As I mentioned in my opening post, I’m a big fan of Jay
Brown.  So, I plan on routinely passing
on what he’s blogging about.  This week,
I’ve got two items:

In Corporate Governance, the SEC, and the Declining
Importance of Delaware Law, Jay suggests that “the SEC, rather than Delaware,
may increasingly be the driving force behind the development of substantive
duties for directors.”  Here’s an
excerpt:

[In] In re Alderman … the Commission settled an action
against directors of a mutual fund.  The
Commission first found a duty — 
“Under the Investment Company Act, directors had an obligation to
make good faith efforts to ensure that certain below-investment grade debt
securities for which market quotations were not readily available were valued at fair
value.”  The Commission then
concluded that this duty had not been fulfilled…. Likewise, the Commission has
sanctioned companies and boards for failing to adequately disclose the process
used in reaching a decision…. Unlike the law in Delaware where less board
involvement usually reduces the risk of liability (and encourages the ostrich
approach to governance), these cases suggest that greater involvement by
directors will in fact reduce the risk

…