A revised and updated version of the popular Corporate Director's Guidebook will be available in January from the Section of Business Law of the American Bar Association. An outstanding stem to stern review and update of the Third Edition was recently performed by members of the Section's Committee on Corporate Laws.
The revised version takes into account all of the changes mandated by the Sarbanes-Oxley Act, the Securities and Exchange Commission, the New York Stock Exchange and NASDAQ. It is written in lay language for use by corporate directors as well as business executives.
The Guidebook is intended to help directors understand how modern corporate governance principles operate and their role in that process. It is not intended as legal advice. Rather, it outlines a framework for directors to follow in performing their duties and responsibilities conscientiously. It is written to be generally applicable to all business corporations, regardless of state of incorporation.
Published in a booklet form of approximately 75 pages, it has become quite common for corporate counsel to supply a copy of the Guidebook to individual directors and key business executives of their clients. In this way, the background for any discussions regarding corporate governance is properly and firmly established. Similarly, the Guidebook gives voice to many of the "best practices" expected of today's board of directors. It reflects the impact of recent cases on corporate governance practices as well.
The Guidebook first reviews the duties, responsibilities and rights of a corporate director. It explains a director's various duties, including the duties of care, loyalty and disclosure. It outlines the business judgment rule and suggests that the Board should first look to the corporation's General Counsel for legal advice on the board's duties and responsibilities.
Next, the Guidebook outlines current practices in Board structure and operations. It discusses the issue of Board composition, leadership, size and meetings. It also discusses director's time commitment and compensation.
Perhaps most importantly, the Guidebook outlines the new definition of the "independent directors" who are required to comprise a majority of the Board. The Guidebook's section on "Deciding to Join a Board" may also be helpful in recruiting new directors.
Not surprisingly, the Guidebook discusses the heightened role of Board Committees. Of particular interest to corporate counsel are the revised sections setting forth a checklist of functions that today's Audit Committee's should perform. Not incidentally, the Guidebook affirms the need for the Audit Committee to meet privately with the corporation's General Counsel from time to time. The Guidebook also provides similar comprehensive treatment of the role expected of today's Compensation Committee and Nominating/Corporate Governance Committee.
The Guidebook also covers other oversight activities of the Board, including philanthropic and political activities. It alerts readers to the need for policies relating to employee safety, health and environmental protection, and product safety as well as to employees generally. It also discusses public policy and social responsibility and the need for a crisis management program.
There is also a section describing duties of directors under the Federal securities laws. In addition to the important discussion of reporting requirements and insider trading, the Guidebook offers a brief discussion of Regulation FD (Fair Disclosure).
The Guidebook concludes with a discussion of director liabilities and indemnification. Again, this sets forth the basics for understanding a subject that can become quite complicated, thus facilitating dialogue when necessary.
The Corporate Director's Guidebook, Fourth Edition, can be a valuable tool for corporate counsel. Making it readily available to clients in director or executive officer positions can make the task of corporate counsel easier. That's no small contribution in a world that recently has only made the job of corporate counsel more difficult.
Copies can be ordered by calling the ABA Service Center at 800-285-2221.
Harold S. Barron is Counsel to McDermott, Will & Emery and the Immediate Past Chair of the ABA Section of Business Law and a member of the Committee on Corporate Laws.