Corporate governance - Vigil

Since 2002, as part of their anti-money laundering (“AML”) responsibilities, broker/dealers have had a gatekeeper-like obligation to monitor customers for “suspicious” activities and to report those activities to the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). In the words of the Financial Industry Regulatory Authority (“FINRA”), “Just as firms have a primary responsibility to supervise their associated persons and ensure that they are not involved in fraudulent schemes, firms must also be vigilant regarding their customers.” [1]

On September 14, 2016, California Governor Jerry Brown signed into law a bill intended to provide transparency with respect to fees and expenses paid by California public pension or retirement systems (“PPPs”) to private equity funds, venture funds, hedge funds and absolute return funds (each, a “Fund”) in which they invest. This post seeks to answer some of the key questions regarding the new law (the “Fee Disclosure Law”) that we believe will be of particular interest.

It is well-known that CEOs are sometimes rewarded for luck. The classic example is that of oil company CEOs whose compensations increase with the price of oil (Bertrand and Mullainathan 2001). This has been show to hold for other factors that are both outside the control of the manager, and observable to the boards who grant compensation, yet rarely adjust it for these factors. My paper is an attempt to estimate the magnitude of the pay-for-luck component in option-based compensation. How much of the “pay-for-performance” compensation is actually paid for luck?

One-size-does-not-fit-all in corporate law and governance. But do firms really choose their right “size” of governance as conventional wisdom holds? That one-size-does-not-fit-all is frequently used to object mandatory corporate law and other sorts of intervention, such as proxy advisory firms’ voting recommendations, which presumably interfere with firms’ tailoring governance arrangements to their specific needs. Surprisingly, this assumption has not been systematically assessed against available evidence, incorporated rigorously to corporate law theory, or thought through carefully.

In the United States, insider trading law is premised on an anti-fraud statute—Section 10(b) of the Securities Exchange Act of 1934—and therefore liability turns on theories about why insider trading is fraudulent. For nearly forty years, courts have relied on the “classical theory” to explain the classic case of insider trading, where a corporate insider uses information derived from his corporate position to trade in his own corporation’s stock.

The Delaware Court of Chancery yesterday held that claims challenging the sufficiency of merger disclosures should be pursued before the merger closes if they are to be pursued at all. An Nguyen v. Michael G. Barrett, et al., C.A. No. 11511-VCG (Del. Ch. Sept. 28, 2016).

In our recent paper, Earnings and the Value of Voting Rights, we examine the impact of earnings announcements on the value of shareholder voting rights (i.e., voting premium). Earnings are associated with and indicative of the efficiency in the management of the company. We contend that earnings not only inform investors regarding the risky stream of cash flows (ownership role), but also influence the control rights by providing a benchmark for shareholders to express their concerns with corporate performance and to pressure management for corporate reform (control role). This dual role of earnings naturally maps into the separation of ownership and control functions in modern corporations.

All eyes in the City will be on Theresa May this week in Birmingham. Anyone expecting a rowing-back on worker representation is likely to be disappointed

With autumn just beginning, the proxy and annual reporting season may seem a long way off. However, in light of the amount of work and planning that goes into the proxy statement, annual report and annual meeting of shareholders, this is the ideal time to begin preparations. This post provides an overview of key issues that companies should consider as they get ready for the upcoming 2017 proxy and annual reporting season.

The best companies for corporate governance in the FTSE 100 are British American Tobacco (BAT) and Unilever, while Tesco and Berkeley Group Holdings are the worst, according to a report released by the Institute of Directors (IoD).

Until very recently, it was not controversial to claim that shareholder litigation had entered a period of crisis.  A significant majority of deals involving publicly-traded corporations (most of which are organized in Delaware) were challenged in litigation, and to make matters worse, much o

Today [September 21, 2016], I want to talk about the ongoing transformation of the world’s trading markets from analog to digital, from human to algorithmic trading and from stand-alone centers to seamless trading webs. I will describe how market regulation by the CFTC, particularly, and other agencies, generally, has not kept pace with this transformation and why that curtails its effectiveness in overseeing the safety and soundness of contemporary markets. I will outline a forward-looking agenda for the CFTC and other market regulators that supports America’s vital national interest in maintaining the world’s deepest, most durable and most vibrant capital and risk transfer markets in the algorithmic, digital world of the 21st century.