Yearly Archives: 2016

2015 Annual Corporate Governance Review

Posted by Rajeev Kumar, Georgeson Inc., on

Friday, February 12, 2016

Rajeev Kumar is a senior managing director of research at Georgeson Inc. This post is based on the executive summary of a Georgeson report; the full report is available here.

The stage for the 2015 proxy season was set early by the actions of the New York City Comptroller’s Office in sponsoring 75 shareholder proposals, with proxy access playing out as the dominant governance issue. The total number of shareholder proposals, as a result, reversed its decline and registered its highest total in the past five years. Support for say-on-pay proposals remained high, support for director elections continued to increase and the issues of board composition and succession planning remained in the spotlight. There were continued calls for engagement between issuers and shareholders, emphasizing increased participation by directors and a focus on long-term value creation and related issues. Proxy fight activism continued to raise interesting issues and discussions about how best to deal with activists.

Weekly Roundup: February 5–February 11

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

Friday, February 12, 2016

Weekly Roundup
More from:

This roundup contains a collection of the posts published on the Forum during the week of February 5, 2016 to February 11, 2016.

2015 Year-End Activism Update

Posted by Barbara L. Becker & Eduardo Gallardo, Gibson, Dunn & Crutcher LLP, on Friday, February 5, 2016

Tags: Board composition, Boards of Directors, Director nominations, Hedge funds, Management, Mergers & acquisitions,Proxy contests, Settlements, Shareholder activism, Shareholder proposals, Shareholder rights, Shareholder voting

Fed Rules on CFO Attestation Requirements

Posted by Andrew R. Gladin, Sullivan & Cromwell LLP, on Saturday, February 6, 2016

Tags: Accounting, Audits, Banks, CFOs, Compliance and disclosure interpretation, Disclosure, External auditors, Federal Reserve, Financial institutions, Financial Regulation, Financial reporting, Foreign banks, Internal auditors

FinCEN: Know Your Customer Requirements

Posted by Dan Ryan, PricewaterhouseCoopers LLC, on Sunday, February 7, 2016

Tags: Accounting, Anti-corruption, Banks, Beneficial owners, Compliance & ethics, Due diligence, Financial institutions,Financial Regulation, International governance, Risk, Risk assessment

The Real Effects of Share Repurchases

Posted by Mathias Kronlund, University of Illinois at Urbana-Champaign, on Monday, February 8, 2016

Tags: Accounting, Analyst forecasts, Capital allocation, Earnings announcements, Financial reporting, Firm performance,Growth rates, Incentives, Long-Term Value, Market reaction, Repurchases, Shareholder activism, Shareholder value,Short-termism

Securities Class Action Filings: 2015 Year in Review

Posted by John Gould, Cornerstone Research, on Monday, February 8, 2016

Tags: Class actions, Disclosure, Filings, Foreign firms, International governance, IPOs, Merger litigation, Mergers & acquisitions, Securities enforcement, Securities litigation, Settlements, U.S. federal courts

SEC Proposal on Resource Extraction Payments

Posted by Nicholas Grabar & Sandra Flow, Cleary, Gottlieb, Steen & Hamilton LLP, on Tuesday, February 9, 2016

Tags: Anti-corruption, Canada, Disclosure, Dodd-Frank Act, Europe, Information asymmetries, International governance,Jurisdiction, Reporting regulation, SEC, SEC rulemaking, Securities Regulation, Transparency

The Board-Centric Annual Meeting

Posted by John C. Wilcox, Sodali, on Tuesday, February 9, 2016

Tags: Accountability, Board dynamics, Board meetings, Boards of Directors, Decision making, Engagement, Fiduciary duties, Institutional Investors, Integrated reporting, Long-Term Value, Management, Materiality, Oversight, Risk,Shareholder activism, Shareholder meetings, Shareholder rights, Shareholder value, Transparency

Mergers and Acquisitions—2016

Posted by Andrew R. Brownstein, Wachtell, Lipton, Rosen & Katz, on Wednesday, February 10, 2016

Tags: Foreign firms, Hostile takeover, International governance, Inversions, IRS, Leveraged acquisitions, Mergers & acquisitions, Private Equity, REITs, Securities Regulation, Shareholder activism, Spinoffs, Strategic buyers, Takeovers,Tax avoidance

A Conversation with SEC Chair Mary Jo White

Posted by Mary Jo White, U.S. Securities & Exchange Commission, on Wednesday, February 10, 2016

Tags: Accredited investors, Board composition, Boards of Directors, Crowdfunding, Disclosure, Diversity, Dodd-Frank Act, Engagement, Investor protection, JOBS Act, Liquidity, Proxy access, SEC enforcement, SEC rulemaking, Securities enforcement, Securities Regulation, Shareholder activism, Shareholder rights

Activist Settlements and Heightened Scrutiny—Ebix

Posted by Robert C. Schwenkel, Fried, Frank, Harris, Shriver & Jacobson LLP, on Thursday, February 11, 2016

Tags: Boards of Directors, Charter & bylaws, Deal protection, Delaware cases, Delaware law, Director nominations,Engagement, Entrenchment, Proxy contests, Settlements, Shareholder activism, Shareholder suits, Shareholder voting,Takeover defenses, Unocal standard

Top M&A Developments and Trends for 2016

Posted by Barbara L. Borden, Cooley LLP, on Thursday, February 11, 2016

Tags: Antitrust, Arbitrage, Boards of Directors, Director liability, Duty of loyalty, Fiduciary duties, Financial advisers, Firm valuation, Going private, Indemnification, Merger litigation, Mergers & acquisitions, Private Equity, Shareholder activism,Shareholder suits

Top M&A Developments and Trends for 2016

Posted by Barbara L. Borden, Cooley LLP, on

Thursday, February 11, 2016

Barbara L. Borden is a partner in the business department and head of the Mergers & Acquisitions practice at Cooley LLP. This post is based on a Cooley publication by Ms. Borden, Jamie Leigh, Craig Menden, Al Browne, and Mutya Harsch.

2015 witnessed an all-time high in M&A deal value at over $5 trillion, according to Dealogic. The high volume was primarily attributable to strategic megadeals that used stock as full or partial consideration, with healthcare and technology as the two most targeted industries.

In 2016, we continue to expect to see heavy M&A volume in healthcare with similar drivers. Big pharma will likely continue to try to fill product pipelines as high-revenue drugs go off patent (they seem to favor orphan, specialty and cancer drugs for hard to cure indications or for patient populations that are refractory to first line therapy). Specialty pharma may continue to compete for approved drugs that are underperforming where commercial execution can be improved. And development-stage life science companies will continue to consider M&A among its strategic alternatives in light of the challenges involved with transitioning from a development-stage company to a commercial drug company. Inverted pharma companies are likely to continue to use tax rate differences to create synergies that drive acquisitions.

Activist Settlements and Heightened Scrutiny—Ebix

Posted by Robert C. Schwenkel, Fried, Frank, Harris, Shriver & Jacobson LLP, on

Thursday, February 11, 2016

Robert C. Schwenkel is co-chair of the Corporate Department and global head of the M&A and Private Equity Practices at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank publication by Mr. Schwenkel, Steven Epstein, Philip Richter, and Gail Weinstein. This post is part of the Delaware law series; links to other posts in the series are available here. Related research from the Program on Corporate Governance about hedge fund activism includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here), The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here), and The Law and Economics of Blockholder Disclosure by Lucian Bebchuk and Robert J. Jackson Jr. (discussed on the Forum here).

The Delaware courts generally apply the heightened scrutiny standard under Unocal to a review of challenged board actions that have been taken in response to a perceived threat that relates to corporate control. Under Unocal, the board has the burden of demonstrating that it reasonably perceived a threat, and that its response was neither preclusive nor draconian and was reasonable in relation to the threat. In In re Ebix, Inc. (Jan. 15, 2016), the Chancery Court:
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A Conversation with SEC Chair Mary Jo White

Posted by Mary Jo White, U.S. Securities & Exchange Commission, on

Wednesday, February 10, 2016

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. The following post is based on Chair White’s recent interview at the Keynote Session of the 43rd Annual Securities Regulation Institute, available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

SEC Chair Mary Jo White participated in a Q&A session with Steven Bochner, Chair of the Securities Regulation Institute. The Q&A was part of Northwestern University School of Law’s 43rd Annual Securities Regulation Institute. The event was held in San Diego, California. This transcript was edited for clarity.

Steven Bochner: It is my great honor to introduce the Alan Levenson keynote speaker and I’m going to read her resume, even though I know most of it by heart, because it’s a long, impressive resume and we’re honored to have you here, Chair White.

Mergers and Acquisitions—2016

Posted by Andrew R. Brownstein, Wachtell, Lipton, Rosen & Katz, on

Wednesday, February 10, 2016

Andrew R. Brownstein is a partner in the corporate group at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum by Mr. Brownstein, Steven A. Rosenblum, Jodi J. Schwartz, Adam O. Emmerich, and Andrew J. Nussbaum.

2015 was a record year for M&A. Global M&A volume hit an all-time high of over $5 trillion, surpassing the previous record of $4.6 trillion set in 2007. U.S. M&A made up nearly 50% of the total. The “mega-deal” made a big comeback, with a record 69 deals over $10 billion, and 10 deals over $50 billion, including two of the largest on record: Pfizer’s $160 billion agreement to acquire Allergan and Anheuser-Busch InBev’s $117 billion bid for SABMiller. Cross-border M&A reached $1.56 trillion in 2015, the second highest volume ever.

A number of factors provided directors and officers with confidence to pursue large, and frequently transformative, merger transactions in 2015. The economic outlook had become more stable, particularly in the United States. Many companies had trimmed costs in the years following the financial crisis, but still faced challenges generating organic revenue growth. M&A offered a powerful lever for value creation through synergies. In a number of cases, the price of a buyer’s stock rose on announcement of an acquisition, as investors rewarded transactions with strong commercial logic, bucking historical trends. Equity prices in 2015 were strong, if flat, providing companies with valuable acquisition currency. For at least the first half of the year, strong appetite from debt investors (particularly for quality credits) and low interest rates enabled acquirors to obtain financing on attractive terms.

The Board-Centric Annual Meeting

Posted by John C. Wilcox, Sodali, on

Tuesday, February 9, 2016

John Wilcox is Chairman of Sodali and former Head of Corporate Governance at TIAA-CREF. This post is based on a Sodali publication by Mr. Wilcox.

For a growing number of listed companies around the world the annual shareholder meeting has come to resemble a trial by ordeal. Instead of the traditional town-meeting business forum, the AGM has morphed into a jousting field where activists, proxy advisors and various special interest groups play a dominant role. This state of affairs has evolved because for the past three decades companies have been resistant to change and defensive about governance reform, while shareholders and activists have taken the lead in successfully promoting greater board accountability and stronger governance rules. Corporate scandals, the financial crisis, escalating CEO pay, declining public trust in business leaders together with enhanced shareholder rights have transformed the annual meeting into an event where companies often focus on damage control rather than showcasing their business.

SEC Proposal on Resource Extraction Payments

Posted by Nicholas Grabar & Sandra Flow, Cleary, Gottlieb, Steen & Hamilton LLP, on

Tuesday, February 9, 2016

Anti-corruption, Canada, Disclosure, Dodd-Frank Act, Europe, Information asymmetries, International governance, Jurisdiction, Reporting regulation, SEC, SEC rulemaking, Securities regulation, Transparency
More from: Daniel Chor, Nicolas Grabar, Nina Bell, Sandra Flow, Cleary Gottlieb

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, Nina E. Bell, and Daniel Chor. The complete publication, including footnotes and Annex, is available here.

On December 11, 2015, the Securities and Exchange Commission (the “Commission”) issued a proposed rule (the “Proposed Rule”) on disclosure of resource extraction payments, more than two years after a federal court vacated a prior version of the rule. The Proposed Rule is similar in many ways to the Commission’s original rule, adopted in August 2012 (the “2012 Rule”)—in large part because the Commission is implementing a detailed congressional directive contained in Section 1504 of the 2010 Dodd-Frank Act. However, in addition to addressing the deficiencies the court found in the original rulemaking, the Commission has made other notable changes to reflect global developments in transparency for resource extraction payments, particularly in the European Union and Canada.

Securities Class Action Filings: 2015 Year in Review

Posted by John Gould, Cornerstone Research, on

Monday, February 8, 2016

Class actions, Disclosure, Filings, Foreign firms, International governance, IPOs, Merger litigation, Mergers & acquisitions, Securities enforcement, Securities litigation, Settlements, U.S. federal courts
More from: John Gould, Cornerstone Research

John Gould is senior vice president at Cornerstone Research. This post is based on a Cornerstone Research report. The complete publication is available here.

Number and Size of Filings

Plaintiffs filed 189 new federal class action securities cases (filings) in 2015—the most since 2008, and an 11 percent increase compared with 2014. The number of filings in 2015 was in line with the average number of filings observed annually between 1997 and 2014.
The total Disclosure Dollar Loss (DDL) of cases filed in 2015 jumped to $106 billion from $57 billion in 2014—an 86 percent increase. DDL remained below its historical average of $121 billion.
The total Maximum Dollar Loss (MDL) increased by 73 percent—from $215 billion in 2014 to $371 billion in 2015. MDL was approximately 61 percent of the historical average of $607 billion.
The number of mega filings in 2015 increased substantially from 2014. There were five mega DDL cases (those with a DDL of at least $5 billion) and eight mega MDL cases (those with an MDL of at least $10 billion)—compared to zero and two in 2014, respectively.

The Real Effects of Share Repurchases

Posted by Mathias Kronlund, University of Illinois at Urbana-Champaign, on

Monday, February 8, 2016

Accounting, Analyst forecasts, Capital allocation, Earnings announcements, Financial reporting, Firm performance, Growth rates, Incentives, Long-Term value, Market reaction, Repurchases, Shareholder activism, Shareholder value, Short-termism
More from: Heitor Almeida, Mathias Kronlund, Vyacheslav Fos

Mathias Kronlund is Assistant Professor of Finance at the University of Illinois at Urbana-Champaign. This post is based on an article authored by Professor Kronlund; Heitor Almeida, Professor of Finance at the University of Illinois at Urbana-Champaign; and Vyacheslav Fos, Assistant Professor of Finance at Boston College.

Companies face intense pressure from activist shareholders, institutional investors, the government, and the media to put their cash to good use. Existing evidence suggests that share repurchases are a good way for companies to return cash to investors, since cash-rich companies tend to generate large abnormal returns when announcing new repurchase programs. However, some observers argue that the cash that is spent on repurchase programs should instead be used to increase research and employment, and that the recent increase in share repurchases is undermining the recovery from the recent recession and hurting the economy’s long-term prospects. Repurchases have also been cited as an explanation for why the increase in corporate profitability in the years after the recession has not resulted in higher growth in employment, and overall economic prosperity.

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Yearly Archives: 2016

2015 Annual Corporate Governance Review

Weekly Roundup: February 5–February 11

2015 Year-End Activism Update

Fed Rules on CFO Attestation Requirements

FinCEN: Know Your Customer Requirements

The Real Effects of Share Repurchases

Securities Class Action Filings: 2015 Year in Review

SEC Proposal on Resource Extraction Payments

The Board-Centric Annual Meeting

Mergers and Acquisitions—2016

A Conversation with SEC Chair Mary Jo White

Activist Settlements and Heightened Scrutiny—Ebix

Top M&A Developments and Trends for 2016

Top M&A Developments and Trends for 2016

Activist Settlements and Heightened Scrutiny—Ebix

A Conversation with SEC Chair Mary Jo White

Mergers and Acquisitions—2016

The Board-Centric Annual Meeting

SEC Proposal on Resource Extraction Payments

Securities Class Action Filings: 2015 Year in Review

Number and Size of Filings

The Real Effects of Share Repurchases

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