Publicly Traded Company Challenges

Topics Role of Corporate Secretary and Supporting the Board Preparing Minutes – Public Company Concerns Regulation FD Public Company Governance Considerations Shareholder Engagement Activist Shareholders Shareholders’ Meetings SEC Filings – Role of In-House Counsel Securities Law and SEC Developments

Role of Corporate Secretary and Supporting the Board Office of Corporate Secretary generally required by state corporation law Role of Corporate Secretary’s Office Combined with General Counsel or separate? Coordinate Board and committee meetings and materials Draft minutes Liaison between directors and management Maintain corporate and subsidiary records Stock transfer records other shareholder matters Role in Board evaluations Setting Board/Committee Agendas Agenda review process Involvement of Chair, Lead Independent Director, committee chairs, senior management

Drafting Board and Committee Minutes Legally required – official and permanent record of actions taken Discoverable in litigation and enforcement actions Evidence of directors exercise of business judgment and compliance with applicable rules and regulations Taking the Minutes Methodology – not intended to be a verbatim transcript; use agenda as outline Director notes – not recommended; should be discarded after meetings; director portals Content – specific circumstances (e.g., a proposed transaction or pending litigation) may dictate the content Additional board materials – Secretary to have a copy Exposure risk Choosing words carefully If Secretary is not the GC, GC should approve before distribution to the Board

Regulation FD Intended to prohibit selective disclosure of material, nonpublic information Pressure points: Earnings calls Investor meetings Calls with analysts Confirming prior guidance Reg FD Policies Role of IR and in-house counsel What to do if you have a potential Reg FD violation

Public Company Corporate Governance Considerations Sarbanes-Oxley governance requirements Auditor independence Corporate responsibility Enhanced financial disclosures and internal control over financial reporting Corporate and criminal fraud accountability Prohibition on loans to insiders Dodd-Frank governance requirements Say-on-pay shareholder vote Clawback and hedging policies Compensation consultant independence Other Dodd-Frank governance provisions yet to be implemented

Public Company Corporate Governance Considerations (continued) Director Independence Requirements – NYSE and Nasdaq Generally, a majority of the Board consist of independent directors Common independence “traps” Supplier/service provider relationships Immediate family member relationships Prior employment Generally must have fully independent Audit, Compensation, and Nominating and Governance committees of the Board Heightened independence requirements for Audit and Compensation Committee members Watch out for consulting fees and related-person disclosures involving directors Clayton Act “Interlocking Directorates” Prohibits a director from also serving as a director of a competitor

Shareholder Engagement Conducting an institutional investor outreach program Generally occurs during proxy “offseason” Who should be involved? Investor Relations, Compensation, Legal, others Board oversight and involvement with shareholder engagement program Tips for engagement Be proactive – don’t wait for a crisis or controversy Discuss governance in the context of strategy Maintain continuous cycle of engagement Proxy advisory firms – ISS and Glass Lewis Issue voting recommendations to institutional investor clients Although large institutions increasingly follow their own proxy voting guidelines Tips for engaging with proxy advisors Listen and have a conversation Include the experts

Shareholder Engagement (continued) Proxy advisors and large institutional investors have helped to drive many common/emerging governance practices Majority voting for directors Proxy access Ability of shareholders to call special meetings Board leadership structure Additional Board committees Hot button topics for institutional investors Executive compensation Board skills/composition/diversity Board “refreshment” and “overtenured” directors Director “overboarding” ESG (environmental, social, and governance) issues

Activist Shareholders As opposed to traditional institutional investors, activists focused on creating short-term value Tactics range from dialogue with board/management to formal proxy contests Campaigns may focus on a variety of issues, including overall board governance, enterprise strategy, M&A activity, balance sheet issues, etc. Increasingly targeting CEOs at start of campaigns, having found that just obtaining board seats is not always productive (e.g., American International Group, Inc., Arconic Inc., and CSX Corp.)

Activist Shareholders (continued) While sometimes helpful and could improve governance, more often than not are disruptive and prevent from building long-term shareholder value Stages of engagement: stakebuilding, engagement, proxy contest, litigation, takeover Pay attention to warning signs: analyst reports suggesting structural changes, pointed questions on earnings calls or during investor conferences, changes in shareholder base and activist interest in other industry players Important to have a well-coordinated response play (CEO vs Board; advisor involvement; confidentiality)

Annual Shareholders’ Meetings Meeting logistics – location, security, admission policies, etc. Agenda and rules of conduct Quorum, voting and ballots Shareholder proposals Rule 14a-8 proposals ‘Floor’ proposals and advance notice bylaw provisions Preparing for disruptions or unexpected events Role of inspector of election Adjournment and shareholder Q&A

SEC Reporting Obligations Annual/Quarterly SEC Filings – Role of in-house counsel Form 10-K and 10-Q Proxy Statement and Annual Report to Shareholders Disclosure controls and procedures Disclosure Committee – role and composition Role of Board and Board committees in reviewing and approving SEC filings Section 16 filings Directors and officers required to report transactions in company stock within 2 business days Typically filings are facilitated by company Section 16 liability and insider trading policies

SEC Reporting Obligations (continued) Current Reports on Form 8-K – common triggering events Entry or termination of a material definitive agreement Acquisition or disposition of assets Earnings releases Financial obligations and off-balance sheet arrangements Material impairments Unregistered sales of equity securities Change in auditors or financial restatements Appointment or departure of directors or certain executive officers Amendments to articles or bylaws Amendments to or waivers of the code of ethics Shareholder voting results

Securities Law Developments – What to Expect Dodd-Frank Reform/Repeal Efforts CEO Pay Ratio disclosure Pay for Performance disclosure Conflict Minerals SEC Enforcement Priorities