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New Board MemberLegal Issues Orientation
[Date]
[Name]
Vice President & General Counsel
Agenda• Board Members’ Fiduciary Duties--state law• Board Members’ Fiduciary Duties--federal law• Confidentiality• Conflicts of Interest• Gifts• Reporting Obligations• Open Meetings• Public Record Act• Role of the General Counsel/OGC Overview
[Privilege Notice]
Fiduciary Duties--State Law• Arises under case law and statute (Corporations Code 5231(a))
• Carries extra responsibilities beyond those of contractor or ordinary employee– Duty of Loyalty: involves placing interests of University above own
interests or any others; must act in good faith and in best interests of the University
– Duty of Care: involves exercising such care, including reasonable inquiry, as an ordinarily prudent person under like circumstances
• Business judgment rule– Affords substantial deference to Board decisions--courts will refuse to
review Board actions or substitute their judgments for those of Board conforming to above duties
– Permits Board to rely on information of competent senior administrators, outside experts, and Board committees
[Privilege Notice]
Fiduciary Duties--State Law (cont’d)
• Same standards generally govern statutory & contractual indemnities (i.e. insurance coverage)
[Privilege Notice]
Fiduciary Duties--Federal Law• Sarbannes-Oxley Act is key federal statute governing
oversight of publicly traded commercial companies• Most provisions legally are inapplicable to University, but
– Is key reference point for assessing compliance with duties of loyalty and care
– Is factor in federal sentencing guidelines used by most regulatory & enforcement agencies in determining consequences for misconduct of organizations and individuals
• Key provisions expressly applicable to University concern establishment of whistleblower procedures & establishment/oversight by Board of a corporate compliance program
[Privilege Notice]
Confidentiality• Proceedings of the Board generally are subject to public
accountability/transparency legislation (see below)• Certain information nonetheless is protected from
disclosure by other laws, including– certain personnel information (medical records, performance &
disciplinary actions)– records of students (FERPA) and medical patients (HIPAA)
• Agenda materials and discussions related to Closed sessions of the Board also generally must be kept confidential– Bylaws specify a process for obtaining authorization to disclose
such information in the proper case
• Communications with attorneys should be kept confidential
[Privilege Notice]
Conflicts of Interest• The Political Reform Act is key state law establishing COI
standards for “public officials” (including our Board Members)• Act generally prohibits a Member from participating in or
influencing decisions in which s/he has a material financial interest
• Disabling financial interests include– Investments above threshold level in an entity that would be affected by
Board action– Serving as a director, officer or employee of an affected entity– Having been the recipient of income above threshold level from an
affected entity within the preceding 12 months– Having been the recipient of gifts above threshold level from an affected
entity within the preceding 12 months– The official’s own income, expenses, liabilities or assets
[Privilege Notice]
Conflicts of Interest (cont’d)
• The above disabling interests standard applies to public officials & their immediate family members (spouse, domestic partner, children)
• The standard is subject to foreseeability, materiality & generality exceptions--complex--seek advice
• Where disabling interest(s) emerge, a Member is required to disclose publicly (during open session), recuse himself or herself from the discussion & vote, and leave the room during discussion & vote
[Privilege Notice]
Gifts• Involves anything of value directly offered or “earmarked”
for a public official not generally available to public (e.g. travel discounts, club memberships, use of private plane or condominium, meals, gift baskets)
• Gift of travel, accommodations & food given to University may not be used by Members
• Otherwise, limit of $420 within preceding 12 months from a single source--absolute prohibition
• Multiple gifts from multiple parties within a single entity deemed to be from single source (i.e. aggregated for purposes of gift cap)
[Privilege Notice]
Gifts (cont’d)
• FPPC has suggested that even gifts from close friends & family members may be subject to limits
• Rules can be complex/counterintuitive--seek advice
[Privilege Notice]
Reporting Requirements• Certain public officials (including Members) are required to file
Form 700, Statement of Economic Interests, within 10 days of appointment and by March of each successive calendar year
• For Members, Form is filed with COI Coordinator within Office of General Counsel
• Form generally requires disclosure of all debt & equity investments; real estate investments; income, loans & business positions; gifts; & travel payments--made or received during reporting period
• Scope of interests are stated in dollar ranges• Forms are available on request to the public• Fines and other sanctions assessable for late/inaccurate submissions
[Privilege Notice]
Open Meetings• State Code requires that, subject to exceptions, all meetings
of full Board & committees be publicly noticed and open to the public, with opportunity for public comment
• “Meeting”--any congregation of– Majority/quorum of members– At same time & place (caveat: serial meetings)– To hear, discuss or deliberate on item within Board’s/Committee’s
jurisdiction– Excludes social gatherings, other gatherings where no Board
business is transacted
[Privilege Notice]
Open Meetings (cont’d)
• Serial meetings--prohibited– Between meeting contacts among majority/quorum of members for
purposes of obtaining votes or other commitments re item on Board/Committee agenda (statute)
– Above, plus contacts for purposes of obtaining information re item that may come before Board/Committee in the future (AG Guidance)
– Complex & fact specific--best to seek advice
• Commonly cited exceptions to above rules: matters involving—– Investments– Litigation– Acquisition or disposition of property– Appointment, dismissal, performance or compensation of employees
[Privilege Notice]
Public Records Act• Generally requires disclosure, on request, of all University
records, unless subject to exception– Covers documents prepared by or for Members, e.g. email
• Catch-all provision allows withholding of information if public interest in access is outweighed by public interest in non-disclosure (includes personal privacy)
• Examples of disclosable Member information: name, appointment dates, committee assignments, Form 700
• Examples of witholdable Member information: home address & telephone number, names of family members, birth date, social security number
[Privilege Notice]
Key Provisions re GC Role• Bylaw 21.2 (Responsibilities of the GC)
– Chief Legal Officer of University w/charge of all legal matters– Attends all Board/Committee meetings, represents Corporation in all legal proceedings, advises Board, President and senior administrators– Oversees provision of legal services, subject to President’s direction
• Policy on University Legal Services– GC directs campus counsel substantively and supervises outside counsel– Board has full access to GC and vice versa– Budget for OGC established by President in consultation w/Board
• Regents’ Resolution– Authority of the GC to retain outside counsel
[Privilege Notice]
OGC Organizational Structure
[Privilege Notice]
Key Service Drivers
[Privilege Notice]
Cost Trends - All Segments (in millions)
[Privilege Notice]