 Your new post is loading...
Shareholder advocates have warned the Morrison government's temporary weakening of rules requiring listed companies to keep investors informed threatens to harm market confidence and could blemish the Australian sharemarket's strong reputation for transparency. Treasurer Josh Frydenberg this week gave listed companies a six-month reprieve from strict rules on continuous disclosure, a regime that requires companies to keep investors constantly updated on issues that could have a material effect on share prices. Mr Frydenberg said the changes would shield companies from "opportunistic" class action lawsuits which could arise if company forecasts made during the highly uncertain backdrop of the pandemic turned out to be wrong. While company directors have supported the changes, critics on Tuesday warned the move was unnecessary and said it could raise corporate funding costs by hurting the Australian sharemarket's reputation overseas.
[...] The crisis is testing the resilience of the “G” in the ESG triad of environmental, social and governance responsibilities. Boards handle normal business risk through ordinary processes such as audit, and company-specific risks through business continuity programmes and contingency planning. But few if any had prepared a plan for the first shockwave of a global pandemic whose impact on business has outweighed the disruption of the 9/11 terrorist attacks on the US or the 2008 financial crisis. [...] Active directors may have more of their personal reputation at stake and will therefore devote more time to rescuing the company. [...] Those with “busy” directors, who actively offer advice to executives, perform better through a crisis in the short term than companies with more passive “monitoring” directors, according to a new working paper, based on a study of how hundreds of US companies responded to disruptive events. That seems counter-intuitive, given that established research suggests advisory directors impede shareholder value, co-author Luh Luh Lan of the National University of Singapore told the ECGI webinar.
Most passenger planes today fly virtually empty, but when Virgin Atlantic flight VS251 landed at Heathrow Airport near London on a cloudy afternoon late last month, most of its 258 seats were occupied. No one was violating social distancing recommendations, though. The seats, along with the plane’s belly, were loaded with medical supplies. That flight was one of nine that Virgin flew last month that used passenger planes — without any passengers — to transport ventilators, masks, gloves and other medical necessities between Shanghai and London. It was one of the most vivid examples of how thoroughly the pandemic has muddled the economics of the industry. Airlines have long carried freight alongside passengers, but it never made sense to use their planes exclusively for cargo. That changed in March. As companies eliminated thousands of flights, cargo space became scarce and the price of sending goods by plane shot up, creating an economic case for repurposing idled passenger planes.
Illuminated open signs are going out all over Europe, some will not be lit again in our life-time. Many however will reignite, but only thanks to last-minute acts of life-saving economic engineering. But without careful attention, today’s rescuers could become the inadvertent architects of tomorrow’s ruin. Why might this happen and what can we do to stop it? As Europe recovers from the peaks of the Coronavirus pandemic, policymakers who shut down heaven and earth to contain the virus must now move mountains to save the economy. Governments initially rushed to keep firms afloat, mostly by providing loans. But, with spiraling debts abound, government loans may not be enough to keep companies solvent and equity (part-ownership) is now on the table. [...] Is this the dawn of the nearly dead? Not necessarily. There are four principles to consider how and under what conditions support should be given.
The May 1, 2020 federal felony indictment [1] of former Blue Bell Creameries LLP CEO Paul W. Kruse provides an important lesson to governing boards and their senior executives on the regulatory risks associated with communications during times of corporate crisis, especially communications with public health and safety implications. Company executives and public relations consultants often debate about what is too little or too much to say in a time of crisis. The Kruse prosecution is a reminder that there can be criminal implications to those debates, and sometimes there can be more risk in what a company does not say than in what it does say. The case also provides a cautionary note about the broad scope of anti-fraud enforcement authority available to the federal government. Together, these are risks that corporate leadership should discuss with their general counsel and the compliance officer, especially given the ongoing pandemic. The most immediate of these lessons are the critical need (a) for corporate leaders to be extraordinarily careful with the transparency and accuracy of crisis communications, especially those relating to acute impact on consumers created by the company’s products or services; and (b) to confirm that the company’s compliance program adequately alerts the board to the presence of such risks.
After decades of routinely dismissing such claims, Vice Chancellor Laster’s recent 41-page decision in Hughes v. Hu represents the third time since the Delaware Supreme Court’s decision last year in Marchand v. Barnhill that the Court of Chancery has sustained a Caremark duty of oversight claim at the pleading stage. It remains unlikely that these recent decisions signal some change in the law, but rather reflect allegations of unique or extreme examples of certain corporate behavior. That said, these cases serve as a reminder of the importance of active, engaged board oversight of “mission critical” risk and compliance issues, and boards should take proactive steps to ensure that directors do not face personal liability for a failure of oversight.
The scope of supply-chain disruption from the Covid-19 outbreak has highlighted the importance of a well-crafted force majeure clause. It’s also brought this sometimes-overlooked contract provision out of the dark obscurity of “fine print” and into the light of increased scrutiny and discussion in the Covid-19 legal news world. So, what is force majeure, when does it apply, and how is it being shaped and applied in light of the novel coronavirus pandemic? Force Majeure Means What the Parties Say It Means
Force majeure means “supervening cause or force.” In the United States and other common-law jurisdictions such as the United Kingdom and Canada, force majeure is a creature of contract.
[...] Compared with other jurisdictions, in particular the United States, the number of activist campaigns involving Swiss companies is still moderate. However, Switzerland is a key European target for activist shareholders. With six campaigns on targets with a market capitalisation of more than US$500 million in 2019, Switzerland ranked fourth in Europe after the United Kingdom, France and Germany. Since 2012, actions in Switzerland have more than doubled. The chances of success depend on the content of the campaigns and cannot easily be measured among others because targets may announce changes in operations or strategic adjustments as their own (pre-existing) plans that happen to coincide with the requests of the activist shareholder. Proxy fights at shareholders' meetings are rarely successful, but occasionally activists win them (eg, Veraison at Comet's 2019 proxy fight for chair election). The chances of success are higher if proxy advisers such as the Institutional Shareholder Services and Glass Lewis issue voting recommendations in support of the activist's requests.
[...] For decades, companies were meant to focus on only one thing: shareholder value. The neo-liberal philosophies expounded by economists like Milton Friedman in the 1970s took hold in the last decades of the 20th century and dominated… everything. Government was to be minimised, shareholder returns to be maximised. Period. The Business Roundtable, an association of America’s leading CEOs has, since 1978, hammered the shareholder-primacy message home in its principles of corporate governance. The 2008 financial crisis cracked this logic open. By the summer of 2019, business was re-inventing itself, and 181 CEOs signed a declaration that “the purpose of a company is to serve all its stakeholders - customers, employees, suppliers, communities and shareholders.” Even Bridgewater hedge fund founder Ray Dalio is arguing for an overhaul of capitalism. The pandemic pushed into this already-swinging pendulum – exponentially – and is revealing which companies are walking the new talk.
It was late and Martin A. Kits van Heyningen feared he was letting the team down at the company he co-founded, KVH Industries. Rather than lay off workers in response to the coronavirus pandemic, he had decided to cut salaries, and when he emailed a video explaining his decision at 3 a.m. last month, he was prepared for a barrage of complaints. Instead, he woke to an outpouring of support from employees that left him elated. “It was one of the hardest things I’ve done, but it turned out to be the best day of my life at work,” said Mr. Kits van Heyningen. “I was trying to keep their morale up. Instead, they kept my morale up.” Even as American employers let tens of millions of workers go, some companies are choosing a different path. By instituting across-the-board salary reductions, especially at senior levels, they have avoided layoffs.
Six European Union states will scrap bans on short-selling shares introduced during bouts of extreme market volatility in March when national lockdowns were rolled out across the bloc to fight the COVID-19 pandemic. The bloc’s securities watchdog, the European Securities and Markets Authority (ESMA), said Austria, Belgium, France, Greece and Spain had decided not to renew short-selling bans that expire at 2159 GMT on Monday. Italy has decided to lift its ban, due to expire on June 18, to align itself with the other five EU states, ESMA said. French markets watchdog AMF said that since the implementation of the ban, it has observed a progressive normalization in trading. “Markets have partly reduced their losses, trading volumes and volatility have returned to levels that are still high compared to mid-February, however this reflects market participants’ uncertainties in the current context,” the AMF said in a statement. Equity strategists told Reuters the end of the bans underlined how liquidity had improved in major European countries, but questioned any impact the curbs had made.
In late February as the COVID-19 pandemic was accelerating, the Delaware Chancery Court issued an important decision that is likely to impact transactions during the expected recession. In Salladay v. Lev, C.A. No. 2019-0048-SG (Del. Ch. Feb. 27, 2020) (“Salladay”), the court held that a conflicted transaction—not involving a controlling shareholder—could only be cleansed through the use of a special committee under Trados II [1] if the special committee was constituted ab initio (i.e., from the outset). Salladay is the first time that a Delaware court has held that the ab initio requirement established by Kahn v. M&F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”) and its progeny applies in a non-MFW scenario (i.e., in a transaction without a conflicted controlling shareholder). Accordingly, a conflicted transaction without a controlling stockholder, can be “cleansed” under Trados II and become eligible for review under the business judgment rule if an empowered special committee of independent directors is constituted at the outset before any substantive economic discussions occur and the other MFW standards relating to special committees are met. [2] However, if the special committee is not established ab initio, and there are disputed questions of fact about whether the conflicted transaction was properly cleansed under Corwin [3], then the director defendants will have the burden to prove that the transaction was entirely fair.
Organizations are standing up analytics capabilities in a matter of weeks to inform business responses to COVID-19 challenges and prepare for the future. Here’s how. Prior to the COVID-19 pandemic’s stranglehold on the world, leaders increasingly embraced advanced analytics and artificial intelligence (AI), for good reason. These capabilities are expected to offer between $9.5 trillion and $15.4 trillion in annual economic value. Along the way, many executives found they had to overcome hefty cultural and organizational hurdles. Most have yet to apply the core practices, such as agile delivery methods and strong data practices, necessary to scale the technology successfully.
|
We study the contribution of directors to firm resilience by assessing the relative importance of their advisory and monitoring roles at times of crisis. Based on manually collected US data, we document that four bord-related variables affect market reactions around disruptive events. Board independence and the presence of directors with industry expertise exacerbate the negative share price effect, whereas the converse is true for director busyness and board size. These reactions imply that, in times of crisis, advice-oriented boards fare better than monitoring-oriented boards
Tesla’s new carrier for its Directors & Officers insurance coverage is its CEO. Tesla says it made the move because the D&O insurance companies made "disproportionately" high premium demands. What caused the D&O marketplace to become so expensive for Tesla? The actions of its CEO and the inaction of its Board. There’s much we don’t know about the new arrangement because, as usual, Tesla is mum about the details. But this much seems clear: having Musk as the insurer creates unhealthy incentives and added perils. [...] But for a company of Tesla’s size, and with its large and growing litigation docket, the idea of abandoning third party D&O coverage seems astonishing. And, as I will argue here, having the CEO provide the coverage is extraordinarily risky for the enterprise, for its directors, and for all its debt and equity claimants.
LONDON (Reuters) - A cluster of big name hedge funds have started betting against French companies, moving in after the lifting of a short-selling ban imposed earlier this year to calm financial markets, an analysis of regulatory filings showed. France joined Italy, Spain, Belgium, Austria and Greece in dropping short-selling bans last week. They had banned the practice for many stocks two months ago to curb extreme stock market volatility caused by economic uncertainty that has resulted from the coronavirus lockdowns. Hedge funds engage in so-called “short-selling” by borrowing a stock from an institutional investor, such as a pension fund, and selling it back when the shares fall, pocketing the profit. [...] Regulatory filings in the seven days since the bans ended showed that France accounted for more than half the 125 regulatory notifications of changes to short positions against companies in the six markets.
In times of crisis, the risk of shareholder derivative litigation rises as boards of directors face heightened scrutiny of their actions. While business judgment protection applies to good faith board efforts to navigate a crisis, boards and their advisors should be mindful of guidance that the Delaware courts have issued in the past year, including in a Delaware Chancery Court case decided on April 27, regarding the circumstances in which a claim can move forward seeking to hold directors personally liable for a failure of oversight. The 1996 Delaware Chancery Court decision in In re Caremark Int’l Inc. Deriv. Litig. clarified that directors are responsible for overseeing that the company has in place information and reporting systems reasonably designed to provide the board and senior management with timely, accurate information sufficient to support informed judgments about compliance risk.
The German government and Lufthansa, which has been hit hard by the coronavirus pandemic, have reached a preliminary deal on a €9-billion ($9.8-billion) bailout. The airline has been in talks with Berlin for weeks over aid to help it to cope with what is expected to be a protracted travel slump, but the carrier has been wrangling over how much control to yield in return for support. The German Finance and Economy Ministries on Monday said Lufthansa was an operationally healthy company before the coronavirus outbreak, was profitable and had good prospects for the future but had got into trouble because of the pandemic. Rivals such as Franco-Dutch group Air France-KLM and U.S. carriers American Airlines, United Airlines and Delta Air Lines have also sought state aid.
For over two decades, the federal government has employed roughly the same approach to corporate crime. Prosecutors promise leniency in exchange for corporations’ commitment to improve the internal structures and systems that ensure their employees’ compliance with law. Over the years, this leniency-for-compliance framework has generated not only a sophisticated and robust compliance industry, but also a proliferation of enforcement policies designed to improve corporate policing and disclosure. The framework has also generated two sub-fields of scholarship. One examines the dynamics of corporate enforcement, whereas the other studies the corporation’s compliance function. Two recent papers of mine seek to further conversation in both of these areas.
Corporations in the hardest-hit sector of the economy are taking a combination of cash-conserving actions as consumer discretionary spending declines to concerningly low levels. These actions may signal approaching distress for more companies. They are also among the measures taken by the “zombie companies” of the pandemic that are being propped up by bonds and government assistance. Year to date, S&P 500 consumer, cyclical companies have announced the highest number of buyback suspensions and dividend cuts compared to all other sectors. Twenty-eight S&P 500 companies in the consumer, cyclical industry have announced buyback suspensions and 21 have announced dividend cuts so far in 2020. Across all industries, 75 S&P 500 buyback suspensions have been announced this year, along with a total of 34 dividend cuts.
The impact of COVID-19 on the global economy was swift and substantial. Unemployment numbers are reaching depression-era levels and nations are clamouring to unveil stability packages intended to lessen the economic impact. Will these measures work to restore the economic status quo, or is this an opportunity to rethink our economic structures? In this episode of Big Tech, co-hosts David Skok and Taylor Owen speak with Joseph Stiglitz, a Nobel laureate economist and a professor at Columbia University, about lessons from past economic crises, and how those lessons apply to the economic fallout of COVID-19.
Alimentation Couche-Tard Inc. says the novel coronavirus pandemic will open up new takeover opportunities and accelerate its plans to introduce touchless technology as the Canadian convenience store giant grapples with rapidly shifting industry dynamics. The Laval, Que.-based company, one of the world’s biggest convenience store players, hasn’t made a major acquisition since buying Texas-based CST Brands Inc. for US$4.4-billion in 2017. Last month, Couche-Tard decided to focus on its own business and suspended efforts to take over fuel retailer Caltex Australia Ltd. The fallout of COVID-19 and the rout in global oil prices had made uncertain the target’s prospects and cash flow. But while visibility “became cloudy” on the merits of a Caltex transaction, other deals will almost certainly present themselves, said Couche-Tard chief executive Brian Hannasch. Takeover multiples, which show what an investor is willing to pay per dollar of earnings, are just one element of a convenience store sector poised for transformation in the months ahead, he said.
(Bloomberg) -- Hedge funds, market-making firms and other traders across Europe can resume short-selling of equities this week after regulators lifted bans instituted when markets plunged during March’s coronavirus outbreak. Six European countries including France, Spain, and Austria said short-selling can begin again on Tuesday as bans set to expire Monday will not be renewed. Italy’s prohibition, slated to end in June, will also now end today. “Short-selling is an activity that is part of a well-functioning market,” Robert Ophele, chairman of France’s Autorité des Marchés Financiers, said Monday in a Bloomberg TV interview. Ophele said the restrictions “didn’t have any detrimental effects” on the market and he looks forward to subsequent research on the effect of the bans, which covered markets hosting 60% of trading in the euro zone.
After the Covid-19 crisis struck, equity prices abruptly plunged across the world. The clear prospect of an almost unprecedented decrease in supply and demand, coupled with extreme uncertainty about the longer-term prospects for the economy worldwide, justified the price adjustments. Yet, in conditions of plummeting prices and high volatility, policymakers around the world felt under pressure ‘to do something’ to stop the downward trend in market prices. As was the case during the financial crises of 2008-09 and 2011-12, these pressures have quickly led to the adoption of market-wide short-selling bans. In addition, both in Europe and in
the US, there have been calls for an even more drastic measure: a lasting ‘stock exchange holiday’. This chapter reviews the evidence on the effects of shortselling bans during the financial crisis and discusses the merits of stock exchange holidays and concludes that neither of these measures bring benefits to financial markets.
While the evolution of empires and currencies is one continuous story that started before there was recorded history, in this chapter I am going to pick up the story around the year 1600. My objective is simply to put where we are in perspective of history and bring us up to date. I will begin by very briefly reviewing what the Big Cycle looks like and then scan through the last 500 years to show these Big Cycles playing out before examining more closely the declines of the Dutch and British empires and their reserve currencies. Then I will show how the decline of the British empire and the pound evolved into the rise of the US empire and US dollar and I will take a glimpse at the emergence of the Chinese empire and the Chinese renminbi. That will bring us up to the present and prepare us to try to think about what will come next.
|
