Carrington Coleman has been providing corporate governance advice for many years. Our practice is grounded in broad experience. Given the recent rash of corporate failures—coupled with allegations of mismanagement and breaches of fiduciary duty—the spotlight of legislators, regulators, stock exchanges, and the public has been focused brightly on matters of corporate governance. A veritable blizzard of proposed reforms and a renewed focus on the oversight responsibilities of directors, officers, and majority shareholders make sound counsel and advice in this area more essential than ever. We are able to bring independent legal advice and counsel to directors, officers, similarly grouped board members, or members of special committees when a particular situation demands independence and decisive action.
There are six principal, but interrelated, aspects of the Carrington Coleman corporate governance practice: (1) advice to management, directors, and shareholders concerning their fiduciary duties and responsibilities; (2) advice regarding director and officer insurance and corporate indemnification; (3) Sarbanes-Oxley rules and regulations; (4) corporate governance litigation; (5) development of corporate compliance programs; and (6) advice concerning business entity separation.
Corporate Governance Advice
This aspect of our corporate governance practice focuses upon guidance and advice to officers, directors, special committees, and shareholders regarding their fiduciary duties in varied situations. We have represented special committees in evaluating corporate strategic alternatives such as mergers, acquisitions, or internal growth strategies, conducting investigations, preparing reports regarding shareholder litigation demands, investigating transactions involving potential conflicts of interest with directors, and evaluating the composition and responsibilities of audit committees.
Director and Officer Insurance and Indemnification
We have represented many corporations, officers, and directors concerning the structure and essential component parts of corporate indemnification and director and officer insurance programs. We have structured programs to fill gaps in corporate indemnification in circumstances where indemnification is not allowed by law or when a corporation becomes financially unable to provide its promised indemnification.
We have also analyzed numerous D&O insurance and indemnification matters and evaluated such coverage from the perspective of potential litigation. In this work we have had occasion to examine and analyze D&O insurance portfolios of hundreds of millions of dollars of both public and private companies.
Litigation Relevant to Corporate Governance Matters
The corporate governance practice has necessarily included adversarial situations arising in the realm of corporate and partnership governance. Our widely respected litigation and insolvency practices provide us the expertise to handle such matters. Our litigation in this area has included claims of securities violations, proxy contests, disputes regarding mergers and acquisitions, and other types of disputes involving the duties and relationships between business entities, managers, and investors. This work also includes cases involving alleged breaches of fiduciary duties by directors and officers, often arising in the context of a failing or a failed enterprise or inopportune mergers or acquisitions. In that regard we have represented and opposed debtors and insolvency trustees in litigation in and out of bankruptcy court involving claims against directors and officers. In connection with this extensive trial experience, our lawyers have regularly appeared before state and federal courts in Texas, Delaware, and across the nation in cases of this kind.
In this aspect of our corporate governance practice, we assist corporations and their boards of directors in developing policies, processes and procedures to enable senior management and boards to fulfill their important oversight functions. We work with company management in evaluating legal compliance challenges posed by company activities and devising plans to encourage routine compliance with statutory and regulatory requirements drawing on specialized practice areas within the Firm. We also assist clients in developing compliance policies in particular legal areas such as insider trading, employee relations, foreign corrupt practices, occupational health and safety and environmental protection, and in recommending comprehensive compliance programs for corporations and their boards.
This practice also involves conducting legal audits to identify areas in which particular compliance attention is warranted and the review of the committee structure of the board of directors, committee charters and committee composition to identify potential issues for management consideration, especially in light of recent proposed rule changes by regulatory bodies. In our analysis we pay particular attention to areas that are increasingly being scrutinized when corporate difficulties cause the adequacy of internal reporting and control procedures to be called into question.
The United States Sentencing Commission’s Federal Sentencing Guidelines provides that a criminal sentence of a corporation may be mitigated if the corporation has in place an effective compliance program. This fact, coupled with recent court decisions suggesting that a board of directors may incur personal liability for damages suffered by the corporation as a result of the board’s failure to monitor corporate activities, makes an informed decision by management and its board on a corporate compliance program increasingly important.
Our experience and multi-disciplinary approach in the corporate governance area has also led us to the representation of parties in various disputes regarding the separation of business relationships. These disputes arise in varied contexts, such as partners or shareholders of closely held entities encountering fundamental business disputes that require negotiation and resolution. We have been successful in representing a number of individuals involved in various businesses, including professional associations, in connection with the satisfactory settlement of such difficult matters. These negotiated settlements routinely employ the use of alternative dispute resolution techniques, such as mediation, to move the settlement process forward.