Yearly Archives: 2012

Securities Class Action Filings

Posted by John Gould, Cornerstone Research, on

Wednesday, August 15, 2012

Class actions, Securities litigation
More from: Alexander Aganin, John Gould, Cornerstone Research

John Gould is senior vice president at Cornerstone Research. This post is based on a report from the Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research, available here. For more information, contact Mr. Gould or Alexander Aganin. A report from Cornerstone Research about last year’s class action filings is available here.

Federal securities class action filing activity in the first half of 2012 has decreased compared with 2011. There were 88 filings in the first six months of 2012, down 6 percent from both the first half and second half of 2011. If current trends hold, there will be 176 filings in 2012 by year-end, less than the 1997 to 2011 average of 193 but in line with the 2009 to 2011 average of 177.

The slight decrease in total filings was largely due to a substantial decline in Chinese reverse merger (CRM) and merger and acquisition (M&A) filings. There were five CRM-related filings and seven M&A-related filings in the past six months. Compared with the first half of 2011, CRM filings were down 79 percent and M&A filings were down 67 percent. Compared with the second half of 2011, CRM filings were down 44 percent and M&A filings were down 68 percent. Despite the drop in CRM-related filings, filings against foreign issuers as a percentage of all filings were greater than every year except 2011. The decrease in M&A filings easily exceeds the 15 percent decline in the number of M&A deals in the first half of 2012 compared with the first half of 2011. [1] While the number of nontraditional filings has declined, traditional securities class action filings have increased by 23 percent since the second half of 2011.

NDA Use Restrictions — Use With Caution

Posted by David Fox, Kirkland & Ellis LLP, on

Tuesday, August 14, 2012

Confidentiality, Goodrich Capital v. Vector Capital, Hostile takeover, Martin Marietta v. Vulcan, New York, U.S. federal courts, Use restrictions
More from: Daniel Wolf, David Fox

David Fox is a partner at Kirkland & Ellis LLP, focusing on complex mergers and acquisitions as a member of the firm’s Corporate Practice Group. This post is based on a Kirkland & Ellis M&A Update by Mr. Fox and Daniel E. Wolf.

Much attention deservedly has been focused on the recent Delaware Chancery and Supreme Court decisions in the high-profile Vulcan/Martin Marietta case where the courts found that a “use restriction” in a confidentiality agreement (i.e., a provision that limits the recipient’s “use” of the disclosing party’s confidential information to a specified purpose) could in certain circumstances preclude the recipient from later commencing a hostile offer for a target company even absent an explicit standstill. A recent decision by Judge Rakoff in the Southern District of New York refusing the defendant’s motion to dismiss shows that “use restrictions” may also limit the ability of a recipient party to pursue an alternative opportunity after receiving confidential information under a non-disclosure agreement (NDA).

In the New York case (which at these preliminary stages accepts as true the factual allegations of the plaintiffs), a private equity investor signed an NDA with a broker/advisory firm that was seeking financing for a corporate client to implement a business idea in the cash management industry. The NDA stated that the PE firm would only use the confidential information shared by the broker to explore a potential business transaction involving the broker and the broker’s client. After actively considering a number of transaction opportunities with the broker and its client, the broker asserted that the investor later pursued and completed an acquisition of one of the potential targets allegedly identified by the broker without including the broker and its client.

Proxy Access: Upcoming Votes at FRX, MDT and HRB

Posted by the Harvard Law School Forum on Corporate Governance & Financial Regulation, on

Monday, August 13, 2012

CorpGov.net, Proxy access, Rule 14a-11, SEC, Shareholder activism, Shareholder proposals
More from: James McRitchie

Editor’s Note: James McRitchie is the publisher of CorpGov.net. Work on proxy access from the Program on Corporate Governance includes Private Ordering and the Proxy Access Debate by Bebchuk and Hirst.

As participants in the Forum know, SEC rule changes that took effect in September 2011 once again allow shareowners the right to submit and vote on “proxy access proposals” as we had done prior to an underground reinterpretation of SEC rules in 1990 and during a brief window of opportunity after AFSCME v AIG (2006). These proposals give shareowners the right to include director nominees in the company’s proxy materials. Arguably, the most innovative recent models of such proposals have now withstood the SEC “no-action” process and will soon come to a vote at Forest Labs (FRX) on August 15th, Medtronic (MDT) on August 23rd and H&R Block (HRB) on September 13th.

Download a PowerPoint presentation and/or read the paper (pdf) on these important proposals. All three proposals were introduced by long-time activist Kenneth Steiner, with the help of John Chevedden. Design of the proposal came from a team of United States Proxy Exchange (USPX) members, including James McRitchie, Glyn Holton, Brett Davidson, Steve Neiman, Daniel Rudewicz, Steven Towns and others, with helpful input from a variety of their contacts.

Private Equity Performance

Posted by Steven Kaplan, University of Chicago, on

Monday, August 13, 2012

Cash flows, Firm performance, Institutional Investors, Private equity, Venture capital firms
More from: Steven Kaplan

Steven N. Kaplan is the Neubauer Family Distinguished Service Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business.

In our recent NBER working paper, Private Equity Performance: What Do We Know?, my co-authors (Tim Jenkinson of the University of Oxford and Robert Harris of the University of Virginia) and I use a new research-quality data set of private equity fund-level cash flows from Burgiss. We refer to private equity as the asset class that includes buyout funds and venture capital (VC) funds. We analyze the two types of funds separately. The data set has a number of attractive features that we describe in detail later. A key attribute is that the data are derived entirely from institutional investors (the limited partners or LPs) for whom Burgiss’ systems provide recordkeeping and performance monitoring services. This results in detailed, verified and crosschecked investment histories for nearly 1400 private equity funds derived from the holdings of over 200 institutional investors. Using these data we reassess the performance of private equity funds, in absolute terms and relative to public markets. Our results are markedly more positive for buyout funds than have previously been documented.

July 2012 Proxy Voting Fact Sheet

Posted by Matteo Tonello, The Conference Board, on

Sunday, August 12, 2012

Executive Compensation, Proxy voting, Say on pay, Shareholder proposals, The Conference Board
More from: Matteo Tonello, Melissa Aguilar, Thomas Singer, The Conference Board

Matteo Tonello is managing director of corporate leadership at the Conference Board. This post relates to a Conference Board report authored by Dr. Tonello, Melissa Aguilar, and Thomas Singer of the Conference Board. The report is available here (registration may be required). A post about a previous proxy voting fact sheet is available here.

As say-on-pay (SOP) resolutions were being voted on during the 2012 proxy season, management nominees to boards of directors of U.S. public companies faced less opposition by investors. This and other data from nearly 2,500 annual general meetings (AGMs) held between January 1 and June 30 at Russell 3000 companies are discussed in the new edition of Proxy Voting Fact Sheet — the periodic report issued by The Conference Board in collaboration with FactSet Research. Data discussed in the report is compared with the S&P 500 and analyzed across 20 business sectors.

The report reviews the most recent statistics on:

Voted, omitted, and withdrawn shareholder proposals.
Proposal sponsors.
Average voting results, by topics.
Say-on-pay management proposals.

Environmental, Social and Governance Investing by University Endowments

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on

Saturday, August 11, 2012

Corporate Social Responsibility, Endowments, Institutional Investors, IRRC Institute, Tellus Institute
More from: Ann Solomon, Catie Ferrara, Christi Electris, Jon Lukomnik, Joshua Humphreys

The following post comes to us from Joshua Humphreys, fellow and principal investigator at the Tellus Institute, and Jon Lukomnik, executive director at the IRRC Institute. This post is based on the executive summary of a report from the IRRC Institute and the Tellus Institute by Mr. Humphreys, Christi Electris, Catie Ferrara, and Ann Solomon; the full report is available here.

With more than $400 billion in combined assets under management, US college and university endowments constitute an important segment of institutional investors involved in sustainable and responsible investing – defined here as the explicit incorporation of environmental, social and corporate-governance (ESG) issues into investment decision-making and active-ownership activities. This study provides one of the most comprehensive analyses to date of the state of ESG investing by educational endowments.

In it, we aggregate multiple survey datasets that address three broad areas of ESG investing activity: 1) the incorporation of ESG criteria into endowment management; 2) shareholder advocacy and active-ownership initiatives; and 3) the governance and transparency of ESG investment decision-making.

In addition to analyzing existing survey data, the study advances a novel interpretation about the distinctiveness of endowments’ involvement in ESG investing. What differentiates educational endowments from the adoption of sustainable and responsible investing strategies by other institutional investors, such as foundations, hospitals, public pensions, corporations, unions or faith-based investors, is the particular constellation of stakeholder relations within which the vast majority of ESG investment practices have been adopted by colleges and universities.

FCPA Whistleblower Lawsuits Under the Dodd-Frank Anti-Retaliation Provision

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on

Friday, August 10, 2012

Dodd-Frank Act, FCPA, SEC, SEC investigations, Securities regulation, SOX, Whistleblowers
More from: Angela Stoner, Steve Nickelsburg, Steven Gatti, Clifford Chance

The following post comes to us from Steve Nickelsburg, partner in the litigation & dispute resolution practice at Clifford Chance LLP. This post is based on a Clifford Chance client memorandum by Mr. Nickelsburg, Steven Gatti, and Angela Stoner. Further discussion of the Foreign Corrupt Practices Act (FCPA) is available here.

In recent months, two district courts have addressed the issue whether employees who claim they were retaliated against for internally reporting violations of the Foreign Corrupt Practices Act can bring a private civil lawsuit against their former employers under the Dodd-Frank anti-retaliation provision. Although both courts decided that the anti-retaliation provision of the Dodd-Frank Act did not apply in these particular cases, the courts disagreed over whether Dodd-Frank whistleblower protections could apply to FCPA whistleblowers who report internally but not to the SEC.

The Whistleblower Provisions

The “anti-retaliation” provision of the Dodd-Frank Act, 15 U.S.C. §78u-6(h)(1)(A) prohibits employers from retaliating against a “whistleblower” for:

i. providing information to the Securities and Exchange Commission (“SEC” or “Commission”);
ii. initiating, testifying in, or assisting in any investigation or judicial or administrative action of the Commission based upon or related to such information; or
iii. making disclosures that are required or protected under the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.) (“SOX”), [certain other securities laws], and any other law, rule, or regulation subject to the jurisdiction of the Commission.

Do Private Equity Fund Managers Earn Their Fees?

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on

Friday, August 10, 2012

Cash flows, Firm performance, Fund managers, Ownership, Private equity
More from: Berk Sensoy, David Robinson

The following post comes to us from David Robinson, Professor of Finance at Duke University, and Berk Sensoy of the Department of Finance at Ohio State University.

In our recent NBER working paper, Do Private Equity Fund Managers Earn Their Fees? Compensation, Ownership, and Cash Flow Performance, we use a large, proprietary database of private equity funds to study the links between the terms of private equity management contracts and the subsequent cash flow behavior and performance of the funds. The database is the largest and most recent source of private equity compensation terms available to date, and is the first to provide information on manager ownership and to include cash flow information along with the terms of management contract.

We use these data to contrast two views of the state of managerial compensation practices in private equity. The first is that highly compensated GPs, or those with little skin in the game, extract excessive rents and have inadequate incentives, which ultimately spells poor returns for limited partners. The second view is that the management contracts we observe reflect (potentially constrained) efficient bargaining outcomes between sophisticated parties, and that management contracts reflect the productivity of GP skills and the agency problems that LP’s face.

Dealing With Activist Hedge Funds

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on

Thursday, August 9, 2012

Boards of Directors, Hedge funds, Institutional Investors, Shareholder activism, Shareholder communications
More from: Martin Lipton, Wachtell Lipton

Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton.

The past ten years have seen a high and increasing level of activist campaigns. There have been more than 300 activist attacks on major companies during this period. Among the major companies that have been attacked are, P&G, McDonald’s, ITW, DuPont, Motorola, Target, Pepsi, Heinz, Kraft and Home Depot. There are more than 100 hedge funds that have engaged in activism and they frequently gain the backing of ISS and major institutional investors, some of which have investments in activist funds. SEC rules do not prevent an activist from secretly accumulating a more than 5% position before being required to make public disclosure.

Hedge fund activism requires attention and warrants similar preparation as to that we recommend for responding to a hostile takeover bid. This memo is a revision of the one I did in 2007 as a supplement to my Takeover Response Checklist. In fact, some activist attacks are designed to change management or the board of the target in order to facilitate a takeover or to force a sale of the target. Careful planning and a proactive response are critical. Failure to prepare reduces a company’s ability to control its own destiny.

Page 25 of 63

« Previous 1 … 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 … 63 Next »