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CALIFORNIA CORPORATE & SECURITIES LAW

“Lead Independent Director” Or “Presiding Director”?

Neither California nor Nevada require that a corporation have either a “lead independent director” or “presiding director” and yet many corporations state that they have such a position.  Why?

Item 407(h) of Regulation S-K requires that if one person serves as both principal executive officer and chairman of the board, a company must disclose whether it has a “lead independent director” and what specific role the lead independent director plays in the leadership of the board.  In proposing this requirement in 2009, the SEC did not attempt to define “lead independent director” not did it acknowledge that the term isn’t generally used in state corporate law.  The release simply assumed that “in some companies” when the PEO and chairman positions are held by single person “a lead independent director is designated to chair meetings of the independent directors”.  That explains, more less, the genesis of the term “lead independent director”.

But what about “presiding director”?  Again, you won’t find this term in either California or Nevada’s corporate laws.  The New York Stock Exchange Listed Company Manual alludes, but doesn’t exactly use, the term.  Rule 303A.03 requires that the non-management directors of each listed company must meet at regularly scheduled executive sessions without management.  The rule further presides that “An independent director must preside over each executive session of the independent directors, although the same director is not required to preside at all executive sessions of the independent directors”.

 

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