Empiricism and Experience; Activism and Short-Termism; the Real World of Business

Harvard Law School Professor Lucian Bebchuk believes that shareholders should be able to control the material decisions of the companies they invest in.  Over the years, he has written numerous articles expressing this view, including a 2005 article urging that shareholders should have the power to initiate a shareholder referendum on material corporate business decisions.  In addition to his writings and speeches, Prof. Bebchuk has established and directs the Shareholder Rights Project at Harvard Law School for the purpose of managing efforts to dismantle classified boards and do away with other charter or bylaw provisions that restrain or moderate shareholder … Read more

Editor's Tweet | 2 Comments  
Editor's Tweet: Wachtell Marty Lipton on Empiricism and Experience; Activism and Short-Termism; the Real World of Business

Wachtell Lipton discusses Delaware Court of Chancery Guidance for Dealing with Dissident Directors

In a series of recent rulings, the Delaware Court of Chancery has provided guidance for boards coping with dissident directors.  Kalisman  v. Friedman, C.A. No. 8447-VCL. 

OTK Associates, LLC is the largest stockholder of Morgans Hotel Group Co.  Jason Kalisman is a founding member of OTK and a member of the Morgans board and, since late 2011, was a member of a special committee of the Morgans board tasked with evaluating the company’s strategic alternatives.  In mid-March 2013, OTK announced that it intended to run a proxy contest for control of Morgans at its next annual meeting, then scheduled for … Read more

Editor's Tweet | 1 Comment  
Editor's Tweet: Wachtell Lipton discusses Delaware Court of Chancery Guidance for Dealing with Dissident Directors

Dealing With Activist Hedge Funds

The 2013 proxy season saw a continuance of the high and increasing level of activist campaigns experienced during the last ten years. There have been more than 300 activist attacks on major companies during this period. No company is too big to become the target of an activist, and even companies with sterling corporate governance practices and positive share price performance, including outperformance of peers, may be targeted. Among the major companies that have been attacked are, Apple, Sony, Hess, P&G, McDonald’s, ITW, DuPont, Target, Pepsi and Kraft. There are more than 100 hedge funds that have engaged in activism … Read more

Wachtell Proposes Bylaw to Ward Off Threat of Conflicted Directors

This year, the practice of activist hedge funds engaged in proxy contests offering special compensation schemes to their dissident director nominees has increased and become even more egregious.  While the terms of these schemes vary, the general thrust is that, if elected, the dissident directors would receive large payments, in some cases in the millions of dollars, if the activist’s desired goals are met within the specified near-term deadlines.

These special compensation arrangements pose a number of threats, including:

  • undermining Board prerogatives to set director pay and select the timeframe over which corporate goals are to be achieved;
  • creating a

Read more

Editor's Tweet | 3 Comments  
Editor's Tweet: Wachtell Proposes Bylaw to Ward Off Threat of Conflicted Directors http://wp.me/p2Xx5U-XC

Wachtell Lipton Discusses Rulemaking Petition for Modernization of Section 13 Beneficial Ownership Reporting Rules

NYSE Euronext, the Society of Corporate Secretaries and Governance Professionals and the National Investor Relations Institute have jointly filed a rulemaking petition with the SEC, seeking prompt updating to the reporting rules under Section 13(f) of the Securities Exchange Act of 1934, as well as supporting a more comprehensive study of the beneficial ownership reporting rules under Section 13. The petitioners urge the SEC to shorten the reporting deadline under Rule 13f-1 from 45 days to two business days after the relevant calendar quarter, and also suggests amending Section 13(f) itself to provide for reporting on at least a monthly, … Read more

Editor's Tweet |
Editor's Tweet: Wachtell Discusses a Rulemaking Petition Calling for Modernization of Section 13 Beneficial Ownership Reporting Rules