11/8/23 – Issue 8.42 – Your weekly news on all things board. 

The new SEC cybersecurity regulations are set to go into effect in less than two months. Last week, the SEC showed that they mean business by filing suit against SolarWinds and its CISO, alleging the company failed to disclose the true state of its cybersecurity readiness before its 2020 cyberattack. The suit underscores the urgency of having a cybersecurity readiness strategy, the importance of being able to thoroughly and honestly report on it, and the consequences of getting it wrong.

In other news, WeWork trading stops on Wall Street; EY describes their governance layout for U.S. operations amid failed split; Nasdaq’s Board Diversity Rule wins in appeal court; and the UK backtracks on proposed reforms to the Corporate Governance Code.

In the Spotlight

How Will the SEC’s Pursuit of SolarWinds Affect Cyber Chiefs?

Professionals from across the cybersecurity world weigh in

“‘I think companies will take a closer look at their disclosures regarding their cybersecurity programs to determine if they are misleading or not.' The board may start to ask, ‘How did we validate that the information we are disclosing about our cybersecurity program is accurate and complete?’ and ‘Has any information come to our attention that contradicts the information we are disclosing?’-Troy Fine, director of compliance advisor services at tech provider Drata” THE WALL STREET JOURNAL

Suit is a “Wake-Up Call” for Organizations

Internal communications point to a failure to disclose true cybersecurity readiness 

“The complaint should be a wake-up call to all public companies that the SEC is serious about holding executives responsible for following its cybersecurity guidelines and shoring up cybersecurity deficiencies. It is also a textbook case of how internal communications can, and will, be used by regulators and litigators to bolster a case, whether those communications are believed to be taken out of context or not. Internal communications like “Even if we start to hire like crazy, which we will most likely not, it will still take years. Can’t really figure out how to unf**** this situation. Not good” will never be read in the most favorable light to the defendant.” NATIONAL LAW REVIEW

From Boardspan this Week:

LAST CHANCE TO REGISTER! Cybersecurity and Governance: Governing the Ungovernable

Join Abby Adlerman and Bethany Mayer in conversation November 9

Our cybersecurity webinar is tomorrow–try to register and come if you can. Bethany Mayer is one of the most respected experts on the topic of cybersecurity and governance, with deep experience and insight into where boards need to focus and how to establish governance of a seemingly ungovernable issue. We guarantee you will come out with a better understanding of your board’s role and responsibilities. Registrants will receive a recording of the webinar in case of any schedule conflicts. 

Thursday, November 9, 2023
12 pm ET

Across the Board

WeWork Stock Halted as the Co-working Giant Prepares for Bankruptcy 

Shares tumbled by 66% last week and have now shed nearly 99% of their value in 2023

“WeWork shares were halted pending news ahead of the opening bell Monday. The company is likely to file for Chapter 11 bankruptcy protection as soon as this week, the Wall Street Journal reported a few days ago. The New York-based desk-leasing giant has lost more than $16 billion since its founding in 2010. It has been burning through its remaining cash amid an unforgiving office market.” THE WALL STREET JOURNAL

EY Will Overhaul its U.S. Governance After Failed Split
Following failed separation of audit and advisory business, EY overhauls governance to give partners greater voice

“Ernst & Young is stepping up its U.S. governance overhaul efforts, a bid to give partners there a greater voice in firm strategy, following the failed separation of its audit and advisory businesses earlier this year. The proposal comes as the Big Four accounting firm continues to work to untangle the mess left by its decision in April to scrap plans to split auditing and consulting into two different firms. EY spent $600 million and more than a year working on the split. The U.S. unit, led by Julie Boland, played a key role in the blowup of the split. A handful of U.S. audit partners complained that the consulting business was receiving the majority of its lucrative tax business. The opposition strengthened dissent within the global firm.” WALL STREET JOURNAL

Fifth Circuit Upholds Nasdaq’s Original Ruling on Board Diversity in Activist Appeal
It found that Nasdaq is a private company, and not subject to the constitutional restraints applied to state actors

“In Alliance for Fair Board Recruitment v. SEC, a panel of three 5th U.S. Circuit Court of Appeals judges upheld Nasdaq’s rules on board diversity. The rules require each Nasdaq-listed company to disclose information on the voluntary self-identified gender and racial characteristics of its board of directors. The rules also require each company to have or explain why it does not have at least one female and one underrepresented minority or LGBTQ+ director. The petitioners claimed Nasdaq’s diversity disclosure rules are unconstitutional because they infringe on freedom of speech and confer preferential treatment based on gender and race. However, the Fifth Circuit did not reach those questions.” JD SUPRA

UK Waters Down Corporate Governance Reforms After King’s Speech

Complying with the UK Corporate Governance Code is required for approximately 900 companies

“The UK’s accounting watchdog has ditched more than half of its planned changes to the corporate governance code, saying this will support economic growth. The Financial Reporting Council scrapped proposals to give environmental, social and governance reporting responsibilities to audit committees, as well as changes to diversity reporting and shareholder engagement requirements, it said in a statement Tuesday.” BLOOMBERG

Discovering ESG Priorities

If you haven’t started on the sustainability journey, get started

“Discovering your own unique priorities amid the myriad of environmental, social and governance (ESG) best practices and emerging reporting requirements is one of the most important steps boards and management can take…While expanding reporting requirements and stakeholder inquiries may feel like a new ‘flavor of the day’ for boards and management, it’s important to recognize the greater evolution at work: we are living through a refinement in the understanding of the sustainability topics that are important to different stakeholder groups and how that relates back to the business from both a financial and impact perspective. This trend is likely to continue to play out over the coming years.” GRANT THORNTON

Disney’s New CFO Has History with Nelson Peltz

Hugh Johnston fended off activist pressure from Peltz at PepsiCo

“Disney on Monday named Hugh Johnston, the longtime finance chief of PepsiCo, as its next chief financial officer. Johnston joins Disney as the company faces activist pressure from Peltz, whose firm, Trian Fund Management, has built a sizable stake in the company and is threatening a proxy battle. Disney’s stock price has recently tumbled, under pressure from ongoing cord-cutting and the high cost of streaming. During Johnston’s 13-year tenure as Pepsi’s CFO, the company prevailed in its own battle with Peltz. Trian Fund Management in 2016 exited its position in Pepsi, after earlier pushing for a breakup of the global snack-and-beverage maker.” THE WALL STREET JOURNAL

Seat at the Table

• ExxonMobile elects to its board Dina McCormick, Vice Chair, President and Global head of Client Services at banking firm BDT & MSD Partners

• Biogen appoints to its board Monish Patolawala, EVP and Chief Financial and Transformation Officer at 3M

• 3M adds to its board Tom Sweet, former CFO of Dell Technologies

• AI-based weapons detection screening Evolv Technology announces to its board David Gonzales, former CEO of healthcare data group Inmar Intelligence, and; Dr. Rajan Naik, SVP of Strategy and Ventures for Motorola Solutions

• Transportation provider Werner welcomes to its board Michelle Greene, EVP and Chief Information Officer at Cardinal Health

• Optical systems supplier Kopin Corporation appoints to its board David Nieuwsma, former President of Collins Aerospace

• Dominion Energy announces to its board Vanessa Sutherland, EVP of Government Affairs and General Counsel at energy firm Phillips 66, and; Paul Dabbar, Co-Founder and CEO of Bohr Quantum Technology Corp

• Claims management firm Crawford & Company adds to its board Fred Donner, former Senior Managing Director of Global Infrastructure for FTI Consulting

• Safe & Green Holdings appoints to its board Thomas Meharey, Vice President of licensing firm kathy ireland® Worldwide

• Automated driving firm Aeva welcomes to its board Dr. Stefan Sommer, former CEO of vehicle technology manufacturer ZF AG

• Redwood Trust announces to its board Doneene Damon, Attorney Director at Richards, Layton & Finger, P.A.

• Digital transformation provider Intellinetics elects to its board Michael Taglich, President of broker dealer Taglich Brothers

• AI solutions firm Veritone appoints to its board Michael Zilis, EVP and CFO at supply chain firm Ingram Micro

• Medical tech company Masimo welcomes to its board Rolf Classon, former President of Diagnostics at Bayer

About Boardspan
Boardspan is the leading provider of digital governance solutions for boards across all sectors. Our cloud-based assessments, benchmarking analytics and governance education programs complement our board search and advisory services to deliver a holistic approach to governance. Boards of all sizes and stages rely on Boardspan to deliver analytics, insights and outcomes that improve their effectiveness and performance. Clients include KKR, The Kellogg Foundation, Ingersoll Rand, Farfetch, McAfee, Beyond Meat, Box, e.l.f. Beauty, Satellite Healthcare and the U.S. Olympic & Paralympic Committee.