Corporate governance - Vigil

The past decade has seen a dramatic shift in the enforcement of U.S. tax and securities laws away from reliance on public administrative agents and towards the use of paid whistleblowers. Traditionally, violations of tax law were detected by IRS auditors and agents, who reviewed tax returns and conducted investigations. Similarly, violations of securities law were detected by SEC agents, who conducted investigations to detect cases of insider trading, manipulation of market prices, or misrepresentation of important information about securities. Although IRS and SEC agents often relied on tips from various sources, there was no widespread and institutionalized payment of rewards for information on violations of the law.

Cybersecurity has in recent years become an integral component of a board’s role in risk oversight, but directors often find themselves in unfamiliar territory when it comes to formulating policies and oversight processes that address cybersecurity risk. It can be especially challenging for directors to identify upcoming risks and avoid focusing too much on yesterday’s headlines. Prioritizing the following three areas based on impend­ing cyber threats and emerging regulatory developments will help corporate directors stay ahead of the curve.

Climate Change and Sustainability Financial Reporting (CCSFR) is a complex, swiftly evolving, and now crucial area for issuers and capital providers globally. It has arrived front-and-center in global capital markets with the entrance of G20/Financial Stability Board (FSB) oversight. The Trump Administration’s resolute efforts to retract, revoke, or otherwise invalidate the climate protection progress made by the Obama Administration, as well as Trump Executive Orders aimed at scaling back financial regulation, will not diminish or derail the global tidal wave of investor demand for “full and fair” CCSFR, nor will Trump Administration actions alter or impede the seismic shift of global governmental support for this disclosure.

In the first 3 months of 2017, our firm’s partners and consulting staff attended more than 200 corporate Boards of Directors compensation committee meetings in our role as executive compensation advisors. From attending these meetings, we have learned a great deal about certain issues emerging as dominant themes in Board discussions about executive pay and corporate governance. Recently, several Pay Governance partners convened an internal meeting at which we shared our collective observations concerning the trends we expect to dominate compensation committee discussions through the remainder of the year.

Activist investor Third Point LLC is pressuring Honeywell International Inc. to spin off its aerospace division, seeking to break off the conglomerate’s biggest business just a few weeks after Honeywell switched leaders.

In our recent study, we find that institutional investors follow high-performing directors to new firms and make larger initial investments in those firms than in other firms. Fama (1980) and Fama and Jensen (1983) support our finding and propose that such directors are especially skilled at advising and monitoring their firms to ensure that shareholder interests are protected.

On March 10, 2017, the US Securities and Exchange Commission (SEC) issued an order (the BZX Order) disapproving a rule change that Bats BZX Exchange (BZX) had proposed to list and trade shares issued by the Winklevoss Bitcoin Trust. On March 28, 2017, the SEC issued another order (the NYSE Arca Order, together with the BZX Order, the Orders) disapproving a rule change that NYSE Arca had proposed to list and trade shares of the SolidX Bitcoin Trust.

The modified version of the legislation, CHOICE Act 2.0, released by House Financial Services Committee Chairman Jeb Hensarling (R-TX), is mostly known for proposing major financial regulatory reforms. Tucked into the lengthy bill, however, are several significant changes that would completely overhaul the shareholder proposal process. Some are similar to proposals by the Business Roundtable, which we previously discussed here.

On March 27, 2017, the Corporation Law Section of the Delaware State Bar Association (DSBA) approved proposed amendments to the Delaware General Corporation Law (DGCL) that had been proposed by the DSBA Corporation Law Council. This year’s amendments are intended to address blockchain maintenance of corporate records, the date of effectiveness of Section 203(b) opt-outs, mergers with non-U.S. entities and the effectiveness of written consents, among other changes.

M&A practitioners are well aware of the several standards of review applied by Delaware courts in evaluating whether directors have complied with their fiduciary duties in the context of M&A transactions.

For four decades, the Financial Accounting Standards Board (FASB) has been the designated private sector organization for setting up standards governing financial reporting for corporate America. During this time, over 160 standards have been issued along with several supporting American Institute of Certified Public Accountants (AICPA) bulletins, which are interpretations and statements of positions intended to offer implementation and supportive guidance for the standards. The FASB asserts that its standards are important to the efficient functioning of the economy because credible and understandable financial information is useful for capital allocation in the economy.

Private-equity firms long have complained that the public markets don’t understand them. Now, an activist investor is taking up their cause.

Mutual-fund manager Neuberger Berman, which owns a 2.7% stake in the organic grocery chain, sent a letter to the company’s board this week urging it to “immediately engage advisors” to review options including a sale or joint venture.

NEW YORK – April 27, 2017 – As globalization is being increasingly challenged and even resisted around the world, what does this mean for global markets, talent, and capital flows? How boards are leading their companies in this new era is the theme of the 2017 WomenCorporateDirectors Foundation (WCD) Global Institute, bringing together 200+ board leaders next month to New York from all over the globe. The 8th annual, invitation-only Global Institute is the premier event for WCD, the largest organization of women board directors globally, with 76 chapters and members serving on more than 6,500 boards.

Despite attracting little notice until recently, the proportion of companies choosing to go public in the U.S. has been plummeting for more than two decades. Why is this happening? Most observers blame public companies’ increasing regulatory costs—particularly disclosure costs. Yet rising costs cannot be the full story, given that the downward trend began well before Sarbanes-Oxley, the supposed game-changer for public-company regulation. In a recent article, The Deregulation of Private Capital and the Decline of the Public Company, I argue that the culprit need not be rising costs of corporate disclosure, but declining benefits.

Directors may need to decide whether pursuing a claim is worth the effort and cost of doing so