Boards of Directors

Subscribe to Boards of Directors

Monday’s Business Roundtable Statement on the Purpose of a Corporation is significant, mostly because it opens the door for more discussion of the idea of “corporate purpose”.  While there are many ways that conversation could go, there are good reasons to believe the discussion will lead to a shift in corporate governance towards more authority and responsibility for corporate boards.  Specifically, boards will be expected to lead on corporate social responsibility issues.…
Continue Reading

Institutional investors are howling for US public companies to focus more on the long-term.[1]  This is unsurprising. Long-term focused companies produce significantly better results over time, reporting far greater revenue growth with less volatility, far higher levels of economic profit, and greater total return to shareholders.[2] So if you are holding stock for a long time, a long-term focus for your portfolio companies is critical.…
Continue Reading

Last week, the Delaware Supreme Court reversed the Delaware Court of Chancery’s dismissal of a Caremark claim[1] that arose out of the Blue Bell ice cream listeria outbreak in the mid-2010s.  See Marchand v. Barnhill, No. 533, 2018 (Del. June 18, 2019).  The Delaware Supreme Court’s opinion in this closely watched case provides useful guidance to directors on the proper role of the board in overseeing risk management.…
Continue Reading

Recently, Vanguard updated its Vanguard Fund proxy voting guidelines, disclosing a proxy voting policy relating to what Vanguard considers to be overboarded directors, based on the evolving role of directors and its assessment of the time and energy required to effectively fulfill director responsibilities. …
Continue Reading

The German Federal Court of Justice (Bundesgerichtshof) recently had the opportunity to clarify a number of important practical questions of corporate law in connection with asset disposals, the allocation of responsibilities among directors and transactions concluded with board members. We summarize the three relevant decisions from 2018/2019 below.…
Continue Reading

In late March 2019, the Hertz Corporation and Hertz Global Holdings, Inc. (collectively, “Hertz”), filed two complaints (the “Damages Proceedings”) against its former CEO, CFO, General Counsel and a group president seeking recovery of $70 million in incentive payments and $200 million in consequential damages resulting from Hertz’s 2015 decision to restate its financial statements and an ensuing SEC settlement against Hertz and federal class action lawsuit (which was dismissed).  At the same time, the defendants in those actions each filed separate complaints (which have been consolidated in the Delaware Chancery Court) demanding advancement of their legal fees in the Damages Proceedings (the “Advancement Proceedings”).  The litigation between Hertz and its former executives raises novel questions about whether executives have a legally cognizable duty to set the right “tone at the top” and the consequences if they fail to do so.  The litigation also raises important and interesting questions regarding clawbacks and indemnification.[1]    …
Continue Reading

In the wake of the Securities and Exchange Commission’s proposed clawback rules under the Dodd-Frank Wall Street Protection and Consumer Reform Act of 2010, many US public companies began implementing clawback policies.[1]  Although the proposal was originally issued in 2015 and the SEC has yet to adopt final clawback rules, instances of alleged executive misconduct in recent years has begun leading to claims under the clawback policies.  Increased scrutiny from legislators, institutional investors, shareholders and the general public has put significant pressure on boards of directors and compensation committees to exercise their rights to claw back compensation in the event of a corporate scandal.[2]

This post discusses two recent developments related to the exercise of compensation clawbacks.  The first confirms that boards should have broad discretion in deciding when to exercise a clawback, and the second discusses important indemnification and advancement issues that can arise in connection with a claim for the enforcement of a clawback policy.…
Continue Reading

As discussed in our most recent blog post, on April 30, 2019, the Criminal Division of the U.S. Department of Justice (“DOJ” or “the Department”) announced updated guidance for the Criminal Division’s Evaluation of Corporate Compliance Programs (“the Guidance”).  The Guidance is relevant to the exercise of prosecutorial discretion in conducting an investigation of a corporation, determining whether to bring charges, negotiating plea or other agreements, applying sentencing guidelines and appointing monitors.[1]  The Guidance focuses on familiar factors: the adoption of a well-designed compliance program that addresses the greatest compliance risks to the company, the effective implementation of the company’s compliance policies and procedures, and the adequacy of the compliance program at the time of any misconduct and the response to that misconduct.  The Guidance makes clear that there is no one-size-fits-all compliance program and that primary responsibility for the compliance program will lie with senior and middle management and those in control functions.…
Continue Reading

The Delaware Supreme Court issued a decision last week that further clarifies when MFW’s “dual protections” must be put in place in order to qualify the transaction for deferential business judgment review.  See Olenik v. Lodzinski, No. 392, 2018 (Del. April 5, 2019).

Under MFW, business judgment review applies to a merger proposed by a controlling stockholder conditioned “ab initio” on two procedural protections: (1) the approval of an independent, adequately-empowered special committee that fulfills its duty of care; and (2) the uncoerced, informed vote of a majority of the minority stockholders.  If the controlling stockholder does not commit to these dual protections ab initio, i.e., from the beginning of negotiations, then the traditional entire fairness standard applies instead.[1]…
Continue Reading

On March 25, 2019, partners Lev Dassin and Arthur Kohn participated in a webcast hosted by The Conference Board, entitled “Corporate Prosecutions: What Companies, Boards and Executives Need to Know.”  Daniel Gitner, a partner at Lankler Siffert & Wohl, also participated on the panel.

The panelists and moderator Doug Chia, executive director of The Conference Board, began by discussing corporate prosecutions generally, including the history of corporate prosecutions and how DOJ attitudes regarding corporate prosecutions have changed over time.  Dassin explained that the DOJ has more recently refocused its attention on prosecuting individuals engaged in corporate misconduct.…
Continue Reading