Sky Blog
Much of the discourse on income inequality between ordinary workers and top executives concentrates on a ratio of chief executive officer (CEO) compensation to average employee compensation. The business strategy, organizational structure, and size of a firm can influence the …
The Financial Reporting Council on July 16 issued a revised corporate governance code and announced that a revised investor stewardship code will be issued before year-end. The code and related materials are available at www.frc.org.uk.
The revised code contains …
President Reagan once said, “I’ve heard that hard work never killed anyone, but I say why take the chance?” In a recent paper, professors Jill Fisch, Assaf Hamdani, and Steven Davidoff Solomon (hereafter “FHDS”) argue that passive investors – …
The popularity of index funds, which automatically track an index of stocks, is continuing to grow in the U.S, and, albeit less intensely, in the EU. Due to the high concentration of the index funds industry, the exponential rise of …
Clawback provisions authorize firms to recoup compensation from executives upon the occurrence of financial restatements or executive misbehavior. The first clawback provision in U.S. federal law was Section 304 of the Sarbanes-Oxley Act of 2002 (SOX 304). SOX 304 requires …
A fundamental question in corporate finance is how mergers and acquisitions create value. Possibilities include generating economies of scale or scope, increasing managerial efficiency, improving production techniques, or strengthening market power. Synergies are a leading motive for doing mergers, but …
In a new paper, we seek to fill a gap in research on the possible benefits of dual class share structures and how they might promote innovation. We start with a bit of history.
Shareholder democracy has been fundamental to …
Serving on a public company’s board of directors carries responsibilities and risks as well as benefits for directors. If directors do not carry out their duties effectively, they risk damaging their reputation, losing their board seats, and facing shareholder lawsuits. …
Whether corporate social responsibility (CSR) is beneficial to shareholders remains a topic of considerable debate. Recent studies suggest that some socially beneficial corporate expenditures (e.g., to reduce environmental harm and thereby the firm’s risk exposure) create value for shareholders. In …
Does paying employees for blowing the whistle on corporate crime to regulators discourage internal reporting and undermine corporate governance? The answer is not as simple as it might seem. My research shows that, as the amount of reward increases, the …
Beginning at least as far back as Professor William Carey’s famously withering 1974 Yale Law Journal article about Delaware’s “enabling” of bad corporate actors, critics of the state’s corporate jurisprudence have alluded to a “race to the bottom” in which …
In light of evolving—and sometimes actively debated—perspectives on the role of public companies with respect to sustainability, corporate social responsibility and other ESG matters (e.g., Barron’s recent report on Sustainable Investing), we are providing a high-level overview …
Short-termism is a loaded phrase in debates over investment time horizons, often used to criticize investors and corporate managers deemed overly focused on near-term gains at the expense of long-term value. One argument is that U.S. mutual funds, as significant …
On April 3, 2018, the Swedish online music company Spotify Technology disrupted the traditional initial public offering (IPO) marketplace when it directly listed its shares on the New York Stock Exchange (NYSE) under the ticker symbol “SPOT.” With a valuation …
As the spotlight on boards, management teams, corporate performance and governance intensifies, as articles like the Bloomberg and Fortune profiles of Elliott Management (“The World’s Most Feared Investor—Why the World’s CEOs Fear Paul Singer” and “Whatever It Takes to Win—How …
Shareholders can generally affect the decisions of companies in two ways: through voice (voting) and through exit (selling their shares). In a new paper, “Management (of) proposals,” we use shareholder voting records on management proposals from 2003 to …
There are now more than twice as many entities formed in Delaware as LLCs and other alternative entities as are formed as corporations. Private equity funds and hedge funds often are formed as LLCs or limited partnerships to take advantage …
Firms generate profits through investments in physical and human capital. In legal regimes that recognize property rights, the firm generally has full ownership over its physical capital, as well as the right to future cash flows generated by these assets. …