Corporate Securities
Corporate Governance Perspectives from an Industry Under the Microscope
Recap from our July 16 webinar: “Direct Selling and Good Corporate Governance in 2026” Most corporate governance presentations follow a familiar script: recite some best practices, note how they offer legal protection for companies and boards, and adjourn. In our recent webinar on good corporate governance, we set out to do something more bespoke. We spotlighted an industry that has seen its share of regulatory attention and plaintiff suits over the years and looked to connect the dots between good governance practices and the specific challenges faced by this industry. I was joined by two very qualified people. Chris Martinez, a litigator in our Salt Lake City office, regularly defends companies in the industry and is familiar with the variety of claims they see. Dave Grimaldi, CEO of the Direct Selling Association in Washington, D.C., is the face of the of the direct selling channel before Congress, the White House, the FTC and other relevant governmental bodies, including at the state levels. While our focus was direct selling, we frequently found ourselves noting how these lessons apply across consumer-facing sectors. Why governance matters before anything goes wrong In the webinar, we noted how a feature of consumer products startups is that many of them are able to grow organically, often without outside, institutional money. That feature is relevant to this discussion, as institutional investors typically require some basic governance and compliance structures, and they also provide a degree of oversight. Without that it can be tempting, particularly in early days when a company is moving fast, to push off worrying about formalities. I made the case that good corporate governance is strategic even when no-one is watching. For example, a situation we see regularly is when a fast-growing company gets to an inflection point where they seek investment or a sale, but their weak governance and thin compliance programs lead to a negative impact on their valuation. During due diligence, buyers are accumulating all the issues and assessing value impacts. In particular, a buyer will look at potential third party (including governmental) claims. A quick corporate clean-up can help going forward, but often, that contingent liability historically just sits there. Investors and buyers regularly will discount a company’s value or put money in a long-term escrow that otherwise would go to the seller right away. In short, not having your house in order will cost you at strategic moments, even if the underlying risks never come to pass. Chris made a similar point from the litigation perspective: It’s really the process that matters as much as the outcome. Having good processes where risks are brought to the board, where they’re discussed, and the reasons why a decision is made is put into the minutes will better prepare a company to utilize the business judgment rule. Even if the decision ends up being wrong, that process itself can often be enough to shield the company or the decision makers from liability. The industry-wide stakes Dave brought another perspective that often does not make it into these types of discussions. He pointed out how governance at the company level doesn’t just protect that company: it helps protect entire industries. In this light, showing a great track record across the industry strengthens Dave’s hand when advocating with regulators to defer to the industry’s self regulatory operation it has invested in (namely, the Direct Selling Self-Regulatory Council). Tighter governance across the sector also reduces the perceived incentives for plaintiffs attorneys, attracting fewer claims overall. He argues that good governance is an asset at all levels and is also strategic right now: Extolling and demonstrating good governance is a very powerful defense mechanism. But it can sometimes be an offensive mechanism. . . . We are in arguably the most light regulatory four-year stretch that America has ever seen. It’s not going to stay this way, and so a lot of what we’re doing right now is smartly preventive. The DSA’s work now is about laying the groundwork to make sure that they don’t have ammunition to come at us and say, you have been asleep at the wheel. Cautionary tales and an industry success story We looked at some cautionary tales, both outside of the industry (Dave had some amazing insights into the FTX collapse) and within it, with Chris walking through how platform compliance failures have been spotlighted by recent FTC complaints brought against distributors. One of the Commission’s concerns is companies who have “compliance programs in name only.” On the success side, Chris pointed to FTC v. Neora as “a bit of a roadmap.” When the FTC brought pyramid scheme and false income claim allegations, Neora prevailed because it had the goods: robust record keeping, sign-up data showing why distributors actually joined (overwhelmingly, to buy products they liked at a discount), and a compliance program that was enforced, including against top-of-field distributors. As Chris summarized: “It was more than lip service, and it went all the way from the top down… It ended up giving them the data and the information they needed to win.” What boards should actually do We closed with practical guidance on a few basic, best practices: Add outside directors early. Even private and family-run companies benefit enormously from at least one or two outside directors, i.e., people not on the management team and not closely tied to it. Management is incentivized to grow and take risks; that’s appropriate. But an outside perspective can say, “I’m not personally invested in this, but I have fiduciary duties, and some of these risks just don’t make sense.” Outside directors also provide a more independent, defensible process for boards to review conflicted transactions like CEO compensation. Committee structure. Committees provide another layer of protection. Start with at least an audit committee that owns compliance oversight. Under the Caremark line of cases, complete board absenteeism on mission-critical risks is treated as a duty of loyalty problem with its attending liability for directors. Worker classification vigilance. With PAGA litigation spreading beyond California, the structure of distributor agreements should become a board topic. Chris noted arbitration provisions as an example: “Everybody who’s in this industry who’s worried about PAGA ought to put their arbitration clauses as a topic of discussion.” Class action waivers can backfire when a plaintiff’s firm files 3,000 individual arbitrations, and the company bears the fees. Board hygiene. The written record matters as much as the underlying conduct. Resist the temptation to let AI record and transcribe board meetings, as you are creating a discoverable, uncurated transcript that can be turned against a board doing everything right. One professional set of minutes, prepared by someone who knows what they’re doing, remains the standard. And Chris offered a tip for individual directors: use a dedicated email address for each board you serve on. “It actually makes you think about whether you ought to put something in an email, and it protects your other communications in a discovery process.” My thanks to Chris Martinez and Dave Grimaldi for their generosity and candor. The webinar slides are available on request, and any of us would be glad to discuss these issues in more depth.
July 27, 2026
by Troy M. Keller
Corporate Securities
Appropriations at Midyear: What Businesses Should Watch—and Do Now
Congress has made progress on fiscal year 2027 appropriations, but businesses should still prepare for another period of temporary federal funding. The House Appropriations Committee completed work on all twelve annual funding bills before the end of June, and three have passed the full House. The Senate has moved more slowly; a planned June markup of several appropriations bills was postponed. That gap makes it unlikely that Congress will complete all twelve bills before current funding expires on September 30. Recognizing that reality, the House passed a continuing resolution on July 21 by a vote of 220–205. The bill would generally maintain current funding through December 4, giving Congress additional time to negotiate after the midterm elections. The Senate may revise the House proposal, but the most likely near-term outcome is some form of continuing resolution, or CR—not completion of the regular appropriations process. Why the Appropriations Process Matters to Businesses A CR prevents a government shutdown, but it does not provide the same certainty as full-year appropriations. Agencies operating under temporary funding may postpone new programs, hiring, contract awards, grant decisions, and other activities until Congress determines their final budgets. The Government Accountability Office has found that CRs can create funding uncertainty, slow hiring, increase administrative burdens, and limit agencies’ management options. The effects extend beyond traditional government contractors. Research institutions and technology companies may face delayed grant awards. Infrastructure developers may encounter uncertainty surrounding federal funding or project schedules. Banks and small businesses may depend on federal lending programs. Companies in regulated industries may need timely agency reviews, approvals, inspections, or guidance. Even when federal funding eventually arrives, the delay can produce compressed deadlines and sudden spending activity later in the fiscal year. Businesses may be asked to submit proposals, hire employees, order equipment, or begin performance on shorter timelines. What Businesses Can Do Now Businesses do not need to predict Congress. They do need to know where a funding delay would create a problem. Map the exposure. Identify the contracts, grants, approvals, loans, and major customers tied to federal funding. Flag anything that depends on new money. Existing programs often continue under a CR. New awards, expansions, and higher funding levels are more likely to slip. Pressure-test the calendar. Ask what happens if an award expected in October moves to December—or later. Focus on hiring, cash flow, procurement, and project start dates. Talk to the agency early. Ask whether a CR could affect an award, option year, modification, grant cycle, or funding increment. Put the impact in concrete terms. When communicating with Congress or an agency, explain the operational consequence: delayed hiring, higher financing costs, missed construction windows, or interrupted research. The goal is not to prepare for every possible outcome. It is to identify the few funding decisions that could materially affect the business and build flexibility around them. What Comes Next The immediate question is whether the Senate accepts the House’s December 4 deadline or negotiates a different stopgap measure. If a CR becomes law, attention will shift to the post-election period. Congress will then have to complete the individual appropriations bills, combine them into larger packages, or approve another extension. Businesses should therefore prepare for two separate uncertainties: whether the government remains funded after September 30 and when agencies will receive their final fiscal year 2027 budgets. A continuing resolution would reduce the immediate risk of a shutdown. It would not resolve the planning challenges created by temporary funding. For businesses, the best response is not to predict every congressional outcome. It is to understand their federal exposure, prepare for multiple timelines, and remain ready to act when funding decisions are finally made.
July 23, 2026
by Samuel Flitton
Corporate Securities
A Main Street Policy Discussion About IPOs
Earlier this month, we hosted a roundtable optimistically titled, "Bringing IPOs Back to Utah." It was largely a local affair, with a mix of executives, trade association representatives, policymakers and investors. A main street crowd, but a savvy one. Dorsey, KPMG, and Zions Bank provided perspectives from the legal, finance and accounting side. We were also quite fortunate to host SEC Commissioner Hester Peirce virtually for the second half of the discussion. For more detail on the event and Commissioner Peirce's comments, see this article from Utah Tech Buzz. The discussion centered on two questions. Below we've noted those questions and some interesting takeaways. Question 1: Are IPOs Valuable for Communities? The first question was the easier one. From the community perspective, it seems obvious that having more public companies headquartered in a state is a good thing. Studies have shown a direct relationship between the presence of public companies and increased entrepreneurship and job growth. Also, going public rather than exiting through M&A increases the odds that a firm’s management team stays local. Keeping headquarters in-state is typically an economic development priority for a state for good reasons. It attracts more talent and increases the likelihood that future capital from those firms is deployed in the state where the decision-makers sit. Question 2: What Can a Local Community do to Increase its Number of Public Companies? The answer unfortunately is not a whole lot by itself—at least not when it comes to addressing some of the broader economic and regulatory trends that have discouraged the public company route in recent years. Smoothing the regulatory path, particularly for small and mid-sized companies, is work that the SEC and potentially Congress need to undertake, and as we’ve commented previously, there are initiatives underway. However, our discussion did cover a few ideas of things communities can do to foster a favorable environment for IPOs, so as to at least make the choice more viable, particularly for the smaller and medium-sized companies. These ideas included things like making changes to the state’s corporate code to provide a more convenient and less expensive forum, particularly for smaller public companies, to adjudicate shareholder litigation. Another thought was tweaking existing economic development incentives to align better with companies on the IPO path. Several companies in our roundtable identified sparse analyst coverage for mid- and small-caps as a major challenge. Without coverage, stock prices are depressed once the attention of an IPO is past. Finding ways to recruit or foster analyst attention would be a game changer, but just how to actually do that is a harder question. Some countries, such as Singapore, have in fact created incentives for institutions to provide coverage for their public companies. It could be worth exploring at the state level. Ironically, perhaps the best thing a community can do is to simply talk about IPOs more. Industry conferences these days will regularly include discussions on M&A exits and access to private capital. But IPO discussions are increasingly rare. It is almost as if the pessimism about being public has become axiomatic, such that few growth-stage companies even consider it an option. Increased dialogue should, if nothing else, shed light on the choice so that companies make informed decisions and policymakers are more aware of what is at stake and what is holding companies back.
June 29, 2026
by Troy M. Keller
