Yearly Archives: 2016

Key Takeaways from the Fed’s 2016 Dodd-Frank Stress Tests

Posted by Dan Ryan, PricewaterhouseCoopers LLP, on
Saturday, July 9, 2016
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Dan Ryan is Leader of the Financial Services Advisory Practice at PricewaterhouseCoopers LLP. This post is based on a PwC publication by Mr. Ryan, Mike Alix, Adam Gilbert, and Armen Meyer.

Large banks will be less constrained in returning capital to shareholders based on this year’s Dodd-Frank Act Stress Test (DFAST). The DFAST results published last Thursday are the Federal Reserve’s (Fed) first stress test results released in 2016. On June 29th, the Fed will release the more important Comprehensive Capital Analysis and Review (CCAR) results. Those will indicate whether the banks passed both the Fed’s qualitative and quantitative assessments in order to return more capital to shareholders. [1]

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Shareholder Proposal Developments During the 2016 Proxy Season

Posted by Elizabeth Ising, Gibson, Dunn & Crutcher LLP, on
Friday, July 8, 2016
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Elizabeth Ising is a partner and Co-Chair of the Securities Regulation and Corporate Governance practice group at Gibson, Dunn & Crutcher LLP. This post is based on a Gibson Dunn client alert by Ms. Ising, Ronald O. Mueller, and Lori Zyskowski. Related research from the Program on Corporate Governance includes Lucian Bebchuk’s The Case for Shareholder Access to the Ballot and The Myth of the Shareholder Franchise (discussed on the Forum here), and Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

This post provides an overview of shareholder proposals submitted to public companies for 2016 shareholder meetings, including statistics, notable decisions from the staff of the Securities and Exchange Commission on no-action requests, and information about litigation regarding shareholder proposals. All shareholder proposal data in this post is as of June 1, 2016 unless otherwise indicated.

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Deposit Insurance: Savior or Subsidy?

Posted by Charles Calomiris, Columbia Business School, on
Friday, July 8, 2016
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Charles Calomiris is the Henry Kaufman Professor of Financial Institutions at Columbia Business School. This post is based on a paper authored by Professor Calomiris and Matthew Jaremski, Assistant Professor of Economics at Colgate University.

The insurance of bank liabilities began as an American experiment in a handful of states during the early-to-mid 19th century. The early state liability insurance systems disappeared by the 1860s, but a second wave of systems arose in the early 20th and U.S. federal deposit insurance was enacted in 1933. Worldwide, bank liability insurance remained a unique (and controversial) policy choice of the United States until the late 1950s, but it spread rapidly throughout the world in recent decades. Today it is a nearly ubiquitous feature of banking regulation endorsed by influential cross-border institutions such as the International Monetary Fund, the World Bank, and the European Union.

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Weekly Roundup: July 1–July 7, 2016

Posted by HLS Forum on Corporate Governance and Financial Regulation, on
Friday, July 8, 2016

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This roundup contains a collection of the posts published on the Forum during the week of July 1–July 7, 2016.

The Indispensability of the Shareholder Value Corporation

Posted by Marc Moore, University of Cambridge, on Friday, July 1, 2016
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Dell: Appraisal Award and Merger Price

Posted by Gail Weinstein, Fried, Frank, Harris, Shriver & Jacobson LLP, on Friday, July 1, 2016
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Court’s Limitation of Timetable for SEC’s Claims for Disgorgement

Posted by Brad S. Karp, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on Saturday, July 2, 2016
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Pillars of Sustainability Leadership

Posted by Matteo Tonello, The Conference Board, Inc., on Sunday, July 3, 2016
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DOJ Declination Letters and the FCPA

Posted by Mark F. Mendelsohn, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on Monday, July 4, 2016
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Does Combining the CEO and Chair Roles Cause Poor Firm Performance?

Posted by Harley Ryan, Georgia State University, on Tuesday, July 5, 2016
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Institutional Investors and Class Action Tolling

Posted by Blair A. Nicholas, Bernstein Litowitz Berger & Grossmann LLP, on Tuesday, July 5, 2016
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Brexit—What Now for Fund Managers?

Posted by Gregg Beechey, Fried, Frank, Harris, Shriver & Jacobson LLP, on Wednesday, July 6, 2016
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Expansion of the BJR to Stockholder Approval of “Medium Form” Mergers

Posted by Scott A. Barshay, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on Wednesday, July 6, 2016
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The HLS Forum is Now on LinkedIn and Facebook

Posted by HLS Forum on Corporate Governance and Financial Regulation, on Wednesday, July 6, 2016
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CEO Materialism and Corporate Social Responsibility

Posted by Robert H. Davidson, Georgetown University, on Thursday, July 7, 2016
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DGCL: Appraisal Actions and “Intermediate-Form” Mergers

Posted by Paul M. Kinsella and Patrick O’Brien, Ropes & Gray LLP, on Thursday, July 7, 2016
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Settlement Agreements with Activist Investors—the Latest Entrenchment Device?

Posted by Derek D. Bork, Thompson Hine LLP, on Thursday, July 7, 2016
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Settlement Agreements with Activist Investors—the Latest Entrenchment Device?

Posted by Derek D. Bork, Thompson Hine LLP, on
Thursday, July 7, 2016
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Derek D. Bork is a partner at Thompson Hine LLP and the Chair of its Takeovers and Shareholder Activism Group. This post is based on a Thompson Hine publication by Mr. Bork. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here), and The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here).

An increase in settlements between public companies and activist investors that have targeted a campaign against a company has been widely reported. An increase in the speed with which these settlements occur—meaning the number of days a settlement is reached after an activist initiates a campaign—has also been widely reported. Some commentators attribute increased settlements to boards being motivated to avoid the costs, distractions and negative publicity that usually come with an extended proxy contest. Other commentators suggest that increased settlements are an indication that boards have begun to recognize the value that activists and other shareholder representatives can bring to a board. The driving force behind increased settlements, however, may be altogether different. Companies may be more frequently seeking settlements with activists, not in the name of good corporate governance, but for a less noble reason—as a defensive measure.

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DGCL: Appraisal Actions and “Intermediate-Form” Mergers

Posted by Paul M. Kinsella and Patrick O'Brien, Ropes & Gray LLP, on
Thursday, July 7, 2016
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Paul M. Kinsella is partner and Patrick O’Brien is partner and co-head of the securities and public companies practice at Ropes & Gray LLP. This post is based on a Ropes & Gray publication by Mr. Kinsella and Mr. O’Brien. This post is part of the Delaware law series; links to other posts in the series are available here.

On June 16, 2016, Delaware Governor Jack Markell signed into law House Bill 371, which amends the Delaware General Corporation Law (DGCL) with respect to, among other things, appraisal proceedings and “intermediate-form” mergers.

Specifically, the bill amends Section 262 of the DGCL to limit de minimis appraisal claims and to provide surviving corporations with the right to pay stockholders exercising appraisal rights prior to the time the Delaware Court of Chancery makes a final value determination, thereby limiting the amount of interest that would accrue on an appraisal award.

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CEO Materialism and Corporate Social Responsibility

Posted by Robert H. Davidson, Georgetown University, on
Thursday, July 7, 2016
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Robert H. Davidson is Assistant Professor at Georgetown University McDonough School of Business. This post is based on a recent paper by Professor Davidson; Aiyesha Dey, Associate Professor of Accounting at University of Minnesota Carlson School of Management; and Abbie J. Smith, Professor of Accounting at University of Chicago Booth School of Business.

Fortune Global 500 firms spend over $15 billion a year on corporate philanthropy and countless hours and dollars on a host of social responsibility (CSR) activities. Corporate social responsibility refers to “managements’ obligation to set policies, make decisions and follow courses of action beyond the requirements of the law that are desirable in terms of the values and objectives of society.” Further, the ethical component of CSR proposed in the literature implies that morals or ethics of individual managers are an important factor in a firm’s CSR practices. This aspect of CSR brings into focus the point that key individuals may be instrumental in formulating and implementing firms’ CSR policy. This raises the question of the importance of individuals’ values, traits and motives in pursuing CSR. In our paper, CEO Materialism and Corporate Social Responsibility, we take a first step in this direction, and examine how CEO behavior outside the workplace, as measured by their materialism (relative ownership of luxury goods) is related to their firms’ CSR performance.

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The HLS Forum is Now on LinkedIn and Facebook

Posted by HLS Forum on Corporate Governance and Financial Regulation, on
Wednesday, July 6, 2016

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The Harvard Law School Forum on Corporate Governance and Financial Regulation is pleased to announce that readers can now access our daily blog posts on LinkedIn and Facebook. Readers are encouraged to follow us on LinkedIn or to like the Forum’s page on Facebook to receive updates on our daily posts and stay up to date on the corporate governance and financial regulation fields.

As a reminder, readers can also follow us on Twitter or subscribe to the Forum’s daily email (instructions are available here).

The Forum, established in 2006, is the leading online resource in the fields of corporate governance and financial regulation. Since its inception, the Forum has featured more than 4,500 posts by more than 3,500 contributors. The Forum is currently attracting more than 70,000 unique visits a month. We hope that the expansion into LinkedIn and Facebook will further increase the ease with which our readers can regularly access our posts.

 

Expansion of the BJR to Stockholder Approval of “Medium Form” Mergers

Posted by Scott A. Barshay, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on
Wednesday, July 6, 2016
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Scott A. Barshay is partner and Global Head of the Mergers & Acquisitions Practice at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul Weiss memorandum by Mr. Barshay, Ariel J. Deckelbaum, Ross A. Fieldston, Justin G. Hamill, Stephen P. Lamb, and Jeffrey D. Marell. This post is part of the Delaware law series; links to other posts in the series are available here.

In In re Volcano Corporation Stockholder Litigation, the Delaware Court of Chancery held that the acceptance of a first-step tender offer by fully informed, disinterested, uncoerced stockholders representing a majority of a corporation’s outstanding shares in a two-step merger under Section 251(h) of the Delaware General Corporation Law (“DGCL”) had the same cleansing effect as a fully informed, uncoerced vote of a majority of the disinterested stockholders of a target corporation in a merger. Upon the receipt of the required tendered shares, the business judgment rule “irrebuttably” applied to the merger and the plaintiff could only challenge it on the basis that it constituted waste.

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Brexit—What Now for Fund Managers?

Posted by Gregg Beechey, Fried, Frank, Harris, Shriver & Jacobson LLP, on
Wednesday, July 6, 2016
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Gregg Beechey is a corporate partner in the London office of Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Mr. Beechey and Zachary Mellor-Clark. Related posts on the legal and financial impact of Brexit include Light at the End of the (Channel) Tunnel, from Akin Gump Strauss Hauer & Feld LLP; Brexit: Possible Options and Impact, from Shearman & Sterling; Brexit: Legal Implications, from Sullivan & Cromwell LLP; The Day After Brexit, from Cadwalader, Wickersham & Taft LLP; and The Legal Consequences of Brexit, from Davis Polk & Wardwell LLP.

The UK referendum of June 23 will have historic implications for the UK and the EU as a whole. We have attempted here to look at some issues for financial services businesses, and in particular fund managers, transacting with the UK and EU.

It is difficult to be definitive because although the vote to leave was decisive (albeit by a fairly narrow margin) what happens next remains to be seen and depends on the stance taken by the UK Government (which will soon be under new leadership), with what seems to be a wide range of options including somehow ignoring the referendum altogether on the one hand, to withdrawing from any dialogue whatsoever with the EU on the other.

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