Posts Tagged ‘Stanley Keller’

U.S. Export Laws and Related Trade Sanctions

Posted by Stanley Keller, Edwards Wildman Palmer LLP, on Saturday November 17, 2012 at 9:17 am
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Editor’s Note: Stanley Keller is a partner at Edwards Wildman Palmer LLP. This post is based on an Edwards Wildman guidance note.

I. Export Laws at a Glance

Most U.S. companies are aware at least generally that U.S. export laws regulate activities such as the shipment of tangible products out of the country and that certain countries are subject to strict economic sanctions. But many companies are unaware of the actual breadth and complexity of U.S. export laws and regulations and what impact those laws have on their business — the result being that many companies do not even know that they are in a legal minefield until it is too late.

The problem that many companies run into is that, though U.S. export laws were intended to focus on the export of sensitive goods to hostile countries and keeping potentially dangerous items out of the hands of persons intent on harming the U.S., the regulations that implement these laws — the very dense and complicated Export Administration Regulations (“EAR”) enforced by the Commerce Department — cover virtually every commercial good and technology originating in the U.S. Additionally, as explained below, the EAR cover much more than the shipment of goods from the U.S. to a foreign country. Rather, the EAR cover the re-export of U.S.-origin goods from one foreign country to another, as well as the release of technology to a foreign national located in the U.S. When overlaid with dozens of stand-alone economic sanctions programs enforced by the Treasury Department, such as the U.S. embargoes of Iran and Cuba, these laws and regulations come together to form a complicated web that effects virtually every U.S. company that does business overseas or that has a product for which there is a market overseas.

When these laws and regulations are violated, the sanctions can be severe. At a minimum, goods can be returned or seized by U.S. or foreign customs officials. More ominously, huge fines (up to twice the value of the transaction) can be imposed, willful violations can result in significant jail time for individuals, and resulting internal investigations and/or government investigations can be burdensome, distracting, very expensive, and cause serious reputational harm to a company.

…continue reading: U.S. Export Laws and Related Trade Sanctions

What Now For Proxy Access?

Posted by Stanley Keller, Edwards Angell Palmer & Dodge LLP, on Thursday August 18, 2011 at 9:29 am
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Editor’s Note: Stanley Keller is a partner at Edwards Angell Palmer Dodge LLP. Other posts related to proxy access, including a number by Lucian Bebchuk and Scott Hirst of the Program on Corporate Governance, are available here.

With the United States Court of Appeals for the District of Columbia Circuit having struck down Rule 14a-11 in Business Roundtable et al v. Securities and Exchange Commission (No. 10-1305, July 22, 2011), the question is where does proxy access now stand and what can now be expected?

The Court overturned the SEC’s attempt to give shareholders the right under the federal proxy rules to have their director nominees included in management’s proxy materials because of the SEC’s failure to adequately justify Rule 14a-11 on a cost-benefit basis. The SEC has several alternatives which undoubtedly are being considered. It could seek rehearing either by the panel or en banc or appeal the decision to the U.S. Supreme Court, it could amplify its analysis of the economic justification for Rule 14a-11 and readopt the rule, it could modify Rule 14a-11 and seek to justify the modification in a way that it believes will pass judicial scrutiny, or it could do nothing on Rule 14a-11 and let it disappear. Under any of these alternatives, the question is what will the SEC do about the amendment of Rule 14a-8, which offers another route to proxy access through shareholder proposals. The amendment has been stayed pending resolution of the court action challenging Rule 14a-11 and further notice from the SEC. Again, the SEC has several alternatives – it could lift the stay and let the amendment take effect as adopted or it could revisit the Rule 14a-8 amendment. I will not presume to predict what the SEC will do, or worse, tell it what it should do regarding Rule 14a-11. However, I have some observations regarding a path forward.

…continue reading: What Now For Proxy Access?

If the Delaware Court of Chancery Got Airgas Right, Professor Bebchuk’s Op-Ed Got it Wrong

Posted by Stanley Keller, Edwards Angell Palmer & Dodge LLP, on Thursday July 7, 2011 at 9:30 am
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Editor’s Note: Stanley Keller is partner of Edwards Angell Palmer Dodge LLP. This post discussing the Airgas case references an op-ed by Professor Lucian Bebchuk, available here. A paper from the Program on Corporate Governance discussing the case is available here, and more posts about the case can be found here. This post is part of the Delaware law series, which is co-sponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

I wrote my comment “Delaware Court of Chancery Gets Airgas Right” (posted on the HLS Forum on March 1, 2011) before reading Professor Lucian Bebchuk’s op-ed “An Antidote for the Corporate Poison Pill” that was published in The Wall Street Journal on February 24, 2011. As such, my comment did not address Professor Bebchuk’s op-ed directly, but rather served as a counterpoint, providing another point of view. In this comment, I offer a more direct response to Professor Bebchuk’s op-ed.

The fundamental difference between Professor Bebchuk and me stems from Professor Bebchuk’s applying Athenian democracy principles to corporate governance (or, if you will, the French Revolution approach) while I favor a more Platonic representative structure (the American Revolution approach). My approach recognizes the central role of directors in corporate change-of-control transactions, regardless of their form, balanced by imposition of fiduciary duty obligations that are subject to court review. No such balance exists if unfettered power is given to shareholders, who have no such fiduciary duties as a check, whose access to information, no matter how robust the disclosure, is likely to be more limited than the board’s, and whose actions often can be controlled by a subset of shareholders with a short-term perspective.

…continue reading: If the Delaware Court of Chancery Got Airgas Right, Professor Bebchuk’s Op-Ed Got it Wrong

Delaware Court of Chancery Gets Airgas Right

Posted by Stanley Keller, Edwards Angell Palmer & Dodge LLP, on Tuesday March 1, 2011 at 9:24 am
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Editor’s Note: Stanley Keller is partner of Edwards Angell Palmer Dodge LLP. The Airgas case was previously discussed in an op-ed by Professor Lucian Bebchuk, available here, and a paper from the Program on Corporate Governance, available here. 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.

Chancellor Chandler’s decision in Air Products and Chemicals Inc. v. Airgas, Inc. (Del. Ch., CA No. 5249-CC, 2/15/11) upholding the board’s maintenance of the company’s shareholder rights plan in the face of an unfriendly cash tender offer the board determined was inadequate has justifiably received a great deal of attention and analysis.  Despite his reluctance, I believe the Chancellor got it right.  By permitting the Airgas board to keep the rights plan in place under the facts of that case, he upheld the foundational director-centric model for governance of Delaware corporations and recognized the importance of long-term value creation as a critical focus for Delaware corporate enterprises.

…continue reading: Delaware Court of Chancery Gets Airgas Right

Shareholder Choice in a World of Proxy Access

Posted by Stanley Keller, Edwards Angell Palmer & Dodge LLP, on Thursday December 31, 2009 at 10:52 am
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Editor’s Note: Stanley Keller is partner of Edwards Angell Palmer Dodge LLP. This post is by Mr. Keller, Robert Todd Lang and Charles M. Nathan. Mr. Lang is a partner of Weil, Gotshal & Manges LLP; and Mr. Nathan is a partner of Latham & Watkins LLP. The views expressed in this paper are solely those of the authors and not those of other members of their respective firms, any of their firms’ clients or any organizations with which they are associated.

Although there can be legitimate debate over whether there should be a federally-mandated proxy access rule, if we assume that the Securities and Exchange Commission does adopt a final proxy access rule in 2010, two critical issues are whether the rule will allow for shareholder choice and, if so, what paradigm will be used. This paper first addresses the cases for and against shareholder choice and concludes that shareholder choice should be permitted on proxy access. It then explores the two principal paradigms the Commission’s final proxy access rules could utilize to provide shareholder choice and makes recommendations on key implementation issues under each paradigm.

The debate at the Commission’s open meeting in May 2009, preceding its divided vote to propose proxy access rules, centered on issues of shareholder choice and private ordering. As proposed, the proxy access rules would give shareholders only a right to liberalize proxy access, but no right to make the terms of proxy access more restrictive or to opt-out completely. Many commentators have criticized the asymmetrical, “one way street” aspect of this version of shareholder choice and argued for a broader version that would allow greater freedom to shareholders to vary the SEC prescribed access regime in either direction.

…continue reading: Shareholder Choice in a World of Proxy Access

Corporate Governance and the U.S. Senate

Posted by Stanley Keller, Edwards Angell Palmer & Dodge LLP, on Saturday September 19, 2009 at 9:51 am
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(Editor’s Note: This post by Stanley Keller of Edwards Angell Palmer & Dodge LLP is based on an article in the Massachusetts Lawyers’ Weekly.)

Classified boards, where directors serve staggered terms (typically for three years with one-third of the directors elected each year), has been a recognized corporate governance alternative for a long time. The laws of every state permit corporations to structure their boards in this way. In fact, it is the default rule in Massachusetts for publicly traded companies unless the board of directors or the shareholders elects to opt out.

This should sound familiar because it is the way members of the United States Senate are elected, with Senators serving six-year terms and one third elected in each two-year election cycle. The Constitution’s Framers understood the stabilizing effect of this arrangement, which they believed would ensure continuity and allow Senators to take responsibility for measures over time and make them independent of rapid swings in public opinion. For more than 200 years, this policy has served the nation well. It is a policy that also has served corporations and their investors well when they have chosen to use it.

Yet undoing this corporate governance system is precisely what is now being proposed – ironically, by two Senators. They want to prohibit for stock exchange traded companies the very governance system under which they serve. They claim that classified boards of directors are part of what they call a “widespread failure of corporate governance” that was one of the “central causes of the financial and economic crises that the United States faces.”

Such a claim ought to be accompanied by hard evidence – but it is not, and with good reason. There is no evidence suggesting that classified boards were in any way a contributing factor to the ongoing economic crisis. To the contrary, companies involved in recent financial meltdowns whose boards were not classified include AIG, Washington Mutual, Bear Stearns, Citigroup, Bank of America, Lehman Brothers and General Motors. Going back to the 2001-era financial frauds, Enron, WorldCom, Tyco and HealthSouth all had unclassified boards. If anything, then, good policy and common sense suggest that we would want to retain the alternative of classified boards, not prohibit them.

As is the case with the U.S. Senate, too-frequent elections, rather than staggered terms of office, are what can undermine desired continuity and the ability to govern for the long term.

The key point is that we should not have a one-size fits all mandate for corporate governance. Rather, investor choice ought to be retained, not discarded. Certainly, corporations and their shareholders should be free to decide whether or not they want a classified board and whether the governance structure that is fine for the United States Senate works for them. Indeed, the current system is working as we would want it to, with individual choice at individual companies exercised freely – less than 40% of the S&P 500 companies have classified boards and, during the last six years, more than 200 companies have successfully put to a shareholder vote proposals to declassify their boards of directors.

In short, there is simply no evidence that classified boards bear any of the blame for the recent economic crisis. The laws of all states allow for classified boards, with Massachusetts mandating it, and there is the ability for investors to make a choice on the matter. In these circumstances, the current legislative proposal to preempt state laws and do away with classified boards is an inadvisable step back from investor choice, and toward the imposition of an unjustified one size fits all federal governance rule that will do nothing to prevent future financial breakdowns.

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