Corporate governance - Vigil

Recent events worldwide prove that cyber risk impacts every element of an organization—and even the most brilliant information security expertise must be supported by a cross functional cybersecurity mission and culture to succeed. In this webcast, business leaders can learn—through case studies and actionable insights—how to build and maintain a structure in which leaders across companies are able to work together seamlessly to comprehend, measure, and respond to cyber risk challenges.

Executive compensation is a rich, complex, and controversial topic. In addition to there being an intense debate among academics on its drivers, the efficiency of current practices, and the case for reform, few topics have sparked as much interest among the general public. Politicians, regulators, investors, and executives themselves have all taken strong positions on whether and how to reform pay.

Prominent activist investors such as hedge funds, pension funds, and influential individual shareholders and families increasingly aim to reshape corporate policies and strategy.

Over the past 20 years, there has been a major shift in how large public companies have compensated their outside Directors. [1] These changes have included the elimination of Board meeting fees, granting of equity compensation in the form of full-value shares, the elimination of Director retirement plans and other perquisites, adoption of stock ownership guidelines for Directors, and giving of supplemental cash retainers to Committee Chairs in recognition of their substantial time commitments to committee work.

Recently, there has been an increasing focus on how political uncertainty affects economic activity. Elections, in particular, generate uncertainty regarding future governmental policies that could impact firm cash flows. Academic research shows that firms often respond by reducing capital raising and investment activities (e.g., Baker et al., 2016; Jens, 2017). Importantly, declines in real activity can have negative long-term consequences for the firm and its investors. Therefore, it is important to understand the actions managers can take to mitigate such effects.

New York’s new cybersecurity regulations (the “Regulations”) become effective on August 28, 2017, marking a significant milestone in what is likely to be a new era in cybersecurity regulation on both a national and international level.

In a much-anticipated decision, on June 27, 2017, the Supreme Court of Delaware reversed the Chancery Court’s ruling in Chicago Bridge v. Westinghouse The Delaware Supreme Court determined that an independent auditor appointed to resolve purchase price adjustment disputes did not have a “wide-­ranging brief to adjudicate all disputes” under the Purchase Agreement but, rather, “one confined to a discrete set of narrow disputes.” Specifically, the Court held that the Independent Auditor could not hear the seller’s arguments that the purchase price should be reduced because historical financial statements and accounting practices were not compliant with generally accepted accounting principles. The decision represents an important statement on the limits of authority of Independent Auditors acting “as an expert, not an arbitrator.”

There is a big debate in Washington about the attempt in many states to restrict people’s ability to vote in political elections. Yet, there is almost complete silence about a more imminent and no less important form of vote suppression: the attempt to limit shareholder votes introduced in the Financial Choice Act, approved by the House in June. As in all forms of vote suppression, it takes a very technical and even benign form: the Financial Choice Act increases from the current level of $2,000 to 1% the ownership threshold for submitting shareholder proposals to be included in corporate ballots. While $2,000 might be too low to filter out purely frivolous proposals, 1% becomes prohibitive for all but a handful of institutional investors: for example, to make a proposal in Apple you would need over $7 billion in holdings.

What makes a board of directors “diverse?” For many years, discussions about board diversity have focused primarily on issues of gender, race, and ethnicity. Studies show that there has been some improvement in gender and racial diversity on boards, especially for the largest Fortune 100 boards (for examples, see the “2016 Board Diversity Census of Women and Minorities on Fortune 500 Boards,” a multi-year study published by the Alliance for Board Diversity in collaboration with Deloitte).

This week witnessed two very significant developments in the new paradigm for corporate governance, one in the U.S. and one in the U.K. Both will have cross-border impact. Both have the purpose of promoting investment to achieve sustainable long-term investment and growth.