Corporate governance - Vigil

A securities class action is a complex event characterized by scarce information, high uncertainty, and increased information asymmetry between stakeholders and firms.  In our paper “The Effect of Investor Attention on Fraud Discovery and Value Loss in Securities Class Action Litigation,” we argue that investor attention helps to disseminate information regarding fraudulent activity and to shape the market’s reaction to the lawsuit filing.  Specifically, we find that higher investor attention improves learning about fraudulent activity and exacerbates the negative effect of the litigation event.  As more investors learn about fraudulent activity, the negative effect of litigation on a firm’s reputational capital increases.

A battle is brewing for control of America’s most dynamic companies. Entrepreneurs are increasingly seeking protection from interference or dismissal by public

There are two starkly different sides to the heated debate over staggered boards. On  one are those who argue, based in part on work by Professors Lucian Bebchuk and Alma Cohen, that the staggered board is value decreasing because it enables the entrenchment of inefficient directors and management.

The issue of multiple directorships on corporate boards has come under increasing scrutiny from both academicians and practitioners. There is conflicting evidence in the academic literature about the impact of multiple directorships on firm value and performance. Core, Holthausen, and Larcker (1999) report that busy directors require an excessively high level of compensation, which in turn, leads to poor firm performance.

On 29 August 2017, the UK Government published its response to the green paper on corporate governance reform that it issued at the end of November 2016. It intends to implement its reform proposals — so that they apply to accounting periods starting after June 2018 — by a mixture of secondary legislation and changes to the UK Corporate Governance Code (the “Governance Code”) coupled with the preparation of new guidance and certain other initiatives in related areas. Except for foreign premium-listed companies which may be affected by the Governance Code changes, the reforms (including the CEO pay ratio reporting) will only apply, to differing extents, to UK-incorporated companies.

The New York Stock Exchange (“NYSE”) has amended its rules on companies’ notifications to the NYSE about upcoming dividends. The rule changes were approved by the Securities and Exchange Commission on Monday, August 14 and took effect immediately. The amended rules require companies that intend to make announcements outside market hours that involve dividends or stock distributions to notify the NYSE at least ten minutes before making the announcement. The NYSE has not made any changes to the requirements for announcements made during market hours. A blackline of the changes to the text of the Listed Company Manual is available here. A chart prepared by the NYSE in anticipation of the rule change comparing the requirements that will apply during and outside of market hours is available here.

One of the biggest names in Canadian investing says that the Bank of Canada acted “far too late” on raising interest rates and that the country’s housing markets still has room to fall.

In the last decade, financial technology (or “fintech”) has revolutionized the way that finance works. Robo-advisors have turned the art of investing into an automated process run entirely by algorithms. Crowdfunding firms have harnessed the wisdom of crowds to make it easier than ever for individuals and companies to raise capital. And virtual currencies such as Bitcoin have emerged to challenge the very idea of money.

Providing a useful perspective on corporate governance today is an examination of the evolution of conceptions of “good” corporate governance that have successively revolutionized the corporate landscape. “Evolution” in this context does not refer to some natural evolution, but changes in the beliefs of managers concerning how to run their businesses effectively. “Good” corporate governance refers to what is perceived as good from the point of view of firm managers and may or may not translate into what is good for society.

In a 2016 post to Weil’s Private Equity Insights blog it was suggested that deal professionals and their counsel should not only “choose governing law wisely, but also choose it thoroughly!” [1] That suggestion was an effort to highlight the importance of the actual language used in the choice-of-law clauses found in the miscellaneous provisions at the back of most M&A-related agreements. And a recent ruling by Vice Chancellor Slights in the Delaware Court of Chancery provides yet another opportunity to reinforce that suggestion. [2]

The Federal Reserve’s proposed supervisory guidance on corporate governance is a breath of fresh air that should encourage banking boards to focus on their core responsibilities and avoid blurring the distinctions between executive and non-executive duties.  It is also a signal that supervisors intend to move away from the blunt “check-the-box” approach to corporate governance that has especially burdened banking boards in recent years.  We applaud this rebalancing in supervisory approach.

On August 11, 2017, the Internal Revenue Service (IRS) published Revenue Procedure 2017-45, which provides guidance on when it will treat stock distributions by certain real estate investment trusts (REITs) and certain regulated investment companies (RICs) as distributions of property under Section 301 of the Internal Revenue Code. Stock distributions eligible for this treatment may constitute dividends under Section 301 and increase the amount of the REIT’s or the RIC’s dividends paid deduction.

nsider trading allegations have surfaced at Equifax, a credit rating agency that last week announced a data breach that could potentially affect 143 million consumers in the United States, nearly half of the country’s population. SEC filings show that three Equifax executives—Chief Financial Officer John Gamble Jr.,

Also Uber, Martin Shkreli and broker conflicts of interest.

Since the financial crisis, regulators have been shifting their focus from traditional microprudential regulation, which protects individual banks and other financial firms , to “macroprudential” regulation that protects the stability of the financial system itself. Regulators have begun expanding that macroprudential focus to include bankruptcy “resolution” techniques designed to reorganize the capital structure of, or else to liquidate with minimal systemic impact, systemically important firms that become financially troubled.

As a follow-up to our prior post, the New York Stock Exchange (“NYSE”) is delaying implementation of its rule change on notifications to the NYSE about announcements outside of market hours related to dividends or stock distributions. Companies should continue to comply with the current rule (summarized here) and follow their existing practices until the implementation date for the new rule, which will likely be in February 2018. The NYSE plans to provide companies with updated information prior to the date when they will be required to begin complying.

A central goal of corporate law is to make managers accountable to shareholders. So it may come as a surprise that America’s federal government frequently compels companies to “effectively exclude the Shareholder from . . . influence over the Corporation’s business or management [.