Board Level Responsibility for Opioid Business Risk Oversight:   

Central to the IOA’s strategy to involve the board in opioid risk oversight, is a shareholder resolution developed by the IOA that asks boards to create a special committee of independent directors to investigate and report to investors how the board is assessing and managing legal, financial, and reputational risks related to its opioid business.  This report includes discussion of how the board receives and monitors information on opioid-related compliance procedures and company investments in anti-diversion measures.  It should also review compensation arrangements for executives, as well as distribution, sales and marketing (if applicable) and managerial workforce, including the presence or absence of negative discretion policies, clawbacks, and incentive metrics tied to sales and compliance.  The report should cover how the board monitors corporate political and lobbying expenditures including contributions and trade association activities related to opioid legislation or regulatory matters.  The committee should have access to independent legal and financial advisors, if needed.  The SEC consistently ruled in favor of shareholders when companies sought to exclude this proposal.  Because the proposals usually received majority support from shareholders - often between 61 and 79% support - many companies decided to settle and produce an oversight report prior to going to a vote.  

Generally, we seek similar recognition of opioid business risk board oversight in the board and relevant committee charters.  In addition to publishing board risk reports, some companies, including Cardinal Health and Assertio Therapeutics have established new board level committees with responsibility for overseeing opioid business risks.  Cardinal’s charter for this new committee is detailed.  As well, chief compliance officers should report directly to the board or a relevant committee of the board to ensure open and independent channels of communication and also to ensure that a management structure for risk oversight is independent of business lines to avoid conflicting incentives.