TheCorporateCounsel.net

In this edition of “Strange But True Corporate Stories,” we present Hexagon – a Swedish company that held its quarterly earnings call last week. The company had good news to report – sales & earnings were both up.  Was there any bad news?  No, nothing really. . . well . . .maybe there’s this one tiny issue that wasn’t worth mentioning during the call:

Swedish measurement technology firm Hexagon has defended the time it took to announce the arrest of its chief executive for alleged insider trading after it came to light he was under arrest during last week’s earnings call with analysts.

After being detained in Sweden on Oct. 26, Ola Rollen was allowed by the Swedish Economic Crime Authority to present Hexagon’s third-quarter results in a conference call on Oct. 28, the agency told Reuters on Tuesday, adding two of its police officers were with Rollen during the call. Analysts on the call were not told Rollen had been arrested or that police were in the room.

The company finally announced – three days after the conference call – that authorities had accused its CEO of insider trading in connection with an investment in a Norwegian company.

My favorite part of this story is the idea of two police officers sitting with the CEO while he was on the conference call. I’m sorry, but I can’t get the picture of Joe Friday & Bill Gannon out of my head.

Board Survey: Positive Trends on Cybersecurity

According to this BDO survey, boards are becoming more engaged on cybersecurity issues, investments to defend against cyber-attacks are increasing, and more companies are putting cyber-breach response plans in place.

Approximately three-quarters (74%) of public company directors report that their board is more involved with cybersecurity than it was 12 months ago and 80% say they have increased company investments during the past year to defend against cyber-attacks, with an average budget expansion of 22 percent. This is the third consecutive year that board members have reported increases in time and dollars spent on cybersecurity. The survey also identified improvements in the number of boards with cyber-breach response plans in place (from 45% to 63%).

That’s the good news. The bad news is that only 27% of companies surveyed are sharing information about cyber-attacks with entities outside of their business – a practice that needs to become more prevalent for the safety of critical infrastructure and national security, particularly at larger organizations.

“You’re Fired!”: Board Governance & CEO Turnover

This Stanford study starts with the proposition that one measure of good governance is a board’s willingness to terminate an underperforming CEO, & then looks into what governance characteristics result in stricter board oversight of the CEO. The study concludes that companies are likely to terminate an underperforming CEO, and identifies the following governance factors associated with stricter CEO monitoring:

– Independent/outside directors

– Experienced/engaged directors

– Significant institutional ownership

– Companies with access to replacement candidates

The study also suggests that “busy boards” – those where a majority of the directors serve on three or more boards – provide worse CEO oversight & are less likely to fire an underperforming CEO.

– John Jenkins