“Wow. In the past sixteen minutes I learned everything there is to learn for an MBA!” Thus spoke NACD President and CEO Ken Daly, in response to panelists Ken Duberstein (former Reagan chief of staff) and Norm Augustine (retired chairman and CEO of Lockheed Martin) expounding on their philosophies of “Courageous Board Leadership,” on the final morning of the annual NACD Corporate Governance Conference.
Augustine’s philosophy is straightforward: “Find quality people, tell them what you want, and get out of the way.” Quality people are those who have “enthusiasm, intelligence, and respect for others.”
The Honorable Kenneth M. Duberstein
Duberstein said that “a good leader empowers those around him to do their jobs better.” Leadership, he said, is “judgment, values, and integrity.” A good leader seeks “people who are independent but loyal to the mission.”
All panelists agreed that “professional skepticism” applied in the appropriate way, is healthy to the success of any enterprise. All believe that, while it is not necessary to agree with one another, board members should serve in a collegial fashion, get along, and respect each other.
What are the emerging legal trends for directors as we come to a close of 2010 and a year fraught with new laws and regulations?
The Honorable William B. Chandler, III, Chancellor, Delaware Court of Chancery
In today’s second plenary session, the Honorable William B. Chandler III from the Delaware Court of Chancery “held court” with William M. Lafferty, defense attorney with Morris, Nichols, Arsht & Tunnell LLP; Honorable Norman Veasey, senior partner with Weil, Gotshal & Manges LLP; and Jessica Zeldin, shareholder attorney, with Rosenthal, Monhait & Goddess, PA on “Emerging Legal Trends.”
The Honorable E. Norman Veasey
The general consensus among panelists is that the Delaware Law remains unchanged by the Dodd-Frank Act. Yes, there are now more compliance and disclosure regulations, but the judicial standards will not be affected. That said, directors should expect an increase in derivative litigation.
Lafferty, a practicing defense attorney in Delaware, stressed the importance of Delaware courts, despite the increase of lawsuits in other jurisdictions. Lafferty said that in Delaware, “you will get a fair opportunity to be heard” in a “non-jury trial” and in a “prompt and timely manner.”
William M. Lafferty
Lafferty also pointed out that boards can ensure that shareholder lawsuits be filed in Delaware with the adoption of a charter or bylaw provision. Jessica Zeldin, who jestingly said she was “the enemy in the room” as a shareholders’ attorney, countered that the use of a charter provision for this purpose may have an unintended backlash from shareholders.
Zeldin offered what she labeled the “special sauce” of how plaintiff attorneys go after boards. She highlighted M&A cases and situations where board and management have divergent interests from shareholders.
This led to a discussion about disclosure and ensuring that the proxy statement includes all required metrics. Otherwise, companies will be “on the hook” for the missing metrics thus triggering Revlon and other disclosure violations.
The panelists provided a wealth of information that all directors should hear. For those unable to attend the conference, all plenary sessions are available for viewing in our Conference-to-Go.
The panelists for “Just Do It! Board-Shareowner Communications for 2011” were CalSTERS’ Janice Hester Amey, The Corporate Library’s Nell Minow, Computer Associates’ Bill McCracken, and Broadridge’s Marvin Sims. The panel tackled the hot topic issues related to the Dodd-Frank Act such as say-on-pay, majority voting, executive compensation, and separation of the CEO and chairman. While consensus on these topics was elusive, panelists did agree that the next year will be a “bumpy ride” for both boards and shareholders.
The panelists agreed that the Dodd-Frank Act is intended to improve board-shareowner communications; however, the results will likely be mixed. For example, proxy access was a point of disagreement amongst the panelists; some believe it will help foster greater accountability to the shareholders, while others believe it is not well thought-out as presented by the SEC.
Conversation also turned towards executive compensation. Nell Minow believes “nothing is more central than compensation.” Countering Ms. Minow was Bill McCracken, who emphasized that there should not be over-reliance on compensation, as there is more to consider when anticipating the failure or success of the board.
Editor and Co-Founder, The Corporate Library
CEO, CA Technologies; Director, NACD
Portfolio Manager, California State Teachers’ Retirement System (CalSTRS)