Corporate governance - Vigil

The Delaware Court of Chancery recently established new guidelines regarding the ability of a corporation to ratify defective corporate acts due to a failure of authorization pursuant to Sections 204 or 205 of the Delaware General Corporation Law (“DGCL”) in Nguyen v. View, Inc., C.A. No. 11138-VCS (Del. Ch. Jun. 6,2017). After the enactment of Sections 204 and 205 in 2014, corporations have been able to fix corporate acts that were not validly approved or were inconsistent with the corporation’s certificate of incorporation, or seek relief from the Court of Chancery to validate a corporate act under certain circumstances. Nguyen is the latest in a line of cases that attempts to establish the boundaries of the remedial effects of Sections 204 and 205.

The S&P Dow Jones and FTSE Russell indices recently took actions designed to exclude companies with multi-class share structures from several of the most prominent market indices.

The Second Circuit recently considered the extraterritorial application of the U.S. securities laws in the private securities class action context, bringing some clarity to an area of the law that is increasingly important given the globalization of financial markets.

In response to a statutory requirement, the SEC Staff of the Division of Economic and Risk Analysis (DERA) has issued a lengthy report to Congress on the combined impacts of the Dodd-Frank Act and other financial regulations on access to capital for consumers, investors and businesses and market liquidity. DERA studied (a) capital raising in the primary markets by analyzing evidence on the evolution of the issuance of debt, equity and asset-backed securities across registered and exempt offerings and (b) secondary market liquidity by analyzing market activity and liquidity in corporate bonds and US treasuries, along with funds and investment companies that invest in those securities.

The structure and content of corporate communications with shareholders contribute to pressures towards short-termism. For example, the practice of issuing quarterly earnings guidance seems to reinforce short-term investment horizons. CEOs have also described short-term pressures as having intensified over the last five years, citing, in addition, the competitive environment, performance expectations from the board, economic uncertainty, and vocal activist investors as factors.

This post provides an update on shareholder activism activity involving NYSE- and NASDAQ-listed companies with equity market capitalizations above $1 billion during the first half of 2017. Activism has continued at a vigorous pace thus far in 2017. As compared to the same period in 2016, [the complete publication] captured more public activist actions (59 vs. 45), more activist investors taking actions (41 vs. 35), and more companies targeted by such actions (50 vs. 38).

This post updates the Council of Institutional Investors’ (CII) 2015 guide, “Proxy Access: Best Practices,” an overview of the Council’s views on common proxy access bylaw provisions. Proxy access, a mechanism that enables shareholders to place their nominees for director on a company’s proxy card, gives shareholders a meaningful voice in board elections.

An August 21 blog post, “Shareholders Deserve Right to Choose Mandatory Arbitration,” by Professor Hal S. Scott, argues that the introduction of mandatory arbitration clauses into corporate charters would be good for stockholders. Nothing could be further from the truth.

Recently, shareholder activists have been pursuing proxy contests seeking to prevent re-election of the CEO as a director, by proposing an alternative director nominee. When voting in proxy contests, many shareholders give significance to (or automatically follow) the recommendations of Institutional Shareholder Services Inc. (ISS).

On August 9, 2017, the Board of Governors of the Federal Reserve System (FRB) published proposed guidance (Proposal) that would address supervisory expectations on boards of directors of banks and holding companies, as applicable.

On August 18, 2017, the Delaware Court of Chancery granted defendants’ motion to dismiss a class action brought by former minority stockholders of Martha Stewart Living Omnimedia, Inc. (“MSLO”) against Martha Stewart and Sequential Brands Group, Inc. (“Sequential”).