Harvard Convenes the Corporate Governance Roundtable

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday March 23, 2015 at 9:15 am
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The Harvard Law School Program on Corporate Governance and the Harvard Law School Program on Institutional Investors convened the Harvard Roundtable on Corporate Governance last Wednesday, March 18. The event brought together for a roundtable discussion 75 prominent experts with a wide range of perspectives on this subject, including those of investors, issuers, advisors, and academics. Participants in the event, and the topics of discussion, are set out below.

The Roundtable, which was co-organized by Lucian Bebchuk, Stephen Davis, and Scott Hirst, was sponsored by a number of co-sponsors (listed here), the supporting organizations of the Program on Corporate Governance (listed on the program site here), and the institutional members of the Harvard Institutional Investor Forum (listed here).

The Roundtable sessions focused on board composition, and other current issues in corporate governance. The Roundtable began with discussion of board composition issues. The participants discussed a variety of issues on the topic, including director experience and skills, director tenure and age, board refreshment, board diversity and board evaluations. The Roundtable then moved to a discussion of proxy access and other current issues in corporate governance, and engagement between issuers and investors on such issues.

The participants in the Harvard Roundtable on Corporate Governance included:

…continue reading: Harvard Convenes the Corporate Governance Roundtable

SEC Charges Schedule 13D Filers for Untimely Disclosure

Posted by David A. Katz, Wachtell, Lipton, Rosen & Katz, on Monday March 23, 2015 at 9:09 am
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Editor’s Note: David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz specializing in the areas of mergers and acquisitions, corporate governance, and complex securities transactions. This post is based on a Wachtell Lipton memorandum by Mr. Katz and Alison Z. Preiss.

The Securities and Exchange Commission announced last week that it had charged eight directors, officers and major stockholders for failing to timely disclose steps taken to take their respective companies private in their beneficial ownership reports on Schedule 13D. The orders issued by the SEC indicate the SEC staff became aware of the violations in the course of their review of proxy and Schedule 13E-3 transaction statements, which described the steps taken in the required disclosures regarding the background of the transactions. The orders note that emails and other contemporaneous communications clearly indicate the steps taken that had not been properly disclosed. The orders issued by the SEC (to which the offending parties consented) resulted in cease-and-desist orders and payment of civil penalties.

…continue reading: SEC Charges Schedule 13D Filers for Untimely Disclosure

Key Points From the 2015 Comprehensive Capital Analysis and Review (CCAR)

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday March 22, 2015 at 9:05 am
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Editor’s Note: The following post comes to us from Dan Ryan, Leader of the Financial Services Advisory Practice at PricewaterhouseCoopers LLP, and is based on a PwC publication by Mike Alix, Steve Pearson, and Armen Meyer.

The 2015 stress test results published on March 11th as part of the Federal Reserve’s (“Fed”) CCAR follow last week’s release of Dodd-Frank Act Stress Test (“DFAST”) results. [1] CCAR differs from DFAST by incorporating the 31 participating bank holding companies’ (“BHC” or “bank”) proposed capital actions and the Fed’s qualitative assessment of BHCs’ capital planning processes. The Fed objected to two foreign BHCs’ capital plans and one US BHC received a “conditional non-objection,” all due to qualitative issues.

…continue reading: Key Points From the 2015 Comprehensive Capital Analysis and Review (CCAR)

The Role of Academics and Industry in Improving Equity Market Structure

Posted by Michael S. Piwowar, Commissioner, U.S. Securities and Exchange Commission, on Saturday March 21, 2015 at 9:29 am
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Editor’s Note: Michael S. Piwowar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Piwowar’s recent remarks at the University of Notre Dame, Mendoza College of Business, Center for the Study of Financial Regulation; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Piwowar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today [March 13, 2015], I want to focus my remarks on the equities markets, and specifically equity market structure. Although it may be hard for some of you in this room to believe, in the 20 months since I began this job, some have suggested that I am a so-called “market structure expert.” While such comments are certainly flattering, I cannot accept the compliment. Of course, my academic research, my private and public sector experience, and my current role as a Commissioner at the Securities and Exchange Commission (“SEC” or the “Commission”) have all given me unique insights into the functioning of our equities markets. However, like many people in this room, I still consider myself a “student of markets.” With so many issues to examine and debate, and the continued evolution of the financial markets, I think we can agree there is more for all of us to observe and learn.

It has been fifteen months since I gave my first speech on equity market structure. Both before and since, my colleagues at the Commission have kept the issue of market structure in the forefront through their own public remarks. Congress also has been expressing keen interest in equity market structure, shining a bright light on the issue. And we have had some unsolicited prompting by a bestselling author, who, to put it lightly, does not have flattering things to say about the current state of the equity markets in what many refer to as simply “The Book.” Given all of this attention, I am frankly disappointed that we at the SEC have accomplished very little.

…continue reading: The Role of Academics and Industry in Improving Equity Market Structure

A Few Observations on Shareholders in 2015

Posted by Mary Jo White, Chair, U.S. Securities and Exchange Commission, on Friday March 20, 2015 at 9:03 am
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Editor’s Note: Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s recent address at Tulane’s 27th Annual Corporate Law Institute; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today [March 19, 2015], I will share a few observations on three specific areas: the current state of shareholder activism; the shareholder proposal process; and fee-shifting bylaws. I know your next two panels take up aspects of these important topics, but I think the space is lively and big enough for all of us to comment.

The Current Activism Landscape

There are different views on what is meant by “shareholder activism,” but just the word “activism” triggers an adverse reaction from many companies. Reflexively painting all activism negatively is, in my view, using too broad a brush and indeed is counterproductive. To me, the term activism captures the range of efforts by investors to influence a company’s management or decision-making. Some of it is constructive. In certain situations, activism seeks to bring about important changes at companies that can increase shareholder value. Now, some of you may find the juxtaposition of the word “activism” with “shareholder value” does not comport with your sense of reality. Some of you also believe that activists are not interested in increasing long-term value for shareholders and other stakeholders. Still others will assert that activists are simply short-term traders looking to make a quick dollar. I did say this was a lively topic with many different views.

…continue reading: A Few Observations on Shareholders in 2015

Delaware Innovates to Create a World-Class Arbitration Regime

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday March 19, 2015 at 9:08 am
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Editor’s Note: The following post comes to us from Greg Varallo, Director and Executive Vice President at Richards, Layton & Finger. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On March 11, 2015, the Delaware State Bar Association gave its formal approval to HB 49, which was filed yesterday in the Delaware Legislature. If passed by the Legislature, the bill, which bears the title the Delaware Rapid Arbitration Act, will establish Delaware as a cutting-edge seat for business arbitrations. Building on the best of the state’s earlier experiment with judicially annexed arbitration, the new legislation was crafted with extensive consultation and input from constituencies around the US and internationally. One thing became clear as a result of those consultations: businesses and their advisors are alarmed at the marked drift in arbitration practice away from timely, efficient dispute resolution.

…continue reading: Delaware Innovates to Create a World-Class Arbitration Regime

Correcting Corporate Benefit: Curing What Ails Shareholder Litigation

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday March 19, 2015 at 9:05 am
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Editor’s Note: The following post comes to us from Sean J. Griffith, T.J. Maloney Chair in Business Law at Fordham University School of Law, and is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Sometimes the remedy is worse than the disease. This, it seems, is the implicit view of the Delaware State Bar Association’s Corporation Law Council (the “Council”) with regard to fee-shifting in shareholder litigation. The Council’s second proposal on fee-shifting, circulated in early March 2015, [1] is much like their first, circulated in May 2014 in the wake of ATP Tour v. Deutscher Tennis Bund. [2] Both would prevent corporations from seeking to saddle shareholders with the cost of shareholder litigation by means of a fee-shifting provision, whether adopted in the charter or the bylaws.

…continue reading: Correcting Corporate Benefit: Curing What Ails Shareholder Litigation

When Executives Fail: Managing Performance on the CEO’s Team

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday March 18, 2015 at 9:02 am
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Editor’s Note: The following post comes to us from Mark Nadler, Principal and co-founder of Nadler Advisory Services, and is based on a Nadler white paper.

Picture, if you will, the chief executive officer of a Fortune 500 company slumped over a conference table, holding his head in his hands, anguishing over whether the time had come to pull the plug on one of his most senior executives. “Tell me,” he asks in despair, “is it this hard for everybody?”

Yes, it is.

Of all the complex, sensitive, and stressful issues that confront CEOs, none consumes as much time, generates as much angst, or extracts such a high personal toll as dealing with executive team members who are just not working out. Billion-dollar acquisitions, huge strategic shifts, even decisions to eliminate thousands of jobs—all pale in comparison with the anxiety most CEOs experience when it comes to deciding the fate of their direct reports.

To be sure, there are exceptions. Every once in a while, an executive fouls up so dramatically or is so woefully incompetent that the CEO’s course of action is clear. However, that’s rarely the case. More typically, these situations slowly escalate. Early warning signs are either dismissed or overlooked, and by the time the problem starts reaching crisis proportions, the CEO has become deeply invested in making things work. He or she procrastinates, grasping at one flawed excuse after another. Meanwhile, the cost of inaction mounts daily, exacted in poor leadership and lost opportunities.

…continue reading: When Executives Fail: Managing Performance on the CEO’s Team

SEC Enforcement Developments in 2014, and a Look Forward

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday March 18, 2015 at 9:00 am
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Editor’s Note: The following post comes to us from Bill McLucas, partner and chair of the securities department at Wilmer Cutler Pickering Hale and Dorr LLP, and is based on a WilmerHale publication by Mr. McLucas; the complete publication, including footnotes, is available here.

As we noted last year in our memorandum focused on 2013 developments, Securities and Exchange Commission Chair Mary Jo White has called for the SEC to be more aggressive in its enforcement program. By all accounts, the Enforcement Division has responded to that call. The past year saw the SEC continue the trend, started under Enforcement Director Robert Khuzami in 2009, of transforming the SEC’s civil enforcement arm into an aggressive law enforcement agency modeled on a federal prosecutor’s office. This should not come as a surprise since both Andrew Ceresney, the current Director, and George Cannellos, Ceresney’s Co-Director for a brief period of time, like Khuzami, spent many years as federal prosecutors in the Southern District of New York. And the Commission itself is now led for the first time by a former federal prosecutor, Mary Jo White, the US Attorney for the Southern District of New York from 1993 to 2002. Given the events of the past decade involving the Madoff fraud and the fallout from the 2008 financial crisis, we believe both the aggressive tone and positions the SEC has taken in recent years will continue.

…continue reading: SEC Enforcement Developments in 2014, and a Look Forward

Agencies Release New Volcker Rule FAQ

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday March 17, 2015 at 9:18 am
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Editor’s Note: The following post comes to us from Sullivan & Cromwell LLP, and is based on a Sullivan & Cromwell publication by Whitney A. Chatterjee, H. Rodgin Cohen, C. Andrew Gerlach, and Eric M. Diamond; the complete publication, including footnotes and appendix, is available here.

On February 27, 2015, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the Commodity Futures Trading Commission (collectively, the “Agencies”) provided an important addition to their existing list of Frequently Asked Questions (“FAQs”) addressing the implementation of section 13 of the Bank Holding Company Act of 1956, as amended (the “BHC Act”), commonly known as the “Volcker Rule.”

The Volcker Rule imposes broad prohibitions on proprietary trading and investing in and sponsoring private equity funds, hedge funds and certain other investment vehicles (“covered funds”) by “banking entities” and their affiliates. The Volcker Rule, as implemented by the final rule issued by the Agencies (the “Final Rule”), provides an exemption from the covered fund prohibitions for foreign banking entities’ acquisition or retention of an ownership interest in, or sponsorship of, a covered fund “solely outside of the United States” (the “SOTUS covered fund exemption”).

…continue reading: Agencies Release New Volcker Rule FAQ

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