Sky Blog
The embrace of shareholder activism as a tool to bring about broad social change is a welcome development. It reflects a trend of outsourcing public functions and values to private actors and stems in part from a frustration with interest …
The Statement on the Purpose of a Corporation by the Business Roundtable, a one-page document signed by nearly all the organization’s member CEOs,[1] has been dramatically portrayed by the media (with the BRT’s encouragement) as a new commitment by …
Audit committee responsibilities have consistently increased, and practitioners have raised concerns that audit committees may be overloaded with duties. For example, in a 2005 interview, one audit committee member noted, “It’s becoming almost excessive. We get press releases almost weekly …
The failure of the Council of Institutional Investors to join the Business Roundtable in rejecting shareholder primacy and embracing stakeholder corporate governance is misguided. The argument that protection of stakeholders other than shareholders should be left to government regulation is …
Equity compensation is a beneficial tool when it motivates employees to engage more intensely in performance-enhancing activities. One negative consequence of equity compensation, however, is that it provides incentives to manage earnings (i.e., to strategically present financial reports or structure …
The question that emerges from proposals to elevate a corporation’s “purpose,”[1] the call for co-determination in Senator Warren’s Accountable Capitalism Act and now the Business Roundtable’s purported elevation of stakeholder interests, is whether corporate governance is capable of …
Related party transactions (RPTs) refer to a transfer of resources, services, or obligations between a reporting entity and a related party and usually offer insiders a way to expropriate wealth from other investors via self-dealing. Both the Financial Accounting Standards …
In an important transcript ruling issued on August 14,[1] the Delaware Court of Chancery upheld the validity and vitality of advance notice bylaw provisions, which govern the timing and disclosure requirements of stockholder nominations of board candidates. The ruling …
In recent years, large asset managers have reached incredible sizes, managing trillions of dollars of assets on behalf of tens of millions of clients. The largest three – BlackRock, Vanguard, and State Street – taken together (the “Big Three”), vote …
Do fiduciary responsibilities have any effect on the behavior of firm insiders? In a series of studies, I find empirical evidence that stronger fiduciary duties reduce managerial risk taking. And that is not all. The evidence indicates that stronger fiduciary …
The ever-evolving challenges facing corporate boards prompt periodic updates to a snapshot of what is expected from the board of directors of a major public company—not just the legal rules, or the principles published by institutional investors and various corporate …
Following the financial crisis, regulators, academics, and practitioners investigated the factors that contributed to the systemic failure of the financial system. An important dimension of systemic risk that was identified is the correlated movements in market prices among banks during …
Institutional investors are howling for US public companies to focus more on the long-term.[1] This is unsurprising. Long-term focused companies produce significantly better results over time, reporting far greater revenue growth with less volatility, far higher levels of economic …
We investigate whether the use of humor during public earnings conference calls influences the content and outcomes of the calls. Earnings releases are key events for corporations and the investors and analysts who follow them. In conjunction with the earnings …
In the 2019 proxy season, “overboarding” became a center-stage issue for many companies and investors. Several large asset managers, including Vanguard, BlackRock, and LGIM, enhanced their voting guidelines to apply stricter criteria, while some directors serving on multiple public company …
Mutual funds own approximately 30 percent of the U.S. equity market, and the Big Three fund families – Blackrock, Vanguard, and State Street – are the largest blockholders in the vast majority of large, publicly traded companies. This has made …
In a recent article, I develop a theory of the corporation as a legal entity based upon the foundation of property law, which I call a “property theory of corporate law.” This theory, unlike the contractarian perspective on the corporation, …
Critics of the shareholder-primacy model assert that it is flawed because it encourages managers to adopt a myopic view of profit generation that forgoes necessary investment and creates externalities borne by society. These critics argue that greater attention should be …
Companies are more concerned with the #MeToo movement than they used to be. Why this is the case is obvious, but much about the topic is not clear. What does this concern lead companies to do? What should this concern …
In a recent article, we seek to shed light on several important aspects of measuring and providing data about companies’ performance on environmental, social, and governance (ESG) issues. The article is intended to provide a useful guide for the …