The Board of Directors and a Review of Corporate Disclosure

by J. Robert Brown, for The Race to the Bottom, February 17, 2010.

When the Commission inked the settlement with Bank of America (yet to be approved by Judge Rakoff), it included some corporate governance reforms.  One of them was to require the audit committee to retain disclosure counsel who would review the company’s disclosure and report to the audit committee.  As the settlement disclosed:

  • IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that within forty-five (45) days of the entry of this Final Judgment, the Audit Committee of BAC’s Board of Directors (“Audit Committee”) shall retain disclosure counsel with expertise in disclosure issues (“Disclosure Counsel”) for a period of three (3) years after entry of this Final Judgment. The Disclosure Counsel shall report solely to the Audit Committee. BAC shall require that the Disclosure Counsel: (i) review drafts of all of BAC’s public disclosure statements, including all quarterly reports, annual reports, proxy statements, and current reports containing financial information; and (ii) confer, in executive session, with members of the Audit Committee at all regularly scheduled meetings of the Audit Committee, separate and apart from the nonindependent members of BAC’s Board of Directors, to discuss the adequacy of BAC’s disclosures in its public disclosure statements. BAC shall also require that the Disclosure Counsel, for the period of engagement, not enter into, directly or indirectly, any other employment, consulting, or other professional relationship with BAC or its affiliates, directors, officers, employees, or agents without obtaining the consent of the Commission’s staff…(continue reading)

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