Corporate Secretary and Foley hosted Compensation Practices and Policies — How Do They Impact Risk? as part of the Corporate Wavelength Web conference series. Hosted by experienced professionals, the series addresses the latest trends in corporate governance, risk management, and compliance.
In light of the recent economic and financial downturns, “risk” has become the latest buzzword. For business executives and boards of directors, assessing risk is nothing new: Good business leaders have long been preparing for and managing various risks. However, the challenges of the current economic climate have raised the profile of the risk management efforts of boards and senior management.
While investors and other commentators continue to call for better disclosures regarding risk, the SEC recently proposed rules that would require companies to disclose 1) how compensation practices and policies impact risk and 2) the board’s role in the company’s risk assessment. Some financial industry participants in government bailout programs already have been required to assess the riskiness of their compensation programs in order to limit compensation that might cause executives to take “unnecessary” and “excessive” risks that threaten the value of the company, and federal legislation has been proposed that would impose similar requirements on large financial institutions generally. At the same time, individual companies and their directors and officers work to put the increased emphasis on risk assessment into appropriate perspective given the diversity of risk environments in which companies operate.
During this Web conference, Foley Transactional & Securities Partners Jay O. Rothman and Mark T. Plichta discussed the roles of boards and their committees in assessing and disclosing risk, particularly in the coming proxy season.
