The Law of Governance Risk Management and Compliance 2nd edition by Geoffrey Miller ISBN 1454887133 9781454887133

Introduction
A. What are Governance, Risk Management, and Compliance?
B. The Role of Attorneys
C. Subject Areas

---

Part I – Governance

OECD Principles of Corporate Governance
Douglas M. Branson, Proposals for Corporate Governance Reform: Six Decades of Ineptitude and Counting
Basel Committee on Banking Supervision Consultative Document—Core Principles for Effective Banking Supervision

Chapter 1 – Shareholders
A. Pros and Cons of Shareholder Power

• Lucian Bebchuk, The Case for Increasing Shareholder Power

• Stephen M. Bainbridge, The Case for Limited Shareholder Voting Rights
  B. Shareholder Proposals

• SEC Rule 14a-8
  C. Say on Pay
  D. Investor Activists
  E. Proxy Advisers

Chapter 2 – The Board of Directors
A. The Full Board

1. Powers

2. Size

3. Tenure in Office

• Sally Beauty Holdings, Inc. 2013 Proxy Statement

4. Qualifications
   a. Independence

   • NYSE Listed Company Manual §303A.02
     b. Skills
     c. Diversity

5. Fiduciary Duties
   a. The Duty of Care

   • In re Citigroup Inc. Shareholder Derivative Litigation
     b. The Duty of Loyalty

   • In re Southern Peru Copper Corp. Shareholder Derivative Litigation
     c. Caremark and the Duty of Oversight

   • In re Caremark International Inc. Derivative Litigation

   • Stone v. Ritter

   • Rich ex rel. Fuqi Int’l, Inc. v. Yu Kwai Chong

   • In re Pfizer Inc. Shareholder Derivative Litigation
     B. Chairmen

• Hess Corporation 2013 Proxy Statement
  C. Lead Directors

• Carlon Corporation Charter of the Lead Independent Director
  D. Audit Committees
  E. Risk Committees

• Greenbrier Corporation Risk Committee Charter
  F. Compliance Committees

• Applied Bosonics Compliance Committee Charter
  G. Governance and Nominating Committees

• NYSE Listed Company Manual, ¶ 303A.04: Nominating/Corporate Governance Committee

• Klaassen v. Allegro Development Corporation
  H. Compensation Committees

1. General Considerations

2. Structure and Function

   • In re The Walt Disney Company Derivative Litigation

3. Consultants

4. The Role of Shareholders in Compensation

5. Compensation of Independent Directors

Chapter 3 – Executives
A. Introduction
B. The Management Team

• General Electric Company Annual Report to Shareholders, for the Fiscal Year Ended December 31, 2012
  C. Chief Executive Officer

• General Electric Company Annual Report to Shareholders, for the Fiscal Year Ended December 31, 2012
  D. Chief Financial Officer
  E. Chief Audit Executive

1. What Is Internal Audit?

2. How Does Internal Audit Work?

3. Best Practices

• Board of Governors of the Federal Reserve System Federal Deposit Insurance Corporation Office of the Comptroller of the Currency Office of Thrift Supervision, Interagency Policy Statement on the Internal Audit Function and Its Outsourcing

• Board of Governors of the Federal Reserve System, Supplemental Policy Statement on the Internal Audit Function and Its Outsourcing

4. Vendors

• Board of Governors of the Federal Reserve System, Interagency Policy Statement on the Internal Audit Function and Its Outsourcing

• Board of Governors of the Federal Reserve System, Supplemental Policy Statement on the Internal Audit Function and Its Outsourcing
  F. Chief Compliance Officer
  G. General Counsel
  H. The Chief Risk Officer
  I. Director of Human Resources

---

Part II – Compliance

Chapter 4 – Introduction to Compliance
A. What Is Compliance?
B. Landmarks in the History of Compliance
C. The Rise of the Administrative State

1. Increases in the Scope and Complexity of Regulation

2. From Judging to Administration
   a. The Power to Establish Norms of Conduct

   • SEC v. Chenery Corp.

   • National Cable & Telecommunications Association v. Brand X Internet Services

   • City of Arlington v. F.C.C.
     b. The Power to Determine Legal Rights

   • Crowell v. Benson

   • Atlas Roofing Co., Inc. v. Occupational Safety and Health Review Commission

   • Gray Financial Group, Inc. v. SEC

   • Camp v. Pitts

   • Ex parte Young

   • Sackett v. Environmental Protection Agency

3. Enforcement Powers
   a. Power to Obtain Information

   • Donovan v. Dewey
     b. The Power to Impose Penalties
     D. The Compliance Response
     E. The Compliance Industry

Chapter 5 – Internal Enforcement
A. Introduction
B. Compliance Policies
C. Compliance Programs

• Zambac Co. Compliance Program
  D. Hiring

1. Background Investigations

2. Use of Information
   a. Arrests and Convictions

   • Equal Employment Opportunity Commission, EEOC Files Suit Against Two Employers for Use of Criminal Background Checks
     b. Credit History
     E. Training
     F. Monitoring

3. Drug and Alcohol Testing

   • Texas Workforce Commission, Model Drug-Free Workplace Policy

4. Surveillance
   G. Investigations

5. Types of Investigations

   • Miriam Hechler Baer, Corporate Policing and Corporate Governance: What Can We Learn from Hewlett-Packard’s Pretexting Scandal?

6. Comparison of Internal Investigations and Government Investigations

7. The Role of Counsel

8. Disclosure

9. Enforcement Credit

   • Assistant Attorney General Leslie R. Caldwell Remarks at the Compliance Week Conference

Chapter 6 – Regulators
A. Individual or Corporate Liability?

• Individual Accountability for Corporate Wrongdoing, Deputy Attorney General Sally Quillian Yates
  B. Regulation of the Compliance Program

1. General Considerations

2. “Best Practice” Recommendations

   • Remarks by Assistant Attorney General for the Criminal Division Leslie R. Caldwell

3. Legislative and Regulatory Mandates

   • Bank Secrecy Act

   • Securities and Exchange Commission Final Rule: Compliance Programs of Investment Companies and Investment Advisers

4. Compliance Terms in Settlements

   • Consent Order, In the Matter of: RBS Citizens, N.A.

   • Consent Order, In the Matter of: HSBC Bank USA, N.A.

   • United States v. International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, AFL-CIO
     C. Regulation of Compliance Officers

5. Requirements to Establish and Empower Compliance Officers

   • Securities and Exchange Commission Final Rule: Compliance Programs of Investment Companies and Investment Advisers

6. Obligations to Compliance Officers

   • Securities and Exchange Commission, In the Matter of Carl D. Johns

7. Liability of Compliance Officers

   • In the Matter of Judy K. Wolf

   • Statement of Commissioner Daniel M. Gallagher on Recent SEC Settlements Charging Chief Compliance Officers with Violations of Investment Advisers Act Rule 206(4)-7

   • In the Matter of Theodore W. Urban
     D. Oversight Liability

• SEC, In the Matter of Steven A. Cohen

• United States v. S.A.C. Capital Advisors, LLP
  E. Mitigation of Penalties

• EPA, Incentives for Self-Policing: Discovery, Disclosure, Correction, and Prevention of Violations

• SEC, Report of Investigation Pursuant to Section 21(a) of the Securities Exchange Act of 1934 and Commission Statement on the Relationship of Cooperation to Agency Enforcement Decisions
  F. Advice
  G. Admissions

• SEC’s Memorandum of Law in Response to Questions Posed by the Court Regarding Proposed Settlement

• SEC v. Citigroup Global Markets, Inc.

• SEC v. Citicorp Global Markets, Inc.

---

Part III – Risk Management

Chapter 18 – Introduction to Risk Management
A. What Is Risk?
B. What Is Risk Management?
C. The Public Interest in Risk Management
D. Enterprise Risk Management

1. Definition of Risk

2. Distribution of Responsibility for Managing Risk

3. Risk Mitigation Strategies

4. Priority of the Topic

5. Focus of Risk Assessment

6. Transparency of Risk and Risk Management
   E. Types of Risk
   F. Governance of Risk

7. Corporate Law Approaches

   • Wachtell, Lipton, Rosen & Katz, Risk Management and the Board of Directors

   • Unwritten Rules: The Importance of a Strong Risk Culture, Thomas J. Curry, Comptroller of the Currency

8. Regulatory Approaches
   G. Disclosure of Risk

• Target Corporation 2012 Form 10-K Item 1A

Chapter 19 – Approaches to Risk Management
A. Data
B. Risk Appetite
C. Implementing the Risk Appetite

1. Compiling a Risk Inventory

2. Assessing Inherent Risk

3. Assessing Controls and Mitigation Options

4. Assessing Residual Risk

5. Accepting Residual Risk
   D. Black Swans, Fat Tails, and Stress Tests

• Kevin Dowd, Math Gone Mad: Regulatory Risk Modeling by the Federal Reserve
  E. Drilling Down: Specific Risk-Management Strategies

1. Corporate Default Estimation Methods

2. Black-Scholes Option Pricing Formula

3. Value-at-Risk Models
   F. Model Risk

• Board of Governors of the Federal Reserve System, Supervisory Guidance on Model Risk Management

• In the Matter of: JPMorgan Chase Bank, N.A.
  G. Rating Agencies
  H. Government Risk Assessment
  I. Behavioral-Economic Approaches to Risk Management

• Geoffrey Miller & Gerald Rosenfeld, Intellectual Hazard: How Conceptual Biases in Complex Organizations Contributed to the Crisis of 2008

Chapter 20 – When Risk Management Fails
A. UBS and the Financial Crisis

• Transparency Report to the Shareholders of UBS AG: Financial Market Crisis, Cross-Border Wealth Management Business, Liability Issues, and Internal Reviews
  B. The London Whale

• Permanent Subcommittee on Investigations, United States Senate, JPMorgan Chase Whale Trades: A Case History of Derivatives Risks and Abuses
  C. Benghazi

• Report of the State Department Accountability Review Board
  D. Royal Bank of Scotland

• U.K. Financial Conduct Authority Final Notice to Royal Bank of Scotland Plc. et al.