Posts Tagged ‘Board composition’

Governance Priorities for 2014

Editor’s Note: Holly J. Gregory is a partner and co-global coordinator of the Corporate Governance and Executive Compensation group at Sidley Austin LLP. This post is based on an article that originally appeared in Practical Law The Journal. The views expressed in the post are those of Ms. Gregory and do not reflect the views of Sidley Austin LLP or its clients.

As the fallout from the financial crisis recedes and both institutional investors and corporate boards gain experience with expanded corporate governance regulation, the coming year holds some promise of decreased tensions in board-shareholder relations. With governance settling in to a “new normal,” influential shareholders and boards should refocus their attention on the fundamental aspects of their roles as they relate to the creation of long-term value.

Institutional investors and their beneficiaries, and society at large, have a decided interest in the long-term health of the corporation and in the effectiveness of its governing body. Corporate governance is likely to work best in supporting the creation of value when the decision rights and responsibilities of shareholders and boards set out in state corporate law are effectuated.

…continue reading: Governance Priorities for 2014

Considerations for Directors in the 2014 Proxy Season and Beyond

Posted by Amy L. Goodman, Gibson, Dunn & Crutcher LLP, and John F. Olson, Gibson, Dunn & Crutcher LLP and Georgetown Law Center, on Monday January 27, 2014 at 9:19 am
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Editor’s Note: Amy Goodman is a partner and co-chair of the Securities Regulation and Corporate Governance practice group at Gibson, Dunn & Crutcher LLP and John Olson is a founding partner of Gibson, Dunn & Crutcher’s Washington, D.C. office and a visiting professor at the Georgetown Law Center. The following post is based on a Gibson Dunn alert by Ms. Goodman, Mr. Olson, Gillian McPhee, and Michael J. Scanlon.

As we begin 2014, calendar-year companies are immersed in preparing for what promises to be another busy proxy season. We continue to see shareholder proposals on many of the same subjects addressed during last proxy season, as discussed in our post recapping shareholder proposal developments in 2013. To help public companies and their boards of directors prepare for the coming year’s annual meeting and plan ahead for other corporate governance developments in 2014, we discuss below several key topics to consider.

…continue reading: Considerations for Directors in the 2014 Proxy Season and Beyond

Gender Diversity at Silicon Valley Public Companies 2013

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday January 20, 2014 at 9:08 am
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Editor’s Note: The following post comes to us from David A. Bell, partner in the corporate and securities group at Fenwick & West LLP. This post is based on a Fenwick publication, titled Gender Diversity in Silicon Valley: A Comparison of Large Public Companies and Silicon Valley Companies; the complete survey is available here.

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). [1] 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:

…continue reading: Gender Diversity at Silicon Valley Public Companies 2013

Top 10 Topics for Directors in 2014

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday December 31, 2013 at 9:00 am
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Editor’s Note: The following post comes to us from Kerry E. Berchem, partner and co-head of the corporate practice group at Akin Gump Strauss Hauer & Feld LLP. This post is based on an Akin Gump corporate alert primarily drafted by Tracy Crum and N. Kathleen Friday; the full publication, including footnotes, is available here.

U.S. public companies face a host of challenges as they enter 2014. Here is our list of hot topics for the boardroom in the coming year:

  • 1. Oversee strategic planning amid continuing fiscal uncertainty and game-changing advances in information technology
  • 2. Address cybersecurity
  • 3. Set appropriate executive compensation as shareholders increasingly focus on pay for performance and activists target pay disparity
  • 4. Address the growing demands of compliance oversight
  • 5. Assess the impact of health care reform on the company’s benefit plans and cost structure
  • 6. Determine whether the CEO and board chair positions should be separated
  • 7. Ensure appropriate board composition in light of increasing focus on director tenure and diversity
  • 8. Cultivate shareholder relations and strengthen defenses as activist hedge funds target more companies
  • 9. Address boardroom confidentiality
  • 10. Consider whether to adopt a forum selection bylaw

…continue reading: Top 10 Topics for Directors in 2014

Corporate Governance at Silicon Valley Companies 2013

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday December 6, 2013 at 9:06 am
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Editor’s Note: The following post comes to us from David A. Bell, partner in the corporate and securities group at Fenwick & West LLP. This post is based on portions of a Fenwick publication, titled Corporate Governance Practices and Trends: A Comparison of Large Public Companies and Silicon Valley Companies (2013); the complete survey is available here.

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). [1] 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

…continue reading: Corporate Governance at Silicon Valley Companies 2013

Some Thoughts for Boards of Directors in 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. The following post is based on a Wachtell Lipton memorandum by Mr. Lipton, Steven A. Rosenblum, and Karessa L. Cain.

In many respects, the relentless drive to adopt corporate governance mandates seems to have reached a plateau: essentially all of the prescribed “best practices”—including say-on-pay, the dismantling of takeover defenses, majority voting in the election of directors and the declassification of board structures—have been codified in rules and regulations or voluntarily adopted by a majority of S&P 500 companies. Only 11 percent of S&P 500 companies have a classified board, 8 percent have a poison pill and 6 percent have not adopted a majority vote or plurality-vote-plus-resignation standard to elect directors. The activists’ “best practices” of yesterday have become the standard practices of today. While proxy advisors and other stakeholders in the corporate governance industry will undoubtedly continue to propose new mandates, we are currently in a period of relative stasis as compared to the sea change that began with the Sarbanes-Oxley Act and unfolded over the last decade.

In other respects, however, the corporate governance landscape continues to evolve in meaningful ways. We may be entering an era of more nuanced corporate governance debates, where the focus has shifted from check-the-box policies to more complex questions such as how to strike the right balance in recruiting directors with complementary skill sets and diverse perspectives, and how to tailor the board’s role in overseeing risk management to the specific needs of the company. Shareholder engagement has been an area of particular focus, as both companies and institutional investors have sought to engage in more regular dialogue on corporate governance matters. The evolving trend here is not only the frequency and depth of engagement, but also a more fundamental re-thinking of the nature of relationships with shareholders and the role that these relationships play in facilitating long-term value creation. Importantly, this trend is about more than just expanding shareholder influence in corporate governance matters; instead, there is an emphasis on the roles and responsibilities of both companies and shareholders in facilitating thoughtful conversations instead of reflexive, off-the-shelf mandates on corporate governance issues, and cultivating long-term relationships that have the potential to curb short-termist pressures in the market.

…continue reading: Some Thoughts for Boards of Directors in 2014

Reputation Incentives of Independent Directors

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday November 25, 2013 at 9:14 am
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Editor’s Note: The following post comes to us from Ronald Masulis, Professor of Finance at the Australian School of Business, University of New South Wales, and Shawn Mobbs of the Department of Finance at the University of Alabama.

Reputation concerns create strong incentives for independent directors to be viewed externally as capable monitors as well as to retain their most valuable directorships. In our paper, Reputation Incentives of Independent Directors: Impacts on Board Monitoring and Adverse Corporate Actions, which was recently made publicly available on SSRN, we extend this literature significantly by examining the effects of differential reputation incentives across firms that arise when a director holds multiple directorships.

Firms having boards composed of a greater portion of independent directors for whom this directorship represents one of their most prestigious are associated with firm actions known to reward directors and are negatively associated with firm actions known to be costly to director reputations. Specifically, they are associated with a lower likelihood of covenant violations, earnings management, earnings restatements, shareholder class action suits and dividend reductions. In addition, we also find they are positively associated with stock repurchases and dividend increases.

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Understanding the Board of Directors after the Financial Crisis

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday November 21, 2013 at 9:22 am
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Editor’s Note: The following post comes to us from Joseph A. McCahery and Erik P. M. Vermeulen, both of Tilburg University Law School.

Research on the composition and structure of the board of directors is a thriving subject in the aftermath of the financial crisis. The discussion thus far has assumed that finding the right board members is extremely important because they tend to enhance corporate strategy and decision-making. Consider the case of Apple’s board. Following Steve Jobs’ return to the firm in 1997, he understood well the important role of the board of directors to both improve company productivity and build relationships with its suppliers and customers. In order for the board of directors to become a competitive advantage and help carry Apple forward, its members needed to have a thorough understanding of the computer industry and the firm’s products. Accordingly, a change in the composition of the board of directors was arguably a necessary first step to bring back focus, relevance and interaction (with the outside world) to the company in its journey to introduce disruptive innovations and creative products to its customers. The result was impressive: Between August 6th, 1997 (the day the “new” board was introduced) and August 23rd, 2011 (the last day of Jobs as the CEO of Apple), the stock price soared from $25.25 to $360.30, increasing 1,327 per cent.

…continue reading: Understanding the Board of Directors after the Financial Crisis

Developments Regarding Gender Diversity on Public Boards

Posted by David A. Katz, Wachtell, Lipton, Rosen & Katz, on Tuesday November 12, 2013 at 9:23 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 and complex securities transactions. This post is based on an article by Mr. Katz and Laura A. McIntosh that first appeared in the New York Law Journal; the full article, including footnotes, is available here.

While the number of women directors on U.S. public company boards has not risen dramatically since 2012, the issue of gender diversity on boards continued to gain momentum and global prominence over the last 12 months. Since we last discussed this issue, new legislative and non-governmental initiatives around the world have resulted in growing numbers of women directors and greater shareholder focus on board diversity and related disclosures. This issue is likely to become increasingly significant in 2014 and beyond, both in the United States and abroad.

EU Developments

Earlier this month, the European Commission moved a step closer to imposing a form of gender quota on major public companies in the European Union. Two committees of the European Parliament voted in favor of a proposal by the European Commission to require certain public companies to increase the representation of women on their boards. The proposed law applies only to large public companies, with no exceptions even for companies in which women compose less than 10 percent of the workforce, and, if adopted, provides for obligatory sanctions for failure to follow the proposed requirements.

…continue reading: Developments Regarding Gender Diversity on Public Boards

Directors Survey: Boards Confront an Evolving Landscape

Posted by Mary Ann Cloyd, PricewaterhouseCoopers LLP, on Friday October 11, 2013 at 9:16 am
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Editor’s Note: Mary Ann Cloyd is leader of the Center for Board Governance at PricewaterhouseCoopers LLP. The following post is based on the executive summary of PwC’s Annual Corporate Directors Survey; the complete publication is available here. A previous PwC survey, concerning board composition, was discussed on the Forum here.

We are witnessing unprecedented change in the corporate governance world: new perspectives on boardroom composition, higher levels of stakeholder engagement, more emphasis on emerging risks and strategies, and the increasing velocity of change in the digital world. These factors, coupled with calls for enhanced transparency around governance practices and reporting, the very active regulatory and lawmaking environment, and the enhanced power of proxy advisors, are all accelerating evolution, and in some cases creating a revolution, in the boardroom.

In the summer of 2013, 934 public company directors responded to our 2013 Annual Corporate Directors Survey. Of those directors, 70% serve on the boards of companies with more than $1 billion in annual revenue. As a result, the survey’s findings reflect the practices and boardroom perspectives of many of today’s world-class companies. The focus of this year’s research not only reflects in-depth analysis of contemporary governance trends, but also emphasizes how boards are reacting to a rapidly evolving landscape. These are the highlights:

…continue reading: Directors Survey: Boards Confront an Evolving Landscape

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