Boardroom Governance with Evan Epstein

Mark Molumphy: "Boards of Directors Routinely Fail to React Properly in Times of Crisis"

Episode Summary

In this episode, I talk with Mark Molumphy, a partner at the law firm Cotchett, Pitre & McCarthy. Mark is an experienced litigator and has served as lead or co-lead counsel in major consumer and investor class and derivative actions, including cases involving prominent companies such as Apple, Facebook, Wells Fargo, BP, Oracle, Lehman Brothers, PG&E, WeWork and HP. Mark leads the Shareholder Rights and Corporate Governance practice at his firm. I think it’s important to discuss corporate governance from the plaintiff side in this podcast, particularly regarding how litigation can impact the role of boards and individual directors in both public and private companies in Silicon Valley and beyond. If you like this show, please consider subscribing, leaving a review or sharing this podcast with colleagues or friends. You can also subscribe to the Boardroom Governance Newsletter at evanepstein.substack.com

Episode Notes

Start of interview [1:12]
Mark's "origin story" [2:02]
How he got started with Cotchett, Mitre & McCarthy (1993) [3:40]
His current practice focusing on corporate governance cases [5:03]
His opinion on current state of corporate governance in public companies:
1. Increased focus on diversity on boards [7:27]
2. Data Breaches, Privacy and Cybersecurity "one of the hottest areas" [10:03]
His take on the current TikTok situation (forced sale by US President) [12:08]
"The CISO is the most important executive after the CEO [in IT companies]" [13:27]
In 20 years of practice, he sees the same familiar patterns: "there seems to be [when things go wrong] an inability to react properly by directors in times of crisis. A failure of the board to have some type of process in place to deal with something that was unforeseen." [15:30]
His take on dual-class shares and the WeWork case. How going public puts the company at "a whole other level in terms of scrutiny of governance practices." "The dual-class is a red flag." [17:15]
They are looking for "an imbalance in voting power", questionable transactions, inspections demands (books and records), conflicts of interest, self-dealing, insider-trading [21:29]
How they investigate their cases: books and records requests, private investigators, disgruntled employees, experts in the field. [24:21]
Litigation in private companies, including venture-backed companies: "there has been an uptick in the last year or two" [27:14]
"If you think it's difficult to get information [for litigation purposes] from a public company (with shareholder inspection demands), it's 10x worse in the case of private companies." [33:11]
His experience deposing directors of private venture-backed companies [36:12]
His opinion around the debate of the purpose of the corporation [38:40]
How he sees the future of shareholder litigation: more cybersecurity litigation (companies should have specific cybersecurity committees) and board committees litigation. [40:20]
His take on exclusive federal forum provisions (bylaw amendments) [42:12]
His take on trend of California companies and employees leaving the state [47:40]
His favorite books: [48:50]
1. Team of Rivals (on Abraham Lincoln) (2006) (by Doris Dearns Goodwin)
2. Dead Wake: The Last Crossing of the Lusitania (2016) (by Erik Larson)
His professional mentors: [51:40]
1. Susan Illston
2. Joe Cotchett
His favorite quotes: [53:59]
1. John Madden: "Don't worry about the horse being bling, just load the wagon."
2. Warren Buffett: "Only when the tide goes out do you discover who's been swimming naked.”
His "unusual habit" that he loves: walking with his bulldog every morning to pick up the newspaper. [56:26]
The living person he most admires: his parents from "the Greatest Generation" [57:14]

Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License