So much of the architecture of corporate governance has been the subject of recent federal reforms (SOX, Dodd-Frank, FCPA expansion, etc.) that it is easy to forget that those enactments leave a lot of the governance landscape unaddressed. Clearly, federal requirements for compulsory CEO and CFO financial statement certifications, automatic clawback of senior executive stock option grants following restatement of financials, expanded MD&A and CD&A disclosures, say-on-pay voting requirements, board committee charter mandates, federal one-size-fits-all proxy access rules (that have been blocked in court from implementation), new federal whistleblowing protection schemes, and other federal reforms have reshaped many of the peaks and valleys of corporate governance and are covered at length in this handbook.
However, directors’ robust exercise of their oversight responsibilities depends on much more than taking into account those federal promontories and gullies. Arguably, some of the most important director oversight functions, such as CEO succession, conflict of interest avoidance, strategic risk assessment, capital allocation and employee retention occupy large spaces in the governance landscape that are only indirectly touched by headline-fetching federal reforms. Yet those other key oversight responsibilities might easily become neglected lacunae in the landscape if they are overshadowed by the burden and time devoted to regulators’ mandates.
Consequently, well apart from regulatory guidelines and headline pressures that structure many board tasks, directors also need to devote the self-disciplined effort requisite to fulfilling those fundamental oversight duties.