Corporate Secretary

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US Chamber: FCPA guidance letter

Download FCPA_Guidance_Letter_02_21_2012


Revealed: The truth about board portals and cyber security




Thinking of buying Facebook? Here’s what you need to know


Aarti Maharaj, deputy editor

Mark Zuckerberg’s governance structure will allow him to maintain control of the company. Facebook sought to raise $5 billion in a hotly anticipated initial public offering (IPO), according to reports.

In the S1 document filed with the SEC yesterday, the company also released its financials. In 2011 the eight-year-old company’s revenue increased to 88 percent while its net income rose 65 percent to $1 billion, thus making Facebook extremely attractive to investors.

Since the company will be reporting to the SEC in April, it seems that many will be openly scrutinizing founder Zuckerberg’s every move. But when it comes to governance, this runs the gamut from ownership of Facebook to activist investors attempting to shake up the company’s boardroom.

According to Ronald Barusch of Dealpolitik, Zuckerberg seems to have a strong hold on the control of Facebook via two corporate techniques: dual classes of stock and voting agreements.

Barusch says shares of Facebook will be divided into two classes: Class A shares can be bought in the market with one vote per share, while Class B shares – which consist of previously issued and all shares owned by the 27-year-old billionaire Zuckerberg – will be granted 10 votes per share.

Zuckerberg owns only about 28 percent of those Class B shares, so it may seem that he has no control over the company. But he has voting agreements with many of his shareholders, and that gives him a proxy to vote with sufficient additional shares to grant him voting rights roughly equivalent to 57 percent of the super-voting stock. And that’s where Zuckerberg wins.

As for activist investors, Facebook seems prepared to fend off any hostile takeovers with preferred stock that can be used for poison pills to help the company buy more time.

Ideally, once Zuckerberg receives the majority of votes, this governance structure will allow him to maintain control of the company. Case in point: Zuckerberg will always have the upper hand in all transactions at Facebook, and his robust governance structure allows him to do so.


5 qualities of the highly effective corporate secretary


Aarti Maharaj, deputy editor

Maintaining effectiveness continues to be a challenge in any industry. As for the corporate secretary, below are some thoughts sent in from our readers in response to yesterday’s newsletter, 5 qualities of the highly effective corporate secretary.

(i) Robert Tannous, chief operating partner, Porter Wright, a corporate law firm:

•    Understand the company's business and operations in detail;
•    Be knowledgeable of corporate law and corporate governance issues and trends;
•    Have strong communication skills to interact with management and the board of directors, to        push a strong corporate governance compliance agenda, and to educate management and                directors on corporate governance issues and trends;
•    Have a strong will to do the right thing in the face of adverse circumstances both inside and            outside the company;
•    Be prompt in recording and finalizing corporate records; and
•    Be able to strike a balance of the appropriate recordkeeping of meetings and events. 

(ii) Fay Feeney, CEO, Risk for good, corporate board chair consultant:

Board chairs are operating in an age where success is grounded in seeing and hearing the mosaic of viewpoints to lead their company into the future.  The board's oversight of compliance is essential and corporate secretaries and can add a powerful voice on ethical practices that create a sustainable company.  We've seen many famous brands lose their way.  The corporate secretaries who bring an outside view and interpret the collective voices to the board chair are assured a role in helping to co-create the future.

(iii) Steve Barth, co-chair of Foley & Lardner's transactional and securities practice group and chair of Foley's National Directors Institute:

A truly effective corporate secretary has to blend many attributes, but chief among them is an intimate knowledge of the preferences of the board's chairman and lead director, and of the culture of the board itself.  In particular, a good corporate secretary needs to know the extent and style of information to present to the board.  Some chairmen and boards desire a lot of detail, while others only want to focus on very important, high-level matters.

(iv) Frank Feather, global business futurist:

I think the corporate secretary has to be ‘all-knowing’, not in the sense of having to be expert in everything, but in order to know what is going on that impacts decisions, such that before decisions are made, the corporate secretary can nudge the chair and/or CEO to ask ‘what about XYZ?’ I think corporate secretaries have to shadow the chair or CEO, put themselves inside their heads, to know how they think (or should think), and to keep everything on the right track.

Another thought relates to the minutes. They should not only accurately reflect what transpired, but must be such that they can withstand public scrutiny once finally approved.

Above all, staying updated with latest governance trends and communicating effectively with board members and senior management will add value to the role of the corporate secretary.


Corporate governance wish list (continued)


Aarti Maharaj, deputy editor

Here are some responses to yesterday’s newsletter, entitled  A corporate secretary’s governance wish list.

(i) Bart Schwartz, monitor for Deutsche Bank, receiver of Madoff-related Merkin hedge funds, monitor of BP trading activities, among others:

Boards ought to be demanding for more anecdotal information rather than relying on statistics when reviewing the effectiveness of a compliance program.  Along with that, the board should increase its scrutiny of major risks which have not blossomed, not because the risk is any less, but because management may have become too accustomed to the risk and too blasé about managing it.

(ii) Parveen Gupta, professor and chair, department of Accounting, Lehigh University:

There should be proactive, not reactive, risk oversight by the board. And risk is defined here more broadly than only the financial risk. The board needs to be more engaged in risk oversight, which means clearly defining their company's risk tolerance (stomach) vis-à-vis risk appetite (eyes).

(iii) Ken Handal, president, Governance Risk and Compliance (GRC) at Guidepost
Solutions and former corporate secretary of CA:

I would recommend that boards set up a compliance and risk committee focused on the interplay between an effective enterprise risk management program and a compliance program that helps mitigate those risks to the company's strategy, reputation, financials and operations. Boards need to have the time and tools to bring these issues and solutions to the forefront in their deliberations.

(iv) Brian Barnier, industry analyst, ValueBridge Advisors:

It’d be great to see a deeper merging of legal-driven and value-driven corporate governance. Regulators and investors are both pushing for improved governance. While there is often commonality, too often the differences are reflected in rather different professional association buzz, conference topics, news articles, academic publications and more. In 2012, a modest resolution is for legal, financial, investor relations leaders (internal and external) to pledge to work more closely on governance that drives risk-return balanced value, and meets compliance requirements.

In a nutshell, many corporate secretaries and industry observers are calling for better compliance and risk strategies to be implemented by companies within the next year. While regulators play a significant role in ensuring that all firms are behaving fairly, it is still up to the board to set an example and get more involved in the company’s operations.


Finding the right general counsel


Aarti Maharaj, deputy editor




Ever wondered what constitutes good corporate governance?


Aarti Maharaj, deputy editor

A recent blogpost by Charles Nathan, counsel and co-chair of global law firm Latham Watkins’ corporate governance task force, attempts to answer this question in his commentary titled, ‘A 12-step program to truly good corporate governance.’

And what does it all boil down to?

Here’s a quick roundup of the 12 steps:

(i)  The proper goal of corporate governance is to enhance value creation for shareholders

(ii) Recognize that most analogies to political, economic or legal theory are rhetorical devices and   not merely answers

(iii) Don’t base corporate governance policies solely on concerns about separation of shareholders    and corporate managers

(iv) Don’t get caught up in a debate about short-term vs long-term strategy and execution

(v) Affirm the board’s primary role as strategic adviser and supervisor of management, not as an enforcer of regulatory and legal requirements

(vi)  Limit board size to enhance its effectiveness

(vii) Select nominees for directors and highlight key competencies

(viii) Select a board leadership structure that works in the context of a particular board and management team

(ix) Don’t fall prey to calls for frequent shareholder votes in the name of accountability

(x) Remove the clutter of shareholder proposals from the annual meeting agenda

(xi) Release public companies from the straitjacket of one-size-fits-all governance policies and metrics

(xii) Recognize that investors voting with their feet is a far more efficient discipline for under-performing managements than imposition of one-size-fits-all corporate governance theories which are unproven creators of economic value

Essentially, according to Nathan, if you carefully follow these steps in tandem with your existing governance structure, this will create an economic value for your shareholders. So what are you waiting for?

Click here to read more about the ‘12-step program to truly good governance.’

Source: The Harvard Law School Forum on Corporate Governance and Financial Regulation.


Proxy Advisory Firms and Stock Option Exchanges: The Case of Institutional Shareholder Services

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Berkshire Hathaway audit committee report

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BH report


American Airlines flight attendants protest exec comp


Aarti Maharaj, Deputy editor

Lately, there’s been quite some buzz around airline industry,  with antitrust battles percolating across the industry. Now, executive compensation is coming into play.

On Wednesday, disgruntled American Airlines flight attendants protested at 10 airports across the nation to voice their concerns over the company’s executive compensation practices.

The NY Daily News reports that American Airlines flight attendants came out in large numbers and protested at JFK Airport the lump sum bonuses given to the airline’s upper echelon executives after reporting losses.

‘The top five execs have reaped $100 million in bonuses since 2005, while the carrier lost more than $4.2 billion’, the Daily News reports. ‘Then in 2003, the flight attendants agreed to cut in pay and benefits worth $340 million annually, which they say kept American out of bankruptcy.’

American Airlines claims that the bonuses are ‘variable compensation’ linked to positive stock performance, which makes up 75 percent of executive salary.


The first indictment in US v. Stevens

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LauraStevens Indictment

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