Yearly Archives: 2017

SEC’s Investor Advisory Committee Airs Concerns Over Multi-Tiered Offerings Following Snap’s IPO

Posted by Brian Shea, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. , on
Tuesday, May 9, 2017
, , , , , , , , , , , ,
More from: ,

Brian Shea is an associate at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. This post is based on a Mintz Levin publication by Mr. Shea. Related research from the Program on Corporate Governance includes The Untenable Case for Perpetual Dual-Class Stock by Lucian Bebchuk and Kobi Kastiel (discussed on the Forum here).

Snap Inc., which debuted on the New York Stock Exchange (NYSE) on March 2nd, was the largest tech IPO since Alibaba went public in 2014. Initially priced at $17 per share, the share price jumped to more than $24 by the end of the first trading day, raising $3.4 billion and beating market expectations.

Beyond the magnitude of the offering and its implications for the broader deal pipeline, Snap’s IPO has raised interesting governance issues around its non-voting shares, which the SEC’s Investor Advisory Committee (IAC) [1] tackled on March 9th at its quarterly meeting. The IAC’s discussion centered on Snap’s three-tiered capital structure: Class C shares with 10 votes per share for founders Evan Spiegel and Bobby Murphy, Class B shares with one vote per share for pre-IPO VC investors and other insiders, and Class A shares with no voting rights for public investors. Companies like Facebook and Google have employed similar structures in the past; in fact, a recent study by Institutional Shareholder Services (ISS) noted that dual- and multi-class capital configurations are common, especially in the technology sector. [2] However, the notion of affording no voting rights whatsoever to public investors is unprecedented.

READ MORE »

Delaware and Santa Fe

Posted by James Park, UCLA, on
Tuesday, May 9, 2017
, , , , , , , , , , , ,
More from:

James J. Park is Professor of Law at UCLA School of Law. This post is based on his recent paper, forthcoming as a chapter in Delaware’s Dominance in Corporate Law, is part of the Delaware law series; links to other posts in the series are available here.

The U.S. Supreme Court’s 1977 decision in Santa Fe Industries v. Green drew a line between corporate and securities law that arguably enabled Delaware to become the leading creator of corporate law. Prior to Santa Fe, the federal courts had become receptive to suits brought under Rule 10b-5 alleging corporate misconduct rather than a clear misrepresentation to investors. These decisions emboldened the plaintiff in Santa Fe to argue that a breach of fiduciary duty standing alone could support a federal securities fraud claim.

By rejecting this argument and emphasizing that federal securities law regulates disclosure while state corporate law regulates the internal affairs of the corporation, the Supreme Court helped open the door to Delaware’s dominance of corporate law for the next two decades. Soon after it was decided, the Delaware Supreme Court observed that “Santa Fe is a current confirmation by the Supreme Court of the responsibility of a state to govern the internal affairs of corporate life.” As one Delaware judge noted years later, Santa Fe “abruptly reversed” a “creeping federalization of corporate law.” A prominent corporate law scholar has observed that Santa Fe is a symbol for a “world of weak federal corporate law.”

READ MORE »

California District Court: Indirect Purchasers Can Bring Fraud Claims Against Private Company

Posted by Michael S. Dicke and Alexis I. Caloza, Fenwick & West LLP, on
Tuesday, May 9, 2017
, , , , ,
More from: , ,

Michael S. Dicke is a partner and Alexis I. Caloza is an associate at Fenwick & West LLP. This post is based on a Fenwick publication by Mr. Dicke and Mr. Caroza.

In a case with important implications for late-stage private companies, a federal magistrate judge ruled last week that investors in funds holding private company securities can bring fraud claims against the issuer of the securities and its officers, even though the plaintiffs had no dealings with the issuer or its officers and hold no actual shares.

The dispute involves the securities of Theranos, a private life sciences company headquartered in Silicon Valley. In Colman v. Theranos, a case of first impression, U.S. Magistrate Judge Nathanael Cousins of the Northern District of California held that California Corporations Code sections 25400(d) and 25500 permit suits by “indirect purchasers” of pre-IPO shares, i.e. purchasers who bought securities interests from intermediaries and not from the issuer. In its April 18 decision, the court reasoned that because the statutes are designed to combat fraud affecting the market and price for the issuer’s securities, there is no requirement that a purchaser have direct dealings with the issuer, or even that the purchaser have relied specifically on any alleged false statement made by the issuer. Instead, the court held, false public statements which are alleged to have affected the market for the issuer’s securities, and which the issuer made to induce purchase of the company’s shares generally, can form the basis for a claim under California law. The court further held that plaintiffs may sue corporate officers responsible for the allegedly false statements.

READ MORE »

Past, Present and Future Compensation Research: Economist Perspectives

Posted by Michael Gibbs, University of Chicago, on
Monday, May 8, 2017
, , , , , , , ,
More from:

Michael Gibbs is Clinical Professor of Economics at the University of Chicago Booth School of Business, and Research Fellow at the Institute for the Study of Labor (IZA). This post is based on an piece authored by Professor Gibbs and published in Compensation & Benefits Review. Related research from the Program on Corporate Governance about CEO pay includes Paying for Long-Term Performance (discussed on the Forum here) and the book Pay without Performance: The Unfulfilled Promise of Executive Compensation, both by Lucian Bebchuk and Jesse Fried.

At the 2016 Academy of Management conference, a group of leading human resource scholars held a panel discussion assessing the state of compensation research, which was subsequently published in Compensation and Benefits Review [CBR]. Afterwards, CBR editor Charles Fay asked me to organize a panel discussion of economists on the same topic. This seems a good time to assess where we now stand in this field. Over the last several decades economists have produced an enormous literature on compensation, especially incentives. The 2016 Nobel Prize in Economics was shared by Bengt Holmstrom (with Oliver Hart). Bengt’s work provided a rigorous theoretical foundation for understanding incentives, and inspired much of the empirical literature on the topic in economics, accounting, and governance. Meanwhile, “Workforce Analytics” has emerged as a new tool that firms use to manage their employees. It uses statistical analysis of data on employees, policies, and outcomes—precisely what personnel economists have done for two decades in studying compensation and related issues. Given recognition by the Nobel Committee, and adoption of similar methods by practitioners, where does compensation research go from here?
READ MORE »

What You Are Likely to Hear in the Board Room

Posted by Steve Pakela & Lane Ringlee, Pay Governance LLC, on
Monday, May 8, 2017
, , , , , , , , , , , , ,
More from: , , ,

Steve Pakela and Lane Ringlee are managing partners at Pay Governance LLC. This post is based on a Pay Governance publication by Mr. Pakela, Mr. Ringlee, and John Ellerman.

In the first 3 months of 2017, our firm’s partners and consulting staff attended more than 200 corporate Boards of Directors compensation committee meetings in our role as executive compensation advisors. From attending these meetings, we have learned a great deal about certain issues emerging as dominant themes in Board discussions about executive pay and corporate governance. Recently, several Pay Governance partners convened an internal meeting at which we shared our collective observations concerning the trends we expect to dominate compensation committee discussions through the remainder of the year.

The goal of this post is to share our views with you regarding the emerging issues and developments in executive compensation. Below, we identify the trends we believe will be addressed by many Board compensation committees in the coming months and our firm’s insights regarding these issues.

READ MORE »

CHOICE Act 2.0: House Financial Services Committee Revises Regulatory Reform Bill

Posted by John C. Dugan and Randy Benjenk, Covington & Burling LLP, on
Monday, May 8, 2017
, , , , , , , , , , , , , , ,
More from: , ,

John C. Dugan is a partner and Randy Benjenk is an associate at Covington & Burling LLP. This post is based on a Covington publication. Additional posts addressing legal and financial implications of the Trump administration are available here.

On April 19, 2017, the House Financial Services Committee (the “Committee”) released a new “discussion draft” of the Financial CHOICE Act, its comprehensive regulatory reform bill (“CHOICE Act 2.0”). The Committee released the first version of the bill (“CHOICE Act 1.0”) in June 2016.

Buoyed by the election of a Republican president, and following several months of public and industry outreach, Committee leadership has made a number of significant changes to the bill. Key changes from the CHOICE Act 1.0 include:

READ MORE »

SEC Enforcement Activity—Strong Through First Half of FY 2017

Posted by David F. Marcus and Sara E. Gilley, Cornerstone Research, on
Sunday, May 7, 2017
, , , , , , ,
More from: , ,

David F. Marcus is Senior Vice President and Sara E. Gilley is a Principal at Cornerstone Research. This post is based on a Cornerstone publication.

Despite the uncertainty introduced by changes in SEC leadership and the new administration, enforcement activity continued at a strong pace during the first half of FY 2017 (October 1, 2016–March 31, 2017).

Total Number of SEC Enforcement Actions Filed

  • The SEC filed 334 total enforcement actions during the first half of FY 2017, compared to 372 during the same period in the previous fiscal year.
  • Excluding actions against delinquent filers, the number of enforcement actions in the first half of FY 2017 was 299—virtually unchanged from the same period in the prior fiscal year.
  • The SEC continued to file the vast majority of its actions (80 percent) as administrative proceedings rather than civil actions.

READ MORE »

Board Changes and the Director Labor Market: The Case of Mergers

Posted by Ralph A. Walkling, Drexel University, on
Saturday, May 6, 2017
, , , , , , , , ,
More from: , ,

Ralph A. Walkling is Christopher and Mary Stratakis Professor in Corporate Governance and Accountability and Founder of the Center of Corporate Governance at Drexel University LeBow College of Business. This post is based on a recent paper authored by Professor Walkling; David Becher, David Cohen Research Scholar and Associate Professor of Finance at Drexel University Lebow College of Business; and Jared Wilson, Assistant Professor of Finance at Indiana University Kelley School of Business.

The modern era has ushered in dramatic changes to corporate governance. While firms used to place celebrities and politicians on their boards, increased demand for specialized expertise and greater scrutiny by regulators, activists, and shareholders all likely motivated firms to alter their boards and demand more from directors. In spite of this, little is known about changes to boards or characteristics of directors selected. In an ideal world, directors should monitor and advise management in an independent manner. However, given shareholders’ limited influence over director selection, it is possible that directors cater to managerial interests in board composition decisions. Our objective is to examine board dynamics and the attributes associated with director selection.

READ MORE »

The Regulation of Trading Markets: A Survey and Evaluation

Posted by Paul Mahoney, University of Virginia, and Gabriel Rauterberg, University of Michigan, on
Friday, May 5, 2017
, , , , , , , , , , ,
More from: ,

Paul G. Mahoney is a David and Mary Harrison Distinguished Professor at the University of Virginia School of Law, and Gabriel Rauterberg is an Assistant Professor of Law at the University of Michigan Law School. This post is based on their recent paper.

The U.S. equity markets have undergone profound changes in the past 15 years. In place of face-to-face or telephonic negotiation and execution of trades, electronic communications and information processing systems match incoming buy and sell orders automatically. Trading in listed stocks, which used to be heavily concentrated on the listing exchange, is now widely dispersed among multiple automated trading venues. Exchange specialists and over-the-counter market makers have been largely replaced by proprietary traders that offer liquidity to the automated markets by executing algorithmic trading strategies. Those strategies often rely on a menu of new and complex order types that trading venues have created to supplement the traditional market and limit orders.

READ MORE »

Corporate Governance in the Trump Era: A Note of Caution

Posted by William R. McLucas and Rachel Murphy, Wilmer Cutler Pickering Hale and Dorr LLP, on
Friday, May 5, 2017
, , , , , , , , , , , , ,
More from: , ,

William R. McLucas is a partner and Rachel Murphy is counsel at Wilmer Cutler Pickering Hale and Dorr LLP. This post is based on a WilmerHale publication which originally appeared in Westlaw Journal Corporate Officers and Directors Liability. Additional posts addressing legal and financial implications of the Trump administration are available here.

The past decade or so has been a challenging time for publicly held companies, particularly those in the financial sector. Since 2008, banks and financial services firms have been the subject of an aggressive effort by the U.S. government to crack down on those seen as associated with the market crash of 2008 and the subprime mortgage crisis. Public reports suggest that, as of this time last year, America’s largest banks had paid fines totaling upward of $110 billion in connection with the mortgage crisis. [1] That staggering total includes settlements between nine of the largest global banks and the DOJ’s Residential Mortgage-Backed Securities Working Group totaling more than $43 billion in cash penalties and consumer relief. [2] Further, the number of investigations and civil and criminal prosecutions for violations of the Foreign Corrupt Practices Act (“FCPA”), and the penalties associated with those prosecutions, seem to have spiked in the wake of 2008. READ MORE »

Page 54 of 83
1 … 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 … 83