Columbia Law School
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Corporate Governance
Wachtell Lipton Discusses Directors’ Duties in an Evolving Risk and Governance Landscape
The stakes for responsible corporate stewardship have never been higher.
Corporations today account for a greater proportion of our collective productivity than ever before. Of the 100 largest economies in the world, 71 are corporations, and only 29 are countries. …
Do Anti-Pledging Policies Have Unintended Consequences for Corporate Governance?
Many managers receive company stock as compensation and then pledge that stock as collateral for personal loans. The practice is increasingly common, and its potential economic impact is anything but negligible. For example, Larcker and Tayan (2010) document that pledged …
What Comes After Shareholder Primacy? Employee Empowerment
In corporate law, the U.S. academic elite stubbornly clings to shareholder primacy as the foundational principle of the field. The concept is simple, even elegant: Shareholders should be given ultimate control of the corporation because they are entitled to the …
Do Credit Rating Agencies Detect Accounting Frauds?
Accounting fraud imposes severe costs on firms and their stakeholders. Firms at which fraud occurs often have inefficient resource allocation and face higher cost of capital and regulatory penalties. While shareholders suffer the brunt of these damages, frauds can also …
Nuveen Offers 2019 Proxy Season in Review
The 2019 proxy season was marked by an increased willingness among shareholders to hold boards accountable on director elections, say- on-pay, and environmental, social and governance (ESG) shareholder proposals. For example, almost 5 percent of directors received less than 80 …
Blockchain-Based Corporate Governance
Corporate governance is characterized by agency constructs. The agency relationship in modern finance and corporate governance is characterized by attempts to optimize incentives between principals and agents, control costs, minimize information asymmetries, control adverse selection and moral hazard, optimize risk …
Stock-based Compensation, Financial Analysts, and Equity Overvaluation
Stock-based compensation (SBC) is a significant and growing expense for many firms. From fiscal year 2006 to 2018, average SBC has increased steadily from 2.6 percent to 3.8 percent of operating expenses for publicly-traded companies. Despite its importance, however, most …
Exequity Discusses Economic Voodoo and ISS’ Use of Economic Value Added
Institutional Shareholder Services (ISS) recently introduced Economic Value Added (EVA) as its latest approach to measuring company performance. Recent white papers from ISS, authored by Bennett Stewart (ISS Senior Advisor), who, along with former business partner Joel Stern, developed the …
How CEOs’ Experience at Buyout Targets Affects Corporate Policies
Private equity (PE) firms influence their buyout targets in many ways. The literature documents that PE improves target firms’ operational practices, productivity, and innovation while cutting existing jobs and creating new ones. It is far less clear whether and how …
The Goals of the Corporation and the Limits of the Law
What should be the purpose of the public corporation? Over the last few years, that has become an increasingly open and contested question, as evidenced by the recent statements of the corporate sector itself, the practice of B corporations like …
Wachtell Lipton Discusses Stakeholder Governance and the Fiduciary Duties of Directors
There has recently been much debate and some confusion about a bedrock principle of corporate law – namely, the essence of the board’s fiduciary duty, and particularly the extent to which the board can or should or must consider the …
Business Roundtable’s Statement on Corporate Purposes Has Noble Aims but Creates Uncertainty
The Business Roundtable’s controversial new Statement on the Purpose of a Corporation (“Statement”) is a significant corporate governance development that requires thorough board discussion. The Statement will not only affect corporate purposes generally, but also have a very uncertain impact …
Modern ESG Activism and Past Civil Rights Activism Compared
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 …
Richards Kibbe & Orbe Discusses Limited Legal Implications of Business Roundtable Statement
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 …
Are Audit Committees Suffering from Overload?
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 …
Wachtell Lipton Discusses Stakeholder Corporate Governance: Business Roundtable and CII
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 …
How Rank and File Equity Compensation Affects Earnings Management
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 …
Addressing Economic Insecurity: Why Social Insurance Is Better Than Corporate Governance Reform
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 …
Economic Consequences of Corporate Governance Disclosure
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 …