Corporate governance - Vigil

The SEC will this week take its next steps toward revamping what information companies must release and how they do so, even as it continues to operate with bare-bones leadership.

Delaware law today is based upon the core concept that corporate directors cannot subordinate the best interests of stockholders to that of other corporate constituencies unless stockholders themselves expressly support that subordination.

In 2016, the U.S. Securities and Exchange Commission (SEC) continued its regulatory focus on private funds. The SEC investigated and brought cases related to staple issues such as disclosure failures and Foreign Corrupt Practices Act violations, and extended into areas such as cybersecurity and valuation. As 2017 gets off the ground, complete with the uncertainty inherent with a new administration, private funds naturally wonder about the future of the recently-robust enforcement environment. It is ever more important for private fund advisers to continue to update and improve their compliance infrastructure and to evaluate their internal policies and procedures.

Although officers are crucial to corporate operations, scholarly and theoretical accounts tend to slight officers. Officers are often amalgamated with directors into a single category, “managers,” which elides significant differences.

Banking and capital markets, often viewed as dominated by men, achieved high scores in a newly released survey measuring the diversity in their director ranks.

People matter. Or as it is put in Washington circles, “personnel is policy.” With the transition of the White House from President Obama to President Trump, there will be new people throughout the federal government. This includes a Republican majority at the Securities and Exchange Commission (SEC)—a new chairman along with two Republican commissioners. (The SEC is bipartisan with no more than three of the five commissioners allowed to be from the same political party.)

The topic of director tenure has increasingly become the focus of both academics and investors. Some argue that long-term directors contribute deep knowledge of the company and provide experience, historical memory and continuity to the board—along with the gravitas sometimes necessary to challenge management.

Contrary to longstanding practice and to their reputation for investing in public companies, mutual funds, including some of the most prominent, are allocating portions of their portfolios to private venture-stage firms, including famous unicorns like Airbnb and Uber. In my forthcoming article, Should Mutual Funds Invest in Startups? A Case Study of Fidelity Magellan Fund’s Investments in Unicorns (and other Startups) and the Regulatory Implications, I analyze whether the securities laws adequately protect mutual-fund investors from the risks that arise when their funds add this unique asset class to fund holdings.