CEO’s Long Term Relation with Executive Results in Injunction

Relationships are often centeral focus. Relationships with family and friends are typically at the center of many matters and events. There are times, however, when relationships can cause issues and even difficulties. In one case recently settled by the Commission, for example, a relationship was critical. The failure of a senior executive at a company to disclosure a relationship ended with a settled enforcement action. SEC v. Craigie, No. 1:24-cv-7382 (S.D.N.Y. filed Sept. 30, 2024).

Defendant James R. Craigie served as the CEO of public company Church & Dwight Co. Inc., for eleven years, beginning in 2004. He also served as a non-independent member of the Board of Directors beginning in 2007 and continuing until 2019. He was, in addition, a director of several other public companies.

To become an independent director the Board had to assess if Mr. Craigie had any material relationship with the firm. To make this assessment the Board relied primarily on Mr. Craigie. After considering information provided by Mr. Craigie the Board determined in January 2019 that he was independent, effective at the 2020 annual shareholder meeting.

In fact, Mr. Craigie did not disclose that he maintained a close personal friendship with a firm Executive. He also asked Executive not to disclosure their relationship.

In early 2023 the firm learned that Mr. Craigie had a close personal relationship with Executive. The Board determined that he had violated his obligation of candor and confidentiality under the company Code of Conduct. In 2021 and 2022 the firm had represented in its proxy materials that Mr. Craigie was an independent director – it was unaware of his relationship with Executive. The complaint alleges violations of Exchange Act Section 14(a) and Rule 14a-9.

To resolve the matter Defendant Craigie consented to the entry of a permanent injunction based on the Section and Rule cited in the complaint. He also agreed to pay a penalty of $175,000 and the entry of a five-year officer director bar. See Lit. Rel. No. 26145 (Sept. 30, 2024).