Dodd-Frank Reflects ‘New Normal’–“Boards Are the Problem”

Dodd-Frank Reflects 'New Normal'--"Boards Are the Problem"“We’re seeing a sea-change in the environment of shareholder empowerment,” said Holly Gregory, Weil Gotshal partner and governance expert. “The Dodd-Frank bill accelerates a fundamental change, a new normal in the balance of governance power. “ She went on to note that the eighth anniversary of Sarbanes Oxley, enacted during the aftermath of WorldCom and Enron debacles,  boards were seen as the solution to the failures in corporate accountability. “In sharp contrast the new legislation reflects the view that boards are the problem and shareholders must be empowered to hold boards accountable.”

Gregory made these remarks on a National Association of Corporate Directors and Weil Gotshal webinar attended by hundreds of directors on Friday as boards try to gain a better understanding of the requirements that the new legislation that President Barack Obama signed into law on July 21, 2010.

“I want to emphasize that the theme within the legislation is that boards are the problem,” said Gregory.

Boards are well advised to recognize that the implementation of the legislation will fundamentally change their interactions with shareholders.  For directors who have eschewed any contact with shareholders, they must engage with shareholders in meaningful ways to elicit their support.  The sooner and more intelligently that they begin this dialogue, the better for them.

How Will Directors Respond to SEC’s Broker-Vote Rule?

The SEC’s July 1 decision to eliminate broker discretionary voting in directors’ elections could have significant consequences when it takes effect in the 2010 proxy season.  In a press release last week, the Conference Board suggested board members analyze the company’s current vulnerabilities with regard to activist investors and to “regularly communicate in compliance with Regulation FD and insider trading rules with the 10 largest institutional shareholders to inform them of the business strategy, including new efforts for improving shareholder value.” Continue reading

Directors Need to Step Up to Shareholder Communication

In his entreaty to his fellow senators to support his Shareholder Bill of Rights Act of 2009, Charles Schumer notes that “one of the central causes of the financial and economic crises… is the widespread failure of corporate governance.” As he summarizes it, “too many corporate boards neglected their most fundamental responsibility—to prioritize the long-term health of their firms and their shareholders, and oversee management accordingly.” Continue reading

Shareholder Meetings Should Prompt Revitalized Communication

Many boards heaved a collective sigh of relief after this year’s annual shareholder meeting. Many, but not all. At the Citigroup annual meeting, directors fielded questions for six hours, allowing shareholders to express their frustration and pain over the devastating loss in shareholder value.

Meanwhile, in Charlotte at the Bank of America annual meeting, shareholders stripped Ken Lewis of his Chairman mantle. Given these circumstances, most directors in this season of shareholder meetings felt lucky to escape with a random interruption by a shareholder gadfly or an extended question that became a chance to pontificate during the Q&A period. Continue reading