43rd Annual Rocky Mountain Securities Conference Coverage: Corporate Governance in a Changing Regulatory and Enforcement Climate

The final session of the conference focused on governance issues in the post Dodd-Frank environment.  The panel included Cathy Krendl, Krendl Krendl Sachnoff & Way, P.C.; John Olson, Gibson, Dunn & Crutcher, LLP; Jason Day, Perkins Coie; and Josiah Hatch, Ducker, Montgomery, Aronstein & Bess, P.C.

The panel highlighted many issues regarding Dodd-Frank and its effect on corporate governance.  A few of note include: (1) Say on Pay, (2) Proxy Access, (3) Independent Compensation Committees and Compensation Consultants, and (4) Risk Management Oversight.

Initially, the panel discussed Say on Pay and options for responding to an negative recommendation from ISS.  The panel stated that while the shareholder vote has no legal consequences, it does have reputational consequences and many corporations have responded by changing their compensation packages to receive a positive vote recommendation from ISS. 

Next, was a discussion of Proxy Access.  The panel discussed the “3-3 Rule”, which has been stayed awaiting adjudication at the 2nd Circuit.  The main challenge to the rule was that the SEC failed to meet its obligation under the 34 Act for investigating the Rule’s impact on competition and for failing to perform an in-depth cost-benefit analysis. 

Finally, the panel discussed the Board’s responsibilities regarding Risk Management.  The panel emphasized the regulatory rules currently existing including NYSE Rules, SOX 404 regarding internal controls, and the SEC disclosure rules.  The SEC is primarily interested in a disclosure of the Board’s role in overseeing risk management and how this system is affecting the management of the company.  Although, this seems good for shareholders the panel mentioned the strong Business Judgment Rule protection offered in this area, citing In re Citigroup Inc. S'holder Derivative Litig., 964 A.2d 106 (Del. Ch. 2009).

This concludes our coverage of the 43rd Annual Rocky Mountain Securities Conference. We would like to thank all the presenters and speakers for their insights and the Colorado Bar Association for allowing us to attend.  Thank all our followers for another great conference and we look forward to next year.