Notes

Outline

Riding the Enron Wave Without Falling Off the Board:  Strategies for Compliance and Survival Boris Feldman Wilson Sonsini Goodrich & Rosati October 17, 2002 © 2002, Boris Feldman

Topics Tectonic shifts Survival strategies

Tectonic Shifts Retrospective regulation Piling on the CEO and CFO Explosion of chain-of-command Hat swaps in the courtroom Personalized exposure Today, cooked books; tomorrow, the world

Survival Strategies Ask yourself:  “should I stay on this Board?” Evaluate current risk/reward equation Do you have time? Analyze potential conflicts Assess confidence in management to adjust to new requirements Embrace the new world If you can’t accept your enhanced role enthusiastically, consider sitting out a few innings

Survival Strategies (cont.) Controls are the key Accounting controls vs. disclosure controls Consider an audit of your controls Strengthen the internal-audit function Direct reporting relationship to Audit Committee Early warning system for Audit Committee Build your own instead of outsourcing Provide adequate staffing Create viable internal channel for whistleblowers

Survival Strategies (cont.) Meaningful quarterly oversight Interviews of key internal personnel Controller Head of credit & collections Review of key metrics Non-standard transactions Manual journal entries Write-offs, especially of receivables Bases for reserve calculations Probing discussions with outside auditors

Survival Strategies (cont.) Effective use of counsel Private questioning of in-house and outside disclosure counsel Processes that ensure meaningful, timely involvement by outside counsel Take notes Borrow lessons from due diligence requirements in a public offering

Survival Strategies (cont.) Protect yourself with insurance Become involved with company’s D&O insurance decisions Consider purchasing a PUP:  Personal Umbrella Policy