COURSE SYLLABUS ADVANCED SEMINAR IN CORPORATE GOVERNANCE, RISK AND COMPLIANCE (Wednesdays - 245pm - 425pm, starting January 16, 2013) REV 1/11/13 --Doug Scrivner, 1-650-949-4818(home office); 1-415-602-2525(cell); douglasscrivner@mac.com --Jim Bender, 1-918-605-2944(cell), 1-539-573-8705(office); jim.bender@wpxenergy.com This 2 credit-hour seminar will examine a variety of issues related to corporate compliance programs and efforts, a critical area for corporations and other entities in today s world and an area of great opportunity and challenge for lawyers. Anchoring in corporate governance principles and best practices and risk management law and practice, the course will explore both theory and practice, together with specific issues in the implementation and execution of corporate compliance programs. Specific topics, using case studies and guest speakers where appropriate, will include the role of boards, lawyers and other professionals; the role of ethics and codes of conduct; compliance systems and frameworks; the Foreign Corrupt Practices Act and other key statutes; government regulatory frameworks and enforcement efforts; and transnational issues and comparative views. All readings will be posted on Blackboard, unless otherwise advised. Please be advised that we will continue to assess and refine future readings during the semester and therefore reading more than 2 weeks ahead is at your risk. The flow of the semester is as follows (with detailed descriptions and readings on subsequent pages): 1. The Landscape and Theory January 16 2. The Legal and Regulatory Framework January 23 3. The Actors and their Roles -- January 30 4. The role and responsibilities of lawyers specifically February 6
5. Current Issues in Corporate Governance -- February 13 6. Risk Management/ERM/Business context/tools and theory February 20 7. The Ethics piece of the puzzle February 27 8. Compliance Systems and Frameworks March 6 9. FCPA as a prototype March 13 {March 20 is Spring Break} Short paper likely due in this time frame 10. Financial Services/Health/Pharma/Federal Government for a Highly Regulated Business perspective and other compliance sectors March 27 11. Corporate Investigations and systems/issues April 3 12. Enforcement Issues and Trends April 10 13. International issues and a comparative look April 17 14. Reprise: Pulling it all together April 24 Final paper due May XX Learning Objectives To Come Useful Websites {URLs to come}: NACD OECD 2
Harvard Corporate Governance OECG DOJ Stanford Rock Center and Larcker site BRT Ethics Institute Institure for Global Ethics Markkala Center, Santa Clara U Institute for Enterprise Ethics, Daniels Corporate Board Member COSO Corpedia Transparency International UK sites 3
GRADING {Still under development} 1/3: class participation. Note that participation includes attendance as well as quantity and quality of class discussion and interaction, including especially questions to, and discussion with, guest speakers. Pursuant to the student handbook, you may not be permitted to submit a final paper if you fail to attend 20% or more of class sessions (3 or more classes), without prior approval in the discretion of the instructors. In addition, since our subject is so topical, we will for most, if not all, class sessions, take 10-15 minutes to discuss a current situation of interest from media reports for the week. We encourage students to review the Wall St. Journal, NY Times or other outlets for such stories of interest and share them with the class through Blackboard. We will identify a specific story on Sunday night each week to be the primary discussion topic the next Wednesday and expect each student to have read that specific story and be prepared to discuss in class. Finally, there will be several one-page assignments, described below, that will be used in the assessment of class participation and this portion of the overall grade for the class. 1/3: short paper due March XX: - Please take a corporate debacle (subject company to be agreed with one of us by XXXXXXX) and in 5 10 pages (target, not a strict limit) assess whether it reflects failures of governance, risk management and/or compliance, and where you would assess primary responsibility for the failure, including specifically your assessment of the role of the lawyers. Grade will be based on quality of writing and thinking reflected in the paper. 1/3: final paper due no later than May XX. Topic to be agreed by May X. Please choose a compliance sector (other than FCPA/anti-corruption), for example, export control, data privacy, anti-trust/competition law, intellectual property, insider trading, Reg FD, OSHA, labor (or a segment thereof), or other sector of your choice. Please advise one of us no later than May X of proposed topic and we will confirm. In 10 to 15 pages (again, a target, not a strict limit), you, as compliance officer for a multinational company that provides technology services and solutions to 4
clients in 50 countries around the world, are proposing to the CEO and the Board the design and implementation of a compliance program addressing the sector you have selected (assuming that it is not addressed at all yet, so you are starting from scratch). Start with the What what are the legal issues and requirements being addressed? Proceed to the Why what are the risks and liabilities of failing to address this area; what are the benefits that can be achieved in this area (i.e., make the case for action)? Then lay out the How what are the components and elements that comprise your approach to effectively addressing this compliance sector? In the How section, it is OK to do bullet points/outline the various elements rather than fully develop each element; you do not need to go into great depth about each element but make sure you are complete in capturing and describing all the elements you need for the program to be effective (both in the legal sense and in a business sense). Finally, tell management what to expect from a successful implementation and what the key success factors are. Grade will be based on how well you have captured key lessons from the course, thoroughness of your approach, creativity and quality of writing and thought. 5
The Landscape and Theory - 1/16/13 Discussion Topics: General introduction to the course, key concepts and frameworks, a historical perspective, and objectives for the course. -Pathway to Principled Performance: the OCEG Framework, in GRC360, pages 4-8 (2007) -Framing the Future of Corporate Governance: Deloitte Governance Framework (2012) -Seven Myths of Corporate Governance, Larcker and Tayan (2011) -The HSBC Settlement s 5-Page Road Map to Corporate Compliance, McConnell and Simon, in Corporate Counsel December 13, 2012 -Short-Termism Leads List of 2013 Board Concerns, Lipton, in NACD Directorship, 2012 -How do we Align our GRC Initiatives, OCEG 2007 (one page illustration) -Corporate Governance Ecosystem, OCEG 2008 (one page illustration) 6
The Legal and Regulatory Framework 1/23/13 Discussion Topics: Sources and content of the legal rules that govern in this space. -Business Roundtable, Principles of Corporate Governance 2012, pages 5-12 -In re Caremark, Delaware Chancery Court, 1996 -Stone v. Ritter, Delaware Supreme Court, 2006 -Willkie Farr memo on Disney case, 2005 -Orrick SOX piece pages A1-A10 and A20-A21 -NYSE Listing Standards, Section 303A, Corporate Governance Standards, pages 7-16 and 22-26 7
The Actors and their Roles 1/30/13 --Guest speaker: Mary Beth Vitale, President, Colorado Chapter, National Association of Corporate Directors; Director, CoBiz Financial, Zynex Discussion Topics: While we will focus intensely on the role of directors and officers, we will also scan the wide array of other actors and their roles in GRC, including shareholders, shareholder activists, analysts, auditors and governance rating firms. -Wachtel Lipton Memo - Key Issues for Directors 2013 -Wachtel Lipton Memo - Spotlight on Boards 2012 -D&O Liability: Avoiding Legal Hot Spots, Keenan, Corporate Board Member 2012-12 Key Lessons from 2012, Peregrine (McDermott Will) (2013) -ABA Business Law Section Task Force Report on Delineation of Governance Roles and Responsibilities 8/1/2009, full report -NYSE Report, Commission on Corporate Governance, 9/23/2010, pages 1-7 and 24-32. -Corporate Governance Activism: Here to Stay? Latham & Watkins 2012 8
The role and responsibilities of lawyers specifically - 2/6/13 Discussion Topics: What is the role (what are the roles) of the lawyer? Do whom does the lawyer owe duties? What are those duties? What is going on in the legal profession? Ben Heineman, The General Counsel as Lawyer-Statesman, Harvard Law School Forum on Corporate Governance and Financial Regulation, at http://blogs.law.harvard.edu/corpgov/2010/09/05/the-general-counsel-aslawyer-statesman/ Excerpts from New York City Bar 2006 Report, pdf on Blackboard, pages 30-125 Excerpts from ABA Model Rules, read rules and related commentary, Rule 1.2, 1.6, 1.13 and 2.1. SEC part 205, text of the rule as promulgated by SEC Release 33-8185, copy available on Blackboard. The text of the rule is found right after Section VII, Statutory Authority, which is on page 57 of 82 when the document is printed (the text of the rule is 10 pages). UPDATE? 9
Current Issues in Corporate Governance 2/13/13 Guest speaker: Professor John Holcomb, Daniels COB Discussion Topics: survey of current issues in corporate governance, with emphasis on executive compensation, CEO succession, crisis management, and shareholder activism. -In re Oracle Derivative Litigation, Delaware Chancery Ct. 2003 -Larcker/Tayan piece on proxy access -WSJ piece on CEOs -Preparing the Board for Crisis, Herbert Winokur -- MOVE THIS? -Professor Holcomb content to come. 10
Risk Management/ERM/Business context/tools and theory 2/20/13 Guest speaker: {TBC --- Rod Filiben, KPMG} Discussion Topics: Introduction to ERM and risk management. Roles and responsibilities. Issues and challenges. - Enterprise Risk Management Integrated Framework, Executive Summary (COSO, 2009) - Effective Enterprise Risk Oversight, The Role of the Board of Directors (COSO, 2009) - ERM, Understanding and Communicating Risk Appetite, pages 1-10 (COSO, 2012) - Developing Key Risk Indicator to Strengthen ERM (COSO 2010) - Accenture pieces: o Constructive Tension by Foster, London and Dewor (2009) o The Risk Masters by Culp (2011) - NC State ERM Initiative, Report on the Current State of Enterprise Risk Oversight. - Wachtel Lipton, Risk Management and the Board of Directors Update for 2012 11
- NOTE: See class assignment for next week (described on page 12). Please advise me of name of the company you will review, by Friday the 22nd. 12
The Ethics piece of the puzzle 2/27/13 Discussion Topics: The centrality of ethics, values and leadership to governance, risk and compliance; decision-making; bad apple or bad barrel? Class Assignment: Pick a Fortune 500 company, other than Accenture, review its Code of Business Ethics (or equivalent) and related materials on the corporate website, and prepare a one-page report card reflecting your assessment of the company s Code. As noted, please advise us of the company name by Friday, February 22nd. - Section 8B2.1, Effective Compliance and Ethics Program, US Federal Sentencing Guidelines, Chapter 8 (page 512 of version on Blackboard) see especially 8B2.1(a)(2) (we will return to the Sentencing Guidelines in 2 weeks) - Foley & Lardner piece, Despite Ruling, Federal Sentencing Guidelines Remain Gold Standard for Healthcare Compliance Programs (2005) - Accenture Code of Business Ethics; flip the pages but focus primarily on pages 4-7 and 28-30. - Corpedia whitepaper on Best Practices in Code of Conduct Development, pages 2-25; - Deloitte, Managing Bad Apples and Protecting the Barrel 13
Compliance Systems and Frameworks 3/6/13 Guest Speaker: { TBC: Ted Banks } Discussion Topics: overview of compliance systems and frameworks NEED TO UPDATE - Sarbanes-Oxley Section 404: A Guide for Management (IIA, 2008), pages 3-17 and 21-24. - SEC Final Rule on SOX 404, Release 33-8238 et al, Sections I.A through II.G (pages 5 of 105 through 26 of 105 in printed version as posted) - COSO, Internal Control Integrated Framework, Exposure Draft, December 2011, pages 1 46 and 129. - Weil Gotshal, SEC Disclosure and Corporate Governance (2011) - Accenture 2011 10K, Risk Factors at pages 16-33, MD&A at pages 42-53, pages 65-66 - Accenture 2011 Proxy, pages 13-14 and 50. 14
FCPA as a prototype 3/13/13 Discussion Topics: deep dive into various aspects of FCPA law and practice to illustrate key points and the challenges of transnational/crossborder business, especially in emerging markets Readings {TO BE UPDATED }: - US Federal Sentencing Guidelines, Chapter 8 Sentencing of Organizations, Section 8B2.1 -FCPA statute itself, PL 105-366 (11/10/98) -DOJ/SEC guidance -Accenture, UNGC, COP Supplemental Report on Principle 10, pages 1-10 and Attachment C (but flip the pages of Attachments A and B as well) -Transparency Int l, Business Principles for Countering Bribery (2009) -Transparency Int l Business Principles for Countering Bribery: TI Six Step Process (2005) -Halliburton DOJ FCPA Opinion (2008) -SEC v Lucent complaint (2007) -take a quick look at fcpamap.com (not on Blackboard) -if you have time, take a pass through Gibson Dunn 2011 Year-End FCPA update (one of the best law firm analyses on FCPA) 15
An Example of a Highly Regulated Business perspective 3/27/13 (Health Care, Federal Government, etc) --{ Guest Speakers: TBD } Discussion Topics: deep dive into XXXXXXX to see how compliance works in such a context. Readings TO BE UPDATED : -Risk Management Lessons from the Global Banking Crisis of 2008, Senior Supervisors Group -An Integrated Approach to Corporate Compliance, US HHS OIG and AHLA -Package of materials re banking: -page 2, summary of statutes -Compliance Management handbook, pages 1-5 only -OCC Overview, pages 1-8 only -3 articles on Dodd-Frank 16
Corporate Investigations and systems 4/3/13 Guest speaker: Trip Mackintosh, Holland & Hart Discussion Topics: types of investigations; actors; privilege issues; dealing with whistleblowers; voluntary disclosure issues -OCEG, How Should we Conduct Investigations? -Brief Protocol for Employee Interviews in Internal Corporate Investigations, Mackintosh & Gallegos -Under Fire in a Mega Trade Sanctions Case, Mackintosh -In-House Counsel s Guide to Conducting Internal Investigations, O Melveny & Myers LLP -Whistleblower Protection under the Sarbanes-Oxley Act, Martin, Hoffman and Casey -2011 Sees Focus on Whistleblowing and Dodd-Frank Claims, Haaf and Platt -Audit Committee Compliance Report, Accenture 17
Enforcement Issues and Trends 4/10/13 Discussion Topics: current topics in enforcement; deferred prosecutions; use of monitors; voluntary disclosure; derivative actions and shareholder suits; shareholder activism One-pager due around here: draft an 8K {or 10Q Legal proceedings} disclosure based on fact pattern to be provided {an FCPA situation{ OR alternatively, one pager with your recommendation NOT to disclose on the same facts. -McNulty Revisited, Ladig (2008) -Section 9-28.000 of US Attorneys Manual, Principles of Federal Prosecution of Business Organizations -US v. Stein, 2d Circuit 2008 -SEC Report of Investigation [in re Seabord] (2001) -SEC Policy Statement concerning Cooperation by Individuals (2010) -Alcatel-Lucent Deferred Prosecution Agreement, pages 1-17 and Attachments C and D -To Self-Disclose or Not to Self-Disclose, Bass Berry & Sims (2008) 18
International issues and a comparative look 4/17/13 Discussion Topics: Conflict of Laws issues; international conventions; role of NGOs; comparative look at key countries. -The UK Corporate Governance Code (2010), pages 1-26 -EU Corporate Governance Framework Green Paper (2011), pages 1-20 -ISS 2012 International Proxy Voting Summary Guidelines (2011) -UK Bribery Act 2010 Ministry of Justice Guidance (2011), pages 1-31 -Wachtell Lipton, For Directors, A Wake-up Call from Down Under (2011) -Accenture, UN Global Compact: Communicating on Progess (2011) 19
Reprise: Pulling it all together 4/24/13 Discussion Topics: What does it all mean? How does it all fit together? What about the business case? Where is it all going? -Restoring Trust in Corporate Governance, CED Policy Brief (2010) -The Convergence Evolution, KPMG (2011) -The Role of Culture and the Value Proposition, David Gebler (2011), pages 1.7 1.14 -OCEG Red Book V. 2.1 (2012), pages Intro 1 Intro 8, 7-13 -The Business Case for Corporate Social Responsibility, Carroll and Shabana (2010), pages 85-102 -Company Stakeholder Responsibility, Business Roundtable (2006), pages 4-11 20