Corporate governance - Vigil

Calgary – Les Autorités canadiennes en valeurs mobilières (ACVM) annoncent aujourd’hui la mise en œuvre du Règlement 91-102 sur l’interdiction visant les options binaires, qui rend illégale toute publicité, offre, vente ou autre opération relative à des options binaires dont l’échéance est de moins de 30 jours auprès de personnes physiques.

In a recent New York Times article, Steven Davidoff Solomon listed several possible explanations for a significant decline in the number of initial public offerings (IPOs). Among the most interesting was that there are many large and successful high-tech acquirers such as Facebook, Google, and Microsoft that are willing to pay top dollar for high flying unicorns (private companies with equity values greater than $1 billion) before they become public companies. The ability of the private markets to provide financing may have matured to the point where the advantages of financing through the public markets are no longer as great. Shareholder activism may also be scaring off companies that would normally enter the public markets. The relatively low number of IPOs over the last several years is simply a reversion back to what we should consider to be normal, perhaps 150 per year but with lots of volatility in that number.

Shareholder activism in the US has increased greatly over the past decade, measured not only in scope and the pools of capital dedicated to it but also in sophistication and in the range of tactics employed.

Technological shocks, import competition, and shifts in regulatory policies lead with increasing frequency to major industry shakeouts and radical change in economic environments. Whether firms succumb or thrive depends on the extent to which they restructure and reinvent their business models. Therefore, it is crucial to understand which factors help spur prompt and successful restructuring of firms affected by permanent negative shocks and, at the macroeconomic level, of stagnating economies.

Securities fraud class actions are a key feature of the US regime of corporate governance. Firms from all around the world that cross-list on US markets consequently become subject to this regime. While some countries endeavor to imitate it, others prefer to shun this mode of private enforcement. In our article, forthcoming in the Journal of Financial Economics, we use the US Supreme Court case in Morrison v. National Australia Bank as a natural experiment to assess the role and effect of this enforcement mechanism. We find surprising evidence that suggests implications for firms and law-makers alike.

It is an honor to testify before this Committee for the first time since my confirmation. Since joining the SEC, my experience has strongly reinforced my view that our talented and committed staff is fundamental to the agency’s effectiveness. The SEC’s mission to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation is deeply ingrained throughout our offices and divisions. I also want to thank Commissioners Stein and Piwowar for their valuable counsel and guidance to me as well as for their unwavering commitment to the Commission.

ROCKVILLE, M.D. (25 September 2017) – Institutional Shareholder Services Inc. (ISS), a leading provider of corporate governance and responsible investment solutions to financial market participants, today released the results of its annual global benchmark voting policy survey.

The Board of Governors of the Federal Reserve System (the “Board”) has adopted final rules [1] that represent a significant shift in the terms of over-the-counter derivatives, repurchase and reverse repurchase transactions and securities lending transactions. These rules will require buy-side firms to relinquish certain termination rights that have long been part of bankruptcy “safe harbors” for these types of contracts under bankruptcy and insolvency regimes in many jurisdictions in order to continue trading with large financial institutions. The new rules will impact institutional investors, hedge funds, mutual funds, sovereign wealth funds and other buy-side market participants who enter into over-the-counter derivatives, repurchase and reverse repurchase transactions and securities lending transactions with large financial institutions.

On September 21, 2017, the SEC issued guidance to assist companies in their efforts to comply with the pay ratio disclosure requirement mandated by the Dodd-Frank Act. Overall, the guidance should come as a relief to many companies. It came in three parts:

Hedge funds have become active in corporate governance. They push for changes in strategy and the adoption of specific business plans.

Recent years have seen a sharp decline in the number of initial public offerings (IPOs) in the U.S. While this decline has garnered considerable attention both in academic and policy circles and in the press, its causes remain unclear (Gao, Ritter, and Zhu (2013); Doidge, Karolyi, and Stulz (2013, 2017))

A pair of high-profile proxy contests currently underway—Trian’s campaign to add Nelson Peltz to Procter & Gamble’s board, and Pershing Square’s effort to replace three members of Automatic Data Processing’s board—reflect diverging paths in the ongoing evolution of activism. While the ADP contest may be seen, to some extent, as a continuation of this spring’s trend toward increasingly contentious fights, Trian seems to be deliberately distancing itself from such hostilities. The outcome of these two contests, at the ballot box as well as reconfiguring the income statements of these corporations over the next few years, will likely have a lasting impact on the overall strategy and tone of future activist campaigns.

This study uses Japanese firm data to empirically test the “quiet life hypothesis,” which predicts that managers who are subject to weak monitoring from shareholders avoid making difficult decisions such as risky investment and business restructuring. We employ cross-shareholder and stable shareholder ownership as the proxy variables of the strength of a manager’s defense against market disciplinary power. We examine the effect of the proxy variables on manager-enacted corporate behaviors and the results indicate that entrenched managers who are insulated from the disciplinary power of the stock market avoid making difficult decisions such as large investments and business restructures. However, when managers are closely monitored by institutional investors and independent directors, they tend to be active in making difficult decisions. Taken together, our results are consistent with the managerial quiet life hypothesis.