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The Department of Labor Carpet Bombs Investor Protection

By Kurt N. Schacht and Karina Karakulova September 29, 2020 by renholding

The Department of Labor (DOL) has launched a major attack on investor protection and shareholder rights in the last three months. In three successive strikes against long-standing practices of ERISA fiduciaries, the DOL has created disorder and confusion. Its actions …

The Conflict Between BlackRock’s Shareholder Activism and ERISA’s Fiduciary Duties

By Bernard S. Sharfman September 29, 2020 by renholding

BlackRock, an investment adviser that primarily markets and manages index funds to millions of passive investors around the globe, has become a leading shareholder activist. Based on the extremely large amount of assets it has under management ($7.3 trillion), its …

Quinn Emanuel Discusses the Duty of Loyalty for Designated Directors

By Julia Beskin, Molly Stephens, R. Brian Timmons and Jonathan Bunge September 28, 2020 by Nisha Chandra

For the partners and managing directors of private equity firms who have also been designated to serve as directors of one of the firm’s portfolio companies (“designated directors”), navigating potential conflicts of interest is a fact of life. As businesses …

Does Limited Liability Matter?

By Yrjö Koskinen, Nga Nguyen, and J. Ari Pandes September 23, 2020 by renholding

In 1911, Nicholas Murray Butler (president of Columbia University and winner of the Nobel Peace Prize) wrote that the limited liability corporation is the greatest single discovery of modern times. It has since become one of the most common organizational …

Director Overlap: Groupthink versus Teamwork

By Jeffrey L. Coles, Naveen D. Daniel and Lalitha Naveen September 21, 2020 by renholding

Corporate boards are charged with the critical tasks of assessing top management performance and making compensation and dismissal decisions. Moreover, boards serve as a valuable source of advice and counsel to top management. While board members tend to be highly …

Milton Friedman’s Essay and the True Purpose of the Business Corporation

By Martin Lipton September 18, 2020 by renholding

From a practical standpoint, the most significant part of the 1970 Milton Friedman essay in the New York Times was the headline: “The Social Responsibility Of Business Is to Increase its Profits.” For a half-century, that phrase has …

What Blockchain and Artificial Intelligence Won’t Do for Corporate Lawyers

By Jeffrey M. Lipshaw September 15, 2020 by renholding

There have been a number of scholarly paeans to blockchain as a corporate governance tool. It creates a permanent and irreversible chain of custody that can be used for shareholder record keeping and voting, insider trading, corporate disclosures, and trade …

ESG, Common Ownership, and Systematic Risk: How They Intersect

By John C. Coffee, Jr. September 14, 2020 by renholding

This brief column will assert that three developments that seem unrelated are in fact closely related and may soon impact U.S. corporate governance with the force of a freight train. This column summarizes a longer article just posted by this …

Recent Delaware Cases on Managing Conflicts: Board- and Stockholder-Level Measures from MFW Case Law

By Nate Emeritz, Brian Currie and Jason Schoenberg September 11, 2020 by renholding

Delaware courts have recently had opportunities to address the dual conditions for management of controlling stockholder conflict transactions under Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”) and its progeny. That MFW structure provides …

Recent Delaware Cases on Managing Conflicts: Stockholder-Level Measures

By Nate Emeritz, Brian Currie and Jason Schoenberg September 8, 2020 by renholding

Delaware courts have recently had the opportunity to evaluate and discuss management of potential conflicts. That guidance may be particularly salient in the context of insider transactions and down-rounds, which may animate potential conflicts and lead to difficult litigation for …

Recent Delaware Cases on Managing Conflicts: Board-Level Measures

By Nate Emeritz, Brian Currie and Jason Schoenberg September 4, 2020 by renholding

Recent Delaware case law offers useful guidance regarding options for management of potential conflicts. Those cases demonstrate that conflicts can be mitigated by board or stockholder actions and that such measures for managing conflicts should be thoughtfully tailored to the …

SEC Commissioner Peirce Speaks on Corporate Governance

By Hester M. Peirce August 28, 2020 by renholding

We are here today to talk about excellence in corporate governance. Before I begin, I have to remind you that the views I represent are my own and not necessarily those of the Securities and Exchange Commission or my fellow

…

Delaware Law and the “End of History” in Creditor Protection

By Jared A. Ellias and Robert J. Stark August 27, 2020 by renholding

What should a judge do when creditors claim that they were harmed by management and a board’s carelessness or disloyalty? If the creditors were shareholders, the judge would apply fiduciary duty doctrines to determine liability. Yet it’s unclear what legal …

Does Environmental and Social Disclosure Affect Innovation at Companies?

By Brian Gibbons August 26, 2020 by renholding

Companies are typically not compelled to disclose environmental and social (E&S) information because this information does not meet the materiality standard used in many jurisdictions. However, some shareholders have an explicit mandate to screen potential investments based on E&S criteria. …

The Social Voice of CEOs

By Swarnodeep Homroy August 25, 2020 by renholding

CEOs have increasingly been speaking out on social issues that are not directly related to their core businesses. Why are they doing so, and what are the consequences for their companies?

In a new paper, I examine the phenomenon of …

Wachtell Lipton Discusses Executive Compensation Considerations – Looking Ahead and Staying Nimble

By Jeannemarie O'Brien and Adam J. Shapiro August 25, 2020 by renholding

Unpredictability has dominated the economic climate over the last six months and likely will continue in the months ahead. Companies that swiftly and thoughtfully assess and respond to evolving challenges will most effectively manage through the pandemic. This theme applies …

How to Address Nonprofit Governance Failures

By Peter Molk and D. Daniel Sokol August 24, 2020 by renholding

Governance failures at for-profit corporations are the topic of frequent media stories, judicial opinions, and academic analyses. Nonprofit governance, however, has received significantly less attention. This lack of attention is not because nonprofits are immune from governance failures, and recent …

Changing the Guard: Improving Corporate Governance with D&O Insurer Rotations

By Andrew Verstein August 19, 2020 by renholding

Insurance companies try to detect and reduce risk. Health insurers encourage preventative care, fire insurers insist on functioning sprinklers, police insurers investigate alleged misconduct and drop departments that tolerate excessive force, and Hollywood insurers flag risky scenes as requiring stunt …

Wachtell Lipton Discusses the Other “S” in ESG: Building a Sustainable and Resilient Supply Chain

By David M. Silk, David B. Anders, Sabastian V. Niles, Christina C. Ma and Carmen X.W. Lu August 17, 2020 by renholding

The current pandemic, blind spots in information flows through supply lines, the shutdowns in meat processing plants around the world, the ongoing shortages in personal protective equipment and, most recently, the scandal involving British retailer Boohoo, have all underscored the …

The False Dichotomy of Corporate Governance Platitudes

By Jeffrey M. Lipshaw August 12, 2020 by renholding

Last August, the Business Roundtable (an organization of around 200 corporate CEOs) announced it was amending its Principles of Corporate Governance to eliminate the statement that the “primary purpose” of a corporation was to serve its shareholders. The CEOs wanted …

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