Corporate governance - Vigil

A recent decision in Delaware illustrates yet another difficulty investors face when using redemption of their stock as a liquidity strategy. In this case, a private equity fund, Oak Hill Capital Partners, and the directors of one of its portfolio companies (both outsiders and those designated by the fund) were sued for breach of fiduciary duty and other claims in connection with the redemption of preferred stock held by the fund. The court’s refusal to dismiss the case creates the potential for a long and expensive court battle and ultimately the possibility of liability for Oak Hill and the directors.

On April 21, 2017, President Trump signed two presidential memoranda calling for review of portions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”). These presidential memoranda follow the executive order signed on February 3 (see our client alert here) setting forth “Core Principles” intended to guide the regulation of the U.S. financial system.

Activist investor Starboard Value LP has taken a 5.7% stake in Parexel International Corp., increasing pressure on the drug-research company to improve results or find a buyer.

In Financial Markets and the Political Center of Gravity, Travis Coan and I investigate the link between left-right market-friendliness across the developed world and financial markets. Academics across multiple disciplines and policymakers in multiple institutions have in recent decades searched for the economic, political, and institutional foundations for financial market strength. Promising theories and empirics have developed, including major explanations from differences in nations’ political economy.

Communities around the world face many difficult issues, including poverty, climate change, social and economic inequality, the cost and quality of education and healthcare, stagnant wages, financial market instability, disease, and food security.

The focus of good corporate governance is making sure executives run their firms well. But how do we define success? One way is to look at performance in terms of profits, stock-prices or growth. But all these measures have a major component of luck and may be very poor signals of managerial quality. As any sports fan knows if your players are unlucky it’s hard to win games no matter how great a manager you are.

Dow Chemical Co. and DuPont Co. will reassess how the chemical giants plan to separate into three companies following their merger, after shareholders of both companies raised questions about the details of each new company.

A significant emerging governance issue is how best to monitor – and influence – the management style of senior executives who by nature are insensitive to the risks of their initiatives. As recent controversies across multiple industry sectors confirm, such insensitivity can lead to extraordinary legal, accounting and reputational crises for the organization.

Two recent decisions from the Delaware Court of Chancery faithfully apply the Delaware Supreme Court’s holding in Corwin v. KKR Financial Holdings LLC. No surprise there. Corwin held that when “a transaction not subject to the entire fairness standard is approved by a fully informed, uncoerced vote of the disinterested stockholders, the business judgment rule applies.” That is so even if, pre-Corwin, an all-cash merger otherwise would have been subject to enhanced scrutiny under Revlon.

Thank you for the kind introduction.  I’m grateful for the opportunity to speak at this financial reporting conference for the second time.

Before I continue, let me remind you that the views expressed today are my own and not necessarily those of the Commission, the individual Commissioners, or other colleagues on the Commission staff.

Whole Foods Market Inc. is dramatically reshaping its board in an effort to show it is open to change after an activist investor last month publicly urged the organic-grocery chain to explore a sale and speed up its turnaround efforts.

There has been an emerging litigation trend in Delaware, where most U.S. public companies are incorporated, alleging that directors breached their fiduciary duties and committed waste of corporate assets in granting themselves excessive awards under the company’s equity compensation plan. [1] Because directors have a direct interest in their own pay, Delaware courts have held that board decisions on director compensation do not receive the protection of the business judgment rule without proper stockholder ratification.

On May 25 we will host the WSJ Pro Cybersecurity Forum in London. Speakers include U.K. Information Commissioner Elizabeth Denham, Cheri McGuire of Standard Chartered and Uber’s John Flynn. Check out details here: http://cyber.wsj.com/ Many members of corporate boards continue to use poor cybersecurity practices in their communications with other board members, acknowledging the risks of doing […]

As the Trump administration starts to assess which parts of the post-financial regulatory landscape to change, new research suggests that few board directors believe the Dodd-Frank Act should be left alone – but many would prefer a facelift to wholesale repeal.