The Role of Public Pension Funds in Governance

By Ying Duan, Yawen Jiao and Kunsun Tam October 24, 2018 by renholding

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, …

Going Concern Opinions, Institutional Ownership, and CEO Compensation

By Ning Ren and Yun Zhu October 22, 2018 by renholding

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 …

Wachtell Lipton Discusses the State of Play in Activism

By Martin Lipton and Zachary S. Podolsky October 11, 2018 by renholding

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,

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Is Shareholder Voting an Effective Corporate Governance Tool?

By Cory A. Cassell, Tyler J. Kleppe and Jonathan E. Shipman October 3, 2018 by renholding

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 …

SEC Commissioner Airs Her Beef With Stakeholders

By Hester M. Peirce September 26, 2018 by renholding

Last time I flew to California, the skies were so clear that I was able to keep an eye on the changing landscape below all the way across the country. The vastness and great variety was striking. Having grown up

…

Corporate Governance and Countervailing Power

By Brian Cheffins September 19, 2018 by renholding

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 …

Comparative Corporate Governance

By Ilir Haxhi September 7, 2018 by renholding

By adopting a systematic cross-national comparative approach, my recent study provides an overview of corporate governance (CG) around the world. It takes stock of what we know about the two main CG models, the variations within and across these models, …

The Subversion of Shareholder Democracy and the Rise of Hedge-Fund Activism

By Jang-Sup Shin September 6, 2018 by renholding

Hedge fund activists are technically just minority shareholders, yet they exert enormous influence, often forcing companies to undertake fundamental restructuring and substantially increase stock buybacks and dividends. For instance, Third Point Management and Trian Fund Management, holding only 2 percent …

Corporate Governance—The New Paradigm—A Better Way Than Federalization

By Martin Lipton August 24, 2018 by renholding

While “The Accountable Capitalism Act” introduced on August 15 by Senator Elizabeth Warren contains several very worthwhile provisions, it is premised on the federalization of all public corporations with revenues in excess of $1 billion. Mandatory federal incorporation and the …

How Creditors Affect Corporate Governance

By Tomas Jandik and William R. McCumber August 13, 2018 by renholding

Though the majority of studies in corporate governance focus on the ability of shareholders to advise and monitor firms, debt financing is much more common than equity financing. According to the Thomas Reuters Loan Pricing Corporation, $2 trillion in syndicated …

Are Independent Board Members Necessarily Credible?

By Yvan Allaire August 8, 2018 by renholding

By the late 2000s, independent directors were in the majority on the boards of almost every type of U.S. organization. While this achievement may have improved corporate governance, it was not the panacea that some had anticipated, as subsequent events …

Wachtell Lipton Discusses Gender Diversity and Board Quotas

By David A. Katz and Laura A. McIntosh August 8, 2018 by renholding

California has made headlines this summer with legislative action toward instituting gender quotas for boards of directors of public companies headquartered in the state. The legislation has passed the state senate; to be enacted, it must be passed by the …

How Corporate Governance Affects Mimicking Peers’ Financial Decisions

By Douglas J. Fairhurst and Yoonsoo Nam August 1, 2018 by renholding

Traditional explanations for why companies choose certain financial policies focus on firm-specific factors. For instance, all else being equal, firms with higher tax rates are likely to favor debt financing over equity financing, given the tax advantages of debt. However, …

Where the Fisch, Hamdani, and Davidoff Solomon Theory of Passive Investors Goes Awry

By J.B. Heaton July 25, 2018 by renholding

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 – …

Sullivan & Cromwell Discusses Hot Topics in Corporate Governance

By Sullivan & Cromwell July 16, 2018 by renholding

Corporate Governance, Surveys, Policies and Reports

Lazard Report Finds Increased Shareholder Activism in Q1 2018: Lazard’s Quarterly Review of Shareholder Activism for Q1 of 2018 found increased activism by shareholders in terms of number of campaigns initiated, board seats

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How External Whistleblower Rewards Affect Internal Reporting

By Masaki Iwasaki July 6, 2018 by renholding

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 …

Wachtell Lipton Discusses Boards’ Role in Sustainability and Corporate Social Responsibility

By David M. Silk, David A. Katz, Sabastian V. Niles and Carmen X.W. Lu July 3, 2018 by renholding

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 …

Wachtell Lipton Discusses Shareholder Activism, Corporate Governance, and the Hunt for Long-Term Value

By Sabastian V. Niles June 22, 2018 by renholding

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 …

Does Firing a CEO Pay Off?

By George Alexandridis, John A. Doukas and Christos Mavis June 14, 2018 by renholding

The chief executive officer (CEO) and the top management team are typically viewed as critical to the success or failure of companies. As it is not uncommon for top executives to make value-destroying decisions, the role of internal control mechanisms, …

The Third Stage of Corporate Governance

By James P. Hawley and Jon Lukomnik May 22, 2018 by renholding

The recent announcements from major institutional investors about issues such as gender diversity and climate change seem like reactions to social ills. But they are not unmoored from investing. They are logical expressions of a relatively newly empowered, third phase …

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