The Buck Stops With the Board: The Full-Time Job Of A Company Director

by Mark Friedman  on Monday, Jul. 2, 2012 12:00 am  

A wave of new regulations is making board services more of a full-time proposition. (Photo by Shutterstock)

These days, serving on a public company’s board of directors is practically becoming a full-time job as directors face more government regulation and scrutiny from investors.

And directors could find themselves in trouble for failing to take action. For example:

* In April, a shareholder of Wal-Mart Stores Inc. sued the board of directors of the Bentonville retailer in connection with the allegations revealed by The New York Times that the company’s Mexican division paid million of dollars in bribes so stores could be opened faster than if the company went through normal government channels.

“Wal-Mart’s Board of Directors consciously ignored red flags concerning the existence of widespread corruption at Wal-Mart and consciously ignored the management decision to suppress the investigation into rampant bribery and attempted cover-up at the highest executive level at” Wal-Mart’s subsidiary, Wal-Mart de Mexico, said the lawsuit filed in U.S. District Court in Arkansas. Wal-Mart said in a news release in April that it had been working on compliance with the U.S. Foreign Corrupt Practices Act “and has a rigorous process in place to quickly and aggressively manage issues like this when they arise.”

“We will not tolerate noncompliance with FCPA anywhere or at any level of the company,” the news release said. “We are confident we are conducting a comprehensive investigation and if violations of our policies occurred, we will take appropriate action.”

* In November, three former outside directors of DHB Industries of Pompano Beach, Fla., settled a case with the U.S. Securities & Exchange Commission for being “willfully blind to numerous red flags signaling the accounting fraud, reporting violations, and misappropriation at DHB,” according to a SEC news release.

The directors, Jerome Krantz, Cary Chasin and Gary Nadelman, all of Old Westbury, N.Y., neither admitted nor denied the allegations in their court filings. But Nadelman agreed to pay $966,935, Krantz agreed to pay $496,464, and Chasin agreed to pay $205,723 to settle the case.

List:See our PDF directory of the boards of directors for each Arkansas public company, which includes names, compensation and stock holdings of each director:

New Rules

A wave of new regulations came as a result of passage of the Dodd-Frank Wall Street Reform & Consumer Protection Act of 2010. The act contains new rules for how public companies must operate, including more disclosure for company boards.

“With the additional regulation, the job of being a director of a company, particularly a large one, is becoming more difficult,” said David Connolly, a partner in the New York law firm of Shearman & Sterling LLP who advises companies on corporate governance issues. “There are more regulations to pay attention to. The job becomes more complex and requires more time from directors and also more interaction between the directors and executives at the companies.”

Connolly said it was too early to tell, though, if the Dodd-Frank Act had been effective in providing more transparency into company boards, which was its intent, because some rules hadn’t yet gone into effect and some of the deadlines for implementing the rules had been extended.



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