Monthly Archives: April 2017

Global Climate Change and Sustainability Financial Reporting: An Unstoppable Force with or without Trump

Posted by Linda M. Lowson, Global ESG Regulatory Academy, on

Sunday, April 30, 2017

Capital markets, Climate change, Disclosure, Dodd-Frank Act, Donald Trump, Environmental disclosure, ESG, Financial regulation, Financial reporting, FSB, FSOC, SEC, SEC enforcement, SEC rulemaking, Securities regulation, Sustainability, US House
More from: Linda Lowson

Linda M. Lowson is Chief Executive Officer of the Global ESG Regulatory Academy and Editor-in-Chief of an ABA special publication on Climate Change and Sustainability Financial Reporting. This post is based on a recent publication by Ms. Lowson. Additional posts addressing legal and financial implications of the Trump administration are available here.

Climate Change and Sustainability Financial Reporting (CCSFR) is a complex, swiftly evolving, and now crucial area for issuers and capital providers globally. It has arrived front-and-center in global capital markets with the entrance of G20/Financial Stability Board (FSB) oversight. The Trump Administration’s resolute efforts to retract, revoke, or otherwise invalidate the climate protection progress made by the Obama Administration, as well as Trump Executive Orders aimed at scaling back financial regulation, will not diminish or derail the global tidal wave of investor demand for “full and fair” CCSFR, nor will Trump Administration actions alter or impede the seismic shift of global governmental support for this disclosure.

Do the FASB’s Accounting and Reporting Standards Add Shareholder Value?

Posted by Urooj Khan, Columbia University, on

Saturday, April 29, 2017

Accounting, Accounting standards, CFOs, Compliance and disclosure interpretation, Disclosure, FASB, Financial reporting, Firm valuation, GAAP, Information asymmetries, Information environment, Market efficiency, Market reaction, Shareholder value
More from: Bin Li, Mohan Venkatachalam, Shivaram Rajgopal, Urooj Khan

Urooj Khan is Class of 1967 Associate Professor of Business at Columbia Business School. This post is based on a recent paper by Professor Khan; Bin Li, Assistant Professor at University of Texas at Dallas Naveen Jindal School of Management; Shivaram Rajgopal, Roy Bernard Kester and T.W. Byrnes Professor of Accounting and Auditing at Columbia Business School; and Mohan Venkatachalam, R.J. Reynolds Professor of Business Administration at Duke University Fuqua School of Business.

For four decades, the Financial Accounting Standards Board (FASB) has been the designated private sector organization for setting up standards governing financial reporting for corporate America. During this time, over 160 standards have been issued along with several supporting American Institute of Certified Public Accountants (AICPA) bulletins, which are interpretations and statements of positions intended to offer implementation and supportive guidance for the standards. The FASB asserts that its standards are important to the efficient functioning of the economy because credible and understandable financial information is useful for capital allocation in the economy.

Cybersecurity Trends for Boards of Directors

Posted by Patrick Fitzgerald & William Ridgway, Skadden, Arps, Slate, Meagher & Flom LLP, on

Friday, April 28, 2017

Accounting, Boards of Directors, Compliance and disclosure interpretation, Cybersecurity, Disclosure, Insurance, Oversight, Risk, Risk management, Risk oversight, SEC, Securities regulation, Whistleblowers
More from: Patrick Fitzgerald, William Ridgway, Skadden

Patrick Fitzgerald is a partner and William Ridgway is counsel at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on a Skadden publication by Mr. Fitzgerald and Mr. Ridgway.

Cybersecurity has in recent years become an integral component of a board’s role in risk oversight, but directors often find themselves in unfamiliar territory when it comes to formulating policies and oversight processes that address cybersecurity risk. It can be especially challenging for directors to identify upcoming risks and avoid focusing too much on yesterday’s headlines. Prioritizing the following three areas based on impending cyber threats and emerging regulatory developments will help corporate directors stay ahead of the curve.

Determining the Likely Standard of Review in Delaware M&A Transactions

Posted by Robert B. Little & Joseph A. Orien, Gibson, Dunn & Crutcher LLP, on

Friday, April 28, 2017

Boards of Directors, Business judgment rule, Controlling shareholders, Delaware cases, Delaware law, Duty of care, Fairness review, Fiduciary duties, Merger litigation, Mergers & acquisitions, Shareholder suits
More from: Joseph Orien, Robert Little, Gibson Dunn

Robert B. Little is a partner and Joseph A. Orien is an associate at Gibson, Dunn & Crutcher LLP. This post is based on a Gibson Dunn publication by Mr. Little and Mr. Orien, and is part of the Delaware law series; links to other posts in the series are available here.

M&A practitioners are well aware of the several standards of review applied by Delaware courts in evaluating whether directors have complied with their fiduciary duties in the context of M&A transactions. Because the standard applied will often have a significant effect on the outcome of such evaluation, establishing processes to secure a more favorable standard of review is a significant part of Delaware M&A practice. The chart below identifies fact patterns common to Delaware M&A and provides a preliminary assessment of the likely standard of review applicable to transactions fitting such fact patterns. However, because the Delaware courts evaluate each transaction in light of the transaction’s particular set of facts and circumstances, and due to the evolving nature of the law in this area, this chart should not be treated as a definitive statement of the standard of review applicable to any particular transaction. [1]

Weekly Roundup: April 21–April 27, 2017

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

Friday, April 28, 2017

Weekly Roundup
More from:

This roundup contains a collection of the posts published on the Forum during the week of April 21–April 27, 2017.

Principles for Financial Regulatory Reform

Posted by William Dudley, Federal Reserve Bank of New York, on Friday, April 21, 2017

Tags: Bankruptcy, Banks, Capital requirements, Dodd-Frank Act, Federal Reserve, Financial crisis, Financial institutions, Financial reform, Financial regulation, Liquidity, Recovery & resolution plans, SIFIs, Stress tests, Systemic risk, Too big to fail

Corporate Governance

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on Friday, April 21, 2017

Tags: Agency costs, Agency model, Boards of Directors, Fiduciary duties, Hedge funds, Long-Term value, Shareholder activism, Shareholder rights, Shareholder value, Short-termism, Stakeholders

Lessons Learned from the Wells Fargo Sales Practices Investigation Report

Posted by Brad S. Karp and Roberto J. Gonzalez, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on Saturday, April 22, 2017

Tags: Accountability, Bank boards, Banks, Boards of Directors, Compliance & ethics, Consumer protection, Corporate culture, Financial institutions, Financial regulation, Management, Misconduct, Oversight, Risk oversight, Wells Fargo

One Take on the Report of the Independent Directors of Wells Fargo: Vote the Bums Out

Posted by Howell E. Jackson, Harvard Law School, on Saturday, April 22, 2017

Tags: Accountability, Bank boards, Banks, Boards of Directors, CFPB, Compliance & ethics, Consumer protection, Financial institutions, Financial regulation, Incentives, Misconduct, Oversight, Proxy advisors, Risk oversight, Shareholder voting, Wells Fargo

Assessing Financial Advisor Compensation Disclosure Following Vento v. Curry

Posted by James E. Langston, Cleary Gottlieb Steen & Hamilton LLP, on Monday, April 24, 2017

Tags: Compensation disclosure, Conflicts of interest, Delaware cases, Delaware law, Disclosure, Fairness review, Fiduciary duties, Financial advisers, Merger litigation, Mergers & acquisitions, Proxy disclosure, Transparency

The Untenable Case for Perpetual Dual-Class Stock

Posted by Lucian Bebchuk and Kobi Kastiel, Harvard Law School, on Monday, April 24, 2017

Tags: Agency costs, Boards of Directors, Capital structure, Controlling shareholders, Dual-class stock, Incentives, IPOs, Shareholder voting, Tech companies

Stiffing the Creditor: The Effect of Asset Verifiability on Bankruptcy

Posted by Florencio Lopez-de-Silanes, SKEMA Business School, on Tuesday, April 25, 2017

Tags: Accounting, Bankruptcy, Debt, Debtor-creditor law, Distressed companies, Liquidation, Reorganizations, Restructurings, Supreme Court

The Importance of Nonfinancial Performance to Investors

Posted by Mathew Nelson, EY, on Tuesday, April 25, 2017

Tags: Accountability, Corporate Social Responsibility, Disclosure, Environmental disclosure, ESG, Institutional Investors, International governance, Long-Term value, Reputation, Risk management, Surveys, Sustainability

Director Duties and Legal Safe Harbours: A Comparative Analysis

Posted by Jennifer Hill & Matthew Conaglen, University of Sydney, on Wednesday, April 26, 2017

Tags: Australia, Boards of Directors, Business judgment rule, Delaware articles, Delaware law, Director liability, Duty of care, Fiduciary duties, International governance, Legal history, Liability standards, Safe harbor, UK

Institutional Investors Lead Push for Gender-Diverse Boards

Posted by Anthony Goodman & Rusty O’Kelley, Russell Reynolds Associates, on Wednesday, April 26, 2017

Tags: BlackRock, Board composition, Boards of Directors, Commonsense Principles, Director qualifications, Diversity, Engagement, Institutional Investors, Shareholder voting, SSgA, Succession

Wells Fargo Lessons: Will Leaders Ever Learn?

Posted by Ben W. Heineman, Jr., Harvard Law School and Harvard Kennedy School of Government, on Wednesday, April 26, 2017

Tags: Accountability, Bank boards, Banks, Boards of Directors, Compliance & ethics, Consumer protection, Corporate culture, Financial institutions, Management, Misconduct, Oversight, Risk oversight, Wells Fargo

What Do the SEC’s Recent Bitcoin Disapproval Orders Really Mean for Investors?

Posted by Wenchi Hu & Vivian A. Maese, Latham & Watkins LLP, on Thursday, April 27, 2017

Tags: Bitcoin, Blockchain, Commodities, Exchange Act, Financial regulation, Financial technology, Innovation, Listing standards, NYSE, SEC, SEC enforcement, Securities regulation

The Deregulation of Private Capital and the Decline of the Public Company

Posted by Elisabeth de Fontenay, Duke University School of Law, on Thursday, April 27, 2017

Tags: Capital formation, Capital markets, Deregulation, Disclosure, External financing, Firm valuation, Information asymmetries, Information environment, IPOs, Private firms, Public firms, Sarbanes–Oxley Act, Securities regulation

Financial CHOICE Act Imposes Sweeping Shareholder Proposal Reforms

Posted by Ning Chiu, Davis Polk & Wardwell LLP, on Thursday, April 27, 2017

Tags: Boards of Directors, CHOICE Act, No-action letters, Ownership, Proxy materials, Rule 14a-8, SEC, Securities regulation, Shareholder proposals, Shareholder rights, Shareholder voting, US House

Financial CHOICE Act Imposes Sweeping Shareholder Proposal Reforms

Posted by Ning Chiu, Davis Polk & Wardwell LLP, on

Thursday, April 27, 2017

Boards of Directors, CHOICE Act, No-action letters, Ownership, Proxy materials, Rule 14a-8, SEC, Securities regulation, Shareholder proposals, Shareholder rights, Shareholder voting, US House
More from: Ning Chiu, Davis Polk

Ning Chiu is counsel at Davis Polk & Wardwell LLP. This post is based on a Davis Polk publication by Ms. Chiu.

The modified version of the legislation, CHOICE Act 2.0, released by House Financial Services Committee Chairman Jeb Hensarling (R-TX), is mostly known for proposing major financial regulatory reforms. Tucked into the lengthy bill, however, are several significant changes that would completely overhaul the shareholder proposal process. Some are similar to proposals by the Business Roundtable, which we previously discussed here.

The Deregulation of Private Capital and the Decline of the Public Company

Posted by Elisabeth de Fontenay, Duke University School of Law, on

Thursday, April 27, 2017

Capital formation, Capital markets, Deregulation, Disclosure, External financing, Firm valuation, Information asymmetries, Information environment, IPOs, Private firms, Public firms, Sarbanes–Oxley Act, Securities regulation
More from: Elisabeth de Fontenay

Elisabeth de Fontenay is an Associate Professor at Duke University School of Law. This post is based on a recent article authored by Professor de Fontenay.

Despite attracting little notice until recently, the proportion of companies choosing to go public in the U.S. has been plummeting for more than two decades. Why is this happening? Most observers blame public companies’ increasing regulatory costs—particularly disclosure costs. Yet rising costs cannot be the full story, given that the downward trend began well before Sarbanes-Oxley, the supposed game-changer for public-company regulation. In a recent article, The Deregulation of Private Capital and the Decline of the Public Company, I argue that the culprit need not be rising costs of corporate disclosure, but declining benefits.

What Do the SEC’s Recent Bitcoin Disapproval Orders Really Mean for Investors?

Posted by Wenchi Hu & Vivian A. Maese, Latham & Watkins LLP, on

Thursday, April 27, 2017

Bitcoin, Blockchain, Commodities, Exchange Act, Financial regulation, Financial technology, Innovation, Listing standards, NYSE, SEC, SEC enforcement, Securities regulation
More from: Douglas Yatter, Federico Soddu, Stephen Wink, Vivian Maese, Wenchi Hu, Yvette Valdez, Latham

Wenchi Hu and Vivian A. Maese are partners at Latham & Watkins LLP. This post is based on a Latham publication by Ms. Hu, Ms. Maese, Stephen P. Wink, Yvette D. Valdez, Douglas K. Yatter, and Federico F. Soddu.

On March 10, 2017, the US Securities and Exchange Commission (SEC) issued an order (the BZX Order) disapproving a rule change that Bats BZX Exchange (BZX) had proposed to list and trade shares issued by the Winklevoss Bitcoin Trust. On March 28, 2017, the SEC issued another order (the NYSE Arca Order, together with the BZX Order, the Orders) disapproving a rule change that NYSE Arca had proposed to list and trade shares of the SolidX Bitcoin Trust. The Orders do not allow securities with bitcoin as the underlying asset to be traded on a national securities exchange because of the SEC’s concern that bitcoin markets are unregulated and susceptible to manipulation. Importantly, the Orders do not impact trading in bitcoin, but only the proposed trading in instruments that would be securities on national securities exchanges with underlying assets in bitcoin. The Orders do not break the SEC’s silence to date on its specific views of bitcoin and other cryptocurrencies as securities, and the Orders do not otherwise affect cryptocurrencies, blockchain and distributed ledger technology, or any of their respective applications.

Wells Fargo Lessons: Will Leaders Ever Learn?

Posted by Ben W. Heineman, Jr., Harvard Law School and Harvard Kennedy School of Government, on

Wednesday, April 26, 2017

Accountability, Bank boards, Banks, Boards of Directors, Compliance & ethics, Consumer protection, Corporate culture, Financial institutions, Management, Misconduct, Oversight, Risk oversight, Wells Fargo
More from: Ben Heineman

Ben W. Heineman, Jr. is former GE General Counsel and is a senior fellow at Harvard Law School and Harvard Kennedy School of Government. He is author of The Inside Counsel Revolution: Resolving the Partner-Guardian Tension (Ankerwycke 2016), as well as High Performance with High Integrity (Harvard Business Press 2008).

We’ve seen this bad movie before. The question is why does it keep repeating itself and why do business people never learn the obvious lessons?

An internal report from independent Wells Fargo directors and the law firm, Shearman & Sterling has recently laid out in detail the sorry story of systemic consumer fraud that began 15 years ago in 2002. The misconduct was eye-popping. To meet sales quotas, receive incentive compensation and please superiors, thousands of Wells Fargo employees (5000 in recent years) falsified bank records, forged customer signatures, opened more than 2000 unauthorized checking or savings accounts for non-consenting customers, charged improper fees, and illegally transferred customer funds.

Institutional Investors Lead Push for Gender-Diverse Boards

Posted by Anthony Goodman & Rusty O’Kelley, Russell Reynolds Associates, on

Wednesday, April 26, 2017

BlackRock, Board composition, Boards of Directors, Commonsense Principles, Director qualifications, Diversity, Engagement, Institutional Investors, Shareholder voting, SSgA, Succession
More from: Anthony Goodman, Rusty O'Kelley, Russell Reynolds

Anthony Goodman is a member of the Board Effectiveness Practice and Rusty O’Kelley is a member of the CEO and Board Services Practice at Russell Reynolds Associates. This post is based on a Russell Reynolds publication by Mr. Goodman and Mr. O’Kelley.

Despite decades of companies’ commitments to improve gender diversity at all levels of senior leadership, female representation on US corporate boards remains low: according to State Street Global Advisors (SSGA), one out of every four Russell 3000 companies do not have a single woman on their board and nearly 60% have fewer than 15%. Women held 18.8% of the board seats of companies in the Fortune 1000 in 2016. Frustrated by the slow pace of change, the world’s largest institutional investors are now taking the campaign directly to their investees, arguing that gender diversity at the board level is material to a company’s financial performance.

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Monthly Archives: April 2017

Global Climate Change and Sustainability Financial Reporting: An Unstoppable Force with or without Trump

Do the FASB’s Accounting and Reporting Standards Add Shareholder Value?

Cybersecurity Trends for Boards of Directors

Determining the Likely Standard of Review in Delaware M&A Transactions

Weekly Roundup: April 21–April 27, 2017

Principles for Financial Regulatory Reform

Corporate Governance

Lessons Learned from the Wells Fargo Sales Practices Investigation Report

One Take on the Report of the Independent Directors of Wells Fargo: Vote the Bums Out

Assessing Financial Advisor Compensation Disclosure Following Vento v. Curry

The Untenable Case for Perpetual Dual-Class Stock

Stiffing the Creditor: The Effect of Asset Verifiability on Bankruptcy

The Importance of Nonfinancial Performance to Investors

Director Duties and Legal Safe Harbours: A Comparative Analysis

Institutional Investors Lead Push for Gender-Diverse Boards

Wells Fargo Lessons: Will Leaders Ever Learn?

What Do the SEC’s Recent Bitcoin Disapproval Orders Really Mean for Investors?

The Deregulation of Private Capital and the Decline of the Public Company

Financial CHOICE Act Imposes Sweeping Shareholder Proposal Reforms

Financial CHOICE Act Imposes Sweeping Shareholder Proposal Reforms

The Deregulation of Private Capital and the Decline of the Public Company

What Do the SEC’s Recent Bitcoin Disapproval Orders Really Mean for Investors?

Wells Fargo Lessons: Will Leaders Ever Learn?

Institutional Investors Lead Push for Gender-Diverse Boards

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