Sky Blog
The following post comes to us from David A. Katz, a partner at Wachtell, Lipton, Rosen & Katz, and Laura A. McIntosh, a consulting attorney for the firm. The views expressed are the authors’ and do not necessarily represent the … Read more
This Tuesday, May 21, shareholders at JP Morgan Chase & Co. (“JPMorgan”) will vote on whether the bank should separate the roles of chairman and CEO. Currently, Jamie Dimon holds both titles. The impending vote is not binding on the … Read more
As annual meeting season approaches, so too does the first deadline for companies listed on the NASDAQ Stock Market (Nasdaq) to comply with amended compensation committee rules. Traditionally, evaluation of director independence of Nasdaq-listed companies differed for purposes of serving … Read more
China now has the second-largest number of Fortune Global 500 companies in the world. Most of the Chinese companies on the list are state-owned enterprises (sometimes called “SOEs”) organized into massive corporate groups with a central government agency as their … Read more
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, … Read more
The following post comes to us from Professor Mariana Pargendler of the Fundação Getulio Vargas School of Law at São Paulo, Brazil.
Despite prior waves of privatization, state-owned enterprises (SOEs) remain a fixture of the variety of capitalism embraced by … Read more
The Institute For The Fiduciary Standard, a non-profit organization based in Washington, D.C., has created a prize—to be known as the Tamar Frankel Fiduciary Prize—which will be awarded annually to a person who has made a “significant contribution to the … Read more
Equity ownership in the United States no longer reflects the dispersed share ownership of the canonical Berle-Means firm. Instead, in our new working paper, The Agency Costs of Agency Capital: Activist Investors and the Revaluation of Governance Rights, Ron … Read more
In our new paper, The Present and Future of Corporate Governance: Re-Examining the Role of the Board of Directors and Investor Relations in Listed Companies, forthcoming in the European Company and Financial Law Review, we contribute a new … Read more
In recent years, the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have aggressively investigated and enforced both the anti-bribery and accounting provisions of the Foreign Corrupt Practices Act (FCPA). Many of these matters have been the … Read more
This is the heyday of institutional investor activism in proxy contests. Insurgents are running more slates and targeting larger companies. They are also enjoying a higher rate of success: 66% of proxy contexts this year have been at least partially … Read more
Earlier this week, the SEC announced that it had entered into a non-prosecution agreement (NPA) with Ralph Lauren Corporation to resolve an investigation under the Foreign Corrupt Practices Act (FCPA). While the Department of Justice also announced that it had … Read more
The partitioning of businesses into separate legal entities has been the focus of financial and legal study for decades. This literature has looked at the implications of legal separations across various dimensions such as corporate governance, limited liability, tax, and … Read more
Securities analysts play a key role in securities markets, and publicly held companies as a matter of market practice regularly brief them to help them understand company results and business trends. There have been some unfortunate instances, however, in which … Read more
Venture capitalists (VCs) play a significant role in the financing of high-risk, technology-based business ventures. VC exits usually take one of three forms: an initial public offering (IPO) of a portfolio company’s shares, followed by the sale of the VC’s … Read more
In its widely followed Allergan decision, the Delaware Court of Chancery declined to apply collateral estoppel to dismiss a Delaware derivative complaint even though a California federal court dismissed (with prejudice) essentially the same complaint brought by different stockholders. The … Read more
The imbalance in the supply and demand of venture capital of the past few years has led parties to look for new escape routes from the industry. There is the ‘survival of the fittest’ evidence that the number of active … Read more
Yesterday, the Securities and Exchange Commission (SEC) directly addressed the application of Regulation Fair Disclosure (Regulation FD) to corporate use of social media outlets such as Facebook and Twitter. In a Report of Investigation—a format used by the SEC to … Read more
The Dodd-Frank Act gave the SEC the authority to adopt, but did not require it to adopt, a uniform fiduciary standard of conduct for both broker-dealers and investment advisers when providing personalized investment advice about securities to retail customers. On … Read more
Something new and significant is taking shape. For a variety of reasons—the impact of the JOBS Act, the growing popularity of equity private placements, the appearance of new trading markets for venture capital and other non-reporting companies—a new tier of companies is growing rapidly that is composed of issuers that are not “reporting” companies, but that do have a significant number of shareholders. In terms of the size of their shareholder class, these companies overlap with public companies, but they trade in the dark—and actively. More importantly, as their number grows, it is predictable that existing and new trading venues will begin to compete to attract and capture the trading interest in these stocks. This column will call these firms “semi-public companies” to reflect their intermediate status, midway between truly private firms (such as early stage venture capital startups and family-held firms) and public companies. Read more
In the paper, “Management Influence on Investors: Evidence from Shareholder Votes on the Frequency of Say on Pay”, which was recently made publicly available on SSRN, my co-author (David Oesch of the University of St. Gallen) and I … Read more
Plaintiffs’ attorneys have continued to bring, or threaten, litigation against U.S. companies following the filing of their annual proxy statements. These complaints generally allege disclosure deficiencies in connection with the approval of equity compensation plans and/or the advisory shareholder “say-on-pay” … Read more
This week, New York State Comptroller Thomas P. DiNapoli and New York City Public Advocate Bill de Blasio urged the Securities and Exchange Commission to respond to a petition I co-authored with my colleagues John Coffee, Ronald Gilson and … Read more
In our paper, The Evolution of Shareholder Voting Rights: Separation of Ownership and Consumption, which was recently made publicly available on SSRN, we show how the ownership patterns of early business corporations shaped their peculiar governance structure. While the … Read more
The following post comes to us from Trevor Norwitz, a partner at Wachtell, Lipton, Rosen & Katz in New York and a lecturer-in-law at Columbia Law School:
In the upcoming proxy season, shareholders at several major corporations will be asked … Read more
In a 2010 article in the Texas Law Review entitled “Embattled CEOs”, Professors Marcel Kahan and Ed Rock argued that, over the past decade or so, CEOs of US public companies have gradually been losing power to their boards and … Read more
In Kallick v. SandRidge Energy, Inc., the Delaware Court of Chancery, in an opinion by Chancellor Strine, enjoined the incumbent board of SandRidge Energy, which faced a consent solicitation initiated by a large stockholder seeking to de-stagger and replace … Read more
In three relatively low profile decisions issued by the Delaware Court of Chancery in February 2013, the court reached seemingly atypical results given the issued involved and the procedural postures of the respective cases. The first decision was on February … Read more
With the recent increase in activism, some on Wall Street are blaming shareholders for the short-term mentality of corporate boards.
But many of these activists represent a small subset of investors in publicly held companies. As a result, corporate boards … Read more
Delaware dominates the corporate chartering market in the U.S—it is the only state that attracts a significant number of out-of-state incorporations. As a result, incorporation decisions are “bimodal,” with public and private firms typically choosing between home-state and Delaware incorporation.… Read more
My new Essay Should Angel-Backed Start-ups Reject Venture Capital? challenges the conventional wisdom that venture capital is a necessary – and even desirable – source of financing for all start-ups. In particular, this Essay argues that some start-ups that attract … Read more
My draft article, Blocking the Ax: Shielding Corporate Counsel from Retaliation as an Alternative to White Collar Hypercriminalization, recommends that the NYSE and Nasdaq amend their corporate governance listing standards to require that termination of a public company’s general … Read more
More and more companies appear with strange abbreviations behind their business name. Consider Chrysler Group LLC (instead of Inc.) or LVMH Montres & Joaillerie France SAS. Some even speak about the “endangered corporate form” and point to the rise of … Read more
A shareholder typically brings a derivative suit on behalf of a corporation against the company’s current or former officers or directors in one of two contexts: either after the shareholder has demanded that the board cause the company to bring … Read more
With the 2013 proxy season now well underway, two recent decisions emphasize the potential litigation risks public companies face under federal and state disclosure law. These decisions highlight the need for companies to focus on disclosure requirements as they prepare … Read more
In the next few months, thousands of public companies will hold their annual shareholder meetings. I would like to take this opportunity to emphasize the importance of robust proxy disclosure to shareholders and to highlight areas in which the disclosure … Read more
The accepted wisdom is that a lawyer who represents herself—by acting as both a lawyer and a director—has a fool for a client. In our working paper, Lawyers and Fools: Lawyer-Directors in Public Corporations, my co-authors, Lubomir Litov and … Read more
My forthcoming article, Interbank Discipline, draws attention to the important role that banks play monitoring and disciplining other banks. To understand the significance of interbank discipline, the Article proposes a new way of thinking about market discipline more generally. … Read more
Poor corporate governance is a pervasive problem in the charitable nonprofit sector. Prominent examples of mismanagement and abuse include instances of intentional misconduct, such as embezzlement and unauthorized self-dealing, and negligent conduct, such as failure to diversify the organization’s investment … Read more
Last week, Professor Robert J. Jackson, Jr. sat down with Bloomberg Law’s Lee Pacchia to discuss his SEC petition to require public companies to disclose their political spending. The SEC has received more than 300,000 comments on the petition, more … Read more
When a business enterprise is confronted with a situation that suggests that there has been a violation of law, the judgments made at the outset may well be critical to the ultimate outcome. Indeed, poor choices concerning how the matter … Read more
Commissioner Daniel M. Gallagher delivered the below remarks before the Corporate Directors Forum at the University of San Diego, San Diego, California, on January 29, 2013:
Thank you Anne [Sheehan] for your very kind introduction. I am honored to be … Read more
A committee of law professors that I co-chair with Lucian Bebchuk has petitioned the SEC to develop rules requiring public companies to disclose the use of shareholder money on politics. The petition has received unprecedented support, including comments from more … Read more
William Cary’s opinion for the SEC in In re Cady, Roberts & Co. built the foundation on which the modern law of insider trading rests. Today, we have a stable framework of three distinct legal theories—the classical theory, the misappropriation … Read more
Increasing amounts of communications by and relating to companies are taking place through social media. Broadly defined, social media refers to forms of electronic communication through which users share information, ideas and other content (using text, audio, video and images). … Read more
Since 2010, when the U.S. Supreme Court unleashed corporate political spending in Citizens United v. Federal Election Commission, shareholder advocates have been warning of the dire consequences of secret campaign contributions and demanding that corporations reveal their political spending. … Read more
This is the eighth year that we have provided an annual review of key Delaware corporate and commercial decisions. During 2012, we reviewed and summarized over 200 decisions from Delaware’s Supreme Court and Court of Chancery on corporate and commercial … Read more
In 2002, the UK began requiring an advisory shareholder vote on the annual executive and non-executive director compensation practices of UK-incorporated quoted companies (“UK Companies”). Eight years later, in July 2010, the US followed suit when President Obama signed into … Read more
