Counseling Boards in the Current Crisis: Rocky Mountain Securities Conference

The highlight of the day for me was the panel on counseling boards of directors, moderated by Cathy Krendl, including James Doty, John Olson, and Josiah Hatch. This panel covered a wealth of topics including fiduciary duties, mergers and acquisitions, deal protection devices, say on pay, disclosure, broker-dealer voting, and access.

Mr. Doty started the discussion with an impressive 13 minute summary of Delaware case law regarding director reliance on experts and fiduciary duties. Among the cases he discussed were Citicorp, Stone v. Ritter, Lyondell v. Ryan, and Gantler v. Stevens.

Next, Mr. Olson addressed the tensions between directors and shareholders, and how government’s presence in the board room creates a new dynamic. Olson then paralleled Parratt’s and Shapiro’s words that shareholder access is coming very soon.

Say on Pay was another hot topic in this panel. Currently, TARP requires say on pay for companies accepting substantial money, but the SEC has yet to create a rule on this topic. Nonetheless, Congress stated that this provision is effective immediately. The panel expressed concerns about compliance with this provision absent an SEC rule providing instruction.

Olson pointed to Intel as an example of a corporation implementing say on pay. The company asked shareholders if they agreed with the compensation committee’s policies and procedures for determining compensation. According to the panel, simply asking shareholders how they feel about policies and procedures may not be enough. The company probably must ask if shareholders approve of policies, procedures, base compensation, and incentive compensation.

Ms. Krendl posed an interesting question towards the end of the session, asking if directors who are forced by the government to take a certain action can satisfy their fiduciary duties by claiming “the government made me do it.” The panel briefly discussed this issue surrounding Bear Stearns and Bank of America.

I was honored to attend the conference and hear from the collection of brilliant securities lawyers that presented. I look forward to next year.