What Keeps Your Board Up At Night?

Transcription

1 What Keeps Your Board Up At Night? July 12, 2016 ACC Chapter Meeting CLE MELANIE M. TRENT, Executive Vice President, General Counsel, Chief Administrative Officer & Company Secretary, Rowen Companies CATHERINE JAMES, Executive Vice President, General Counsel, and Chief Compliance Officer, Dynegy, Inc. SEAN GORMAN, Partner, Bracewell LLP 1

2 The Answer Will Depend On: Size and type of company; industry Whether company is public or private Who are the majority owners, shareholders, investors Items in the news What outside consultants, seminars, trainings are focused on Individual board members and their backgrounds What they consider high risk items What other boards they sit on 2

3 ADVISING THE BOARD

4 How Can You Calm Your Board s Fears? Identify and discuss risks and threats before issues arise Use the Enterprise Risk process Review risk policies and processes and audit plans with the board Demonstrate to the board that company has strong control environment Give the board regular updates on risk process and issues (i.e. hotline calls, internal investigations) 4

5 How Can You Calm Your Board s Fears? (cont.) Walk through how management would propose to handle a crisis and get board to buy-in Determine if specialized board committees are necessary for specific risks 5

6 Advising the Board Principle of board oversight (general obligation to protect corporate assets) Directors entitled to rely on management and outside experts Business Judgment Rule applies 6

7 FIDUCIARY DUTY

8 Board Member Fiduciary Duty Standards Duty of care Board members must educate themselves with all material information reasonably available to them prior to making a business decision Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985). Duty of loyalty Board members have the duty to eschew any conflict between duty and self-interest Ivanhoe Partners v. Newmont Mining Corp., 535 A.2d 1334, 1345 (Del. 1987). 8

9 Senior Management Fiduciary Duty Standards Texas: Corporate officers owe fiduciary duties of care, good faith, and loyalty to the corporation they serve, but generally not to individual shareholders unless a contract or confidential relationships exists between them in addition to a corporate relationship Cotton v. Weatherford Bancshares, Inc., 187 S.W.3d 687, 698 (Tex. App. Fort Worth 2006). Delaware: Officers of Delaware corporations owe fiduciary duties of care and loyalty, and have the same fiduciary duties as [board members] Gantler v. Stephens, 965 A.2d 695, & n.37 (Del. 2009). 9

10 Senior Management Fiduciary Duty Standards Personal Liability: Corporate officers can be held personally liable when they have breached their fiduciary duty of care (by gross negligence), or breached their duty of loyalty, or have acted in bad faith In re Caremark International, Inc. Derivative Litigation, 698 A.2d 959 (Del. 1996). 10

11 What Keeps Your Board Up At Night? July 12, 2016 ACC Chapter Meeting CLE MELANIE M. TRENT, Executive Vice President, General Counsel, Chief Administrative Officer & Company Secretary, Rowen Companies CATHERINE JAMES, Executive Vice President, General Counsel, and Chief Compliance Officer, Dynegy, Inc. SEAN GORMAN, Partner, Bracewell LLP 11