Yearly Archives: 2010

Committee On Capital Markets Regulation Proposes Fed-Regulated Clearinghouses To Reduce Systemic Risk

Posted by the Harvard Law School Forum on Corporate Governance & Financial Regulation, on
Thursday, March 11, 2010
, , ,
More from:
Editor’s Note: Hal Scott is the Director of the Program on International Financial Systems at Harvard Law School and the co-chair of the Committee on Capital Markets Regulation. This post relates to a letter from the Committee to the Chairmen and Ranking Members of the Senate Banking Committee and House Financial Services Committee; the letter is available here.

The Committee on Capital Markets Regulation (CCMR), an independent, non-partisan research organization and a leading proponent of carefully considered financial regulatory reform, has proposed a comprehensive approach to reforming regulatory oversight of derivatives markets to reduce systemic risk in the financial system, through greater use of derivatives clearinghouses, to be overseen by the Federal Reserve.

In a 28-page letter to the Chairmen and Ranking Members of the Senate Banking Committee and House Financial Services Committee, the CCMR has provided a framework for legislating on many of the largest and thorniest financial reform issues on the Congressional agenda.

READ MORE »

Clearing House Association Joins Board of Governors of the Fed. v. Bloomberg

Posted by Paul Saltzman, The Clearing House Association, and Robert J. Giuffra, Jr., Sullivan & Cromwell LLP, on
Thursday, March 11, 2010
, ,
More from: , ,

Paul Saltzman is Executive Vice President, General Counsel and Head of The Clearing House Association. Robert J. Giuffra, Jr. is a Partner at Sullivan & Cromwell LLP. Mr. Giuffra argued the Second Circuit appeal on behalf of The Clearing House Association. The opening and reply briefs of The Clearing House Association in the Second Circuit case are available here and here.

The Clearing House Association, a membership business league comprised of eleven of the largest financial institutions in the United States, is a party to the pending appeal in the United States Court of Appeals for the Second Circuit by the Board of Governors of the Federal Reserve System (the “Board”) in Board of Governors of the Federal Reserve System v. Bloomberg L.P., No. 09-4083 (2d Circuit, filed September 30, 2009) , which concerns whether the Freedom of Information Act (“FOIA”) requires the Board to disclose bank-by-bank and loan-by-loan information about borrowing by financial institutions with Federal Reserve Banks (“FRBs”). The Clearing House Association supports the Board’s position that FOIA Exemption 4 protects such competitively sensitive financial information from public disclosure. The Second Circuit held oral argument on January 11, 2010. The Association’s opening and reply memoranda in support of its appeal are available here and here.

READ MORE »

Harvard Corporate Faculty Lead SSRN Rankings

Posted by the Harvard Law School Forum on Corporate Governance & Financial Regulation, on
Wednesday, March 10, 2010
,
More from:

Statistics released by the Social Science Research Network (SSRN) indicate that, as of the end of 2009, Harvard Law School faculty members associated with the Program on Corporate Governance led SSRN author rankings; they captured six of the top 100 slots – including the number one slot – among the top 100 law school professors (in all fields) in terms of readers’ use of their work.

Professor Lucian Bebchuk was ranked first among all law school professors, as well as sixth among all authors on SSRN. His papers (available on his SSRN page here) have attracted a total of more than 120,000 downloads.

In addition, the top 100 law professors included Professors Reinier Kraakman (ranked 15 among law school professors and 69 among all authors), Allen Ferrell (25 among law school professors, 130 among all authors), Jesse Fried (27 among law school professors, 139 among all authors), Mark Roe (34 among law school professors, 177 among all authors), and Alma Cohen (39 among law school professors, 195 among all authors).

SSRN is the leading electronic service for social science research, and its electronic library contains (as of December 2009) over 219,300 full-text documents by more than 85,000 authors.

Executive Compensation: A New View from a Long-Term Perspective

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on
Wednesday, March 10, 2010
, ,
More from: ,

This paper comes to us from Carola Frydman, Assistant Professor of Finance at MIT, and Raven Saks Molloy, Economist at the U.S. Federal Reserve.

In our paper, Executive Compensation: A New View from a Long-Term Perspective, 1936-2005, which is forthcoming in the Review of Financial Studies, we document important changes in the level and the structure of executive pay from 1936 to 2005. The real value of total compensation followed a J-shaped pattern over our sample period. After a sharp decline during World War II, the level of pay increased at a modest rate from the mid-1940s to the mid-1970s, and then rose at an increasing rate from the 1970s to the present. The composition of executive compensation also changed considerably since the 1950s, as both stock options and other forms of incentive pay became larger shares of total compensation over time.

The relative stagnation of compensation during the 1950s and 1960s is surprising because the level of executive pay did not keep pace with the growing size of firms during this period. By contrast, pay and firm size have been more strongly correlated in recent decades. Decomposing the relationship between compensation and firm size into its cross-sectional and time series components, we find that the cross-sectional relationship has remained relatively stable over the past 70 years. On the other hand, while the level of pay moved almost one-to-one with the average market value of firms over the past 30 years, this correlation was one-tenth to one-third as large in the 1946-1975 period. Moreover, the strong correlation that we find in the later period may be biased upward by spurious correlation in the market value of firms and the level of pay.

READ MORE »

Who Should Submit Shareowner Proposals?

Posted by James McRitchie, CorpGov.net, on
Tuesday, March 9, 2010
, ,
More from:

James McRitchie is the publisher of CorpGov.net. This post relates to Apache Corp. v. Chevedden, S.D. Tex., No. 4;10-cv-00076, 1/8/10. The court documents in that case are available here.

In Apache v. Chevedden, Apache’s court brief says: “When it comes to shareholder proposals, Apache is the ‘David’ and Chevedden is the ‘Goliath.’” That seems strange coming from a $33 billion market cap company. However, after reading their brief, I agree; the company seems to be at a disadvantage. They don’t seem to know how corporate ownership in America works.

The lawsuit stems from what appears to be ambiguous language contained in SEC Rule 14a-8(b)(2) regarding how to demonstrate proof of ownership when submitting a shareowner proposal.

… at the time you submit your proposal, you must prove your eligibility to the company in one of two ways:

(i) The first way is to submit to the company a written statement from the “record” holder of your securities (usually a broker or bank) verifying that, at the time you submitted your proposal, you continuously held the securities for at least one year. You must also include your own written statement that you intend to continue to hold the securities through the date of the meeting of shareowners …

READ MORE »

Incentives of Private Equity General Partners from Future Fundraising

Posted by Michael S. Weisbach, Fisher College of Business at The Ohio State University, on
Monday, March 8, 2010
,
More from:

Michael Weisbach is Professor and Ralph W. Kurtz Chair in Finance at The Ohio State University.

In the paper, Incentives of Private Equity General Partners from Future Fundraising, which was recently published on SSRN, my co-authors (Ji-Woong Chung, Berk Sensoy, and Léa Stern) and I evaluate the importance of future fundraising to the incentives of private equity general partners. To do so, we formalize the logic by which good performance today could lead to higher future incomes for GPs.

We present a model in which a private equity partnership potentially has an ability to earn abnormal returns for their investors, but this ability is unknown. Given an observation of returns, investors update their assessment of the GP’s ability, and, in turn, decide how much capital to allocate to the partners’ next fund. We derive predictions about the relation between the performance of a particular fund and the fund’s partners’ abilities to raise capital in the future. Intuitively, the model implies that the more informative the fund’s performance is about GPs’ abilities, the more sensitive future fundraising should be to today’s performance. In addition, the way in which abilities can be “scaled” will affect investors’ willingness to commit higher quantities of capital for a given level of managerial ability. These larger funds will lead, in expectation, to higher compensation for the partners, since compensation agreements almost always change linearly with fund size. Given this setup, we derive an explicit formula calculating the effect of fund performance today on expected future GP compensation.

READ MORE »

SEC Release Establishes Guidance on Climate Change Disclosure

Posted by Edward F. Greene, Cleary Gottlieb Steen & Hamilton LLP, on
Sunday, March 7, 2010
, , ,
More from: , ,

Edward Greene is a partner at Cleary Gottlieb Steen & Hamilton LLP focusing on corporate law matters. This post is based on a Cleary Gottlieb Alert Memo by Ann Bonneville and Richard Bidstrup.

On February 2, 2010, the Securities and Exchange Commission issued an interpretive release to provide guidance on existing Commission disclosure requirements as they apply to climate change.

In issuing the release, the Commission stated that its objective is to provide clarity on disclosure relating to climate change, including in an issuer’s risk factors, business description, legal proceedings and management’s discussion and analysis. The Commission emphasized that the release does not impose any new legal requirements or modify existing ones. In particular, the release does not, in and of itself, require an issuer to disclose its carbon footprint or the steps it is taking to reduce emissions. Chairman Mary Schapiro also observed that the Commission is not taking a position on any facts relating to climate change or global warming.

It would, however, be naïve to think that Commission statements of this sort do not drive practice, and we expect all issuers to focus on this area in the current reporting season. We also expect more disclosure, given the Commission’s endorsement of the principle expressed in the seminal case of TSC Industries, Inc. v. Northway, Inc. that doubts about materiality should be resolved in favor of disclosure. The release likewise foreshadows increased regulatory scrutiny not only of disclosure by issuers whose business is clearly implicated by the effects of climate change, but also by others whose business may be affected in more indirect or speculative ways. Increased disclosure will also likely attract attention from other regulators and NGOs, as well as from shareholders seeking to advance an environment-friendly agenda through the annual meeting shareholder proposal process. It is noteworthy that the Commission’s action has already drawn strong criticism from Capitol Hill, with Rep. Spencer Bachus (R-Alabama), the ranking member of the House Financial Services Committee, characterizing the action as “ill-advised” and “reaching beyond the SEC’s expertise.”

READ MORE »

Alternative Dispute Resolution in the Delaware Court of Chancery

Posted by Rachelle Silverberg, Wachtell, Lipton, Rosen & Katz, on
Saturday, March 6, 2010
, ,
More from: ,

Rachelle Silverberg is a partner and member of the Litigation Department at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton firm memorandum by Ms. Silverberg. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

New rules took effect February in Delaware governing the arbitration of business disputes in the Delaware Court of Chancery. The rules implement amendments to Delaware law, adopted last year, granting the Chancery Court jurisdiction to arbitrate certain business disputes, and compliment rules already in place governing the Court’s mediation of business and technology disputes.

Under the new law, the Court of Chancery has jurisdiction to arbitrate “business disputes,” which would include most complex corporate and commercial disputes. At least one of the parties must be a business entity, and at least one must be organized under Delaware law or have its principal place of business in Delaware. No party can be a consumer. In a claim exclusively for monetary damages, the amount in controversy must be at least $1 million. All parties must consent to the arbitration.

READ MORE »

Fixing the Problems with Client Directed Voting

Posted by John Wilcox, Sodali, on
Friday, March 5, 2010
, ,
More from:

John Wilcox is Chairman of Sodali and an independent consultant on corporate governance to TIAA-CREF.

In their recent post on the Forum entitled Restoring Balance in Proxy Voting: The Case For “Client Directed Voting (available here), Frank Zarb Jr. and John Endean advocate Client Directed Voting (CDV), and describe how CDV might work. However, their model suffers from a significant problem. As envisioned by Mr. Zarb and Mr. Endean, CDV would offer beneficial owners only three choices: (1) to vote in proportion to other retail shareholders; (2) to vote as the board recommends; (3) to vote “contrary to the board’s recommendation.” This approach offers no improvement over the old discredited system of broker discretionary voting. In fact, proportional voting is a practice that violates the core governance principle of one-share-one-vote and increases the risk of manipulative practices. What is needed is an efficient model of CDV that is contextual and that can be customized to individual companies and their circumstances.

It is possible to conceive of a much more robust model for CDV in which retail investors would have access to a variety of meaningful choices for directed voting. CDV make sense if it could be structured to offer retail beneficial owners (RBOs) meaningful and customized voting choices, an audit trail, regular reporting and annual contract renewal.

To be meaningful, CDV should provide RBOs an array of voting analyses and choices from different types of institutional investors and other groups, including public pension funds, environmental and social investors, long term centrists such as TIAA-CREF, labor unions, advocacy investors, etc. It is interesting to speculate whether or how activist institutional investors, short-term investors or hedge funds might participate in a CDV system. It is also interesting to consider whether the voting recommendations of proxy advisory firms might appear on CDV platforms, with or without accompanying analyses.

READ MORE »

The Corporate Pyramid Fable

Posted by the Harvard Law School Forum on Corporate Governance & Financial Regulation, on
Friday, March 5, 2010
, ,
More from: ,
Editor’s Note: This post comes to us from Steven Bank, Professor of Law at UCLA, and Brian Cheffins, Professor of Corporate Law at the University of Cambridge.

In our paper, The Corporate Pyramid Fable, which was recently published on SSRN, we investigate the impact intercorporate taxation of dividends had on corporate pyramids. Intercorporate taxation of dividends became a permanent feature of the U.S. tax landscape in 1935. Correspondingly, to assess the impact of this change, we rely on a pioneering hand-collected dataset based on filings made between 1936 and 1938 with the Securities and Exchange Commission by investors owning 10% or more of shares of corporations registered with the Commission. To the extent that the received wisdom concerning tax and corporate pyramids is correct, the introduction of taxation on intercorporate dividends in 1935 should have prompted the rapid unwinding of corporate-held ownership blocks in public companies, thus causing the simplification of complex group structures, including pyramidal arrangements.

Our results indicate matters worked out much differently. Although politicians may have supported the intercorporate dividends tax because they believed that it would induce corporations to unwind stakes held in other publicly traded corporations, tax reform apparently did not have that effect. Corporations that owned large stakes in publicly traded firms rarely sought to exit in the years immediately following the introduction of intercorporate taxation of dividends, and many corporations even increased their ownership stakes in other corporations. A key reason the introduction of intercorporate taxation of dividends did not have the anticipated impact was that the tax burden was so modest. Although dividends by one corporation to another corporation were no longer completely tax-free, they remained largely exempt.

READ MORE »

Page 37 of 46
1 … 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46