Dodd-Frank and the conflict minerals rule: this new regulatory initiative may affect about 6,000 companies in the United States and abroad. What boards need to know, and why they need to act now.

• Author: Low, Jim
• Position: INFORMATION FOR THE BOARD

COMPLY? Don't comply? Wait and see? It is certainly an important moment for companies as they consider how to comply with the recently challenged Conflict Minerals provision of the Dodd-Frank Act. On October 19, the U.S. Chamber of Commerce and the National Association of Manufacturers filed a lawsuit seeking to stop or modify the Securities and Exchange Commission's Conflict Minerals rule adopted in August.

"Petitioners request that this rule be modified or set aside in whole or in part," the two groups said in their filing. In a statement, they said the business community "understands the seriousness of the strife occurring in the Democratic Republic of Congo ... However, the final conflict minerals rule imposes an unworkable, overly broad and burdensome system that will undermine jobs and growth and may not achieve Congress's overall objectives."

Court challenge aside, we believe there are a number of good reasons for moving forward with a strategy to address the conflict minerals issue. For one thing, these issues speak directly to a board director's core responsibilities, which include protecting the company's brand and image and ensuring that investor value is maintained. And carrying out these responsibilities could potentially be quite beneficial to a company's business operations when coupled with the compliance timetable.

Conflict Minerals: A brief history

If you are not familiar with the Conflict Minerals rule, here's a brief overview. 'When Congress wrote the Dodd-Frank Act, it included several "miscellaneous" provisions, including a provision dealing with minerals exported from the war-torn Democratic Republic of the Congo (DRC) and neighboring countries. Congress created the provision because of concerns that these minerals are helping to finance conflict in the region and are contributing to a humanitarian crisis. Lawmakers believe that requiring companies to disclose their use of these minerals will provide transparency for investors and could, through that transparency, ultimately help curb the violence.

A large number of companies will be affected by the Conflict Minerals provision, because these minerals--commonly referred to as 3TG, for tin, tantalum, tungsten and gold--are used in a wide range of industries, including electronics and communications, aerospace and automotive, jewelry, health care devices, and diversified industrial manufacturing. The SEC estimates it may affect about 6,000 companies in the United States...