As the new year begins, we can't help but look forward
and wonder what 2012 has in store for corporate counsel. Many predictions have been
made regarding the top trends and issues we will see in corporate governance in
The following list of trends and issues is culled from
various sources and compiled into what I think will be on the top of the list
for lawyers, directors, and board members in the year to come.
1. Campaign Finance Disclosure -
with a Presidential Election in the United States in 2012, expect to see more
pressure on directors to maintain oversight of corporate donations to political
campaigns and adherence to proper campaign finance disclosures. According to a post by Francis H. Byrd called Top Ten Issues for Boards
in 2012, "Taft-Hartley and public pension funds are looking to increase the
number of proposals they filed last year. Their hope is that the filed
resolutions will lead to agreements with companies to limit and/or have the
board oversee such contributions and corporate political activities." In-house
attorneys will want to keep tabs on the activities in this area and make sure
that boards keep within the designated limits.
2. Public Perception of Compliance
Effectiveness, Executive Compensation Fairness, and Risk Management -
after the financial crisis and adoption of Dodd-Frank, corporations have a
public perception hurdle to manage that may be more difficult than the actual
compliance hurdles now legally required of them. Look to see boards wanting
advice on disclosure, shareholder statements, and perhaps even PR issues.
3. Separation of Powers in Board Leadership -
often the CEO will sit on the Board of Directors for corporations in the United
States. There is a growing corporate population calling for a clear split
between executive leadership and board functions, similar to what is currently
common in European companies. In his article, The Separation of Board and Company,
Jonathan F. Foster says that a Boards most important function is to set an
effective agenda that helps accomplish its primary objectives: "appointment,
oversight and compensation of senior management; review of budgets and
strategy; and oversight of financial reporting and capital structure." He goes
on to say that an independent Board leader has the flexibility to set an
appropriate agenda more easily than senior leadership and CEOs because they must
focus on running the company, rather than running the board. Also, a CEO's
immersion in the day-to-day operations may compromise her ability to maintain
an objective oversight of senior management. When paired with number 2 above,
look to see more Boards opting for a separation in these roles.
4. "Say on Pay Not Going Away" -
as Dodd-Frank becomes hits its second birthday be wary of the terrible twos.
Due to a "flagging economy that is driving down earnings," Business Insider writes, "investors are likely to more closely scrutinize
rising pay, and may take a more confrontational stance than they did during the
financially heady days of the 2011 proxy season, when a rising economic tide
seemed set to lift all boats." They predict more no votes and a tougher time
raising executive compensation without push-back. Compensation committees
will need to be vigilant in justifying raises, and according to Byrd (see 1
above), pay attention to any pay practices "that both proxy advisory firms and
majority shareholders have deemed problematic."
5. Boba-Frank: Whistleblower Bounty Hunters -
Section 922 of the Dodd-Frank Act contains a narrowly approved set of rules (3
to 2 to be precise), which created a $300 million whistleblower program.
Employees are now eligible to collect between 10% to 30% when they provide
original information leading to a monetary sanction exceeding $1,000,000.
According to The New Bounty Hunters: Congress Creates New Incentives to
Report Securities and Commodities Fraud an article by Thomas A. Hanusik, Michael W.
Lieberman, and Brian Roemer of Crowell & Moring LLP, "the SEC and
CFTC have discretion to determine the whistleblower award, taking into account:
Expect to see a rise in the number of bounties collected
as whistleblowers begin to take advantage of the financial incentives and
anti-retaliation provisions of Dodd-Frank.
What corporate governance trends do you predict for the
Read more on the
For more information about LexisNexis
products and solutions connect with us through our corporate site.