New Fiduciary Duty In The 21st Century: California Roadmap Paper – Regarding ESG

I have provided below a link to a pdf of a new paper (September 2020) that is written as “the result of a collaboration between the PRI and the Climate Risk Initiative at UC Berkeley School of Law’s Center for Law, Energy & the Environment.” The UNEP Finance Initiative also appears to be an author or sponsor.

The paper and its recommendations are not law. However, the paper is potentially (i.e., appears to be) more than simply discussion when you view the Acknowledgements (page 4) and the Forwards (pages 5-7).

The paper contains 40 recommendations in 7 categories which encourage California to enact legislation and/or regulations that require ESG standards or processes and disclosures for the listed entities and organizations.

I will not be spending much time on this paper for the reason that as a general rule I don’t spend much time on discussion papers that are not proposed or actual legislation, regulations or rules. However, I am mentioning this paper because I am presuming that it was written with at least some buy-in from other people who have the authority to make some or all of the provisions enforceable by law. And I note that at page 26, under the heading “Challenges” with respect to ESG integration, the paper notes “A lack of consistent, comparable, robust, and widely available ESG data . . . ,” and the paper also does contain the 40 specific recommendations many of which relate to statutes (law) or regulations (also law).

One additional comment about the paper and ESG standards, while the paper in part discusses legislation to require and mandate that certain non-governmental businesses implement certain ESG standards and reporting or disclosure, the paper also discussed or provides ESG recommendations for governmental organizations in California – for which I presume that ESG standards and reporting (i.e., standards and reporting for governmental entities and organizations) could be ordered or required immediately or relatively easily right now – thus, one approach would be for governmental entities and organizations to lead the way by example.

The following is a link to the paper:

Best to you. David Tate, Esq.

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this post. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only

Litigation, Disputes, Mediator & Governance: Business, Trust/Probate, Real Property, Governance, Elder Abuse, Investigations, Other Areas

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com

Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance and governance committee, responsibilities and rights, compliance, investigations, ESG, and risk management  http://auditcommitteeupdate.com

My law practice primarily involves the following areas and issues:

Trust, Estate, Probate Court, Elder and Dependent Adult, and Disability Disputes and Litigation

  • Trust and estate disputes and litigation, and contentious administrations representing fiduciaries, beneficiaries and families; elder abuse; power of attorney disputes; elder care and nursing home abuse; conservatorships; claims to real and personal property; and other related disputes and litigation.

Business, Business-Related, and Workplace Disputes and Litigation: Private, Closely Held, and Family Businesses; Public Companies; Nonprofit Entities; and Governmental Entities

  • Business v. business disputes including breach of contract; unlawful, unfair and fraudulent business practices; fraud, deceit and misrepresentation; unfair competition; licensing agreements, breach of the covenant of good faith and fair dealing; etc.
  • Misappropriation of trade secrets.
  • M&A disputes.
  • Founder, officer, director and board, investor, shareholder, creditor, VC, control, governance, decision making, fiduciary duty, conflict of interest, independence, voting, etc., disputes.
  • Buy-sell disputes.
  • Funding and share dilution disputes.
  • Accounting, lost profits, and royalty disputes and damages.
  • Insurance coverage and bad faith.
  • Access to corporate and business records disputes.
  • Employee, employer and workplace disputes and processes, discrimination, whistleblower and retaliation, harassment, defamation, etc.

Investigations, Governance, and Responsibilities and Rights

  • Corporate, business, nonprofit and governmental internal investigations.
  • Board, audit committee, governance committee, and special committee governance and processes, disputes, conflicts of interest, independence, culture, ethics, etc.; and advising audit committees, governance committees, officers, directors, and boards.

Mediator Services and Conflict Resolution

* * * * *

New ESG/SDGs Metrics From International Business Council (IBC) of the World Economic Forum (WEF)

The following is a link to a pdf of Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation (a 96 page paper):

The paper, which was published in September 2020, is a project of the International Business Council (IBC) of the World Economic Form (WEF) in collaboration with Deloitte, EY, KPMG and PwC. I believe that this is the first time that the Big 4 have gotten together in an effort to develop ESG and sustainability standards.

The paper defines the finished project as follows: “This work defines a core set of “stakeholder Capitalism Metrics” (SCM) and disclosures that can be used by IBC members to align their mainstream reporting on performance against environmental, social and governance (ESG) indicators and track their contributions towards the SDGs [UN Sustainable Development Goals] on a consistent basis.”

The paper and its ESG metrics are based on four pillars:

Pillar 1: Principles of Governance;

Pillar 2: Planet;

Pillar 3: People; and

Pillar 4: Prosperity.

This paper is a good initial effort to define measurable standards and metrics. In light of the authors and contributors this paper and its further related amendments, tweaks, and discussions will become a direct standard for IBC members, and some parts of it will become indirect or voluntary standards for some other organizations.

Many provisions in the paper are heavily focused on GRI (Global Reporting Initiative) standards. Thus, for example, the paper does not focus on SASB (Sustainability Accounting Standards Board) standards. You might also be aware that the SASB and the IIRC (International Integrated Reporting Council) announced on November 25, their intent to merge into a unified organization “in major step towards simplifying the corporate reporting system.” A lot of significant developments and changes are occurring in the ESG and sustainability areas.

As the IBC/Big-4 paper is heavily focused on GRI standards, and UN Sustainable Development Goals, it is or will be relevant or more relevant for US corporations that operate internationally. The extent, if any, to which select provisions in the paper are made applicable to US corporations and/or other organizations what operate solely or primarily domestically in the US is yet to be seen.

Best to you. David Tate, Esq.

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this post. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only

Litigation, Disputes, Mediator & Governance: Business, Trust/Probate, Real Property, Governance, Elder Abuse, Investigations, Other Areas

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com

Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance and governance committee, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

My law practice primarily involves the following areas and issues:

Trust, Estate, Probate Court, Elder and Dependent Adult, and Disability Disputes and Litigation

  • Trust and estate disputes and litigation, and contentious administrations representing fiduciaries, beneficiaries and families; elder abuse; power of attorney disputes; elder care and nursing home abuse; conservatorships; claims to real and personal property; and other related disputes and litigation.

Business, Business-Related, and Workplace Disputes and Litigation: Private, Closely Held, and Family Businesses; Public Companies; Nonprofit Entities; and Governmental Entities

  • Business v. business disputes including breach of contract; unlawful, unfair and fraudulent business practices; fraud, deceit and misrepresentation; unfair competition; licensing agreements, breach of the covenant of good faith and fair dealing; etc.
  • Misappropriation of trade secrets.
  • M&A disputes.
  • Founder, officer, director and board, investor, shareholder, creditor, VC, control, governance, decision making, fiduciary duty, conflict of interest, independence, voting, etc., disputes.
  • Buy-sell disputes.
  • Funding and share dilution disputes.
  • Accounting, lost profits, and royalty disputes and damages.
  • Insurance coverage and bad faith.
  • Access to corporate and business records disputes.
  • Employee, employer and workplace disputes and processes, discrimination, whistleblower and retaliation, harassment, defamation, etc.

Investigations, Governance, and Responsibilities and Rights

  • Corporate, business, nonprofit and governmental internal investigations.
  • Board, audit committee, governance committee, and special committee governance and processes, disputes, conflicts of interest, independence, culture, ethics, etc.; and advising audit committees, governance committees, officers, directors, and boards.

Mediator Services and Conflict Resolution

* * * * *

Designing and Implementing Your Organization’s ESG (Environmental, Social and Governance)

At the bottom of this post I have included a link to an article in Forbes that I find worthwhile for beginning the steps toward your design and implementation of ESG.

One of the current difficulties with starting to design and implement ESG for your organization is that there continues to be no single definition or list of criteria for exactly what ESG is, and, thus, what is included in ESG. Perhaps related, but really a different issue, is that there is no agreed upon standard or process for how to audit or even evaluate ESG from one organization to the next. For example, the following are some of the various standards that have been developed for ESG standards and evaluating ESG, and which contain their various respective criteria and components including for example SASB (Sustainability Accounting Standards Board), GRI (Global Reporting Initiative), UN SDGs (UN Sustainable Development Goals), MSCI, ISS ESG, and Sustainalytics (Morningstar), to name some.

However, stepping back a few steps from the above paragraph, it can also be argued that the lack of one or two definitive standards might also be a benefit for the majority of organizations that want to start designing and implementing their ESG. I say that because while a significant focus has been directed toward ESG in public companies and possible required regulations, all of which takes time and has taken time and regulations and legal requirements whatever they are and whatever they might become will in any event be a progression of starts and stops, the fact is that the great, great majority of organizations are nonpublic, nonprofit and governmental to which legal requirements for public companies will not apply, or only might at some point become relevant but typically not in a legal required sense.

There is in fact no obstruction to any organization, whether public, nonpublic, nonprofit or governmental, designing, implementing, and even reporting ESG. That having been said, however, depending on the type of organization “reporting” and what the organization says or represents about its ESG will require consideration from a legal perspective, but that also is true about everything that the organization reports or says or represents about its operations, policies, conduct, governance, etc.

I have written about ESG several times (including six posts in 2019 and 2020 in which ESG is part of the title), see for example NASDAQ snapshot https://wp.me/p75iWX-jw, SEC Commissioner comments https://wp.me/p75iWX-gH, CAQ calls for ESG standards https://wp.me/p75iWX-xH, from Protiviti https://wp.me/p75iWX-qU, and What if California Government, Nonprofits and Education are Leaders https://wp.me/p75iWX-hi.

Looking more at specific design and implementation of ESG, the following is a link to an article in Forbes that I find worthwhile for beginning the steps toward your design and implementation of ESG: “How to Operationalize ESG” https://www.forbes.com/sites/betsyatkins/2020/05/08/how-to-operationalize-esg/?sh=601883294835. One of the points is that the organization has the ability, and even for public companies at least in part the ability, to design and implement its own ESG and can start small, limited or specifically focused and can then grow from there, keeping in mind, of course, that what the organization reports or says or represents about its ESG will require consideration from a legal perspective.

Best to you. David Tate, Esq.

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this post. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only

Litigation, Disputes, Mediator & Governance: Business, Trust/Probate, Real Property, Governance, Elder Abuse, Investigations, Other Areas

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com

Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance and governance committee, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

My law practice primarily involves the following areas and issues:

Trust, Estate, Probate Court, Elder and Dependent Adult, and Disability Disputes and Litigation

  • Trust and estate disputes and litigation, and contentious administrations representing fiduciaries, beneficiaries and families; elder abuse; power of attorney disputes; elder care and nursing home abuse; conservatorships; claims to real and personal property; and other related disputes and litigation.

Business, Business-Related, and Workplace Disputes and Litigation: Private, Closely Held, and Family Businesses; Public Companies; Nonprofit Entities; and Governmental Entities

  • Business v. business disputes including breach of contract; unlawful, unfair and fraudulent business practices; fraud, deceit and misrepresentation; unfair competition; licensing agreements, breach of the covenant of good faith and fair dealing; etc.
  • Misappropriation of trade secrets.
  • M&A disputes.
  • Founder, officer, director and board, investor, shareholder, creditor, VC, control, governance, decision making, fiduciary duty, conflict of interest, independence, voting, etc., disputes.
  • Buy-sell disputes.
  • Funding and share dilution disputes.
  • Accounting, lost profits, and royalty disputes and damages.
  • Insurance coverage and bad faith.
  • Access to corporate and business records disputes.
  • Employee, employer and workplace disputes and processes, discrimination, whistleblower and retaliation, harassment, defamation, etc.

Investigations, Governance, and Responsibilities and Rights

  • Corporate, business, nonprofit and governmental internal investigations.
  • Board, audit committee, governance committee, and special committee governance and processes, disputes, conflicts of interest, independence, culture, ethics, etc.; and advising audit committees, governance committees, officers, directors, and boards.

Mediator Services and Conflict Resolution

* * * * *

The Private Directors Association – A Worthwhile Association – Take A Look, You Might Find It Interesting

I have become a member of the Private Directors Association and the San Francisco Chapter in which I am participating. The following is a link to the webpage for the San Francisco Chapter: https://www.privatedirectorsassociation.org/chapters/san-francisco-chapter/, and you can view the organization as a whole at http://www.privatedirectorsassociation.org. As you might be aware, the great majority of businesses and organizations are private (i.e., non-public entities). The PDA is a very active organization nationally and locally with many multiple state chapters, and with new chapters in progress – in my view you should take a look.

Best to you. David Tate, Esq.

——————————————————————–

Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this post. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only

Litigation, Disputes, Mediator & Governance: Business, Trust/Probate, Real Property, Governance, Elder Abuse, Investigations, Other Areas

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com

Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance and governance committee, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

My law practice primarily involves the following areas and issues:

Trust, Estate, Probate Court, Elder and Dependent Adult, and Disability Disputes and Litigation

  • Trust and estate disputes and litigation, and contentious administrations representing fiduciaries, beneficiaries and families; elder abuse; power of attorney disputes; elder care and nursing home abuse; conservatorships; claims to real and personal property; and other related disputes and litigation.

Business, Business-Related, and Workplace Disputes and Litigation: Private, Closely Held, and Family Businesses; Public Companies; Nonprofit Entities; and Governmental Entities

  • Business v. business disputes including breach of contract; unlawful, unfair and fraudulent business practices; fraud, deceit and misrepresentation; unfair competition; licensing agreements, breach of the covenant of good faith and fair dealing; etc.
  • Misappropriation of trade secrets.
  • M&A disputes.
  • Founder, officer, director and board, investor, shareholder, creditor, VC, control, governance, decision making, fiduciary duty, conflict of interest, independence, voting, etc., disputes.
  • Buy-sell disputes.
  • Funding and share dilution disputes.
  • Accounting, lost profits, and royalty disputes and damages.
  • Insurance coverage and bad faith.
  • Access to corporate and business records disputes.
  • Employee, employer and workplace disputes and processes, discrimination, whistleblower and retaliation, harassment, defamation, etc.

Investigations, Governance, and Responsibilities and Rights

  • Corporate, business, nonprofit and governmental internal investigations.
  • Board, audit committee, governance committee, and special committee governance and processes, disputes, conflicts of interest, independence, culture, ethics, etc.; and advising audit committees, governance committees, officers, directors, and boards.

Mediator Services and Conflict Resolution

* * * * *  

A simple nine point risk management and ERM process – a short video

Below I have provided a link to a short video on youtube in which I discuss a simple nine point risk management and ERM process. Please do feel free to also pass this information to anyone else who might be interested.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing as a lawyer in California only

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this post. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only

Litigation, Disputes & Mediator: Business, Trust/Probate, Real Property, Governance, Elder Abuse, Investigations, Other Areas

Blogs:

Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com

Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance and governance committee, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

My law practice primarily involves the following areas and issues:

Trust, Estate, Probate Court, Elder and Dependent Adult, and Disability Disputes and Litigation

      • Trust and estate disputes and litigation, and contentious administrations representing fiduciaries, beneficiaries and families; elder abuse; power of attorney disputes; elder care and nursing home abuse; conservatorships; claims to real and personal property; and other related disputes and litigation.

Business, Business-Related, and Workplace Disputes and Litigation: Private, Closely Held, and Family Businesses; Public Companies; Nonprofit Entities; and Governmental Entities

      • Business v. business disputes including breach of contract; unlawful, unfair and fraudulent business practices; fraud, deceit and misrepresentation; unfair competition; licensing agreements, breach of the covenant of good faith and fair dealing; etc.
      • Misappropriation of trade secrets.
      • M&A disputes.
      • Founder, officer, director and board, investor, shareholder, creditor, VC, control, governance, decision making, fiduciary duty, conflict of interest, independence, voting, etc., disputes.
      • Buy-sell disputes.
      • Funding and share dilution disputes.
      • Accounting, lost profits, and royalty disputes and damages.
      • Insurance coverage and bad faith.
      • Access to corporate and business records disputes.
      • Employee, employer and workplace disputes and processes, discrimination, whistleblower and retaliation, harassment, defamation, etc.

Investigations, Governance, and Responsibilities and Rights

      • Corporate, business, nonprofit and governmental internal investigations.
      • Board, audit committee, governance committee, and special committee governance and processes, disputes, conflicts of interest, independence, culture, ethics, etc.; and advising audit committees, governance committees, officers, directors, and boards.

Mediator Services and Conflict Resolution

* * * * *

Governance and a definition of the term “governance” a short video

Below I have inserted a short video in which I discuss governance and the term “governance.” Please do feel free to pass this information to anyone else who might be interested.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing as a lawyer in California only

 

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this post. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only

Litigation, Disputes & Mediator: Business, Trust/Probate, Real Property, Governance, Elder Abuse, Investigations, Other Areas

Blogs:

Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com

Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance and governance committee, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

My law practice primarily involves the following areas and issues:

Trust, Estate, Probate Court, Elder and Dependent Adult, and Disability Disputes and Litigation

      • Trust and estate disputes and litigation, and contentious administrations representing fiduciaries, beneficiaries and families; elder abuse; power of attorney disputes; elder care and nursing home abuse; conservatorships; claims to real and personal property; and other related disputes and litigation.

Business, Business-Related, and Workplace Disputes and Litigation: Private, Closely Held, and Family Businesses; Public Companies; Nonprofit Entities; and Governmental Entities

      • Business v. business disputes including breach of contract; unlawful, unfair and fraudulent business practices; fraud, deceit and misrepresentation; unfair competition; licensing agreements, breach of the covenant of good faith and fair dealing; etc.
      • Misappropriation of trade secrets.
      • M&A disputes.
      • Founder, officer, director and board, investor, shareholder, creditor, VC, control, governance, decision making, fiduciary duty, conflict of interest, independence, voting, etc., disputes.
      • Buy-sell disputes.
      • Funding and share dilution disputes.
      • Accounting, lost profits, and royalty disputes and damages.
      • Insurance coverage and bad faith.
      • Access to corporate and business records disputes.
      • Employee, employer and workplace disputes and processes, discrimination, whistleblower and retaliation, harassment, defamation, etc.

Investigations, Governance, and Responsibilities and Rights

      • Corporate, business, nonprofit and governmental internal investigations.
      • Board, audit committee, governance committee, and special committee governance and processes, disputes, conflicts of interest, independence, culture, ethics, etc.; and advising audit committees, governance committees, officers, directors, and boards.

Mediator Services and Conflict Resolution

* * * * *

 

 

CAQ calls for ESG standards and frameworks – my view: start small and reasonably certain, but just get started now, and then move forward from there . . . .

David W. Tate, Esq., San Francisco and California – dave@tateattorney.com

I have written about ESG in prior posts. The Center for Audit Quality has now also called for the development of standards and frameworks that present ESG, and, presumably will allow (and lead to?) the auditing of ESG.

In one form or another ESG and concepts similar or relating to ESG have been discussed for years – for how many years, I don’t know, maybe 10, or 20, or 30 years in one form or another.

And it is entirely possible that these concepts will be discussed but will remain in some form of limbo for another 5 to 10 years, or longer. Or, ESG, including the auditing of ESG can start essentially immediately.

Standards exist already.

When you are looking at auditing or an audit you naturally can get into discussions about numbers or amounts that are presented on the financial statements, or notes to the financial statements, or management’s discussion and analysis, and for public companies (of which size?), private businesses (of which status and size – family owned, pre-IPO, small, mid-, or large, or simply regular closely held, etc.), nonprofits, and governmental entities, etc. As the CAQ mentions, you can also get into jurisdictional scope issues, such as statewide, countrywide, or worldwide, etc., standards.

In concept, anything and everything can be discussed, disclosed, and audited. Here’s my recommendation: start small and reasonably certain, but just get started now, and then move forward from there . . . .

I view this from an “A,” “B,” “C” approach (similar to how I view evidence in a case). “A” – this is what you already have in hand. “B” – this is what you reasonably believe exists, and that you reasonably believe you can obtain from a specifically identifiable source, but that you do not now have. “C” – this is essentially uncertain or speculative – it might well exist or should exist but don’t count on getting it.

For ESG, start with standards that exist that generally are recognized by the most influential stakeholders or authorities within a jurisdictional location whether it be local, statewide, countrywide or worldwide. Currently you might only have 8-10 “A” generally recognized standards for “E” environmental, 6-7 “A” standards for “S” social, and 3-4 “A” standards for “G” governance – and that’s fine. ESG will be developing and changing for the next 100+ years. The point is to get going with this, now, and it is possible to do so.

The following is a partial snapshot from the CAQ online discussion.

Best to you, Dave Tate, Esq. (San Francisco and California) – dave@tateattorney.com

Litigation, Governance, Administrations, Investigations, Mediator & Conflict Resolution

Mediation and Conflict Resolution Hexagon Matrix to Help Achieve Resolution and Settlement – Dave Tate, Esq.

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this post. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs

Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com

Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance and governance committee, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

My law practice primarily involves the following areas and issues:

Trust, Estate, Probate Court, Elder and Dependent Adult, and Disability Disputes and Litigation

      • Trust and estate disputes and litigation, and contentious administrations representing fiduciaries, beneficiaries and families; elder abuse; power of attorney disputes; elder care and nursing home abuse; conservatorships; claims to real and personal property; and other related disputes and litigation.

Business, Business-Related, and Workplace Disputes and Litigation: Private, Closely Held, and Family Businesses; Public Companies; Nonprofit Entities; and Governmental Entities

      • Business v. business disputes including breach of contract; unlawful, unfair and fraudulent business practices; fraud, deceit and misrepresentation; unfair competition; licensing agreements, breach of the covenant of good faith and fair dealing; etc.
      • Misappropriation of trade secrets.
      • M&A disputes.
      • Founder, officer, director and board, investor, shareholder, creditor, VC, control, governance, decision making, fiduciary duty, conflict of interest, independence, voting, etc., disputes.
      • Buy-sell disputes.
      • Funding and share dilution disputes.
      • Accounting, lost profits, and royalty disputes and damages.
      • Insurance coverage and bad faith.
      • Access to corporate and business records disputes.
      • Employee, employer and workplace disputes and processes, discrimination, whistleblower and retaliation, harassment, defamation, etc.

Investigations, Governance, and Responsibilities and Rights

      • Corporate, business, nonprofit and governmental internal investigations.
      • Board, audit committee, governance committee, and special committee governance and processes, disputes, conflicts of interest, independence, culture, ethics, etc.; and advising audit committees, governance committees, officers, directors, and boards.

Mediator Services and Conflict Resolution

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One possible definition of “Governance” . . . .

One possible definition of “Governance” – from the softer side of my blogging:

“Of or relating to an entity, organization, group, or person’s authority and exercise of authority, leadership, decision-making, ability to communicate and communications, accountability, transparency, expertise, availability to be questioned or challenged, open-mindedness, and trustworthiness, and processes, style and optics relating thereto.”

Governance also is situational and transitional, and depends on the particular facts and the optics at hand.

Best to you, Dave Tate, Esq. (San Francisco and California)

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Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this post. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs

Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com

Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance and governance committee, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

My law practice primarily involves the following areas and issues:

Trust, Estate, Probate Court, Elder and Dependent Adult, and Disability Disputes and Litigation

      • Trust and estate disputes and litigation, and contentious administrations representing fiduciaries, beneficiaries and families; elder abuse; power of attorney disputes; elder care and nursing home abuse; conservatorships; claims to real and personal property; and other related disputes and litigation.

Business, Business-Related, and Workplace Disputes and Litigation: Private, Closely Held, and Family Businesses; Public Companies; Nonprofit Entities; and Governmental Entities

      • Business v. business disputes including breach of contract; unlawful, unfair and fraudulent business practices; fraud, deceit and misrepresentation; unfair competition; licensing agreements, breach of the covenant of good faith and fair dealing; etc.
      • Misappropriation of trade secrets.
      • M&A disputes.
      • Founder, officer, director and board, investor, shareholder, creditor, VC, control, governance, decision making, fiduciary duty, conflict of interest, independence, voting, etc., disputes.
      • Buy-sell disputes.
      • Funding and share dilution disputes.
      • Accounting, lost profits, and royalty disputes and damages.
      • Insurance coverage and bad faith.
      • Access to corporate and business records disputes.
      • Employee, employer and workplace disputes and processes, discrimination, whistleblower and retaliation, harassment, defamation, etc.

Investigations, Governance, and Responsibilities and Rights

      • Corporate, business, nonprofit and governmental internal investigations.
      • Board, audit committee, governance committee, and special committee governance and processes, disputes, conflicts of interest, independence, culture, ethics, etc.; and advising audit committees, governance committees, officers, directors, and boards.

Mediations and Services as a Mediator

* * * * *

Comments About Going Concern Uncertainties, CAMs, Etc. – Relevant In This Economic Environment

I have pasted below my post from May 28, 2019, because of the discussion about going concern uncertainties. Obviously in this economic environment a going concern issue might be pressing for more entities than usual.

And if you are interested in CAMs (critical audit matters), the May 28, 2019, post also in part discusses CAMs and provides a link to a prior May 9, 2019, post that also discussed CAMs. Subsequent to the May 9 and 28, 2019, posts I have also provided comments about CAMs in three additional posts – those subsequent posts and links to those posts are as follows: July 17, 2019 https://wp.me/p75iWX-im, September 22, 2019 https://wp.me/p75iWX-k8, and February 22, 2020 https://wp.me/p75iWX-pl.

I don’t hear or see much in the news about disclosures about an entity’s going concern, but I have a feeling that this is going to become a bigger issue for certain public companies, their boards and audit committees, and their auditors. Evaluating going concern is a complicated topic – thus, in this post I am highlighting one aspect, but an important aspect. See, FASB ASU No. 2014-15, and subsequent materials relating thereto. I suspect that most people would conclude that evaluating a potential issue relating to going concern involves, or depending on the circumstances could involve, especially challenging, subjective, or complex auditor judgment – thus, potentially raising critical audit matters or CAMs. Click on the following link  https://wp.me/p75iWX-fr for a prior summary post about CAMs. I digress here for one comment: in regard to CAMs, one might ask, for example, “When are the circumstances of an auditor’s judgment simply ‘challenging’ v. ‘especially challenging’”?

Going concern can generally be defined as an evaluation of the entity’s expected ability to continue as an ongoing viable going concern business entity within one year after the date that its financial statements are issued (or within one year after the date that the financial statements are available to be issued, when applicable). Thus, for example, obviously for some business entities it can become a question of liquidity or liquid assets v. rate of cash burn. For the purpose of this post, I am looking at this issue only from an accounting/auditing viewpoint. Many other issues can arise, such as, for example, possible shareholder, investor, and creditor rights, and possible officer, director, and shareholder or majority shareholder liability relating thereto.

Now to the single point of this post, ASU No. 2014-15 provides that when evaluating conditions and events as to whether there is substantial doubt about an entity’s ability to continue as a going concern, the “initial” evaluation does not take into consideration the potential effect of management’s plans that have not been fully implemented as of the date that the financial statements are issued (for example, the initial evaluation might not take into consideration plans to raise capital, borrow money, restructure debt, or dispose of an asset, that have been approved but that have not been fully implemented as of the date that the financial statements are issued). Again, I digress for one comment: in the above discussion, consider, for example, how to evaluate when a matter is “approved” v. “fully implemented.”

Importantly, I note, however, that later in the going concern evaluation process, mitigating factors should be taken into consideration including, for example, the probability that management’s plans will be effectively implemented within one year after the date that the financial statements are issued, and the probability that management’s plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Thus, in the evaluation process there is a timing aspect to considering possible mitigating factors: first they are not considered, but subsequently they are considered including their probability of implementation and success. Obviously, the going concern evaluation can be or can become complicated.

Best to you, Dave Tate, Esq. (San Francisco and California)

———————————————————————-

Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.

Thank you for reading this post. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.

Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only.

I am also the Chair of the Business Law Section of the Bar Association of San Francisco.

Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com; Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance and governance committee, responsibilities and rights, compliance, investigations, and risk management  http://auditcommitteeupdate.com

My law practice primarily involves the following areas and issues:

Trust, Estate, Probate Court, Elder and Dependent Adult, and Disability Disputes and Litigation

  • Trust and estate disputes and litigation, and contentious administrations representing fiduciaries and beneficiaries; elder abuse; power of attorney disputes; elder care and nursing home abuse; conservatorships; claims to real and personal property; and other related disputes and litigation.

Business, Business-Related, and Workplace Disputes and Litigation: Private, Closely Held, and Family Businesses; Public Companies; Nonprofit Entities; and Governmental Entities

  • Business v. business disputes including breach of contract; unlawful, unfair and fraudulent business practices; fraud, deceit and misrepresentation; unfair competition; licensing agreements, breach of the covenant of good faith and fair dealing; etc.
  • Misappropriation of trade secrets
  • M&A disputes
  • Founder, officer, director and board, investor, shareholder, creditor, VC, control, governance, decision making, fiduciary duty, conflict of interest, independence, voting, etc., disputes
  • Buy-sell disputes
  • Funding and share dilution disputes
  • Accounting, lost profits, and royalty disputes and damages
  • Access to corporate and business records disputes
  • Employee, employer and workplace disputes and processes, discrimination, whistleblower and retaliation, harassment, defamation, etc.

Investigations, Governance, and Responsibilities and Rights

  • Corporate, business, nonprofit and governmental internal investigations
  • Board, audit committee, governance committee, and special committee governance and processes, disputes, conflicts of interest, independence, culture, ethics, etc.; and advising audit committees, governance committees, officers, directors, and boards

The following are copies of the tables of contents of three of the more formal materials that I have written over the years about accounting/auditing, audit committees, and related legal topics – Accounting and Its Legal Implications was my first formal effort, which resulted in a published book that had more of an accounting and auditing focus; Chapter 5A, Audit Committee Functions and Responsibilities, for the California Continuing Education of the Bar has a more legal focus; and the most recent Tate’s Excellent Audit Committee Guide (February 2017) also has a more legal focus:

Accounting and Its Legal Implications

Chapter 5A, Audit Committee Functions and Responsibilities, CEB Advising and Defending Corporate Directors and Officers

Tate’s Excellent Audit Committee Guide

The following are additional materials that you might find useful:

Audit Committee Self-Evaluation Process and Format (and for Boards and Other Committees) – click on the following link https://wp.me/p75iWX-sd for my March 19, 2020, post with an attachment to the discussion and paper.

An internal investigation summary overview page from a prior blog post which you can find at https://wp.me/p75iWX-dk if the below scan is too difficult to read (and you will also find other posts about investigations on my blog):

 

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

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Audit Committee Self-Evaluation Process and Format (and for Boards and Other Committees)

I have pasted below the introduction from my paper Audit Committee Self-Evaluation Process and Format (and for Boards and Other Committees)(please excuse the formatting which changed slightly during the copy and paste), and below this paragraph I have provided a link to a pdf of the entire paper. This is an important topic for boards, audit committees, and other committees – please do tell other people about this blog post and the paper, and feel free to print and use the paper and provide it to other people. I hope that you find this useful. You will also find a lot of additional audit committee, board, governance committee and related materials on prior posts to this blog.

Here is the link to the pdf: Audit Committee Self-Evaluation 03192020

Best to you, Dave Tate, Esq.

AUDIT COMMITTEE SELF-EVALUATION PROCESS AND FORMAT

(AND FOR BOARDS AND OTHER COMMITTEES)

 

DAVID W. TATE

Attorney at Law

Inactive Certified Public Accountant (California)


Copyright 2020 David W. Tate (however, you are authorized to download and print these materials for your use, and to also pass them to other people who would be interested)

 

BLOGS

D&O, Audit Committees, Risk Management, Compliance, Investigations & Governance: http://auditcommitteeupdate.com

Trust, Estate, Conservatorship & Elder Abuse Litigation: http://californiaestatetrust.com

Linkedin: http://www.linkedin.com/in/davetateesq

Twitter: http://twitter.com/davidtateesq

 

Self-evaluation is an important board and committee activity, and can be very helpful if done properly.

 

A.  Introduction and Overview

The following discussion specifically covers audit committee self-evaluations and provides processes that you can use – this discussion can also be used for board and other committee self-evaluations and processes, such as for governance and risk committees. As noted elsewhere in these materials, although many board and audit committee functions, responsibilities and tasks are specified by statute, regulation, rule or pronouncement, board and audit committee member standards of care remain significantly dependent on due diligence and prudent judgment.

Boards, audit committees and other committees of various entities are required by law, regulation or rule to conduct annual committee self-evaluations; however, it is worthwhile for boards, audit committees and other committees of all public and private companies and nonprofit entities to conduct self-evaluations. Board committee jobs are challenging, ongoing, and technical in nature, and require the members to significantly interact with many people in different capacities within and outside of the entity. It only makes sense that boards and committees should at least once each year take time to step back and review, evaluate and make improvements to their manners of operation, and also consider helpful actions that can be taken by other people with whom the board, audit committee, or other committee interacts. Self-evaluation will be worthwhile even if it results in improving only one area of operation.

Board and committee responsibilities originate from several different sources at least including (1) activities and responsibilities that boards or committees voluntarily undertake or that are delegated to them; (2) the business judgment rule; (3) the specific laws, regulations and rules that are applicable to the entity’s directors and committee members; (4) the wording of the board and committee charters, if there are charters; (5) shareholder and stakeholder expectations, and (6) for audit committees, accounting and auditing pronouncements relating to the outside auditor’s activities.

Prudent board and committee processes and diligence are also important to reduce member and entity liability and reputation risk. An increasing number of cases hold that board and audit committee members can be liable for failure to exercise sufficient diligence, failure to spot and respond to red flags, and failure to take action. Active board, committee and corporate diligence tend to demonstrate prudent business judgment and negate allegations of recklessness, improper intent, intentional wrongdoing, or “scienter” such as in the context of securities litigation, thus reducing the risk of securities liability and damages. In the context of audit committee activities, potential entity, board, and audit committee member liability typically arises in the context of alleged improper accounting practices, written and oral public misrepresentations (such as with respect to financial matters), and improper employment practices.

Although not required, there can be advantages to having a facilitator conduct an interactive interview approach to the self-evaluation process, but without performance grading or rating: it can be difficult to construct a questionnaire with standardized questions that would be similarly understood by each of the participants in the self-evaluation process; different people use different rating scales; different people express responses in different manners; and certain important issues will change from year to year. A facilitated approach may encourage better discussion and comment, compilation, continuity, explanation, and follow-up. Contact me if you are interested in committee self-evaluation assistance at a reasonable fixed fee.

Issues and topic areas to consider during the self-evaluation process will naturally vary from entity to entity, and from board, audit committee or other committee to board, audit committee or other committee. Thus, to stimulate discussion, below for both boards and audit committees I have provided lists of potential broad issues or topic areas to consider for discussion and evaluation, including both successes and possible improvements; and I have also outlined processes to assist your board and audit committee self-evaluation processes.

B.  Audit Committee Self-Evaluation

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