Five questions with CapitalOne

Amy Cook serves as the associate general counsel and assistant corporate secretary for the card, regulatory and enterprise governance group of Capital One’s legal department. Her responsibilities include providing strategic legal support for the board, responding to director inquiries and advising the board on corporate governance and its fiduciary duties. Recently, she spoke to deputy editor Aarti Maharaj about likely governance trends for 2012.

1) What do corporate secretaries need to know about Sarbanes-Oxley (SOX), Dodd-Frank and other regulatory changes to prepare themselves for next year?

We are in the midst of yet another period of significant change, similar to the SOX era, when the focus included audit committee independence and enhanced corporate governance listing standards. That period was followed by expanded SEC disclosure rules on executive compensation in 2006 and proxy disclosures in 2009, and then by the enactment of Dodd-Frank in 2010 and ensuing rulemaking, including say on pay and proxy access rules.  

Looking forward to 2012, it will be important to continue monitoring the ongoing implementation of Dodd-Frank mandates. I expect the SEC to propose rules relating to Dodd-Frank’s clawback and pay ratio provisions. I also expect SEC and stock exchange rulemaking on disclosures related to compensation consultants and compensation committee member independence as well as other compensation-related provisions. Many corporate secretaries will also need to be concerned about the adoption of conflict mineral rules ‒ minerals mined in conditions of armed conflict and human rights abuses. Companies should also continue to monitor activity related to proxy access.

Corporate secretaries should consider whether – and to what extent – to voluntarily comply with Dodd-Frank requirements in the 2012 proxy statement if the SEC does not adopt final rules in time. Moreover, in preparing for next year’s proxy season, corporate secretaries should continue to evaluate their companies’ disclosures and practices.  

2) Most of your experience is derived from providing the board with adequate support. What tips can you offer regarding providing strategic legal support for the board’s meetings and ongoing operations?

The key is keeping the board, the governance committee and management updated on governance developments and recent trends in order to avoid surprises. Corporate secretaries can do this by sharing written background materials between board meetings, as well as providing periodic updates at meetings.  

Also, when briefing the board on governance trends, it’s important to examine the disclosures and practices of companies in your peer groups (both in terms of industry and size) and then consider them in light of what is the right approach for your company. Executing a review of your approach (which we do every year) and preparing for ongoing SEC rulemakings will help you and your legal department to achieve overall success and enhance the company’s proxy statement and governance processes.

In addition, corporate secretaries should embrace the many new technology tools such as board portals and even social media, which better enable communications with directors. There is also a vast amount of information from various sources so you have to be able to filter out the critical things that are relevant to the board and the legal department. Some resources I have found to be helpful include the Society of Corporate Secretaries and Governance Professionals’ website, webinars hosted by outside counsel and the Practising Law Institute, publications from the National Association of Corporate Directors, Corporate Secretary and The Corporate Board.

3) Corporate secretaries are tasked with new responsibilities every year. In the financial services industry, how are the general role and responsibilities of the corporate secretary evolving?  

Dodd-Frank dramatically increased the regulation of the financial services industry. As a result, corporate secretaries at financial services companies must be able to address a wide variety of complex issues embedded in Dodd-Frank regulations ‒ for instance, the requirement for certain financial institutions to create resolution plans or ‘living wills’, describing how they could be resolved under specific insolvency regimes. There is a considerable governance component to how those plans will be structured.  

There is also heightened awareness of a financial institution’s legal entity structure as it relates to resolution plans and in general. Many corporate secretary offices manage their company’s subsidiary management function and may be reviewing their structures in light of the rulemaking.

I think there is also an evolution in how companies generally think about the corporate secretary’s role. Governance should be part of a company’s business strategy rather than a check-the-box exercise, and the corporate secretary can play an important role in integrating governance into a company’s overall strategy.  

4) Since the financial meltdown, the corporate secretary’s office has become a well-known entity and, increasingly, other departments team up with it – for example, there’s an ever-increasing link between investor relations (IR) and the corporate secretary. How is this helpful?

These types of cooperation are not a new trend. Most recently, the need for increased dialogue with shareholders regarding say on pay made coordination between IR, the compensation/benefits department and the corporate secretary a critical component of the decision-making process. This is true on a variety of governance issues as institutional shareholders may have different people responsible for proxy voting and making investment decisions.  

The benefits of cooperation include creating strategies that from the outset recognize the perspectives and needs of the various departments involved. In addition, each department is then educated on the various issues the other is addressing, which is helpful when a corporate governance question comes up during IR meetings with a shareholder’s investment team. Partnering with IR is also a great way to get to know your shareholders better, which leads to better information flow. The board benefits from this collaborative effort by having a more holistic view on how the investors are thinking, which creates more effective governance relations.

5) US companies are experiencing a variety of corporate governance changes. What emerging trends are you seeing in this area?

Several recent changes to US corporate governance practices – like say on pay – originated in other countries. US companies with significant international operations will increasingly consider international corporate governance developments like the European Commission’s Green Paper on the European Union corporate governance framework and the UK’s Corporate Governance Code when evaluating their corporate governance practices. It will also be interesting to see what impact there is on future Dodd-Frank rulemaking given the decision by the US Court of Appeals vacating the SEC’s mandatory proxy access rule on the grounds that the commission failed to fully consider the rule’s costs and benefits.