Ten Thoughts for Ordering Governance Relationships in 2010

Posted by Holly Gregory, Weil, Gotshal & Manges LLP, on Monday January 11, 2010 at 9:21 a.m.

Editor's Note: Holly Gregory is a Corporate Partner specializing in corporate governance at Weil, Gotshal & Manges LLP. This post is based on a Weil Gotshal client memorandum by Ms. Gregory, Ira M. Millstein and Rebecca C. Grapsas . The complete memorandum is available here .

As the 2010 proxy season nears, we encourage both boards and shareholders to rethink the contours of their relationship. We expect institutional shareholders to have greater influence in director elections this year given the increasing prevalence of majority voting requirements and, for the first time, the absence of discretionary voting by brokers of uninstructed shares. Institutional shareholder power will expand further in 2011 if the SEC moves forward with proxy access rules and Congress enacts legislation mandating majority voting and “say on pay.” In this environment, boards and shareholders will be well served by considering in an open way how this shift in influence should be reflected in changes in behavior.

For boards , the challenge will be to understand the key concerns of the company's shareholder base and get out ahead on these issues. Boards should also consider whether company disclosures and communications can be improved to better inform shareholders and encourage them to make company-specific decisions through a long-term lens. This will require devoting more attention, resources and creativity to communications and relations with shareholders. Boards that are insensitive to shareholder concerns risk bruising election battles, while providing further inducement for the homogenized governance mandates currently percolating in Washington.

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The Board's Role in Succession Planning

Posted by Jeffrey Stein, King & Spalding LLP, on Wednesday January 20, 2010 at 9:06 am

Editor's Note: Jeffrey Stein is a partner in the Corporate Practice Group at King & Spalding LLP. This post is by Mr. Stein, Bill Baxley and Rob Leclerc , and relates to a report on a recent meeting of the Lead Director Network, which is available here.

One of the most challenging aspects of the recent financial crisis has been the significant increase in the number of CEOs who have left their companies unexpectedly or on short notice. Despite this trend and the widespread view that succession planning is a critical board function, directors of many public companies are not fully satisfied with the effectiveness of their succession planning.

Against this background, the Lead Director Network, a group of lead directors, presiding directors and non-executive chairmen from many of America's leading companies, met recently to discuss the board's role in succession planning. Following this meeting, King & Spalding and Tapestry Networks have published the ViewPoints report here to present highlights of the discussion that occurred at the meeting and to stimulate further consideration of this subject.

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http://blogs.law.harvard.edu/corpgov/2010/01/20/the-board%e2%80%99s-role-in-succession-planning/#more-6488

Board of Directors Meeting Agendas

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on Friday January 8, 2010 at 9:25 am

Editor's Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisition and matters affecting corporate policy and strategy. This post is based on a Wachtell, Lipton, Rosen & Katz client memorandum by Mr. Lipton, Steven A. Rosenblum , and Karessa L. Cain .

The numerous legislative and regulatory initiatives adopted or proposed in response to the economic crisis, and the increased corporate governance activism by shareholders and their advisory organizations, raise the question of what are the key matters that a board should be considering on a regular basis. As a supplement to our recent post on the Forum, entitled Some Thoughts for Boards of Directors in 2010 , we developed the following list of matters. Some matters could be visited once a year; and some should be visited at each meeting. Some companies will need to add matters to this list in view of relevant business, corporate governance or other issues specific to their companies. Boards should also consider the extent to which some of these matters should be addressed more fully by board committees. Each company should tailor the scope of, and the allocation of time to, the matters, and the frequency of their consideration, to its particular circumstances.
-Performance of the business, including comparison to budget and peers
-CEO succession and exposure of senior executives to the board.

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http://blogs.law.harvard.edu/corpgov/2010/01/08/board-of-directors-meeting-agendas/#more-6313

Posted by Benjamin W. Heineman, Jr., Harvard Law School Program on Corporate Governance and Program on the Legal Profession, on Wednesday January 27, 2010 at 9:10 am

Editor's Note: Ben W. Heineman, Jr. is a former GE senior vice president for law and public affairs, a senior fellow at Harvard University's schools of law and government and trustee of the Committee for Economic Development. This post is based on a Policy Brief by Mr. Heineman published by the Committee for Economic Development, which is available here . This article also appeared in Business Week Online .

The business community faces a crisis in confidence both in its own ranks and in the broader society. Many are asking: how can corporations govern themselves more effectively - and truly be held accountable?
One answer is increased public regulation. The origins of the Great Recession include bad business decision-making caused in no small part by excessive and poorly structured corporate compensation. Not surprisingly, there are now energetic public policy debates about the governance both of the financial sector (a variety of measures are being considered to ensure safety and soundness) and of all publicly held corporations (with focus on an enhanced shareholder role and mandated compensation and risk processes.

http://blogs.law.harvard.edu/corpgov/2010/01/27/restoring-trust-in-corporate-governance/#more-6916

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