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NYSE Governance Services

Hot Topics in Legal/Regulatory

The Rise of the GC: From Legal Adviser to Strategic Adviser

April 11, 2016


As the scope of both enterprise risk oversight and corporate governance continues to expand and evolve, so does the role of the corporate general counsel. There is little argument that today’s GC has a much wider purview beyond the customary responsibility of serving as the organization’s chief legal officer and, quite often, its corporate secretary. As these roles shift, many organizations are finding that the perspective of the general counsel—who has been trained to analyze issues legally, ethically, and objectively, is uniquely positioned to bring additional insights to strategic decisions.

Managing Gatekeeper Anxiety

March 7, 2016

Michael W. Peregrine, McDermott Will & Emery

Corporate board members are encountering a new, perhaps unexpected and likely distracting oversight responsibility: managing the personal liability concerns of corporate “gatekeepers”. This new responsibility is the byproduct of three particular, intersecting developments: the Department of Justice enforcement focus on individual accountability; regulatory scrutiny of the role of corporate “gatekeepers” in connection with financial reporting and corporate compliance; and ongoing litigation addressing access to traditional individual defenses. The corporate board will want to pursue pro-active responses to these concerns in order to assure the continued engagement of its valued “gatekeepers”.

SEC Charges Software Company With FCPA Violations

February 1, 2016

From the SEC

The Securities and Exchange Commission today announced that software manufacturer SAP SE has agreed to give up $3.7 million in sales profits to settle charges that it violated the Foreign Corrupt Practices Act (FCPA) when procuring business in Panama.

An SEC investigation found that SAP’s deficient internal controls allowed a former SAP executive to pay $145,000 in bribes to a senior Panamanian government official and offer bribes to two others in exchange for lucrative sales contracts. The SEC charged the SAP executive, Vicente E. Garcia, in a separate enforcement action last year that included a parallel criminal action. Garcia has been sentenced to 22 months in prison.

ECJ Safe Harbor Opinion Has Implications for all Data Transfers out of Europe

October 9, 2015

By Lokke Moerel and Miriam Wugmeister, Morrison & Foerster LLP

A landmark decision is expected on Tuesday by the European Court of Justice ("ECJ") on the validity of the EU-US Safe Harbor Framework as an adequacy mechanism for European companies to transfer personal information to U.S. companies. If the ECJ follows the Advocate General’s ("AG's") opinion issues on September 23, 2015, in this matter, this will have implications for the other data transfer mechanisms currently in place. The ruling could fundamentally change the way in which European organizations are able to conduct business globally.


May 5, 2015

By Joseph J. Basile, Foley Hoag LLP

Shareholder litigation around M&A continues to be nearly inevitable. With 93% of those M&A deals valued over $100 million attracting at least one law suit in 2014, directors are understandably looking over their shoulders in the boardroom whenever they consider a deal of any significance. In this environment, Vice Chancellor Glasscock’s recent decision in Southeastern Pennsylvania Transportation Authority v. AbbVie Inc. is a refreshing reminder that it is the job of the board – not the stockholders and not the courts – to assess the risk inherent in M&A transactions.

2014 Year-End Update on Corporate NPAs and DPAs

January 9, 2015

From Gibson Dunn

In 2014, DOJ entered into 19 DPAs and ten NPAs, including a “restitution and remediation agreement,” a “criminal enforcement agreement,” and a “side letter agreement." Although three of the agreements classified as NPAs were issued under different names, the difference appears to be more one of form than function. DOJ’s “restitution and remediation agreement” with SunTrust Mortgage, Inc., its “side letter agreement” with Stryker Corporation, and its “criminal enforcement agreement” with Pilot Travel Centers, LLC, d/b/a/ Pilot Flying J (“Pilot Flying J”)–reminiscent of DOJ’s agreement, discussed in our 2012 Year-End Update, with Gibson Guitar–all have the nuts and bolts of standard NPAs. The Pilot Flying J agreement, however, goes a small step further than typical NPAs by attaching an unfiled criminal information, in lieu of a statement of facts, that DOJ is “prepared to file” in the event of a breach of the agreement. The varieties of NPAs and DPAs underscore that the practices are subject to bespoke agreements created by the 94 U.S. Attorneys’ Offices.

Recent Trends at the SEC Regarding Whistleblower Risk

May 4, 2015

By Daniel N. Marx, Foley Hoag LLP

Whistleblower risk is—and should be—a high priority for public companies as well as their officers and directors. In recent years, since the enactment of the Dodd-Frank Act, the SEC has strongly encouraged and financially incentivized whistleblowers to report potential wrongdoing by their own companies and colleagues. In a recent speech, Chairwoman Mary Jo White championed whistleblowers as providing “an invaluable public service,” called the whistleblower program at the SEC “a game changer” and referred to the SEC itself as “the whistleblowers advocate.”

Top 10 Enforcement Trends In 2015

May 4,2015

By Richard H. Girgenti, KPMG Forensic Advisory Services

Corporate directors are subject to increasing scrutiny and pressure from regulators to ensure that they are fulfilling their responsibility to provide effective oversight of their company’s management of regulatory risk. The challenge that directors face in fulfilling this responsibility is daunting when one considers the speed and volume of regulatory change, the multiplicity of government enforcement agencies who in any given matter are bringing state, federal and global regulatory enforcement actions, and the increasingly aggressive tactics used by government enforcers resulting in record fines and penalties, class action law suits, lost earnings and reputation damage. Understanding the mindset of those responsible for bringing regulatory enforcement actions and the issues that they are focusing on is essential for a director to fulfill his/her responsibility of effective oversight. Below is a top 10 list for 2015 of emerging or continuing areas of regulatory enforcement and government tactics and strategies that should be top of mind for every director.

SEC Hits Hard on Executive Perks

April 30, 2015

By Marc Fagel & Shailey Jain, Gibson Dunn & Crutcher

On March 31, the Securities and Exchange Commission filed a litigated securities fraud action against Andrew Miller, former CEO of Polycom, Inc., alleging that he received about $190,000 in undisclosed perquisites over the course of about three years. The SEC simultaneously announced a settlement with the company itself, assessing a $750,000 penalty – a relatively large sum for a case in which the undisclosed payments were quantitatively immaterial to the company’s financial statements. Indeed, the SEC’s complaint against the CEO highlighted his efforts to conceal his expenses from the company, and the SEC’s administrative order against Polycom recognized the company’s prompt remedial actions.

Three Practical Steps to Oversee Enterprise Risk Management (ERM)

April 2, 2015

By Scott Hodgkins, Steven B. Stokdyk, Joel H. Trotter of Latham & Watkins

Oversight of enterprise risk management, or ERM, continues to challenge boards and occupy a prominent place on the governance agenda. Effective ERM seeks to balance risk and opportunity while enhancing value-creation opportunities. Proxy advisors may recommend “against” or “withhold” votes against directors of companies that experience a material failure of risk oversight.

Lessons for Directors Considering Partnerships with Activists

March 27, 2015

By David E. Rosewater, Michael E. Swartz, Mark L. Garibyan and Brandon S. Gold of Schulte Roth & Zabel LLP

Pershing Square Capital Management, L.P. and Valeant Pharmaceuticals International, Inc.'s partnership in pursuit of an acquisition of Allergan, Inc. offers important lessons for directors of potential acquirers who are considering teaming up with activist investors for similar reasons. Takeaways from their experience can help avoid insider trading liability and offer alternate means for acquiring control over a target.

Seven Lessons For Boards From Securities Lawsuits

November 26, 2014

By Dorothy J. Spenner & Daniel A. McLaughlin, Sidley Austin LLP

As litigators who defend lawsuits arising from stock price declines and debt downgrades and defaults, we have seen what can go wrong with securities offerings. Lawsuits can arise from legitimate corporate scandals, but also from industry-wide market events like the 2008 credit crisis. And the ground rules are constantly shifting; a pending Supreme Court case, Omnicare, could hold directors liable for a statement of the company’s opinion (like a valuation or statement about legal compliance) even if they honestly believed it but lacked a reasonable basis.

2014 Annual Report To Congress On The Dodd-Frank Whistleblower Program

November 26, 2014

From the SEC

Pursuant to Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), the U.S. Securities and Exchange Commission (“Commission” or “SEC”) created a whistleblower program designed to encourage the submission of high-quality information to aid Division of Enforcement (“Enforcement”) staff in discovering and prosecuting violations of the federal securities laws. There are three integral components of the Commission’s whistleblower program—monetary awards, retaliation protection, and confidentiality protection—each of which is equally important to the continued success of the program. During Fiscal Year 2014, the Office of the Whistleblower (“OWB” or “Office”) administered the Commission’s whistleblower program with an eye to furthering each of these objectives. Fiscal Year 2014 was historic for the Office in terms of both the number and dollar amount of whistleblower awards.

Recent Decisions Confirm That Forum Selection Bylaws Are Best Considered on a Clear Day – But May be Beneficial Later as Well

October 6, 2014

By Michael G. O’Bryan, Kevin A. Calia, and James J. Beha II, Morrison & Foerster

“Exclusive forum” bylaws and charter provisions are a powerful tool for managing the risk of parallel corporate governance litigation against a company and its directors in multiple forums, allowing stockholders to bring such litigation but requiring that they bring it in one specified jurisdiction, typically the company’s state of incorporation. The Delaware Chancery Court, in its 2013 Chevron decision, held that such provisions are generally enforceable, and courts in several other states have dismissed stockholder litigation based on Delaware forum selection provisions. As a result, more companies are adopting such provisions.

2014 General Counsel Survey

September 19, 2014

From Grant Thornton LLP

A Grant Thornton LLP online survey, conducted in early 2014 by American Lawyer Media, served to gain further insight into in-house counsels’ assessment of the following top three threats uncovered in the 2013 survey:

  • Regulatory compliance related to corruption and bribery
  • Regulatory-related litigation and investigations
  • Cybersecurity and data privacy

The results show that in-house counsel are dealing with a lack of resources, which impacts their ability to proactively reduce and appropriately react to these risks.

Communicating Voluntary Disclosure of Corporate Political Spending

August 1, 2014

By Charles Nathan, RLM Finsbury

Over the past several years, judicial decisions involving Citizens United, McCutcheon and SpeechNow.org have lifted caps on total political contributions, and also expanded the number of avenues through and amounts which companies can lawfully contribute to political campaigns. Corporate donations can still be made to recipients like political action committees and third-party organizations (such as trade associations). Now, however, companies can also contribute directly to campaigns and to organizations that support candidates and political causes, including Section 501(c)(4) social welfare organizations.

Dodd-Frank At 4: Where Do We Go from Here?

July 23, 2014

From Morrison & Foerster

Where do we go from here? As we mark another milestone in regulatory reform with the fourth anniversary of the enactment of the Dodd-Frank Act, it strikes us that although most studies required to be undertaken by the Act have been released and final rules have been promulgated addressing many of the most important regulatory measures, we are still living with a great deal of regulatory uncertainty and extraordinary regulatory complexity.

The Evolution of Law Departments

June 4, 2014

By Bob Barker

With an increasingly competitive marketplace combined with a perpetually evolving regulatory landscape and increased enforcement efforts, it is imperative – now more than ever – for organizations to be navigated by trusted legal counsel. Historically, the legal department has been composed of a General Counsel, attorneys with specific areas of experience, and numerous outside counsel contracted as needed. However, in the last decade, organizations have begun maximizing the value of the legal department by significantly reducing dependence on outside counsel. We surveyed industry-leading General Counsel to understand exactly how in-house legal departments are evolving.

GCS in the Boardroom

April 26, 2014

From BarkerGilmore

NYSE Governance Services, Corporate Board Member and BarkerGilmore collaborated to survey the opinions of directors who serve or chair the company’s nominating/governance committee, board chairs, and CEOs of U.S.-based publicly traded companies. The survey analyzes their opinions about the value of the corporate general counsel to the executive team and reports on perceptions of the value of general counsel as outside board members of other companies.

Maximizing Value: Considerations for Directors of a Company in Distress

February 3, 2014

Bby Michael H. Torkin, Sullivan & Cromwell LLP

The U.S. corporate default rate currently is below historical averages, hovering slightly below 2008 pre-crisis levels. Restructuring professionals, however, are cautioning that a rising interest rate environment, exacerbated by the Fed’s reduction in fiscal stimulus, could lead to a softening of the ongoing robust multiyear credit cycle. In addition, it has been reported that the Department of Treasury’s Office of the Comptroller of the Currency has “suggested” to a number of U.S. institutional lenders that they begin to more closely scrutinize credit standards – focusing on reigning in issuances of covenant-light high yield debt as well as tightening leverage ratios. If credit tightens, leveraged companies that have successfully accessed traditional credit markets could face significant challenges.