Joseph Leo, Attorney
Chris Sackett, Attorney
Attorneys at Law
666 Grand Avenue, Suite 2000
Des Moines, IA 50309
– Governance generally is a set of rules that are
applicable to a system of government or
– Corporate governance is a more specifically a
set of rules that are applicable to corporate
Corporate Governance Generally
• Rules that apply to:
– Who has the responsibility to make what
– What are the standards of conduct that are
applicable to each person.
Recent Developments in Corporate
• Sarbanes Oxley Act of 2002
– New Securities and Exchange Act regulations
regarding corporate disclosures.
– Independent auditor requirements.
– Collapse of the banking system and related
Basics of Corporate Governance
• Who makes what decisions on behalf of
• Creates a hierarchy of decision-making.
Purpose of Corporate Governance
• Purpose = rules to efficiently and
effectively operate the company.
– Would be inefficient and ineffective for
shareholders to make all decisions for the
– Would not be appropriate for officers or
directors to make certain large decisions at
the risk of the shareholders.
• Also to provide standards of conduct for
directors and officers.
• Both state and federal law apply.
• State law applicable to general rules of
corporate governance and duties.
• Federal law applicable to certain “public”
companies or other regulated companies.
• In Iowa, there are laws that govern:
– Limited liability companies
• For the most part, these are default rules.
• Can be altered by the company’s bylaws
or other corporate governance
• Who will make what decisions?
– This depends largely on the size of the
company (now and in the future).
– Also depends on how actively involved the
owners/shareholders of the company are.
• Typical decisions that are allocated to
– Election of directors
– Sale of all or substantially all assets
– Liquidation of the company
– Issuance of shares for less than a set price
– Entering into contracts with directors/officers
• Role of the owner/shareholder
• Role of the board of directors
• Role of the officers
Standard of Conduct
• Duties applicable to directors and officers
– Duty of care
– Duty of loyalty
– Duty of good faith and fair dealing
• Who pays when a director or officer is
sued for acting on behalf of the company?
• Ability of the company to provide this
– Who decides whether to indemnify or not?
• Director and Officer insurance policies
• Securities restrictions on indemnification
Sarbanes – Oxley Act of 2002
• Landmark legislation
– Reaction to corporate and accounting
• New standards for all United States public
• Auditor independence
• Corporate Officer/Director responsibility
• Enhanced disclosure rules
• Significant criminal fraud accountability