June 25, 2014

Corporate Governance in a Shifting World: A Personal Story

I’m just loving this beautiful story from Suneela Jain of Cleary Gottlieb:

I spoke animatedly, my words pouring forth ever more quickly as I sought to provide my parents with yet another detail about corporate governance in the United States. We had long finished our breakfasts – down to the post-breakfast chips my dad always looks to as soon as he finishes his meal. We sat, as we always had, tucked around one end of the table. They listened to me with looks of concentration – whether interested in the subject matter or surprised at my apparent excitement about it, I was unsure.

The California kitchen table at my parents’ is far from the New York apartment my husband and I share. Over the last decade of law school and work, we had become accustomed to visiting California twice a year, each time in and out of our respective homes to visit friends. 2013 was different as, in March, my dad was diagnosed with an aggressive form of brain cancer. The world shifted. My trips quickly became more frequent.

Bringing the Outside In

The corporate governance chatter was a reflection of a project that Cleary Gottlieb, my law firm, had given me to accommodate my increased travel. The project was to work with a group from Cleary and The Conference Board to write a White Paper about the history of engagement between shareholders and corporations in the United States. I felt relieved to have the new bits of knowledge to share with my parents.

I have vivid memories of my dad emerging excitedly from his room after opening statements that showed that his stocks – the companies he had researched and then selected as good bets to build my parents’ savings – had done well. My dad, who came to the United States from India in his early 30s, was intensely proud of the career he built here – of his participation in the American system – and he loved to discuss and debate all topics about how it does or should work. My mom, a devoted environmentalist, was keenly interested in issues related to corporate responsibility.

And so, in place of the other topics that hovered in the air at our home, I told my parents what I was learning about the evolution of corporate governance in the United States. I told them about the legal framework that defined the roles of the board of directors, management and shareholders, and how changing norms and practices affected expectations about “shareholder democracy.” I told them about early “gadflies,” and how shareholder proposals targeted segregation of Greyhound buses and apartheid in South Africa. I talked to them about hedge fund activists. About the challenges posed by derivatives trading. About the theoretical roots of supporting a management-centric or shareholder-centric model of governance. About the challenge of really thinking about what “shareholder value” means.

It was a conversation in which my dad, historically, would have been an active participant. Instead, my voice prattled without challenge or interruption. After some time, my dad rubbed his eyes and said he needed to rest. My mom, running in so many directions and occupied with doing so many things, decided to do the same. I returned to the small desk in my childhood room to do my work; a heavy sadness having settled over me.

Honoring the Inside Out

A few hours later, as I had re-settled in my laptop and paper-dominated universe, I heard soft steps approach me and felt a hand on my back. I turned to see my dad, his brow furrowed. “But Suneela,” he said, “how do I vote?” I smiled, and we settled in for a new conversation.

My dad no longer receives the bulky proxy statements on which he would have marked his preferences for a board slate or a shareholder proposal. My parents’ carefully managed portfolio has long-since shifted to mutual funds and similar investments, and someone else is responsible for exercising the vote that their holdings represent.
When I think about corporate governance – when I think about the rules, regulations, pressures and norms that influence how and what decisions at corporations are made – I think about my parents. My parents are no longer “shareholders” in the traditional sense. My dad no longer revels in the fortunes of “his” companies. At the same time, their sense of security and well-being is intimately connected with the stock market and the companies that compose it.

When my parents married, my mom was a yoga teacher and my dad had only the orange robes for which he had little use as he decided to leave his life as a monk and start a life with my mom. The savings they have now reflect decades of hard work and careful financial management. They both believe strongly in a world that is managed with integrity, holds the possibility of opportunity for all, and honors and preserves the natural beauty in which they connect with their sense of gratitude – despite the uncertainty that each day can bring.

Working on the White Paper with the team at The Conference Board and my colleagues at Cleary exposed me to the thoughtful efforts among a number of attorneys, counsel, business leaders, board members, investors and academics, who make their livings as successful participants in the corporate arena, and also have a strong interest in improving it. They recognize the impact that public companies have on all facets of American life – on financial security, social cohesion, community development, our parks and forests – and they are interested in building a system that flourishes in the context of that impact, not despite it.

Their work is a challenge. It requires establishing a common vision and honesty about the challenges and uncertainties in achieving it. It requires time, respect and a willingness to make difficult decisions. It requires thinking about the system as a whole and its consequences and opportunities for the various social segments that contribute to and live at the effect of it.

I continue to engage in the corporate governance conversation because I have great hopes that the efforts of these people will achieve results. I have great hopes that the much-touted social entrepreneurship ethos of my generation will be backed by action that naturally builds trust and confidence in America’s business leaders. I believe there is tremendous space for talented business leaders to step up to a platform that recognizes and respects the intentions and the possibilities of our economic system. I know there are many who are eager to give them a lift, and at least two who would get great satisfaction simply from hearing stories about the possibilities revealed from the loftier view.

Transcript: “Big Changes Afoot: How to Handle a SEC Enforcement Inquiry Now”

We have posted the transcript for the recent webcast: “Big Changes Afoot: How to Handle a SEC Enforcement Inquiry Now.”

Thanks for the Gumball Mickey – Gunderson Dettmer, Redwood City

In this 20-second video, the fine lawyers at Gunderson Dettmer in Redwood City, CA pay homage to the old Hasbro TV commercial. This one is pretty funny…

– Broc Romanek