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Corporate Counsel Connect collection

October 2016 edition

New corporate governance principles • Online reviews and endorsements • Ensuring arbitration for employee disputes


New corporate governance principles

Public companies should take note of the recently issued Commonsense Principles of Corporate Governance (Governance Principles) and consider whether some or all of the principles may be applicable to their own circumstances.

In July 2016, a group of CEOs of prominent companies and institutional investors released a set of corporate governance principles on the roles and responsibilities of boards, companies, and shareholders. The Governance Principles address eight key topics:

  • The composition and internal governance of the board
  • Board responsibilities
  • Shareholder rights
  • Public reporting
  • Board leadership
  • Management succession planning
  • Executive compensation
  • The role of asset managers in corporate governance

The Governance Principles are not meant to be a one-size-fits-all solution, but instead should be used by company directors, executives, institutional shareholders, and in-house and outside counsel to start a discussion on what constitutes good corporate governance.

Companies should review the Governance Principles and keep them in mind when evaluating their own corporate governance structure and guidelines and engaging with their shareholders.

For more information on the Governance Principles, see Practice Note, Corporate Governance Practices: Commentary.

Online reviews and endorsements

To ensure regulatory compliance across international borders, companies handling online reviews and endorsements should review the guidelines recently published by the International Consumer Protection Enforcement Network (ICPEN), an organization that consists of the FTC and consumer protection agencies from more than 50 other countries.

The ICPEN guidelines provide:

  • Guidance to help companies address the cross-border nature of online reviews
  • Recommendations for endorsements, which may also cross borders when posted online

While the ICPEN guidelines cannot substitute for an analysis of each country’s laws, they do offer common best practices for administrators and marketing professionals for the solicitation, publication, and moderation of online reviews and endorsements.

The ICPEN guidelines advise that companies handling online reviews should:

  • Not write, commission, or publish fake reviews
  • Not edit or conceal all or part of relevant, truthful, and lawful reviews
  • Emphasize equality and fairness in the publication process
  • Proactively moderate reviews for compliance with truth-in-advertising standards
  • Be transparent in the collection and publication of reviews

The ICPEN guidelines recommend that companies handling endorsements should:

  • Ensure endorsements are neither false nor misleading
  • Clearly and conspicuously disclose relevant commercial relationships and paid-for content

When creating online review programs and endorsement agreements, companies should review and follow the ICPEN guidelines, as well as relevant FTC regulations and recommendations.

Ensuring arbitration for employee disputes

The recent dispute between former Fox News anchor Gretchen Carlson and former Fox News executive Roger Ailes illustrates the potential difficulty of enforcing arbitration for inter-employee disputes where an arbitration provision does not explicitly require arbitration for these disputes and does not broadly define the company to include its employees.

In Carlson v. Ailes, a sexual harassment dispute, the terms of an arbitration provision in Carlson’s employment agreement required arbitration for any dispute arising out of the agreement or Carlson’s employment. However, the only parties to the agreement were Carlson and Fox News. The agreement also did not define Fox News to include any executives or other employees of the company.

After Carlson sued Ailes (but not Fox News), Ailes sought to compel confidential arbitration and stay all judicial proceedings based on the arbitration provision in Carlson’s agreement with Fox News. Carlson opposed the motion in part by arguing that she did not have an agreement to arbitrate with Ailes. Carlson also argued that the alleged sexual harassment:

  • Occurred outside the scope of Ailes’ agency, authority, and employment with Fox News.
  • Did not arise from her agreement with Fox News.

To help ensure that all employment-related disputes are subject to arbitration, especially those involving highly confidential information or sensitive allegations, arbitration provisions in both employment-related agreements and any company alternative dispute resolution program or policy should explicitly require confidential arbitration for an inter-employee dispute. The provisions should:

  • Apply to disputes between all former, current, and future employees in their personal and institutional capacities, even where the company is not a party to the dispute.
  • Define the company to include all former, current, and future employees.

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