Is Elon Musk needling the SEC – if so, is it actionable, unwise?

I have provided below links to two articles from yesterday, about new comments by Elon Musk in which he possibly needles the SEC or the recent claims against him. The articles assert that there was also a drop in Tesla stock price.

Is there a correlation between the comments and the Tesla stock price? There could be, but that question requires additional evaluation and evidence.

Are the comments actionable, i.e., unlawful? At this point I would say, most likely, no they are not directly actionable.

Are the comments indirectly actionable or could they cause an action to be brought in an indirect manner? Perhaps – consider that the board has a responsibility to take actions that are for the benefit of the company and its shareholders – There already is a red flag that Mr. Musk is prone to making public comments some of which can reflect negatively upon himself, or upon Tesla, or upon the Tesla stock price. At law the board, and probably one or more committees of the board possibly including the audit committee, have a responsibility, and a risk management responsibility, to take action to address, prevent, and remedy significant risks in certain circumstances. It is my understanding that the SEC also noted lapses by the Tesla board. Could an action, or a new action be brought against Tesla and its board for failure of oversight and action? I would say, yes, quite possibly so.

Are the comments unwise? In my view, I would say yes, definitely. Ask, what is to be gained by the comments that will benefit Tesla or its shareholders? Nothing that I can see. Additionally, the settlement with the SEC is not yet Court approved. The comments certainly don’t help the settlement approval process – the comments don’t help with the Court or with the SEC.

The Tesla board really needs to take action and get on top of this. Is the board willing to do this? Is the board sufficiently independent? Are any board members going to resign out of frustration or the board’s inaction? Is the board going to speak up, and possibly address these issues publicly? My view is that Mr. Musk needs to be helped with this. 

Below are the links to the two articles:

https://www.yahoo.com/news/teslas-musk-mocks-sec-judge-demands-justify-fraud-010454646–finance.html

https://techcrunch.com/2018/10/04/elon-musk-is-trolling-the-sec-on-twitter/?yptr=yahoo

Best to you, David Tate, Esq. (and inactive California CPA), Royse Law Firm, Menlo Park, California office, with offices in northern and southern California.  My blogs: trust, estate, elder abuse and conservatorship litigation http://californiaestatetrust.com, D&O, boards, audit committees, governance, etc. http://auditcommitteeupdate.com, workplace http://workplacelawreport.com

David Tate, Esq., Overview of My Practice Areas (Royse Law Firm, Menlo Park, California office, with offices in northern and southern California. http://rroyselaw.com)

  • Civil Litigation: business, commercial, real estate, D&O, board and committee, founder, owner, investor, creditor, shareholder, M&A, and other disputes and litigation; and investigations
  • Probate Court Litigation: trust; estate; power of attorney; elder, disability, and dependent adult abuse and protection; and conservatorship disputes and litigation
  • Administration: trust and estate administration and contentious administrations representing fiduciaries and beneficiaries
  • Workplace (including discrimination) litigation and consulting
  • Board, director, committee and audit committee, and executive officer responsibilities and rights, governance, and investigations

Royse Law Firm – Overview of Firm Practice Areas – San Francisco Bay Area and Los Angeles Basin

  • Corporate and Securities, Financing and Formation
  • Corporate Governance, D&O, Boards and Committees, Audit Committees, Etc.
  • Intellectual Property – Patents, Trademarks, Copyrights, Trade Secrets
  • International
  • Immigration
  • Mergers & Acquisitions
  • Labor and Employment
  • Litigation (I broke out the litigation as this is my primary area of practice)
  •             Business & Commercial
  •             IP – Patent, Trademark, Copyright, Trade Secret, NDA
  •             Accountings, Fraud, Lost Income/Royalties, Etc.
  •             Internet Privacy, Hacking, Speech, Etc.
  •             Labor and Employment
  •             Mergers & Acquisitions
  •             Real Estate
  •             Owner, Founder, Investor, D&O, Board/Committee, Shareholder
  •             Lender/Debtor
  •             Investigations
  •             Trust, Estate, Conservatorship, Elder Abuse, and Administrations
  • Real Estate
  • Tax (US and International) and Tax Litigation
  • Technology Companies and Transactions, Including AgTech and HealthTech, Etc.
  • Wealth and Estate Planning, Trust and Estate Administration, and Disputes and Litigation

Disclaimer. This post is not a solicitation for legal or other services inside or outside of California, and also does not provide legal or other professional advice to you or to anyone else, or about a specific situation – remember that laws are always changing – and also remember and be aware that you need to consult with an appropriate lawyer or other professional about your situation. This post also is not intended to and does not apply to any particular situation or person, nor does it provide and is not intended to provide any opinion or any other comments that in any manner state, suggest or imply that anyone or any entity has done anything unlawful, wrong or wrongful – instead, each situation must be fully evaluated with all of the evidence, whereas this post only includes summary comments about information that may or may not be accurate and that most likely will change over time.

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Board understanding of culture and mood are pretty low – per NACD materials

Below I have provided a snapshot from NACD promotional materials that I received – the materials are Benchmark Your Board, with which I tend to agree, if the benchmark evaluation is done with meaningful detail, evaluation, and recommendations, and if the board then takes action to improve the board, and all levels of the organization. I find all of the statistics from the materials (see below) of interest; however, for the purpose of this blog post I am focused on the corporate culture section – earlier this year corporate or business or nonprofit or organization culture was heavily in the news, but these things tend to pass.

I don’t hear as much about culture now. But in my view, culture and values need to stay in the news as they are one of the keys to how the entity (i.e., the people in the entity) act or behave, and perform.

Notice, according to the materials, 87% of directors say that their boards have a high understanding of the tone at the top, but is that true and what does that really mean; only 35% of directors say that their boards understand the mood in the middle, whatever that means, but nevertheless, the percentage is very low; and only 18% have a high understanding of the buzz at the bottom, again whatever that means, but the percentage is very low. These seem like failing grades, evidencing, in addition to other things, that board members need get out and visit and mingle at the facilities more.

NACD Benchmark Your Board promotion stat. page

And here are additional materials from prior posts:

Organization Culture Compass Circle

OVERVIEW OF A RISK MANAGEMENT PROCESS THAT YOU CAN USE 03162018

Audit Committee 5 Lines of Success, Diligence, and Defense - David Tate, Esq, 05052018

COSO Enterprise Risk Management Framework ERM Components and Principles

Best to you, David Tate, Esq. (and inactive California CPA), Royse Law Firm, Menlo Park, California office, with offices in northern and southern California.  My blogs: trust, estate, elder abuse and conservatorship litigation http://californiaestatetrust.com, D&O, boards, audit committees, governance, etc. http://auditcommitteeupdate.com, workplace http://workplacelawreport.com

David Tate, Esq., Overview of My Practice Areas (Royse Law Firm, Menlo Park, California office, with offices in northern and southern California. http://rroyselaw.com)

  • Civil Litigation: business, commercial, real estate, D&O, board and committee, founder, owner, investor, creditor, shareholder, M&A, and other disputes and litigation; and investigations
  • Probate Court Litigation: trust, estate, elder abuse, and conservatorship disputes and litigation
  • Administration: trust and estate administration and contentious administrations representing fiduciaries and beneficiaries
  • Workplace (including discrimination) litigation and consulting
  • Board, director, committee and audit committee, and executive officer responsibilities and rights; and investigations

Royse Law Firm – Overview of Firm Practice Areas – San Francisco Bay Area and Los Angeles Basin

  • Corporate and Securities, Financing and Formation
  • Corporate Governance, D&O, Boards and Committees, Audit Committees, Etc.
  • Intellectual Property – Patents, Trademarks, Copyrights, Trade Secrets
  • International
  • Immigration
  • Mergers & Acquisitions
  • Labor and Employment
  • Litigation (I broke out the litigation as this is my primary area of practice)
  •             Business & Commercial
  •             IP – Patent, Trademark, Copyright, Trade Secret, NDA
  •             Accountings, Fraud, Lost Income/Royalties, Etc.
  •             Internet Privacy, Hacking, Speech, Etc.
  •             Labor and Employment
  •             Mergers & Acquisitions
  •             Real Estate
  •             Owner, Founder, Investor, D&O, Board/Committee, Shareholder
  •             Lender/Debtor
  •             Investigations
  •             Trust, Estate, Conservatorship, Elder Abuse, and Administrations
  • Real Estate
  • Tax (US and International) and Tax Litigation
  • Technology Companies and Transactions, Including AgTech and HealthTech, Etc.
  • Wealth and Estate Planning, Trust and Estate Administration, and Disputes and Litigation

Disclaimer. This post is not a solicitation for legal or other services inside or outside of California, and also does not provide legal or other professional advice to you or to anyone else, or about a specific situation – remember that laws are always changing – and also remember and be aware that you need to consult with an appropriate lawyer or other professional about your situation. This post also is not intended to and does not apply to any particular situation or person, nor does it provide and is not intended to provide any opinion or any other comments that in any manner state, suggest or imply that anyone or any entity has done anything unlawful, wrong or wrongful – instead, each situation must be fully evaluated with all of the evidence, whereas this post only includes summary comments about information that may or may not be accurate and that most likely will change over time.

Elon Musk / Tesla – purported SEC settlement, but corporate governance and board member judicial independence questions also remain

To say the least, it must have been a stressful couple of months for Tesla board members – how do you get your undisputed CEO leader and visionary to control himself, to take care of his mental and physical health, stop doing stupid or ill-advised things and making stupid or ill-advised public communications, and stop causing self-inflicted wounds? Or, at this point, how much do you need Mr. Musk to be the CEO of Tesla – can’t some other person take the helm – someone who is better qualified to build cars, and who also is an electric/battery power visionary? And where was the board in all of this? Well . . . we don’t know because they were silent to the public.  

You might have heard the news that the SEC filed suit against Mr. Musk last week as a result of an ill-advised and possibly unlawful public comment that he made. Yesterday (Saturday) I read two articles about possible settlement or actual settlement with the SEC. The following earlier-in-the-day article represents that Mr. Musk had rejected a settlement offer made by the SEC.  But please be aware that I never simply accept a news or other article as being correct – the article might be correct, or some of it might be correct, or none of it might be correct, you can be reasonably certain that the article is not entirely complete, and I also watch for the adjectives used and the opinions and conclusions reached as opposed to facts and whether or not those facts are supported with objective, credible evidence and sources. Thus, although I am using articles below, I am not representing or suggesting that they are correct or entirely correct. 

I found the first, earlier-in-the-day article interesting because of its discussion about the terms (presumably only some of the terms) of settlement purportedly offered by the SEC, and more interesting for the purported reasons why the settlement offer was rejected. The reasons for rejection, for example, do not include whether or not acceptance of the settlement would be in the best interests of Tesla and its stockholders. The reasons suggest that the settlement was rejected based on reasons personal to Mr. Musk, the reasons suggest a desire to maintain and not lose board control, and the reasons suggest a lack of board member involvement in whether or not the settlement should be accepted, and a lack of board member active diligent governance, oversight, and independence. Of course, obviously there are additional facts about which we are not aware.

In terms of board member independence, I am talking about possible lack of judicial independence, not independence as defined by stock exchange or similar rules, or whether or not the board member is an officer of Tesla. Board member judicial independence is an evolving and increasingly important attribute and evaluation – for example, does the board member truly diligently and prudently evaluate the issues at hand in the best interests of the stockholders and the company, and make decisions that are independent of the director’s self interests and independent of the director’s relationships with the executive officers and with the other directors. As you might be aware, judicial independence, for example, also takes into consideration business, financial, social, family, and friend interactions, relationships, and influences or pressures.

The following is the earlier-in-the-day article representing that settlement with the SEC was rejected and at least some of the purported reasons for the possible rejection – see a picture from the earlier-in-the-day first article below or  Click Here For Article

Musk reportedly doesn't settle with SEC

A later-in-the-day article then represented that settlement with the SEC had been accepted, and at least some of the purported terms of the settlement. I would view acceptance of the purported settlement as a good decision in the right direction for Tesla and its stockholders, and also for Mr. Musk. I will be interested in hearing who the two new directors will be, the process for and who nominates/selects the new directors and what Mr. Musk’s involvement will be in that process, and who the independent directors will be and whether they will be and are judicially independent as they should be judicially independent after taking into consideration that matters, issues and people over which they will have specific oversight and responsibility. See a picture from the later-in-the-day second article below or Click Here For Article

Musk reportedly settles with the SEC

Best to you, David Tate, Esq. (and inactive California CPA), Royse Law Firm, Menlo Park, California office, with offices in northern and southern California.  My blogs: trust, estate, elder abuse and conservatorship litigation http://californiaestatetrust.com, D&O, boards, audit committees, governance, etc. http://auditcommitteeupdate.com, workplace http://workplacelawreport.com

David Tate, Esq., Overview of My Practice Areas (Royse Law Firm, Menlo Park, California office, with offices in northern and southern California. http://rroyselaw.com)

  • Civil Litigation: business, commercial, real estate, D&O, board and committee, founder, owner, investor, creditor, shareholder, M&A, and other disputes and litigation; and investigations
  • Probate Court Litigation: trust, estate, elder abuse, and conservatorship disputes and litigation
  • Administration: trust and estate administration and contentious administrations representing fiduciaries and beneficiaries
  • Workplace (including discrimination) litigation and consulting
  • Board, director, committee and audit committee, and executive officer responsibilities and rights; and investigations

Royse Law Firm – Overview of Firm Practice Areas – San Francisco Bay Area and Los Angeles Basin

  • Corporate and Securities, Financing and Formation
  • Corporate Governance, D&O, Boards and Committees, Audit Committees, Etc.
  • Intellectual Property – Patents, Trademarks, Copyrights, Trade Secrets
  • International
  • Immigration
  • Mergers & Acquisitions
  • Labor and Employment
  • Litigation (I broke out the litigation as this is my primary area of practice)
  •             Business & Commercial
  •             IP – Patent, Trademark, Copyright, Trade Secret, NDA
  •             Accountings, Fraud, Lost Income/Royalties, Etc.
  •             Internet Privacy, Hacking, Speech, Etc.
  •             Labor and Employment
  •             Mergers & Acquisitions
  •             Real Estate
  •             Owner, Founder, Investor, D&O, Board/Committee, Shareholder
  •             Lender/Debtor
  •             Investigations
  •             Trust, Estate, Conservatorship, Elder Abuse, and Administrations
  • Real Estate
  • Tax (US and International) and Tax Litigation
  • Technology Companies and Transactions, Including AgTech and HealthTech, Etc.
  • Wealth and Estate Planning, Trust and Estate Administration, and Disputes and Litigation

Disclaimer. This post is not a solicitation for legal or other services inside or outside of California, and also does not provide legal or other professional advice to you or to anyone else, or about a specific situation – remember that laws are always changing – and also remember and be aware that you need to consult with an appropriate lawyer or other professional about your situation. This post also is not intended to and does not apply to any particular situation or person, nor does it provide and is not intended to provide any opinion or any other comments that in any manner state, suggest or imply that anyone or any entity has done anything unlawful, wrong or wrongful – instead, each situation must be fully evaluated with all of the evidence, whereas this post only includes summary comments about information that may or may not be accurate and that most likely will change over time.

This is a bigger issue than Christine Blasey Ford and Brett Kavanaugh – rights of alleged victims, rights of alleged wrongdoers, witness credibility, evidence, burdens and presumptions, and due process in a time of 24/7 argument, opinions and accusations

This is a bigger issue than Christine Blasey Ford and Brett Kavanaugh – rights of alleged victims, rights of alleged wrongdoers or perpetrators, witness credibility, burdens of proof, presumptions, veracity of evidence, etc., are all needed in this time of 24/7 social argument, opinions and accusations – due process

For the most part discussions about due process are significantly lacking in this time of 24/7 social argument, opinions and accusations. And as a result, what you end up with are largely subjective arguments and opinions, based sometimes on evidence that appears solid but often based on incomplete facts or assertions, speculation, hyperbole, misinformed or uninformed or unqualified speakers or storytellers, or constructive misrepresentations or fraud.

Whereas, and for good reasons, there are rules to be followed as guideposts in a court of law, clearly that is not true in the case of 24/7 social argument, opinions and accusations. This would be a good time for renewed emphasis on rules and techniques for debate, and legal rules of evidence, burdens of proof, presumptions, rights of alleged victims and rights of alleged perpetrators, in addition to professionalism in journalism (such as the Society of Professional Journalists Code of Ethics  https://www.spj.org/ethicscode.asp).

For example, as general principles:

1.  An alleged victim has to prove his or her case the specified claims of wrongdoing with credible evidence;

2.  An alleged wrongdoer or perpetrator is entitled to know the specific claims and evidence that are asserted against her or him;

3.  An alleged wrongdoer or perpetrator is presumed innocent of the claims made, and is entitled to present her or his case and defenses to the specific claims with credible evidence, and to present evidence to rebut or impeach the alleged victim and his or her specific claims and evidence (and yes, the alleged wrongdoer can become a victim if the allegations made are unfounded); and

4.  Unless there is a law or legal principle that switches the burden of proof, the standard is that the alleged victim is the party who is first required to establish his or her case and specific claims with credible evidence, and, generally, an alleged wrongdoer or perpetrator is not required to establish her or his case or defenses to the specific claims until the alleged victim first sustains his or her burden of proof.

If a party, including an alleged victim or an alleged wrongdoer or perpetrator, presents weaker or less satisfactory evidence when it is within the power of that party to produce stronger and more satisfactory evidence, there is or can be a presumption or an inference that the evidence offered should be viewed with distrust.

In addition to the actual evidence presented (testimony and documents), the credibility of witnesses and evidence (testimony and documents) is of key importance.

See, for example, California Evidence Code §780:

Except as otherwise provided by statute, the court or jury may consider in determining the credibility of a witness any matter that has any tendency in reason to prove or disprove the truthfulness of her or his testimony at the hearing, including but not limited to any of the following:

(a) Her or his demeanor while testifying and the manner in which she or he testifies.

(b) The character of her or his testimony.

(c) The extent, including causes and symptoms, of her or his capacity or impairment to perceive, to recollect, or to communicate any matter about which she or he testifies – including, for example, the passage of time since the date of the alleged incident, and, in most situations, evidence of a witness’s mental or emotional stability or instability.

(d) The extent of her of his opportunity to perceive any matter about which she or he testifies.

(e) Her or his character for honesty or truthfulness or for dishonesty or untruthfulness.

(f) The existence or nonexistence of a bias, interest, or other motive.

(g) A statement previously made by her or him that is consistent with her or his testimony at the hearing.

(h) A statement made by her or him that is inconsistent with any part of her or his testimony at the hearing.

(i) The existence or nonexistence of any fact testified to by her or him.

(j) Her or his attitude toward the action in which she or he testifies or toward the giving of testimony.

(k) Her or his admission of untruthfulness.

See also Federal Rules of Evidence Rules 402, 608 and 613.

The failure to report an alleged occurrence or to communicate about an alleged occurrence also could imply that an event did not occur or occurred differently and could in that manner attack the witness’s credibility and truthfulness; however, generally the opportunity exists to explain the failure to report or to communicate about an alleged occurrence, and that failure does not create a presumption or an inability to testify, unless, perhaps, there is a requirement that the witness report the occurrence, which in that instance, also could present a per se violation of law. 

Thanks for reading. David Tate

 

 

Ohio State University Urban Meyer investigation report and other information

The following is a re-post from http://workplacelawreport.com

I have provided below a link to a Yahoo.com Sports article about the events and investigation relating to Zach Smith, Urban Meyer, and Athletic Director Gene Smith, and a link to the investigation report and other documents provided by Ohio State University (which was also included as a link in the Yahoo.com Sports article).

I find this information fascinating, although I have only had time to skim some of the materials. It is fascinating for the fact that Ohio State included not only the investigation report, but also employment file documents. Although I have no way of knowing if Ohio State has been fully transparent, objective and independent in its investigation, the University certainly has gone to some length.

I am primarily interested in the investigation and the resulting report, and I will be providing additional comments about those matters in other posts.

I do note, however, something from the Zach Smith personnel materials – his 2017 Ohio State Football Assistant Coaches’ Performance Review (Public Record) under the “General” category “#27. Understands and adheres to University core values” has a “4” rating (meets expectations) which should be sufficient in most situations, but specifically does not contain a “5” rating (exceeds expectations), and I am wondering why it is a “4” and not a “5” – from what I have seen of Ohio State University, I would have expected that the University would have required a “5” rating, or included a comment that category #27 will be improved to a “5” rating. But, I’m also looking at this in hindsight which is a view that can be problematic and subject to error or misunderstanding.

Thanks for reading. More to follow. David Tate, Esq. 

Yahoo.com Sports article link:

https://www.yahoo.com/news/top-takeaways-ohio-states-urban-meyer-investigation-report-040137276.html

Link to the Ohio State University website page (provided in the Yahoo.com Sports article), containing documents pertaining to Zach Smith (including his personnel file), Urban Myer, and the report following investigation:

https://news.osu.edu/public-records-related-to-the-investigation-into-allegations-involving-urban-meyer/

 

Guidance For Workplace And Business Investigations

Guidance For Workplace And Business Investigations

The following are some comments as guidance for workplace and business investigations. We are seeing ongoing news about situations where investigations did not occur, and situations where investigations have been starting or are in progress, and also apparently where situations of alleged possible unlawful activity occurred or might have occurred but was not reported (although in some situations knowledge of possible unlawful activity might had been known). These issues don’t simply reflect on the accuser and the accused, but reflect on the business, nonprofit or governmental entity at issue, and, variously depending on the situation, elected representatives, executive officers, boards of directors and the board committees, general counsel, compliance and ethics professionals, HR, employees, perhaps internal audit and even the external auditor, etc., and throughout the entire organization or entity.

In the workplace setting, for example, an employer has a duty to take reasonable steps to prevent harassment, discrimination, and unlawful employment practices, and to correct inappropriate workplace behavior. See, e.g., California Gov. Code §12940(k); and 29 CFR 1604.11(d). An employer can be liable for the failure to investigate, at least if there was underlying unlawful activity. And a failure to investigate can be considered ratification of unlawful activity. In appropriate circumstances on a claim of wrongful termination, the question can become whether the employer acted appropriately and in good faith after conducting a reasonable investigation and based on a reasonable belief in that investigation – in other words, the reasonableness of the employer’s investigation can become the standard by which the employer is judged for alleged wrongful termination liability purposes.

The following are some of the issues and steps to consider or follow when determining whether an employer’s investigation of the conduct and situation was reasonable, and whether the employer had a reasonable belief in that investigation – did the employer or entity:

  • Take the complaint of wrongdoing seriously;
  • Maintain confidentiality of the situation to the extent reasonably possible;
  • Conduct a timely investigation, promptly after receiving the complaint of wrongdoing;
  • Decide and appoint an appropriate sufficiently independent and qualified person or committee to oversee the investigation, and for decision-making;
  • Consider whether the investigator will be someone in-house or from outside the entity;
  • Have the investigation performed by an investigator who is competent and knowledgeable about the relevant issues (including for example, as necessary, claims, defenses, applicable law, burdens of proof, presumptions, evidence, gathering evidence and showing required, etc.), and also how to conduct (and evaluate) investigations, investigation techniques, evidence (including, e.g., credibility, admissibility, whether the evidence or possible evidence is “A” or “B” or “C,” examination, confirmation or support, cross-examination, rebuttal or debunking, and impeachment), writing reports and opinions, and oral communications and testimony, and also note issues that might be present if the investigation is performed by an attorney for whom attorney client or work product privileges might be claimed – in short, work these issues out before the investigator is selected;
  • Consider legal counsel and possible other assistance needed;
  • Follow appropriate complaint investigation procedures;
  • Listen to and treat the difference sides fairly and equally;
  • Obtain, evaluate and understand the claims that are being made and possible defenses – including, e.g., claims based on a statute or section of law, a regulation, or a rule, and also claims based on some other standard such as any applicable policy, handbook, code of conduct, contract, collective bargaining agreement, etc. that had been enacted or adopted;
  • Provide the accuser with ample opportunity to offer evidence of his or her claims including what occurred or not, documents that might be relevant, and the names of and information about witnesses who he or she believes can provide relevant comments about the alleged occurrence(s);
  • Give the alleged wrongdoer fair notice of the claims being made;
  • Provide the alleged wrongdoer with ample opportunity to offer evidence in his or her defense, including what occurred or not, documents that might be relevant, and the names of and information about witnesses who he or she believes can provide relevant comments about the alleged occurrence(s);
  • When appropriate, provide and communicate an appropriate means whereby third parties can provide information that is relevant to the issues and the investigation;
  • Have the investigator conduct a thorough investigation, under the circumstances (note that in some circumstances courts have held that the investigation need not necessarily be perfect, but it should be sufficient, reasonable and thorough under the exigencies and circumstances at hand without the benefit of full discovery or a trial);
  • Have the investigator prepare a well-reasoned report and conclusions, supported by and based on objective evidence;
  • Have the investigator report to the decision-making person or committee;
  • Have the decision-maker or committee prudently and appropriately evaluate the claims, defenses and investigation; and
  • Implement progressive discipline if appropriate?

Of course, each situation is different, and for some of the above points the courts and regulatory agencies have provided additional guidance.

David Tate, Esq., Royse Law Firm, Menlo Park, California office, with offices in northern and southern California. http://rroyselaw.com

David Tate, Esq., Overview of My Practice Areas (Royse Law Firm, Menlo Park, California office, with offices in northern and southern California. http://rroyselaw.com

  • Civil Litigation: business, commercial, real estate, D&O, board and committee, founder, owner, investor, creditor, shareholder, M&A, and other disputes and litigation
  • Probate Court Litigation: trust, estate, elder abuse, and conservatorship disputes and litigation
  • Administration: trust and estate administration and contentious administrations representing fiduciaries and beneficiaries
  • Workplace (including discrimination) litigation and consulting

Royse Law Firm – Overview of Firm Practice Areas – San Francisco Bay Area and Los Angeles Basin

  • Corporate and Securities, Financing and Formation
  • Corporate Governance, D&O, Boards and Committees, Audit Committees, Etc.
  • Intellectual Property – Patents, Trademarks, Copyrights, Trade Secrets
  • International
  • Immigration
  • Mergers & Acquisitions
  • Labor and Employment
  • Litigation (I broke out the litigation as this is my primary area of practice)
  •             Business & Commercial
  •             IP – Patent, Trademark, Copyright, Trade Secret, NDA
  •             Accountings, Fraud, Lost Income/Royalties, Etc.
  •             Internet Privacy, Hacking, Speech, Etc.
  •             Labor and Employment
  •             Mergers & Acquisitions
  •             Real Estate
  •             Owner, Founder, Investor, D&O, Board/Committee, Shareholder
  •             Lender/Debtor
  •             Investigations
  •             Trust, Estate, Conservatorship, Elder Abuse, and Administrations
  • Real Estate
  • Tax (US and International) and Tax Litigation
  • Technology Companies and Transactions, Including AgTech and HealthTech, Etc.
  • Wealth and Estate Planning, Trust and Estate Administration, and Disputes and Litigation

Disclaimer. This post is not a solicitation for legal or other services inside or outside of California, and also does not provide legal or other professional advice to you or to anyone else, or about a specific situation – remember that laws are always changing – and also remember and be aware that you need to consult with an appropriate lawyer or other professional about your situation. This post also is not intended to and does not apply to any particular situation or person, nor does it provide and is not intended to provide any opinion or any other comments that in any manner state, suggest or imply that anyone or any entity has done anything unlawful, wrong or wrongful – instead, each situation must be fully evaluated with all of the evidence, whereas this post only includes summary comments about information that may or may not be accurate and that most likely will change over time.

 

 

Defining The Board’s Oversight Of Risk Management

WHEREAS the board’s oversight of risk management is an ongoing topic of discussion and definition, NOW THEREFORE from time to time I engage in these discussions.

More seriously, in addition to my own research and materials, I read a fair number of discussions by other people and groups about director, officer, and board committee (audit committee) member responsibilities, rights, compliance, and liability.

At the bottom of this post I have included links to two recent posts by Norman Marks in which he discusses risk management. While I find that pronouncements and discussions by major organizations on these topics can be insightful and advancing, typically they are much less insightful and advancing than they should and can be. Topics such as corporate governance; board and board committee oversight, responsibilities and rights; business culture and values; auditing, etc., tend to move forward like molasses on a plate. Norman provides leading, worthwhile discussions – some of which I agree and some of which I disagree, but Norman does provide independent forward-looking and leading thought. Norman and I have different backgrounds – I find that in most situations the different backgrounds and experiences of the people involved should be acknowledged and noted, and encouraged, along with their viewpoints.

The following is a short version today of the board’s oversight of risk management – I say “today” because these are and will continue to be topics and definitions in development:  The board, its committees, and its directors oversee executive management’s successful achievement of the organization’s strategies and objectives, of which risk management is an integral component of the business processes.

The following is a longer more detailed version today of the board’s oversight of risk management:  The board, its committees, and its directors oversee executive management’s and the organization’s strategies, plans, and decision making for the successful achievement of the organization’s business strategies and objectives, of which risk management or enterprise risk management or what might happen is an integral component of the ongoing and regular business processes. Note: I added “or what might happen” from one of Norman’s discussions.

Note also, often oversight of risk management is delegated to a committee of the board, such as the audit committee, and in some industries a separate risk committee is mandated by statute, rule or regulation. Even if not required by law, it is still my belief that the overall board should address risk management oversight although having a committee of the board provide initial and perhaps more detailed oversight might be prudent and also legally acceptable. And I believe that these best practices also hold true for nonprofits even if a nonprofit is allowed by law to entirely delegate risk management to a committee of the board – the overall board should nevertheless still be involved in the manner that the board determines is prudent and in keeping with the business judgment rule.

Changing topics and under the category of other questions for consideration by directors (and also by officers and others) – and because I deal with these issues on a daily basis – from the different view of legal responsibilities and rights, liability, and reputation – short version – does the director reasonably believe that she or he can describe and explain, and support and defend his or her actions and inactions?

Or, longer more detailed version from the different view of responsibilities and rights, liability, and reputation – long version – does the director reasonably believe that she or he can describe and explain, and support and defend his or her actions and inactions taken and not taken to satisfy the director’s oversight and governance responsibilities under the microscope of crisis management, shareholder and proxy questioning, inquiries or contests, lawsuits, regulatory inquiries, employee questioning or inquiries, customer questioning, social media, investigations, and reputation attacks?

The following are links to two of Norman Marks’ recent posts on risk management:

https://normanmarks.wordpress.com/2018/03/09/is-the-goal-of-risk-governance-taking-boards-in-the-wrong-direction/

https://normanmarks.wordpress.com/2018/05/12/are-you-managing-risk-or-are-you-managing-the-organization/

Please see also the additional materials in this post below. Wishing you the best and success. David Tate, Esq.