Monthly Archives: March 2017

Reforming Culture and Conduct in the Financial Services Industry: How Can Lawyers Help?

Michael Held is general counsel and executive vice president of the Legal Group at the Federal Reserve Bank of New York. This post is based on Mr. Held’s recent remarks at Yale Law School’s Chirelstein Colloquium. The views expressed in this post are those of Mr. Held and do not necessarily reflect those of the Federal Open Market Committee or the Federal Reserve System.

My topic today is culture in financial services. Reform of culture has been a priority for the Federal Reserve Bank of New York for several years. Many of the observations I will share today are based on that work. But, as always, what I have to say reflects my own views and not necessarily those of the Federal Reserve Bank of New York or the Federal Reserve System.[1]

My thesis is that lawyers should play important roles at financial firms as advisors not just on law—what is legal or illegal—but also on culture. As I see it, culture is distinct from both public law and private rules. That doesn’t mean that culture is completely independent of either. Indeed, a group’s culture often informs and is informed by its rules. But culture is a powerful force in its own right.


Anti-Activist Poison Pills

Marcel Kahan is George T. Lowy Professor of Law at NYU School of Law and Edward B. Rock is Professor of Law at NYU School of Law. This post is based on a recent paper by Professor Kahan and Professor Rock. 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 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.

Hedge funds have become active in corporate governance. They push for changes in strategy, including making very specific proposals, and sometimes seek (and secure) board representation. They do this by buying shares, conducting public campaigns, lobbying managers and other shareholders, and sometimes running a proxy contest. In response, boards of directors have adopted a variety of “defensive measures” including deploying the “poison pill” shareholder rights plan against activists.


The Rise of Settled Proxy Fights

Jason Frankl is Senior Managing Director and Steven Balet is Managing Director at FTI Consulting. This post is based on an FTI publication by Mr. Frankl, Mr. Balet, and Merritt Moran.

Shareholder activists showed no signs of slowing down in 2016. These investors continue to instill fear  in corporate board rooms across America and bring their concerns to the public as illustrated by the growing number of proxy fights; 110 in 2016 alone, a 43% surge over 2012. [1] In that time, companies have more frequently succumbed to these investors and at times, accepted unfavorable settlement terms instead of pushing forward and fighting through a proxy contest.


Majority Voting: Latest Developments in Canada

Stephen Erlichman is partner at Fasken Martineau DuMoulin LLP and Executive Director at the Canadian Coalition for Good Governance. This post is based on a Fasken Martineau publication by Mr. Erlichman.

previous post on this site was written about (i) the Toronto Stock Exchange (“TSX”) adopting a majority voting listing requirement, effective June 30, 2014, which requires each director of a TSX listed issuer (other than those which are majority controlled) to be elected by a majority of the votes cast, other than at contested meetings (the “TSX Majority Voting Requirement”) and (ii) Bill C-25 which was introduced by the federal Canadian government on September 28, 2016 and proposes amendments to the Canada Business Corporations Act (“CBCA”) that include true majority voting (i.e., by requiring shareholders to cast their votes “for” or “against” each individual director’s election and prohibiting a director who has not been elected by a majority of the votes cast from serving as a director except in prescribed circumstances) (the “Bill C-25 Amendments”). This post explains the latest developments in Canada with respect to both of these initiatives, as well as a further development with respect to majority voting in the Province of Ontario.


Gender Diversity at Silicon Valley Public Companies 2016

David A. Bell and Kristine M. Di Bacco are partners in the corporate and securities group at Fenwick & West LLP. This post is based on portions of a Fenwick publication.

Fenwick & West has released its updated study about gender diversity on boards and executive management teams of companies in the technology and life science companies included in the Silicon Valley 150 Index and very large public companies included in the Standard & Poor’s 100 Index. [1] The Fenwick Gender Diversity Survey uses over 20 years of data to provide a better picture of women’s participation at the most senior levels of public companies in Silicon Valley.

The report reviews public filings from 1996 through 2016 to analyze the gender makeup of boards, board leadership, board committees and executive management teams in the two groups, with special comparisons showing how the top 15 largest companies in the SV 150 fare, as they are the peers of the large public companies included in the S&P 100.

Key observations include:


Pre-IPO Pay for Snap’s CEO Evan Spiegel Outpaced Fellow Tech CEOs

Dan Marcec is Director of Content at Equilar, Inc. This post is based on an Equilar publication by Mr. Marcec which was originally published in the Equilar Knowledge Center.

Snap Inc. recently filed its Form S-1, setting in motion plans for an upcoming initial public offering. The filing included fiscal year 2016 compensation for CEO Evan Spiegel and two other executives, providing the first public disclosure of the company’s top executive compensation.

The company [sought] a valuation that would rank among the largest initial valuations of recent IPOs in the internet and technology space. Equilar examined seven other recently IPO’d companies to see how Snap’s CEO compensation compared in the company’s final year before the offering. Below are the companies included in the study alongside their valuations at IPO.


Standing out from the Crowd via Corporate Goodness: Evidence from a Natural Experiment

Juan (Julie) Wu is Assistant Professor of Finance at the University of Nebraska at Lincoln College of Business Administration. This post is based on a recent paper by Professor Wu; Lei Gao, Assistant Professor of Finance at Iowa State University College of Business; and Jie (Jack) He, Associate Professor at the University of Georgia Terry College of Business.

The past few decades have witnessed increasing awareness of corporate social responsibility (CSR) activities. These corporate goodness activities, where firms commit to giving simultaneous attention to the legitimate interests of all stakeholders, include (but are not exclusive to) employee relations, corporate philanthropy, and environment initiatives. Increases in corporate CSR engagement have generated ever-growing attention from academics of various disciplines, regulators, professional investors, and various other stakeholders. However, despite the continuous academic effort to better understand why firms engage in CSR, we still lack strong evidence on the motives of corporate goodness due to the endogeneity problem, a well-known methodological issue faced by most empirical studies. Our paper overcomes this challenge by using a natural experiment setting and sheds new light on why firms undertake CSR activities.


Long-Term Value Begins at the Board

Ronald P. O’Hanley is President and CEO of State Street Global Advisors and Vice Chairman of State Street Corporation. This post is based on Mr. O’Hanley’s recent remarks at the Weinberg Center 2017 Corporate Governance Symposium at the University of Delaware.

It’s an honor to be here with you today [March 7, 2017], and I am grateful for the opportunity to share our perspectives on corporate governance.

First, I want to acknowledge the important work that Charles and his team do here at the Weinberg Center in promoting corporate governance.

The forum you provide for leaders in business, public policy and the legal community to discuss the governance issues that directly affect the ability of businesses to grow and prosper over the long run is absolutely critical.

These are existential issues not only for shareholders who want to invest in a vibrant future-but for our economy as a whole.

Today, I want to discuss our belief that “Long-Term Value Starts at the Board” and will review several key aspects:


Energy Transfer Equity: Importance of Careful Compliance by General Partner with MLP Requirements

Gail Weinstein is senior counsel and Philip Richter is a partner at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank publication by Ms. Weinstein, Mr. Richter, Steven EpsteinWarren S. de WiedScott B. Luftglass, and Robert C. Schwenkel. This post is part of the Delaware law series; links to other posts in the series are available here.

In Energy Transfer Equity L.P. Unitholder Litigation (Mar. 1, 2017), the Court of Chancery denied the parties’ cross-motions for summary judgment, and ruled that the plaintiffs’ challenge to the General Partner’s issuance of convertible units to certain (but not all) unitholders, in exchange for their common units (the “Issuance”), required development of a full factual record at trial. The principal issues to be determined, according to the court, were: (i) whether the Conflicts Committee approval of the Issuance was effective (in which case claims of impropriety would be barred) and (ii) whether, in any event, the Issuance was a “distribution” under the partnership agreement (in which case it would have been prohibited, as the agreement provided that all “distributions” must be made pro rata to all the unitholders).


DOJ’s New Guidance for Compliance Programs

Ryan Rohlfsen and Amanda Raad are partners at Ropes & Gray LLP. This post is based on a Ropes & Gray publication by Mr. Rohlfsen, Ms. Raad, David Rojas and Grant Hodges.

On February 8, 2017, the Fraud Section of the U.S. Department of Justice (the “DOJ”) published a guide for companies called “Evaluation of Corporate Compliance Programs” (the “Guidance”). The Guidance is composed of common questions that the DOJ asks when evaluating a company’s compliance program. While the Guidance questions are largely based on familiar sources, such as the United States Sentencing Guidelines and the “Principles of Federal Prosecution of Business Organizations” in the United States Attorney’s Manual, [1] the questions provide a greater degree of detail and insight into the DOJ’s process for evaluating compliance programs.


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