UK Takeover Panel Proposes Narrowing the Scope of Companies Subject to the Takeover Code

Posted by Bruce Embley, Simon Toms, and Craig Kelly, Skadden, Arps, Slate, Meagher & Flom LLP, on
Monday, April 29, 2024
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Bruce Embley and Simon Toms are Partners and Craig Kelly is a Counsel at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on a Skadden memorandum by Mr. Embley, Mr. Toms, Mr. Kelly and George Knighton.

On 24 April 2024, the UK Takeover Panel (the Panel) published Public Consultation Paper 2024/1 (the PCP), which proposes a significant change to the applicability of the UK Takeover Code (the Code), by narrowing the scope of companies to which the Code applies.

The amendments proposed by the PCP would, if adopted, result in a significantly reduced number of companies subject to the Code and impact those that are incorporated in the UK but listed on the NYSE or NASDAQ.
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For or against? The year in shareholder resolutions—2023

Posted by Donna F. Anderson and Jocelyn S. Brown, T. Rowe Price, on
Monday, April 29, 2024
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Donna F. Anderson is Global Head of Corporate Governance and Jocelyn S. Brown is Head of Governance for EMEA and Asia-Pacific at T. Rowe Price. This post is based on their T. Rowe Price memorandum.

This is the fourth year that we have published analysis of our voting results on shareholder resolutions on environmental, social, and political topics.[1] Since the 2021 proxy voting season, when these resolutions earned unusually high support, we have observed a bifurcation among proponents of these resolutions, particularly in the U.S. and Canada. Many resolutions are still put forward under a traditional framework of advocating for actions that could increase the value of the corporation or reduce the risks it faces. However, a new approach has taken hold in these markets that we believe is not tethered to value creation for shareholders. We explore the effects of this bifurcation in this year’s report.

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Introduction to SEC v. Panuwat: Understanding “Shadow” Insider Trading

Posted by J.W. Verret (George Mason University), and Greg Lawrence (Lawrence Law), on
Monday, April 29, 2024
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J.W. Verret is an Associate Professor of Law at George Mason University and a Counsel at Lawrence Law, and Greg Lawrence is a Partner at Lawrence Law. This post is based on their recent paper.

In the groundbreaking case SEC v. Panuwat, the Securities and Exchange Commission (SEC) successfully pioneered a legal theory referred to as “shadow” insider trading. This concept extends traditional insider trading paradigms to situations where an individual, privy to material non-public information (MNPI) regarding one company (Company A), capitalizes on that knowledge to trade securities in another company (Company B). The facts of the case against Matthew Panuwat, a former executive at Medivation, illuminate this novel application of the law.

According to the SEC’s complaint, Panuwat, an employee of the pharmaceutical company Medivation, became aware that Medivation would soon be bought out. Just a few minutes after learning that information, Panuwat commenced purchasing out-of-the-money, short-term call options in another company, Incyte Corp. The SEC argued that Incyte was a closely comparable company to Medivation, and therefore, these trades in Incyte constitute illegal insider trading.

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Climate Action 100+ Departures Put Proxy Voting in the Spotlight

Posted by Lindsey Stewart, Morningstar, Inc, on
Sunday, April 28, 2024
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Lindsey Stewart is Director of Investment Stewardship Research at Morningstar, Inc. This post is based on a Morningstar memorandum by Mr. Stewart and River Meng.

Key Takeaways

Manager Exits Grab Headlines Ahead of Proxy Season 

  • Five US asset managers recently decided to exit or amend their participation in the Climate Action 100+ engagement initiative. The initiative has faced accusations of collusive behavior, which it denies.
  • Invesco, JPMorgan, Pimco, and State Street have left the initiative. BlackRock has restricted its participation to its non-US business.
  • The five exited or amended signatories’ support for 20 climate-related resolutions flagged by CA100+ averaged 45%, with a range of 10% to 95%.

Proxy-Voting Records Show No Evidence of Collusion

  • Proxy-voting records for the 20 flagged resolutions in 2023 suggest a wide range of voting approaches among CA100+ signatories, not collusion.
  • The 50 CA100+ signatories we reviewed supported an average 76% of the resolutions. Support by 10 nonsignatories averaged 27%.
  • The 35 asset manager signatories supported an average 74% of the resolutions, ranging from 10% to 100%. Average support by five nonsignatory asset managers in the US stood much lower, at 11%.

Further Evidence of Managers’ US-Europe Divide 

  • The average voting profile of the five exited or amended signatories is very similar to that of other US managers. The 20 US managers we reviewed supported an average 48% of the 20 resolutions.
  • In contrast, 20 European managers we reviewed supported an average 85% of the 20 resolutions.
  • Twenty public pension asset owners in the US and Canada averaged 71% support for the proposals. Even among five nonsignatory asset owners, only two supported less than 60% of the 20 resolutions.

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That Starbucks DEI Case Doesn’t Stand for What You Think It Does

Posted by Scott Shepard, Stefan Padfield, and Ethan Peck (The National Center for Public Policy Research), on
Saturday, April 27, 2024
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Scott Shepard is General Counsel and Director, Stefan Padfield is Deputy Director, and Ethan Peck is an Associate of the Free Enterprise Project (FEP) at The National Center of Public Policy Research (NCPPR). This post was prepared for the Forum by Mr. Shepard, Mr. Padfield, and Mr. Peck.

Shareholders have many reasons to be concerned about the embrace of DEI by the corporations they are invested in. One can draw a direct line from corporate DEI commitments to the staggering losses of Disney, Target, and Bud Light this past summer, as well as the $26 million “reverse discrimination” judgment levied against Starbucks this past year. And there is reason to believe the financial losses attributable to corporate commitments to DEI will only get worse before they get better, because many of the relevant corporate decision-makers appear zealously committed to discriminating on the basis of race and pushing radical gender ideology regardless of the legal and financial risk, while the growing backlash against this radicalism will ensure more cases are filed and more boycotts are implemented. Simply put, the “true believers” will continue to push their radical neo-racism and biology-defying and family-destroying transgenderism until they are forced to stop.

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The CSDDD: How the Phoenix Can Rise from the Ashes

Posted by Robert G. Eccles (Saïd Business School), Richard Gardiner, and Andrea Webster, World Benchmarking Alliance, on
Friday, April 26, 2024
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Robert G. Eccles is a Visiting Professor of Management Practice at Saïd Business School; Richard Gardiner is EU Public Policy Lead, and Andrea Webster is Financial System Transformation Lead at World Benchmarking Alliance. This post was prepared for the Forum by Professor Eccles, Mr. Gardiner, and Ms. Webster.

There was no shortage of disappointment and discourse from all sides during the recent negotiations on the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). Opinions were plentiful, diverse, passionate, and the gloves certainly came off in the final round.

The debate played out amongst ourselves, where on February 5, 2024  one of us (Eccles, a Democrat) waded into the debate with a piece with Dan Crowley (his Republican friend) taking a critical view of CSDDD. It received a number or comments when it was posted on LinkedIn; far more negative ones than positive. Another one of us (Webster, a good friend of Bob’s) bitingly wrote that ‘I think you can do better than this” and “your comment about extraterritorial reach into the US made me snort my cup of tea…the irony.”

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Weekly Roundup: April 19-25, 2024

Posted by the Harvard Law School Forum on Corporate Governance, on
Friday, April 26, 2024

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This roundup contains a collection of the posts published on the Forum during the week of April 19-25, 2024

The Hidden Logic of Shareholder Democracy

Posted by Usha Rodrigues (University of Georgia), on Friday, April 19, 2024
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The Case Against the SEC’s Final Climate Rules Begins in Earnest (and What It Means)

Posted by Paul Davies, Sarah Fortt, and Betty Huber, Latham & Watkins LLP, on Saturday, April 20, 2024
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A New Governance Paradigm is Necessary for AI-Powered Boards

Posted by Alissa Kole, GOVERN, on Sunday, April 21, 2024
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Governance Matters: The Proof Is in the Proxy

Posted by Bob Herr and Ryan Oden, AllianceBernstein, on Monday, April 22, 2024
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Taxation and Corporate Governance

Posted by Reuven S. Avi-Yonah and Ariel Siman (University of Michigan), on Monday, April 22, 2024
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Q1 2024 Review of Shareholder Activism

Posted by Jim Rossman, Chris Ludwig, and Quinn Pitcher, Barclays, on Monday, April 22, 2024
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Alternative Data – A COSO perspective

Posted by Nicolas H.R. Dumont, Dave Navetta and Michael Egan, Cooley LLP, on Tuesday, April 23, 2024
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“ES” Versus “G” in Corporate Governance: You Can’t Have It All

Posted by Patrick Corrigan (University of Notre Dame), on Tuesday, April 23, 2024
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The Gist of Tornetta

Posted by Michael R. Levin, The Activist Investor, on Tuesday, April 23, 2024
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U.S. Supreme Court Rules on Liability for Item 303 Omissions in Shareholder Suits

Posted by Julia A. Malkina, Cason J.B. Reily and Matthew A. Schwartz, Sullivan & Cromwell LLP, on Wednesday, April 24, 2024
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The Limits of Individual Prosecutions in Deterring Corporate Fraud

Posted by Samuel Buell (Duke University School of Law), on Wednesday, April 24, 2024
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Environmental & Social Policy Issues in the 2024 U.S. Proxy Season

Posted by Heidi Welsh, Sustainable Investment Institute, on Wednesday, April 24, 2024
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Issuers see former directors take on activist role

Posted by Will Arnot, Diligent Market Intelligence, on Thursday, April 25, 2024
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Unicorn Shareholder Suits

Posted by Verity Winship (University of Illinois Urbana-Champaign), on Thursday, April 25, 2024
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A Proven Success: The SEC Whistleblower Regime Provides a Roadmap for DOJ’s New Program

Posted by Allison Herren Lee, Kohn, Kohn & Colapinto LLP, on Thursday, April 25, 2024
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A Proven Success: The SEC Whistleblower Regime Provides a Roadmap for DOJ’s New Program

Posted by Allison Herren Lee, Kohn, Kohn & Colapinto LLP, on
Thursday, April 25, 2024
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Allison Herren Lee is a former SEC Commissioner and Of Counsel at Kohn, Kohn & Colapinto LLP. This post is based on her Kohn, Kohn, & Colapinto piece.

The Department of Justice (DOJ) recently announced that it is embarking on a “90-day  sprint” to develop a whistleblower award program. This is a promising and welcome development for fairness and the rule of law in corporate America. Whistleblower programs at other federal agencies have been resounding successes, bolstering enforcement efforts against hard-to-detect crimes by incentivizing those with knowledge of misconduct to come forward.

As DOJ considers how best to construct this new program, it fortunately has a model of success to consider in the programs created under Dodd-Frank at the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).  READ MORE »

Unicorn Shareholder Suits

Posted by Verity Winship (University of Illinois Urbana-Champaign), on
Thursday, April 25, 2024
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Verity Winship is a Professor of Law and Senior Associate Dean for Academic Affairs at the University of Illinois Urbana-Champaign. This post is based on her article forthcoming in the Indiana Law Journal.

Huge private companies like Epic Games or SpaceX are everywhere, creating gaps between the private-market reality and legal structures that were designed for public companies. This major economic shift has created a blind spot in the law and its analysis. Although an emerging literature explores the world of startups, whole areas remain unexamined. A key uncharted area is shareholder litigation: suits brought by investors against the company in which they own shares.

Shareholder litigation against public companies is frequent and expected. Given its importance, academic and industry analysis of shareholder litigation is extensive. To date, however, the analysis has focused almost exclusively on shareholder litigation against public companies. Given the shift from large public to large private companies, it is natural to ask how shareholders sue in the private context. Unicorn Shareholder Suits offers a systematic account of shareholder litigation against the private companies that now dominate the corporate landscape.

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Issuers see former directors take on activist role

Posted by Will Arnot, Diligent Market Intelligence, on
Thursday, April 25, 2024
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Will Arnot is Senior Editorial Specialist at Diligent Market Intelligence (DMI). This post is based on his Diligent memorandum.

A growing number of former directors and founders have turned dissident as of late, returning to companies to push for new strategies and reforms.

Outside of campaigns where former executives are brought forward as nominees, such as Trian Partners’ slate for Walt Disney featuring the media giant’s former chief financial officer Jay Rasulo, U.S.-headquartered companies have seen a considerable increase in campaigns directly led by former affiliates, with seven such advances recorded in 2023, compared to four in 2022.

Europe-based insider campaigns doubled from three to six in the same period, with most demands by former executives and directors focused on refreshing the board.

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