Yearly Archives: 2017

U.S. Tax Reform: Strategies for Executing Transactions in the Face of Uncertainty

Posted by Nicholas J. DeNovio, Latham & Watkins LLP, on

Sunday, March 12, 2017

Accounting, Capital markets, Cross-border transactions, Disclosure, Financial regulation, Incorporations, Internal Revenue Code, International governance, IRS, Mergers & acquisitions, REITs, Securities regulation, Tax avoidance, Taxation
More from: Jiyeon Lee-Lim, Kirt Switzer, Laurence Stein, Nicholas DeNovio, Latham

Nicholas J. DeNovio is a partner at Latham & Watkins LLP. This post is based on a Latham publication by Mr. DeNovio, Jiyeon Lee-Lim, Laurence J. Stein, and Kirt Switzer.

Tax reform plans would fundamentally alter the landscape for key business decisions, impacting a business’ legal, finance, corporate development and other divisions, as well as tax groups.

Key Points:

Tax reform would change taxation, capital and operating structures.
The House Ways & Means Committee and the Trump Administration have each released tax reform proposals addressing five key themes: lowering the corporate tax rate, interest and other deductions, a territorial system, a one-time tax on accumulated overseas earnings and a destination-based cash flow tax.
Forward-looking strategies can help parties keep transactions on track.

The Delaware Trap: An Empirical Study of Incorporation Decisions

Posted by Robert Anderson IV, Pepperdine University, on

Saturday, March 11, 2017

Accounting, Corporate forms, Decision-making, Delaware articles, Delaware law, Disclosure, Incorporations, Inside counsel, Jurisdiction, Regulation D, Risk, State law
More from: Robert Anderson

Robert Anderson IV is Associate Professor of Law at Pepperdine University School of Law. This post is based on his recent paper, and is part of the Delaware law series; links to other posts in the series are available here.

One of the most enduring debates in corporate law is whether the United States system of corporate law federalism leads to a “race to the bottom” or a “race to the top.” [1] Race to the bottom theorists argue that because insiders of companies must initiate incorporation decisions, jurisdictions compete to provide legal rules that favor insiders, allowing them to extract private benefits at the expense of the corporation or its shareholders. Race to the top theorists argue that market constraints prevent insiders from favoring such jurisdictions, and that jurisdictions actually compete to provide efficient legal rules that enhance shareholder value. Although the dichotomous framing as a “race” to the “top” or “bottom” is a bit of an oversimplification of a more nuanced debate, that version of the debate has dominated discussions of corporate law for decades.

Stock Rising

Posted by Matthew Goforth, Equilar, Inc., on

Friday, March 10, 2017

Accountability, Equity-based compensation, Executive Compensation, Executive performance, Firm performance, Incentives, Management, Pay for performance, Say on pay, Shareholder value, Stock options, TSR
More from: Matthew Goforth, Equilar

Matthew Goforth is Research Manager at Equilar, Inc. This post is based on an Equilar publication which originally appeared in the Winter 2017 issue of C-Suite magazine, available here.

Compensating employees with equity—particularly the C-suite—addresses several objectives for companies aiming to manage talent effectively and create shareholder value. A public company’s ability to recruit, promote, incentivize and retain the right people to formulate and execute strategic initiatives aimed at growing returns for shareholders is paramount, and therefore the invitation to share in the spoils of company success is a powerful tool. Consistent with these trends, the median salary of an S&P 500 CEO has climbed 10% since 2011, and while annual cash bonuses have been relatively flat, median stock-based pay increased 57%.

The nuances lie in creating a single compensation program that works for the key stakeholders—both employees and investors alike.

The Modern Slavery Act 2015: Next Steps for Businesses

Posted by Raj Panasar, Cleary Gottlieb Steen & Hamilton LLP, on

Friday, March 10, 2017

Accountability, Cross-border transactions, Disclosure, Due diligence, Financial reporting, International governance, Labor markets, Oversight, Risk management, Transparency, UK
More from: Hannah Disselbeck, Melissa Reid, Raj Panasar, Cleary Gottlieb

Raj Panasar is a partner at Cleary Gottlieb Steen & Hamilton LLP. This post is based on a Cleary Gottlieb publication by Mr. Panasar, Melissa Reid, and Hannah Disselbeck.

Under the Modern Slavery Act 2015, organisations conducting business in the United Kingdom with worldwide revenues of at least £36 million are required to publish a transparency statement describing the steps they have taken in the last financial year to ensure their business and supply chains are free from modern slavery and human trafficking. The obligation applies to financial years ending on or after 31 March 2016, and transparency statements should be published as soon as reasonably practicable after, and ideally within six months of, the financial year end.

Weekly Roundup: March 3–9, 2017

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

Friday, March 10, 2017

Weekly Roundup
More from:

This roundup contains a collection of the posts published on the Forum during the week of March 3–9, 2017.

Uncapping Executive Pay

Posted by Michael Doran, University of Virginia, on Friday, March 3, 2017

Tags: Bonuses, Director liability, Equity-based compensation, Executive Compensation, Executive performance, Golden parachutes, Internal Revenue Code, IRS, Management, Stock options, Taxation

Commissioner Stein Remarks on U.S. Securities-Based Crowdfunding

Posted by Kara M. Stein, U.S. Securities and Exchange Commission, on Friday, March 3, 2017

Tags: Capital formation, Crowdfunding, Equity offerings, FINRA, Investor protection, JOBS Act, Retail investors, SEC, Securities regulation, Small firms, Tech companies

Alternatives to Quantitative Metrics in Performance Share Plans

Posted by Lane T. Ringlee, Pay Governance LLC, on Saturday, March 4, 2017

Tags: Equity-based compensation, Executive Compensation, Executive performance, Firm performance, Long-Term value, Management, Pay for performance, Proxy advisors, Shareholder value, TSR

Trends in Merger Investigations and Enforcement at U.S. Antitrust Agencies: 2006–2015

Posted by Cagatay Koç and Joseph T. Breedlove, Cornerstone Research, on Sunday, March 5, 2017

Tags: Antitrust, DOJ, FTC, Hart-Scott-Rodino Act, Merger litigation, Mergers & acquisitions, Securities enforcement, Securities regulation

The Trajectory of American Corporate Governance: Shareholder Empowerment and Private Ordering Combat

Posted by Jennifer G. Hill, University of Sydney, on Monday, March 6, 2017

Tags: Australia, Boards of Directors, Institutional Investors, International governance, Japan, Long-Term value, Private ordering, Proxy access, Shareholder activism, Shareholder rights, Shareholder voting, UK

Focus on Annual Incentives: Metrics, Goals, and More

Posted by Roy Saliba, Institutional Shareholder Services, Inc., on Monday, March 6, 2017

Tags: Accounting, Boards of Directors, Compensation committees, Executive Compensation, Executive performance, Firm performance, Forecasting, Incentives, Institutional Investors, Management, Pay for performance, Proxy advisors, Say on pay, Shareholder value, Short-termism

A Look at Board Composition: How Does Your Industry Stack Up?

Posted by Paula Loop, PricewaterhouseCoopers LLP, on Monday, March 6, 2017

Tags: Board composition, Board evaluation, Board tenure, Boards of Directors, Disclosure, Diversity, International governance, Management, Peer groups

Teaming Up and Quiet Intervention: The Impact of Institutional Investors on Executive Compensation Policies

Posted by Mieszko Mazur, IESEG School of Management, and Galla Salganik-Shoshan, Ben-Gurion University of the Negev, on Tuesday, March 7, 2017

Tags: Blockholders, Equity-based compensation, Executive Compensation, Incentives, Institutional Investors, Institutional monitoring, Management, Managerial style, Oversight, Peer effects, Public firms, Risk-taking, Shareholder value, Stock options

Initial Lessons from the Anthem-Cigna M&A Lawsuit

Posted by Jonathan Corsico and Aric H. Wu, Gibson, Dunn & Crutcher LLP, on Tuesday, March 7, 2017

Tags: Acquisition agreements, Antitrust, Break fees, Delaware cases, Delaware law, Merger litigation, Mergers & acquisitions, Termination, Termination fees, U.S. federal courts

Dow 30 CEOs’ Stock Value Gained $400 Million Since Election Day

Posted by Dan Marcec, Equilar, Inc., on Tuesday, March 7, 2017

Tags: Equity-based compensation, Executive Compensation, Executive ownership, Firm performance, Firm valuation, Incentives, Management, Market reaction, Presidential elections, Stock performance

The Heterogeneity of Board-Level Sustainability Committees and Corporate Social Performance

Posted by Rani Hoitash, Bentley University, and Udi Hoitash, Northeastern University, on Wednesday, March 8, 2017

Tags: Accountability, Accounting, Board performance, Boards of Directors, Corporate Social Responsibility, Environmental disclosure, ESG, Oversight, Risk management, Stakeholders, Sustainability

The Regulatory and Enforcement Outlook for Financial Institutions in 2017

Posted by Brad S. Karp, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on Wednesday, March 8, 2017

Tags: Accountability, Accounting, Banks, BSA/AML, Compliance & ethics, Compliance and disclosure interpretation, Cybersecurity, Financial institutions, Financial regulation, Money laundering, Oversight, Risk management

The Materiality Gap Between Investors, the C-Suite and Board

Posted by Judy McLevey, The Conference Board, on Wednesday, March 8, 2017

Tags: Accounting, Boards of Directors, Corporate Social Responsibility, Disclosure, Environmental disclosure, ESG, Financial reporting, Information asymmetries, Inside information, Insider trading, Institutional Investors, Management, Materiality, SEC, Securities regulation, Sustainability

Pilot CEOs and Corporate Innovation

Posted by Jingjing Zhang, McGill University, on Thursday, March 9, 2017

Tags: Behavioral finance, Corporate culture, Executive Compensation, Firm performance, Incentives, Innovation, Management, Managerial style, R&D, Risk-taking

Shareholder Engagement: An Evolving Landscape

Posted by Tom Johnson, Abernathy MacGregor, on Thursday, March 9, 2017

Tags: Board communication, Boards of Directors, Engagement, Financial reporting, Fund managers, Institutional Investors, Management, Proxy advisors, Proxy voting, Shareholder activism, Shareholder meetings, Transparency

State Street Global Advisors Announces New Gender Diversity Guidance

Posted by Sharo M. Atmeh, CamberView Partners, LLC, on Thursday, March 9, 2017

Tags: Board composition, Board dynamics, Board performance, Boards of Directors, Director qualifications, Disclosure, Diversity, Engagement, Institutional Investors, Proxy season, Proxy voting, Shareholder voting, SSgA

State Street Global Advisors Announces New Gender Diversity Guidance

Posted by Sharo M. Atmeh, CamberView Partners, LLC, on

Thursday, March 9, 2017

Board composition, Board dynamics, Board performance, Boards of Directors, Director qualifications, Disclosure, Diversity, Engagement, Institutional Investors, Proxy season, Proxy voting, Shareholder voting, SSgA
More from: Allie Rutherford, Andrew Letts, Chad Spitler, Sharo Atmeh, PJT Camberview

Sharo M. Atmeh is a Principal at CamberView Partners, LLC. This post is based on a CamberView publication by Mr. Atmeh, Andrew Letts, Allie Rutherford, and Chad Spitler.

On Tuesday, State Street Global Advisors (SSGA) issued a memo and press release (discussed on the Forum here) calling on 3,500 global companies, representing more than $30 trillion in market capitalization, to increase the number of women on corporate boards. Timed to coincide with observance of International Women’s Day, SSGA’s initiative is the latest, and most assertive, move by a major U.S.-based institutional investor to push companies toward increasing gender diversity on boards.

Shareholder Engagement: An Evolving Landscape

Posted by Tom Johnson, Abernathy MacGregor, on

Thursday, March 9, 2017

Board communication, Boards of Directors, Engagement, Financial reporting, Fund managers, Institutional Investors, Management, Proxy advisors, Proxy voting, Shareholder activism, Shareholder meetings, Transparency
More from: Tom Johnson, Abernathy MacGregor

Tom Johnson is Chief Executive Officer of Abernathy MacGregor. This post is based on an Ethical Boardroom publication by Mr. Johnson.

The significant rise of activism over the last decade has sharpened the focus on shareholder engagement in boardrooms and executive suites across the US.

Once considered a perfunctory exercise, designed to simply answer routine questions on performance or, occasionally, drum up support for a corporate initiative, shareholder engagement has become a strategic imperative for astute executives and board members who are no longer willing to wait until the annual meeting to learn that their shareholders may not support change of some sort, or their strategic direction overall.

Pilot CEOs and Corporate Innovation

Posted by Jingjing Zhang, McGill University, on

Thursday, March 9, 2017

Behavioral finance, Corporate culture, Executive Compensation, Firm performance, Incentives, Innovation, Management, Managerial style, R&D, Risk-taking
More from: Jayanthi Sunder, Jingjing Zhang, Shyam Sunder

Jingjing Zhang is Assistant Professor of Accounting at McGill University Desautels Faculty of Management. This post is based on a recent article authored by Ms. Zhang, Jayanthi Sunder, Associate Professor of Accounting at the University of Arizona Eller College of Management, and Shyam Sunder, BeachFleischman Professor of Accounting at the University of Arizona Eller College of Management.

Corporate innovation is an important driver of firm value. However, given the inherently risky nature of innovation outcomes, CEOs would be reluctant to undertake innovation. Mainstream research in economics has focused on extrinsic motivation though the design of financial incentives. An alternative solution is to select CEOs with the right temperament for innovation. A recent survey of 5,000 executives in innovative companies, Dyer, Gregersen, and Christensen (2011) find that successful innovators exhibit certain behavioral attributes, suggesting the potential role of intrinsic motivation in affecting firms’ innovation success. In our recent article, Pilot CEOs and Corporate Innovation, published in the Journal of Financial Economics, we examine the relative effectiveness of the CEO’s intrinsic versus extrinsic motivation on corporate innovation. The lack of attention on intrinsic motivation is largely due to the fact that it is difficult to observe and measure the behavioral traits of successful innovators in a large-scale sample.

The Materiality Gap Between Investors, the C-Suite and Board

Posted by Judy McLevey, The Conference Board, on

Wednesday, March 8, 2017

Accounting, Boards of Directors, Corporate Social Responsibility, Disclosure, Environmental disclosure, ESG, Financial reporting, Information asymmetries, Inside information, Insider trading, Institutional Investors, Management, Materiality, SEC, Securities regulation, Sustainability
More from: Judy McLevey, The Conference Board

Judy McLevey is former Associate Director of The Conference Board Governance Center. This post is based on a Conference Board publication authored by Ms. McLevey.

Investors, the C-suite and boards have different views about what is, or should be, considered material information. A company’s financial results would be considered material by all parties. Based on SEC rules, companies are required to provide updates on their financial results on a quarterly and annual basis (10-Q and 10-K, respectively) and also timely disclose specified material developments that occur in between quarters (8-K and/or press release). Beyond pure financial information, other examples of material news would include merger & acquisition activity, changes in control and/or management changes, significant product announcements, dividends, etc.

The Regulatory and Enforcement Outlook for Financial Institutions in 2017

Posted by Brad S. Karp, Paul, Weiss, Rifkind, Wharton & Garrison LLP, on

Wednesday, March 8, 2017

Accountability, Accounting, Banks, BSA/AML, Compliance & ethics, Compliance and disclosure interpretation, Cybersecurity, Financial institutions, Financial regulation, Money laundering, Oversight, Risk management
More from: Brad Karp, H. Christopher Boehning, Jessica Carey, Michael Gertzman, Roberto Gonzalez, Paul Weiss

Brad S. Karp is chairman and partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul, Weiss publication by Mr. Karp, Roberto J. Gonzalez, Michael E. Gertzman, H. Christopher Boehning, Jessica S. Carey.

Economic sanctions, anti-money laundering and cybersecurity remain at the forefront of U.S. regulatory priorities. This memorandum surveys major developments and trends in these areas in 2016 and early 2017 and provides an outlook for financial institutions in the year ahead. As discussed below, although the new administration brings considerable uncertainty, we believe the strong federal agency focus in these areas is likely to continue. And, at the state level, the New York Department of Financial Services’ attention to these areas will continue to be rigorous. Boards of directors, senior management, general counsel and compliance officers of both U.S. and non-U.S. financial institutions would be well advised to continue their vigilance in these areas. We also provide some practical suggestions for continuing to strengthen compliance in this challenging environment.

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Yearly Archives: 2017

U.S. Tax Reform: Strategies for Executing Transactions in the Face of Uncertainty

Key Points:

The Delaware Trap: An Empirical Study of Incorporation Decisions

Stock Rising

The Modern Slavery Act 2015: Next Steps for Businesses

Weekly Roundup: March 3–9, 2017

Uncapping Executive Pay

Commissioner Stein Remarks on U.S. Securities-Based Crowdfunding

Alternatives to Quantitative Metrics in Performance Share Plans

Trends in Merger Investigations and Enforcement at U.S. Antitrust Agencies: 2006–2015

The Trajectory of American Corporate Governance: Shareholder Empowerment and Private Ordering Combat

Focus on Annual Incentives: Metrics, Goals, and More

A Look at Board Composition: How Does Your Industry Stack Up?

Teaming Up and Quiet Intervention: The Impact of Institutional Investors on Executive Compensation Policies

Initial Lessons from the Anthem-Cigna M&A Lawsuit

Dow 30 CEOs’ Stock Value Gained $400 Million Since Election Day

The Heterogeneity of Board-Level Sustainability Committees and Corporate Social Performance

The Regulatory and Enforcement Outlook for Financial Institutions in 2017

The Materiality Gap Between Investors, the C-Suite and Board

Pilot CEOs and Corporate Innovation

Shareholder Engagement: An Evolving Landscape

State Street Global Advisors Announces New Gender Diversity Guidance

State Street Global Advisors Announces New Gender Diversity Guidance

Shareholder Engagement: An Evolving Landscape

Pilot CEOs and Corporate Innovation

The Regulatory and Enforcement Outlook for Financial Institutions in 2017

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