By: Mark Tarallo
On June 23, 2014, SEC Chair Mary Jo White spoke to the Twentieth Annual Stanford Directors’ College held at the Stanford University Rock Center for Corporate Governance. Chair White’s remarks focused on the SEC’s view of the role of the board of directors in a corporation.
Chair White characterized her remarks as covering three topics-one attitudinal, one advisory, and one descriptive. The “attitudinal” topic was the view that the SEC takes regarding directors as the most important “gatekeepers” of a corporation. She noted that “it is essential for directors to establish expectations for senior management and the company as a whole, and exercise appropriate oversight to ensure that those expectations are met. It is up to directors, along with senior management under the purview of the board, to set the all-important “tone at the top” for the entire company.” From an advisory perspective, Chair White spoke to the obligation of the board to engage in self-reporting when they learn of any wrongdoing and working cooperatively with regulators. She referred to prior decisions and press releases to show how self-reporting and cooperation is viewed favorably by the SEC, and called on directors to “[m]ake it clear from the outset that the board’s expectation is that any internal investigation will search for misconduct wherever and however high up it occurred; that the company will act promptly and report real-time to the Enforcement staff on any misconduct uncovered; and that the company will hold its responsible employees to account.” Last, Chair White described the workings of the SEC’s Whistleblower program and why it is necessary for the board to take any tips or accusations seriously. It is clear from her remarks that the SEC plans to hold boards accountable for compliance failures, and while her remarks were targeted at public reporting companies, they are instructive for private companies as well, and directors of private companies should take note of the increasing obligations to ensure compliance.
A full copy of the text of Chair White’s comments can be found here.
Please feel free to contact Mark with any questions on this topic.