As in prior years, Edwards Angell Palmer & Dodge LLP is live blogging from the PLUS D&O Symposium. There were several interesting points discussed during the second panel discussion, including the following:
- Boards will probably not go against shareholder "Say on Pay." It is tough to sustain a case against the Board if shareholder "Say on Pay" is followed.
- The Board's role in risk management is to manage the upside and the downside. The upside, however, creates the most risk as it requires the balancing of capital, resources, revenue, etc.
- Boards must focus on being proactive and set an appropriate level of risk-taking for the company.
- Boards must understand why their companies are engaging in M&A deals and establish success factors that are clear and measurable. Compensation and benefits need to be addressed at the due diligence stage and not at the end of the deal.
- Boards need to think of the unthinkable and prepare for disaster recovery. Boards can maximize their effectiveness by engaging in regular discussions that address real corporate issues that their companies face.
- Red flags that should cause underwriters to look deeper into a company are a recent merger, a new CEO from outside the company, changes in Board compensation, shareholder actions against the company, disputes among non-management directors, criminal prosecution, and corporate crisis.
- In order to mitigate risk, underwriters are encouraged to meet personally with the corporate secretary and general counsel, conduct background research on the company regarding any publicized internal troubles, and ensure that the company’s employees participated in ethics training and that ethics are an integral part of corporate culture.