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Corporate Governance Protection Against Litigation

In the past couple of years, there has been an onslaught of corporate governance cases, stemming from the credit crisis and the general business conditions of the economic recession. In an article by Sheryl Hopkins, "Litigation Stemming from the Credit Crisis Increasing" in the Jan/Feb 2011 issue of Financial Executive Magazine, there are several approaches executives can use to protect their organizations.

Joel Lesser
Joel Lesser
For starters, the officers and directors must not only define the roles and responsibilities, but put processes and procedures in place to: 1) govern decision making, 2) ensure the parties are informed on those decisions, and 3) ensure they are followed, and if not, why not. These simple measures can be crucial in avoiding and defending the litigation of SEC cases and general fiduciary duty roles. This includes misstated financial statements and/or improper disclosures.

Many current cases are headed to trial because motions to dismiss have been denied. Settlements are very expensive; there have been 16 settlements of sub prime and credit crisis-related actions for more than $1.8 billion as of November 2010.

Even M&A activity is generating claims against directors and officers regarding the price of the transaction or even the decision to merge.

The establishment and continuing efforts of a strong governance process is one key element in protecting your company.

Joel Lesser is a CFO who makes decisions - with his own brand of diligence, integrity and thoughtfulness - that ensure reliable foundations on which businesses and talent may grow.
Acutely aware of the domino effect of change, he constantly asks himself, “Are we not only doing it right, but also are we doing the right thing?”

Lundi 28 Mars 2011

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