Corporate governance - Vigil

The reported demise of dual-class stock appears to be, to paraphrase Mark Twain, “greatly exaggerated.” The end of dual-class stock was predicted following the decisions this summer by the major indices, including FTSE Russell (who operates the Russell 3000 index) and S&P Dow Jones (who manages the Dow Jones 500 index) to ban most companies that went public with multi-class stock. The decisions by the indices came at the behest of numerous institutional investors, especially passive funds, who argued that only companies with a single class of stock should be included in the most prominent indexes. The decisions by the major indexes led many market observers to conclude that companies going public would no longer adopt multi-class stock since it created the risk that these companies would be excluded from the indexes.

Former stockholders of SARcode Bioscience were recently denied a claim that they were entitled to be paid $425 million in milestone payments under a merger agreement. The decision provides an anecdotal lesson in drafting milestones and suggests that the more technically prescribed milestones may be more difficult to meet, even though the development of the drug is ultimately successful.

Special litigation committees (SLCs) are controversial. They are supposed to dispassionately consider the merits of derivative litigation brought by shareholders against the company and some of its officers/directors, but they are composed of board members from the same company/board that is being sued. As a result, some shareholders and academics complain that these SLCs always seek to dismiss the shareholders’ cases and operate solely to protect directors from liability.

Good afternoon and thank you for inviting me to speak today. Before I begin, let me give the required disclaimer that the views I express here today are my own and do not necessarily represent the views of the Commission or its staff.

Against the backdrop of a new administration in Washington and growing social divisiveness, US public company directors are faced with great expectations from investors and the public. Perhaps now more than ever, public companies are being asked to take the lead in addressing some of society’s most difficult problems. From seeking action on climate change to advancing diversity, stakeholder expectations are increasing and many companies are responding.

Since 2007, the Center for Audit Quality (CAQ) has commissioned an annual survey of US retail investors. Each year, our Main Street Investor Survey measures confidence in US capital markets, global capital markets, audited financial information, and investing in publicly traded companies.

This post summarizes and comments upon a representative sampling of responses (through September 15, 2017) from financial regulators, issuers, institutional investors, credit rating agencies, and voluntary sustainability reporting frameworks, to the draft Guidance issued on December 14, 2017, and to the final Guidance published on June 29, 2017, by the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures (TCFD).

Non-employee director (NED) compensation has come into the corporate governance spotlight in recent years. ISS’ 2017 Board Practices Study indicated that median NED pay at S&P 1500 firms has steadily increased every year since 2012 and stood at approximately $211,000 in 2016.

In recent years, executive compensation in the U.S. has become a hotly debated issue. A central point of contention is peer benchmarking, an integral part of the pay-setting process in which firms compare their executives’ compensation with that of rivals in the labor market.

Advisory votes on compensation are more than half a decade old in the U.S., and the trends are clear:

In recent weeks, high-profile companies like Wells Fargo, Uber, Equifax, The Weinstein Co., Fox News and many more have garnered media attention for their leadership and corporate cultures. And the boards of companies including Whirlpool, CACI International and Citigroup have formed culture committees to surveil the climate in their respective organizations.

Regulation of proxy advisors is back on the U.S. legislative agenda. If enacted, the proposed rules could create delays to the delivery and threats to the independence of proxy research, with investors footing the bill.

Hedge fund activism has transformed the corporate governance landscape – possibly for better, possibly for worse. But as activist funds emerge as the newest and most potent players in corporate governance, there is one certainty: New agency costs also arise.

ROCKVILLE, M.D. (30 October 2017) – Institutional Shareholder Services Inc. (ISS), a leading provider of governance and responsible investment solutions to the global financial community, today announced methodology changes to QualityScore, ISS’ state-of-the-art global corporate governance scoring solution for institutional investors.

On September 29, 2017, the United States Securities and Exchange Commission (“SEC”) brought its first enforcement action arising from an Initial Coin Offering (“ICO”). This action is the latest sign that the SEC will be carefully scrutinizing the ICO market and transactions involving ICOs.