“We’re seeing a sea-change in the environment of shareholder empowerment,” said Holly Gregory, Weil Gotshal partner and governance expert. “The Dodd-Frank bill accelerates a fundamental change, a new normal in the balance of governance power. “ She went on to note that the eighth anniversary of Sarbanes Oxley, enacted during the aftermath of WorldCom and Enron debacles, boards were seen as the solution to the failures in corporate accountability. “In sharp contrast the new legislation reflects the view that boards are the problem and shareholders must be empowered to hold boards accountable.”
Gregory made these remarks on a National Association of Corporate Directors and Weil Gotshal webinar attended by hundreds of directors on Friday as boards try to gain a better understanding of the requirements that the new legislation that President Barack Obama signed into law on July 21, 2010.
“I want to emphasize that the theme within the legislation is that boards are the problem,” said Gregory.
Boards are well advised to recognize that the implementation of the legislation will fundamentally change their interactions with shareholders. For directors who have eschewed any contact with shareholders, they must engage with shareholders in meaningful ways to elicit their support. The sooner and more intelligently that they begin this dialogue, the better for them.