The Conference Board Governance Center Blog


Which Dodd-Frank rules will stay? Which ones will go?

By Gary Larkin, Research Associate, The Conference Board Governance Center

With a flurry of executive orders in his first two weeks in office, President Trump made one thing absolutely clear. The Dodd-Frank Wall Street Reform and Consumer Protection Act passed by Democrats in 2010 will soon be reformed itself by the current Republican majority.

But the big question for boards is which corporate governance-related Dodd-Frank rules will be eliminated and which will stay.

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How Did we Get Here? The Committee on Corporate Political Spending has Answers

As President Trump—the first sitting executive of a company to become commander in chief— begins to roll out his agenda, many in political circles are asking the question, “how did we get here?”

Prior to Election Day, The Conference Board’s Governance Center held a meeting of its Corporate Political Spending Committee in Washington, D.C., that attempted to answer that question and many other related ones. One product of this meeting is the report, “Have we reached a tipping point?” It features insights and highlights from the Governance Center’s Committee on Corporate Political Spending meeting on the “Varied Views on Corporate Political Spending from Main Street to Wall Street and in Between.” Committee members were joined by FEC commissioners, members of the press, investors, and other stakeholders.

Some of the messages from that meeting include:

  • After the Citizens United vs. FEC decision in 2010, political spending
  • increased by $1 billion.
  • The vast majority of money raised in federal elections comes from limited,
  • publicly disclosed contributions made by individuals.
  • The public perception of money in politics is undermining people’s trust in our democratic institutions.

The report is now available for complimentary download by Conference Board members.



How Good is Gender Diversity for Boards?

Is it good business for companies to add women to their boards? That is the question two professors—one from Pace University and another from USC—attempted to answer in The Conference Board’s latest Director Notes publication.

The report, entitled “The Effect of Gender Diversity on Board Decision-making: Interviews with Board Members and Stakeholders,” investigates the argument that women can add new and valuable perspectives to a process traditionally dominated by a relatively small circle of men. Its conclusions are primarily based on interviews with 24 French directors and stakeholders held after that country instituted a quota of 40 percent of either gender on public company boards by 2017. The report also cites other research in the area of gender diversity.

Among the findings in the report, the authors concluded that the real value of adding women to boards came not from their gender per se, but from the fact that they were more likely to be outsiders. They were also more likely to be foreigners, have expertise in more diverse business issues and functions than their male counterparts, and to have risen through the ranks outside the traditional elite networks. The authors conclude that bringing these different perspectives can substantively improve the collective decision-making of a board.

Conference Board members can download the report here. For more information on board diversity, read Every Other One: A Status Update” from The Conference Board’s Committee on Economic Development.


The Materiality Gap between Investors, the C-suite and Board

By Judy McLevey, former Associate Director, The Conference Board Governance Center

Investors, the C-suite and boards have different views about what is, or should be, considered material information. A company’s financial results would be considered material by all parties. Based on SEC rules, companies are required to provide updates on their financial results on a quarterly and annual basis (10-Q and 10-K, respectively) and also timely disclose specified material developments that occur in between quarters (8-K and/or press release). Beyond pure financial information, other examples of material news would include merger & acquisition activity, changes in control and/or management changes, significant product announcements, dividends, etc.

The definition of materiality varies from company to company and industry to industry because it is a fact-based determination that is subject to interpretation. The Supreme Court, SEC, Financial Accounting Standards Board (FASB), international regulators, etc. have all offered their opinions/guidance on the definition of materiality. The SEC, in its Selective Disclosure and Insider Trading Rule, defined material information as something where “there is a substantial likelihood that a reasonable shareholder would consider it important” in making an investment decision. To fulfill the materiality requirement, there must be a substantial likelihood that a fact “would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.”

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Universal proxy roundtable highlights publication and primer available

While many Americans are focused on what a Trump administration will mean for such issues as healthcare, immigration, and gender diversity, those in the governance community are also concerned about the fate of the many Dodd-Frank Act rules enacted during the Obama administration and the possibility of mandatory use of universal proxy cards in contested director elections.

The latter governance issue has been monitored by The Conference Board Governance Center, which convened a roundtable on September 20, 2016. The Center has published roundtable highlights, which includes a primer on universal proxy written in Q&A format by Weil attorneys. Conference Board members can download the complimentary publication here. Read the rest of this entry »