Conference call

Colorado Springs began its life as an urban center known for its open-area spaces in 1871, the height of the American gold rush and the push to colonize the West. Many famous American families and businessmen made their fortunes in the hills surrounding the town.  136 years later another group flocked to the mountains in search of a different kind of wealth – best practice in corporate governance and compliance.

The 61st national conference of the Society of Corporate Secretaries and Governance Professionals took place at the end of June in the spectacular surrounds of the Broadmoor Hotel. In excess of 500 corporate secretaries, general counsel, lawyers, regulators and vendors attended the four-day event, which for many is the highlight of the governance year.

From both sides now

A great deal had happened since the last time the Society had visited the grand halls of the Broadmoor. In fact, Enron was still flying high and receiving some of the highest accolades available to governance professionals. My how times have changed. But it is these very changes that formed the focal point for the first full day of sessions, which got underway with a panel titled ‘Behind the headlines – lessons learned from corporate scandals.’ The topic was split into two distinct sessions, the first led predominantly by lawyers, and the second by academics.

Unlike many panels examining the raft of governance failures over the past five years, which often lean toward generalization and anecdotal tales, the two sessions kicking off this conference, and the first in particular, offered real-life stories and practical advice from those that actually had important parts to play.

Conference chairman and senior vice president, corporate governance, deputy general counsel and secretary at Exelon, Katherine Combs, was the moderator for that first seminal panel. The speakers were Sean Berkowitz, partner at Latham & Watkins; Alice Martin, US attorney Northern District of Alabama, US Department of Justice; Douglas Sprague, chief, Oakland Branch Northern District of California, US Department of Justice; and Eric Sussman, lecturer, UCLA Anderson Graduate School of Management, and deputy chief, US attorney’s office.

Attendees were provided a look inside the minds and processes of government prosecutors. The insights that were provided by Martin, who supervised the corporate fraud investigation of HealthSouth from 2003-2006, and the subsequent trial of Richard Scrushy, HealthSouth’s former CEO, were particularly well received. Martin’s efforts in the HealthSouth case resulted in the conviction of 17 corporate officers.

Gaining a feel for the mindset of investigators and the specific details that they tend to focus on is extremely important to the corporate secretary and to all involved in the fields of compliance and governance. Not only is this kind of understanding useful in the unfortunate event that a company finds itself under investigation, but it also allows management to examine internal processes and make corrections long before any problems arise.

Something for everyone

As chairman of the conference, Combs explained that she was intent on making the event useful to everyone. ‘One of the challenges is the diverse nature of the group. While we are all involved in governance and compliance, everyone is looking for something a little different.’ Some attendees had been in the industry 20 years or more and some were fresh to the role and to the Society. Coming from such a broad range of market caps and sectors, a very wide range of viewpoints were presented. Another hurdle Combs wanted to address was finding ‘topics that people really need to know about [that] at the same time, may not be well covered elsewhere.’

Keeping these concerns in mind, Combs and the conference committee set up a number of breakout sessions targeted at specific areas of interest. Attendees were free to choose which topic most suited their needs and interests.

One such topic of growing importance, but that may not be on the radar screen, is privacy. There are a number of legal challenges and the panel that discussed this issue was one of the best-attended breakouts. Also on that first day, Sam Guess, associate general counsel and assistant secretary of Wal-Mart Stores, offered up his experiences organizing one of the biggest (and sometimes controversial) annual meetings in the country. It may seem easy, but with around 20,000 people, and more than a few activists, it is a difficult task to make sure everyone leaves happy, he cautioned.

For larger US companies subsidiary management is one of the most pressing issues facing the compliance, governance and legal teams. The ‘Beyond the basics’ panel looked at some of the more challenging problems with ensuring all corporate entities, domestically and globally, remain in compliance.

Simple hardships

No governance-related conference would be complete without an assessment of new disclosure rules. Compensation proved to be one of the hottest topics of the year and there is not a corporate secretary in the country that has not spent a considerable amount of time managing new disclosures. The SEC, investors, the media and the companies themselves had high expectations for the results of the new rules, but unfortunately, few were satisfied once everything was said and done. While most companies made extensive efforts to explain compensation policies and performance measures for executives in the simplest language, it is just impossible to conduct a thorough discussion of the issues without some complexity.

All in attendance believe that while it may have been burdensome this year, the process and the output will improve in the near future as companies become accustomed to the task to investors’ desires.

As with any new law there are unintended consequences. Many of these were discussed in the open sessions on Friday, which covered the somewhat non-specific topic ‘New risks and liabilities: What keeps you up at night?’ It is, of course, impossible to cover everything that keeps a corporate secretary up at night but the panelists fielded questions about the impact of the removal of broker discretionary vote in director elections, selective waiver and its impact on waiver of privilege, pending ‘notice and access’ and what it might do to voter turnout and a raft of other issues.

The Broadmoor itself is not completely unfamiliar with the concept of unintended consequences. The lake behind the main building, which forms the focal point of many of the bars and restaurants, was once home to a pair of sea lions. They were introduced to control the over population of fish (which themselves had been introduced many years earlier). After eating most of the fish, the well-fed sea lions took to sitting on the shore of the lake and barking loudly for more food. For those of you that have ever heard the barking of an unhappy sea lion up close you will understand why the guests were not happy with the situation. The animals were removed.

Governance cowboys

Like all its predecessors, the 61st conference was not all about panels and meetings. Attendees were treated to a range of social activities, including a casino night (the Broadmoor operated as a casino from 1891 until becoming a full luxury resort in 1918 with John Rockefeller as first celebrity guest). On Thursday night members were privy to a western and rodeo spectacular. Maybe the organizers were trying to make a comment about the governance cowboys that contributed to so many of the corporate scandals in recent years.

The combination of solid educational sessions and social activities highlights what Combs and many of her peers believe is the strongest element of the conference and the society as a whole – networking with peers. And it shouldn’t just be about members of the Society. These days, there are thousands of people working in governance, compliance, law and ethics that can gain value from the perspectives and experience of conference panelists and attendees.