Corporate governance - Vigil

We recently published a paper on SSRN, Succession Losers: What Happens to Executives Passed Over for the CEO Job?, that examines the career paths and performance of senior executives who are passed over in succession races.

Activist investor Elliott Management called for change at Cognizant, $34.6 billion IT-outsourcing firm whose growth prospects have been upended by the rise of cloud computing.

Today [Nov. 16, 2016], we will consider the future of financial regulation and, more specifically, whether the Dodd-Frank Act went too far. Am I happy to share my views with you, but before I begin, I must give the standard disclaimer that my remarks are my own and do not necessarily reflect the views of the Commission, the Commissioners or my colleagues on the Commission staff.

Corporate governance eschews monetary liability for breach of the fiduciary duty of care by corporate directors and officers. In the US and many other jurisdictions, the bar to liability is explicit: the Business Judgment Rule shields directors and officers from liability for bad business decisions except in the most egregious cases. In other jurisdictions, the bar results from procedural and other hurdles to recovery.

The payday loan industry has an unfavourable image with the public, and politicians and the media mainly discuss it in a negative light. Despite its unfavourable reputation, the licensed payday loans industry provides a necessary service for cash-strapped Canadians who lack access to alternate sources of credit in times of need. It also generates a substantial economic footprint for the national economy in the process.

Since 2003, Fenwick has collected a unique body of information on the corporate governance practices of publicly traded companies that is useful for Silicon Valley companies and publicly‑traded technology and life science companies across the U.S. as well as public companies and their advisors generally. Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100) and the technology and life science companies included in the Silicon Valley 150 Index (SV 150). [1]

ISS announced on November 8th that proxy research reports published after February 1, 2017 will include a standardized comparison of the company’s CEO pay with a relative financial performance ranking versus peers as measured by multiple financial metrics including return on equity, return on assets, return on invested capital, revenue growth, EBITDA growth, and growth in cash flow from operations.

Bill C-27 sets new terms for federally regulated employers looking to create target-benefit pension plans, which some groups say will lead to reduced retirement security for Canadians

Regulatory agencies are created to act in the public interest but often end up acting in the interests of those regulated. This is known as regulatory capture. The theory of regulatory capture may be given both a broad and narrow interpretation. Under a broad interpretation, a group of entities seeking regulatory favor or “a special interest” affect state intervention in various areas, including taxation, monetary policy and legislation. Under a narrow interpretation, special interest groups manipulate regulators directly.

The staff of the Division of Corporation Finance of the Securities and Exchange Commission has issued three additional responses to company no-action requests to exclude shareholder-proposed amendments to proxy access bylaw provisions previously adopted by the company. Each of the three SEC responses states that the SEC staff does not believe that the company can exclude the shareholder proposals on the basis that either:

A key question in corporate governance is how to control problems arising from conflicts of interest between agents and principals. The existing literature has extensively investigated traditional ways of dealing with agency problems such as hostile takeovers, the board of directors, and institutional investors, and has found mixed evidence regarding their effectiveness.

Of all the social and economic challenges to the current state of Delaware corporate law, perhaps the most potentially revolutionary is the shift in attitudes about the very purpose of corporations.  Delaware corporate law holds as a core precept that the corporation’s goal is to maximize shareholder value.  Corporations’ freedom to serve the goals of other corporate constituencies (such as employees, customers, or the communities in which the companies operate) or to serve broader goals such as protecting the environment or aiding the poor is constrained by the requirement that any such efforts be primarily aimed at improving the bottom line for the benefit of the companies’ shareholders.  With its recent authorization of public benefit corporations (“PBCs”), Delaware has now made it possible for entrepreneurs to change this shareholder primacy rule by choosing a business entity form that is required to pursue the social good as well as profits.

A few years ago, Preet Bharara, the U.S. Attorney of the Southern District of New York, proclaimed that insider trading is “rampant” in U.S. securities markets, a quote well known to followers of financial markets and securities law.

Since the mid-1970’s the agency-cost theory, popularized by Michael Jensen, has been used and gilded by academics to justify and promote shareholder-centric corporate governance. The agency cost theory, along with Eugene Fama’s efficient market theory and Milton Friedman’s 1970 dictum that the sole purpose of the business corporation is to maximize profits for its shareholders, have been used to promote legislation, regulation and so-called “best practices” designed to limit the power of management and boards of directors to defend strategies designed to create sustainable long-term growth.