Corporate governance - Vigil

Activist hedge funds recovered from a slow start last year, ending 2016 with sharp gains, spurred by a stock rally that followed the U.S. presidential election.

This year, in his annual letter to corporate CEOs, Laurence D. Fink, CEO of asset manager BlackRock, challenges companies to address the impact of significant political, economic, societal and technological changes on their current strategies for long-term value creation: “As BlackRock engages with your company this year, we will be looking to see how your strategic framework reflects and recognizes the impact of the past year’s changes in the global environment. How have these changes impacted your strategy and how do you plan to pivot, if necessary, in light of the new world in which you are operating?”

The Delaware Court of Chancery ruled [on January 30, 2017] that the protection of the business judgment rule afforded to directors involved in a change of control transaction that is approved by a majority of fully informed, disinterested stockholders—as reinforced by the Delaware Supreme Court in 2015 in Corwin v. KKR Financial Holdings LLC [1] (discussed in a prior alert)—applied to a merger notwithstanding the presence of a target corporation controlling stockholder that was unaffiliated with the buyer.

The U.K. Work and Pensions Committee said an existing corporate governance code should be extended to the defined benefit funds of large private companies to make company directors more accountable.

Regions Financial Corporation has created a new position of chief governance officer and appointed Hope Mehlman to the role.

Directors will need to continue to focus on strategic planning, especially in light of significant anticipated changes in U.S. government policies, continued international upheaval, the need for productive shareholder relations, potential changes in interest rates, uncertainty in commodity prices and cybersecurity risks, among other factors.

Tour operator TUI AG’s executive compensation came under attack by a shareholder advisory group as U.K. investors target excessive pay packages.

As the 2017 proxy season approaches, companies may be preparing to solicit shareholder approval for a new, or an amendment to an existing, equity incentive plan. In doing so, in addition to considering business needs, companies must keep in mind the positions of proxy advisory firms—particularly Institutional Shareholder Services (ISS) and Glass Lewis—if those firms’ recommendations have a significant influence on the company’s shareholder base. In addition, as ISS positions tend to drive market practice, even companies with a shareholder base not heavily influenced by ISS should be aware of its policies.

In recent years, the Securities and Exchange Commission has focused on using quantitative analysis to identify statistical outliers and anomalies through programs like the Aberrational Performance …

Trian Fund Management, one of the biggest activist investors, has built up a more than $3 billion stake in Procter & Gamble Co., adding urgency to the consumer-product giant’s efforts to turn around its business and boost its stock price.

The board is commonly described as a monitor of management on behalf of dispersed shareholders, but fundamental aspects of exactly how and when it adds value, are still open questions (Adams, Hermalin and Weisbach (2010)).

The stockholder litigation reform agenda is currently shaped by the felt necessity of the time to reduce or eliminate those types of stockholder actions that typically had been settled for nominal relief soon after filing.

The new Administration and Congress are pursuing a multi-pronged approach to regulatory relief for financial services firms, with stated goals of reducing administrative burdens and complexity as a means to spur economic growth.