Corporate governance - Vigil

In Is Say on Pay All About Pay? The Impact of Firm Performance, we seek to answer the question whether “say on pay” votes really focus on executive compensation. As policymakers evaluate the decision whether to retain say on pay, it is worth examining more carefully the information that shareholders convey through their vote on executive compensation, a question we examine in this article. We find that, although pay plays a role in voting results, the say on pay vote is largely a means for shareholders to express dissatisfaction with firm performance.

The London Interbank Offered Rate (LIBOR) is intended to reflect the average rate at which banks can borrow in the unsecured market. It is computed by taking a trimmed mean of the daily reported borrowing rates of the banks on a panel. But panel banks may have incentives to manipulate LIBOR to profit off of their exposure to the benchmark. Manipulating one of the rates by even a fraction of a basis point can bring substantial gains: the market for derivative and loan products that use LIBOR rates has been estimated at greater than $300 trillion.

Incentive plans have the potential to drive executives towards achieving superior results for their companies and investors. At the same time, real and perceived risks in these programs can either blunt the potential drive of management or encourage excessive risk taking. A key goal in welldesigned executive incentive programs is to motivate executives to take the actions necessary to achieve strong results for shareholders while mitigating the motivation to take excessive risks.

Investors and regulators in the current corporate governance environment have increased their focus on companies’ transactions with their directors, senior management, and other related persons. These related-party transactions raise special disclosure issues for non-US companies, known as foreign private issuers (FPIs), that are listed on US stock exchanges.

The notion that corporations must develop effective ethics and compliance programs is uncontroversial. Earlier this month, Deputy Attorney General Rod Rosenstein explained that the “sophistication of compliance measures and tools that we see today regularly exceed the measures that were in place ten years ago.”

Today, in a Special Edition on INSEAD Directors Forum newsletter, it was announced that from 1st September 2017, INSEAD Corporate Governance Initiative (ICGI) will take on a new identity as INSEAD Corporate Governance Centre (ICGC). 

Shareholder activism is often thought of in binary terms: activist v. company, dissident nominees v. company directors. Media coverage dramatically frames the “showdown” of prominent and press-savvy activists taking on companies as both sides seek the upper hand on the way to the ballot box. While an “us vs. them” mentality makes for a compelling narrative, this framework has a major flaw: it doesn’t include shareholders, who are the most important constituency in driving the outcome of proxy contests.

We recently published a paper on SSRN, Building a Better Board Book, that evaluates the quality of information presented by management to directors in advance of board meetings.

Chances are blockchain has the potential to significantly impact your business—are you ready?

The Conference Board recently released a report that reviews the key environmental and social (E&S) proposals in the 2017 proxy season. The report provides details on some of the most prominent topics, including topics which received high levels of shareholder support and topics that have seen notable changes in support levels compared to previous years.

On October 11, 2017, at the first open meeting under Chairman Jay Clayton’s tenure, the SEC proposed amendments to modernize and simplify certain disclosure requirements in Regulation S-K. The proposed amendments are largely consistent with the recommendations in the SEC’s FAST Act Report to Congress in November 2016 (the “Report”). [1] The rulemaking proposal is intended to improve the readability and navigability of SEC documents and discourage repetition and disclosure of immaterial information.

Frequently touted for its absolute scale, it seems fitting that the knock-down, drag-out fight between Trian and P&G is slated to continue into extra rounds. Indeed, P&G is the largest firm to ever face a proxy contest, and the cash reportedly invested by the two sides tops all prior campaigns.

In 2013, the Securities and Exchange Commission announced a new policy of sometimes requiring admissions when settling enforcement actions. 

When purchasing a company, private equity sponsors typically use a combination of debt and equity to fund the purchase price. When structuring a transaction, private equity sponsors may invest all or a portion of their equity capital in the form of preferred stock or issue preferred stock to minority investors if sufficient debt is not available. Similarly, a company may, from time to time, issue one or more series of preferred stock to raise necessary operating capital when debt financing is only available on restrictive terms or not available at all.