This session will provide a comprehensive understanding of the Business Judgment Rule (BJR) as it applies to corporate governance, with a specific focus on how directors and officers can navigate potential litigation. The session will start with a foundational overview of the BJR, followed by an in-depth analysis of the key legal cases that have shaped its application. Additionally, the session will delve into the strategies for advising corporate clients—particularly directors and officers—on how to avoid becoming targets of litigation, including the role of independent board directors in mitigating risk.
Session Structure and Key Topics:
1. Introduction to the Business Judgment Rule (BJR)
Objective: Provide a foundational understanding of the BJR and its role in corporate governance.
- Definition of the BJR and its purpose in protecting directors and officers from liability.
--- The BJR presumption: when courts defer to the decisions of corporate leaders.
--- Key elements required to invoke the BJR: good faith, rationality, and lack of conflicts of interest.
--- Key areas where the BJR applies: financial decisions, strategic direction, and operational oversight.
2. Key Legal Cases Shaping the Business Judgment Rule
Objective: Explore the landmark cases that have defined and evolved the application of the BJR.
- Smith v. Van Gorkom (1985): The duty of care in decision-making and its relation to the BJR.
- Aronson v. Lewis (1984): The standard for judging board decisions and establishing the BJR presumption.
- In re Caremark International Inc. Derivative Litigation (1996): The BJR's application in oversight and monitoring duties.
- Stone v. Ritter (2006): Examining the role of good faith and the implications for directors' oversight responsibilities.
- Directors' duty of loyalty vs. duty of care: Understanding the balance and how courts distinguish between them.
3. Litigating Business Judgment: Defending and Pursuing Claims
Objective: Offer insight into the litigation landscape for D&O claims and how the BJR impacts defense and pursuit of litigation.
- Litigating under the BJR: When the rule can be overcome by plaintiffs and how courts assess the decision-making process of directors.
- Strategies for defending directors and officers in lawsuits, including the use of the BJR as a key defense.
- How plaintiffs attempt to overcome the BJR (e.g., allegations of bad faith, lack of independence, or conflicts of interest).
- Case studies and trends in shareholder derivative suits and class actions.
4. How to Advise Directors and Officers to Avoid Becoming Targets of Litigation
Objective: Discuss proactive strategies for corporate advisors to help directors and officers avoid litigation exposure.
- Best practices for documenting decisions to ensure alignment with the BJR.
- The importance of maintaining a robust conflict-of-interest policy and board independence.
- Key governance practices that mitigate risks: regular board evaluations, clear delegation of authority, and transparency in decision-making.
- Ensuring compliance with statutory and fiduciary duties—particularly in distressed situations.
- The role of internal and external advisors in helping directors navigate complex situations.
5. The Role of Independent Board Directors in Mitigating Risk
Objective: Highlight the importance of independent directors in protecting the organization and its leadership from litigation.
- Defining the role and responsibilities of independent board members.
- How independent directors help reinforce the BJR in decision-making processes.
- The critical role of independent directors in distressed or bankruptcy situations.
- Best practices for selecting, empowering, and working with independent board directors to safeguard against personal liability.
Target Audience:
General Business Bankruptcy Counsel | Corporate Governance Professionals | Directors and Officers (D&O) | Litigators specializing in corporate governance and D&O cases | Financial Advisors specializing in distressed situations and workouts | CROs
Learning Objectives:
- Gain a comprehensive understanding of the Business Judgment Rule and its importance in corporate governance.
- Analyze major legal cases and their impact on the application of the BJR.
- Develop strategies for defending and pursuing litigation involving directors and officers.
- Learn proactive strategies for advising directors and officers to minimize the risk of personal liability and litigation.
- Understand the importance of independent board directors in mitigating risks for directors and officers.
Business
Suggested Speakers
In high profile restructurings, managing public perception and crafting a go-forward narrative matters. This session explores how strategic communications play a critical role in mitigating reputational damage and preserving brand and estate value throughout the restructuring process, including positioning the company for success upon emergence.
We will explore the importance of:
- Developing a comprehensive communication strategy to address various stakeholders (employees, partners, media, etc.) and preserve enterprise value
- Being prepared to implement aspects of the strategy even before filing (given propensity for leaks) and during key moments of the process through emergence
- Communicating effectively to promote business objectives, shape public perception, support legal strategies, and stabilize key stakeholder relationships
- Proactively (and reactively) addressing misinformation, media inquiries and stakeholder concerns to protect the brand and franchise
- Learning from real-world examples of communication efforts in major bankruptcies
Participants will be able to understand:
- The role strategic communications play in preserving value of the brand and business, including keeping internal and external parties apprised and on side
- The importance of crafting clear, forthright, consistent and timely messaging
- The ways in which strategic communications can significantly influence the outcome of a restructuring process
Many bankruptcy professionals are being called upon to help healthcare provider organizations as this industry faces unprecedented business distress. Whatever the professional's role, some basic understanding of healthcare finance can strengthen decision-making and performance.
This session will provide a high-level view of the unique fiscal considerations in the healthcare provider organization, specifically: 1) accounting and financial statements; 2) cashflow including the massive revenue cycle and accounts payable functions; 3) a murkier part of cashflow buried in the various governmental and private payer reimbursement models, and 4) fraud.
Beginning with accounting and financial statements, the mystery of gross revenue, net revenue, and accounts receivable on the income statement will be examined. Even experienced healthcare CFOs can trip up on accounts receivable calculations given the complexities of payer reimbursement models and payment practices, as well as the payer market changes occurring at an ever-faster pace.
Healthcare provider cashflow management consists of voluminous variations and constant change, more so in revenue cycle but also in accounts payable. Years ago, revenue cycle was simply called “billing.” The term revenue cycle more accurately describes the revenue generation process which can involve every function in the healthcare provider organization, from physician and nursing care to lab work and housekeeping.
Third, fundamentals of the most common healthcare reimbursement models will be discussed starting with basic fee-for-service reimbursement and moving through other models to the present attempts at value-based reimbursement. It may be surprising that while the industry grapples with the new value-based models, a sizable part of reimbursement is still fee-for-service.
Finally, there will be brief mention of fraud and embezzlement which can develop in the troubled healthcare provider organization and may be a significant contributor to poor financial performance.
Participants will gain a high-level perspective on the unique fiscal considerations in the healthcare provider organization to inform their work in advising clients in this troubled industry. A solid base of knowledge in healthcare finance will support accurate financial performance projections, prioritization of turnaround strategies, and organization valuations. Given the esoteric complexities in this field, attendees will also gain an appreciation for situations where using healthcare financial specialists may be helpful.
First, participants will understand special aspects of income statements for healthcare provider organizations, in particular the difficulty of estimating accounts receivable due to the variability in the payer market, reimbursement models, and billing policies and procedures.
Second, attendees will be able to discuss the umbrella structure of cashflow in the healthcare provider organization from revenue generation to accounts payable.
They will understand the fundamentals of the “revenue cycle” which spans the entire healthcare provider organization. They will also be able to outline some mid-level billing functions, common operational problems with billing in the distressed healthcare organization, and practical solutions to address them, including artificial intelligence (AI).
On the other side of cashflow management, participants will understand the cash management structure and issues in vendor contracting, purchasing, and accounts payable in the healthcare organization.
Next, participants will gain a deeper awareness of how various healthcare reimbursement models in the marketplace – e.g., Medicare Advantage, health maintenance organizations (HMOs), high-deductible plans, accountable care organizations (ACOs), etc. – affect the financial performance of healthcare provider organizations.
Finally, attendees will be made aware of some places fraud and embezzlement may develop in the distressed healthcare organization.
Creditor
Jeanne
Goche, MA, JD
jgoche@SolutionsinHealthCareManagement.com
Solutions in Health Care Management, a consultancy and financial advisory specializing in health care
