Yearly Archives: 2018

Effective Board Evaluation

Posted by Steve Klemash, Rani Doyle, and Jamie C. Smith, EY Center for Board Matters, on

Friday, October 26, 2018

Board evaluation, Board monitoring, Board oversight, Board performance, Boards of Directors, Long-Term value, Oversight
More from: Jamie Smith, Rani Doyle, Steve Klemash, EY

Steve W. Klemash is Americas Leader; Rani Doyle is Executive Director; and Jamie C. Smith is Associate Director, all at the EY Center for Board Matters. This post is based on their EY publication.

Investors, regulators and other stakeholders are seeking greater board effectiveness and accountability and are increasingly interested in board evaluation processes and results. Boards are also seeking to enhance their own effectiveness and to more clearly address stakeholder interest by enhancing their board evaluation processes and disclosures.

The focus on board effectiveness and evaluation reflects factors that have shaped public company governance in recent years, including:

Weekly Roundup: October 19-25, 2018

Posted by the Harvard Law School Forum on Corporate Governance & Financial Regulation, on

Friday, October 26, 2018

Weekly Roundup
More from:

This roundup contains a collection of the posts published on the Forum during the week of October 19-25, 2018.

Proxy Access Proposals

Posted by Stephen T. Giove, Arielle L. Katzman and Daniel Yao, Shearman & Sterling LLP, on Friday, October 19, 2018

Tags: Advanced notice, Boards of Directors, Charter & bylaws, Institutional Investors, Proxy access, Proxy voting, Shareholder nominations, Shareholder proposals, Shareholder rights, Shareholder voting, Surveys

Reforming Director’s Long-Term Duties in the EU

Posted by Claire Jeffwitz and Filip Gregor, Frank Bold, on Saturday, October 20, 2018

Tags: Boards of Directors, Corporate Social Responsibility, Environmental disclosure, ESG, EU, Europe, International governance, Long-Term value, Sustainability

Cybersecurity Disclosure Benchmarking

Posted by Steve W. Klemash, Les Brorsen, and Charles W. Seets Jr., EY Center for Board Matters, on Sunday, October 21, 2018

Tags: Boards of Directors, Cybersecurity, Disclosure, Institutional Investors, Oversight, Proxy advisors, Risk assessment, Risk disclosure, Risk management, Securities regulation

A Watershed Development for “Material Adverse Effect” Clauses

Posted by Barbara Becker, Jeffrey Chapman, and Stephen Glover, Gibson, Dunn & Crutcher LLP, on Monday, October 22, 2018

Tags: Adverse effects, Delaware cases, Delaware law, Materiality, Merger litigation, Mergers & acquisitions, Risk assessment, Termination, Whistleblowers

Insider Trading and the Integrity of Mandatory Disclosure

Posted by James J. Park (UCLA), on Monday, October 22, 2018

Tags: Disclosure, Information environment, Inside information, Insider trading, Market efficiency, Property rights, Rule 10b-5, SEC, SEC enforcement, Securities enforcement, Securities regulation, Voluntary Disclosure

Lazard’s Review of Shareholder Activism—2018 3Q YTD

Posted by Jim Rossman, Lazard, on Monday, October 22, 2018

Tags: Boards of Directors, Europe, Hedge funds, Institutional Investors, International governance, Mergers & acquisitions, Shareholder activism

Contracting Out of Appraisal Rights

Posted by Christopher B. Chuff, Pepper Hamilton LLP, on Tuesday, October 23, 2018

Tags: Appraisal rights, Contracts, Delaware cases, Delaware law, DGCL, Drag-along rights, Merger litigation, Mergers & acquisitions, Shareholders agreements, Written consent

Managing the Narrative: Investor Relations Officers and Corporate Disclosure

Posted by Andy Call (Arizona State University), on Tuesday, October 23, 2018

Tags: Disclosure, Earnings announcements, Engagement, Institutional Investors, Investor relations officers, Regulation FD, Shareholder communications, Surveys

Open Letter: Commonsense Corporate Governance Principles 2.0

Posted by Margaret Popper, Sard Verbinnen & Co, on Tuesday, October 23, 2018

Tags: Board composition, Board leadership, Boards of Directors, Commonsense Principles, Executive Compensation, Fund managers, Institutional Investors, Long-Term value, Management, Public firms, Shareholder rights, Short-termism, Transparency

Tokens and the Extraterritorial Reach of US Securities Laws

Posted by David Felsenthal, Steven Gatti, and Jesse Overall, Clifford Chance US LLP , on Wednesday, October 24, 2018

Tags: Blockchain, Class actions, Cryptocurrency, Exchange Act, Financial technology, ICOs, Innovation, International governance, Jurisdiction, Securities regulation, Shareholder suits

Trademarks in Entrepreneurial Finance

Posted by Thomas J. Chemmanur (Boston College), Harshit Rajaiya (Boston College), Xuan Tian (Tsinghua University), Qianqian Yu (Lehigh University), on Wednesday, October 24, 2018

Tags: Entrepreneurs, Firm valuation, Information environment, Intellectual property, IPOs, Private equity, Trademarks, Venture capital firms

CBS-NAI Dispute, Part III: Can Stockholders Rely on Stock Exchange Rules to Prevent Dilution of Their Voting and Economic Interests?

Posted by Victor Lewkow, Christopher E. Austin, and Paul M. Tiger, Cleary Gottlieb Steen & Hamilton LLP, on Wednesday, October 24, 2018

Tags: Boards of Directors, Controlling shareholders, Dividends, Dual-class stock, Listing standards, Minority shareholders, NYSE, Securities litigation

CEO Succession Practices in the S&P 500

Posted by Matteo Tonello, The Conference Board, Inc. and Jason Schloetzer, Georgetown University, on Thursday, October 25, 2018

Tags: Boards of Directors, Diversity, Executive performance, Executive turnover, Firm performance, Management, Succession

Powering Preemptive Rights with Presubscription Disclosure

Posted by Jesse M. Fried (Harvard Law School), on Thursday, October 25, 2018

Tags: Controlling shareholders, Equity offerings, Minority shareholders, Preemptive rights, Private firms, Shareholder rights, Shareholder voting, Tunneling

Improving Information for Investors in the Digital Age

Posted by Kara M. Stein, U.S. Securities and Exchange Commission, on Thursday, October 25, 2018

Tags: Accounting, Accounting standards, Disclosure, Firm performance, Information asymmetries, Information environment, Investor protection, Securities regulation

Improving Information for Investors in the Digital Age

Posted by Kara M. Stein, U.S. Securities and Exchange Commission, on

Thursday, October 25, 2018

Accounting, Accounting standards, Disclosure, Firm performance, Information asymmetries, Information environment, Investor protection, Securities regulation
More from: Kara Stein, U.S. Securities and Exchange Commission

Kara M. Stein is a Commissioner at the U.S. Securities and Exchange Commission. The following post is based on Commissioner Stein’s recent remarks at the Council of Institutional Investors 2018 Fall Conference, available here. The views expressed in the post are those of Ms. Stein and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Thank you, Ken [Bertsch], for that kind introduction. I would like to start out by thanking the Council of Institutional Investors for inviting me to speak with you. It is a pleasure to be here.

I last spoke to you in May 2014 about “Building Momentum.” [1] At the time, I was a rookie Commissioner. Now, I stand before you after five years as a Commissioner and over 5,700 votes under my belt. It has been an amazing time to be on the Commission, and I’ve learned a great deal about what matters to both companies and investors. Today, I’d like to share with you some of my thoughts borne from my experience. Specifically, my thoughts on how the Commission should improve disclosure to investors in the Digital Age. [2]

Powering Preemptive Rights with Presubscription Disclosure

Posted by Jesse M. Fried (Harvard Law School), on

Thursday, October 25, 2018

Controlling shareholders, Equity offerings, Minority shareholders, Preemptive rights, Private firms, Shareholder rights, Shareholder voting, Tunneling
More from:

Jesse Fried is the Dane Professor of Law at Harvard Law School. This post is based on his recent paper. Related research from the Program on Corporate Governance includes Cheap-Stock Tunneling Around Preemptive Rights by Prof. Fried and Holger Spamann (discussed on the Forum here).

In a paper recently posted on SSRN, Powering Preemptive Rights with Presubscription Disclosure, I put forward a proposal to make preemptive rights more effective: requiring the controller of a firm to disclose its subscription decision before outside investors decide their own.

Most corporations around the world have a controller: control is concentrated in the hands of either a single shareholder or a small group of shareholders acting in concert. Almost every unlisted (private) firm is a controlled firm. And many listed firms in the U.S. and most listed firms outside the U.S.—in Europe, Asia, and South America—are controlled firms.

CEO Succession Practices in the S&P 500

Posted by Matteo Tonello, The Conference Board, Inc. and Jason Schloetzer, Georgetown University, on

Thursday, October 25, 2018

Boards of Directors, Diversity, Executive performance, Executive turnover, Firm performance, Management, Succession
More from: Jason Schloetzer, Matteo Tonello, The Conference Board

Matteo Tonello is Managing Director at The Conference Board, Inc. This post relates to CEO Succession Practices: 2018 Edition, an annual benchmarking report authored by Dr. Tonello and Gary Larkin of The Conference Board with Professor Jason Schloetzer of the McDonough School of Business at Georgetown University, and made possible by a research grant from executive search firm Heidrick & Struggles.

According to a new report by The Conference Board, the exceptional longevity of the bull market that followed the Great Recession appears to have stretched leadership tenures at large U.S. public companies, resulting in a higher average CEO age. The study, CEO Succession Practices: 2018 Edition, annually documents and analyzes chief executive officer succession events of S&P 500 companies, updating a historical database first introduced in 2000. In 2017, there were 54 CEO successions among S&P 500 companies.

In 2009, at the peak of the Great Recession, the typical CEO of an S&P 500 held his or her position for 7.2 years—the shortest average tenure ever reported by The Conference Board. However, CEO tenure started to rebound soon after, rising to 10.8 years by 2015; in 2017, departing CEO tenure was the highest recorded since 2002, at nearly 11 years. (In contrast, employee tenure across the broader labor market has remained relatively constant over the past 30 years, at about five years). Consistent with this evidence, in 2017 the average age of a sitting S&P 500 CEO was 58.3 years, or more than two years older than the average CEO in 2009.

CBS-NAI Dispute, Part III: Can Stockholders Rely on Stock Exchange Rules to Prevent Dilution of Their Voting and Economic Interests?

Posted by Victor Lewkow, Christopher E. Austin, and Paul M. Tiger, Cleary Gottlieb Steen & Hamilton LLP, on

Wednesday, October 24, 2018

Boards of Directors, Controlling shareholders, Dividends, Dual-class stock, Listing standards, Minority shareholders, NYSE, Securities litigation
More from: Christopher Austin, Paul Tiger, Victor Lewkow, Cleary Gottlieb

Victor Lewkow, Christopher E. Austin and Paul M. Tiger are partners and Gloria B. Ho is an associate at Cleary Gottlieb Steen & Hamilton LLP. This post is based on their Cleary Gottlieb memorandum.

As described in a prior post, on May 17, 2018, the majority of the CBS board (other than the three directors with ties to NAI) considered and purported to approve a dividend of a fraction of a Class A (voting) share to be paid to holders of both CBS’s Class A (voting) common stock and Class B (nonvoting) common stock for the express purpose of diluting NAI’s voting interest in CBS, with the payment of such dividend conditioned on Delaware court approval. In addition to diluting NAI’s voting power from about 80% to about 20%, such dividend would have also diluted the voting rights of other Class A stockholders. [1]

Although it is not clear from the public record whether and to what extent the non-NAI-affiliated directors considered the NYSE’s Shareholder Approval Policy in approving the dividend, NAI believed that the proposed dividend (which was not conditioned on stockholder approval) raised serious issues under that NYSE Policy.

Trademarks in Entrepreneurial Finance

Posted by Thomas J. Chemmanur (Boston College), Harshit Rajaiya (Boston College), Xuan Tian (Tsinghua University), Qianqian Yu (Lehigh University), on

Wednesday, October 24, 2018

Entrepreneurs, Firm valuation, Information environment, Intellectual property, IPOs, Private equity, Trademarks, Venture capital firms
More from: Harshit Rajaiya, Qianqian Yu, Thomas Chemmanur, Xuan Tian

Thomas Chemmanur is a Professor at the Boston College Carroll School of Management. This post is based on a recent paper by Professor Chemmanur; Harshit Rajaiya, Ph.D. candidate at the Boston College Carroll School of Management; Xuan Tian, JD Capital Chair Professor of Finance at Tsinghua University PBC School of Finance; and Qianqian Yu, Professor of Finance at Lehigh University.

Trademarks are an important determinant of the economic value created by firms. A trademark is a word, symbol, or other signifier used to distinguish a good or service produced by one firm from the goods or services of other firms. Firms use trademarks to differentiate their products from those of other firms, reduce search costs for consumers, and to generate consumer loyalty through advertising, all of which may affect their product market performance and therefore their financial performance. However, despite the importance of trademarks for the economic activities of firms, there is a relatively little evidence on the role played by trademarks in entrepreneurial finance: i.e., in the financing, performance, and valuation of young firms at various stages in their life. One exception is Block, De Vries, Schumann, and Sandner (2014), who investigate the relation between the number of trademark applications by VC-backed start-up firms and the valuations of these start-up firms by VCs.

Tokens and the Extraterritorial Reach of US Securities Laws

Posted by David Felsenthal, Steven Gatti, and Jesse Overall, Clifford Chance US LLP , on

Wednesday, October 24, 2018

Blockchain, Class actions, Cryptocurrency, Exchange Act, Financial technology, ICOs, Innovation, International governance, Jurisdiction, Securities regulation, Shareholder suits
More from: Daniel Silver, David Adams, David Felsenthal, Jesse Overall, Robert Houck, Steven Gatti, Clifford Chance

David Felsenthal and Steven Gatti are partners and Jesse Overall is an associate at Clifford Chance US LLP. This post is based on a Clifford Chance memorandum by Mr. Felsenthal, Mr. Gatti, Mr. Overall, Robert Houck, Daniel Silver, and David Adams.

Token issuers often sell their securities offshore and consider such sales to be exempt from US securities regulation. But this raises the question of location—are the token sales in fact outside the US for securities law purposes? In In re Tezos Securities Litigation [1], a class action lawsuit brought by investors alleging that the tokens sold in the Tezos Initial Coin Offering were in fact securities, a federal court recently asked and answered the question: “where does an unregistered security [transaction], purchased on the internet, and recorded ‘on the blockchain,’ actually take place?” [2]

In the process, the court formulated a US federal securities law extraterritoriality analysis that—for what we believe is the first time ever—specifically takes the unique characteristics of blockchains into account. The court listed several factors that contributed to its determination that the sale of Tezos tokens had occurred in the United States, including that: US investors bought Tezos tokens; a website that sold the tokens was hosted in the US and run by a person located in the US; marketing efforts targeted US residents; and, most intriguingly, payments made in Ether for the Tezos tokens were validated by a network of Ethereum nodes clustered more densely in the US than in any other country.

Open Letter: Commonsense Corporate Governance Principles 2.0

Posted by Margaret Popper, Sard Verbinnen & Co, on

Tuesday, October 23, 2018

Board composition, Board leadership, Boards of Directors, Commonsense Principles, Executive Compensation, Fund managers, Institutional Investors, Long-Term value, Management, Public firms, Shareholder rights, Short-termism, Transparency
More from: Margaret Popper, Sard Verbinnen

The Commonsense Principles of Corporate Governance were developed, and are posted on behalf of, a group of executives leading prominent public corporations and investors in the U.S. The Open Letter and the Principles 2.0 are also available here and here.

A little more than two years ago, we published the Commonsense Principles of Corporate Governance That work represented a collaborative effort—a search for common ground—by representatives of some of America’s largest corporations and institutional investors. We said then, and it is no less true today, that the long-term prosperity of millions of American workers, retirees and investors depends on the effective governance of our public companies. We hoped that our Principles would be part of a larger dialogue about the responsibilities and need for constructive engagement of those companies, their boards and their investors. We think that has been the case. Other groups have published their own works on the subject. Among them are an investor-led effort by the Investor Stewardship Group (ISG) called the Framework for U.S. Stewardship and Governance, a business-led effort by the Business Roundtable (BRT) called Principles of Corporate Governance, and a piece by the International Business Council of the World Economic Forum called The New Paradigm.

Managing the Narrative: Investor Relations Officers and Corporate Disclosure

Posted by Andy Call (Arizona State University), on

Tuesday, October 23, 2018

Disclosure, Earnings announcements, Engagement, Institutional Investors, Investor relations officers, Regulation FD, Shareholder communications, Surveys
More from: Andrew Call, Lawrence Brown, Michael Clement, Nathan Sharp

Andy Call is Professor of Accounting at Arizona State University W.P. Carey School of Business. This post is based on a recent article forthcoming in the Journal of Accounting & Economics authored by Prof. Call; Lawrence D. Brown, Seymour Wolfbein Professor of Accounting at Temple University Fox School of Business; Michael B. Clement, KPMG Centennial Professor of Accounting at University of Texas McCombs School of Business; and Nathan Y. Sharp, Associate Professor of Accounting at Texas A&M University Mays Business School.

Although investor relations officers (IROs) play an important role in managing corporate communications with important stakeholders and in helping their companies achieve an appropriate valuation, the academic literature on investor relations is only in its early stages. IROs are responsible for communicating with the investment community and shaping the company narrative. As a result, IROs interact regularly with sell-side analysts and institutional investors and are at the center of many disclosure-related activities, including quarterly earnings conference calls and press releases, among others. In fact, because they manage so many important corporate disclosure activities, IROs are frequently referred to as “chief disclosure officers.”

We survey 610 IROs of publicly traded U.S. companies and interview 14 IROs to better understand their roles in managing companies’ communications with sell-side analysts and institutional investors and in overseeing corporate disclosures. Our survey explores numerous topics for which IROs are uniquely qualified to provide valuable insights, including: the reasons, settings, timing, and value of IROs’ interactions with sell-side analysts and institutional investors; how IROs control outsiders’ access to senior management; how sell-side analysts help IROs convey their company’s message to institutional investors; the value of various types of disclosures for communicating the company narrative; the role of IROs (vis-à-vis the role of CFOs) in preparing various disclosures; planning for and managing public earnings conference calls; the size and composition of the conference call queue; private “call-backs” after public earnings calls; the determinants of IROs’ internal performance ratings; and IROs’ experiences with Regulation Fair Disclosure (Reg FD).

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Yearly Archives: 2018

Effective Board Evaluation

Weekly Roundup: October 19-25, 2018

Proxy Access Proposals

Reforming Director’s Long-Term Duties in the EU

Cybersecurity Disclosure Benchmarking

A Watershed Development for “Material Adverse Effect” Clauses

Insider Trading and the Integrity of Mandatory Disclosure

Lazard’s Review of Shareholder Activism—2018 3Q YTD

Contracting Out of Appraisal Rights

Managing the Narrative: Investor Relations Officers and Corporate Disclosure

Open Letter: Commonsense Corporate Governance Principles 2.0

Tokens and the Extraterritorial Reach of US Securities Laws

Trademarks in Entrepreneurial Finance

CBS-NAI Dispute, Part III: Can Stockholders Rely on Stock Exchange Rules to Prevent Dilution of Their Voting and Economic Interests?

CEO Succession Practices in the S&P 500

Powering Preemptive Rights with Presubscription Disclosure

Improving Information for Investors in the Digital Age

Improving Information for Investors in the Digital Age

Powering Preemptive Rights with Presubscription Disclosure

CEO Succession Practices in the S&P 500

CBS-NAI Dispute, Part III: Can Stockholders Rely on Stock Exchange Rules to Prevent Dilution of Their Voting and Economic Interests?

Trademarks in Entrepreneurial Finance

Tokens and the Extraterritorial Reach of US Securities Laws

Open Letter: Commonsense Corporate Governance Principles 2.0

Managing the Narrative: Investor Relations Officers and Corporate Disclosure

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