Monthly Archives: February 2016

2015 Year-End Activism Update

Posted by Barbara L. Becker & Eduardo Gallardo, Gibson, Dunn & Crutcher LLP, on

Friday, February 5, 2016

Board composition, Boards of Directors, Director nominations, Hedge funds, Management, Mergers & acquisitions, Proxy contests, Settlements, Shareholder activism, Shareholder proposals, Shareholder rights, Shareholder voting
More from: Barbara Becker, Eduardo Gallardo, Gibson Dunn

Barbara L. Becker is partner and co-chair of the Mergers and Acquisitions Practice Group at Gibson, Dunn & Crutcher LLP, and Eduardo Gallardo is a partner focusing on mergers and acquisitions, also at Gibson Dunn. The following post is based on a Gibson Dunn M&A Client Alert. The full publication, including charts and survey of settlement agreements, is available here.

This post provides an update on shareholder activism activity involving domestically traded public companies with market capitalizations above $1 billion during the second half of 2015, together with a look back at shareholder activism throughout 2015. While many pundits have suggested shareholder activism peaked in 2015, shareholder activism continues to be a major factor in the marketplace, involving companies of all sizes and activists new and old. Activist funds managed approximately $122 billion as of September 30, 2015 (vs. approximately $32 billion as at December 31, 2008). [1] In 2015 as compared to 2014, we saw a significant uptick in the total number of public activist actions (94 vs. 64), involving both a higher number of companies targeted (80 vs. 59) and a higher number of activist investors (56 vs. 34). [2]

Weekly Roundup: January 29–February 4

Posted by HLS Forum on Corporate Governance and Financial Regulation, on

Friday, February 5, 2016

Weekly Roundup
More from:

This roundup contains a collection of the posts published on the Forum during the week of January 29, 2016 to February 4, 2016.

M&A at a Glance: 2015 Year-End Roundup

Posted by Ariel J. Deckelbaum, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on Friday, January 29, 2016

Tags: Acquisitions, Break fees, Canada, Cross-border transactions, Go-shop, Hostile takeover, International governance,Mergers & acquisitions, Public firms, Strategic buyers, Takeovers, Tender offer, UK

Alternatives to Equity Shares in a Low Stock Price Environment

Posted by Steve Pakela, Pay Governance LLC, on Saturday, January 30, 2016

Tags: Boards of Directors, Compensation committees, Equity-based compensation, Executive Compensation, Incentives,Institutional Investors, Management, Pay for performance, Proxy advisors, Say on pay, Shareholder value, Shareholder voting, Stock options, Stock performance

U.S. Uncleared Swap Margin, Capital, and Segregation Rules

Posted by Annette L. Nazareth, Davis Polk & Wardwell LLP, on Sunday, January 31, 2016

Tags: Basel Committee, Capital requirements, CFTC, Derivatives, FDIC, Federal Reserve, Financial Regulation, Margin requirements, OCC, Prudence, SEC, SEC rulemaking, Securities Regulation, Swaps, Swaps entities

Chancery Court on Disclosure-Only Settlements

Posted by Jason M. Halper, Orrick, Herrington & Sutcliffe LLP, on Monday, February 1, 2016

Tags: Attorneys’ fees, Delaware cases, Delaware law, Derivative suits, Disclosure, Discovery, Fiduciary duties, Merger litigation, Mergers & acquisitions, Rural/Metro, Settlements, Shareholder suits

So You’re Thinking of Joining a Public Company Board

Posted by David A. Katz, Wachtell, Lipton, Rosen & Katz, on Monday, February 1, 2016

Crowdfunding and the Digital Shareholder

Posted by Andrew A. Schwartz, University of Colorado Law School, on Tuesday, February 2, 2016

Tags: Agency costs, Behavioral finance, Capital formation, Crowdfunding, Disclosure, Entrepreneurs, Information asymmetries, Investor protection, JOBS Act, Reputation, SEC, SEC rulemaking, Securities Regulation, Small firms, Social networks, Solicitation, Venture capital firms

Corporate Governance Survey—2015 Proxy Season

Posted by David A. Bell, Fenwick & West LLP, on Tuesday, February 2, 2016

Tags: Board composition, Board declassification, Board leadership, Boards of Directors, Classified boards, Corporate governance, Diversity, Dual-class stock, Executive ownership, Majority voting, Outside directors, Public firms, Shareholder proposals, Surveys, Tech companies

2015 Year-End Securities Litigation Update

Posted by Jonathan C. Dickey, Gibson, Dunn & Crutcher LLP, on Wednesday, February 3, 2016

The New Paradigm for Corporate Governance

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on Wednesday, February 3, 2016

Tags: Bebchuk-Brav-Jiang study, Board communication, Board leadership, Corporate Social Responsibility, Engagement,ESG, Hedge funds, Institutional Investors, Investor horizons, ISS, Long-Term Value, Management, Proxy advisors,Shareholder activism, Short-termism

In re Lions Gate: Corporate Disclosure of Securities Enforcement

Posted by David M.J. Rein, Sullivan & Cromwell LLP, on Thursday, February 4, 2016

Tags: Class actions, Compliance and disclosure interpretation, Disclosure, Form 8-K, Materiality, Regulation S-K, SEC,SEC enforcement, SEC investigations, Section 10(b), Securities enforcement, Securities litigation, Shareholder suits,U.S. federal courts, Wells notice

2016 Proxy Season: Engagement, Transparency, Proxy Access

Posted by Howard B. Dicker, Weil, Gotshal & Manges LLP, on Thursday, February 4, 2016

2016 Proxy Season: Engagement, Transparency, Proxy Access

Posted by Howard B. Dicker, Weil, Gotshal & Manges LLP, on

Thursday, February 4, 2016

Howard B. Dicker is a partner in the Public Company Advisory Group of Weil, Gotshal & Manges LLP. This post is based on a Weil publication; the complete publication, including footnotes and appendix, is available here. 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).

While shareholders have a wide spectrum of views on corporate objectives, the time horizon for realizing these objectives and environmental, social and governance (ESG) issues, there is an emerging consensus that—regardless of size, industry or profitability—public companies must achieve greater accountability to their shareholders, through engagement and transparency, than ever before. Corporate engagement and transparency now take two forms: direct dialogue, increasingly involving directors, and enhanced proxy statement and other public disclosure that sheds light on the company’s strategy and the performance of its board, board committees and management, demonstrates responsiveness to shareholder ESG concerns, and justifies the composition of the board in light of the company’s present needs. Throughout this post, we offer practical suggestions about “what to do now” to meet shareholder expectations about engagement and transparency and to address a host of other new developments for the 2016 proxy season.

In re Lions Gate: Corporate Disclosure of Securities Enforcement

Posted by David M.J. Rein, Sullivan & Cromwell LLP, on

Thursday, February 4, 2016

Class actions, Compliance and disclosure interpretation, Disclosure, Form 8-K, Materiality, Regulation S-K, SEC, SEC enforcement, SEC investigations, Section 10(b), Securities enforcement, Securities litigation, Shareholder suits, U.S. federal courts, Wells notice
More from: David Rein, Jacob Cohen, Sullivan & Cromwell

David M.J. Rein is a partner in the Litigation Group at Sullivan & Cromwell LLP . This post is based on a Sullivan & Cromwell memorandum by Mr. Rein and Jacob E. Cohen. The complete publication, including footnotes, is available here.

On January 22, 2016, the United States District Court for the Southern District of New York (Judge John Koeltl) dismissed In re Lions Gate Entertainment Corp. Securities Litigation, a putative securities fraud class action lawsuit, brought under Section 10(b) of the Securities Exchange Act of 1934. The complaint alleged that the company should have disclosed publicly the pendency of a Securities and Exchange Commission (“SEC”) investigation, the company’s intention to settle with the SEC and the company’s receipt of a so-called “Wells Notice”—i.e., a letter from the SEC Enforcement Division staff informing the company that it “has decided to recommend that the Commission bring an enforcement proceeding.”

The New Paradigm for Corporate Governance

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

Wednesday, February 3, 2016

Bebchuk-Brav-Jiang study, Board communication, Board leadership, Corporate Social Responsibility, Engagement, ESG, Hedge funds, Institutional Investors, Investor horizons, ISS, Long-Term value, Management, Proxy advisors, Shareholder activism, Short-termism
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. 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). Critiques of the Bebchuk-Brav-Jiang study by Wachtell Lipton, and responses to these critiques by the authors, are available on the Forum here.

Since I first identified a nascent new paradigm for corporate governance with leading major institutional investors supporting long-term investment and value creation and reducing or eliminating outsourcing to ISS and activist hedge funds, there has been a steady stream of statements by major investors outlining the new paradigm. In addition, a number of these investors are significantly expanding their governance departments so that they have in-house capability to evaluate governance and strategy and there is no need to outsource to ISS and activist hedge funds. The following is a summary consolidation of what these investors are saying in various forums.

2015 Year-End Securities Litigation Update

Posted by Jonathan C. Dickey, Gibson, Dunn & Crutcher LLP, on

Wednesday, February 3, 2016

Jonathan C. Dickey is partner and Co-Chair of the National Securities Litigation Practice Group at Gibson, Dunn & Crutcher LLP. This post is based on a Gibson Dunn publication.

The year was yet another eventful one in securities litigation, from the Supreme Court’s game-changing opinion in Omnicare regarding liability for opinion statements, to several significant opinions out of the Delaware courts regarding, among other things, financial advisor liability and the apparent end to disclosure-only settlements. This post highlights what you most need to know in securities litigation developments and trends for the last half of 2015:

Corporate Governance Survey—2015 Proxy Season

Posted by David A. Bell, Fenwick & West LLP, on

Tuesday, February 2, 2016

Board composition, Board declassification, Board leadership, Boards of Directors, Classified boards, Corporate governance, Diversity, Dual-class stock, Executive ownership, Majority voting, Outside directors, Public firms, Shareholder proposals, Surveys, Tech companies
More from: David Bell, Fenwick

David A. Bell is partner in the corporate and securities group at Fenwick & West LLP. This post is based on portions of a Fenwick publication titled Corporate Governance Practices and Trends: A Comparison of Large Public Companies and Silicon Valley Companies (2015 Proxy Season); the complete survey is available here.

Since 2003, Fenwick has collected a unique body of information on the corporate governance practices of publicly traded companies that is useful for Silicon Valley companies and publicly-traded technology and life science companies across the U.S. as well as public companies and their advisors generally. Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100) and the high technology and life science companies included in the Silicon Valley 150 Index (SV 150). [1]

Crowdfunding and the Digital Shareholder

Posted by Andrew A. Schwartz, University of Colorado Law School, on

Tuesday, February 2, 2016

Agency costs, Behavioral finance, Capital formation, Crowdfunding, Disclosure, Entrepreneurs, Information asymmetries, Investor protection, JOBS Act, Reputation, SEC, SEC rulemaking, Securities regulation, Small firms, Social networks, Solicitation, Venture capital firms
More from: Andrew Schwartz

Andrew A. Schwartz is an Associate Professor at University of Colorado Law School. This post is based on Professor Schwartz’s recent article published in The Minnesota Law Review, available here.

After several years of delay, Internet-based securities crowdfunding is finally poised to go live this year thanks to the SEC’s recent issuance of Regulation Crowdfunding. Through crowdfunding, people of modest means will for the first time be legally authorized to make investments that are currently offered exclusively to “accredited” (wealthy) investors. This democratization of entrepreneurial finance sounds great in theory, but will it work in practice? Will non-accredited investors really buy unregistered securities in speculative startups, over the Internet, with only the barest form of disclosure? The conventional wisdom among most legal scholars is, basically, no. In their view, securities crowdfunding is doomed to failure for myriad reasons, including fraud, [1] costs, [2] dilution, [3] adverse selection, [4] opportunism, [5] and more. [6]

So You’re Thinking of Joining a Public Company Board

Posted by David A. Katz, Wachtell, Lipton, Rosen & Katz, on

Monday, February 1, 2016

David A. Katz is a partner specializing in the areas of mergers and acquisitions, corporate governance and activism, and crisis management at Wachtell, Lipton, Rosen & Katz. The following post is based on an article by Mr. Katz and Laura A. McIntosh that first appeared in the New York Law Journal.

Candidates for directorships on public company boards have much to consider. Potential exposure to legal liability, public criticism, and reputational harm, a complex tangle of applicable regulations and requirements, and a very significant time commitment are facts of life for public company directors in the modern era. The extent to which individuals can effectively manage the risks of directorship often depends on company-specific factors and can be increased through diligence and thoughtful preparation on the part of the director and the company.

Chancery Court on Disclosure-Only Settlements

Posted by Jason M. Halper, Orrick, Herrington & Sutcliffe LLP, on

Monday, February 1, 2016

Attorneys' fees, Delaware cases, Delaware law, Derivative suits, Disclosure, Discovery, Fiduciary duties, Merger litigation, Mergers & acquisitions, Rural/Metro, Settlements, Shareholder suits
More from: Gregory Beaman, Jason Halper, Peter Rooney, Orrick

Jason M. Halper is a partner in the Securities Litigation & Regulatory Enforcement Practice Group at Orrick, Herrington & Sutcliffe LLP. This post is based on an Orrick publication by Mr. Halper, Peter J. Rooney, and Gregory Beaman. This post is part of the Delaware law series; links to other posts in the series are available here.

It’s a familiar story in M&A transactions. A merger is announced and, within days, the plaintiffs’ bar scrambles to file suits on behalf of the selling company’s stockholders, alleging that the seller’s board agreed to an inadequate price and made misleading disclosures about the deal. After going through “the motions”—the plaintiffs file a motion for preliminary injunction and the defendants produce certain agreed-upon documents—a settlement is reached whereby the plaintiffs give defendants a broad release in exchange for (often immaterial and unhelpful) supplemental disclosures and the defendants’ agreement to pay (and not to oppose court approval of) a “six-figure” fee award to plaintiffs’ counsel. According to the Trulia Court, the result is tantamount to a deal “tax” on M&A transactions.

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Monthly Archives: February 2016

2015 Year-End Activism Update

Weekly Roundup: January 29–February 4

M&A at a Glance: 2015 Year-End Roundup

Alternatives to Equity Shares in a Low Stock Price Environment

U.S. Uncleared Swap Margin, Capital, and Segregation Rules

Chancery Court on Disclosure-Only Settlements

So You’re Thinking of Joining a Public Company Board

Crowdfunding and the Digital Shareholder

Corporate Governance Survey—2015 Proxy Season

2015 Year-End Securities Litigation Update

The New Paradigm for Corporate Governance

In re Lions Gate: Corporate Disclosure of Securities Enforcement

2016 Proxy Season: Engagement, Transparency, Proxy Access

2016 Proxy Season: Engagement, Transparency, Proxy Access

In re Lions Gate: Corporate Disclosure of Securities Enforcement

2015 Year-End Securities Litigation Update

Corporate Governance Survey—2015 Proxy Season

So You’re Thinking of Joining a Public Company Board

Chancery Court on Disclosure-Only Settlements

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