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Corporate Governance
Sullivan & Cromwell Offers Corporate Governance Updates
On October 18, Institutional Shareholder Services Inc. (“ISS”) announced that the comment period for its 2019 benchmark voting policy is open until 5:00 PM ET on November 1, 2018. For U.S. companies, ISS is soliciting comments on proposed changes relating …
The Role of Public Pension Funds in Governance
Public pension funds have great influence over corporate governance because of the size and nature of their portfolios: They manage more than $3 trillion in assets and often invest in a large number of companies. Besides largely unobservable private negotiations, …
Long-Term Economic Consequences of Hedge Fund Activist Interventions
Our new academic study examines the long-term effects of interventions by activist hedge funds. Prior studies document positive equal-weighted long-term returns and operating performance improvements following activist interventions, and typically conclude that activism is beneficial to shareholders. We challenge and …
Going Concern Opinions, Institutional Ownership, and CEO Compensation
Auditors issue going concern opinions when they have substantial doubts about a client’s ability to continue as a going concern for one year beyond the financial statement date. Abundant anecdotal evidence shows that companies that received these opinions went through …
Proposed New Disclosures for Mutual Fund Advisers
According to the Securities and Exchange Commission (SEC) release establishing the Proxy Voting Rule, an investment adviser “is a fiduciary that owes each of its clients duties of care and loyalty with respect to all services undertaken on the client’s …
How Institutional Ownership Affects Insider Trading
Institutional owners have traditionally been thought of as passive investors that have little concern for or influence on corporate policies and decisions. In contrast, recent literature shows that while many institutions are passive in terms of their investment choices and …
Lame Duck CEOs
The process of replacing key individuals is crucial to organizations’ performance. This is as true for presidents of countries as it is for CEOs. When a firm announces the departure of a CEO without announcing a successor, the incumbent CEO …
Don’t Fear California’s New Board Gender Quota
On September 30, 2018, only hours before the deadline, California Gov. Jerry Brown signed bill SB 826, making his state the first in the U.S. to adopt board gender quotas for public companies.
The law requires listed companies headquartered in …
Wachtell Lipton Discusses the State of Play in Activism
As we approach the 2019 proxy season, developments since September 2017 prompt a brief updated review of the state of play.
- The threat of activism remains high, and has become increasingly global.
- Activist assets under management remain at elevated levels,
Sullivan & Cromwell Discusses California’s Female Gender Quotas for Public Companies
On September 30, 2018, Governor Brown of California signed into law a bill, SB-826, to require female representation on the boards of directors of publicly traded companies who identify as being headquartered in the state. SB-826 makes California the first …
Debevoise on Material Omissions in Private Equity Secondary Transactions
As private equity funds approach the end of their lives, a fund’s general partner is often encouraged by the fund’s limited partners and third-party buyers to consider secondary liquidity solutions. Liquidity solutions can involve fund extensions, asset sales to third-party …
Shearman & Sterling on Director Compensation and the Delaware Courts
The Delaware courts have recently rendered a series of decisions, culminating with the Delaware Supreme Court’s December 2017 holding in In re Investors Bancorp, Inc. Stockholder Litigation, No. 169 (Del. 2017) (“Bancorp”), limiting the extent to which the business judgment …
Director Compensation and Related Party Transactions
Related party transactions (RPTs) involve the transfer of resources, services, or obligations between a reporting company under the Securities Exchange Act and a related party (SFAS 57; IAS 24). Some of the highest profile accounting scandals, such as the ones …
Is Shareholder Voting an Effective Corporate Governance Tool?
Proponents of shareholder voting argue that restricting it would reduce the ability of shareholders to hold management accountable. The implication of this argument is that mandating equal voting rights for all shares will benefit shareholders. However, the evidence as to …
Bonfire of the Vanities–2018 Style: The Case of Elon Musk
Elon Musk came close to doing something truly unique. No, not his electric car. Rather, he was about to roll the dice with his shareholders’ equity.
Securities analysts estimate that somewhere between 25 and 35 percent of the value of …
Sullivan & Cromwell Discusses ISS’ 2018 Governance Principles Survey Results
On September 18, 2018, Institutional Shareholder Services (ISS) released the results of the first half of its Annual Policy Survey. The Annual Policy Survey is designed to gather feedback from stakeholders, including institutional investors, companies, corporate directors and other market …
How Corporate Social Responsibility and Influential Institutional Ownership Affect Firm Value
Corporate social responsibility (CSR) is defined as “actions that appear to further some social good, beyond the interests of the firm and that which is required by law” (McWilliams and Siegel, 2001). According to this definition, CSR activities not only …
Corwin at a Crossroads: Could DVMT Stock Be the Tracker Jacker in Dell’s Hunger Games?
Of all the conjured hazards faced by the teenage gladiators in the dystopian novel The Hunger Games, the Tracker Jacker (a genetically engineered wasp) was the most deadly and unpredictable when provoked. Dell Technologies Inc. may soon have to …
Corporate Governance and Countervailing Power
The analysis of corporate governance has been a strikingly one-sided affair. The focus has been almost exclusively on “internal” checks and balances, namely scrutiny of executives by the board of directors and by shareholders. In contrast, mechanisms that can operate …