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Proposed Legislation Would Mandate Public Company Risk Committees

Senators Charles Schumer (NY-D) and Maria Cantwell (WA-D) have introduced a bill, the "Shareholder Bill of Rights Act of 2009," which among other things would impose certain corporate governance standards, including requiring boards of public companies to to have a risk committee. The risk committee would committee would be responsible for the establishment and evaluation of risk management practices. The operative language is an amendment to existing Section 14A the Securities Act of 1933, and would add a subsection entitled, "Corporate Governance Standards. The proposed language requiring risk committees reads:

Each issuer shall, 1 year after the date of issuance of final rules under paragraph (2), establish a risk committee, comprised entirely of independent directors, which shall be responsible for the establishment and evaluation of the risk management practices of the issuer.


The legislative language would also give the SEC the rulemaking powers necessary to effectuate the requirements for risk committees.  The proposed bill in its current form does not exempt investment companies from the risk committee requirement.

The full text of the proposed "Shareholder Bill of Rights" is available at:  http://www.corpfinblog.com/uploads/file/bill-text-shareholders-bill-of-rights-act-of-2009%282%29.pdf