DSC_0023.jpeg The fourth session of the day at The Economist’s 7th General Counsel Conference focused on “The GC, the board and governance issues,” with a panel that included moderator TK Kerstetter, President and Chief Executive Officer of Board Member Inc/Corporate Board Member, Marty Wilczynski, Senior Managing Director at FTI Consulting, Stephen Cutler, Executive Vice-president and General Counsel of JPMorgan Chase, Bruce Vanya, Partner at Katten Muchin Rosenman LLP, and Ed Knight, Executive Vice-president, General Counsel, and Chief Regulatory Officer at NASDAQ OMX.

Kerstetter introduced the panel by saying that there are multiple topics that they could talk about surrounding the issue of governance, but he would start with the SEC.  He said that people thought Mary Shapiro would be just a placeholder, but she’s been upfront, particularly with enforcement.  Cutler, having worked at the SEC in the past, had a unique perspective and wanted to give the audience a sense of where enforcement is going.  First, he said there is a more prosecutorial bent than ever before, because of the personnel makeup.  He said this would change the shape of the SEC and make them more attuned to cooperation, such as rewarding the first person in the door.  He also said it meant they would be rapping people hard and would be less attuned to what securities enforcement defense lawyers have paid attention to for a living.  As a result, there would be more negotiating room around the edges.  Secondly, there will be an emphasis on speed.  Over the last few years, they have let cases drift, tempered by what Judge Rakoff did with the Bank of America case.  Third, there will be more power of and to the staff, which means less checks & balances.  Fourth, there has been a move on the part of the enforcement division to specialize and fifth, there is more of a focus on individuals.  Before, they used to hold companies responsible, but not individuals, which is changing.  Cutler pointed out that the SEC will now see everything they do through the prism of Madoff and Bear Stearns, as well as from an agency that wasn’t sure it would even exist anymore nine months ago.  Wilczynski said that with respect to the current environment, it’s fair to say that they’ll be active in the next few years, but he’s seeing mixed signals.  With the reorganization taking place, slots aren’t being filled aggressively.  So though they’re active, the reorganization is slower than expected and there is an impact offset by the public record.  In the last five years or so, the number of formal orders that the commission issued was about half of the 450 orders that have already been issued in 2009.  It doesn’t feel that busy, but in public, they seem to be fully geared up, while in reality, there are still reorganization issues slowing things down.  2010 will be much busier.

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DSC_0020.jpeg After a short networking break, we reconvened at The Economist’s 7th General Counsel Conference for a panel discussion of “The election of directors: Could 2010 be the perfect storm?” The panel included moderator TK Kerstetter, President and Chief Executive Officer of Board Member Inc/Corporate Board Member, Michael McAlevey, Vice-president and Chief Corporate, Securities and Finance Counsel of General Electric, Peggy Foran, Vice-president, Chief Governance Officer, and Corporate Secretary of Prudential Financial, and Shelley Dropkin, General Counsel, Corporate Governance of Citigroup.

Kerstetter asked the panelists to start by commenting on their biggest concerns as the proxy season gets started.  Dropkin said that it’s a combination of losing 452 on directors and majority voting, which could have unintended consequences.  Now there’s a great concentration of institutions, activists and investors in the vote and she’s concerned about the degree to which they’re influenced by proxy advisors.  Dropkin asked how responsible would institutions be in exercising their vote.  She foresees a lot of strange results that could occur and have magnified impact because of the reduction of the retail vote.  McAlevey said that he is concerned about a couple of things.  Tactically, for a company like his, they have a significant retail vote, so this is meaningful and they need to come up with a way to encourage them to vote. They’ll need to look at the discretionary vote and do the math, so that they can see how it will affect them.  He suggested hiring a proxy advisor firm to find new ways to contact and remind people to vote.  His more seismic point was that much attention is focused on giving more weight to shareholders without making adjustments, but the economic crisis in 2008 was also the shareholders responsibility.  The steps being taken may empower shareholders even more and encourage short-term interests.  Foran believes there will be directors who are not elected.  She said that activists kill what is already dead.  Agreeing with the others, she shared that she was afraid of the impact on the boardroom.  They’ll need courageous directors for the future, because those doing the right thing may get voted off.  She feels it will be important for directors to communicate and engage, to tell their story before someone else tells it.Continue Reading The Economist’s General Counsel Roundtable Session Review: The election of directors: Could 2010 be the perfect storm?

DSC_0019.jpeg The second session of The Economist’s General Counsel Roundtable was a panel on the topic of “Balancing the growth imperative with escalating risk.”  Matthew Bishop, the US Business Editor for The Economist moderated the panel, which included John Lynch, US General Counsel of BP America and Deirdre Stanley, the Executive Vice-president and General Counsel of Thomson Reuters.

Lynch started with his view of the role of the general counsel in risk management, based on his own experience. He feels there’s an element of getting ahead of governance and reporting to the Board, but the role of the GC is different for each company, based on its needs.  The answer to the role of the GC lies with the unique factors of the company, subject to risk, which is a broad topic.  He then defined what he sees as the four different types of risk: compliance risk, legal risk, function risk, and event risk.  Stanley said that at Thomson Reuters, it is lightly regulated, so their strategies and processes aren’t tied up in a lot of regulation.  She sees the role of the GC as risk identification and risk environment identification, which she defined as the point at which they trip up on a new regulation that wasn’t applicable before.  As the Foreign Corrupt Practices Act seeks to become increasingly global, the articulation of risk itself is important, because changing operations increases the risk that they might not have otherwise identified.  Mitigation is the third part of a GC’s responsibilities and requires the close integration of legal with operations.

Bishop then asked, with the push to be more global, how do they help managers to understand how to do business in China, for example.  Lynch answered that they tell them that risk management is what they see in the case law around governance, not what Seth Harris described about deciding whether to comply.  Bishop followed up by asked about the trade-off between growth and risk management.  Lynch agreed that he feels that there is a trade-off, but they’re trying to prevent it at BP.  He said that to grow, they can either access a new country or become more efficient, which is tougher.  To grow, they need to identify the risks, a mitigation plan, and how to fund it.  Stanley said that she doesn’t see it as a trade-off, but as a balance.  As in any business, without risk, there’s no reward.  The challenge is how to grow in a greater risk environment, so she works to instill risk management awareness in managers and encourages leaders to be involved in all incremental changes.  Lynch added that it’s important to have legal and compliance in the same complement as the business is expanding, and not after or towards the end of planning. Continue Reading The Economist’s General Counsel Roundtable Session Review: Balancing the growth imperative with escalating risk

On Tuesday, December 1st, the ILN participated as a marketing partner in The Economist’s 7th General Counsel Roundtable in Washington, DC.  The theme of the conference was “navigating through the new regulatory landscape,” and the morning kicked off with a session with Seth Harris, the Deputy Secretary of the US Department of Labor, entitled “How will the new regulatory environment impact the GC?”

Moderated by Matthew Bishop, the New York Bureau Chief and US Business Editor for The Economist, Harris gave a brief overview of the current unemployment situation and talked about the Recovery Act.  Bishop asked him for his thoughts on the outlook for unemployment, and Harris started by saying that when President Obama took office, 700,000 jobs were being lost a month and the economy was frozen and declining.  Though the US hasn’t dug its way out entirely, there is some improvement, with recent job loss at 180,000 a month.  Jobs lost claims are the lowest they have been since September of 2008 and banks are doing better.  The Administration is working to turn job loss into job creation.  Harris observed that the 2.8% growth in the GDP during the last quarter, which should continue, will likely lead to job growth as well, which generally lags behind by a couple of quarters.  He added that he hopes the workers will see a share of growth next year.  That being said, he cautioned that there will be continuing rates of unemployment for a long time, and that the economy will take a long time to recover.  Though it’s not an utterly jobless recovery, Harris would like to see more growth.

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