address the increasing importance of corporate governance on investor behavior and evaluate the evolving consensus on good corporate governance.

Transcription

1 Course Description: This course will: CORPORATE GOVERNANCE LAW 802C GOLDEN GATE UNIVERSITY LAW SCHOOL FALL 2009 THURSDAYS, 6:30 P.M. TO 9:10 P.M. AUGUST 20, 2008 THROUGH NOVEMBER 19, 2008 highlight the rising importance of corporate governance as evidenced by the Sarbanes-Oxley Act of 2002 and the adoption of related rules promulgated by the Securities and Exchange Commission and the national securities exchanges; focus on the impact of these regulatory initiatives on public corporations, their executive officers, their directors, their auditors, and their attorneys; and address the increasing importance of corporate governance on investor behavior and evaluate the evolving consensus on good corporate governance. My goal is to introduce you to a broad array of topics under the corporate governance umbrella. I will emphasize breadth of material over depth of material. Among the many qualities that I believe a good lawyer should have is the ability to recognize potential problems even if the potential problem falls outside their primary practice area. Classroom Room assignments will be posted on the 2nd floor at the entrance of the Faculty Center, 3rd floor in front of the Law Registrar's Office and 3rd floor west corridor. My Contact Information Rick E. Hansen Counsel, Corporate Governance Chevron Corporation rhansen@chevron.com Course Web site (TWEN) Course Materials I do not expect you to buy a text for this class. 1

2 Your readings will come primarily from Bart Schwartz and Amy L. Goodman, Corporate Governance: Law and Practice (Matthew Bender & Co., 2007) (available on In addition, I will expect you to have access to and be familiar with the following resources. The Securities Lawyer s Deskbook (available at NYSE Listed Company Manual (available at NASDAQ Marketplace Rules (Section 4350): Qualitative Listing Requirements for Nasdaq Issuers, Except for Limited Partnerships ( 13) California Corporations Code (available on or Delaware General Corporation Law (available at or Social Science Research Network (available at Final Examination, Evaluations and Grading: This course will not include a final examination. Your grade will reflect your performance on the following items. 12 in-class quizzes, each worth 10 points each. (I will actually give 13 quizzes, but I will drop your lowest quiz score). Quizzes are my preferred means of ensuring that you regularly attend class and, more importantly, that you read the assigned materials and are prepared to in class. Quizzes will be given at the end of the first hour of class. You must be present in class when the quiz is given. (No make-ups will be allowed, unless you are required to miss class because of a death in your family, your own wedding, illness evidenced by a doctor s note or a bona-fide religious observance (e.g. Festivus is not a bona-fide religious observance)). 1 Hot Topic Debate, worth 50 points. You will be evaluated on your preparation of an outline for and your performance in one Hot Topic Debate against one of your classmates. Each student will be assigned to argue the affirmative or negative on a particular topic. Each student will have 10 minutes and will be subject to cross-examination by myself or fellow students. Class participation: 10 points. 2

3 Attendance Policy ABA Standard 304 specifies that students are required to regularly and punctually attend class. Golden Gate University School of Law requires every student to prepare class assignments, attend class regularly, and participate knowledgeably in class discussions. Course Calendar PLEASE NOTE: For those items marked skim I will expect you to have a general understanding of the location, content and outline of the item for the purpose of working with the item during class. As many of these items are statutes or regulations, I will not expect you to have mastered their content. 1/14 Aug. 20 Enron: the Smartest Guys in the Room. An introduction to the Sarbanes-Oxley Act. (Read/Skim) Skim The Sarbanes-Oxley Act of 2002 (available at Skim Handout Overview of Sarbanes-Oxley Act of /14 Aug. 27 Quiz #1 Focus on SarbOx: The PCAOB Definitions and sources of corporate governance. What does it mean to be a public company? The rights of stockholders. (Read/Skim) Skim Sections 101 to 109 of the Sarbanes-Oxley Act of 2002 (available at Skim Sections 12, 13 and 15(d) of the Securities Exchange Act of 1934 ((available at Skim Sections 109, 141, 211, 212, 220, 242, 251, 271, 275 of the Delaware General Corporation Code. Read Free Enterprise Fund v. The Public Company Accounting Oversight Board (2007 U.S. Dist. LEXIS 24310, March 31, 2007). Read Schwartz and Goodman, Chapter 1 ( History and Sources of Corporate Governance ) and Chapter 3.01 ( Importance and Nature of the Topic through 3.05(4)(b)(iii) ( Grounds for Exclusion... ). Read Hoschett v. TSI Int. Software, 683 A.2d 43 (Del. Ch. 1996). 3/14 Sept. 3 Quiz #2 Hot Topic Debate #1: Should the positions of chairman and CEO be separated? Focus on SarbOx: Reforming the Board of Directors 3

4 The Board of Directors: roles, duties and responsibilities. Skim Sections 303A.01 through 303A.03 of the NYSE Listed Company Manual and Section 4350(c) of the NASDAQ Marketplace Rules. Skim Section 141 of the Delaware General Corporation Code and Section 300 and 309 of the California General Corporation Law. Read Schwartz and Goodman, Chapter 4.01 ( The Business of the Corporation... ) through 4.04(2) ( Independent Directors ) and 4.05(1) ( Entire Fairness Review... ) through 4.05(3) ( Section ) Read Grimes v. Donald, 673 A.2d 1207 (Del. Ch. 1996). Read In re The Walt Disney Company, 825 A.2d 275 (Del. Ch. 2003). 4/14 Sept. 10 Quiz #3 Hot Topic Debate #2: Does executive certification add value? Focus on SarbOx: New Duties and Liabilities for Corporate Management. Officers: roles, duties and responsibilities. Directors and Officers: liabilities and limitations on liability (Part I). Skim Sections 302, 304, 402, 406, 906 of the Sarbanes-Oxley Act of 2002 (available at Skim Section 303A.12 of the NYSE Listed Company Manual. Skim Sections 102(b)(7), 142 and 145 of the Delaware General Corporation Code and Sections 204, 309, and 317 of the California General Corporation Law. Read Lyman Johnson, Having the Fiduciary Duty Talk: Model Advice for Corporate Officers (available on TWEN). Read Schwartz and Goodman, Chapters ( The CEO, the CFO... ) through 14.02(2)(b) ( Penalties ); Chapter 14.02(3) ( The Section 906 Certification ) through 14.02(4) ( Self-Regulatory Organization... ); Chapter 5.01 ( Limitations on Liability...) through Chapter 5.03(9) ( Indemnification Agreements ). 5/14 Sept. 17 Quiz #4 Hot Topic Debate #3: Director-centric governance vs. shareholder-centric governance: which is better? Focus on SarbOx: Loans to Executives and Compensation Clawbacks Directors and Officers: liabilities and limitations on liability (Part II). The stockholder-centric vs. board-centric view of corporate governance. Skim Sections 304 and 402 of the Sarbanes-Oxley Act of 2002 (available at Skim Sections 102(b)(7) and 145 of the Delaware General Corporation Code and Sections 204 and 317 of the California General Corporation Law. Read Schwartz and Goodman, Chapter 5.01 ( Limitations on Liability...) through 4

5 Chapter 5.03(9) ( Indemnification Agreements ). Read Zirn v. VLI Corp., 681 A.2d 1050 (Del. 1996). Read CA, Inc. v. AFSCME (2008 Del. LEXIS 329) (available on TWEN). Read John F. Olson, Shareholder-Centric vs. Director Centric Corporate Governance (available on TWEN). Read Martin Lipton, Shareholder Activism and the Eclipse of the Public Corporation (available on TWEN). Lucian Bebchuck, The Case for Increasing Shareholder Power (available on TWEN) (Parts I-IV only). Read Theodore N. Mirvis, et. al. The Case for Increasing Shareholder Power, A Response (available on TWEN). 6/14 Sept. 24 Quiz #5 Hot Topic Debate #4: Should stockholders have direct access to an issuer s ballot and proxy statement for the purpose of nominating directors? Focus on SarbOx: Board Committees Overview of board structure and processes. Guest Speaker The SEC and Corporate Governance, with David T. Mittelman (Reed Smith). Skim Section 141 of the Delaware General Corporation Code and Section 300 and 311 of the California General Corporation Law. Skim Regulation S-K, Item 407 (available at Read American Federation of State, County and Municipal Employees Pension Plan v. American International Group, 462 F.3d 121 (2d Cir. N.Y. 2006). Read SEC Release No (July 27, 2007), Release No (July 27, 2007) and Release No (December 6, 2007) (available on TWEN). Read Lucian Bebchuck, The Myth of the Shareholder Franchise (available on TWEN). Read Martin Lipton, The Many Myths of Lucian Bebchuck (available on TWEN). 7/14 Oct. 1 Committees of the Board the Nominating and Governance Committee. Skim Section 141 of the Delaware General Corporation Code and Section 300 and 311 of the California General Corporation Law. Skim Regulation S-K, Item 407 (available at Read Schwartz and Goodman, Chapter 7 ( Board Structure and Processes ) 5

6 through Chapter 8 ( The Nominating and Corporate Governance Committee ). 8/14 Oct. 8 Quiz #6 Focus on SarbOx: The Audit Committee Committees of the Board the Audit Committee (Part I) Skim Sections 201 through 206, Sections 301 through 304 and Sections 404, 406 and 407 of the Sarbanes-Oxley Act of 2002 (available at Skim Section 10A of the Securities Exchange Act of 1934 (available at Skim Regulation S-K, Item 407 (available at Read Schwartz and Goodman, Chapter 9 ( The Audit Committee ). Read Pirelli Armstrong Tire Corp. Retiree Medical Benefits Trust v. Raines, 534 F.3d 779 (D.C. App. August 2008). 9/14 Oct. 15 Quiz #7 Hot Topic Debate #5: Has SarbOx Section 404 been worth it? Focus on SarbOx: Accounting, Internal Controls and Audits Committees of the Board The Audit Committee (Part II) and The Compensation Committee (Part I) Skim Sections 201 through 206, Sections 301 through 304 and Sections 404, 406 and 407 of the Sarbanes-Oxley Act of 2002 (available at Skim Section 10A of the Securities Exchange Act of 1934 (available at Skim- Regulation S-K, Item 307, 308 and 407 (available at Read Schwartz and Goodman, Chapter ( The Internal Audit Function...) and Chapter ( The Independent Public Accountants ). Read In the Matter of Ernst & Young LLP, Ferraro and Lutze (SEC Administrative Proceeding No , August 5, 2008) (available on TWEN). Read Schwartz and Goodman, Chapter ( Rise of the Compensation Committee ) through 10.06(3) ( Review and Discussion with Management... ). Class Date Topics 6

7 10/14 Oct. 22 Quiz #8 Hot Topic Debate #6: Is executive compensation out of control? Hot Topic Debate #7: Should stockholders have a Say on Pay? Focus on SarbOx: Forfeiture of Compensation Committees of the Board The Compensation Committee (Part II) Corporate Governance and Executive Compensation Skim Section 304 of the Sarbanes-Oxley Act of 2002 (available at Skim- Regulation S-K, Item 401 through 402 and 407 (available at Read Schwartz and Goodman, Chapter ( General Considerations Surrounding...) through 15.03(2) (b)(iv) ( Absolute vs. Relative Performance...); Chapter ( Sarbanes-Oxley Section ) through ( Corporate Governance Best Practices...). Read SEC v. Yuen, 2006 U.S. Dist. LEXIS (CD Cal. 2006) (available on TWEN). Read SEC v. Yuen, 2008 U.S. App. LEXIS 7606 (9 th Cir. 2008) (available on TWEN). 11/14 Oct. 29 Quiz #9 Focus on SarbOx: Codes of Ethics Corporate Governance Guidelines and Codes of Conduct Skim Section 303A.09 and 303A.10 of the NYSE Listed Company Manual and Section 4350(n) of the NASDAQ Marketplace Rules. Skim Section 406 of the Sarbanes-Oxley Act of 2002 (available at Skim the Federal Sentencing Guidelines for Organizations (available at Appendix 13-A in Schwartz and Goodman). Read Schwartz and Goodman, Chapter 6 ( Corporate Governance Guidelines ) and Chapter ( The Code of Conduct ) through Chapter 13.02(c)(ii) ( Cases Interpreting Caremark); Chapter ( Section ) through Section ( Related Sections...); and Chapter ( Compliance and Ethics Programs... ). Read Bainbridge, Chapter 4 ( Whistle Blowers... ). Read Welch v. Chao, 536 F.3d 269 (4 th Cir. 2008) (available on TWEN). 12/14 Nov. 5 Quiz #10 7

8 Focus on SarbOx: Rules of Professional Responsibility for Attorneys. The role of counsel in corporate governance. Guest Speaker The Role of the Corporate Secretary and Chief Governance Officer, with Lydia I. Beebe (Chevron Corporation). Skim Section 307 of the Sarbanes-Oxley Act of 2002 (available at Skim Standards of Professional Conduct for Attorneys (available at Read (Former) SEC Commissioner Harvey J. Goldschmid, A Lawyer s Role in Corporate Governance. (available on TWEN). Read SEC Release No (January 29, 2003) (available on TWEN). Read Schwartz and Goodman, Chapter ( The Corporate Secretary ) through Chapter ( The Chief Governance Officer ); Chapter ( The General Counsel ). Read Jill E. Fisch and Kenneth M. Rosen, Is There a Role for Lawyers in Preventing Future Enrons? (available on TWEN) 13/14 Nov. 12 Quiz #11 Hot Topic Debate #8: Do governance rating firms add value? Focus on SarbOx: Disclosures in periodic reports. Writing in plain English. Governance Rating Firms and Corporate Governance Ratings. Skim Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 (available at Skim Sections 401, 404 and 408 of the Sarbanes-Oxley Act of 2002 (available at Skim Form 10-K, Form 10-Q, Form 8-K of the Securities Exchange Act of 1934 (available at Skim Chevron Corporation 2007 Annual Report on Form 10-K and 2008 Proxy Statement (available on TWEN). Read Preface, Chapter 1 ( What is a Plain English Document? ) and Chapter 6 ( Writing in Plain English ) of A Plain English Handbook: How to Create Clear SEC Disclosure Documents (available at Read Robert Daines, et al, Rating the Ratings: How Good are Commercial Governance Ratings? (available on TWEN) Read Stephen J. Choi, et al, Director Elections and the Influence of Proxy Advisors. (available on TWEN) 14/14 Nov. 19 Quiz #12 Hot Topic Debate #9: Do stockholder proposals enhance a firm s corporate governance? 8

9 Focus on SarbOx: Has it been worth it? Proxy statements and annual meetings. Stockholder proposals. Skim Section 211 of the Delaware General Corporation Code and Section 300 and 600 of the California General Corporation Law. Skim Section 14(a) of the Securities Exchange Act of 1934 (available at Skim Schedule 14A ( Information Required in a Proxy Statement ) (available at Skim Rule 14a-8 ( Proposals of Security Holders (available at Skim Chevron Corporation 2008 Proxy Statement. Read Joao Dos Santos, et al, Analysis of the Wealth Effects of Shareholder Proposals (available on TWEN). Read (former) SEC Commissioner Paul S. Atkins, Shareholder Rights, the 2008 Proxy Season and the Impact of Shareholder Activism (available on TWEN). 9