Wachtell Lipton on Dealing with Activist Hedge Funds and Other Activist Investors

Despite a short dip at the outset of the pandemic, activism has rebounded and now continues at an ever-growing intensity.  As we have previously noted, regardless of industry, size or performance, no company should consider itself immune from activism.  No company is too large, too popular, too new or too successful.  Even companies that are respected industry leaders and have outperformed the market and their peers have been and are being attacked.  And companies that have faced one activist may be approached, in the same year or in successive years, by other activists or re-visited by the prior activist.

Although … Read more

Wachtell Lipton Puts a Spotlight on Boards

The ever-evolving challenges facing corporate boards prompt periodic updates to a snapshot of what is expected from the board of directors of a public company—not just the legal rules, or the principles published by institutional investors and various corporate and investor associations, but also the aspirational “best practices” that have come to have equivalent influence on board and company behavior.  The ongoing coronavirus pandemic and resulting economic and social turbulence, combined with the wide embrace of ESG, stakeholder governance and sustainable long-term investment strategies, are propelling a decisive inflection point in the responsibilities of boards of directors.  The 2016 and … Read more

Wachtell Lipton Discusses Key Corporate Governance Issues for Mid-Year 2021

Last year, we did a mid-year edition of our annual Thoughts for Boards of Directors to highlight key issues and considerations in managing the challenging business environment and profound upheaval caused by the pandemic.  Many of these issues are still top-of-mind as the “new normal” continues to evolve, and will continue to be prominent themes in boardroom discussions. As we emerge from the pandemic, boards and management teams should continue to assess their corporate purpose, strategy, risk management procedures, and board committee structures to optimize their ability to deal with the ever-proliferating number and complexity of business risks and opportunities … Read more

Wachtell Lipton Discusses Investor Engagement in the New Paradigm for Corporate Governance

The accelerated interest in sustainability, ESG, corporate social responsibility and investment for long-term growth and value creation (the new paradigm) as most cogently exemplified by Value Act’s newly formed Spring Fund focusing on promoting environmental and social goals of the companies in which it invests; by the promotion by the World Economic Forum of “The New Paradigm: A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth;” by the creation of the Investors’ Stewardship Group and its issuance of its principles for stewardship which embrace ESG and long-term investment; and, finally,

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Wachtell Lipton Offers Thoughts for Boards of Directors in 2018

As 2017 draws to a conclusion and we reflect on the evolution of corporate governance since the turn of the millennium, a recurring question percolating in boardrooms and among shareholders and other stakeholders, academics and politicians is:  what’s next on the horizon for corporate governance?  In many respects, we seem to have reached a point of relative stasis.  The governance and takeover defense profiles of U.S. public companies have been transformed by the widespread adoption of virtually all of the “best practices” advocated to enhance the rights of shareholders and weaken takeover defenses.

While the future issues of corporate … Read more

Wachtell Lipton discusses 2015 Corporate Governance Trends

Some Thoughts for Boards of Directors in 2015

The challenges that directors of public companies face in carrying out their duties continue to grow. The end goal remains the same, to oversee the successful, profitable and sustainable operations of their companies. But the pressures that confront directors, from activism and short-termism, to ongoing shifts in governance, to global risks and competition, are many. A few weeks ago we issued an updated list of key issues that boards will be expected to deal with in the coming year (accessible at this link: The Spotlight on Boards). Highlighted below are a few … Read more

ISS Publishes Guidance on Director Compensation (and Other Qualification) Bylaws

In the latest instance of proxy advisors establishing a governance standard without offering evidence that it will improve corporate governance or corporate performance, ISS has adopted a new policy position that appears designed to chill board efforts to protect against “golden leash” incentive bonus schemes.  These bonus schemes have been used by some activist hedge funds to recruit director candidates to stand for election in support of whatever business strategy the fund seeks to impose on a company.

In its new FAQ, ISS warns that if a board adopts “restrictive director qualification bylaws” designed to prohibit “golden leashes” without submitting … Read more

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Wachtell Lipton on ISS Addressing Dissident Director Compensation Bylaw

ISS Proxy Advisory Services recently recommended that shareholders of a small cap bank holding company, Provident Financial Holdings, Inc., withhold their votes from the three director candidates standing for reelection to the company’s staggered board (all of whom serve on its nominating and governance committee) because the board adopted a bylaw designed to discourage special dissident compensation schemes.  These special compensation arrangements featured prominently in a number of recent high profile proxy contests and have been roundly criticized by leading commentators.  Columbia Law Professor John C. Coffee, Jr. succinctly noted “third-party bonuses create the wrong incentives, fragment the board and … Read more

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

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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

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