Corporate governance - Vigil

Individuals who submit shareholder proposals to companies for inclusion on their proxy statements are often characterized as nuisances. These shareholders often have little wealth at stake yet exert considerable effort and incur non‐trivial expenses in order have a shareholder proposal put to a vote—which more often than not does not support the proponent’s proposal. David Larcker and Brian Tayan explore the motivations of these investors in a recent piece, Gadflies at the Gate: Why Do Individual Investors Sponsor Shareholder Resolutions?

To learn how companies make decisions about share repurchases, Tapestry Networks interviewed 44 directors serving on the boards of 95 publicly traded US companies with an aggregate market capitalization of $2.7 trillion. The complete publication (available here) synthesizes these directors’ views and broader research on repurchase programs.

Modern corporations are characterized by the separation of ownership and control, thus shareholder engagement in important corporate decisions is fundamental to the governance process. Despite its importance, evidence on the role of shareholder engagement in one of the most important corporate decisions—mergers and acquisitions (M&As) is limited and mixed. Our paper provides one of the first large sample studies documenting a positive causal effect of shareholder approval on corporate M&As.

On September 13, 2016, the New York Department of Financial Services (“DFS” or the “Department”) issued proposed regulations (the “Proposed Regulations”) designed to guard against the onslaught of cyber-attacks faced by banks, insurance companies and other financial services providers.

General Counsels (GCs) are supposed to wear multiple hats and manage these hats efficiently. On the one hand, they are the top legal officer for the firm, working closely with the top management and formulating and executing the firm’s legal strategy. On the other hand, they are the corporate watchdog. Sarbanes Oxley (SOX) imposes a watchdog role for GCs since corporate attorneys must report any potential violation to the chief executive officer and if the response from these officers is inadequate, then to the board of directors to stop any potential wrongdoing.

With ever growing institutional shareholdings and recent regulatory reforms to enhance shareholder rights, proxy advisory firms, ISS and Glass Lewis in particular, have a large influence on shareholder votes. It is thus critical that these independent advisory firms issue unbiased recommendations and be free of potential conflicts of interest. My article, Outsourcing Corporate Governance: Conflicts of Interest within the Proxy Advisory Industry, publicly available on SSRN, provides the first study on whether and when conflicts of interest can arise from serving both shareholders and issuers.

The American equity markets are the strongest in the world, and one of the Commission’s most important responsibilities is to work every day to maintain their fairness, orderliness, and efficiency. Optimizing market structure is a continuous process, one that requires the Commission to act with both care and intensity, strictly guided by what is best for investors and capital formation for public companies.

Thank you for giving me the opportunity to discuss Ulrich Bindseil’s excellent paper, which builds on his considerable body of work in this field and provides an insightful discussion of monetary policy implementation. What makes Ulrich’s contributions notable is the unique combination of academic rigor and practical insights he brings to the topic

On August 30, 2016, the U.S. Securities and Exchange Commission (“SEC” or the “Commission”) reaffirmed its commitment to its whistleblower program by issuing the second largest award in its five-year history.

On August 25, a federal court in the District of New Jersey issued a much-anticipated decision, finding after a lengthy trial that shareholder plaintiffs failed to prove claims that AXA entities had charged excessive mutual fund management fees in violation of Section 36(b) of the 1940 Act. In the first case to proceed to trial since the U.S. Supreme Court established the legal standard for these claims in its landmark 2010 decision in Jones v. Harris Associates L.P., the New Jersey trial court held in the defendants’ favor on all claims relating to twelve mutual funds operating in a “manager of managers” structure.

I am pleased to have the opportunity this morning [Sept. 14, 2016] to speak about the Commission’s whistleblower program to an audience so integral to that program, whistleblowers and their counsel. Whistleblowers provide an invaluable public service, often at great personal and professional sacrifice and peril.

In our article The Role of Proxy Advisory Firms: Evidence from a Regression-Discontinuity Design, forthcoming in the Review of Financial Studies, we analyze the effect of Institutional Shareholder Services (ISS) recommendations on shareholder voting outcomes. Over time, regulators and market participants have become increasingly concerned with the influence proxy advisors allegedly have on investors’ votes and have pushed for stringent regulation of the proxy advisory industry. However, there is disagreement about whether the impact of proxy advisors’ recommendations is as strong as is sometimes claimed.

In the area of corporate investment policy and governance, one of the most widely-studied topics is corporate “short-termism” or “investment myopia”, which is the practice of preferring lower-valued short-term projects over higher-valued long-term projects. It is widely asserted that short-termism is responsible for numerous ills, including excessive risk-taking and underinvestment in R&D, and that it may even represent a danger to capitalism itself