Skechers USA, Inc. (“Skechers” or the “Company”) was accused of using numerous “unfounded claims” in the advertising of its “Shape-ups” line of rocker-bottom shoes. These “unfounded claims” resulted in numerous consumer and personal injury lawsuits and a $40 million settlement with the Federal Trade Commission. Through the diligence of Hynes Keller & Hernandez, and after extensive negotiations, a settlement was reached which directly addresses the reasons the “unfounded claims” were able to be initiated in the first place. For example, the Settlement calls for all significant advertising campaigns to be reviewed by the legal department or outside legal counsel for appropriateness and legal conformity. The Settlement also contemplates the maintenance of a code of business ethics as required by the rules of the New York Stock Exchange and rules and regulations promulgated by the U.S. Securities and Exchange Commission under the direction of the Company’s General Counsel with the assistance of Human Resources Department and continuing periodic business ethics and code of conduct training to Company employees and additional training for managers with functions that require the approval, preparation, execution, or dating of documents. The Settlement also provides for various improvements which support the Company’s compliance procedures, including a requirement that the Head of Internal Audit, who is responsible for reviewing Skechers’ internal controls, report to the Chair of the Audit Committee on an ongoing, real time basis.
Moreover, the Company agreed to measures which strengthen the Board of Directors’ independence, oversight and transparency. These measures include rotation of the lead director position, ensuring the independence of the Board’s committees, written independence guidelines, increased director training and greater access to information for shareholders. As nearly every corporate governance expert has recognized, an independent board of directors and strong audit committee is the bedrock of sound corporate governance and supervision of corporate affairs. See, e.g., Ira M. Millstein & Paul W. MacAvoy, The Active Board of Directors and Performance of the Large Publicly Traded Corporation, 98 Colum. L. Rev. 1283, 1318 (1998) (finding “a substantial and statistically significant correlation between an active, independent board and superior corporate performance”); Beyond “Independent” Directors: A Functional Approach to Board Independence, 119 Harv. L. Rev. 1553, 1553 (2006) (noting that “the need for active, independent boards has become conventional wisdom”).