Top 11 Legal and Regulatory Tips for Boards of Directors in 2011

by Elizabeth A. Ising and Amy L. Goodman for Boardmember, February 22nd, 2011.

The economic and regulatory landscape in 2011 poses unprecedented challenges for boards of directors of public companies.  Directors face scrutiny from shareholders, Congress, regulators and the public along with continued legal, legislative and regulatory developments.  Directors need to remain informed and be prepared to respond at an accelerated pace.  To assist boards in preparing for and addressing the changes ahead, below are 11 legal and regulatory tips for public company boards to consider in 2011:

1.  Understand the company’s business and industry and be active in the strategic planning process. Beyond the director orientation provided when a director joins a board, directors should continuously expand their knowledge about the company’s business and industry.  They should review external information sources, such as analyst reports and industry publications.  Directors also should monitor and receive regular briefings on the company’s strategic planning process and understand how legal and regulatory developments may impact the company’s strategic plans.

2.  Engage in regular risk oversight. Increased government enforcement activity and the globalization of litigation underscore the need for boards to play an active oversight role with respect to company risk assessment and risk management processes.  Board oversight of risk includes understanding the company’s key risks, concurring with the company’s risk appetite, understanding the programs management has established to assess and manage risks and actively monitoring the company’s assessment of risks in light of these risk management programs.

3.  Encourage robust compliance programs that have adequate resources. New incentives and protections for whistleblowers in the Dodd-Frank Wall Street Reform and Consumer Protection Act likely will result in an increase in whistleblowers reporting directly to the Securities and Exchange Commission and bypassing company internal procedures.  At the same time, the internationalization of anti-corruption efforts continued in 2010 with numerous countries implementing anti-graft legislation and unprecedented cross-border cooperation between U.S. and foreign regulators.  As a result, boards should set the “tone at the top,” see that management reinforces a culture of integrity and accountability and regularly ask whether the company’s compliance programs are actually effective at preventing and detecting violations of law.  Boards similarly should see that management has implemented compliance programs responsive to a wide-range of risks and inquire as to whether the company provides sufficient training regarding the company’s compliance programs, including its code of conduct.

4.  Engage in ongoing succession planning (…)

5.  Focus on shareholder engagement early and often (…)

6.  Be attuned to evolving executive compensation practices (…)

(Read the full article here. )



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