Capitalism is abundant in contradictions that result in the production of crises. During such crises capital goes through devaluations that give rise to unemployment, bankruptcies and income inequality. The ability of a nation to resist the forces of devaluation depends on the array of institutional or spatio-temporal fixes it possesses, which can buffer the effects of the crisis, switch the crisis to other nations or defer its effects to the future. Corporate governance configurations in a given social order can function as institutional or spatio-temporal fixes provided they are positioned within an appropriate institutional environment that can give rise to beneficial complementarities.
Archive for the ‘Comparative Corporate Governance & Regulation’ Category
Amid the recent uptick in U.S. IPO transactions to levels not seen since the heady days of 1999 and 2000, Davis Polk’s pipeline of deals remains robust, leading us to believe that strength in the U.S. IPO market will continue in the near future. With ongoing pressure on companies that are past the IPO stage to update or modify their corporate governance practices to align with the views of some shareholders and proxy advisory groups, we thought this would be a good time to review corporate governance practices of newly public companies to see if they have also shifted in recent years. Our survey is an update of our October 2011 survey and focuses on corporate governance at the time of the IPO for the 100 largest U.S. IPOs from September 2011 through October 2013. Results are presented separately for controlled companies and non-controlled companies in recognition of their different governance profiles.
Significantly expanding on the data in the Fenwick Corporate Governance Survey (discussed on the Forum here), Fenwick has published the first survey to analyze gender diversity on boards and executive management teams of companies in the technology and life science companies included in the Silicon Valley 150 Index (SV 150) compared to the very large public companies included in the Standard & Poor’s 100 Index (S&P 100).  The Fenwick Gender Diversity Survey analyzes eighteen years of public filings regarding boards and management teams—beginning with the 1996 proxy season and ending with the 2013 proxy season—to better understand changes in the leadership of some of our most important companies, and the gradual gender diversity improvements taking place. The 70-page report includes detailed analysis of:
Among the many legalese-heavy paragraphs appearing under the “Miscellaneous” heading at the back of transaction agreements is a section that stipulates the laws of the state that will govern the purchase agreement as well as disputes relating to the deal. Often, it is coupled with a section that dictates which courts have jurisdiction over these disputes. While the state of incorporation or headquarters of one or both parties is sometimes selected, anecdotal as well as empirical evidence suggests that a healthy majority of larger transactions choose Delaware or New York law. Reasons cited include the significant number of companies incorporated in Delaware, the well-developed and therefore more predictable legal framework in these jurisdictions, the sophistication of the judiciary in these states, the perception of these being “neutral” jurisdictions in cases where each party might otherwise favor a “home” state, and the desired alignment with the governing law of related financing documents (usually New York).
“Leximetrics,” which involves quantitative measurement of law, has become a prominent feature in empirical work done on comparative corporate governance, with particular emphasis being placed on the contribution that robust shareholder protection can make to a nation’s financial and economic development. Using this literature as our departure point, we are currently engaging in a leximetric analysis of the historical development of U.S. corporate law. Our paper, Law and History by Numbers: Use, But With Care, prepared for a University of Illinois College of Law symposium honoring Prof. Larry Ribstein, is part of this project. We identify in this paper various reasons for undertaking a quantitative, historically-oriented analysis of U.S. corporate law. The paper focuses primarily, however, on the logistical challenges associated with such an inquiry.
Since 2003, Fenwick has collected a unique body of information on the corporate governance practices of publicly traded companies that is useful for Silicon Valley companies and publicly-traded technology and life science companies across the U.S. as well as public companies and their advisors generally. Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100) and the high technology and life science companies included in the Silicon Valley 150 Index (SV 150).  In this report, we present statistical information for a subset of the data we have collected over the years. These include:
- makeup of board leadership
- number of insider directors
- gender diversity on boards of directors
- size and number of meetings for boards and their primary committees
- frequency and number of other standing committees
- majority voting
- board classification
- use of a dual-class voting structure
- frequency and coverage of executive officer and director stock ownership guidelines
- frequency and number of shareholder proposals
- number of executive officers
Paul Hastings is pleased to present the third edition of “Breaking the Glass Ceiling: Women in the Boardroom,” a comprehensive, global survey of the way different countries address the issue of gender parity on corporate boards. This edition is a supplement to our full 2012 report, and provides updates to jurisdictions with notable developments over the past 12 months, as well as five new jurisdictions: Austria, Denmark, Finland, India, and Sweden.
Given the dynamism and evolution of this issue, we have developed an interactive website dedicated to providing the most current information and developments on the issue of diversity on corporate boards. Included are details about the legislative, regulatory, and private sector developments and trends impacting the representation of women on boards in countries around the world. In addition, there are interviews with corporate executives and directors as well as individuals who are making strides in addressing this issue—whether at their own companies, within their industries, or as a thought leader. We are honored to share the insights of three women who have been, and are today, pioneers in their own right and have lent their voices and efforts to address this issue:
The US and EU rules implementing Basel III follow many aspects of Basel III closely, but there are major differences in approach in several key areas. Financial institutions have been engaged in a “race to the top” to show strong capital ratios but rules on leverage appear to be the most challenging and may require significant business restructuring. The interplay between the US and EU implementation of Basel III and the gradual “phase in” of certain rules, particularly on liquidity and leverage, will have a profound impact on the relative competitiveness of relevant US and EU financial institutions. This client publication, and the accompanying US/EU comparison and summary table, highlight points of international consistency and divergence.
Basel III establishes a new set of global standards for capital adequacy and liquidity for banking organizations. Although principally aimed at banks, these standards also apply to certain other types of financial institution (e.g., EU investment firms) as well. The Basel Committee on Banking Supervision (the “Basel Committee”) developed Basel III to supplement and, in certain respects, replace, the existing Basel II standards, the composite version of which was issued in 2006 as an update to Basel I.  The core elements of Basel III were finalized at the international level in 2010 and implementing rules have now been issued in 25 of the 27 jurisdictions that comprise the Basel Committee. 
Since 2001, eight stock exchanges around the world have launched corporate governance indices (CGIs), sometimes as part of a broader environment, social, and governance (ESG) initiative. The comprehensive analysis of these indices is presented in our World Bank/IFC study: “Raising the Bar on Corporate Governance – A Study of Eight Stock Exchanges Indices”. The study is the first of its kind, and it reveals that CGIs may have a positive impact in enhancing legal and regulatory frameworks by contributing to the development of objective and measurable governance benchmarks. The study also shows that CGIs offer companies an opportunity to differentiate themselves in the market and be more attractive to foreign and domestic capital; and, ultimately, CGIs incentivize companies to adopt better governance practices. Nevertheless, as the process for vetting companies to access the indices continues to evolve, the scrutiny of underlying methodologies, the disclosure of company ratings or company self-assessments, and the on-going monitoring process have still room to improve.
In our paper, Seasoned Equity Offerings, Corporate Governance, and Investments, forthcoming in the Review of Finance, we assess how the strength of governance affects investor confidence about management’s intended uses of the proceeds from SEOs. Our primary tests are conducted using difference-in-differences approaches using the staggered enactments of business combination statutes (BCS) as an exogenous shock weakening external pressure for good governance from the market for corporate control.
These tests are supplemented by two additional analyses, one relying on shareholder-value-reducing acquisitions as an ex post proxy for weak governance; the other relying on top management’s firm-related wealth sensitivity to shareholder value as a proxy for the strength of internal governance. These empirical analyses cover different sample periods spanning 1982 through 2006. Investor reaction to SEOs is positively and significantly related to the strength of governance regardless of which empirical strategy we use and which time period we examine.
The economic magnitudes of governance impacts are surprisingly large, explaining much of the negative stock price reactions to the announcement of SEOs. Absent secondary offerings, investors’ main concern with SEOs is whether management will use the proceeds productively or wastefully. Good governance enhances investor confidence, helping firms raise external equity at lower costs.