Jeffrey Stein and Bill Baxley, partners at King & Spalding LLP, have drafted a post at the Harvard Law School Forum on Corporate Governance and Financial Regulation providing tips on drafting the new disclosures on board leadership and risk oversight mandated by the new proxy disclosure rules. The new proxy disclosure rules, adopted by the SEC on December 16, 2009, are applicable to investment companies, and of particular concern to fund directors are the new disclosure requirements regarding:
- The background and qualifications of directors and nominees;
- The consideration of diversity in the process by which candidates for director are considered for nomination; and
- Board leadership structure and the board’s role in risk oversight.
In their blog post, Stein and Baxley offer "recommendations for U.S. public companies, as they begin their work in drafting the descriptions of their board leadership models and approaches to risk oversight, for publication in their 2010 proxy statements. Though the post is aimed at the disclosures of operating companies, the recommendations are, for the most part, applicable to investment companies as well. Stein and Baxley provide eight considerations/tips in drafting this new disclosure:
- Have the board thoughtfully review its current leadership structure.
- Consider the sources of "Leadership"
- Consider the different approaches to disclosing the responsibilities and contributions of lead directors.
- Consider how the board leadership model might change with time and new circumstances.
- Companies will be able to make changes in their board leadership structures without having to disclose that the changes were made only recently.
- Consider your audience and the length of the disclosure.
- Draw a connection between board leadership and risk oversight.
- Get started early on drafting.
In addition to these tips, they also link to a King & Spalding publication containing some useful examples of proxy statement disclosures on board leadership and risk oversight: King & Spalding Client Alert, December 21, 2009. Those advising boards on these new disclosure requirements may find these examples enlightening, and boards themselves may use these examples when reviewing their funds' proposed disclosures.
Stein and Baxley's post, "Drafting Disclosure Relating to Board Leadership and Risk Oversight" is available at: http://blogs.law.harvard.edu/corpgov/2010/01/03/drafting-disclosure-relating-to-board-leadership-and-risk-oversight/
The King & Spalding alert, "Samples of Proxy Statement Disclosure Relating to Board Leadership and Risk Oversight," is available at: http://www.kslaw.com/Library/publication/ca122109.pdf