Looking Ahead to The 2006 Proxy Season
January 26, 2006
As the 2006 proxy season gets underway, shareholder activism shows no signs of slowing. Over the last few years, high-profile corporate scandals and news stories about executive excess and corporate waste have compelled many investors to seek -- or demand -- a more active role in corporate governance matters of the companies they own. Now that most companies have implemented the changes required by the Sarbanes-Oxley Act of 2002 (SOX) and the stock exchanges, the agenda of the shareholder activist is changing.
Drafting a Practical and Useful Code of Ethics
January 18, 2006
Pursuant to Section 406(c) of the Sarbanes-Oxley Act (SOX), the Securities and Exchange Commission adopted Regulation S-K 406, which requires reporting companies to disclose whether the company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. In addition, New York Stock Exchange Rule 303A.10, American Stock Exchange Section 807 and Nasdaq Rule 4350(n) require listed companies to adopt and disclose a code of conduct for directors, officers and employees. In response to these requirements, public companies have adopted codes of conduct varying in length and complexity. Few precedents were available prior to the deadlines for adopting codes, and many companies adopted codes of conduct that stated code provisions as simple and strict commandments or merely paraphrased the text of the regulations. For example, some codes include a requirement to "at all times obey all applicable federal, state and local laws and regulations" or "not engage in any transaction involving a conflict of interest."
Confidential Client Communications? Maybe Not
January 18, 2006
Former SEC Chairman William H. Donaldson noted in a March 5, 2004 speech that SOX was needed to deal with "a general erosion of standards of <i>integrity and ethics</i> in the corporate and financial world ... The acquiescence by the gatekeepers, like accountants, who turned their backs or actually condoned such accounting manipulation, combined with stock option incentives to management, fueled the short-term focus." (emphasis added).) Ironically, the SEC and the Department of Justice, which enforce SOX's criminal provisions, appear ready to burden the traditional ethical obligations of corporate legal counselors to keep client communications confidential in an effort to police the integrity and ethics of other corporate gatekeepers. To that end, the SEC imposes certain reporting requirements on corporate counselors, attempts to preempt state ethics rules, and DOJ prosecutors routinely pressure "target" corporations to waive the attorney-client privilege to obtain "cooperation" points. Corporate counselors must be aware of those initiatives to properly balance their competing obligations.
Compliance and Ethics Programs: Passivity Is Pass'
January 18, 2006
Corporate compliance and ethics programs have matured significantly from their humble beginnings. Since they appeared in the 70s in response to government investigations of overseas bribery in the aerospace, defense and armaments industries, leading to enactment of the Foreign Corrupt Practices Act, compliance programs have spread into most, if not all, other industries. Moreover, compliance programs have received official "endorsement" by the government through the Sentencing Guidelines for Organizational Defendants (Sentencing Guidelines), which appeared in their original form in 1991 as Chapter 8 of the Federal Sentencing Guideline Manual.
CD: Proposal Centers and Marketing Automation
January 11, 2006
Telephone and Web-based conference will teach you how to produce better proposals and marketing materials more efficiently. This is a critical need for firms that are growing rapidly and is heightened by continuing corporate efforts to converge their outside counsel.
Practice Tip: Navigating the FDA's Recent RiskMAP Guidance
January 06, 2006
As part of the Food and Drug Administration's ("FDA") ongoing and comprehensive efforts to minimize risks while preserving the benefits of medical products, the FDA recently released three industry guidance documents on risk management strategies. These final guidance documents, applicable to various stages of drug and biological product development, will assist manufacturers in developing and improving methods to assess and monitor the risks associated with drugs and biologics. The risk minimization action plan is one of these initiatives that promises to further tip the balance of the risk-benefit profile of drugs and devices.
Punitive Damages: How Much Is Too Much? Two Recent California Supreme Court Opinions Leave the Question Unanswered
January 06, 2006
In June 2005, in two companion decisions, the California Supreme Court for the first time interpreted a line of recent, landmark U.S. Supreme Court opinions on punitive damages. In so doing, the California Supreme Court attempted to bring clarity to the politically charged and legally nettlesome issue of when punitive damage awards become constitutionally excessive. However, the court's decisions may raise more questions than they answer. Instead of setting a bright-line rule for lower courts and litigants to follow (such as a fixed ratio of punitive damages to compensatory damages beyond which punitive damages must not go — something some courts of appeal attempted to do in response to the high court's landmark opinions), the court in <i>Lionel Simon v. San Paolo U.S. Holding Co., Inc.</i> No. S121723 (June 16, 2005) ("<i>Simon</i>"), and <i>Greg Johnson, et al., v. Ford Motor Company,</i> No. S121933 (June 16, 2005) ("<i>Johnson</i>"), elected to constrain, but fundamentally preserve, the possibility of truly punishing punitive damage awards.
Case Notes
January 06, 2006
Highlights of the latest product liability cases from around the country.
