Cyber, Data Privacy, Diversity Top List of Risky Concerns for General Counsel This Year
Lori Zyskowski, a partner in the New York office of Gibson, Dunn & Crutcher, recently spoke with Corporate Counsel about the trends she sees and the challenges they present for general counsel in 2020.
January 27, 2020 at 04:46 PM
4 minute read
Corporations in America entered a new decade facing several heightened risks in finance, securities and corporate governance that should concern general counsel, says attorney Lori Zyskowski.
Zyskowski is a partner in the New York office of Gibson, Dunn & Crutcher and is co-chairwoman of its securities regulation and corporate governance practice. She also has a perspective gained from 13 years working in-house at major companies, including most recently as executive counsel for corporate, securities and finance at General Electric Co.
Zyskowski recently spoke with Corporate Counsel about the trends she sees and the challenges they present for general counsel in 2020. Here are excerpts from that conversation, edited for clarity and brevity.
Corporate Counsel: What are some of the top trends you see in terms of securities enforcement that impacts the job of the general counsel?
Lori Zyskowski: One trend we are seeing is a significant focus on cyber-related misconduct. It's important for general counsel to be very concerned about this. Not only could their companies be a victim of cyber misconduct, but also because actors around them may have liability issues.
In addition, the [U.S. Securities and Exchange Commission's] division of enforcement teams seem to be focusing more on cyber-related financial fraud. Enforcement is also focusing on investment advisers. This SEC is trying to benefit Main Street investors. It is very much looking at advisers who may have conflicts of interests or are not acting in best interests of retail investors.
CC: What can general counsel be doing in this area?
LZ: Cyber and data privacy are among the top risks, especially with all the uncertainty still around the new California privacy act [the California Consumer Privacy Act went into effect Jan. 1, though its final regulations won't be finalized until July. As risks continue to change, it's important to do tabletop exercises, for example, in the event of a breach. Companies must continually be reevaluating what is needed.
And the board's oversight of risk is another area. Just make sure that the company has an appropriate process around overseeing risk.
CC: You mentioned there were several heightened risks. What's another area?
LZ: A very big focus for many general counsel in the coming year is ESG [environment, social and governance] and sustainability. ESG is just such an important lens to look at how companies do business. It includes human capital management [for example, workforce diversity and gender pay equity]. And it includes climate change.
There was [BlackRock Inc. CEO] Larry Fink's recent letter to CEOs urging improved disclosure for shareholders on climate change and on sustainability. BlackRock is changing how it does investments, making sustainability the center. Fink recommended that companies look to the Sustainability Accounting Standards Board and to the Task Force on Climate-Related Financial Disclosures. BlackRock will be looking for companies that align their disclosures to the standards of both.
CC: How important are diversity issues in the coming year?
LZ: More diversity continues to be something very important. We are starting to see reporting requirements around board makeup. California has a law requiring a certain number of female directors while other states, like New York, are requiring reports on board diversity. Institutional investors are very focused on these disclosures as well, as are proxy advisory companies.
CC: Is there any other risk area you'd like to mention?
LZ: I think audit committee oversight. The SEC in December issued a reminder to audit committees on what they should be focused on, such as auditor independence, generally accepted accounting practices and substantial engagement with the auditor on critical audit matters, or so-called CAMS. The fiscal year ended in December is first time these CAMS will be reflected in audit reports. It's important that general counsel understand what these CAMS are and make sure that the audit committee has a process to evaluate them. I spoke more about this last week as part of a Gibson Dunn panel on the 16th Annual Challenges in Compliance and Corporate Governance.
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