BulletProofBlog the blog on crisis communications

On Monday, Federal District Court Judge Jed Rakoff rejected a proposed $33 million settlement between Bank of America and the Securities and Exchange Commission (SEC) as "neither fair, nor reasonable, nor adequate" in addressing alleged failures to disclose material shareholder information about the bank' s 2008 purchase of Merrill Lynch. Yesterday afternoon, the bank received more bad news in the form of subpoenas from New York Attorney General Andrew Cuomo for members of its board of directors to testify under oath.

Now, five Bank of America directors (the rest are likely soon to follow) will have to testify as to whether they knowingly withheld information from the marketplace about the mounting losses and massive bonuses at Merrill prior to a December 2008 shareholder vote to approve the acquisition. It seems that Judge Rakoff and Attorney General Cuomo want to be part of the trend toward a tougher, no-nonsense SEC - and be part of the process to help determine whether or not investors are being sufficiently protected. Taken together, these events (and those that will surely follow) should send chills down the spine of all corporate directors.

As adversaries seek to paint board members as either asleep at the switch or willing to pull the wool over investors' eyes, directors who find themselves in the spotlight - as well as those who wish to avoid it in the future - have a continuing need to be seen and heard making shareholder protection their top priority. They must not only embrace compliance, they must articulate the specific ways in which they are leading reforms that put investors first.

Regulators, prosecutors, and the courts have now made it clear that they will accept nothing less.

Michael W. Robinson is Senior Vice President of Corporate and Finance at Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog.