Answering To A Higher Authority: Sovereign-Mandated Oversight In The Board Room And The C-Suite

Fordham Journal of Corporate & Financial Law Volume 17, Number 2 2012 Article 1 Answering To A Higher Authority: Sovereign-Mandated Oversight In The Board Room And The C-Suite Thomas F. O’Neil III∗ Brendan T. Kennedy† ∗ † Copyright c 2012 by the authors. Fordham Journal of Corporate & Financial Law is produced by The Berkeley Electronic Press (bepress). http://ir.lawnet.fordham.edu/jcfl Answering To A Higher Authority: Sovereign-Mandated Oversight In The Board Room And The C-Suite∗ Thomas F. O’Neil III and Brendan T. Kennedy Abstract The relationship between business organizations and the sovereign agencies that regulate them is being redefined domestically and abroad. In the context of corporate enforcement proceedings, a critical challenge is how to achieve, most effectively, the timehonored public sector objectives of punishment, deterrence, financial restitution and rehabilitation. At issue are important policy considerations and at stake are the integrity and security of the commercial marketplace. The public sector increasingly must balance the pressures of limited resources against the need to ensure that ∗ Mr. O’Neil is the founder and President of The Saranac Group LLC, a strategic consulting firm that advises boards of directors and senior management in the areas of corporate governance, business ethics, regulatory compliance, restoration of trust and monitoring. He has held a number of executive positions in publicly-traded companies including Executive Vice Chairman, General Counsel and Secretary of WellCare Health Plans, Inc., and Senior Vice President and General Counsel of The MCI Group. He also has been a partner with two preeminent law firms, DLA Piper LLP (US) and Hogan & Hartson (now Hogan Lovells US LLP). During his tenure at DLA Piper LLP (US), Mr. O’Neil was a Joint Global Practice Group Leader and chaired the U.S. Government Affairs Practice Group. Earlier in his career, Mr. O’Neil served as an Assistant U.S. Attorney for the District of Maryland, a law clerk to U.S. District Judge Alexander Harvey II, and a legislative assistant to former Congressman Stewart B. McKinney. He received his A.B., magna cum laude, from Dartmouth College and his J.D. from Georgetown University, where he is now an adjunct professor of law teaching corporate governance. He is a member of the International Association of Independent Private Sector Inspectors General. ** Mr. Kennedy is a Senior Associate with DLA Piper LLP (US), where he specializes in commercial and regulatory litigation, corporate compliance and defense, and risk assessment and monitoring. He has advised companies in complex compliance matters involving, among other things, data security and privacy, financial controls, policies and procedures and records management. Across a broad array of industrial sectors, Mr. Kennedy has conducted internal investigations and represented companies in voluntary disclosures to regulators and enforcement officials. Mr. Kennedy earned his undergraduate degree from the University of Texas at Austin, and he received his J.D. from the University of Baltimore School of Law, where he served as Articles Editor on the Law Review. †With heartfelt appreciation, the authors thank their colleagues, William O. Mandycz, Esq., Michael M. Sevi, Esq., Ellen E. Smith, Esq., and Rebecca Miller for their exceptional assistance and collaboration in every phase of the development of this article. corporate citizens behave not only lawfully, but ethically and responsibly. One solution that has been adopted is the imposition of independent, private sector oversight on companies and firms that have been the targets or subjects of investigations. While its success to date has varied, this evolving joint venture model is undeniably viable and it will become even more appealing to enforcement officials in this global era of fiscal restraint. Answering to a Higher Authority addresses the evolution of private sector oversight and its implementation domestically and in capitalist nations abroad. With equal importance, this Article explores various policy considerations and offers refinements and solutions to all constituencies related to the selection, KEYWORDS: Corporate law, control suite VOLUME XVII 2012 NUMBER 2 FORDHAM JOURNAL OF CORPORATE & FINANCIAL LAW ANSWERING TO A HIGHER AUTHORITY: SOVEREIGN-MANDATED OVERSIGHT IN THE BOARD ROOM AND THE C-SUITE Thomas F. O’Neil III T. Brendan Kennedy ANSWERING TO A HIGHER AUTHORITY: SOVEREIGN-MANDATED OVERSIGHT IN THE BOARD ROOM AND THE C-SUITE1 Thomas F. O’Neil III* T. Brendan Kennedy**† 1. The “C-Suite” refers to “Control Suite,” common parlance for the senior management team of corporate entities. * Mr. O’Neil is the founder and President of The Saranac Group LLC, a strategic consulting firm that advises boards of directors and senior management in the areas of corporate governance, business ethics, regulatory compliance, restoration of trust and monitoring. He has held a number of executive positions in publicly-traded companies including Executive Vice Chairman, General Counsel and Secretary of WellCare Health Plans, Inc., and Senior Vice President and General Counsel of The MCI Group. He also has been a partner with two preeminent law firms, DLA Piper LLP (US) and Hogan & Hartson (now Hogan Lovells US LLP). During his tenure at DLA Piper LLP (US), Mr. O’Neil was a Joint Global Practice Group Leader and chaired the U.S. Government Affairs Practice Group. Earlier in his career, Mr. O’Neil served as an Assistant U.S. Attorney for the District of Maryland, a law clerk to U.S. District Judge Alexander Harvey II, and a legislative assistant to former Congressman Stewart B. McKinney. He received his A.B., magna cum laude, from Dartmouth College and his J.D. from Georgetown University, where he is now an adjunct professor of law teaching corporate governance. He is a member of the International Association of Independent Private Sector Inspectors General. ** Mr. Kennedy is a Senior Associate with DLA Piper LLP (US), where he specializes in commercial and regulatory litigation, corporate compliance and defense, and risk assessment and monitoring. He has advised companies in complex compliance matters involving, among other things, data security and privacy, financial controls, policies and procedures and records management. Across a broad array of industrial sectors, Mr. Kennedy has conducted internal investigations and represented companies in voluntary disclosures to regulators and enforcement officials. Mr. Kennedy earned his undergraduate degree from the University of Texas at Austin, and he received his J.D. from the University of Baltimore School of Law, where he served as Articles Editor on the Law Review. † With heartfelt appreciation, the authors thank their colleagues, William O. Mandycz, Esq., Michael M. Sevi, Esq., Ellen E. Smith, Esq., and Rebecca Miller for their exceptional assistance and collaboration in every phase of th (...truncated)