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 …

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 …

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 Reform in Post-Crisis Financial Firms: Two Fundamental Tensions

By Christopher M. Bruner September 5, 2018 by renholding

The manner in which financial firms are governed directly affects the stability and sustainability of both the financial sector and the “real” economy, as the financial crisis and associated regulatory reform efforts have tragically demonstrated. However, two fundamental tensions continue …

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 …

Wachtell Lipton Discusses UK Corporate Governance Code

By Martin Lipton July 26, 2018 by renholding

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 …

The Consequences of Restatements for Outside Directors

By Daniel Street July 13, 2018 by renholding

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. …

Corporate Social Responsibility v. Corporate Shareholder Responsibility

By Amal P. Abeysekera and Chitru S. Fernando July 9, 2018 by renholding

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 …

SEC Adopts Changes to Disclosure of Funds’ Liquidity Risk

By Securities and Exchange Commission June 29, 2018 by renholding

The Securities and Exchange Commission on June 28, 2018, adopted amendments to public liquidity-related disclosure requirements for certain open-end funds. Under the amendments, funds would discuss in their annual or semi-annual shareholder report the operation and effectiveness of their liquidity

…

How Management Manipulates Voting on Its Own Proposals

By Ilona Babenko, Goeun Choi and Rik Sen June 21, 2018 by renholding

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 …

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 Discusses Labor Department’s Cautionary Tone on ESG-Related Matters

By David M. Silk, Sabastian V. Niles, Alicia C. McCarthy and Carmen X.W. Lu May 8, 2018 by renholding

With shareholder proposals regarding ESG and sustainability matters becoming the most common kind of proposal, proxy advisory firm ISS marketing a new “Environmental & Social QualityScore” product for rating public companies, asset managers developing ESG-related guidelines and voting policies, and …

The Hidden Cost of Meritless Class Action Lawsuits

By Elisabeth Kempf and Oliver Spalt April 30, 2018 by renholding

Close to 40 percent of all companies listed on major U.S. stock exchanges have been targeted by a securities class action lawsuit at least once between 1996 and 2017, according to the Stanford Securities Class Action Clearinghouse. These lawsuits are …

How CEOs’ Personal Finances Affect Their Companies’ Financial Decisions

By Timo P. Korkeamaki, Eva Liljeblom and Daniel Pasternack April 3, 2018 by renholding

A number of recent studies have focused on how the behavior of chief executives affects their firms’ financial decisions. We contribute to this literature by looking at the connections between CEOs’ personal finances and those of their firms. Unique data …

Wachtell Lipton Discusses Investor Engagement in the New Paradigm for Corporate Governance

By Martin Lipton, Steven A. Rosenblum, Karessa L. Cain and Sabastian V. Niles February 13, 2018 by charlesbluesky

The accelerated interest in sustainability, ESG, corporate social responsibility and investment for long-term growth and value creation (the new paradigm) as most cogently exemplified by Value Act’s newly formed Spring Fund focusing on promoting environmental and social goals of the

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Does Conservative Reporting Deter Securities Class Action Lawsuits?

By Michael Ettredge, Ying (Julie) Huang and Weining Zhang February 8, 2018 by renholding

The number of accounting-related class action lawsuits has increased in recent decades, imposing billions of dollars of direct and indirect costs on public companies and, eventually, their shareholders each year. Although accounting theory says that litigation risk generates accounting conservatism …

New Year’s Resolutions for Director Compensation from Investors Bancorp

By Jennifer S. Conway, Edmond T. Fitzgerald, Arthur H. Kohn, Brian D. Robbins and Vanessa C. Richardson February 5, 2018 by renholding

In recent years, shareholder plaintiffs have brought a series of claims before the Delaware Court of Chancery alleging that directors of Delaware companies have abused their discretion in granting themselves excessive equity compensation for their board service. These cases raised …

Wachtell’s Lipton Reviews the State of Play in Activism

By Martin Lipton September 21, 2017 by renholding

As we approach the start of the 2018 proxy season, developments since January 2015 prompt a brief review of the state of play.

There has been no slowdown in the U.S.; there has been a significant increase in other countries.

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The Unethical Leader: Who Follows?

By Eric N. Johnson, Linda Kidwell, D. Jordan Lowe and Philip Reckers March 28, 2017 by renholding

When high-profile cases of fraud make the news, we often focus our attention on the CEO or other C-suite executives, asking what signs were missed and how we might better anticipate who might commit fraud. Academics have researched the characteristics …

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Columbia Law School's Blog on Corporations and the Capital Markets

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