Why the SEC Proposal to Regulate Proxy Advisors Is Flawed

By Ken Bertsch February 19, 2020 by renholding

[Editor’s Note: This and the piece that immediately follows offer a point/counterpoint on the SEC’s proxy advisor proposal.] The Council of Institutional Investors opposes the SEC’s proposal to create a new regulatory structure for proxy advisory firms.[1]…

The Results Are in: Global Investor-Director Survey on Climate Risk Management

By The Millstein Center and LeaderXXchange February 14, 2020 by renholding

Institutional investors are increasingly focused on “extra-financial performance” as a predictor of long-term success of companies. Topics like climate change, CO2 emissions reduction, respect for the environment, labour rights, and diversity are more and more factored into investment decisions.

Investors, …

CEO Networks and Shareholder Litigation

By William R. McCumber and Lingna Sun February 11, 2020 by renholding

Academics, notably in sociology and economics, have long understood that social settings are primary drivers of information transmission and economic outcomes, from hiring decisions to product adoption to resource allocation. However, only recently has there been large-sample empirical evidence to …

SEC Chair Clayton Addresses Proposed Order on Access to Equity Market Data

By Jay Clayton January 9, 2020 by renholding

Good morning. This is an open meeting of the U.S. Securities and Exchange Commission on January 8, 2020, under the Government in the Sunshine Act. The Commission today will consider a staff recommendation to issue for public comment a Proposed

…

The Case for Institutional Investors’ Collective Engagements

By Giovanni Strampelli and Gaia Balp November 1, 2019 by renholding

Shareholder cooperation is on the rise as a tool for active corporate ownership and a way to effectively voice concerns about corporate governance and performance. While “wolf packs” of activist hedge funds that aim to bring about significant corporate change …

The Cost to Retail Investors and Public Markets of “Harmonizing” Securities Offering Exemptions

By Erik F. Gerding October 1, 2019 by renholding

In June 2019, the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) issued a Concept Release on the Harmonization of Securities Offering Exemptions (the “Concept Release”), which set forth proposals to expand the …

Institutional Shareholders: Friends or Foes of Banks?

By Emmanuel T. De George, Nayana Reiter, Christina Synn and Christopher D. Williams August 9, 2019 by renholding

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 …

Are Executives Really “Penny Wise and Pound Foolish” About ESG?

By David F. Larcker and Brian Tayan July 26, 2019 by renholding

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 …

Common Ownership Has Not Yet Ushered in an Era of Anticompetitive Behavior

By Andrew Koch, Marios A. Panayides and Shawn Thomas January 24, 2019 by renholding

As mutual funds have become popular with individual investors, the institutions that manage these funds have grown dramatically. Along with the benefit of offering individual investors inexpensive portfolio diversification and engagement in corporate governance, there is mounting concern that the …

How Institutional Ownership Affects Insider Trading

By Stephen A. Hillegeist and Liwei Weng October 18, 2018 by renholding

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 …

Buy-Side Analysts and Earnings Conference Calls

By Michael J. Jung, M.H. Franco Wong and X. Frank Zhang August 29, 2018 by renholding

The role of sell-side equity analysts in the capital markets has been researched extensively by academics over the past several decades. In contrast, due to data limitations, there has been little research on buy-side analysts. Buy-side analysts work for institutional …

How Institutional Investors Gain an Information Advantage: Evidence From Option Backdating

By Wenli Huang, Hai Lu and Xiaolu Wang July 20, 2018 by renholding

Institutional investors are often viewed as informed traders, and individuals attempting to trade in the same market as institutions are likened to “tourists playing poker with professionals in the smoky backroom of a Las Vegas casino.”[1] So how do …

Corporate Governance Consequences of Passive Investing

By Giovanni Strampelli July 19, 2018 by renholding

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 …

The Case for Doing Nothing About Common Ownership of Competing Firms

By Thomas A. Lambert and Michael Sykuta June 20, 2018 by renholding

One of the hottest antitrust topics of late has been institutional investors’ “common ownership” of minority stakes in competing firms. Writing in the Harvard Law Review, Einer Elhauge proclaimed that “[a]n economic blockbuster has recently been exposed”—namely, “[a] small …

Institutional Investor Voting Behavior: A Network Theory Perspective

By Luca Enriques and Sandro Romano May 17, 2018 by renholding

It is received wisdom that institutional investors have insufficient incentives to cast informed votes because they compete on relative performance. If BlackRock invests in the monitoring of one of its portfolio companies, it will become relatively less competitive vis-à-vis the …

Wachtell Lipton Offers Thoughts for Boards of Directors in 2018

By Martin Lipton, Steven A. Rosenblum, Karessa L. Cain, Sabastian V. Niles, Vishal Chanani and Kathleen C. Iannone December 5, 2017 by renholding

As 2017 draws to a conclusion and we reflect on the evolution of corporate governance since the turn of the millennium, a recurring question percolating in boardrooms and among shareholders and other stakeholders, academics and politicians is: what’s next on …

Investor Choice in Global Markets for Securities

By John Armour, Luca Enriques and Martin Bengtzen November 30, 2017 by renholding

In a recent paper, we explore how globalization has affected the operation of securities markets and the challenges this poses for their regulation. The paper is part of the first phase of the New Special Study of the Securities …

How Nonvoting Shares Can Help Promote Efficient Corporate Governance

By Dorothy Shapiro Lund October 4, 2017 by renholding

Companies that go public with multiple classes of shares will be excluded from the major U.S. stock indexes of S&P Dow Jones Indices, the organization announced in July. A few days earlier, FTSE Russell said it would bar dual-class companies …

How Institutional Investors’ Ownership Concentration Affects Corporate Governance

By Patrick Jahnke September 22, 2017 by renholding

Over the past few decades, the ownership of public corporations has been turned on its head. While private individuals owned approximately two-thirds of U.S. equities in 1970, today it is institutional investors like Blackrock, Vanguard, and State Street that control …

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