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A Wish and a Resolution
To corporate leaders: Be a standup employer in 2006.

As a new year dawns, it’s a natural time to be thinking of wishes and resolutions. I have one of each.

My wish is that public corporations regain a sense of themselves as employers. When I first got into the business world in the 1970s, it seemed as if companies were proud of the number of people they employed. In their letter to shareholders in the annual report, chairmen would routinely cite the size of the company’s workforce with the same sense of satisfaction as the amount of the firm’s revenues and the scope of its operations.

That was then. Now what’s being conveyed to the market is something very different. It’s a pride in how few people companies need on their payroll.
   
As a father of two children who are soon to be entering the workforce, I have concerns about this world they are going into. Will it be one that offers young people the promise of good jobs and plentiful opportunities? Jobs that will allow them to support themselves and a family? A working world that believes in taking care of its employees with benefits that address their health and welfare? A working world that sees and treats its workers, young and veterans alike, as assets and not expenses--or, even more disturbing, liabilities?

It’s sad to see companies so often get rewarded by the market when they announce major workforce reductions and other miserly treatment of their self-styled “human resources.” I suggest that corporate leaders stop seeing the company as simply a pass-through mechanism for disbursing its revenues to its owners (after pocketing an outsized take for themselves). If we don’t reverse employee-unfriendly treatment, we will have more to worry about than the future prospects for the younger generation coming into the workforce. We’d better worry about the future of our society.

For another perspective on the CEO and board’s responsibility for the company’s human capital, I draw your attention to this month’s column on “The Sound of Silence in Corporate Reporting” (see below).

And my resolution? It’s simply this: That the publishing staff of Directors & Boards will continue to deliver to you an increasingly valuable portfolio of publications- the print journal, the Boardroom Briefings, the online e-Briefing and Web site, and other products to come--to help you address your leadership and governance challenges.

Question of the Month
Last month we asked if the CEO/board relationship has, over the course of the past year, strengthened, weakened, or stayed about the same? Your response:
 
• The relationship is stronger: 37.5%
• The relationship is weaker: 12.5%
• The relationship is about the same as it was: 37.5%
• Other: 12.5%

Select comments:

“The expectations of the board for the CEO’s and company's priorities and performance are much more clear; and, in setting them, the dialogue has been a lot more vigorous. This transparency has strengthened the relationship.”

“As executive salaries have spiraled higher, boards are under external and stockholder pressures to have an increasingly arms-length relationship with the CEO.”

“This question is too far-reaching. There are cases where CEO/board relationships are stronger than ever, and cases where the relationships are weaker than ever.”

Perhaps the question was far-reaching, but your responses were telling. With all that transpired in another runoff year of corporate scandals and SOX reforms, you sense a firm bond still exists, and perhaps is even stronger, between the CEO and the board.

And Now...Your Prediction
Now to this month’s question. The boardroom atmosphere is always a bit cheerier when the stock market is in an accommodating mood. Let’s see how constructive you think the market will be for boards this year? Click here to make your stock market prediction.

How will the major market averages finish 2006?


Jim Kristie is the editor and associate publisher of  Directors & Boards.

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The 2005 Bankruptcy Reform Act: Impact on Directors (Part 2)

By Jay D. Adkisson

Ed. Note: Part 1 of this article, which addressed the thrust of the 2005 Bankruptcy Reform Act on director liability, appeared in the December 2005 e–Briefing.

Stung by criticism in a New York Times article about a ‘loophole for the rich’ in the new bankruptcy act, Congress passed a new section 548(e) that allows a bankruptcy trustee to claw back assets that were transferred to an asset protection trust within 10 years of the filing of the voluntary or involuntary bankruptcy petition, if the transfer was meant to diminish the rights of creditors.

Since the very purpose of an asset protection trust is to diminish the rights of creditors, the import is that assets transferred to such trusts can be easily backed out by the bankruptcy trustee.

The new 548(e) not only applies to asset protection trusts, which are self–settled trusts that one creates for his own benefit, but also applied to ‘like devices.’ Congress did not attempt to define ‘like devices’ but one could reasonably infer that it is anything that has a specific purpose for protecting assets while allowing the person who created the structure to have the beneficial use of those assets.

Not that Congress needed to worry about asset protection trusts. The bankruptcy courts had never respected them anyway and in a series of cases the courts simply treated the assets in such trusts as part of the bankruptcy estate.

In one case, involving former derivatives trader Stephen J. Lawrence, the court ordered him to provide information relating to his offshore trust and when he refused the court cast him into prison for contempt. Lawrence went into jail in August of 2000, and was still in the pokey as of the writing of this article.
  
[Click Here to Read the Entire Article]

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The Sound of Silence in Corporate Reporting

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Editor's note:  Each month, we ask a Directors & Boards reader to comment on critical issues facing directors today.  If you'd like to participate in this section in the future, please email Scott Chase. 

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Boardroom Briefing:  CEO and Executive Compensation
Directors & Boards' lastest Boardroom Briefing, on CEO and Executive Compensation, is now in the mail. You can download a pdf copy of the entire report here.






NACD Releases New Governance Reports
The National Association of Corporate Directors has released two new publications of interest to board members and advisers. Its 2005 Public Company Governance Survey covers more than 100 governance topics, with data drawn from 5,000 public companies, plus responses from 630 directors who ranked their top issues and effectiveness in numerous areas of board practice. The Report of the NACD Blue Ribbon Commission on Director Liability provides what the association states is an “unprecedented level of clarity on both the myths and realities of personal liability under both federal and state law.” The commission was chaired by E. Norman  Veasey, former chief justice of the Delaware Supreme Court. Copies of the reports are available from NACD by calling 202-775-0509, or online at http://www.nacdonline.org.


New Corporate Governance Center Established
Drexel University’s LeBow College of Business launched a Center for Corporate Governance (http://www.lebow.drexel.edu/Centers/CorpGov) on December 14 with a celebration that featured keynote speaker Michael Capellas, CEO of MCI Inc. Dr. Ralph Walkling will serve as the center’s executive director, and will be the first chairholder of the Christopher and Mary Stratakis Chair in Corporate Governance and Accountability. Benefactor Christopher Stratakis is an alumnus of the Philadelphia-based university and a senior partner in a New York law firm.
   
The center will promote corporate governance research and awareness to educate and mentor executives and future business leaders through forums, workshops, panel discussions, and presentations. “With the addition of the center,” said LeBow College Dean George Tsetsekos, “corporate governance is a central focus that will be integrated throughout our academic programs, research, and service to the business community.”


Securities Offering Reform Resource Center Launched
Sutherland Asbill & Brennan LLP (http://www.sablaw.com) has established the Securities Offering Reform Resource Center to guide public companies as they wade through the sweeping new rules adopted by the U.S. Securities and Exchange Commission regarding registered offerings, which went into effect December 1, 2005.
  
"The SEC's securities offering reform is changing the way registered offerings are conducted," says Cynthia M. Krus, a partner at Sutherland and head of the firm’s Securities/Corporate Governance Group. "There are many new processes and procedures that must be instituted by offering participants to facilitate the successful completion of registered offerings. We expect the Securities Offering Reform Resource Center will help companies navigate this new terrain."
   
Visitors to the center (http://www.SecuritiesOfferingReform.com) can sign up to request in-person seminars regarding the new rules as well as submit comments and questions. The online center also includes recent articles, legal alerts, and presentations by Sutherland's corporate/securities attorneys as well as news coverage about the reforms. This site will be updated frequently as new information, commentary, and legal alerts are posted.


AIG Names VP-Corporate Governance
American International Group Inc. (http://www.aig.com) has been one of the headline corporate governance stories of 2005. In December the company elected Eric N. Litzky as vice president-corporate governance and appointed him special counsel and secretary to the board of directors. He will report directly to the board on corporate governance and other board matters, as well as continue to provide counsel to AIG in the general corporate, corporate finance, and securities law areas. Secretary to the board is a new position. Litzky joined AIG in 1995 as an assistant general counsel and assistant secretary.