TheCorporateCounsel.net

The avalanche of SEC and stock exchange rulemaking this year did not specifically prescribe any changes that must be made to Board committee charters this year, but I think it does makes sense to review the charters in light of recent developments.

For example, the SEC’s cybersecurity disclosure rules require a description of: (i) a company’s processes, if any, for assessing, identifying and managing material risks from cybersecurity threats must be described in sufficient detail for a reasonable investor to understand those processes; (ii) management’s role in assessing and managing the company’s material risks from cybersecurity threats; and (iii) the board of directors’ oversight of material risks from cybersecurity threats, and if applicable, the company any board committee or subcommittee responsible for the oversight of risks from cybersecurity threats and describe the processes by which the board or such committee is informed about such risks. In light of these new disclosure requirements, a company may consider clarifying in its board committee charters which committee has oversight over cybersecurity risks and outline the means by which the committee is informed about such risks.

Similarly, with all of the focus on insider trading and share repurchases prompted by the SEC’s new rules, it may be advisable to revisit board committee charters to indicate which committee or committees have oversight responsibilities with respect to these key areas of risk.

Further, the compensation committee charter should be revised to indicate any role that the committee plays in the administration of the company’s stock exchange-compliant clawback policy, as well as the committee’s oversight of the timing of equity award grants in light of the new SEC disclosure requirements relating to option grant timing.

With all of those pointers in hand, happy year-end drafting!

– Dave Lynn