Sexual Misconduct and D&O Claims

Kevin LaCroix, writing in The D&O Diary, discusses a recent scholarly article that takes a detailed look at director and officer claims arising out of allegations of sexual misconduct.

The University of Chicago Law School article examines the potential bases of liability, and considers the relative social utility of this kind of litigation, as well as the practical implications for corporate boards and their organizations.

LaCroix writes: “The authors conclude that ‘in some instances, corporate fiduciaries will indeed be liable to shareholders when workplace-sexual misconduct occurs at companies.’ In light of this conclusion, it would be prudent for companies and their executives to take steps to reduce their potential exposure to these kinds of suits.”

Read the article.




Median CEO Pay for the 100 Largest Companies Reaches Record $15.7 Million

The Washington Post is reporting that booming stock market and bulging equity awards propelled the median 2017 compensation for CEOs of the 100 largest companies to the highest figure in 11 years, according to a new analysis by executive compensation and governance research firm Equilar.

“While the median pay increase for CEOs was slightly lower than the year prior, at 5 percent instead of 6 percent, the median CEO pay package was valued at $15.7 million, the first time it notched above 2016’s previous high of $15 million,” writes Jena McGregor.

The highest-paid CEO in this year’s study is Broadcom’s Hock Tan, with a 2017 compensation package valued at $103.2 million. That figure includes a new stock grant valued at $98.3 million that will pay out over a period of several years only if Broadcom meets certain total shareholder return performance thresholds.

Read the Post article.

May 3 Live Event: Explore the Value of ESOPs By Studying a Proven Implementation

Bloomberg Tax will present a live event designed to help business owners, tax, finance directors, in-house counsel, bankers and investment professionals including PE & hedge fund managers to learn how employee stock ownership plans (ESOPs) can provide more than just an exit strategy. They may be an opportunity for a growing business and its employees, the company says.

The event will be Thursday, May 3, 2018, 2:30-6 p.m., at Bloomberg L.P., 120 Park Avenue, New York 10165.

New Era of Material Wealth Creation With ESOPs” will look at all the benefits associated with ESOPs, including top performer retention, growing capital, and future planning.

Presenters will move past theory into the practical implementation of an ESOP. Through a case study, thought leaders will explore all of the stages of the process, including crafting the right design, securing employee buy-in, and more, Bloomberg says on its website.

Register for the event.



Linking Nonfinancial Metrics to Strategy and Culture

National Association of Corporate DirectorsThe National Association of Corporate Directors recently convened a meeting of Fortune 500 audit and compensation committee chairs to discuss the key issues and challenges the board faces in the selection and use of nonfinancial metrics. A free report on the results of that meeting is available from NACD.

Three key takeaways emerged from the meeting.

  • Boards should link nonfinancial metrics to strategic and cultural objectives.
  • Audit committees should leverage internal audits to meet the challenge of nonfinancial data quality oversight.
  • Compensation committees are focusing on the role nonfinancial metrics play in compensation-plan design and in eventual payouts.

The full report from the meeting includes:

  • key questions for boards to ask about nonfinancial metrics
  • the four critical roles for internal audit in support of governance over nonfinancial reporting
  • special considerations for the compensation committee

Download the report.



Facebook Privacy Scandal Unleashes Nationwide ‘Litigation Swarm’

Facebook Inc. finds itself in the eye of a rapidly building legal storm over the disclosure of user data to political research firm Cambridge Analytica as lawsuits stack up from users and investors, and regulatory agencies pile on, Bloomberg Technology reports.

Reporter Christie Smythe quotes Marc Melzer, a New York-based attorney: “Facebook’s having to fight on multiple fronts, with potentially conflicting strategies and obligations, is what will make this ‘litigation swarm’ problematic.” The company will likely “want to move slowly and withhold as much as they can without antagonizing regulators or the courts that are presiding over the suits.”

“Damages could be substantial for shareholders, with one group of investors estimating that at least $50 billion in the company’s market capitalization has been wiped out as a result of the disclosure, which affected 50 million users,” Smythe reports.

Read the Bloomberg Technology article.



ACC Conducting 2018 Global Compensation Survey

ACCThe Association of Corporate Counsel is conducting the new 2018 Global Compensation Survey — the largest self-reported compensation survey within the in-house counsel profession in the world.

This groundbreaking global study of salaries and total compensation will provide in-house counsel and legal operations professionals with the data they need to benchmark pay and benefits.

Participants who complete the survey will receive 25 percent off the report when published.

Take the survey



Webinar: How Solid is Your Whistleblower Program?

More whistleblowers turn directly to the SEC to report complaints of alleged misconduct than to internal reporting systems, reports NAVEX Global. A recent U.S. Supreme Court ruling further encourages this behavior, so it is critical to evaluate a company’s employee whistleblowing program.

NAVEX will present a complimentary webinar on the subject on Tuesday, April 10, 2018, beginning at 10 a.m. Pacific / 1 p.m. Eastern time.

Participants will hear new insights from the 2018 Ethics & Compliance Hotline & Incident Management Benchmark Report. Experts at Baker McKenzie and NAVEX Global have analyzed the data to show you how to assess your program and improve the odds that an employee will report to you first—giving you critical foresight into potential organizational risk.

Presenters will be Carrie Penman, Chief Compliance Officer and Senior VP, NAVEX Global; and Scott Nelson, Partner, Baker McKenzie LLP.

Register for the webinar.



Judge Stunned by Ex-Rolls-Royce Counsel Switching Sides in Litigation

A magistrate judge in the U.S. Western District of Texas has disqualified a former counsel to Rolls-Royce from representing a client in litigation against his former employer, reports Bloomberg Law.

“Donald Little represented Rolls-Royce as in-house counsel from 1997-2008 and as outside counsel in a 2010 case where Rolls-Royce was alleged to have made false statements about ‘suspect’ airplane parts,” explains reporter Mindy L. Rattan. “Rolls-Royce hired George Gage as an expert in that case.”

Then, when Gage sued Rolls-Royce North America Inc. in a qui tam case that involved the explosion of a U.S. Air Force plane, Little represented him.

The magistrate judge who heard the defendant’s motion to disqualify Little said it was “stunning” that Little took that position.

Read the Bloomberg article.




Whistleblower Says Walmart, Eyeing Amazon, Cheated on E-Commerce

Walmart Inc. was sued on Thursday by a former executive who accused the world’s largest retailer of issuing misleading e-commerce results, amid growing pressure from Inc,, and firing him for complaining about it, reports Reuters.

In his complaint, former director of business development Tri Huynh alleges various wrongdoing, including the mislabeling of products, enabling Walmart to charge excessive sales commissions, and failure to properly process customer returns, enabling it to boost results, according to the report by Jonathan Stempel and Nandita Bose.

“Wal-Mart cut corners and cheated in a race to expand and gain market-share,” having been “desperate to gain the ground it had long lost to Amazon,” Huynh said in his complaint filed in U.S. District Court in San Francisco.

Walmart called Huynh a disgruntled former employee who was let go during a restructuring.

Read the Reuters article.





Dallas Judge Denies Toyota Request to Seal Safety, Product Defect Documents

A Dallas judge has rejected an attempt by Toyota to seal documents describing the automaker’s history of withholding information about its defective and dangerous products in connection with consumer lawsuits, often involving injured victims, according to a post on the website of  Androvett Legal Media and Marketing.

In his March 5 ruling, state District Court Judge Dale Tillery said that it is in the public interest to keep such documents open for review because they detail issues involving public health and safety. In a separate ruling, Judge Tillery ordered Toyota to make a representative available to describe how the company manages and stores databases of hundreds of thousands of documents that may contain information about safety and design issues of Toyota products.

Attorneys from The Law Offices of Frank L. Branson obtained the records as part of a lawsuit on behalf of a Dallas family whose two children were seriously injured in 2016 when seatbacks in their Lexus ES300 failed during a rear-end collision.

“The implications of this ruling go far beyond our case,” said Branson. “Toyota has a track record of not producing information in American courts.”

The judge’s order also applies to internal correspondence from a former Toyota corporate lawyer who complained that the automaker routinely refused to comply with information requests from lawyers in product defect cases. The Androvett post says in-house lawyer Dimitrios Biller left Toyota in 2007, citing his objections to Toyota’s lack of transparency and its efforts to avoid releasing proprietary internal documents to plaintiffs in injury lawsuits. Biller’s correspondence specifically describes Toyota’s efforts to settle injury lawsuits rather than turn over a safety database known within Toyota as the “Books of Knowledge.”

The case is Reavis et al. v. Toyota Motor Sales USA et al., Cause No. DC-16-15296.

Branson, who represents the Reavis family along with Branson firm attorneys Chip Brooker and Eric Stahl, said the public deserves access to court files, particularly when the records document safety and design issues.




Uber’s Former Top Lawyer Sought a $100 Million Exit Package, Report Says

Image by Elliott Brown

Before the top corporate lawyer at Uber Technologies departed last year, she sought a $100 million exit package, reports Business Insider.

Salle Yoo joined Uber as its first general counsel in 2012 and was later promoted to be its chief legal officer, leading the company’s 290-person legal department during a tumultuous time. She resigned in September 2017.

Reporter Julie Bort explains: “Yoo thought [the exit package request] only fair because she had seen male executives ask for and get huge exit packages, and she had spent her career at Uber encouraging women to lean in. So she took her own advice, opened her negotiations with [former CEO Travis] Kalanick by shooting high, and held her breath.”

She and Kalanick negotiated a compromise: less than two-thirds her original demand, but with a kicker: If Uber gave a better severance deal to another employee, it had to match the difference for Yoo.

Read the Business Insider article.



GE Stalls Executive Bonuses, But CEO Still Earns 157 Times More Than Average Worker

MarketWatch is reporting that General Electric Co. Chief Executive John Flannery and other top company executives received no bonuses in 2017, but the $9 million Flannery was awarded in his first year as CEO still managed to be 157 times higher than the salary of the company’s median employee.

Claudia Assis reports that GE said in a filing that Flannery’s salary was set at $2 million, plus stock options, pension and deferred compensation and other monies that took his total pay package to $9 million for the year.

“For 2017, the Compensation Committee determined that, for the first time in GE’s history, the senior leaders at GE’s headquarters — our past and present CEOs, CFOs, Vice Chairs, General Counsel and HR directors — would not receive bonuses,” the company said in its annual proxy filing. “We also zeroed out the performance share units awarded to senior leaders in 2015 even though the recipients were technically eligible for a partial payout.”

Read the MarketWatch article.



Wynn Resorts Settles Lawsuit for $2.4B Over Forced Redemption of Shares

Image by Tony webster

The Associated Press is reporting that Wynn Resorts has agreed to pay $2.4 billion in a settlement with a Tokyo casino game maker and its U.S. unit over the forced redemption of their shares in the Las Vegas-based casino operating company in 2012.

The report by Regina Garcia Cano says the company settled with Universal Entertainment Corp., which previously held an almost 20 percent stake in Wynn Resorts through its subsidiary Aruze USA Inc.

“The legal fight between the companies dates back to 2012, when Wynn Resorts pushed out Universal’s founder Kazuo Okada after finding the Japanese tycoon made improper payments to overseas gambling regulators,” she writes. “The actions by Wynn Resorts stemmed from a separate casino resort project Okada was undertaking in the Philippines.”

Wynn Resorts said it found more than three dozen instances over a three-year period in which Okada and his associates engaged in “improper activities for their own benefit.” Wynn Resorts forcibly redeemed Azure’s shares in February 2012 and issued a 10-year, $1.9 billion promissory note, leading to the lawsuit.

Read the AP article.




Five Steps for Directors, Execs to Stay Abreast of Technological Innovation

The National Association of Corporate Directors has published an article titled “The Innovation Era’s Implications for Boards,” which available for downloading free of charge.

The article, from NACD Directorship magazine, suggests five steps for boards and executives to become better versed in cutting-edge technologies—including combinations of new technologies—to create totally new business categories. These five steps are summarized below.

  1. Create a technology learning plan.
  2. Assess advanced technologies and their potential impact on your business.
  3. Elevate board skills and competencies.
  4. Reconsider which companies might be future competitors.
  5. Identify internal and external experts.

Download the article.



Ex-Regal Execs to Draw $30 Million Total in Severance Pay

Image by WhisperToMe

Regal Entertainment’s ex-CEO took home a $14.6 million payout when she and the Knoxville-based theater chain’s other top executives resigned this week, reports Know News, a part of the USA Today network.

Reporter Matt Lakin writes that a report filed with the U.S. Securities and Exchange Commission lists the severance packages awarded to Amy Miles, Regal’s CEO since 2009, and three others.

One of those, general counsel Peter Brandow will receive a $1.04 million payment and an $1.1 million bonus, for an ultimate total payout of $4.7 million. He’d been general counsel since 1999.

“The four bowed out under the terms of Regal’s merger with UK-based Cineworld Group PLC, which became final Wednesday,” writes Lakin.

Read the Knox News article.



ACC Sets 2018 mid-Year Meeting in Denver April 22-24

The Association of Corporate Counsel has set the agenda for the 2018 ACC Mid-Year Meeting, which will be in Denver April 22-24.

The ACC is promoting two special sessions: “Advanced Ethical Issues in Negotiating and Drafting Contracts” with Clara Ohr, general counsel for East Coast Power & Gas, LLC, and a presentation by Gary Kennedy, former CLO of American Airlines and author of “Twelve Years of Turbulence: The Inside Story of American Airlines’ Battle for Survival.”

Three major components of the meeting will focus on:

  • Contracts: Learn advanced drafting and negotiation techniques and tools that drive contract performance, mitigate risk, and meet rapidly changing needs of your organization.
  • Mergers and acquisitions: Knowing business—and your company’s business, specifically—will make you an immensely more valuable business partner as your company navigates complex corporate transactions.
  • Business training: Business management is the #1 non-legal skill desired by CLOs for their lawyers. Boost your business acumen through academic-taught live and on-demand sessions on key finance, accounting, and emotional intelligence concepts.

Get more information.



Why GE is Making a Dramatic Overhaul to Its Board of Directors

General Electric has announced a shakeup that’s unusual in corporate America, disclosing an overhaul to its board that included the departure of eight directors, the nomination of three new members and an eventual change next year in its independent lead director, The Washington Post reports.

“The announcement, which follows a precipitous fall in its share price in recent months and weeks of troubling headlines for investors, was first discussed by new CEO John Flannery in November and had been expected,” writes reporter Jena McGregor. “If shareholders approve the nominees, the industrial giant will have just 12 directors — far closer to the average size board and 33 percent smaller than the 18-member board it had a year ago.”

She adds that the revamp is an example of the kind “of overhaul advisers on governance and board recruitment say is extremely rare, if well overdue at the embattled company.”

Read the Post article.



NACD Governance Outlook: Projections on Emerging Board Matters

The National Association of Corporate Directors has published its 2018 Governance Outlook and made it available for downloading at no charge.

The report provides perspective on the trends, issues, and risks that will command the board’s attention this year.

“Perhaps the biggest challenge for directors right now is deciding where to focus their attention,” the NACD says on its website. “Both risks and opportunities are proliferating at a bewildering pace. How can boards and directors make the most of their limited time?”

The report includes:

  • a summary of directors’ priorities from the 2017–2018 NACD Public Company Governance Survey;
  • an assessment of the future of risk management from Grant Thornton LLP;
  • a look at the forces driving change in board composition and succession;
  • an alert to an often-overlooked liability risk: failing to reveal pertinent information;
  • new trends in D&O exposures; and
  • insight into workforce disruption, cyber-risk reduction, and other risks.

Download the report.



Download: Are You Ready For The GDPR?

Zapproved has published “GDPR Readiness: A Quick Start Guide” about the European Union’s General Data Protection Regulation (GDPR) which is set to go live on May 25, 2018.

Zapproved says that half of all affected businesses won’t be ready for the May launch of the GDPR. This guide is intended to help those struggling with compliance so companies can avoid fines, which can be as much as 4 percent annual corporate turnover, or €20 million — whichever is greater.

“If you collect or maintain data about EU residents or conduct business in the EU, you will need to understand and comply with the data collection, security, access and erasure provisions of the GDPR or face unprecedented penalties,” the company warns.

This complimentary quick guide explains why GDPR exists and how it’s likely to conflict, at least initially, with U.S. discovery principles. It includes a short checklist for the first steps to take to get started with GDPR readiness.

Download the guide.



Just Released: ACC Chief Legal Officers 2018 Survey

The Association of Corporate Counsel has released the new ACC Chief Legal Officers 2018 Survey, a study of the issues and environment in which chief legal officers (CLOs) operate, based upon feedback from nearly 1,300 CLOs in 48 countries.

The report can be downloaded for a fee, and a free executive summary is available.

Notable findings include what keeps CLOs up at night, reporting structures, how CLOs view the future of departmental budgets and staffing, litigation and contract workload, and where data breaches and regulatory issues have the greatest impact.

The 2018 report includes an executive summary, key findings, global and industry benchmarking metrics, and an in-depth question-by-question analysis. Key metrics include:

  • Legal department spend by company revenue
  • Internal, external, and total spend as a percentage of revenue
  • Legal department staffing numbers (including lawyers, paralegals, legal operations and administrative professionals)
  • Matters handled by the legal department (litigation, compliance investigations, contracts)
  • Data breaches, regulatory investigations and patent trolls

Download the report.