SEC Chair White Discusses Directors’ Responsibilities

by Morgan Lewis
Contact

In a recent speech at the Stanford Directors’ College, SEC Chair Mary Jo White discussed several “things that directors should know about the SEC.” Her speech focused on directors as gatekeepers, self-reporting of wrongdoing, and the SEC’s whistleblower program. Chair White was formerly a director and member of a public company’s audit committee and, thus, as SEC Chair, she offers a unique perspective on the role of directors. In her speech, she made the following observations:

Gatekeeper and Oversight Role

  • Directors play a critically important role as gatekeepers in which they are charged with overseeing the company; preventing, detecting, and stopping violations of the federal securities laws at the company; and responding to any problems that occur.
  • Directors in their gatekeeper role need to establish expectations for senior management and the company as a whole, exercise appropriate oversight to ensure that those expectations are met, and set the right “tone at the top” for the entire company.
  • One of the most important director responsibilities is to select the right CEO and make sure he or she understands the importance of the “tone at the top” and a strong corporate culture.
  • “Setting the standard in the boardroom that good corporate governance and rigorous compliance are essential goes a long way toward engendering a strong corporate culture throughout an organization.”
  • Directors should foster a culture that affirmatively encourages and empowers employees to report wrongdoing internally without fear of being harassed, demoted, or fired.
  • Directors must understand a company’s business model and the associated risks, its financial condition, its industry, its competitors, and the broader market.
  • Directors must pay attention to what senior managers say but also listen for the things they do not say.
  • Directors need to ask the difficult questions, particularly if they see something suspicious or problematic, or simply when they do not understand something. They should always insist on obtaining answers when questions arise.
  • Audit committees, in particular, have an extraordinarily important role in creating a culture of compliance through their oversight of financial reporting; handling complaints regarding accounting, internal controls, and auditing matters (as well as whistleblower tips concerning questionable accounting or auditing practices); and selecting and overseeing the company’s auditors.

Interaction with Shareholders

  • Directors should know what the company’s shareholders think by having an open and constructive dialogue with them.
  • Directors should look thoughtfully at shareholder proposals and ask the company’s management team about them and about the proposals that other companies are receiving.

Relationship with Regulators

  • Directors should consider the view of their regulators by listening to what regulators say publicly is important and problematic to them and also perhaps by visiting with them.
  • Directors play a critical role in determining whether a company should self-report identified serious wrongdoing and the level of cooperation with SEC investigations.
  • The SEC brings cases against directors, but these cases should not strike fear in the heart of a conscientious, diligent director.
  • The SEC sees directors as its partners in the effort to ensure that investors in U.S. capital markets can invest with confidence.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morgan Lewis | Attorney Advertising

Written by:

Morgan Lewis
Contact
more
less

Morgan Lewis on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.