Posts Tagged ‘Andrew Brownstein’

CII Urges SEC to Require Disclosure of Third-Party Director Compensation

Editor’s Note: Sabastian V. Niles is counsel in the Corporate Department at Wachtell, Lipton, Rosen & Katz, where he focuses on rapid response shareholder activism, takeover defense and corporate governance. This post is based on a Wachtell Lipton firm memorandum by Mr. Niles, Trevor Norwitz, Andrew R. Brownstein, and David C. Karp.

As we have previously written, special compensation arrangements between public company directors and third parties, such as activist hedge funds or other nominating shareholders, pose serious threats to the integrity of boardroom decision-making and have been sharply criticized by commentators and many institutional shareholders. The Council of Institutional Investors (CII), which has previously declared that third-party director incentive schemes “blatantly contradict” CII policies on director compensation, has now taken the additional step of encouraging the SEC to act to ensure investors are fully informed about such arrangements between nominating shareholders and their director candidates.

…continue reading: CII Urges SEC to Require Disclosure of Third-Party Director Compensation

Risk Management and the Board of Directors—An Update for 2014

Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, Daniel A. Neff, Andrew R. Brownstein, Steven A. Rosenblum, and Adam O. Emmerich.

Introduction

Overview

Corporate risk taking and the monitoring of risks have remained front and center in the minds of boards of directors, legislators and the media, fueled by the powerful mix of continuing worldwide financial instability; ever-increasing regulation; anger and resentment at the alleged power of business and financial executives and boards, including particularly as to compensation during a time of economic uncertainty, retrenchment, contraction, and changing dynamics between U.S., European and emerging market economies; and consistent media attention to corporations and economies in crisis. The reputational damage to boards of companies that fail to properly manage risk is a major threat, and Institutional Shareholder Services now includes specific reference to risk oversight as part of its criteria for choosing when to recommend withhold votes in uncontested director elections. This focus on the board’s role in risk management has also led to increased public and governmental scrutiny of compensation arrangements and their relationship to excessive risk taking and has brought added emphasis to the relationship between executive compensation and effective risk management. For the past few years, we have provided an annual overview of risk management and the board of directors. This overview highlights a number of issues that have remained critical over the years and provides an update to reflect emerging and recent developments.

…continue reading: Risk Management and the Board of Directors—An Update for 2014

Activist Abuses Require SEC Action on Section 13(d) Reporting

Editor’s Note: Theodore N. Mirvis is a partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton memorandum by Mr. Mirvis, Andrew R. Brownstein, Adam O. Emmerich, David A. Katz, and David C. Karp. Work from the Program on Corporate Governance about about Section 13(d) and blockholder disclosure includes The Law and Economics of Blockholder Disclosure by Lucian Bebchuk and Robert J. Jackson, Jr., discussed on the forum here.

Three years ago we petitioned the SEC to modernize the beneficial ownership reporting rules under Section 13(d) of the Securities Exchange Act of 1934 (see our rulemaking petition, our memos of March 7, 2011, April 15, 2011, March 3, 2008 and our article in the Harvard Business Law Review). Since we filed our petition, activist hedge funds have grown more brazen in exploiting the existing reporting rules to the disadvantage of ordinary investors.

…continue reading: Activist Abuses Require SEC Action on Section 13(d) Reporting

ISS Publishes Guidance on Director Compensation (and Other Qualification) Bylaws

Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, Andrew R. Brownstein, Steven A. Rosenblum, Trevor S. Norwitz, David C. Karp, and Sabastian V. Niles.

In the latest instance of proxy advisors establishing a governance standard without offering evidence that it will improve corporate governance or corporate performance, ISS has adopted a new policy position that appears designed to chill board efforts to protect against “golden leash” incentive bonus schemes. These bonus schemes have been used by some activist hedge funds to recruit director candidates to stand for election in support of whatever business strategy the fund seeks to impose on a company.

…continue reading: ISS Publishes Guidance on Director Compensation (and Other Qualification) Bylaws

ISS Addresses Dissident Director Compensation Bylaw

Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. The following post is based on a Wachtell Lipton memorandum by Mr. Lipton, Andrew R. Brownstein, Steven A. Rosenblum, Trevor S. Norwitz, and Sabastian V. Niles.

ISS Proxy Advisory Services recently recommended that shareholders of a small cap bank holding company, Provident Financial Holdings, Inc., withhold their votes from the three director candidates standing for reelection to the company’s staggered board (all of whom serve on its nominating and governance committee) because the board adopted a bylaw designed to discourage special dissident compensation schemes. These special compensation arrangements featured prominently in a number of recent high profile proxy contests and have been roundly criticized by leading commentators. Columbia Law Professor John C. Coffee, Jr. succinctly noted “third-party bonuses create the wrong incentives, fragment the board and imply a shift toward both the short-term and higher risk.” In our memorandum on the topic, we catalogued the dangers posed by such schemes to the integrity of the boardroom and board decision-making processes. We also noted that companies could proactively address these risks by adopting a bylaw that would disqualify director candidates who are party to any such extraordinary arrangements.

…continue reading: ISS Addresses Dissident Director Compensation Bylaw

Bylaw Protection against Dissident Director Conflict/Enrichment Schemes

Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, Theodore N. Mirvis, Andrew R. Brownstein, and Steven A. Rosenblum.

This year, the practice of activist hedge funds engaged in proxy contests offering special compensation schemes to their dissident director nominees has increased and become even more egregious. While the terms of these schemes vary, the general thrust is that, if elected, the dissident directors would receive large payments, in some cases in the millions of dollars, if the activist’s desired goals are met within the specified near-term deadlines.

These special compensation arrangements pose a number of threats, including:

…continue reading: Bylaw Protection against Dissident Director Conflict/Enrichment Schemes

ISS Governance QuickScore: Back to the Future

Posted by Andrew R. Brownstein, Wachtell, Lipton, Rosen & Katz, on Wednesday February 13, 2013 at 8:44 am
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Editor’s Note: Andrew R. Brownstein is a partner in the Corporate Department at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Brownstein, Adam O. Emmerich, David A. Katz, Trevor S. Norwitz and S. Iliana Ongun.

ISS, the dominant proxy advisory firm, recently unveiled its new ISS Governance QuickScore product, which will replace its Governance Risk Indicators (“GRId”) next month. ISS asserts that QuickScore is an improvement on the GRId product because it is “quantitatively driven” (with a “secondary policy-based overlay”). Using an algorithm purportedly derived from correlations between governance factors and financial metrics, QuickScore will rank companies in deciles within each of ISS’ existing four pillars—Audit, Board Structure, Compensation and Shareholder Rights – and provide an overall governance rating to “provide a quick understanding of a company’s relative governance risk to an index or region.” While one can understand, as a business matter, ISS’ desire to continually reinvent and “improve” its products, the constant shifting of goalposts creates uncertainty and inefficiency. More important, QuickScore will likely provide a no more complete or accurate assessment of corporate governance practices than its predecessors, and it may be worse.

When ISS adopted its GRId product three years ago, we cautiously noted that it offered greater transparency and granularity than the blunt one-dimensional CGQ ratings that it replaced. Unfortunately, in our view, going back to a system of opaque quantified ratings is a move in the wrong direction. After a substantial investment of management time and effort, companies have familiarity with the GRId “level of concern” approach, which at least helps them understand and address any legitimate issues or explain any divergences from ISS’ “best practices.” While ISS retains GRId’s formulaic approach, to the extent that it does not share the weightings it assigns to the various governance factors, it reduces transparency as companies would not be able to compute their own QuickScores.

…continue reading: ISS Governance QuickScore: Back to the Future

Mergers and Acquisitions — 2013

Posted by Andrew R. Brownstein, Wachtell, Lipton, Rosen & Katz, on Monday February 4, 2013 at 9:48 am
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Editor’s Note: Andrew R. Brownstein is a partner in the Corporate Department at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Brownstein, Steven A. Rosenblum, Adam O. Emmerich, Mark Gordon, Gordon S. Moodie and Eitan Hoenig.

As we enter 2013, a number of signs – including the strong finish to 2012, macroeconomic factors that appear to be reducing business uncertainty, and intensifying competition in many critical sectors – provide cause for optimism that the breadth and depth of M&A activity will be significantly greater in the coming year than in 2012. Global M&A activity dropped 17.4% in the first three quarters of 2012 compared to the comparable period of 2011, reflecting the European sovereign debt crisis, political uncertainty in the United States and slower economic growth in China and India. But M&A activity turned sharply upward in the fourth quarter: Global announced deal volume for the quarter was the highest in four years, and a number of transformative transactions were announced, including Freeport McMoRan Copper & Gold’s $9 billion acquisitions of Plains Exploration Company and McMoRan Exploration, and ICE’s $8.2 billion acquisition of NYSE Euronext.

…continue reading: Mergers and Acquisitions — 2013

Harvard’s Shareholder Rights Project is Still Wrong

Posted by Martin Lipton and Daniel Neff, Wachtell, Lipton, Rosen & Katz, on Friday November 30, 2012 at 8:55 am
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Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. Daniel A. Neff is co-chairman of the Executive Committee and partner at Wachtell Lipton. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, Mr. Neff, Andrew R. Brownstein, Adam O. Emmerich, David A. Katz, and Trevor S. Norwitz. This post discusses the 2012/2013 activities of the Shareholder Rights Project, which are described in an earlier post here.

A small but influential alliance of activist investor groups, academics and trade unions continues — successfully it must be said — to seek to overhaul corporate governance in America to suit their particular agendas and predilections. We believe that this exercise in corporate deconstruction is detrimental to the economy and society at large. We continue to oppose it.

The Shareholder Rights Project, Harvard Law School’s misguided “clinical program” which we have previously criticized, today issued joint press releases with eight institutional investors, principally state and municipal pension funds, trumpeting their recent successes in eliminating staggered boards and advertising their “hit list” of 74 more companies to be targeted in the upcoming proxy season. Coupled with the new ISS standard for punishing directors who do not immediately accede to shareholder proposals garnering a majority of votes cast (even if they do not attract enough support to be passed) — which we also recently criticized — this is designed to accelerate the extinction of the staggered board.

…continue reading: Harvard’s Shareholder Rights Project is Still Wrong

Forest Laboratories Proxy Fight Vindicates Strong Defense

Posted by Andrew R. Brownstein, Wachtell, Lipton, Rosen & Katz, on Sunday September 2, 2012 at 10:53 am
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Editor’s Note: Andrew R. Brownstein is a partner in the Corporate Department at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Mr. Brownstein, Igor Kirman, and William Savitt.

Forest Laboratories’ shareholders reelected nine out of ten incumbent director nominees, while rejecting three out of dissident Carl Icahn’s slate of four directors, despite ISS’s recommendation in favor of two of Icahn’s nominees. These results, along with the recent victory by AOL against Starboard (see our memo, AOL Shareholders Reject ISS Supported Activist Hedge Fund), represent an important reminder that companies under attack by dissidents have a chance to defend themselves with a well-crafted message that articulates a strategy for long-term success, notwithstanding strong activist pressure with backing from ISS.

…continue reading: Forest Laboratories Proxy Fight Vindicates Strong Defense

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