Monthly Archives: June 2016

Golf Buddies and Board Diversity

Sumit Agarwal is Professor of Finance at the National University of Singapore. This post is based on a paper authored by Professor Agarwal; Wenlan Qian, Associate Professor of Finance at the National University of Singapore; David Reeb, Professor of Finance at the National University of Singapore; and Tien Foo Sing, Associate Professor of Finance at the National University of Singapore.

Studies have shown that firms benefit from corporate boards comprising men and women. Yet in 2014, women’s share of board seats in developed economies averaged 16.7 percent, varying from 3 percent in Japan to 19 percent in the US, and 30 percent in France. There is a gender glass ceiling in board representation. But women can overcome it, and some do.

In our paper, Playing the Boys’ Game: Golf Buddies and Board Diversity, forthcoming in the American Economic Review: Papers and Proceedings, We explore the role of informal networks and gender ceiling in the executive labor market using data on golf games. Specifically, we study whether women who play golf—a largely male-dominated sport—are also more likely to serve on the board of directors of publicly listed companies.

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SEC and Mining Disclosures

Nicolas Grabar and Sandra L. Flow are partners in the New York office of Cleary Gottlieb Steen & Hamilton LLP. This post is based on a Cleary Gottlieb memorandum by Mr. Grabar, Ms. Flow, Jonathan Mendes de Oliveira and Daniel Chor.

The U.S. Securities and Exchange Commission (the “SEC”) proposed last week to replace completely its disclosure requirements for SEC-registered companies engaged in mining activities.

The proposal, issued on June 16, responds to repeated calls over the years for the SEC to improve its mining disclosure requirements and harmonize them with international standards.

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The Day After Brexit

Alec J. Burnside is a partner in the Brussels office of Cadwalader, Wickersham & Taft LLP. This post summarizes a recent Cadwalader presentation by Mr. Burnside and Adam Blakemore, available here.

An exit vote yesterday, June 23, 2016, will confront many companies with a host of challenges. Our presentation, available here, discusses the immediate legal questions firms will need to examine:

  • Does the vote trigger break clauses or termination rights in my contracts?
  • Will my seconded staff have to return to base?
  • Will my firm’s passport to do cross-border business be cancelled?
  • Where will I have to notify my latest company acquisition?
  • Will my exports and imports face tariffs?
  • How might the UK’s tax system be affected?
  • Will the new Data Protection regulation apply in the UK?

This concerns businesses in Asia, the US and worldwide for whom the UK is an entry point to the EU market. To say nothing of trade between the UK and its former EU partners. In the complete presentation, available here, we look over the horizon into an uncertain future.

Brexit: Legal Implications

Ben Perry is a partner in the London office of Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell publication.

In a referendum held in the UK on June 23, 2016, a majority of those voting voted for the UK to leave the EU. This post briefly summarizes some of the main legal implications of the “leave” vote and is primarily for the benefit of those outside the UK who have not followed the referendum campaign in detail.

The “leave” vote has no immediate legal effect under either UK or EU law

The UK currently remains a member of the EU and there will not be any immediate change in either EU or UK law as a consequence of the “leave” vote. EU law does not govern contracts and the UK is not part of the EU’s monetary union.

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Delaware Share Ownership and the Blockchain

Marco A. Santori is a partner at Pillsbury Winthrop Shaw Pittman LLP. This report is based on a Pillsbury client alert. This post is part of the Delaware law series; links to other posts in the series are available here.

On May 2, 2016, at the second annual Consensus conference in New York, Delaware Governor Jack Markell announced his support for the creation of a new method of representation of corporate share ownership. In addition to traditional certificated and uncertificated shares, all Delaware corporations (including a majority of the Fortune 500) will soon have the ability to issue shares using the same technology that underlies the virtual currency Bitcoin. The announcement is part of the Delaware Blockchain Initiative, a groundbreaking new project seeking to clarify the state’s law and welcome the blockchain industry into the state.

Whether they call it “Bitcoin 2.0,” “Blockchain,” “Distributed Ledger Technology,” or simply “DLT,” advocates for the technology have praised its potential to clear and settle nearly any transaction imaginable. The most-promised use case may be in the capital markets, where today’s clearance and settlement is only possible in reliance on numerous clearinghouses, custodians, exchanges and fiduciaries. Each of these intermediaries add a layer of complexity, cost and delay that this new technology can eliminate, argue blockchain technology advocates.

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Non-GAAP Financial Measures: The SEC’s Evolving Views

Nicolas Grabar and Sandra L. Flow are partners in the New York office of Cleary Gottlieb Steen & Hamilton LLP. This post is based on a Cleary Gottlieb memorandum by Mr. Grabar, Ms. Flow, Les Silverman, and Dase Kim.

For months now, the Securities and Exchange Commission (the “SEC”) has been warning—in speeches by commissioners and senior staff, at conferences, and in comment letters to companies—about growing misuse of non-GAAP financial measures (“NGFMs”). On May 17, 2016, the SEC’s Division of Corporation Finance released new and updated Compliance and Disclosure Interpretations (“C&DIs”) on the use of NGFMs that demonstrate the SEC’s tightening policy. The C&DIs challenge practices that were previously considered permissible and indicate various types of practices that will likely prompt SEC scrutiny.

This post discusses the SEC’s views, as reflected in the new C&DIs, and recommends that companies review their approach to using NGFMs to take those views into account.

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Weekly Roundup: June 17–June 23, 2016


More from:

This roundup contains a collection of the posts published on the Forum during the week of June 17–June 23, 2016.




SEC Amendment to Form 10-K





Implications of the Recent Dell Appraisal Decision





Activist Investors and Target Identification

Damien J. Park is Co-Chairman of The Conference Board Inc.’s Expert Committee on Shareholder Activism. This post relates to an issue of The Conference Board’s Director Notes series edited by The Conference Board’s managing director Matteo Tonello. The complete publication, including footnotes, is available here. Related research from the Program on Corporate Governance includes The Law and Economics of Blockholder Disclosure by Lucian Bebchuk and Robert J. Jackson Jr. (discussed on the Forum here); and Pre-Disclosure Accumulations by Activist Investors: Evidence and Policy by Lucian Bebchuk, Alon Brav, Robert J. Jackson Jr., and Wei Jiang.

Considering the growing amount of capital available to established activists and new entrants, the trend for increasing shareholder activity in the US and globally is likely to continue. This post reviews the first phase of an activist’s campaign and perhaps the most important component of any activist investment strategy: how activists go about identifying undervalued and attractive target companies.

The sheer size of assets under management by activist-oriented investors today suggest that most companies will be affected by activism in one form or another, directly or indirectly (see Figure 1: Activist hedge funds assets under management and Figure 2: Number of US activist campaigns).

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The Value of Creditor Control in Corporate Bonds

Oğuzhan Karakaş is Assistant Professor of Finance at the Carroll School of Management at Boston College. This post is based on an article authored by Professor Karakaş; Peter Feldhütter, Assistant Professor of Finance at London Business School; and Edith S. Hotchkiss, Associate Professor of Finance at the Carroll School of Management at Boston College.

In our article, The Value of Creditor Control in Corporate Bonds, recently published in the Journal of Financial Economics, we introduce a measure that captures the premium in bond prices that is due to the value of creditor control. We estimate the premium as the difference in the bond price and an equivalent synthetic bond without control rights that is constructed using credit default swaps (CDS) contracts. The main insight for the methodology is that CDS prices reflect the cash flows of the underlying bonds, but not the control rights. The premium we introduce captures the marginal value of control in a bond until the bond matures or—in the case of a payment default or bankruptcy—until the CDS contracts for that issuer settle, and hence is a lower bound for the control premium.

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Hiring and Firing a Key Executive at Yahoo

Joseph E. Bachelder is special counsel in the Tax, Employee Benefits & Private Clients practice group at McCarter & English, LLP. The following post is based on a column by Mr. Bachelder which first appeared in the New York Law Journal. Andy Tsang, a senior financial analyst with the firm, assisted in the preparation of this column. Related research from the Program on Corporate Governance includes Golden Parachutes and the Wealth of Shareholders by Lucian Bebchuk, Alma Cohen, and Charles C. Y. Wang (discussed on the Forum here). This post is part of the Delaware law series; links to other posts in the series are available here.

Yahoo! Inc. paid its Chief Operating Officer (COO) just under $100 million for 14 months work (November 12, 2012–mid-January 2014). This compensation/severance arrangement is the subject of a recent opinion by the Delaware Court of Chancery and is the subject of this post.

The Amalgamated Bank Case

On February 2, 2016, the Delaware Court of Chancery granted a demand by Amalgamated Bank to inspect the books and records of Yahoo pursuant to Section 220 of the Delaware General Corporation Law (DGCL). Amalgamated Bank v. Yahoo! Inc., 132 A.3d 752 (Del. Ch. 2016). Amalgamated made this demand in connection with its investigation into the circumstances associated with the hiring and firing of the Yahoo COO, Henrique de Castro.

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