The Pervasive Effects of Corporate Governance

Corporate Governance affects more than Board level decisions. Governance, especially the decision-making processes and the assignment of responsibilities can and does materially affect the organization’s risk profile, and in turn, its susceptibility to significant litigation that extends beyond the realm of securities-related litigation.

H. S. Grace and Company, Inc.’s (“HSG”) role in examining these responsibilities extends to the “how and who” that directly affect the quality of the decision-making. More often than not, HSG’s analysis may reveal relevant and probative indicia affecting the duties of care and loyalty, as well as the observance of ordinary and customary business practices in the execution and implementation of management’s duties and responsibilities.

The following are governance issues HSG’s Advisors have been asked to examine:

Failure to implement proper accounting practices and control systems and to monitor financial reporting, including the failure of management to adequately respond to significant accounting and control issues surfaced by Internal Audit.
Active and passive failure to take steps to ensure unrestricted flow of communications between senior management, the Audit Committee, Internal Audit, and others.
Failure to address reporting deficiencies, and the associated significant issues involving write-offs, unreconciled general ledger accounts, liquidity, loan-loss reserves, etcetera.

The types of alleged failures or lapses in governance are limited only to the actor’s imagination and the quality, efficacy, and monitoring of an organization’s “checks and balances.” Assisting trial counsel with the development of the context within which complex commercial and securities litigation arise is a predominant strength of HSG’s advisors due to their vast corporate senior management experience. Understanding and creating the “story” with trial counsel, especially the “why,” is critical to building a plausible yet powerful story that jurors, the Court, or a neutral observer may adopt to frame their opinions.

Richard W. Simmons, Chief Trial Counsel and Deputy General Counsel, Bank of America,1989-1999, had the following to say about his experience working with HSG:

“There is no substitute for experience; that is why Bank of America, formerly NationsBank, chose experience that produced outstanding results. Only an experienced advisor is capable of “recognizing” an issue and understanding how and why that issue may subtly set off a chain reaction of events leading to a serious corporate problem. This is the role that HSG’s advisors played in their corporate life as Senior Executives. Wisdom is revered because such permits one to communicate the complex issues by way of mundane life experiences. For Bank of America, HSG’s assistance to trial counsel was unmatched, and so were the results.”

HSG Evaluates Appropriateness of Directors’ and Officers’ M&A Due Diligence

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