Corporate governance - Vigil

The “traditional” IPO model has received a lot of criticism recently in the media and from venture capital investors for perceived “mispricings” that result in a pop in the opening trade. Recently, the media and investors have seized upon “direct listings,” where a company is listed on an exchange without a capital raising transaction, and instead files a registration statement to facilitate a listing and permit existing shareholders to sell into the market without a formal offering.

We recently published a paper, Paying a Pittance to the CEO: The American Public’s View of CEO Pay, that examines the American public’s view of CEO compensation. Among the controversies in corporate governance, perhaps none is more heated or widely debated across society than that of CEO pay.

Union officials, who represent workers in collective bargaining over workers’ wages, hours and working conditions, are agents of the workers whose interests they are supposed to represent. And, of course, agency costs manifest themselves in the union-worker relationship just as they do in other contexts in which principal-agent relationships exist.

Last week, in a 3 to 2 vote in favor, the Securities and Exchange Commission’s (SEC) proposed regulations that would change how proxy advisory firms interact with public companies and their institutional investor clients regarding proxy voting recommendations. The headline for companies is that the SEC proposal would permit them more time to respond directly to proxy advisors with feedback on proposed voting recommendations.

Corporate boards may wish to adopt a plan of action in response to two recent Delaware decisions suggesting a shift in application of the historically director-friendly Caremark[1] standard for board oversight of a company’s compliance systems.  Such a plan would be designed to reduce director liability exposure, support director retention, and enhance the effectiveness of risk oversight.