Corporate governance - Vigil

When boards, CEOs, and leadership teams thrive, entire organizations succeed with them. But the effectiveness of your leadership team may be endangered by such issues as personal differences, lack of strategic alignment, or failures of structure and governance.

We’ve seen this bad movie before. The question is why does it keep repeating itself and why do business people never learn the obvious lessons?

Directors’ duties are a core element of corporate governance, yet a range of legal safe harbours ultimately shape the contours and stringency of these duties in practice. Although the standards of conduct that constitute directors’ duties (so-called “conduct rules”) are often relatively strict, legal safe harbours can dilute those rules, resulting in the application of more lenient standards of judicial review (“decision rules”). The potential gap between conduct rules and decision rules, which has been labelled “acoustic separation,” is particularly striking in the context of the duty of care as it is applied to directors.

New research from the EY Center for Board Matters shows progress is being made when it comes to sourcing a diverse range of independent directors, Corporate Secretary sister publication IR Magazine reports.

Shareholder activism and sustainability are also growing concerns, particularly at large-cap companies 

Uncertainty hangs over the re-election prospects of several Wells Fargo directors at Tuesday’s annual shareholder meeting, according to people familiar with the matter.

By taking a comprehensive approach to digitization, healthcare companies can deliver products and services more quickly, boost innovation in the industry, and hold down costs.

Corporate governance mechanisms that mitigate problems associated with the separation of ownership and control include board monitoring of managers, compensation incentives, a market for corporate control, and government regulation. Recently, shareholder activism has become an increasingly popular tool as well. Typically, activism involves a hedge fund or other institutional investor with an arm’s-length relationship to a firm acquiring a concentrated stake in that firm and prodding management to make value-enhancing changes. In our study, we find that individual investors who are at the periphery of control, such as founders and former executives, also launch activist campaigns, a phenomenon we term as insider activism.

Despite decades of companies’ commitments to improve gender diversity at all levels of senior leadership, female representation on US corporate boards remains low: according to State Street Global Advisors (SSGA), one out of every four Russell 3000 companies do not have a single woman on their board and nearly 60% have fewer than 15%. Women held 18.8% of the board seats of companies in the Fortune 1000 in 2016. Frustrated by the slow pace of change, the world’s largest institutional investors are now taking the campaign directly to their investees, arguing that gender diversity at the board level is material to a company’s financial performance.

As House panel discusses bill, CII voices concerns about corporate governance implications  

Aerospace parts maker Arconic Inc. on Monday delayed its much-anticipated annual meeting and tried to defuse a long-running spat with an activist investor that last week forced the company’s chief executive to step down.

Several public pension funds and a foundation issued an open letter Monday to Southern Co. criticizing executive compensation at the Georgia-based utility and urging shareholders to vote against two board members because of the issue.

Empirical evidence suggests that asset pledgeability, debt complexity, and valuable control rights of dispersed debt influence the resolution of financial distress. Firms that borrow from multiple uncoordinated creditors and have more tangible assets often fail to renegotiate debt out of court and inefficiently file for bankruptcy.