In June, NACD convened general counsels (GCs) from across the country for a one-day meeting in New York City on the role of the GC in supporting boards of directors. Program panels consisted of directors, GCs, and subject-matter experts on legal issues affecting board decision making.
The Evolving Role of the GC
According to Richard D. Buchband, senior vice president, GC, and secretary for ManpowerGroup, the GC must clear the way for the board to focus on strategic matters. Though each company is different, long past are the days when the GC’s role was to take minutes in the corner of the boardroom.
A clue to how a general counsel will be perceived in any given company may be found in the interview process, when a candidate should take note of whether board members participate. Also, in assessing how the board will utilize the GC, a candidate or sitting GC should be aware of whether board members hail from countries in which the GC traditionally takes a smaller role, reporting not to the CEO but to the CFO, according to Yvonne E. Schlaeppi, director for Stallergenes Greer and former GC for several companies, including Johnson Controls Europe.
Once connected to the board, the general counsel can be of value for many facets of the enterprise, leveraging his or her unique position in the organization to assimilate information and data from across the business. Several suggested that the general counsel should always offer a recommendation when providing input to the board. In fact, judgment is a critical part of what a GC offers the board. “The crux of a GC being a strategic advisor to the board is having your good judgment on the complex mix of puzzles which general counsels deal with all the time—including commercial, legal, and people challenges—recognized and valued,” said Schlaeppi.
Further, the career of Robert Bostrom, senior vice president, GC, and corporate secretary for Abercrombie & Fitch Co., illustrates how the general counsel can be the glue for an organization in turmoil. During a prior role as general counsel at Freddie Mac, he saw several CEOs and CFOs come and go around the time of the 2008 financial crisis and when the government appointed a conservator. Today, Bostrom co-chairs Abercrombie’s enterprise risk management group and leads the organization’s crisis management team, taking point on risks affecting the company’s reputation.
Moving the Board Forward
Of course, given that the GC is often the most knowledgeable person about issues of corporate governance, the GC brings tremendous value by providing advice and counseling on governance matters. Gillian A. Hobson, partner, capital markets and mergers & acquisitions at Vinson & Elkins, pointed out that such governance matters include issues such as independence, diversity, proxy access and others outlined in Commonsense Corporate Governance Principles, published in 2016 by a group of leading executives and investors. In addition, in order to move a board forward, the general counsel has a number of specific tools at his or her disposal. The general counsel can:
Suggest formats for a board evaluation and skills matrix;
Bring outside information (such as NACD’s Blue Ribbon Commission Reports) and outside perspectives (such as those from ISS, BlackRock and others) to the board; or
Develop relationships with board members, including board leadership and more progressive board members.
William E. McCracken, director for MDU Resources Group and for NACD, suggested that when boards get “stuck,” the GC is in a “unique position to lift the board’s vision up to see what else is happening out there.” Steven Epstein, corporate partner and co-head of mergers and acquisitions at Fried Frank, agreed. “The GC will be up to speed on the general M&A landscape and the latest thinking of the courts and will be well-positioned to combine that knowledge with the business objectives of the company, which is extremely valuable to the board.”
No Surprises and Keep It Short
Several times throughout the day, panelists espoused the best practice of imparting “no surprises” to the CEO or the board. For example, if the GC sets up lunch with a board member, Buchband suggests a check in with the CEO after the meeting is set but before the lunch takes place. “I ask the CEO if there are any issues he would like me to raise or discuss,” said Buchband. Keeping the board informed on matters affecting governance is equally important.
Also, all panelists reiterated how important it is for the GC to keep materials short and topline for the board. “We can be victims of our own desire to be thorough,” noted Buchband.
Enterprise Risk Management and Compliance Make the GC’s Job Easier
The role of risk assessment is not to avoid all risk, but rather to identify and manage risk, said George J. Terwilliger III, partner at McGuire Woods. In fact, Bostrom noted that enterprise risk management at Abercrombie helps him and the company prioritize risks. If a risk rises to the top, then a cross-functional, high-level team has agreed that it should be there, and he doesn’t have to champion the cause as a lone voice.
Daniel Trujillo, senior vice president and chief ethics and compliance officer for Wal-Mart International, stressed that a culture of compliance must start at the top. A program must then be implemented that is effective, consistent, data driven, efficient and sustainable. Terwilliger echoed that compliance has to be part of the fabric of the company, with the compliance council acting as a convener rather than as “internal police.” Today, predictive analytics help his team spot trouble early at Walmart, at the country or even the store level.
Consider Cross-Border Complexities
Just as Wal-Mart operates globally, so too do companies like Abercrombie. David H. Kistenbroker, global co-head of white collar and securities litigation at Dechert, reminded the audience to consider cross-border complexities when advising the board. Long-arm statutes in the United States and United Kingdom can impact deals all over the world. Due to such complexities, the GC is in a unique position to be a strategic asset to companies operating globally, especially where board members are all based in in the United States.
NACD would like to thank the panelists for sharing their experiences with attendees, and for these generous sponsors for their support of the event: Dechert, Fried Frank, KPMG, and Vinson & Elkins.
Kimberly Simpson is an NACD regional director, providing strategic support to NACD chapters in the Capital Area, Atlanta, Florida, the Carolinas, North Texas and the Research Triangle. Simpson, a former general counsel, was a U.S. Marshall Memorial Fellow to Europe in 2005.
One of my favorite comments from an attendee at last year’s Global Board Leaders’ Summit went something like this: “I was expecting to be informed; I wasn’t expecting to be inspired.” For a team that works year-round scouring the globe to discover and deliver to you voices that are shaping the future, that’s about as good as it gets.
This year’s Global Board Leaders’ Summit is on track to be our biggest ever, and one big feature of the Summit remains the same: a diverse array of thought leaders will share paradigm-shifting insights that will challenge the way you think about leadership, give you new tools to approach your directorship practice, and perhaps inspire you in surprising ways.
Here’s a sampling of some of the most exciting sessions at Summit this year:
Michelle Crosby’s start-up Wevorce is not only shaking up Silicon Valley, it’s turning the historic, antagonistic model of divorce on its head. The company’s mission is to “help couples ensure their divorce is less damaging to themselves, their finances, and the people they love.” Crosby was named one of the American Bar Association’s Legal Rebels in 2014, a distinction reserved for “lawyers who are breaking new ground using technology.” “Every institution is subject to change, and the more entrepreneurs who learn to work in the system to create that change, the further we’re going to get,” Crosby said in an interview with USA Today. In an intimate fireside chat, Crosby will discuss innovation, entrepreneurship, disruption, and how the company applies the Wevorce model to talent management inside the company.
Howard Ross, one of the most highly rated thought leaders at last year’s Summit, is back again to share insights from his groundbreaking work on unconscious bias, diversity, leadership, and organizational change. The question directors should ask themselves, says Ross, is not “Is there bias?” Rather, directors should ask one another, “What biases do we have that keep us from making choices counter to the values that we say we believe in?” Ross will open the Diversity Symposium on Saturday and will lead an in-depth workshop on Monday focusing on board dynamics.
The United Nations estimates that by 2025, two-thirds of the world’s population may face fresh water shortages, a critical concern for business and society. Whitewater rafting guide turned CEO Pat Crowley is betting that the solution to that crisis might literally be in our backyards. Crowley’s passion for the outdoors led him to work as a water resource planner, which drew his curiosity to crickets, of all things. “I heard about insects as a more environmentally friendly form of nutrition. From a water perspective, it was clearly a game-changer,” he said. Crowley founded Chapul, a company that makes cricket-based energy bars, in 2012, “to leap over this psychological hurdle of eating insects in the United States.” With explosive growth— 500 percent annually for the past two years alone—Crowley is on track to break through those barriers. On the summit mainstage on Monday, Crowley will discuss what it means to be part of building a new industry that is challenging societal norms, reshaping the competitive landscape, and may just help save the planet.
Phil Gilbert has been working with start-ups for the past 30 years, the most recent of which was acquired by IBM in 2010. Now Gilbert leads IBM’s design team with a focus on an empathy-centered workforce. Bringing a start-up mentality to 100-year-old company can be a challenge and almost immediately Gilbert was forced to confront a disconcerting question: “Is the entire way we’re working an anachronism?” Embracing that hard truth has been nothing short of transformational. Gilbert comes to the Summit mainstage to discuss lessons learned in this transformation. “We’re at an interesting crossroads in business. I think the way business is done and businesses work inside themselves has got to fundamentally change in the twenty-first century,” he said.
As managing director of famed Silicon Valley venture capital firm Andreessen Horowitz, Scott Kupor has been part of building brands like Airbnb, Buzzfeed, Facebook, Foursquare, Lyft, Pinterest, and Skype—companies that have become synonymous with disruption. “Things that are fringe today might become mainstream over time,” Kupor explained on Fox News back in June, describing the philosophy that underpins Andreessen Horowitz’s approach to finding the next disruptive trend. In a mainstage fireside chat Tuesday, Kupor will discuss this philosophy in context with everything from M&A activity and shareholder activism, to IPO trends and the next big innovations he sees poised to disrupt the business landscape.
When Chelsea Grayson took on the role of general counsel at American Apparel, she faced a daunting task: to help turn around a company that was operating in an increasingly competitive industry and was coming off of a tumultuous series of events, including high-profile sexual harassment allegations, layoffs, bankruptcy, and protests. In February, Grayson told the legal blog Above the Law, “I have been in-house for over a year now, and I have encountered just about every legal issue a general counsel might experience in an entire career.” Next month, Grayson will share her insights on governing complexity, a subject she has become adept at navigating during her tenure at American Apparel.
These are just a few snapshots of the incredible line-up of thought leaders who will join us in September. Want to learn more? View the full list of speakers and sessions at www.NACDonline.org/summit.
Meeting minutes of the board of directors, which usually are prepared by the corporate secretary, can play a crucial role in a government investigation or civil litigation relating to a decision or indecision of the board of directors or the knowledge of an individual director. In some instances, the minutes could establish an important defense for directors, while in other instances the minutes may subject directors to unnecessary criticism or worse. Directors should ensure that the corporate secretary follows these guidelines.
Unlike the meeting secretary, directors neither are obligated nor are advised to take individual notes during board and committee meetings. Individual director notes are unnecessary because the secretary’s official minutes will contain a record of the meeting. Additionally, director note-taking is risky. Directors’ notes likely would be discoverable in litigation, and notes that seemed clear in the days after a meeting may not be clear several years later after memories have faded. Absent a clear interpretation, adversaries will attempt to impose their own meanings on the notes. Furthermore, if multiple directors take notes, discrepancies may exist with other notes or the official meeting minutes.
Although individual circumstances may vary, below are some general guidelines that corporate secretaries of U.S. companies should follow when they take official notes and prepare meeting minutes for the board of directors. If a company is incorporated outside the United States, different guidance might apply.
Record the essential information. The corporate secretary should record essential information such as the date, starting and ending times, location, attendees (e.g., directors, management, experts, and legal counsel), presence and maintenance of a quorum, meeting chair, materials distributed in advance of the meeting, topics discussed, and decisions made in a formal meeting of the board. In some cases, the secretary should note the length of particular discussions and deliberations, especially if a particular discussion is an important part of the meeting. Directors also should ensure that the notes taken by the corporate secretary do not editorialize, as commentary could be misconstrued by an adversary if discovered in litigation.
Clearly identify separate meetings and tasks. Because notes and minutes are incomplete by nature, the more organization and structure they contain, the easier they will be to understand and interpret in the event that they are scrutinized. Secretaries should use the meeting’s agenda as a guide for organizing and labeling their notes and the minutes, and should indicate transitions from one topic to the next, including presentations by management, counsel, or advisory firms and executive sessions.
Identify in notes when an attorney is present during a conversation. Directors’ interactions with lawyers usually are protected by the attorney-client privilege or work-product protection, which may shield the content of those discussions from being turned over to an adversary. Boards also should consider including the general counsel in meetings that could involve a discussion of legal issues. If a lawyer is present during any portion of a meeting, the minutes should indicate the lawyer’s name and law firm, and the portions of the meeting for which the lawyer was present. Generally, the minutes for these interactions should indicate only that such discussions occurred and the general topics discussed.
Identify and describe the board’s deliberative process. Recording the general fact that the directors discussed or deliberated about an issue is critically important. However, what a particular director said about a particular issue is usually less important. For that reason, and to avoid errors in attribution, the secretary’s notes and official minutes generally should use collective or passive-voice descriptions (e.g., “the directors discussed the matter” or “a discussion ensued”) as opposed to attempting to record individual viewpoints and the directors who expressed them. Because directors may express passionate views about an issue, the secretary should exercise good judgment in determining what to record.
If notes are taken by hand, they should be clearly, legibly recorded, and should not include shorthand. Illegible meeting notes and notes taken in shorthand can be difficult to interpret when the secretary refers to them while drafting the official minutes. Provided typing is not disruptive to the directors in the meeting, directors should ask corporate secretaries to consider taking notes on a secure computer. Clarity and accuracy are crucial because a difference of opinion between directors regarding the events that occurred at a meeting ultimately may be resolved by reference to the secretary’s notes. In the litigation or regulatory enforcement context, unclear notes may result in meeting minutes that lack an obvious, objective interpretation and are susceptible to being misinterpreted by an adversary.
Encourage the secretary to maintain a standard practice of note taking. Secretaries generally should establish and maintain a standard practice for taking notes, retaining meeting materials and individual notes, and preparing meeting minutes. Deviating from a standard practice could raise negative inferences from a regulator or court.
The secretary should distribute the draft minutes for directors to review as soon as practicable. During their review, directors and secretaries should be mindful of any important events that occur between the meeting date and the finalization of the minutes. If a director believes the minutes omit important information, then the director should discuss orally the matter with the secretary. E-mails regarding the minutes between the secretary and directors, or among directors, should be strictly discouraged.
Discuss with counsel whether to retain notes and draft minutes. There may or may not be a legal or corporate requirement for the secretary to retain his or her meeting notes or draft minutes. After the official minutes are approved, the secretary should discuss with company counsel whether there is a requirement to maintain these materials and ascertain the length and nature of the requirement. If there is no requirement to maintain the materials, the secretary should discuss with counsel whether and how to discard them.
Bradley J. Bondi and Bart Friedman are partners with Cahill Gordon & Reindel LLP. They advise financial institutions and global corporations, boards of directors, audit committees, and officers and directors of publicly-held companies in significant corporate and securities matters, with particular emphasis on internal investigations and enforcement challenges. Michael D. Wheatley, a litigation associate at Cahill, assisted with this article.