance Committee is responsible for the continuing review of the governance structure of the Board, and for recommending to the Board those structures and practices best suited to the Company and its stockholders. The Committee and the Board recognize that different structures may be appropriate under different circumstances. Mrs. Rometty serves as IBM’s Chairman and CEO, a structure which the Directors and Corporate Governance Committee and the Board believe is in the best interests of the Company and its stockholders. Additionally, and on the recommendation of Mrs. Rometty, the Board has amended the IBM Board Corporate Governance Guidelines, creating the role of Presiding Director, to be elected by the independent members of the Board, to become effective May 1, 2014. The Presiding Director will have the following responsibilities:
- Preside at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors
- Serve as liaison between the Chairman and the independent directors
- Approve information sent to the Board
- Approve meeting agendas for the Board
- Approve meeting schedules to assure that there is sufficient time for discussion of all agenda items
- Have authority to call meetings of the independent directors, and
- If requested by major stockholders, ensure that he or she is available, as necessary after discussions with the Chairman and Chief Executive Officer, for consultation and direct communication.
“The Directors and Corporate Governance Committee and the Board as a whole accepted the recommendation of Mrs. Rometty and believe that this leadership structure will provide the Company with the continued benefits of combining the leadership role of Chairman and CEO, while also recognizing the unique strengths and capabilities of IBM’s Board members. An independent Presiding Director with the clearly defined duties and responsibilities outlined above will further enhance the contributions of IBM’s independent directors, which have been and will continue to be substantial. Implementation of the Presiding Director position in May, after the 2014 Annual Meeting, will allow the Company to achieve all these objectives and to begin the new Board term with this process and organization.
“The independent directors of the Board have elected Michael L. Eskew to become the Company’s first Presiding Director, effective May 1, 2014. Mr. Eskew has significant global business, leadership and oversight experience as the former chairman and chief executive officer of United Parcel Service, Inc., the current chairman of the Annie E. Casey Foundation, and a board member of Eli Lilly and Company, 3M Company and United Parcel Service, Inc.
“In recent years, much attention has been given to the subject of risk and how companies assess and manage risks across the enterprise. At IBM, we believe that innovation and leadership are impossible without taking risks. We also recognize that imprudent acceptance of risk or the failure to appropriately identify and mitigate risks could be destructive of stockholder value. Senior management is responsible for assessing and managing the Company’s various exposures to risk on a day-to-day basis, including the creation of appropriate risk management programs and policies. IBM has developed a consistent, systemic and integrated approach to risk management to help determine how best to identify, manage and mitigate significant risks throughout the Company. The Board is responsible for overseeing management in the execution of its responsibilities and for assessing the Company’s approach to risk management. The Board exercises these responsibilities periodically as part of its meetings and also through the Board’s three committees, each of which examines various components of enterprise risk as part of their responsibilities. The Audit Committee periodically reviews the Company’s enterprise management framework, including the Company’s enterprise risk management processes. In addition, an overall review of risk is inherent in the Board’s consideration of the Company’s long-term strategies and in the transactions and other matters presented to the Board, including capital expenditures, acquisitions and divestitures, and financial matters. The Board’s role in risk oversight of the Company is consistent with the Company’s leadership structure, with the CEO and other members of senior management having responsibility for assessing and managing the Company’s risk exposure, and the Board and its committees providing oversight in connection with those efforts.”
The entire filing can be read online.
IBM employs an estimated 9,500 people across North Carolina.
This board news is big news for them and for IBM’s other 400,000 workers worldwide.
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