As the SEC's top enforcement lawyer recently reaffirmed, members of boards of directors who ignore their obligation to oversee management and set a positive tone at the top do so at their companies' peril.

In her speech "Keeping up with the Smartest Guys in the Room: Raising the Bar for Corporate Boards," Linda C. Thomsen said, "On a macro level there are perhaps no more important issues than corporate culture and the selection and oversight of the senior executives."

"Tone at the top"—the ethical environment top management and the board of directors creates for a company—has been central to both government and shareholder assessments of corporate liability for fraud since at least 1987. That year, the Treadway Commission issued its seminal report on preventing and detecting corporate fraud. The commission’s findings resonate as clearly today as they did in 1987. Click here to read a detailed article on this topic.

Thomsen's speech signals that tone at the top will continue to be scrutinized in the SEC's enforcement efforts, consistent with the U.S. Sentencing Guidelines.

Ballard's Corporate Compliance and Investigations Practice Group is available to answer your questions and provide guidance on this issue. Please contact Justin P. Klein at 215.864.8606 or kleinj@ballardspahr.com, or John C. Grugan at 215.864.8226 or gruganj@ballardspahr.com.


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