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1、CONFIDENTIALThis report is solely for the use of client personnel.No part of it may be circulated,quoted,or reproduced for distribution outside the client organization without prior written approval from McKinsey&Company.This material was used by McKinsey&Company during an oral presentation;it is no
2、t a complete record of the discussion.June 30,2000Practices of Practices of Board of Directors in Board of Directors in Leading Global Leading Global Insurance CompaniesInsurance CompaniesDominic Barton and Jaehong ParkThis presentation will be in three parts:A.Profile 4 leading global insurance com
3、pany boardsB.Provide you with key principles of effective board governance based on this researchC.Outline potential financial benefit of getting good board governance in placeOVERVIEW1000630.Practices of BOD in Leading GICThis presentation will be in three parts:A.Profile 4 leading global insurance
4、 company boardsB.Provide you with key principles of effective board governance based on this researchC.Outline potential financial benefit of getting good board governance in placeOVERVIEW2000630.Practices of BOD in Leading GICSTRATEGIC CONTROL MAPTop insurance globalizers,1999Performance:Market-to-
5、Book(Ebv)RatioSize:Book Value(Ebv)of Common Equity($Billions)201050100$150ShapersSpecialistsConsolidatorsIncumbentsAllianz&AGFMunich ReAXA-UAP&GuardianZurichSkandiaAegonGeneraliAIGSwiss ReAverage middle-tier playerPrudential UKKorean Insurers3000630.Practices of BOD in Leading GICA.PROFILES OF BOARD
6、 OPERATIONS OF 4 LEADING GLOBAL INSURANCE COMPANIESLEADING GLOBAL INSURANCE COMPANIESMarket CapitalizationUS$billion,Dec 1999AIGAllstateTravelers P&C(division of Citigroup)Allianz1673919134000630.Practices of BOD in Leading GICAll U.S.stock companies U.S.insurance industry U.S.insurance industry wit
7、hout AIG1.02.03.04.05.06.0Market/bookHistorical market-to-book value19901999AIGAIG-THE HIGH PERFORMER5000630.Practices of BOD in Leading GICBoard structure18 directors 4 committeesProfile of board members8 external directors including 3 CEOs and business Vice Chairman,a former World Bank president10
8、 internal directors(3 of which are from subsidiary companies of AIG)CompensationNon-executive outside directors receive 400 shares of AIG common stock a yearAlso,receive an option to purchase 1,000 shares of AIG common stock a yearChairmanIndependent public accounts as auditorExperienced business le
9、aders and specialists Strong incentive based compensation structureRecommends to the Board the nomination of independent public accountant as auditorReviews the performance and scope of audit provided by the independent accountantsAudit CommitteeStock option&compensation committeeFinance committeeEs
10、tablishes the compensation of the CEO and sets policy for compensation for senior managementAdministers the various AIG stock option and other compensation plansOversees the financial affairs and investment activities of AIG and its subsidiariesEnsure ethics&transparencyExecutive committeeServes as
11、a nominating committeeActs for the board between board meetingsMonitor company performanceEnsure superior managementGovern board effectivelyShape long-term strategic direction6000630.Practices of BOD in Leading GICExternal Directors-8Maurice Greenberg-Chairman&CEO of AIGLeslie Gonda-Chairman of Inte
12、rnational Lease Finance Corp(wholly owned subsidiary of AIG)Evan Greenberg-President&COO of AIGEdward Matthews-Vice Chairman of Investment&Financial Service at AIGHoward Smith-Executive VP,CFO and Controller at AIGThomas Tizzio-Senior Vice Chairman of General Insurance,AIGEdmund Tse-Vice Chairman of
13、 Life Insurance at AIGFrank Wisner-Vice Chairman of External Affairs at AIGEli Broad-Chairman&CEO of SunAmerica(wholly owned subsidiary of AIG)Jay Wintrob-Vice Chairman&COO of SunAmerica(wholly owned subsidiary of AIG)Bernard Aidnoff-Senior Counsel,Sullivan&CromwellPei-Yuan Chia-Retired Vice Chairma
14、n of Citibank,N.A.Marshall Cohen-Former CEO of Molsons Brewery and Counsel of Cassels Brock&BlackwellBarber Conable-Retired,former President of World BankMartin Feldstein-Professor of Economics at Harvard UniversityEllen Futter-Director of Bristol-Myers Squibb CompanyCarla Hills-Chairman&CEO of Hill
15、s&CompanyFrank Hoenemeyer-Retired Vice Chairman of Prudential InsuranceInternal Directors-10BOARD PROFILE7000630.Practices of BOD in Leading GICMajority of non-executive directorsHigh power knowledge and experience on the boardCompensation linked to the enhancement of stockholder valueChairmanEnsure
16、 ethics&transparencyBoard structure19 directors5 committeesProfile of board members11 external directors includinga former president of US,7 CEOs 8 internal directorsCompensationBonus awards to executives are not only short term cash but also long term incentives related directly to the enhancement
17、of shareholdervalueEnsure ethics and risk profilesMonitor company performanceEnsure superior managementShape long-term strategic directionGovern board effectivelyActs for Board if schedule conflicts existRecommends candidates to the BoardPeriodically assesses the performance of the BODRepresents the
18、 full BOD in matters relating to compensation of company officersMonitors company performanceReviews issues relating to funding requirements,significant investments,complex financial instruments and credit rating issuesReviews the companys accounting policiesReviews and approves the indepen-dence of
19、 certified pubic accountantReviews the audited financial statementsReviews and approves the companys compliance programsExecutive committeeNominations,compensation&corporate governance committeeEthics and public affairs committeeFinance committeeAudit committee8000630.Practices of BOD in Leading GIC
20、External Directors-11Sanford Weill-Chairman of Board&CEO of TravelersKenneth Bialkin-Director of Travelers Property Casualty Corp.James Dimon-President&COO of Travelers Property Casualty Corp.Thomas Jones-Vice Chairman of Travelers Property Casualty Corp.Robert Lipp-Vice Chairman to Travelers Proper
21、ty Casualty Corp.Deryck Maughan-Vice Chairman of Travelers Property Casualty Corp.Dudley Mecum-Director of Travelers Property Casualty Corp.Arthur Zankel-Director of Travelers Property Casualty Corp.Michael Armstrong-Chairman&CEO of AT&T Corp.Judith Arron-Executive Director&Artistic Director of Carn
22、egie Hall Corp.Joseph Califano Jr.-Senior Partner at Dewey Ballantine LLP(law firm)Leslie Disharoon-Chairman of the Board of John Hopkins Health System EndowmentGerald Ford-Ex-President of U.S.Ann Dibble Jordan-Consultant&Board of Directors of Johnson&Johnson Corp.Michael Masin-Vice Chairman&Preside
23、nt International and Director of GTE Corp.Andrall Pearson-Chairman&CEO of Tricon Global Restaurants,Inc.&Professor at Harvard Business SchoolFrank Tasco-Retired Chairman of Board&CEO of TravelersLinda Wachner-Chairman,President,&CEO of Warnaco Group&Warnaco Inc.Joseph Wright Jr.-Chairman,CEO and Dir
24、ector of AmTec,Inc.BOARD PROFILEInternal Directors-89000630.Practices of BOD in Leading GICEnsure ethics&transparencyMonitor company performanceEnsure superior managementBoard structure13 directors 3 committeesProfile of board members12 external directors including an IT specialist,CEO of BellSouth,
25、COO of Sprint,and CEO of H,etc.1 internal directorCompensationCompensation and succession committee composed entirely of external directorsLong-term cash&equity are major components of executive compensationChairmanAdvises the Board on the appointment of independent auditorsReviews recommendations b
26、y internal as well as external auditorsReviews annual financial statementsMay conduct independent inquiriesRecommends nominees for board of directors&CEODetermines the criteria for the assessment of the performance of the Board and CEOConducts periodic reviews of the performance of CEO and executive
27、sRecommends nominees for certain officer positionsAdministers Allstate executive compensation,stock option and benefits planSmall boardMajority of external directors8 CEOs,IT specialist,and CEO of e-commerce company on the boardCompensation linked to long-term performance of the companyAudit Committ
28、eeNominating&governance committeeCompensation&succession committee10000630.Practices of BOD in Leading GICExternal Directors-12Edward Liddy-Chairman,President&CEO of AllstateDuane Ackerman-Chairman,President&CEO of BellSouth CorpJames Andress-Chairman&CEO of Warner Chilcott PLC(pharmaceuticals)Warre
29、n Batts-Chairman&CEO of Tupperware Corp.Edward Brennan-Former Chairman of Board,President&CEO of Sears,Roebuck&Co.,Director or AMR Corp.,Morgan Stanley Dean Witter&Co.,etc.James Denny-Managing Director of William Blair Capital Partners(private equity fund)James Farrell-CEO of Illinois Tool Works Inc
30、.Ronald LeMay-President&CEO of Waste Management Inc.Michael Miles-Special limited partner of Forstmann Little&Co.(investment banking co.)John Riley-Chairman,President&CEO of Coopers Industries Inc.(electrical products/hardware company)Joshua Smith-Chairman&CEO of Maxima Corp.(technology systems)Judi
31、th Sprieser-Executive VP of Sara Lee Corp.(consumer packaged goods)Mary Alice Taylor-Chairman CEO of HomeGBOARD PROFILEInternal Directors-111000630.Practices of BOD in Leading GICSupervisory board Structure33 board members3 permanent committeesMultiple provisional committees(less than 7)Profile of b
32、oard members23 elected by shareholders10 elected by employees,including labor union membersMeetings24 times a yearChairmanMajority of outsiders on the boardHigh power knowledge and experience on the boardFocusing on corporate strategy and people managementDetermines management compensationSelects th
33、e members of the management boardPersonal affairsAsset managementIntermediaryDefines asset management policyOverseas important investment decisionsPerforms problem solving when emergency situation occursActs for supervisory boardMonitor company performanceEnsure superior managementProvisional commit
34、teesStipulates balance sheet auditorOverseas annual audit processShape long-term strategic directionEnsure ethics&transparencyGovern board effectively12000630.Practices of BOD in Leading GICKarl Miller-Salaried employee,Frankfurter Versicherungs-AGNorbert Blix-Salaried employee,Allianz Versicherungs
35、-AGRenate Daniel-Hauser-Branch Manager,Allianz Versicherungs-AGReiner Lembke-Salaried employee,Allianz Versicheruns-AGFrank Ley-Salaried employee,Allianz Lebensversicherungs-AGAlfred Mackert-Salaried employee,Vereinte Krankenversicherung AGDr.Sylvia Maser-Head of department,Allianz Lebensversicherun
36、gs-AGReinhold Pohl-Custodian,Allianz Lebensversicherungs-AGLienhardt Reich-Salaried employee,Allianz Versicherung-AGRoswitha Schiemann-Branch Manager,Allianz Versicherungs-AGElected by employees-10BOARD PROFILE13000630.Practices of BOD in Leading GICElected by shareholders-23Dr.Klaus Liesen-Chairman
37、 of the Supervisory Board Ruhrgas AGDr.Wolfgang Rller-Former Chairman of the Supervisory Board Dresdner Bank AGDr.Alfons Titzratz-Chairman of the Supervisory Board Dresdner Bank AGDr.Karl-Hermann Baumann-Chairman of the Supervisory Board Siemens AGDr.H.C.Marcus Bierich-Chairman of the Supervisory Bo
38、ard Rober Bosch GmbHDr.Horst Burgard-Former Chairman of the Supervisory Board Deutsche Bank AGKlaus Carlin-Member of the Central Executive Committee Commerce,Bank and Insurance Workers Union(HBV)Betrand Collomb-President Director General LafargeDr.Werner H.Dieter-Former Chairman of the Board of Mana
39、gement Mannesmann AGJrgen Dormann-Chairman of the Board of Management Hoechst AGDr.Christoph Foster-Attorney,Allianz Versicheruns-AGDr.Hermann Franz-Former Chairman of the Supervisory Board Siemens AGFriedhelm Gieske-Former Chairman of the Board of Management RWE AGDr.Rudolf Hickel-Commerce,Bank and
40、 Insurance Workers Union(HBV)Ulrike Mascher-Member of the German Federal Parliament,Parliament permanent secretary,Commerce,Bank and Insurance Workers Union(HBV)Dr.Wolfgang Mller-Former Member of the Board of Management Allianz AktiengesellschaftBernd Pischetsrieder-Former Chairman of the Board of M
41、anagement Bayerische Motoren Werke AGGerhard Renner-Member of the Federal Executive Committee German Union of Commercial,Clerical and Technical Employees(DAG)Edzard Reuter-Former Chairman of the Board of Management Daimler Benz AGDr.Albrecht Schmidt-Speaker of the Board of Management,Bayerische Hypo
42、-und Vereinsbank AGDr.Manfred Schneider-Chairman of the Board of Management Bayer AGDr.Hermann Scholl-Chairman of the Executive Board Robert Bosch GmbHJrgen E.Schrempp-Chairman of the Board of Management Daimler Chrysler AGBOARD PROFILE(CONTINUED)14000630.Practices of BOD in Leading GICThis presenta
43、tion will be in three parts:A.Profile 4 leading global insurance company boardsB.Provide you with key principles of effective board governance based on this researchC.Outline potential financial benefit of getting good board governance in placeOVERVIEW15000630.Practices of BOD in Leading GICB.KEY PR
44、INCIPLES OF BOARD EFFECTIVENESS1.1.Good board governance is built around maximizing shareholder value and improving competitive position2.2.Best practice boards have 5 core functionsEnsure risk profile,ethics,transparencyMonitor company performanceEnsure superior managementShape long term strategic
45、directionGovern board effectively16000630.Practices of BOD in Leading GICBest practice corporate governanceBest practice corporate governanceBest practice corporate governanceSUCCESSFUL COMPANIES ARE GOVERNED TO MAXIMIZE VALUE TO ALL SHAREHOLDERS AND TO IMPROVE COMPETITIVE POSITIONValue maximization
46、 to Value maximization to Value maximization to all shareholdersall shareholdersall shareholdersExpert Expert management management of companyof companyIndependent Independent oversight of oversight of managementmanagementTransparency Transparency to to stakeholdersstakeholders17000630.Practices of
47、BOD in Leading GICShareholder Shareholder value value maximization maximization through clear through clear separation of separation of roles and roles and responsibilities responsibilities between between management management and the Boardand the BoardFocus of discussion Demand value Demand value
48、maximization and maximization and protection of rightsprotection of rights Represents rights of Represents rights of Represents rights of shareholdersshareholdersshareholders Oversees management and Oversees management and Oversees management and checks against misconductchecks against misconductche
49、cks against misconduct Help shape long-term Help shape long-term Help shape long-term strategystrategystrategy Ensure proper development Ensure proper development Ensure proper development and evaluation of leadershipand evaluation of leadershipand evaluation of leadership Responsible for day-to-Res
50、ponsible for day-to-day operation without day operation without intervention from ownersintervention from owners Experts in their industry Experts in their industry and functionand functionTHE BOARD OF DIRECTORS REPRESENTS THE SHARE-HOLDERS WITH A FOCUS ON ENHANCING SHAREHOLDER VALUEShareholdersShar