Since 2009, George Miller has directed the legal, intellectual property, ethics and compliance, risk management, environmental, health and safety, sustainability and government relations functions at global life sciences firm Sigma-Aldrich. Prior to joining Sigma-Aldrich he held a number of senior legal positions at pharmaceutical and healthcare giant Novartis, including deputy general counsel and head of group legal based in Basel, Switzerland; executive vice president and general counsel, Americas; and general counsel, Japan. He spoke to deputy editor Aarti Maharaj about the challenges of managing a legal department.

1. What are some of the latest trends in law department management?

Probably the most important trend, and one that has been building for some time now, is the requirement of ‘doing more with less’.

For most of us, the ‘less’ really is in relative terms, not nominal. The takeaway is that CEOs are looking for their general counsel to provide the same or better support going forward at a lower cost in terms of percentage sales. This is forcing in-house legal departments to look to technology as an enabler of legal services, especially high-volume and lower-value-added legal services; to understand the business deeply, especially trends that change the legal risk profile, so internal resources can be better planned; and to partner with outside counsel and non-traditional legal service providers in order to improve service attributes at a total cost that represents better value.

Another trend that I see for the modern general counsel is ‘value’ – preserving value by providing cost-effective support to the business in the management of legal risk and by finding ways to add value to the business through intelligent and innovative application of law and regulation to the opportunities presented in the business arena. In-house departments that succeed on the value proposition will find their influence expanding significantly – and a law department that can meet the value challenge by successfully doing more with less will be a true champion.

2. You worked in Japan, then Switzerland – how would you describe your experiences in these overseas law departments? What did you learn?

While there were some parallels, the two situations were dramatically different. When I joined FedEx in its new Tokyo regional office, I was the first lawyer for the company that was physically located in Asia and only the second lawyer posted overseas. I had to do the basics – create a department, which included everything from filing systems to contract management systems, and train the local workforce on issues derived from US law that necessarily applied globally. At the same time, given the US penchant for extra-territorial application of its law, I was tasked with training counterparts in the US on a multitude of civil law systems to avoid decisions coming out of FedEx’s Memphis corporate HQ that would have very unfortunate effects on my clients.

If that wasn’t enough of a challenge, FedEx had, just prior to my arrival, closed the acquisition of the Flying Tigers airline. FedEx really had no presence in Asia prior to that and did not understand the market or the cultures; Flying Tigers, on the other hand, had expansive knowledge of the Asian market, and most of the senior management that I dealt with locally were from that company. I soon learned that the FedEx professionals did not understand the Flying Tigers’ business, and the FedEx US team did not understand Asia. I ended up spending a massive amount of time as an interpreter, most of the time on business issues that had nothing to do with legal risk.

In Switzerland I was asked to manage the global legal function of Novartis, a pharmaceutical and healthcare multinational. Much to my surprise, when I arrived in Basel, I learned there was no function. Sure, there were 100 lawyers, but none of them reported to anyone functionally outside of the limited business they served. So, as with my FedEx experience, I had to put in place the basics – only on a much larger scale, as we had lawyers in 25 countries.

3. In your view, what are some things that do not work when trying to create a successful law department?

For most global companies, while a centralized legal function, because of its scale, has the best chance of succeeding in doing more with less, it simply cannot meet the value challenge. Lawyers have to be embedded in the business – there is no other way to really understand the business and gain credibility with the management team. If 65 percent of the business is outside the US, that’s where the lawyers need to be as well.

Irrespective of the form of organization (centralized versus decentralized), lawyers who sit in their offices waiting for clients to come to them are dead wood, in my estimation. They help with neither of the challenges mentioned earlier.

Hiring the right lawyer is difficult, and doubly so when you are trying to support a management team that has no experience with lawyers other than fleeting discussions with outside counsel whenever a problem arises. From a political perspective, you have to involve a couple of key business managers – the lawyer will be sitting as a colleague on the business unit management team, after all – but you have to make it clear that you, as the general counsel, know which lawyer has the requisite skills and experience. All you are looking for from the business is whether the chemistry is right.

4. What makes a successful in-house career? Do you think promotions lead to success or making a switch to another company?

This is a tough question to answer given that success is such a personal and subjective standard. No one wants to lose talented lawyers to another organization simply because you have run out of challenges for them. At Novartis, we developed programs that followed two tracks: one for lawyers who wanted to manage other lawyers, and a second path for lawyers who loved to practice law but didn’t really want to be managers, or perhaps didn’t have the right personal attributes to succeed as managers. With these two tracks, a law department can offer meaningful development opportunities that recognize skills and contributions equally – and believe me, that can help one’s morale immensely.

5. How can a legal department get the most out of its interns?

Where my experience with interns has been at its most positive, we took the time to find the candidates who were most motivated to work with us and had a background or interest in the projects we wanted them to work on. Developing the projects and making sure the in-house ‘mentor’ was sufficiently trained and focused on getting the most out of the interns was key to the success of the program. Expectation management is also a vital – one cannot expect an intern to perform at the level of a five-year lawyer. On the other hand, one should not compromise on a high level of performance – you just need to be certain the capabilities of the intern are understood and match the task at hand. I am a firm believer in molding professionals to become something better, especially young, ambitious minds.

Ten years ago, corporate governance was still in the concept stage. There wasn’t much information available to the public about the way corporations were governed, and there were few regulations, websites or groups dealing with the topic on a daily basis. Over the years, however, the notion of good corporate governance has taken an interesting turn. After a string of corporate failures that crippled the economy, it has become clear that governance matters. So as Corporate Secretary celebrates its tenth anniversary as a publication, we take a look at ten significant events that have changed the face of corporate governance.

1. Sarbanes-Oxley

Perhaps the most important development was the passage of Sarbanes-Oxley (SOX), which has significantly altered the corporate governance landscape. This regulation was born out of the collapse of Enron, WorldCom and Tyco, which exposed the poor accounting and pay practices that many companies were engaged in between 2000 and 2002. Also known as thePublic Company Accounting Reform and Investor Protection Act, the law was implemented to improve transparency and the due diligence process while setting new standards for public company boards, accounting firms, senior management and executives. The statute requires companies to have robust internal control systems that can be built into their compliance processes to promote integrity and accuracy within their business operations.

2. The fall of Lehman Brothers

SOX may not have been the answer to the weak governance and compliance structures of many companies. When one-time financial powerhouse Lehman Brothers filed for Chapter 11 in 2008, it became clear that effective corporate governance measures were needed and regulatory intervention was not enough. Many felt that the collapse of Lehman led to the financial crisis, as it marked the largest bankruptcy in US history. However, Lehman was part of a crescendo of corporate failures, including Fannie Mae, Freddie Mac, AIG, Bear Stearns, General Motors and Merrill Lynch, which contributed to the economic meltdown. The corporate boards of these heavyweights were charged with having poor risk management and oversight procedures. Many critics argue that boards were asleep during this period, and that they failed to set the tone at the top and establish robust governance practices.

3. Dodd-Frank

The corporate governance chaos that emerged from the economic meltdown led to the passage of even more legislation in the form of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In the wake of the Lehman crisis and a culture of abusive financial services practices, regulators felt that corporations should be actively monitored by new governmental agencies in order to increase oversight and streamline the regulatory process. Dodd-Frank was implemented in 2010 to force firms to restructure corporate governance measures in order to prevent another financial crisis. The challenge for many companies, however, was emerging from a crisis having to do more with a lack of resources. The act has imposed burdens on many companies by requiring more disclosures about annual proxy statements and executive compensation, which has ushered in a new era in corporate governance. Now, after two years, Dodd-Frank’s effectiveness is in question (see Who believes in Dodd-Frank?).

4. Social media governance

The evolution of governance has had a twofold effect on the way companies relate to social media. On one hand, a lot of corporations have started integrating the use of Facebook and Twitter into their daily operations in an effort to interact more with customers and to communicate quickly to the public in order to restore public confidence. On the other, websites such as Wikileaks have emerged which expose the unethical and improper behavior of corporate directors. This has had an impact on the way companies govern themselves and manage their reputations.

However, it is the promise of what social media can provide that makes it so significant for governance and compliance. Governance professionals have started analyzing and testing strategies to help deal with new media technologies. Under the corporate governance umbrella, social media governance teams have been implemented to help companies stay ahead of compliance and disclosure threats. In the new regulatory environment, failure to implement effective social media policies, with adequate employee training, is now viewed as a breach of a board’s fiduciary duty to protect the corporation.

5. Say on pay

One of the biggest developments to come out of the financial crisis was shareholder scrutiny of executive compensation. Prior to 2007, executives were cashing out big bonuses while companies suffered major losses. Stock options that allowed executives to reap massive payouts even if their own company was underperforming were highlighted as a concern. Executives seemed to enrich themselves no matter how their company’s stock performed. Regulators and Congress did not take this lightly.

In dealing with the inequities of executive pay, say on pay, another provision of Dodd-Frank, has proven to be a game-changer. This provision allows shareholders to keep an eye on executives’ paychecks by voting for or against their compensation plans at the company’s annual meeting. As the provision has gained momentum, companies have started realigning their pay packages in order to gain shareholder support.

Executives may have a long road ahead, as shareholders have shown that they can band together to reject hefty pay packages. Citigroup’s chief executive Vikram Pandit saw shareholders reject his $15 million pay package in April. At the financial giant’s meeting, about 55 percent of the shareholders either voted against the plan or abstained. Such majority votes against compensation – which in this case included attractive packages for the bank’s four top executives as well as Pandit – are rare. This was the first time shareowners had rejected a compensation package at a major Wall Street bank, and going forward, it may be a new trend.

6. Protecting whistleblowers

While the first whistleblowing protections came out of SOX legislation, Dodd-Frank has expanded the provision with stronger measures to deal with retaliation against whistleblowers and financial incentives so employees won’t think twice about coming forward to report corporate malfeasance.

It has been approximately ten years since Cynthia Cooper, who formerly served as vice president of internal audit at WorldCom, exposed a $3.8 billion fraud that later became one of the largest accounting scandals in US history. Cooper was one of the first to really push the act of corporate whistleblowing into the limelight. Following in her footsteps, Sherron Watkins, vice president of business development for Enron, uncovered a financial scandal that left the company with no other choice than to file for Chapter 11 bankruptcy. Enron quickly became one of a series of audit failures that had a profound impact on the US economy.

While some industry analysts still argue that Watkins’ move to anonymously inform Enron’s CEO via email about the company’s doctored financial statements should not be considered whistleblowing, only someone interested in ethical corporate behavior would have taken the risk to expose the fraud. Today, Dodd-Frank seeks to clarify what is considered whistleblowing. The SEC has moved the whole whistleblowing process online, so filing a claim can be done without much hassle.

At the same time, whistleblowers can bypass the company’s whistleblowing hotlines and report directly to the federal watchdog. With the agency also offering financial rewards for uncovering fraud, finding the courage to blow the whistle should be easier now than ever before.

7. Corporate social responsibility

Ten years ago, the concept of corporate citizenship barely existed. Now shareholder proposals requesting information about CSR efforts are among the most common actions filed during proxy season.

Interest in CSR and sustainability efforts has been growing for years, but now it is deeply embedded in the DNA of many businesses and has moved from a strategy that few knew about to one of the most sought-after initiatives at a company. Corporations have found that in order to expand their businesses globally, they must make sure they respect and protect the communities and environments of the nations in which they want to locate new factories or subsidiaries.

The BP Deepwater Horizon oil spill that occurred in 2010 helped push CSR into the limelight. After the disaster, many risk management experts started questioning how seriously major companies take social responsibility. Shareholders wanted to know whether or not companies were doing enough to avoid these kinds of accidents, and whether these risks were incorporated into the growth projections they were receiving.

The internal and external risks that resulted from the oil spill led to many companies starting to take CSR seriously. Many analysts wondered if BP had met its ethical obligations to protect the environment.

Other companies took heed of BP’s missteps and started pushing CSR initiatives even further. Over time, this has paved the way for a new type of disclosure known as integrated reporting that connects financial and non-financial reporting together. Companies like United Technologies and American Electric Power have created reporting standards to improve transparency by including governance and compliance performance coupled with their financial information.

Due to the changing regulatory landscape and increasing urgency in the marketplace, CSR has become ever more important and has given rise to the new role of chief sustainability officer (CSO) at many corporations. Most CSOs are taken very seriously and have a seat at the executive table.

8. The rise of the FCPA

Enforcement of the Foreign Corrupt Practices Act (FCPA) has hit an all-time high. In 2008, the FCPA gained a lot of attention as Germany-based Siemens was found in violation and agreed to a settlement of $800 million in DoJ and SEC financial penalties. It was then and is still the largest FCPA enforcement action.

In 2010, the SEC created a specialized unit to further enhance its enforcement of the FCPA and added Kara Novaco Brockmeyer to serve as head of its FCPA division. Brockmeyer is well known for leading the FCPA investigations of Halliburton, KBR, Technip and ENI.

According to the SEC’s website, there has been a spike in FCPA enforcement between 2002 and 2012, with major cases like Walmart, Alcatel-Lucent, BAE and Snamprogetti gaining a lot of attention after these companies allegedly made illicit payments. Settlements have increased, and stepped-up enforcement will only add to the number of cases and fines.

With regulators turning more attention to international bribery, companies have been forced to enhance their compliance measures overseas. They have had to put more effort into understanding laws in the different nations in which they do business and creating internal controls to abide by the FCPA’s new and tougher standards.

9. Women on boards

Ten years ago, a woman serving as a corporate director was not the norm. While women are still greatly outnumbered by men onboards today, over the past three years many advocacy groups have been pushing for more women directors to balance out the all-male boardroom.

Corporate governance experts have claimed that having more women directors will contribute to better transparency and accountability practices in the boardroom. Some European nations feel so strongly about this that they have been imposing mandatory quotas for women on boards. By contrast, earlier this year, GMI released a report that says the presence of women on US boards only increased by 0.5 percent from 2009 to 2011 and reached a total of 12.6 percent this year, well below the figures for the Nordic countries, Canada, Australia and France. While over 70 percent of US boards have at least one female director, only 10 percent have three or more women. Women make up only 2 percent of board chairs. Experts believe future improvement of these numbers will change the governance landscape.

10. ‘Shareholder spring’ activism and protests

Shareholder activism is growing on a number of fronts. The Occupy Wall Street movement has continued massive outdoor protests and has inspired an offshoot entity called 99 Percent Power that is really putting some major companies’ risk management and corporate governance strategies to the test. The group is showing up at the annual meetings of corporations, causing confusion and pushing governance reforms. The movement made its debut at Wells Fargo’s annual meeting, which according to the Huffington Post spiraled out of control and was unexpectedly halted after demonstrators claimed proxy votes might be invalid because the bank had acted illegally in prohibiting some shareholders from attending the meeting.

The fact that these movements can have an impact on annual meetings is not a good thing for the corporate secretaries and general counsel who spend a significant amount of time planning and preparing them. Few companies can afford to ignore the prospect of annual meeting disruptions – however, shareholders and labor groups are more willing to adapt to some of these disruptive measures due to frustrations with executives’ unwillingness to adjust certain polices. Governance experts are wondering if these protests are just a one-year phenomenon – or are they a trend that will continue into 2013?

A new report by the CFA Institute, released today at the Society of Corporate Secretaries and Governance Professionals (SCSGP) annual event, reveals that the creation of a visionary board is beneficial for a company’s long-term growth and can stop the fear of failure in its tracks.

The study, entitled Visionary Board Leadership, gathered responses from corporate secretaries, investors, issuer representatives and current and former directors. The report points out that crisis management is seen as an area of strength and will help the board understand and mitigate future risks. By thinking and talking about failure, a visionary board is able to develop robust strategies that work between and beyond the issues at hand.

According to the report, a visionary board takes prudent risks and can best show leadership and combat short-termism by:

(i) Supporting management in delivering sufficient information to investors;

(ii) Actively listening to the concerns of stakeholders;

(iii) Overseeing and understanding corporate strategy;

(iv) Identifying areas of risk and analyzes the bigger picture;

(v) Understanding compensation policies and ensuring that performance and execution of strategy play an important role  when determining pay;

(vi) Guiding a strong board and company culture.

‘The visionary board will make sure the long-term isn’t given short shrift,’ says Matt Orsagh, director of capital markets policy at the CFA Institute and author of the report. ‘Short termism isn’t so much a growing or a flagging trend as it is a part of our markets that is ultimately destructive to growth.’

A good corporate secretary and the visionary board

Strategy is seen as an important aspect of the governance process. In order for a company to have strategic direction, the board and management must have an ongoing collaborative relationship.

The corporate secretary can act as the liaison between the board and management. The study mentions that a board should have the expertise, skills and trust of management so it can add more value to strategy development. Since the corporate secretary often sits in the middle of the board/management relationship, they can act as the facilitator for both sides.

‘The corporate secretary, in the position of trusted board counsel, makes sure that a board has the resources for discharging its fiduciary duties to shareholders, which includes looking after the long-term sustainability of the company,’ adds Orsagh. ‘At the same time, they play a large role in the communications between management, the board and shareowners, and are at the front lines of many of these issues that lead to failure.’

A poll by Deloitte and SCSGP found that 52 percent of boards address strategy at every meeting. Roughly 92 percent allow management to develop strategy and the board, in turn, advises, challenges and approves.

The CFA report echoes these findings and highlights that most boards spend more time concentrating on a company’s financial performance instead of addressing the ‘quality of operations.’ With adequate help from the corporate secretary, a visionary board can provide input and support management in a strong strategic manner that is beneficial in the long run.

‘A corporate secretary can work to ensure that proper strategic planning takes place in the boardroom. A good corporate secretary has the trust of management and the board and can work to ensure that proper strategic planning is always on the board’s agenda,’ Orsagh concludes.

When Matthew Biben was promoted to the new role of general counsel for JPMorgan Chase’s consumer businesses, he knew that dealing with the laundry list of regulatory and operational issues ahead of him would be no walk in the park.

Biben joined JPMorgan Chase in March 2011 as senior legal adviser and general counsel of mortgage banking, so dealing with the aftermath of the 2008 financial crisis was on his radar from the very beginning. In his current role, Biben oversees over 500 legal and compliance professionals who handle all the consumer businesses at the banking giant – this includes mortgage banking, auto loans and student lending, as well as consumer and business banking and credit cards.

‘I was hired to deal with the mortgage crisis, but I was also brought in to pull together a consistent legal framework across the different lines of business,’ Biben says (pictured left).

Creating a more consistent framework under which to operate was necessary for many banks after the industry was shaken by the mortgage crisis and subsequent financial meltdown. Banks were left with significant losses after borrowers defaulted on mortgages and exhausted their credit cards as a global economic slowdown ensued. Banks were also hurt by their exposure to toxic mortgage securities and risky real estate loans. Many financial institutions had approved subprime mortgages to consumers who were not qualified, causing the number of foreclosures to soar due to a lack of effective monitoring of the process. Regulators looked for ways to put an end to it all.

The federal government introduced a number of programs to shore up the banking system and required banks to offer widespread loan modifications to borrowers. The largest banks accounted for more than 80 percent of all loan modifications offered to homeowners, and it cost them billions of dollars to assume the loss from these modifications. Most of the large banks received money from the government to support these efforts. JPMorgan Chase received $25 billion as part of the government’s Troubled Asset Relief Program (TARP), but within a year it had repaid all of the bailout funds. The overall health of the bank remained strong, but it still faced a myriad of challenges.

‘The financial crisis was one of those opportunities for lawyers to demonstrate their value and expertise at a company,’ says Biben, who has also served as an assistant US attorney in the criminal division, and as deputy general counsel for the BNY Mellon. ‘Lawyers are most often called upon to help solve the most unique and complex problems.’

Biben’s appointment came at a time when JPMorgan Chase had started revamping its internal polices in the wake of the new regulatory era brought on by the financial crisis. He used his expertise to develop strategies and implement programs that would help his national legal team put better internal processes in place, improve the effectiveness of compliance and implement governance strategies throughout the banking divisions – all moves designed to strengthen the company and protect it against future economic shocks.

Rebuilding the team

Biben’s first order of business was not just dealing with restructuring and integrating the mortgage and consumer divisions. A major part of his appointment was to start breaking down silos.

To address the common problems many financial institutions have been facing in this new regulatory era, the governance and compliance expert felt that building a solid legal team would be a step in the right direction. To assemble the talent needed to excel in the new, highly regulated environment, Biben focused on going beyond the traditional criteria that most leaders look for.

‘I look for lawyers who possess the right attitude and understand the meaning of execution, accountability, diversity and collaboration,’ he says. ‘I spend a lot of time focusing on creating teams by selecting candidates with sufficient qualifications that leverage collective strength instead of individual contribution.’

However, Biben admits that ‘obtaining the right mix of stars and role players to work together is critical and is sometimes a challenge.’

His secret to building a best-in-class legal team is finding candidates who are willing to go beyond the duties that are assigned to them. ‘Exceeding expectations is a consistent objective – not just meeting goals, but exceeding them at all times,’ he says.

The social media push     

Social media silos can be bad for risk management. In a matter of seconds, one torrid tweet can negatively impact the way a company communicates with its employees and the public.

In order to stay ahead of compliance threats, companies are starting to create platforms where senior management and legal professionals can engage in dialogue around the clock. However, there is still a challenge to develop strategies that satisfy the legal team’s need to protect the company from liability and risk while also enabling the company to enjoy the business benefits that derive from communicating with customers in real time via social media. Traditionally, many attorneys tend to shy away from the use of social media forums, while other professionals question the security of these sites.

Biben believes the benefits are worth the risk. ‘Social media can help facilitate collaboration, especially at a company that has lawyers dispersed all over the world,’ he says.

Biben recalls that before he started in his new role at the country’s largest bank, there were no social forums where lawyers or governance professionals could ask questions, gain legal insight or offer advice. After carefully analyzing the needs of the legal team he had inherited, he decided to find a way to bridge the gap between the governance, risk and compliance departments.

Biben then created the Octagon, an internal social media site where the company’s lawyers and compliance professionals can now securely seek guidance, discuss legal dilemmas and educate each other about current trends. Having access to this type of tool has helped to eradicate many risks, and an added benefit is that younger lawyers can access the program and receive training from well-seasoned experts before addressing an issue.

‘Launching a virtual space where attorneys and other professionals from different departments can get together and actively participate in discussions was one of my top priorities,’ Biben explains. ‘Even though the platform is running, we are still continuing to explore and implement new ways to make the program effective to our legal teams.’

Restructuring the business

Managing legal and compliance risks is not an easy task – when emerging from a crisis, any company’s compliance measures will be put to the ultimate test. But compliance in the banking industry has gained tremendous attention in comparison to other sectors. Financial institutions have a lot of work to do in order to meet new regulatory standards and create programs that can be easily adapted into their existing business models.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, for example, was enacted to address the broad spectrum of issues that resulted from the financial crisis. Under this act, a new Consumer Financial Protection Bureau was introduced to promote transparency by policing the actions of lenders who engage in unfair practices involving mortgages, credit card policies and bank loans.

‘This is one of the areas where JPMorgan has invested a lot of resources, especially in the legal and compliance aspect,’ says Biben.

‘The Dodd-Frank Act has not dramatically affected the way we execute business because we have always had processes and policies in place that help senior management create a controlled environment.’

At the center of the legislation are credit and debit cards, which have generated a lot of attention over the last few years. In an effort to cover some losses from the meltdown, some banks have been charging excessive banking fees and slapping on extra surcharges for the processing of credit card purchases. Consumer advocacy groups have long criticized banks that have marketed credit cards to unsuitable demographics.

Fee structures have also been very complex, and have resulted in consumers spending more than they had bargained for. With mounting fees causing customers to abandon their accounts, regulators have stepped in and created tighter regulations in order to limit banks’ ability to demand excessively high charges.

‘It’s good to always remember that you are in the business to serve the customer,’ Biben says. He feels it all boils down to understanding how well a company’s consumer business can solve a problem instead of allowing it to escalate.

Liquid gold

One project to which Biben’s legal team contributed significantly is the recent Chase Liquid card, which will be available to customers in August. The prepaid card, which is targeted at consumers who want a low-cost alternative to traditional checking accounts, will not charge as many fees as similar cards have in the past. The Chase Liquid card does not charge fees for loading money onto the card at Chase bank branches or withdrawing money from Chase ATMs. The card is available to any customer over the age of 18 and carries a $4.95 per month maintenance fee.

Generally, the card offers services that cost less than other prepaid providers which are outside the bank’s network. It also doesn’t force consumers to open an account at the bank, which might subject them to other banking fees and overdraft charges.

‘Here we sought to make the product offerings consumer-friendly, at a price customers can afford, and break down product silos – this is a practice that you don’t always see in financial firms,’ says Biben.

Going forward, Biben says he has implemented extensive due diligence practices within the divisions he now oversees to make sure that consumer complaints are handled in the right way. While he won’t reveal the details of every approach used to stay on top of these matters, he is sure JPMorgan Chase will continue to thrive and weather any financial storms if consumer needs remain a top priority.

Interfacing with the corporate secretary

As general counsel for JPMorgan Chase’s consumer businesses, Matthew Biben knows collaboration is important for any legal team to be successful. Working closely with the corporate secretary has always been an effective way to strengthen the overall governance processes at the various banks where he has worked.

At JPMorgan Chase, Biben actively collaborates with the corporate secretary on various matters including corporate governance issues, committee charters, and strategic risk management techniques that can be implemented to supplement the board. This is critical because in his new role, Biben has responsibility for supporting two committees of the board of directors.
While at BNY Mellon, Biben also supervised the office of the corporate secretary and made regular reports to the board and its committees.

Governance challenges ahead?

In battling its way to the position of the nation’s top bank after the 2008 financial crisis, JPMorgan Chase has shown an excellent ability to manage the challenge of performing well in a difficult economy while dealing with increased regulations. Recent analysis from Morningstar states: ‘In our view, much of JPMorgan Chase’s outperformance was due to common sense risk management. For example, the bank carried far more tangible capital than Citigroup in early 2008, providing a much larger buffer against subsequent losses. Such conservatism is still paying off – JPMorgan Chase’s capital base and earnings power ensure that the firm’s recent surprise trading loss will not permanently damage the firm. That said, the misstep is a reminder that even the best managers can mitigate, but not eliminate, risk at financial firms.’

Going forward, investigations into JPMorgan Chase’s $2 billion trading loss and its involvement in possible misconduct as an underwriter in the recent Facebook IPO will determine whether the bank will need to improve its governance, compliance and risk management measures in order to continue its strong growth.

Michael Callahan, executive vice president, general counsel and corporate secretary of the California-based search engine giant announced that he will be stepping down from his position, effective July 9.

Ron Bell, the company’s current deputy general counsel for products and the Americas region, will serve as interim general counsel. Bell joined Yahoo! in 1999 and will now report to the company’s CEO Ross Levinsohn.

After 12 years at Yahoo! Callahan said in his resignation letter that he is moving on to seek ‘new opportunities.’ He joined the firm from Skadden Arps Slate Meagher & Flom in 1999.  He was promoted to general counsel in 2003 and became executive vice-president in 2007.

So far this has been a tough year for Yahoo! The company has been wrapped up in allegations of legal and ethical violations and with the general counsel’s impromptu exit, all eyes are back on the company.

But the New York Times reports that Callahan’s sudden departure should not impede the board’s probe into former CEO Scott Thompson’s academic credentials.  As for Facebook, both companies are working toward a settlement over technology patents.

A new report by Governance Metrics International (GMI) reveals that executives who serve as CEO and chair earn a median total compensation over $16 million whereas a separate chief executive and chairman can earn a combined salary of $11 million.

This new finding suggests that companies are not only spending more on the joint roles but that this approach poses a series of accounting and governance risks.

For years, the separation of the chairman and CEO roles has been a hotly debated subject. Many governance research groups and industry observers have long argued that combining the two highest-profile positions is a clear indication that a firm lacks both transparency and accountability.

According to GMI, other findings in the report include:

• Less than 1 percent of companies in the sample (defined as companies with a market cap in excess of $20 billion) with a  combined chair and CEO score an environmental, social and governance rating of above average compared to almost 20 percent of companies with separate roles.
• Companies with a combined CEO and chair and an ESG rating of ‘F’ include Goldman Sachs, News Corporation, Wells Fargo, Coca-Cola Company and AT&T.
• Corporations with combined CEO and chair roles are 86 percent more likely to register as ‘aggressive’ in GMI’s Accounting and Governance Risk model.
• Five-year shareholder returns are nearly 28 percent higher at companies with a separate CEO and chair.

Having one-person monitor him or herself also limits power in the boardroom. And the boardroom dynamic is different. Shareholders are now demanding more engagement from directors, regulators are scrutinizing boardroom composition and proxy advisers are playing a more active role. Against this backdrop, there is a changing dynamic in the boardroom; splitting the roles of chairman and CEO can help facilitate a more open and collaborative environment.

A recent Ethisphere Best Practices in Ethics Communications Workshop sought to educate communications professionals and legal departments on how to develop measures to promote an ethical business culture.

The event featured executives from major public relations firm such as Richard Edelman, CEO of Edelman, and Jack Martin, global chairman and CEO of Hill + Knowlton Strategies, among others, who urged companies to start taking an active role in building and maintaining their reputations.

In an interview with Corporate Secretary magazine, Susan Frank, vice president and assistant general counsel for global compliance at AECOM, who also attended the event, discusses how she uses her legal expertise and communication techniques to build a company with strong ethical values.

It’s official – almost every general counsel owns an iPad, or at least has access to one. Now that most companies have migrated their important information to this wireless device, the general counsel can edit and sign off on documents, visit the board portal and respond to emails anywhere, anytime.

To top it all off, having a variety of apps can make life much easier for these lawyers. In fact, apps offer a good way to stay organized and work efficiently. Given that there’s an app for almost everything, governance professionals are often stuck trying to choose the one that best suits their needs.

‘The iPad can (and should) replace the ubiquitous legal pad for note taking,’ says Stephen Kaplan, senior vice president and general counsel of Connextions, a technology solutions firm. ‘It also weighs significantly less and has greater portability.’

There are, however, some disadvantages. Like many a general counsel, Kaplan (pictured left) relies on his iPad to complete most of his daily tasks but occasionally turns to his trusty laptop to complete major assignments.

‘The key drawback of the iPad is its inability to use the sort of powerful editing tools found in Microsoft Word, but those barriers are being slowly broken down,’ Kaplan points out.

As new updates are constantly being rolled out to help smooth the minor editing glitches in the iPad, Kaplan recommends the following apps for the legal community:

1. MyScriptMemo: Takes your handwriting (even if it is pretty sloppy) and converts it into text with around 95 percent reliability. Certainly the best there is in this genre.

2. Notability: Note taking with great and simple layout. It also takes voice notes for you to review later.

3. TurboScan: If you’re traveling and cannot locate a scanner, you can use the camera on your iPad to do quick scans of short documents.

4. PDF Expert: Execution and annotation of PDFs on the go. It has the greatest feature set of any app in its class.

5. Dragon dictation: All voice-to-text apps need improvement, but Dragon has been at it as long as anyone, and it is constantly attempting to improve its product.

6. Office2 HD: This software appears to be the first to have true ‘track changes’ technology for document creation and editing, a feature lawyers value tremendously.

7. MagicalPad: Most lawyers need this type of productivity app for mind mapping and whiteboarding. Create easy lists, projects and flowcharts on the fly. It contains great export features.

8. Box.net: Cloud-based document storage. Not quite as common as Dropbox, but it has a few more enterprise clients. Data security is an important issue for general counsel and this app makes you feel better when storing confidential information.

9. WestlawNext: Reference is always important and this, in a nutshell, is research on the go, optimized.

10. Feeddler RSS: Excellent layout and easy management of RSS feeds.

Between flights or meetings there’s usually time to spare. ‘Yes, lawyers need to clear their heads,’ says Kaplan. ‘And Angry Birds Space is fun, phenomenal and just as addictive as the original.’

Finding a way to let off some steam after a long contentious annual meeting is often seen as a challenge in itself. Some governance officers and IROs usually head out of town or take some time out to recuperate. But for some, giving back to society is a good way to relieve stress and celebrate a successful annual meeting with colleagues. Fountain Gallery, a place that represents artists with mental illnesses, recently hosted its ninth End of the Annual Meeting Season Celebration, which was an event like no other.

Held at the offices of Ellen Philip Associates in Manhattan, the event featured a collage of original art pieces from artists who came from all walks of life. Among the art mediums represented in the exhibition were acrylic, oil and watercolor paintings, woodcuts and digital photographs. The money raised from the artworks and ticket sales were donated to the Fountain Gallery.

‘This event is a place where transfer agents, proxy solicitors, processors, governance professionals and IROs all gather after a grueling proxy season to enjoy art and the company of each other,’ says Carl Hagberg, chairman and CEO of Hagberg and Associates. ‘It’s more a celebration of a great industry because of the teamwork involved; the printer has to work with the lawyer who then tag teams with the IRO and other senior executives. And a number of these companies present at the event have provided work for the artists and other members of the gallery’s parent organization, Fountain House, through its Transitional Employment program.’

Hagberg, who is a member of Fountain Gallery’s advisory board and one of the event’s hosts adds that at the end of proxy season, there should be a healthy environment where professionals who were involved in the laborious process can convene to discuss matters for the next year.

Governance and investor relations professionals usually spend all year preparing for a company’s annual meeting. The process entails more than just setting an agenda and selecting the right speakers. It involves having sufficient information ready to bat away issues that may surface at any time.

But this year, annual meetings were a bit more treacherous. Protestors launched a string of confrontations at some of the country’s largest corporations that led to the adjournment of some meetings and the cancellation of others. It was a movement that many were not prepared for.

‘This year, we had a larger crowd at the event and it seems that it’s going to continue to grow because the annual meeting process isn’t the same,’ Hagberg notes.

Alan Miller, co-founder of proxy solicitation firm Innisfree, died last July and was honored at this year’s event for his active work in the corporate governance arena. Miller was instrumental in the world of M&A activity and is known for his involvement in a myriad of high-profile transactions.

Last year, the gallery honored David Smith, former president of the Society of Corporate Secretaries and Governance Professionals. Over the years, Smith has contributed significantly to corporate governance and securities regulations.

‘What made this event grow is that people in our industry are very hardworking and after dealing with investors, shareholder proposals, proxy voting, it is clear that professionals who are in this business are very focused and this display of art rang a bell with them that Fountain Gallery artists are similar in many aspects.

Not only do they work on their art but they also help to operate the Gallery – and meaningful work is an important contributor to one’s well-being,’ Hagberg concludes.

The time has come for Facebook to start taking boardroom diversity seriously. The social networking site reported that Sheryl Sandberg, chief operating officer of the company, has joined the board of directors.

Facebook’s announcement coincides with a report released yesterday by the Committee for Economic Development (CED) that urges US companies to add more women to their boards in order to stay competitive in the global economy.

The report, ‘Fulfilling the promise: How more women on corporate boards would make America and American companies more competitive,’ says that the diversity efforts many US companies have adopted are not gaining enough traction. ‘The percentage of women on all US corporate boards has been stuck well below 13 percent for a decade,’ it says.

Roger Ferguson, co-chair of CED and president and chief executive officer of pension fund giant TIAA-CREF, says that successful promotion of boardroom diversity has to start with the tone at the top.

‘Evidence shows that CEO commitment is the most influential factor to realizing gender diversity in corporate leadership positions. Successful companies of the future will be those that attract, train and grow diverse talent at all levels, including the board,’ Ferguson adds.

Mark Zuckerberg, chairman and chief executive, nabbed Sandberg a few years ago from Google where she served as vice president of global online sales and operations at the search engine. In this role she built and managed the online sales channels for advertising, as well as publishing and operations for consumer products worldwide.

Before this move, Sandberg was chief of staff for the US Treasury  under President Bill Clinton, Facebook says.

He has been on the faculty since 1980. Currently co-director of the Wharton Financial Institutions Center, he was formerly vice dean and director of Wharton doctoral programs and executive editor of the Review of Financial Studies. Here he talks to deputy editor Aarti Maharaj about why implementing a governance model that focuses on shareholder value may not be the best strategy.

1. Do you think the regulators’ stance on corporate governance is strong enough to protect the economy from another financial meltdown?

The corporate governance of financial institutions did have an impact on the financial crisis, but it was not the primary reason for the meltdown. Nonetheless, shareholders now take a keen interest when banks are taking risks. For example, if I am a risk manager at a company, I can make a huge gain and the shareholders will make a lot of money, but if I make a loss, someone else has to bear it due to the company’s limited liability. Against this backdrop, when the meltdown occurred, the government had to intervene and bail out the major financial institutions. This shows that in the banking industry, shareholders were chasing the wrong type of incentives. Regulators may have taken note of this amid the crisis, and hopefully they’ll soon have things under better control in order to prevent such risk-taking.

2. How do governance and shareholder value complement each other? How does governance impact unemployment?

In the United States we have a strong focus on shareholder value, so when the bad times came there was a reduction in demand and what companies did during the post-crisis period was to lay off workers or fire them. The economy started growing only recently, and we still have high unemployment rates that might last a few years. If you look at countries like Germany and Japan, they experienced significant output shocks during the crisis: Germany’s GDP fell 7 percent and Japan’s fell 10 percent. And yet, unemployment in these countries did not increase very much. Meanwhile, the United States experienced a smaller drop in GDP, but there’s been a doubling of unemployment, from roughly 5 percent to 10 percent. In Germany, boards of large companies include worker representatives because of the country’s multifaceted corporate governance structure, so firms there don’t fire workers as routinely as US companies do.

Governance professionals need to be aware that if we experience another prolonged financial crisis, firms will have to think twice before laying off large numbers of workers like they did in this recession. In fact, what we can learn from this financial crisis is that we shouldn’t change companies’ governance models, but should consider temporarily implementing policies that they use in other countries to get around the problems we are experiencing.

3. What aspects of corporate governance should countries focus on?

It should be understood that different corporate governance models can yield different economic outcomes. Countries should be making efforts to identify a governance model that works best in their specific context. 
Countries may also need to understand the notion of value in a different way. Should they focus on shareholder value or on stakeholder value? There’s a difference. When managers are incentivized by profit, this can be very beneficial in booms, but it can lead to serious and enduring problems in busts, as we are seeing in the United States today. 
Other countries have done better than the United States on the unemployment issue, and I think this has to do with the governance system that is typical for US companies. We are now seeing the downsides of this governance system, which embraced the shift toward leaner workforces and more efficient production processes in the 1990s, and elevates profit-making above all else.

The result is that the classic ‘American Dream’ is not as reliable today as it once was. If this is an aberration, the model may well prove to have enduring value. If not, a broader shift to a different governance model may be needed.

4. Corporate secretaries and general counsel hold senior positions at companies and have direct access to the board. What should these professionals look for when identifying a sustainable and effective corporate governance model?

This is an important subject that governance professionals should address. The traditional literature on corporate governance suggests that the US /UK model is best, but now there’s some pushback as we see some of the enduring problems with persistent unemployment in the US economy. 
In the US context, governance officers need to look for simplicity, as many problems occur when strategies and terminologies become overly complicated. A governance model should be constructed so that everyone can understand it and relate to it. Google received a lot of criticism for its governance practices because of its voting structure – those kinds of systems can work well because they are simple and everyone knows who is in control, but they can become less successful as time progresses. The one share, one vote model works well. In the long run a governance model should be open to change, and it should remain transparent and communicate a clear understanding of what its goals are.

5. When it comes to governance, clearly there’s no one-size-fits-all approach. You’ve said that countries need to identify a model that works best in their specific context – can you explain this further? How does the difference between shareholder and stakeholder value affect a governance model?

It all depends on the traditions in the various countries. In Japan there is a notion that employees have an important part to play in the company, and that the company isn’t there just for its shareholders, who legally own it. Shareholders don’t have that much power in Japan, while employees and managers have more power than in the West. These sorts of models won’t work well in the United States, however, and conversely, you can’t impose American practices on, say, the Indian governance model. It’s all about finding the right balance.

Frustration is growing among shareholders as they continue to demand greater transparency on stratospheric CEO pay packages. This proxy season, it seems, shareholders have had enough; as a result, they are pushing back loudly on a variety of corporate governance matters that affect executive compensation. The backlash is being felt at annual general meetings across the nation and overseas, with shareholders carefully scrutinizing corporate governance and pay practices.

Many experts thought Dodd Frank would provide the answers to most of the governance problems companies face, and its provisions certainly touch on virtually every corner of the financial markets. But some Wall Street firms are struggling to stay in compliance with this legislation and this is something shareholders are factoring into their investment decisions. To be specific, one might wonder: what exactly do shareholders want? A recent survey by FTI Consulting, a global business advisory firm, sought to answer this question and the results were as follows:

(i) Executive compensation practices remain a major concern and rank high on shareholders’ agendas.

(ii) The annual say-on-pay vote on compensation is becoming increasingly important.

(iii) Investors are calling for greater board independence, quality oversight and effective governance measures that can help protect shareholder interests.

(iv) Shareholders are looking for companies to engage in annual corporate governance roadshows as a form of enhanced communications.

The report reveals that investors are now using their voting power to voice their concerns over dissatisfaction with performance. An astounding 72 percent of the 170 institutional investors polled feel anything more than 30 percent of shareholders voting against executive compensation is solid proof a corporate response is needed.

Meanwhile written communication is seen as a thing of the past. Ninety-two percent of shareholders are calling for more engagement with the board of directors through governance roadshows with more than 58 percent expecting these to be held once a year.

In short, shareholders want – and deserve – corporate governance transparency, enhanced executive compensation disclosures and better engagement.

Whistleblowing has become a top concern for directors because it can happen at any time, and companies are not always equipped with the necessary measures to mitigate such risks.

Since the SEC’s Office of the Whistleblower was launched in August 2011, officials have been dealing with almost 100 tips per day. This year that number is expected to increase as the federal watchdog introduces monetary incentives to encourage employees to report corporate malfeasance directly to the regulator, with the promise of protection against retaliation.

While the SEC is using its regulatory powers to crack down on corporate wrongdoing, companies may want to consider dealing with whistleblowing differently. They may want to enlist the help of an ombudsman to serve as liaison between the board and employees.

Many corporations and financial institutions are still grappling with the complexities of Dodd-Frank. For example, some experts believe employees can use the SEC’s stance on whistleblowing to their advantage for reasons that the provision wasn’t intended for – that is, an employee can file a whistleblower claim simply to secure his or her position at a company.

‘If a company is experiencing slow turnover in sales, an employee can become a whistleblower just to protect his or her job, especially if he or she senses that layoffs will occur sooner or later,’ says Robert Tannous, pictured left, who chairs law firm Porter Wright’s corporate finance and securities practice group. ‘The whistleblowing statue gives employees a private right of action.’

Usually, however, it is in the company’s best interests to have employees use internal fraud mechanisms instead of reporting through the SEC program. Internal programs give companies the opportunity to go to regulators with fraud allegations and demonstrate that they have found the problem and are taking steps to address it; this action could lower fines and penalties. That’s why companies must set up internal hotlines or ombudsman programs that employees trust.

‘Companies may need to constantly review their whistleblowing policies and make sure that employees are educated on this provision,’ says Tannous, ‘because it is part of doing the right thing and can help mitigate risks.’

Fear of retaliation

Retaliation can occur from different levels of management and even from the top echelon of executives. It can take the form of harassment, demotion or termination of a whistleblower’s job position. Directors and high-level executives should understand that if they engage in such practices after internal wrongdoing is discovered, they will pay a price.

For example, disgraced Japanese camera and optical device maker Olympus canned its CEO Michael Woodford in October 2011 after he questioned the dubious payments the company had made to cover losses from security investments. The Wall Street Journal noted that ‘if former president Michael Woodford hadn’t raised concerns about the company’s accounting, the loss-hiding may never have been discovered.’

Olympus claims to have fired Woodford over what it calls his ‘aggressive Western management style’, but Woodford, who worked at the company for more than three decades, disclosed internal documents to show that he was dismissed after he questioned company executives about hiding $1.5 billion in losses. He is now suing Olympus for up to ten years of ‘lost salary’ due to wrongful dismissal. Settlements in such cases can be expensive, and they occur more frequently than many would like to acknowledge.

‘According to surveys, in any given year, between a third and three-quarters of the employees of a company will see at least one incidence of malfeasance,’ says Jonathan McBride, pictured right, a corporate governance consultant and president of McBride Associates. ‘Of that cohort, a quarter to a third say nothing because they are scared of retribution.’

McBride says the root of the problem is that companies ‘have one cohort of directors who are terrified of what they don’t know, and on the other hand there are employees that know things and don’t know who to turn to when faced with an ethical issue.’ In cases such as these, an organizational ombudsman can help a company and its directors set the appropriate tone at the top regarding how such issues are to be dealt with.

What can an ombudsman do for you?

By establishing an ombudsman function, a company can provide the opportunity for employees to openly speak about ethical issues without fear of retaliation. The ombudsman can provide guidance on setting up the right program that can aid all levels of employees. These types of initiatives can facilitate communication, encourage dialogue and feedback from all members of an organization and help build a culture of trust instead of a fear-driven culture of compliance.

‘Having an ombudsman is important,’ says Tannous. ‘Some companies prefer an in-house professional, while others turn to hotlines.’

Tannous believes that having an ombudsman present is crucial when employees wish to file a whistleblower claim. ‘What I’ve seen in my experience is that it’s good to have an ombudsman who is up to speed, who can interact with the employee and who can find a solution to a problem faster than with a hotline where an anonymous message is left,’ he says.

In an article posted on the website of the Society of Corporate Secretaries and Governance Professionals and titled ‘The ombudsman and the corporate secretary’, Stephen Norman, former corporate secretary and governance officer at American Express, writes that having an ombudsman present at a company is seen as being more effective than a hotline. ‘Anecdotally, from other companies that have tried help lines, they don’t get as many calls,’ he says in the article. ‘Also, I believe that an ombuds function indicates that the company is more serious about reaching out and providing a haven for people who have concerns.’

What’s more, by acting as an intermediary between the board and its employees, the ombudsman can help to create a culture and context where there are many options for solving a problem before blowing the whistle.

McBride notes that an ombudsman can serve as a very powerful governance tool and can help address the deficit of trust that exists in corporations today. At the same time, the corporate secretary can also support the ombudsman function by establishing a symbiotic relationship between governance and compliance.

‘The corporate secretary can introduce and support the ombudsman function with the board,’ says McBride. ‘Also, the ombudsman reports to the board periodically, and the corporate secretary can coordinate those reports to the appropriate committees at the right time and provide advice when needed.’

New York-based Dewey & LeBoeuf, one of the nation’s most prestigious law firms, filed for Chapter 11 on Monday night, making it one of the largest law firms to collapse in US history.

On Monday the international law firm announced its plans to liquidate and according to the New York Times, the company is expected to retain 90 employees to assist in the shutting down of its business. At one point, the practice employed well over 1,000 lawyers worldwide. Court filings indicate that the firm has roughly $315 million in liabilities and of that amount $225 million remains unsettled to banks.

Dewey was plunged into a deep freeze for sometime after its profits and debts took an unexpected turn. The Times reports that the corporate law firm was paying its lawyers more than it could actually afford. Adding to the increase pressure, the firm was trying to regain financial traction and stability after the Dewy Ballantine and LeBeouf, Lame Greene & McRae mega merger in 2007.

Despite its financial issues, the firm experienced its fair share of legal success, however. It represented business tycoon Mark Cuban, owner of the Dallas Mavericks, against SEC allegations of insider trading. The firm also provided counsel to MetLife in its $12 billion acquisition of Travelers Life and Annuity.

Regulators are reviewing JPMorgan filings prior to its $2 billion blunder that was announced earlier this month.

The Associated Press says the SEC is carefully scrutinizing the earnings statements and financial reports to uncover if they were ‘accurate and truthful.’

Mary Schapiro, chair of the agency, told the Senate Banking Committee Tuesday that the federal watchdog is also looking into what JPMorgan told investors about the risks before the ‘self-inflicted’ trading loss occurred.

Schapiro and Gary Gensler, chairman of the Commodity Futures Trading Commission (CFTC), believes that the $2 billion trading loss is a clear indication that tougher rules should be imposed on the banking industry.  The CFTC is also investigating the banking giant’s risky move, the report confirms.

But more hearings have been scheduled. On June 6, the Federal Reserve and Treasury Department will testify before the Senate panel.

The lender’s legal department is ready to face off regulators, however.

Bloomberg said yesterday that former agency enforcement chief William McLucas has been appointed by JPMorgan to help handle the string of regulatory probes following the bank’s trading misstep.

McLucas currently serves as a partner at Wilmer Cutler Pickering Hale & Dorr, the law firm retained by JPMorgan after the announcement was made. McLucas headed up the commission’s enforcement unit during 1989-1998 and has reportedly worked with the bank’s general counsel, Stephen Cutler.

Before joining Aviat Networks she was a chief counsel at the Department of Commerce, and prior to that she worked at XM Satellite Radio and Energizer. She earned a bachelor’s degree from Northwestern University and a JD and MBA from Washington University in St. Louis. Here she talks to deputy editor Aarti Maharaj.

1. What is your take on governance in the high-tech/telecommunications industry? Is it different from other sectors?

I see corporate governance as a broad-based set of principles whereby the board oversees accountability, fairness and transparency in the company’s relationship with all of its stakeholders, including management, customers and shareholders. This framework is applicable to all industries, whether it is consumer goods, media, high-tech or telecommunications.

Differences may arise in specific procedures because of the way business is executed or the way an industry is regulated – for instance, the procedural controls and information flows that exist in a manufacturing, high-tech or telecommunications business may not exist in a consulting or advertising business.

2. In your view, what should governance professionals know about IT governance? Do you think it is becoming an area of increasing concern?

IT governance is a subset of corporate governance. Historically, some believed that IT governance focused on IT systems, performance and risk management, and many felt that it was the responsibility of the chief information officer. In reality, however, it is much broader than that.

It involves everyone – the board, management, staff and customers. It is another framework used by the organization to establish transparency and accountability of individual decisions. It helps to ensure the traceability of decisions in order to hold responsible parties accountable. Questions we need to ask about IT from a corporate governance perspective include whether an IT investment will create business value and also reduce or mitigate risks related to IT. I think one area of increasing concern in IT corporate governance for all companies is whether the company is giving an appropriate amount of attention to shielding itself against cyber-security issues such as inadvertent data breaches and intentional hacking.

3. In 2007, Aviat went public. What hurdles did you face post-IPO?

After an IPO, a company typically faces several challenges. In the case of Aviat Networks, which was formerly known as Harris Stratex Networks, two companies with full-scale global operations merged – operational consolidation and synergistic execution were critical parts of the process, as were the implementation of a variety of controls, processes and procedures to manage the combined businesses.

In addition, Aviat Networks had Class A and Class B shareholders, and this required balancing the interests of all respective stakeholders while keeping the governance and compliance landscape in mind. Last but not least, critical in any such transaction is achieving one company culture as this is the basis for how employees behave, perform their functions, interact with customers and make their decisions. Nowadays companies must consider additional issues such as the Dodd-Frank legislation – specifically, the impact of the whistleblower rules, increased use of social media including ‘real-time’ impact, resurgence in shareholder activism, and domestic and global privacy rules.

4. How has your experience at Energizer and XM Satellite Radio molded you for this role at Aviat?

I have been fortunate enough to have had a variety of roles and experiences. I started as an attorney with Energizer’s legal department and was responsible for a wide range of complex legal matters. Because I was always included in senior management’s review of the international business, I developed an interest in working in a business role; I was subsequently offered an opportunity to become a member of the Energizer brand management team and, later, the executive team managing the South and Central American business.

These roles allowed me to handle several challenges faced by a general manager, such as leading cross-functional teams, rolling out new products, managing sales and trade marketing issues, and developing strategic plans to grow the business. After joining XM Satellite Radio as part of the business launch team, I learned about the challenges of working in a start-up environment. At that time, XM had slightly less than 50 employees and was preparing to launch satellites, complete the build-out of its business infrastructure and begin offering satellite radio services to consumers.

After that I was offered a chief counsel position at the US Department of Commerce. I had the privilege of experiencing and making public policy decisions while getting a view into the inner workings of the executive branch of government. I returned to corporate life in the role of general counsel for the Microwave Communications Division of Harris Corporation, which ten months later merged with Stratex Networks to form Harris Stratex Networks, now known as Aviat Networks. All of these valuable experiences enhanced my perspective and helped me to better understand and manage the issues faced by all stakeholders today.

5. Compliance is a key focus area for you as a corporate secretary. What programs did you put in place to handle whistleblowing and whistleblower claims?

From the inception of the company in 2007, Aviat Networks has had a comprehensive business ethics program with a robust Business Code of Ethics. We have a process whereby employees can easily contact a designated business ethics leader or myself, either through email or a direct phone call. Our business ethics leaders, who receive and give business ethics training, are spread throughout the globe. Also, we have a separate telephone line and email address which is handled by a third party in the event that a person chooses to remain anonymous. Once a whistleblower report is received, the third party immediately notifies the head of internal audit, the audit committee chair and myself.

Together, we determine if the item should be referred to human resources or remain with internal audit or legal to conduct the investigation. In a nutshell, all whistleblower claims are communicated to the audit committee. In building an ethical corporate culture, these elements are essential, as is ethical leadership – in fact, an ethical ‘tone at the top’ is critical. Senior executives, supervisors who reinforce and encourage ethical behavior, peers who show commitment, and the company’s values as expressed through informal communication channels should be the basis of any compliance program.

Building a professional online resume is always a good way to connect with current and prospective employers. For those looking for employment, showcasing your talents on LinkedIn can be beneficial to your career.

But when it comes to recommendations, some companies feel it is best for employees and governance professionals to avoid providing recommendations for people they currently work with – especially on LinkedIn.

Endorsing a person on social networks like LinkedIn can have legal implications and may put your credibility at risk. For example, when an employee or colleague jumps ship, the referral stays on his or her LinkedIn page and endorses that individual’s actions, no matter where he or she may move on to. And this is where the problem lies.

‘A lot of companies have a policy where you don’t give referrals,’ says Nancy Calderon, chief administrative officer and US national partner in charge of operations at KPMG, an audit, tax and advisory service.

Many companies have employees that are prohibited from providing referrals or endorsements of other workers because this can lead to serious reputational risk for the company.

According to Calderon, there are three main possible reasons why an employee or a legal professional should not give recommendations:

• It is a violation of the company’s existing policy (social media included)
• Positive referrals can be used by your competitors when employees leave and this can harm your firm’s reputation
• If the employee engages in wrongful behavior and your recommendations are still sitting on his/her LinkedIn page, the media, regulators and others can easily access this information.

If your company does not have a policy about referrals there is no reason why you should not endorse someone you’ve worked closely with over the years. But before you do, however, think about the legal and practical problems that can surface from publicly posted endorsements and recommendations.

The safer and more practical thing to do is make recommendations based on facts you personally know about the individual or business. Concentrate on the areas where you have personal knowledge concerning the person’s qualifications.

So what are your thoughts on LinkedIn recommendations?

After a 10-year stint, Jones decided to step down from her role as general counsel of internet domain giant, Go Daddy, according to the website Domain Name Wire.

Last year, Corporate Secretary magazine awarded Jones and her team the award for best use of technology by a corporate secretary or general counsel. The Go Daddy legal team was honored for its social media initiatives and legal work in the virtual setting.

Jones, pictured left, was Go Daddy’s first lawyer. She established the company’s legal department, which has grown to nearly 100 people. While working to expand the legal team, Jones spearheaded many initiatives to help protect the online community and regularly testified before Congress.

During her tenure, she managed all legal aspects at the company. Reportedly, Nima Kelly, deputy general counsel will serve as the Scottsdale, Arizona-based company’s acting general counsel as Jones moves on to the next chapter in her career.

Jamie Dimon, CEO and chairman of JP Morgan Chase, left the company’s annual shareholder meeting yesterday relatively unscathed, after disclosing a $2 billion plus trading loss at the bank.

In fact, most of the shareholder ballots were locked in prior to Dimon’s announcement of the company’s loss. But the annual meeting gave investors the chance to challenge the high-profile CEO about the company’s $2 billion blunder, which took a toll on investor confidence. Yet, shareholders stood strongly behind Dimon. An Associated Press report found that Dimon’s pay package from last year – $23 million – passed with 91 percent of the vote, while the vote to separate the CEO and chairman role ‘won only 40 percent support.’

Many corporate governance experts have long argued that, in order to boost transparency and enhance accountability, the roles of the chairman and CEO should be separated. But for Dimon, who is known as one of the ‘smartest bankers in the US’, holding both roles will pose no threats to the firm’s current corporate governance structure.

‘In a vast majority of cases separating the roles creates balance of power in the boardroom,’ says Paul Hodgson, senior research associate, GovernanceMetrics International. ‘Combining the roles is definitely not a good idea.’

Meanwhile, as analysts and industry observers are still criticizing Dimon’s costly mistake, regulators are continuing to monitor the trading situation at top Wall Street firms. On Tuesday, a Reuters report revealed that representatives from some of the country’s top financial regulators met to add more language to the Volcker rule, a provision of Dodd Frank that will go into effect in late July.
Under this rule, top financial institutions like JP Morgan, Goldman Sachs and Bank of America will be prohibited from making bets that will contribute to the company’s profits instead of its clients’.

‘There should be tighter regulation around the hedging of risky bets,’ adds Hodgson. ‘When companies like JP Morgan invest money in order to gain profits, it serves as a distraction from the actual business of an investment bank, which is to make money for clients instead of themselves.’

Dimon has been a strong opponent of the Volcker rule, saying that it will restrict competitiveness in the marketplace by imposing limits on proprietary trading by banks.

In reality, however, after Dimon’s trading debacle last week and President Obama’s call for tighter regulations coupled with movements like Occupy the SEC, it seems the Volcker rule is slated to become banks’ worst regulatory nightmare.

The tech giant’s founder and chairman Richard Schulze has resigned from his position after internal investigations reveal that he was aware of former CEO Brian Dunn’s scandalous love affair with a female co-worker.

In light of these revelations, Schulze ‘acted inappropriately,’ by failing to bring the matter to the company’s audit committee.
While Best Buy made it clear that Dunn did not use the company’s resources to facilitate his relationship with the female employee, the internal probe found that Dunn’s behavior showed ‘extremely poor judgment and a lack of professionalism.’

In April, Dunn abruptly decided to call it quits as the Richfield, Minnesota-based company further investigated his relationship with the subordinate employee. The internal probe was initiated by the firm’s audit committee and completed by an outside law firm.

Dunn is expected to walk away with a severance package worth up to $6.6 million from the embattled consumer electronics chain.

There is still no word on who will succeed him.

Schulze said in a statement that when he questioned Dunn about his actions, they were denied and now he accepts the audit committee findings.

The company’s incoming chairman Hatim Tyabji will begin in his new position after its annual meeting on June 21.

Historically, many are conditioned to think that when HR calls, it’s time to start running.

The truth, however, is that HR serves as a supportive arm for many organizations and can help drive success throughout corporate departments. When companies are looking to hire and retain new employees, the HR role becomes a very integral part of the search and identification process. With the recent attention being placed on board diversity, compliance, ethics and transparency, some might wonder how helpful the HR department can be when trying to enforce strong governance practices – and corporate secretaries may also wonder what they can do to help facilitate an ongoing relationship with HR professionals.

HR’s role in governance

In a recent report entitled Why HR governance matters, HR consulting firm Mercer says, ‘HR executives face significant challenges, including managing a global function, realizing returns on technology, accelerating the pace of organizational change, leveraging human capital strategically, and reforming management practices in response to proliferating regulation.’ In essence, the study calls for HR managers to start engaging with other corporate departments – but the single most critical element to help HR achieve governance success is to team up with the corporate secretary.

The corporate secretary can create a symbiotic relationship with the HR function. In fact, there’s no one better than the corporate secretary to ensure that all regulatory and governance requirements are met within HR. According to Mike Johnson, vice president and human resources coordinator at UPS, ‘The HR function at UPS is closely aligned with legal for policy, strategy, training, compliance and workforce management. This ensures consistent application and governance.’

Johnson, who is responsible for the health and safety, compensation and benefits, and employee relations departments at the $53.1 billion logistics firm, says the UPS HR department maintains effectiveness collaboration with the legal department by building what he calls ‘focused knowledge’.

‘Rather than being generalists, legal are counterpart subject matter experts who collaborate on compensation, benefits, health and welfare, health and safety, employment structure, compliance reporting and employment litigation,’ he explains.

It may seem like a relatively new idea for corporate secretaries to buddy up with the HR department, but Johnson says UPS has always invested in the corporate secretary and HR relationship. In turn, this cross-functional collaboration has resulted in the retention of long-term and tenured employees at the company. Consequently, HR has transformed itself into a more effective resource, and many now see the department as a strategic partner.

Promoting diversity through HR  

Some analyst reports indicate that the lack of female representation on boards may have contributed to a series of corporate disasters. Facebook, for instance, is currently under increased scrutiny for having an all-male boardroom, as many industry observers fear that over time this can take a toll on a company’s governance structure.

Diversity at companies is seen as a key ingredient for success. Whether it’s gender or cultural diversity, companies prefer having a larger talent pool to choose from, especially for the boardroom. According to the 2011 Catalyst census: Fortune 500 women executive officers and top earners report, about one in ten companies had no women serving on their boards between 2010 and 2011, while women of color still held only 3 percent of corporate board seats across the US.

Since HR handles hiring, it can have a direct effect on these statistics. However, HR is not the only department responsible for promoting a diversified boardroom and corporation.

Kathryn Komsa, vice president and chief diversity officer at insurance brokerage firm Marsh & McLennan, believes corporate secretaries can help HR professionals find the right candidates for the board.

‘The corporate secretary has the ability to influence the agenda of the board and its respective committees,’ Komsa says. ‘Therefore he or she can ensure that significant HR issues are delivered to the board’s attention, including topics such as talent management, compensation – especially the compensation of senior leaders – and risk management, all of which have a direct correlation to the firm’s progress in diversity and inclusion.’

When board seats become available, the corporate secretary can influence the selection process to ensure that a broad and diverse slate of qualified candidates is identified and vetted, Komsa notes. Furthermore, the corporate secretary can work with the HR department to seek out potential boardroom candidates.

Many board searches require a candidate who is already a board member or CEO. This immediately limits the pool of diverse candidates to a few individuals who already hold these positions. Instead, Komsa stresses that HR and the corporate secretary should work together to redefine the selection criteria – ‘not lower, but redefine’.

Part of the process of ‘redefining’ may mean a company puts greater emphasis on accomplishments rather than roles – an emphasis that will contribute to better strategic initiatives. The ability to turn around a business, analyze and manage risk, manage crises, access new markets or identify and attract top leaders to the company may be found in senior leaders other than current board members or CEOs, Komsa suggests. Therefore, reaching out to diverse board members and asking them to share their networks can provide access to talent pools that should be tapped.

Ultimately, best practices in governance are only achieved through a collaborative approach. If corporate secretaries and HR can work together more often, this will help companies reach new levels of effective governance.

Supporting the board
 
How can a corporate secretary get more involved in the HR function to help support the board? Teri Plummer McClure, pictured left, senior vice president of legal, compliance, audit and public affairs, general counsel and corporate secretary at UPS, says close alignment between the corporate secretary and HR function to enhance decision-making at the board level is built around:

· Collaboration: Support the board and balance information needs for compensation, investor concerns, candidate selection and orientation.

· Communication: Provide effective messaging to the board on management goals, priorities and resource needs as well as data on compensation trends and workplace issues.

· Conveyance: The corporate culture should occasionally be conveyed to ensure that outside directors understand and value the company’s unique issues and practices.

Canadian Stock Transfer (CST) and its partner American Stock Transfer (AST), providers of registry services and technology to the financial market, added Julian Clark to serve as the company’s managing director of Canada and executive vice president of business development and strategy of North America.

In his new role, Clark will oversee the various aspects of the company’s Canadian business while enhancing its global solutions to better serve its clients and shareholders. Clarke will be tasked with supporting and developing strategic initiatives for the company.

According to CST, Clark has more than 25 years of experience providing equity services to the issuer community in Canada, the US and Europe. Throughout his career he has held a series of leadership positions.

At Morgan Stanley Smith Barney, Clark was managing director of Global Stock Plan Services.

Before jumping ship to Morgan Stanley, Clark served as president and chief executive of Mellon Investor Services and president and CEO of the RM Trust Company – a predecessor company to CST.

Said is a veteran corporate securities lawyer who works as a legal consultant to various TSX and TSX Ventures-listed companies in the mining, oil and gas industries. He previously worked as a securities lawyer at a large Toronto-based corporate law firm.

Said obtained a JD from the University of Toronto and received a BA in business administration (honors) with a minor in economics from Wilfrid Laurier University.

Interpublic Group (IPG), an organization of advertising agencies, has announced that Andrew Bonzani has joined the company as senior vice president, general counsel and secretary. Bonzani will report to Michael Roth, IPG’s chairman and chief executive, and succeeds Nick Camera, who is retiring after nearly 20 years with the company.

Bonzani was most recently vice president, assistant general counsel and secretary at IBM. He had been with IBM since 1993 and worked in a number of capacities within the company’s legal department.

At IBM, Bonzani managed the corporate and securities legal department that supports the corporate secretary function. He joined IBM in September of 1993 as an attorney in the corporate legal function. Before that he was associated with the firm of Willkie Farr & Gallagher in New York.

Mainstream Minerals, a mineral exploration and development company, has appointed Lisa McCormack to the role of corporate secretary. McCormack is a seasoned professional law clerk specializing in securities and corporate law. Additionally, she is corporate secretary at several public companies, including Trelawney Mining and Exploration.

McCormack has over 15 years of experience working for various securities and corporate finance law firms in Toronto and assisting public issuers within the mining industry.

International Lease Finance, a wholly owned subsidiary of AIG and the world’s largest independent aircraft lessor, has nabbed legal eagle Hooman Yazhari.

Yazhari will join International Lease Finance as general counsel. He will head up the company’s global legal team and compliance and regulatory functions, and report to CEO Henri Courpron.

Yazhari most recently served as gategroup’s group senior vice president, general counsel and company secretary, and was a member of gategroup’s executive management board.

Prior to gategroup, Yazhari was a solicitor practicing finance and corporate law at the London offices of Chadbourne & Parke. He was also a founding d rector, general counsel and managing director at EM Health. He started his career as a solicitor in the London and Tokyo offices of Linklaters, practicing in the areas of corporate law, project finance and capital markets.

The long-time litigator obtained his law degree from Oxford University and his LLM from the London School of Economics.

VF, a supplier of branded lifestyle apparel, has appointed incumbent vice president and deputy general counsel Laura Meagher to the roles of vice president, general counsel and secretary. She will join VF’s operating committee in May.

Meagher has been practicing corporate law for more than 22 years, eight of them with VF. She will assume overall responsibility for the North Carolina-based company’s legal function, including compliance with securities laws, M&A, general corporate law, corporate governance, intellectual property law and litigation.

Meagher joined VF in 2004 as assistant general counsel. She was appointed to her current role of vice president and deputy general counsel in 2008.

Masonite International, a manufacturer of residential and commercial doors, has announced the appointment of Robert Lewis as senior vice president, general counsel and secretary.

Prior to joining Masonite, Lewis was vice president, general counsel and corporate secretary for Gerdau Ameristeel in Tampa, Florida, where he managed the company’s legal affairs, external communications, public affairs and governmental relations functions. Before that he was senior vice president, general counsel and secretary for Florida-based Eckerd. He began his career at Shackleford Farrior Stallings & Evans in Tampa.

Lewis has 26 years of legal experience, with an extensive track record in M&A, commercial contracts, litigation, corporate governance and legal compliance. Masonite CEO Fred Lynch says, ‘The skills and expertise he has developed working in top legal organizations will enable us to fulfill our strategic goal of building capabilities and developing talent within our legal department.’

Lewis earned his BS in accounting and his JD with honors from the University of Florida. He is a member of the Florida Bar and the American Bar Association, and has also passed the Florida CPA exam.

Plains All American Pipeline (PAA) has named Richard McGee as vice president and general counsel. McGee joined PAA in 2009 as vice president of legal and business development for PAA Natural Gas Storage and in 2011 took on additional responsibilities as vice president and deputy general counsel.

Prior to joining PAA, McGee served three years as general counsel for Duke Energy’s unregulated businesses and as lead counsel for corporate mergers and acquisitions, and eight years as president of Duke Energy International. Before this McGee was a partner at the law firm Vinson & Elkins, where he spent more than 12 years as an energy M&A attorney.

Big4.com, a social networking forum for professionals and alumni of Accenture, Andersen, BearingPoint, Capgemini, Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers (PwC), has reported that Margaret Cole has been appointed general counsel of PwC UK. She will also serve on the company’s executive board.

Cole joins PwC from the Financial Services Authority, where she was managing director of enforcement and financial crime. She will be taking over the reigns from Owen Jonathan, the company’s current general counsel and executive board member, after his retirement in December.

From 1990 to 1995, Cole was a partner with Stephenson Harwood. In 1995, she joined the London Office of international law firm White & Case to create and head its dispute resolution department.

OneBeacon Insurance Group, a Bermuda-domiciled holding company, has announced the appointment of Maureen Phillips as senior vice president and general counsel. She will report to Mike Miller, president and chief executive, and succeeds Brad Rich, who is expected to retire at the end of this year.

Phillips’ legal career spans nearly 30 years, primarily within the insurance industry. She was most recently chief legal officer at Allianz Life Insurance, a role she held since 2008. Previously, Phillips held senior legal positions at Fairview Health Services and at St. Paul Travelers, where she spent 17 years in positions of increasing responsibility. She earned her JD from the University of Southern California.

The Houston Housing Authority (HHA) has appointed Karen Miniex as the organization’s new general counsel. Miniex comes to the HHA from her own law firm, which specializes in civil litigation, including real estate and construction litigation. She brings a significant amount of expertise and knowledge about affordable housing to the agency from her years with the Atlanta Legal Aid Society and as an advisory board member at the Atlanta Housing Authority.

Miniex is licensed to actively practice in the Texas and Georgia courts. She has a BSc in communication studies from Florida State University and a law degree from the University of Michigan Law School.
 Miniex will be responsible for all activities associated with the day-to-day operations of the HHA legal department and will ensure that the HHA and its subsidiaries receive the highest standard of legal representation.

Novavax recently appointed John Herrmann III to the position of vice president and general counsel. Herrmann will have responsibility for the legal affairs of the company and will continue to serve as its corporate secretary.

Herrmann joined Novavax in April 2010 as its executive director of legal affairs and corporate secretary, with significant experience as an executive and in-house attorney. Prior to joining Novavax he was vice president and general counsel of Ore Pharmaceuticals, formerly known as Gene Logic.

Before Gene Logic, Herrmann held senior level in-house counsel positions with Celera Genomics and Baxter Healthcare. At Celera, he was responsible for implementing the founder subscription agreements for accessing Celera’s groundbreaking human genome databases.

During his tenure at Baxter he was lead counsel in the development and operation of a renal disease management affiliate that pioneered healthcare management to patients requiring dialysis in the United States.

Herrmann received a bachelor’s degree in history and political science from Brown University and his JD from the University of Illinois College of Law.

The annual event attracts more than 225 female corporate board directors from across the globe who gather to discuss issues that consistently plague the boardroom and affect the overall governance of a company.

At the event, the notion of good governance remained the dominant theme. Many corporate directors believe good governance means taking a multifaceted approach. According to the WCD, a diversified boardroom includes a set of ‘multi-gender, multi-skilled, multi-national, multi-ethnic and multi-generational’ professionals who will help lead a company through its toughest times.

‘No matter where you are in the world, good governance means looking ahead,’ says Ana Paula Chagas, an attendee and partner at Heidrick & Struggles’ Brazil office. ‘Before making a decision, directors need to look at everything – strategy, sustainability, compliance, risk, culture, stakeholder views, talent management, and so on, because that’s what governance is meant to do: bring every part of a company together and that will certainly result into better shareholder value.’

Chagas, pictured left, founded the first WCD chapter in Brazil, which started out with only 20 members; now, just three years after its launch, the group has 90 members.

‘In Brazil, we are grooming future women directors by providing them with the right training and coaching them to take on these top positions in the boardroom,’ adds Chagas.

Many women might enter the boardroom for the first time this year in the wake of new regulations and mandatory quotas imposed on companies to increase female representation. Against this backdrop, Chagas believes the key to survival in the boardroom is remaining transparent at all times.

‘Always stick to your values and don’t try to imitate others. If you want to help the board achieve good governance, be yourself and set standards,’ she says. ‘What makes a difference on a board is developing and establishing a sense of trustworthiness and that will help you succeed.’

Ricardo Salgado, the vice chairman of Banco Espirito, a private Portugese bank, has quit the NYSE Euronext board after losing a majority of shareholder votes at the exchange operator’s annual meeting on Thursday.

The New York Times reports that Salgado was absent for 75 percent of the NYSE’s board meetings – a move that did not resonate well with shareholders.

His resignation comes at a time when the NYSE is trying to bounce back from losing its bruising battle with European regulators over its attempted merger with Deutsche Börse, an effort that called for more than two dozen meetings, last year.

According to the Times article, Jan-Michiel Hessels, NYSE chairman, said Salgado had a full plate helping his firm through the European crisis and ‘a number of joint meetings of the European Commission, the European Central Bank and the International Monetary Fund, as well as meetings of the Bank of Portugal and the Portuguese Banking Association, to implement the new requirements imposed on Portugal and its banking sector.’

These were the main reasons for Salgado’s absence from NYSE meetings.