Posts Tagged ‘Classified boards’

Proxy Advisory Firms and Corporate Governance Practices: One Size Does Not Fit All

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday June 18, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Bill Libit, partner concentrating in corporate and securities and municipal finance at Chapman and Cutler LLP, and is based on a Chapman publication by Mr. Libit and Todd Freier.

The 2014 proxy season, like previous seasons, has provided shareholders of public US companies with an opportunity to vote on a number of corporate governance proposals and director elections. Throughout this proxy season, proxy advisory firms have provided shareholder vote recommendations “for” or “against” those proposals and “for” or to “withhold” votes for directors. Certain proxy advisory firms, such as Institutional Shareholders Services Inc. (“ISS”) and Glass, Lewis & Co., LLC (“Glass Lewis”), have also published updated corporate governance ratings reports on public companies, including evaluations of a company’s corporate governance risk profile.

…continue reading: Proxy Advisory Firms and Corporate Governance Practices: One Size Does Not Fit All

ISS Recommends Shareholders Withhold Votes for 6 Ashford Trust Directors

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday May 27, 2014 at 9:13 am
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Editor’s Note: The following post comes to us from JJ Fueser, Research Coordinator at UNITE HERE.

UNITE HERE proposals to opt out of Maryland Unsolicited Takeover Act have received resounding support from shareholders of Ashford Hospitality Prime.

Over the past two years, activist shareholder UNITE HERE, the hospitality workers’ union, has been winning corporate governance reforms at lodging REITs, which are nearly all incorporated in Maryland.

Several proposals ask boards to opt out of Maryland statutes which provide a range of anti-takeover tools. The Maryland Unsolicited Takeover Act (MUTA), for example, allows boards to classify at any time without shareholder approval.

UNITE HERE has argued that without opting out of MUTA—and requiring shareholder approval to opt in—a Maryland REIT has not truly declassified its board. The proposals to opt out of Maryland’s anti-takeover statutes have gained traction, with six proposals withdrawn after full or substantial implementation.

…continue reading: ISS Recommends Shareholders Withhold Votes for 6 Ashford Trust Directors

Board Refreshment and Director Succession in Investee Companies

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday May 25, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Rakhi Kumar, Head of Corporate Governance at State Street Global Advisors, and is based on an SSgA publication; the complete publication, including appendix, is available here.

State Street Global Advisors (“SSgA”) believes that board refreshment and planning for director succession are key functions of the board. Some markets such as the UK, have adopted best practices on a comply-or-explain basis that aim to limit a director’s tenure to nine years of board service, beyond which, investors may question a director’s independence from management. Such best practices have helped lower average board tenure, and have encouraged boards to focus on refreshment of director skills and plan for director succession in an orderly manner.

…continue reading: Board Refreshment and Director Succession in Investee Companies

75% of 2014 Engagements Have Already Produced Agreements to Declassify

Editor’s Note: Lucian Bebchuk is the Director of the Shareholder Rights Project (SRP), Scott Hirst is the SRP’s Associate Director, and June Rhee is a counsel at the SRP. The SRP, a clinical program operating at Harvard Law School, works on behalf of public pension funds and charitable organizations seeking to improve corporate governance at publicly traded companies, as well as on research and policy projects related to corporate governance. Any views expressed and positions taken by the SRP and its representatives should be attributed solely to the SRP and not to Harvard Law School or Harvard University. The work of the SRP has been discussed in other posts on the Forum available here.

In a news alert released last week, the Shareholder Rights Project (SRP), working with SRP-represented investors, announced the high level of company responsiveness to engagements during the 2014 proxy season. In particular, as discussed in more detail below, major results obtained so far include the following:

  • Following active engagement, about three-quarters of the S&P 500 and Fortune 500 companies that received declassification proposals for 2014 annual meetings from SRP-represented investors have already entered into agreements to move towards board declassification.
  • This outcome reinforces the SRP’s expectation (announced in a blog post available here) that, by the end of 2014, the work of the SRP and SRP-represented investors will have resulted in about 100 board declassifications by S&P 500 and Fortune 500 companies.

…continue reading: 75% of 2014 Engagements Have Already Produced Agreements to Declassify

Staggered Boards and Firm Value, Revisited

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday March 7, 2014 at 9:02 am
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Editor’s Note: The following post comes to us from Martijn Cremers, Professor of Finance at the University of Notre Dame; Lubomir P. Litov, Assistant Professor of Finance at the University of Arizona; and Simone M. Sepe, Associate Professor of Law at the University of Arizona. Work from the Program on Corporate Governance about staggered boards includes The Costs of Entrenched Boards by Lucian Bebchuk and Alma Cohen, and How Do Staggered Boards Affect Shareholder Value? Evidence from a Natural Experiment by Alma Cohen and Charles C. Y. Wang.

Staggered boards have long played a central role in the debate on the proper relationship between boards of directors and shareholders. Advocates of shareholder empowerment view staggered boards as a quintessential corporate governance failure. Under this view, insulating directors from market discipline diminishes director accountability and encourages self-serving behaviors by incumbents such as shirking, empire building, and private benefits extraction. On the contrary, defendants of staggered boards view staggered boards as an instrument to preserve board stability and strengthen long-term commitments to value creation. This debate notwithstanding, the existing empirical literature to date has strongly supported the claim that board classification seems undesirable, finding that, in the cross-section, staggered boards are associated with lower firm value and negative abnormal returns at economically and statistically significant levels.

…continue reading: Staggered Boards and Firm Value, Revisited

Toward Board Declassification in 100 S&P 500 and Fortune 500 Companies: The SRP’s Report for the 2012 and 2013 Proxy Seasons

Editor’s Note: Lucian Bebchuk is the Director of the Shareholder Rights Project (SRP), Scott Hirst is the SRP’s Associate Director, and June Rhee is a counsel at the SRP. The SRP, a clinical program operating at Harvard Law School, works on behalf of public pension funds and charitable organizations seeking to improve corporate governance at publicly traded companies, as well as on research and policy projects related to corporate governance. Any views expressed and positions taken by the SRP and its representatives should be attributed solely to the SRP and not to Harvard Law School or Harvard University. The work of the SRP has been discussed in other posts on the Forum available here.

The Shareholder Rights Project (SRP) just released its final report for the 2012 and 2013 proxy seasons, the SRP’s first two years year of operations. As the report details, major results obtained include the following:

  • 100 S&P 500 and Fortune 500 companies (listed here) entered into agreements to move toward declassification;
  • 81 S&P 500 and Fortune 500 companies (listed here) declassified their boards; these companies have aggregate market capitalization exceeding one trillion dollars, and represent about two-thirds of the companies with which engagement took place;
  • 58 successful declassification proposals (listed here), with average support of 81% of votes cast; and
  • Proposals by SRP-represented investors represented over 50% of all successful precatory proposals by public pension funds and over 20% of all successful precatory proposals by all proponents.

…continue reading: Toward Board Declassification in 100 S&P 500 and Fortune 500 Companies: The SRP’s Report for the 2012 and 2013 Proxy Seasons

Towards Board Declassification at 100 S&P 500 and Fortune 500 Companies: Advancing Annual Elections in the 2014 Proxy Season

Editor’s Note: Lucian Bebchuk is the Director of the Shareholder Rights Project (SRP), Scott Hirst is the SRP’s Associate Director, and June Rhee is the SRP’s Counsel. The SRP, a clinical program operating at Harvard Law School, works on behalf of public pension funds and charitable organizations seeking to improve corporate governance at publicly traded companies, as well as on research and policy projects related to corporate governance. Any views expressed and positions taken by the SRP and its representatives should be attributed solely to the SRP and not to Harvard Law School or Harvard University. The work of the SRP has been discussed in other posts on the Forum available here.

In a news alert released last week, the Shareholder Rights Project (SRP) announced the work that SRP-represented investors and the SRP are undertaking for the 2014 proxy season, and the significant contribution that this work is expected to make in moving 100 S&P 500 and Fortune 500 companies towards annual elections.

  • 31 shareholder proposals for board declassification have been submitted to S&P 500 and Fortune 500 companies for a vote at their 2014 annual meetings (listed here);
  • 7 companies—about one quarter of the 31 companies receiving proposals—have already entered into agreements to bring management declassification proposals to a shareholder vote;
  • These 7 companies are in addition to 8 other S&P 500 and Fortune 500 companies that have committed to bring agreed-upon management proposals to a vote in future annual meetings following 2012 and 2013 precatory proposals by SRP-represented investors;
  • The 15 agreed-upon management proposals to declassify, coupled with board declassifications that have already taken place at 80 S&P 500 and Fortune 500 companies as a result of the work by the SRP and SRP-represented investors (listed here), can be expected to contribute to the wide-scale move toward annual elections; and
  • The agreements already obtained following the submission of 2014 proposals, and the ongoing engagements by the SRP and SRP-represented investors with companies receiving 2014 proposals that have not yet entered into such agreements, reinforce the SRP’s expectation that, as a result of the work by the SRP and SRP-represented investors, close to 100 S&P 500 and Fortune 500 companies will have moved toward board declassification by the end of 2014.

…continue reading: Towards Board Declassification at 100 S&P 500 and Fortune 500 Companies: Advancing Annual Elections in the 2014 Proxy Season

Towards Board Declassification in One-Hundred S&P 500 and Fortune 500 Companies

Editor’s Note: Lucian Bebchuk is the Director of the Shareholder Rights Project (SRP), Scott Hirst is the SRP’s Associate Director, and June Rhee is the SRP’s Counsel. The SRP, a clinical program operating at Harvard Law School, works on behalf of public pension funds and charitable organizations seeking to improve corporate governance at publicly traded companies, as well as on research and policy projects related to corporate governance. Any views expressed and positions taken by the SRP and its representatives should be attributed solely to the SRP and not to Harvard Law School or Harvard University. The work of the SRP has been discussed in other posts on the Forum available here.

In a news alert released yesterday, the Shareholder Rights Project (SRP), working on behalf of SRP-represented investors, announced the substantial results of the work by the SRP and SRP-represented investors during 2012 and in 2013, the SRP’s first two years year of operations. (The results reported below reflect 2013 outcomes through the end of October 2013.)

As discussed in more detail below, major results obtained include the following (for full details on all outcomes see the SRP’s preliminary 2012-2013 Report released yesterday):

  • 99 S&P 500 and Fortune 500 companies (see more details here) have entered into agreements to move toward declassification;
  • 79 S&P 500 and Fortune 500 companies (listed here) have declassified their boards; these companies have aggregate market capitalization exceeding one trillion dollars, and represent about two-thirds of the companies with which engagement took place;
  • 58 successful declassification proposals (listed here), with average support of 81% of votes cast; and
  • Proposals by SRP-represented investors represented over 50% of all successful precatory proposals by public pension funds and over 20% of all successful precatory proposals by any proponents.

Expected Impact by End of 2014: As a result of these outcomes and the ongoing work of the SRP and SRP-represented investors, it is estimated that, by the end of 2013, the work of the SRP and SRP-represented investors will have resulted in:

  • Close to 100 board declassifications by S&P 500 and Fortune 500 companies;
  • Declassification of the boards of over 60% of the S&P 500 companies that had classified boards as of the beginning of 2012; and
  • A decrease in the incidence of classified boards among S&P 500 companies to less than 10%.

Below are further details about these substantial results:

…continue reading: Towards Board Declassification in One-Hundred S&P 500 and Fortune 500 Companies

The Shareholder Rights Project’s Mid-Year Update

Editor’s Note: Lucian Bebchuk is the Director of the Shareholder Rights Project (SRP), Scott Hirst is the SRP’s Associate Director, and June Rhee is the SRP’s Counsel. The SRP, a clinical program operating at Harvard Law School, works on behalf of public pension funds and charitable organizations seeking to improve corporate governance at publicly traded companies, as well as on research and policy projects related to corporate governance. Any views expressed and positions taken by the SRP and its representatives should be attributed solely to the SRP and not to Harvard Law School or Harvard University. The work of the SRP has been discussed in other posts on the Forum available here.

In a news alert released yesterday, the Shareholder Rights Project (SRP), working on behalf of eight SRP-represented investors, announced the substantial results of the work by the SRP and SRP-represented investors during the first six months of 2013, as well as the aggregate impact of their work during 2012 and 2013.

Produced Large-Scale Reforms: As a result of the work of the SRP and SRP-represented investors, 77 S&P 500 and Fortune 500 companies declassified their boards of directors during 2012 or the first half of 2013. The companies that declassified:

…continue reading: The Shareholder Rights Project’s Mid-Year Update

The New York Times on the Shareholder Rights Project

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday July 8, 2013 at 10:17 am
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The New York Times published on Sunday an article on the work of the Shareholder Rights Project (SRP). The article, entitled New Momentum for Change in Corporate Board Elections, was written by New York Times columnist Gretchen Morgenson.

Based on a review of the SRP’s results and interviews with the SRP’s clients and the Director of the SRP, the article discusses the benefits produced by the SRP’s work. The article begins with the observation that “shareholder efforts that actually succeed in changing dubious corporate governance policies are so rare that when they happen, it makes you sit up and take notice;” and concludes that “[c]learly, the shareholder project is having a positive effect.” The article expresses the hope that “mutual funds would join this bandwagon or construct their own,” and suggests that “[t]he Shareholder Rights Project is a model they might want to emulate.”

The SRP is a clinical program operating at Harvard Law School. The SRP works on behalf of public pension funds and charitable organizations seeking to improve corporate governance at publicly traded companies, as well as on research and policy projects related to corporate governance.

The New York Times article stresses that the work of the SRP and its clients during the 2012 and 2013 proxy seasons has produced a large number of board declassifications at large publicly traded firms, moving these companies to annual elections for directors. The article further notes that “[a] far better approach for holding directors accountable, according to a significant body of academic research, is to make them stand for election annually.”

…continue reading: The New York Times on the Shareholder Rights Project

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