Is the Cost of Equity Greater than the Risk-Free Rate?

By J.B. Heaton August 8, 2019 by renholding

As a matter of abstract financial-economic theory, the cost of equity is straightforward. It is the minimum expected return investors require to hold the firm’s equity at the current price. Financial economists may disagree on the best way to estimate …

ISS Discusses Director Overboarding: Global Trends, Definitions, and Impact

By Kosmas Papadopoulos August 5, 2019 by renholding

In the 2019 proxy season, “overboarding” became a center-stage issue for many companies and investors. Several large asset managers, including Vanguard, BlackRock, and LGIM, enhanced their voting guidelines to apply stricter criteria, while some directors serving on multiple public company …

SEC Chairman Clayton Speaks to Investor Advisory Committee

By Jay Clayton July 29, 2019 by renholding

Thank you, Anne [Sheehan]. Good morning everyone, and I want to extend a special welcome to our new commissioner, Allison Lee.

I am interested in today’s discussion. I understand the Committee first will be talking about the SEC approach to

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Four Things No One Will Tell You About ESG Data

By Sakis Kotsantonis and George Serafeim July 23, 2019 by renholding

In a recent article, we seek to shed light on several important aspects of measuring and providing data about companies’ performance on environmental, social, and governance (ESG) issues. The article is intended to provide a useful guide for the …

Index Funds and the Cost of Engagement

By Patrick Jahnke June 17, 2019 by renholding

Institutional ownership of companies has grown to the point that institutions today own approximately 80 percent of the market value of U.S. stocks.[1] Recent academic research explores this rising ownership concentration and debates the growing importance of “passive” or “index” …

Institutional Investors, Corporate Governance, and Stewardship Codes

By Simone Alvaro, Marco Maugeri and Giovanni Strampelli June 11, 2019 by renholding

As stewardship by institutional investors is an integral part of an adequate system of corporate governance, the growing diffusion of stewardship codes can be seen as a principal reaction to institutional investors’ reticence in monitoring the companies they invest in. …

SEC Commissioner Jackson Speaks on Final Rules Governing Investment Advice

By Robert J. Jackson, Jr. June 6, 2019 by renholding

Our nation is facing a savings crisis. Many young workers are unable to save at all; half of America’s retirees have saved less than $65,000 and face the terrifying prospect of running out of money in retirement.[1] Every time

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Wachtell Lipton Discusses the Corporate Form for Social Good

By David A. Katz and Laura A. McIntosh May 29, 2019 by renholding

State legislation allowing the establishment of benefit corporations—for-profit companies with a stated public purpose—has become widespread over the past decade. This increasingly available corporate form provides a mandate, and a safe harbor, for corporate leaders to pursue societal good along …

SEC Investor Advocate Talks Investor Issues for 2019

By Rick A. Fleming April 22, 2019 by renholding

Good afternoon. I hope you are enjoying this year’s edition of SEC Speaks, which gives the public a good overview of all the work that is going on at the Commission.[1] In the Office of the Investor Advocate, we

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Disclosure Incentives When Competing Firms Have Common Ownership

By Jihwon Park, Jalal Sani, Nemit Shroff and Hal D. White April 2, 2019 by renholding

Over the past three decades, there has been tremendous change in the ownership of publicly-traded firms in the U.S. Consolidation in the asset management industry and the rise in mutual fund investing have led a small number of institutional investors …

ISS Discusses U.S. Proxy Voting Trends from 2000 to 2018: Environmental and Social Issues

By Kosmas Papadopoulos February 5, 2019 by renholding

Appearances can be very deceiving. Case in point: The high-level summary numbers of voting results over the last 19 years seem to indicate that little has changed regarding proxy voting behavior among investors owning U.S. companies. A simple analysis of …

The Demonization of Dual Class Shares

By Bernard S. Sharfman January 18, 2019 by renholding

Why have some corporate governance scholars (here, here, and here) advocated for imposing various sunset provisions on dual class shares? After all, dual class share structures are simply the result of private ordering, that wonderful freedom …

Activist Shareholders at De Facto Controlled Companies

By Gaia Balp January 16, 2019 by renholding

Activist campaigns are on the rise on both sides of the Atlantic. Even large-cap companies are increasingly targeted by activists—particularly hedge funds—with remarkable success. A big reason for that success is the support that activist proposals attract from traditional institutions, …

Common Ownership: The Investor Protection Challenge of the 21st Century

By Robert J. Jackson, Jr. December 12, 2018 by renholding

Thank you so much, Scott [Hemphill], for that incredibly kind introduction.* It’s a real honor to be here with you—and to be invited to testify before the Federal Trade Commission (FTC). I share your commitment to making sure …

Dissecting the Conundrum of Investing in Hedge Funds Despite High Fees and Mediocre Returns

By Cary Martin Shelby November 29, 2018 by renholding

October 2018 ended with the hedge fund industry suffering its worst monthly decline since September 2011, according to the HFRI Fund Weighted Composite Index. Some commentators are predicting that 2018 will end with the hedge fund industry experiencing its worst …

Wachtell Lipton Discusses Default Activism in the Debt Markets

By Steven A. Cohen, Joshua A. Feltman, Emil A. Kleinhaus and John R. Sobolewski November 26, 2018 by renholding

We have recently seen an increase in contentious disputes, some public and many not, between companies and their debt investors. Clashes between borrowers and their lenders are as old as debt itself, but what we are seeing now is something …

Investor-Paid Credit Ratings and Conflicts of Interest

By Leo Tang, Marietta Peytcheva and Pei Li November 14, 2018 by renholding

Credit ratings provide information regarding a company’s default probability. Ratings are relied upon extensively in regulation and private contracting and play a crucial role in the functioning of the capital markets. However, since the major credit rating agencies (CRAs) operate …

Do Public and Private Firms Invest Differently?

By Laura Kawano, Elena Patel and Nirupama Rao November 2, 2018 by renholding

Equity markets are an important source of capital financing for firms, particularly in the United States. These large, liquid markets channel capital from savers to firms and facilitate corporate investment by distributing risks among many smaller investors. There is concern, …

SEC Commissioner Discusses Improving Information for Investors in the Digital Age

By Kara M. Stein October 26, 2018 by renholding

I last spoke to you in May 2014 about “Building Momentum.”[1] At the time, I was a rookie Commissioner. Now, I stand before you after five years as a Commissioner and over 5,700 votes under my belt. It has

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SEC’s Co-Director of Enforcement Talks About Her Division’s Impact

By Stephanie Avakian September 21, 2018 by renholding

My speech today [1] happens to fall a little less than two weeks before the close of Steve Peikin’s and my first full fiscal year as Co-Directors of the SEC’s Division of Enforcement. In many respects, a year is an

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