Monthly Archives: February 2017

Gordon v. Verizon: New York Parts Company with Delaware

Paul F. Rugani is a partner at Orrick, Herrington & Sutcliffe LLP. This post is based on an Orrick publication by Mr. Rugani, Robert Loeb, Robert Stern, Michael TuKevin Askew, and William Foley. This post is part of the Delaware law series; links to other posts in the series are available here.

On February 2, 2017, the New York Appellate Division, First Department, issued a decision in Gordon v. Verizon Communications, Inc., No. 653084/13, 2017 WL 442871 (1st Dep’t 2017) approving the settlement of litigation over an acquisition by Verizon Communications (“Verizon”) and articulating a new test to evaluate the fairness of such settlements. The Gordon decision signals that New York will remain a friendly venue to disclosure-based M&A settlements and may see increased shareholder M&A lawsuits as a result.


Tactical Approaches to Proxy Season 2017

Dr. Martha L. Carter is a Senior Managing Director and Head of Teneo Governance; Karla Bos is a Managing Director with Teneo Governance. This post is based on a Teneo publication by Dr. Carter and Ms. Bos.

As most public companies approach the start of Proxy Season 2017, investor voting policies and the hottest trends in corporate governance are important content that highlight issues companies will face at their annual meetings. Equally important are the practical considerations for how to navigate the proxy advisors, engage with investors, react to activists, and position boards for successful voting outcomes.

The landscape has changed in 2017. Most of the fundamental views in governance are out on the table. Say on Pay as a ballot item is over five years old, director independence has been around over a decade, and Sarbanes-Oxley drove significant changes in audit committees nearly fifteen years ago. What has evolved recently is the way in which companies interact with the governance community. A thoughtful approach and clear messaging to the various constituents that will influence proxy season outcomes are as important as the issues underlying the narrative. Here are “seven for seventeen”— seven helpful hints for the 2017 proxy season, along with do’s and don’ts for a successful season.


SEC Enforcement in Financial Reporting and Disclosure—2016 Year in Review

David Woodcock is a partner at Jones Day. This post is based on a Jones Day publication by Mr. Woodcock, Joan E. McKownHenry Klehm III, and Laura Jane Durfee.

We are pleased to present our annual year in review of financial reporting and issuer disclosure enforcement activity for 2016. Like our prior reviews, this one primarily focuses on the Securities and Exchange Commission (“SEC”), but also discusses other relevant developments. In addition to providing an overview of the past year, this post forecasts where activity might be headed in the future. Much uncertainty lies ahead, but there is reason to believe that the regulatory burden could be lightened on public companies.


It’s Time for the Pendulum to Swing Back

Edward D. Herlihy is a partner and co-chairman of the Executive Committee, and Richard K. Kim is a partner in the corporate department at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton publication by Mr. Herlihy and Mr. Kim. Additional posts addressing legal and financial implications of the Trump administration are available here.

President Trump’s recent executive order directing the Treasury and the financial regulatory agencies to reevaluate the banking laws and regulations has encouraged much speculation about a potential rollback of Dodd-Frank. We believe that the new Administration can have a swift, positive and profound impact on the regulatory environment. However, the key to this is not only rolling back Dodd-Frank, but instead countering the prevailing regulatory philosophy through the President’s ability to appoint the senior-most bank regulators. Taken together, the senior policy-makers at the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau have been far more impactful on the regulatory environment than Dodd-Frank.


A Trump Appointed AG May Not Translate to Less Aggressive Enforcement

Jocelyn E. StrauberGary DiBianco, and David Meister are partners at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on a Skadden publication by Ms. Strauber, Mr. DiBianco, Mr. Meister, Eli S. Rubin, and Paul E. Schied. Additional posts addressing legal and financial implications of the Trump administration are available here.

Forecasting the enforcement priorities of the Department of Justice (DOJ) under the Trump administration is difficult at best. Previous statements from both President Donald Trump and his nominee for attorney general, U.S. Sen. Jeff Sessions, R-Ala., shed some light as to their views. While some priorities, such as emphasizing individual culpability, seem likely to continue unchanged, economic realities, changing global dynamics and the promise of deregulation could all impact key areas of enforcement, such as Foreign Corrupt Practices Act (FCPA) prosecutions and criminal and civil cases against financial institutions.


Weekly Roundup: February 10, 2017–February 16, 2017

More from:

This roundup contains a collection of the posts published on the Forum during the week of February 10, 2017–February 16, 2017.

The Law and Brexit X

Global Private Equity Survey

Antitrust Agencies Continue Aggressive Enforcement of the HSR Act

Why Do Boards Exist? Governance Design in the Absence of Corporate Law

Proxy Fights: Don’t Underestimate the Risk

Kai Haakon Liekefett is partner and head of the Shareholder Activism Response Team at Vinson & Elkins LLP. This post is based on a Vinson & Elkins publication.

“We are no target for shareholder activists.” I hear this every other day. From small- and mid-cap companies (and sometimes even large caps) all across the U.S. and abroad, from executive officers, board members and others. Occasionally this assessment is correct. More often than not, however, it is not. It only reflects common misconceptions.

For example, many companies believe that shareholder activism is on the decline because they do not read about it in the news all the time any more. In fact, shareholder activism is as prevalent as ever. There were 233 publicly reported activism campaigns in the U.S. in 2016. Since many activism situations are resolved outside the public eye, we estimate that the number of actual activism campaigns is at least 400 annually. There are around 4,200 public companies in the U.S., which means that activists will target approximately 10% of Corporate America—each year.


Congress Rolls Back SEC Resource Extraction Payments Rule

Nicolas Grabar and Sandra L. Flow are partners at Cleary Gottlieb Steen & Hamilton LLP. This post is based on a Cleary Gottlieb publication by Mr. Grabar, Ms. Flow, and Nina E. Bell. Additional posts addressing legal and financial implications of the Trump administration are available here.

The review of financial regulation under the new administration has its first victim. On February 3, the Senate passed a resolution under the Congressional Review Act that disapproves the SEC’s rule on resource extraction payments. The House of Representatives had already passed the resolution, so the SEC’s rule is no longer in effect.

The target of the joint resolution is a rule requiring each SEC reporting company engaged in commercial development of oil, natural gas or minerals to file annual disclosures on payments it makes to governments. The rule has already had a tortured history, which left it vulnerable to action under the Congressional Review Act (CRA).


Coordination and Monitoring in Changes of Control: The Controversial Role of “Wolf Packs” in Capital Markets

Anita Anand is the J.R. Kimber Chair in Investor Protection and Corporate Governance at the University of Toronto; Andrew Mihalik is a graduate of the Faculty of Law, University of Toronto. This post is based on their recent paper. 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), 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.

“Wolf packs” are loose networks of parallel-minded shareholders (typically hedge funds) that act together to effect change in a given corporation without disclosing their collective interest. Wolf packs are able to circumvent disclosure rules typically applied to shareholders that act together by deliberately avoiding being characterized as a “group” for the purposes of US securities laws or as “acting jointly or in concert” for the purposes of Canadian securities laws. The nascent academic literature relating to wolf packs reveals a number of hypotheses explaining their formation, but these models do not easily apply to jurisdictions whose capital markets differ from those in the US. In our paper, Coordination and Monitoring in Changes of Control: The Controversial Role of “Wolf Packs” in Capital Markets, we develop a new model of wolf pack formation that takes into account market characteristics not previously considered in the literature.


Risk Management and the Board of Directors

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 publication.



The year 2017 begins amid significant shifts in the world’s geopolitical order. Recent events such as the U.S. Presidential election and the United Kingdom’s historic vote to leave the European Union have brought with them a great deal of both political and economic uncertainty. At the same time, the ever-increasing dependence on technological advances characterizing all aspects of business and modern life has been accompanied by a rapidly growing threat of cyberattack and cyberterrorism, including to the world’s most critical commercial infrastructure. As political and commercial leaders grapple with these new realities, corporate risk taking and the monitoring of corporate risk continue to take prominence in the minds of boards of directors, investors, legislators and the media. Major institutional shareholders and proxy advisory firms now evaluate risk oversight matters when considering withhold votes in uncontested director elections and routinely engage companies on risk-related topics. This focus on risk management has also led to increased scrutiny of the relationship between compensation arrangements throughout the organization and excessive risk taking. Risk management is no longer simply a business and operational responsibility of management. It has also become a governance issue that is squarely within the purview of the board. Accordingly, oversight of risk should be an area of regular board assessment. This overview highlights a number of issues that have remained critical over the years and provides an update to reflect emerging and recent developments.


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