'THE DAILY CORPORATE GOVERNANCE DIGEST’ (for public company boards, the C-suite and GCs)

????Please see the items below with the related links (NOTE: access to link content may be metered, require a no-charge registration or require a paid digital subscription)

???????(i)?removing?the CEO mandatory retirement age?policy?at?Target?(and other major companies)/press release of the day:?

?????????Interesting to note that, as reported in this?WSJ?article this morning, "Target CEO Brian Cornell to Stay Three More Years",?Target Corp., in announcing in?this press release?today that its CEO had committed to remain in his current position with the company for three more years, also announced that?it had eliminated the company's mandatory retirement age policy for CEOs of 65. As the?WSJ?article notes,?a number of other major U.S. corporations have also recently removed or adjusted their mandatory CEO retirement age policies, among them?3M, Merck?andBoeing:

???????????"Target Corp.?said Chief Executive?Brian Cornell?agreed to remain in his role for an additional three years and the company’s board eliminated its mandatory retirement age of 65,seeking to provide stability at a time of upheaval in the retail industry.?The decision keeps the 63-year-old?at the helm of the company....

???????????"Mr. Cornell has led Target since 2014 and?would have reached retirement age in early 2024 under the old company policy.?He also serves as Target’s board chairman.?The retailer joins other companies, including?3M?Co.?and?Merck?& Co., that in recent years have relaxed or removed mandatory retirement ages for chief executives. Last year,?Boeing?Co.?said?it?was raising the retirement age?for CEO?David Calhoun?to 70 from 65?so he could stay in the role......

???????????"Target didn’t undertake an executive search to identify other CEO candidates as part of the decision to eliminate the mandatory retirement policy, a Target spokeswoman said. Mr. Cornell doesn’t have an employment contract with the Minneapolis, Minn, company....."

?????????Below is from the Target press release:

??????????"Target Corporation?today announced that?Brian Cornell?has committed to remain as CEO and lead the company for approximately three more years......

?????????"In discussions about the company's longer term plans,?it was important to us as a board to assure our stakeholders that Brian intends to stay in his role beyond the traditional retirement age of 65.??We enthusiastically support his commitment and his continued leadership, especially considering his track record and the company's strong financial performance during his tenure,"?said?Monica Lozano, lead independent director of Target's Board of Directors.?"Since joining Target in 2014, Brian has worked to transform Target into an omnichannel leader by driving a guest-centric, purpose-driven strategy. The board is pleased that Brian has committed to continue leading Target's strategy and driving its multi-year, long-range plan alongside his talented leadership team."......

??????????"With Cornell's commitment,?Target's board of directors?eliminated its retirement policy,?which was designed to initiate a discussion regarding?the possible retirement of its?CEO at the age of 65......"

???????(ii)?codes of conduct 'best practices'?(with examples from the codes of 9 major global companies): This June,?LRN?(a?provider of advisory and educational services on ethics, regulatory compliance, and corporate culture)?released?this useful guide for?codes of conduct, its "2022 Code of Conduct Report", based on?its review of 147?codes of conduct?of major global companies (see item (i) from June 30/22). The report inter alia identifies the following?8 key elements?(what the report refers to as "dimensions") of?effective codes:

??????????"--?Tone from the Top:?An inspiring message from?senior leadership that?demonstrates a commitment to ethical behavior and living the values of the organization.?

???????????--?Purpose and Values Orientation:?A clear statement of what the company values are and how they translate to behavioral expectations for how employees treat one another, customers, and the communities they serve.?

??????????--?Applicability and Administration:?Defining to whom the code applies and how it’s implemented and enforced.?

??????????--?Speaking Up:?A summary of the reporting channels available to employees and a description?of the process for addressing concerns raised.?

??????????--?Risk Topics:?High-level guidance of the risks within the organization and wider industry, along with principles and standards?employees can follow to help avoid or manage these risks.?

???????????--?Knowledge Reinforcement:?Integrated learning aids—e.g., real-life scenarios, ethical decision-making models, links to policies, and links to resources such as training and videos—that are easy to refer back to in the code.?

???????????--Usability:?Making the code accessible to all employees?through easy navigation, readability, and content structure.?

???????????--?Look and Feel:?Making the code a visually engaging reflection of the organization’s brand, including use of imagery and graphics to enhance readers’ comprehension of material."

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?????????In this follow-up note posted on its website in July, "9 ethical code of conduct examples", LRN analyzes and discusses the?"9 ethical codes of conduct that scored highest on each dimension of effectiveness", including?the codes of?3M, Coca-Cola?and?General Motors?(and provides?links to each of the codes in question: see links below):?

??????????"Dimension 1 –?Tone from the Top?(3M:?Global Code of Conduct)

???????????Dimension 2 –?Purpose and Values Orientation?(Barclays:?How we do business)

???????????Dimension 3 –?Applicability and Administration?(Coca Cola:?Code of Business Conduct)

???????????Dimension 4 –?Speaking Up?(Amgen:?Code of Conduct)

???????????Dimension 5 –?Risk Topics?(Imperial Brands:?Code of Conduct)

???????????Dimension 6 –?Knowledge Reinforcement?(Air Liquide:?Code of Conduct)

???????????Dimension 7 –?Usability?(Glencore:?Code of Conduct)

???????????Dimension 8 –?Look and Feel?(Bristol Myers Squibb:?Standards of Business Conduct and Ethics)

???????????Overall effectiveness:?General Motors, 3M, Imperial Brands"

?????????(The above is from the?Society for Corporate Governance?Aug. 9 blog post, "Codes of Conduct: Best Practice Examples")

????????(iii)?Home Depot's head of compliance on the company's two compliance hotlines?(and other features of its compliance program)/advice for chief compliance and ethics officers?(CCOs)?to improve?employee reporting of workplace misconduct:?

?????????(a) In this Aug. 10?Compliance Week?blog post, 'DOJ-informed compliance guidance helps Home Depot prep for potential scrutiny",?Mia Reini, senior manager, corporate compliance and enterprise risk management at The Home Depot,?inter alia describes?the company's two compliance hotlines?and other aspects of its compliance program, as set out in an internal report she had prepared,?"The Home Depot Compliance Program Overview", in order to show how the company's compliance program met the standards for effective compliance programs set out in the U.S. Department of Justice's (DOJ) guidance, "Evaluation of Corporate Compliance Programs" (updated in 2000). Below are excerpts from the blog post:

?????????????".......The report describes in detail how the compliance function works at The Home Depot, like its support from the top, governance, resources allocated, training, policies and procedures, and more.?Here are some takeaways for compliance professionals: ........

????????????"The company oversees two compliance hotlines, with an internal monitor for action. In addition to reporting issues to a manager or human resources partner, front-line associates can utilize the company’s whistleblower hotline and website, AwareLine.?A second hotline and website, the Supplier AlertLine, “enables suppliers, vendors, service providers, and their employees to report any situation that appears to compromise our Home Depot values or compliance with the law,” the report said.

????????????"Both hotlines are run by a third-party vendor,?but the company’s compliance team members “have full access to all AwareLine and AlertLine reports and are automatically alerted to serious, high-risk cases,” the report said. “Compliance team members advise on escalations and monitor the progress of investigations.”?On the Supplier AlertLine,?Reini said,?“We feel it is very important to have a separate, dedicated, 24/7/365 hotline for the employees of our vendors, suppliers, and service providers to tell us if they are ever asked or directed to do anything that violates law or The Home Depot’s compliance standards or ethical expectations. We believe having our Supplier AlertLine helps us better meet the DOJ compliance guidance on ‘Confidential Reporting Structure and Investigation Process.’”

????????????"Hotline cases are generally opened and under review in a matter of days and monitored for timely resolution. Associates, past associates, or suppliers who submit reports receive tracking information and passwords to follow up on their submissions.

?????????????"The Home Depot has an investigations council,?described in the report as “a cross-functional working group that serves as a leadership-level forum”?that ensures engagement and awareness of compliance investigations at the highest levels of the company.?Membership on the council includes The Home Depot’s general counsel and executives leading corporate compliance and internal audit teams. The council meets quarterly?“to share updates, resources, benchmarking data, and best practices for compliance investigations.”........

?????????????"The company embeds compliance associates in the business. The associates, called compliance leads, are embedded across the business to “provide guidance for the front lines and monitor compliance-related risks” and “engage directly with front-line associates,” the report said. The leads specialize in 19 distinct areas of compliance at The Home Depot and are empowered to monitor compliance-related data collected by the business units to which they are assigned....."

?????????(b) Some interesting?advice for chief complaince and ethics officers (CCOs)?in this report released on Aug. 18 by global research and consulting firm?Gartner,?"Do Employees Actually Believe Reporting Is the Right Thing to Do?." Below is from the report's summary:

???????????"In short:

??????????????-- Chief compliance and ethics officers (CCOs) typically rely on three tactics to improve employee reporting of workplace misconduct: reporting ease, employee safety and personal responsibility.?

??????????????-- Most CCOs overemphasize the importance of improving reporting ease, but?personal responsibility to report has the greatest?impact on employee reporting.

??????????????--?CCOs can encourage employee reporting by creating a new reporting value proposition that speaks to employees’ personal responsibility."

???????????The Gartner report is discussed in this Aug. 26?Fortune?CFO Daily Newsletter?(under, "Big deal"):

????????????"There's a difference between what chief compliance and ethics officers (CCOs) and employees perceive as best practices for reporting workplace misconduct, Gartner found.?Eighty-one percent of compliance leaders surveyed think employees believe reporting is the right thing to do, but only about half (54%) of them actually do. Just?a third of employees believe reporting will result in a better work environment or improve their team’s morale or performance.?"In a hybrid world, workplace?misconduct reporting rates have fallen by 5%, which means compliance is learning about 30% fewer workplace misconduct instances," according to the report.?Gartner advises companies to build a value proposition based on benefit, trust and safety."

???????(iv)?HBR post on crafting a company's 'purpose statement' (with examples, including that of Rio Tinto)/'purpose', 'values', vision' and 'mission' statements distinguished':?

??????????(a)?With a such heightened focus these days on the concept of "corporate purpose", this Aug. 23?HBR?post offers some?suggestions for?writing an effective statement of corporate purpose, "Craft a Measurable Company Purpose", and?includes examples of such statements, in particular that of?Rio Tinto.?Below is the headnote summary of the post:

?????????????"Summary.?As companies write their purpose statements they need to make sure that all their key stakeholders get an explicit mention and promises that are measurable. Too many still focus on just one group of stakeholders, usually investors, while others that have expanded the scope of their purpose often do not explicitly acknowledge other key stakeholders let alone track key performance metrics that apply to non-financial stakeholders."

?????????????Below are some excerpts from the post itself, which includes some examples of corporate purpose statements

?????????????"Today, businesses?around the world are eager to define their reasons for existence and impact on society, and many are working hard to develop a statement of corporate purpose.?As you do this for your company, though, it’s worth going back to the?U.S. Business Roundtable’s statement?on corporate purpose, which says: “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders.”?The statement identifies these stakeholders: customers, employees, suppliers, the communities in which companies operate, and investors.....As you craft your statement, therefore, I suggest that you:

?????????????"Identify your key stakeholders:?.......Ideally a purpose statement will identify all?key stakeholders.??Take?Rio Tinto,?the world’s third largest mining company,?operating in about 35 countries,?with more than 60,000 employees. In his contribution to the?latest annual report,?Dominic Barton, the incoming chair explicitly?recognizes all five groups of stakeholders:

????????????????"Through our products, people, partnerships and technologies, we aim to help enable a decarbonising world, while maintaining our focus on capital discipline, pursuing growth, and delivering attractive returns to shareholders … Building even stronger relationships with our customers, partners and local communities will be an important part of this journey, and something that I am particularly passionate about. I am also keen to ensure that we create a safe, respectful and inclusive work environment......

??????????????"Ensure your impact metrics align with stakeholder categories:?It’s not enough to just recognize that you depend on a stakeholder. You have to track what you’re giving them. Many companies, even if they do explicitly recognize all their key stakeholders, don’t actually have metrics for them......."

?????????????(b) An item?In the Sept./20 issue of this newsletter?discussed this report,?"Enacting Purpose within the Modern Corporation:?A Framework for Boards of Directors",?which inter alia?distinguished between the corporate statements commonly referred to as "purpose", "values", "mission"?and?"vision". Perhaps worthwhile to revisit the distinctions, so here they are, from the report:

????????????????"Of particular interest, the report?distinguishes between, and defines each of,?the following concepts:?corporate purpose;?values; mission;?and?vision.?Below are the definitions of each of these concepts as set out in the report (at pp. 13-14):

????????????????????--?Purpose. Purpose States "Why"?an Organization Exists:?As Professor Colin Mayer, one of our co-chairs puts it,?“the purpose of business is to solve the problems of people and planet profitably, and not profit from causing problems”. This statement deliberately leaves open?the question of the specific purpose of each organisation, but does deliberately and carefully demand a reason for existence alongside the pursuit of profit.?Purpose sets out the reasons why the organisation conducts its various activities, articulating what societal challenge, need or benefit the organisation seeks to address.?This sets it apart from the three other important concepts?for organisations below.?Once this purpose has been debated and formally agreed, the board should not only publish it but also ensure that its internal governance and external reporting evaluate its activities and the outcomes generated against its stated purpose.

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????????????????????--?Values. Values Describe "How"?the Organization Behaves?:?These are often short and punchy bullet points, detailing specific expectations and principles of interaction within the organisation’s internal or external operating environment. More importantly?they should be a call to action. These values should inform and guide the specific day to day behaviours and decisions taken by every member of the organisation. They should be articulated in a way that the intent is clearly understood, and?the board of directors should ensure that the organisational culture embraces these values and enables them to be put into practice by every member of the organisation. Boards of directors also need to ensure that employees are empowered to ensure that key suppliers act in compliance with the organization's stated values.

?????????????????????--?Mission. Mission Sets Out "What"?the Organisation Does:?It captures the day to day activities of the organisation, defining quite literally what business it is in.?It is directly linked?to the strategy of the organisation?and is underpinned by the values deployed to deliver the mission.?It is very practical and descriptive in nature. Mission therefore sets out specifically and practically what the organisation aims to do in pursuit of its stated purpose.?Mission statements provide an opportunity for boards of directors to set out what they specifically intend to deliver to each of the organisation’s different key stakeholder groups.

?????????????????????--?Vision. Vision Describes "Where"?the Organisation Intends to Have Impact:?It describes the outcome that the organisation wants to see from the successful delivery of its stated purpose. Put simply, vision captures what success looks like. By its nature,?vision statements?are aspirational, large scale and usually long-term."

??????????And from a newsletter item a few days later:

???????????"More on this distinction in this?FT?article over the past weekend, "The baffling search for purpose in a purpose statement":

????????????"......The?purpose statement, which supposedly spells out why a company exists, is a younger relative of the decades-old?mission statement?which supposedly defines what an outfit does.?The two are regularly confused with each other and with the “vision statement”, which allegedly alerts the world to what a company will do in future."

???????(v)?when should you disclose the departure of the chief legal officer?(with reference to the current situation at Tesla):?Interesting situation at Tesla raising a disclosure issue, as described in this Aug. 19Law360article, "Tesla's Near Silence On Legal Chief Stirs Disclosure Concerns." As noted in the article, there has been somewhat of a "revolving door" of CLOs at Tesla over the past few years:

???????????"(David) Searle is Tesla's fifth legal chief in a little over three years......Searle,?former federal prosecutor in Houston, has been acting head of legal at the Austin-based company in March. He replaced William Berry, who was vice president of legal for several months before he left in December. Berry had replaced Alan Prescott, who was acting general counsel for 15 months, longer than the two previous Tesla general counsel combined. Before Prescott, Jonathan Chang was the company's general counsel for 11 months. Chang followed trial lawyer Dane Butswinkas, who was general counsel for two months and left in February 2019......."

?????????And now, as reported in the article,?it?is apparently unclear whether or not the current CLO, David Searle, remains with the company, raising a disclosure issue:

???????????"Tesla Inc.?has spent weeks refusing to clear up a murky situation surrounding the role of its onetime legal chief, but experts are split on when the publicly traded company owes it to investors to tell them what happened. For three weeks, neither Tesla, its acting head of legal, David Searle, nor numerous Tesla executives and in-house counsel would confirm or deny that Searle had left his job at the electric vehicle company. The Tesla press contact hasn't responded toLaw360Pulse's requests for comment.

??????????"On Wednesday, Bloomberg News, citing three unnamed sources, reported that Searle parted ways with Tesla?after leading an internal inquiry into questionable purchase orders at the company?and that he was being replaced by deputy general counsel Dinna Eskin. Then later Wednesday, after weeks of no comment, Tesla made a rare move. It got on Twitter to deny the story, saying, "This Bloomberg article is false. David Searle has not left Tesla.?"Bloomberg then changed its story slightly to say that"?David Searle left his position as Tesla's head of legal less than a month?ago. "Tesla, which abolished its public relations department and does not allow anyone but Musk to speak to the press,?still is not returning messages about whether Searle remains with the company and, if so, in what capacity........

???????????"Some corporate experts told Law360 Pulse that Tesla may be taking a risk by not letting investors know what is happening with the leadership of its legal department.?Rutgers University law professor Arthur Laby, a former U.S. Securities and Exchange Commission attorney?who co-directs the Rutgers Center for Corporate Law and Governance,?said the question is materiality, or what a reasonable investor would want to know before investing. "If a company fires its general counsel, and does so repeatedly, that raises red flags for the board, and possibly for investors as well," Laby said. "The company has to ask whether the information is something a reasonable investor would want to know. "If the termination of a general counsel"?comes amid a scandal or major disagreement, that's something that the board should examine, and investors may want to know as well," he said.?"But companies generally do not have to disclose personnel changes in real time. ... It's always a judgment call.".......

??????????"Columbia University law professor John Coffee Jr.?took a less sanguine view. "A public corporation and its senior officers exercising oversight in the area owe a duty to disclose to investors all material information, "Coffee said. "What is material? The resignation of a junior counsel would not be. But a pattern of senior counsel giving up and resigning because they feel they cannot do their job properly or professionally can be material, and with each repetition becomes more likely material."?A public company is not expressly required to disclose a change in its legal chief as it would a change in its outside accountants, he said, but?"the resignation of five chief legal officers in three years is at least as material and suggests even more reason to doubt the adequacy of the company's disclosures. It sounds material to me."

????????????"Douglas Chia, former in-house counsel at Johnson & Johnson and Tyco International and founder of Soundboard Governance LLC, also said the situation was unusual.?"It's not too hard to read into it why this keeps happening,"?Chia said. 'You have a dominant owner and CEO who is not inclined to be very compliant with laws and tends to do things that raise legal issues on a whim. It puts the chief legal officer in a difficult position.'...."

???????(vi)?SEC filing of the day:?Bed Bath & Beyond Inc.?announced on Sunday in?this press release?the tragic death of its CFO?(see item (vi)(a) from yesterday). Yesterday, it announced in?this Form 8-K?filed with the SEC?that its Chief Accounting Officer would take on the added role of interim CFO, as follows:

???????????"Bed Bath?& Beyond Inc. is saddened to report that Gustavo Arnal, Chief Financial Officer of the Company, passed away on September?2, 2022.?Effective September?5, 2022, Laura Crossen, the Company’s Senior Vice President of Finance and Chief Accounting Officer, was appointed Interim Chief Financial Officer. As Interim Chief Financial Officer Ms.?Crossen will be the Company’s principal financial officer on an interim basis and will continue as the Company’s principal accounting officer."

??????????Compensation terms for the interim, as adjusted by the company's Compensation Committee, are disclosed in the said Form 8-K.

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