Monthly Archives: November 2016

Program Hiring Post-Graduate Academic Fellows


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The Program on Corporate Governance is seeking applications from highly qualified candidates who are interested in working with the Program as Post-Graduate Academic Fellows in the areas of corporate governance and law and finance. Candidates should be interested in spending two to three years at Harvard Law School (longer periods may be possible). Candidates should have a J.D., LL.M., or S.J.D. from a U.S. law school, or a Ph.D. in economics, finance, or related areas by the time they commence their fellowship. Candidates still pursuing an S.J.D. or Ph.D. are eligible so long as they will have completed their program’s coursework requirements by the time they start.

During the term of their appointment, Post-Graduate Academic Fellows work on research and corporate governance activities of the Program, depending on their skills, interests, and Program needs. Fellows may also work on their own research and publishing in preparation for a career in academia or policy research. Former Fellows of the Program now teach in leading law schools in the U.S. and abroad.

Applications are considered on a rolling basis, and the start date is flexible. Interested candidates should submit a CV, transcripts, writing sample, list of references, and cover letter to the coordinator of the Program, Ms. Jordan Figueroa, at coordinator@corpgov.law.harvard.edu. The cover letter should describe the candidate’s experience, reasons for seeking the position, career plans, and the kinds of projects and activities in which he or she would like to be involved at the Program. The position includes Harvard University benefits and a competitive fellowship salary.

2017 Proxy Season: ISS and Glass Lewis Update their Voting Policies

Lyuba Goltser is a partner and Megan Pendleton is a senior associate at Weil, Gotshal & Manges LLP. This post is based on a Weil Gotshal publication by Ms. Goltser and Ms. Pendleton.

ISS and Glass Lewis have released updates to their proxy voting policies for the 2017 proxy season, which are available here and here. While this year’s updates seem less far-reaching than we have seen in previous years, companies should familiarize themselves with the new policies, some of which could affect director elections and proposals relating to executive and director compensation. The policy updates will apply to annual meetings held on or after February 1, 2017. In this post, we provide guidance for U.S. public companies on addressing these developments and practical tips for “What to do Now?”.

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Succession “Losers”: What Happens to Executives Passed Over for the CEO Job?

David Larcker is Professor of Accounting at Stanford Graduate School of Business. This post is based on a paper authored by Professor Larcker, Brian Tayan, Researcher with the Corporate Governance Research Initiative at Stanford Graduate School of Business, and Stephen A. Miles, founder and chief executive officer of The Miles Group.

We recently published a paper on SSRN, Succession Losers: What Happens to Executives Passed Over for the CEO Job?, that examines the career paths and performance of senior executives who are passed over in succession races.

Shareholders pay considerable attention to the choice of executive selected as the new CEO whenever a change in leadership takes place. Although it is not precisely known how large a contribution an individual CEO makes to the success of an organization overall, the general perception is that the CEO is crucial, and shareholders are interested to know that the most qualified candidate has been identified.

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Examining the Dodd-Frank Act and the Future of Financial Regulation

Rick A. Fleming is an Investor Advocate with the U.S. Securities and Exchange Commission. This post is based on Mr. Fleming’s recent keynote address to the University of Maryland, Robert H. Smith School of Business Center for Financial Policy. The views expressed in this post are those of Mr. Fleming and do not necessarily reflect those of the Securities and Exchange Commission or its staff.

Today [Nov. 16, 2016], we will consider the future of financial regulation and, more specifically, whether the Dodd-Frank Act went too far. Am I happy to share my views with you, but before I begin, I must give the standard disclaimer that my remarks are my own and do not necessarily reflect the views of the Commission, the Commissioners or my colleagues on the Commission staff.

The Dodd-Frank Act, of course, was adopted in the wake of the financial crisis—which, as you’ll recall, was no ordinary crisis. As of January 2011, when the Financial Crisis Inquiry Commission issued its Final Report, about 4 million families had lost their homes to foreclosure and another four and a half million had slipped into the foreclosure process or were seriously behind on their mortgage payments. Nearly $11 trillion in household wealth had vanished, with retirement accounts and life savings swept away. Millions of Americans had lost their jobs, with unemployment peaking at about 10 percent in October 2009 and staying above 8 percent for 3 years. Stock values plunged, too, with the S&P 500 shedding 55 percent of its value between October 2007 and March 2009.

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SEC’s No-Action Position on Proxy Access Amendment Proposals

John Newell is Counsel and Manager of Public Company Practice at Goodwin Procter LLP. This post is based on a Goodwin publication by Mr. Newell, Daniel P. AdamsDavid H. Roberts, and Bradley C. Weber.

The staff of the Division of Corporation Finance of the Securities and Exchange Commission has issued three additional responses to company no-action requests to exclude shareholder-proposed amendments to proxy access bylaw provisions previously adopted by the company. Each of the three SEC responses states that the SEC staff does not believe that the company can exclude the shareholder proposals on the basis that either:

  • the shareholder’s proposed amendments (which included three or five specific amendments) constitute more than one proposal and could therefore be excluded by the company in reliance on Rule 14a-8(c); or
  • the company had substantially implemented the shareholder’s proposed amendments through its initial adoption of a proxy access bylaw that differed in its ancillary provisions from the amendments subsequently proposed by the shareholder.

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Corruption Culture and Corporate Misconduct

Xiaoding Liu is Assistant Professor of Finance at the University of Oregon’s Lundquist College of Business. This post is based on a recent article by Professor Xiaoding.

A key question in corporate governance is how to control problems arising from conflicts of interest between agents and principals. The existing literature has extensively investigated traditional ways of dealing with agency problems such as hostile takeovers, the board of directors, and institutional investors, and has found mixed evidence regarding their effectiveness. Acknowledging the difficulty in designing effective governance rules to curb corporate scandals and bank failures, regulators and academics have recently turned their attention inward to the firm’s employees. In particular, they ask whether a firm’s inherent tendency to behave opportunistically is deeply rooted in its corporate culture, commonly defined as the shared values and beliefs of a firm’s employees.

In my article, Corruption Culture and Corporate Misconduct, recently published in the Journal of Financial Economics, I investigate this question by studying the role of corporate culture in influencing corporate misconduct. To do so, I create a measure of corporate corruption culture, which captures a firm’s general attitude toward opportunistic behavior. Specifically, corporate corruption culture is calculated as the average corruption attitudes of insiders (i.e., officers and directors) of a company. To measure corruption attitudes of insiders, I use a recently developed methodology from the economics literature that is generally described as the epidemiological approach (Fernández, 2011). It is based on the key idea that when individuals emigrate from their native country to a new country, their cultural beliefs and values travel with them, but their external environment is left behind. Moreover, these immigrants not only bring their beliefs and values to the new country, they also pass down these beliefs to their descendants. Thus, relevant economic outcomes at the country of ancestry are used as proxies of culture for immigrants and their descendants. Applying this approach, I use corruption in the insiders’ country of ancestry to capture corruption attitudes for insiders in the U.S., where the country of ancestry is identified based on surnames using U.S. Census data.

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Monetary Liability for Breach of the Duty of Care?

Holger Spamann is Professor of Law at Harvard Law School. This post is based on a recent article by Professor Spamann.

Corporate governance eschews monetary liability for breach of the fiduciary duty of care by corporate directors and officers. In the US and many other jurisdictions, the bar to liability is explicit: the Business Judgment Rule shields directors and officers from liability for bad business decisions except in the most egregious cases. In other jurisdictions, the bar results from procedural and other hurdles to recovery. In theory, private contractual arrangements could substitute arbitration under tailored standards of liability for court-imposed liability, but in practice, they do not. In fact, the charters of large US corporations routinely reinforce the Business Judgment Rule with express waivers of directors’ monetary liability. Finally, corporations provide insurance and indemnification against any remaining risk of out-of-pocket liability.

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Universal Proxies Move Forward

David Whissel is Vice President and Director of Corporate Governance at MacKenzie Partners, Inc. This post is based on a MacKenzie Partners publication. Related research from the Program on Corporate Governance includes Universal Proxies by Scott Hirst (discussed on the Forum here).

The SEC recently voted to propose amendments to the proxy rules, [1] requiring parties in a contested election to use a “universal proxy card,” which makes it easier for all shareholders to pick-and-choose from a combination of management and dissident nominees by including all nominees on a single proxy card, rather than having to choose between two competing cards. The impetus behind the proposed rule, according to the SEC, is to reform the proxy voting process in such a way that “reflects as closely as possible the choice that could be made by voting in person at a shareholder meeting.” [2] Proponents of the universal proxy card claim that it will make for a “fairer, less cumbersome voting process,” [3] while its detractors criticize it for attempting to “fix the unbroken,” [4] voicing concerns that it will “inevitably increase the frequency and ease of proxy fights.”

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Corporate Governance: A Comparison of Large Public Companies and Silicon Valley Companies

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 (2016 Proxy Season). Related research from the Program on Corporate Governance includes Delaware Law as Lingua Franca: Evidence from VC-Backed Startups, by Jesse Fried, Brian Broughman, and Darian Ibrahim (discussed on the Forum 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 technology and life science companies included in the Silicon Valley 150 Index (SV 150). [1]

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Detecting Illegal Insider Trading

This post is written by the authors of a recent paperPatrick Augustin, Assistant Professor of Finance at the Desautels Faculty of Management at McGill University; Menachem Brenner, Research Professor of Finance at NYU Stern School of Business; Gunnar Grass, Associate Professor of Finance at HEC Montreal; and Marti G. Subrahmanyam, Charles E. Merrill Professor of Finance, Economics and International Business at NYU Stern School of Business.

A few years ago, Preet Bharara, the U.S. Attorney of the Southern District of New York, proclaimed that insider trading is “rampant” in U.S. securities markets, a quote well known to followers of financial markets and securities law. [1] Increased efforts by the U.S. department of Justice (DoJ) and the Securities and Exchange Commission (SEC) have been met with both success and failure. The admission of guilt in the insider indictment of SAC Capital, the well-known hedge fund, can certainly be counted as a victory. In contrast, the case United States vs. Newman, which will make it increasingly difficult for regulators to pursue rogue trading, can certainly be painted as a major setback in the battle against illegal and unfair trading practices. [2] In light of all these developments, any outside observer is likely faced with an overarching question: How does (or should) the SEC go about to catch the “big fish?”

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