Yearly Archives: 2018

Delaware M&A Lessons From 2017 and Outlook For 2018

Posted by Tariq Mundiya, Martin L. Seidel and Mary Eaton, Willkie Farr & Gallagher LLP, on
Thursday, February 15, 2018
, , , , , , , , , , , , , , , ,
More from: , , , , ,

Tariq Mundiya, Martin L. Seidel and Mary Eaton are partners at Willkie Farr & Gallagher LLP. This post is based on Willkie publication by Mr. Mundiya, Mr. Seidel, Ms. Eaton, Sameer Advani, and Jessica Sutton. This post is part of the Delaware law series; links to other posts in the series are available here.

Shareholder Activism

Shareholder activism continued to make headlines in 2017 with record amounts of capital spent targeting corporations, including Arconic, Procter & Gamble, ADP, General Motors, CSX Corporation, and Deckers Outdoor Corporation, among others. In some of these contests, activists pursued litigation. For example, Marcato Capital Management filed suit against the board of Deckers Outdoor Corporation in Delaware Chancery Court seeking to force the company to hold its annual shareholder meeting in December and eliminate expensive change-of-control “proxy penalties” in order to consider an alternative slate of director nominees. The board ultimately mooted the litigation by committing to hold its annual meeting as scheduled in December and deactivating the proxy penalties.

READ MORE »

Time Is Money: The Link Between Over-Boarded Directors and Portfolio Value

Posted by Michael McCauley, Florida State Board of Administration, on
Wednesday, February 14, 2018
, , , , , , , , ,
More from: , , ,

Michael McCauley is Senior Officer, Investment Programs & Governance, of the Florida State Board of Administration (SBA). This post is based on a publication from the Florida SBA by Mr. McCauley; Jacob Williams, Corporate Governance Manager; and Tracy Stewart, Senior Corporate Governance Analyst.

The latest publication on corporate governance from the SBA analyzes the number of directorships at U.S. companies and its correlation with company stock performance. The investment study reviews “over-boarded” directors at U.S. companies within the Russell 3000 stock index and finds a strong inverse relationship between the level of directorships and total shareholder return (TSR) across the 1, 3, and 5 year time periods ending October 2017.

READ MORE »

New Evidence, Proofs, and Legal Theories on Horizontal Shareholding

Posted by Einer Elhauge, Harvard Law School, on
Wednesday, February 14, 2018
, , , , , , , , , , , , ,
More from:

Einer Elhauge is the Petrie Professor of Law at Harvard Law School. This post is based on Professor Elhauge’s recent paper.

When the leading shareholders of horizontal competitors overlap, horizontal shareholding exists. In my initial Harvard Law Review article on horizontal shareholding (discussed on the Forum here), I showed that economic theory and two intra-industry studies indicated that high levels of horizontal shareholding in concentrated product markets can have anticompetitive effects, even when each individual horizontal shareholder has a minority stake. I argued that those anticompetitive effects could help explain longstanding economics puzzles, including executive compensation methods that inefficiently reward executives for industry performance, the historic increase in the gap between corporate profits and investment, and the recent rise in economic inequality. I also showed that when horizontal shareholding has likely anticompetitive effects, it can be remedied under Clayton Act §7.

In a new paper, I show that new proofs and new empirical evidence strongly confirm my economic claims. One new economic proof establishes that, if corporate managers maximize either their expected vote share or re-election odds, they will maximize a weighted average of their shareholders’ profits from all their stockholdings and thus will lessen competition the more that those shareholdings are horizontal, even if each horizontal shareholder has a minority stake. Another new economic proof shows that with horizontal shareholding, corporations maximize their shareholders’ interests by increasing the extent to which executive compensation is based on industry performance, rather than individual firm performance. Neither new proof requires any communication or coordination between different shareholders, between different managers, or between shareholders and managers.

READ MORE »

2018 Proxy Season Preview

Posted by Steve W. Klemash, EY Center for Board Matters, on
Wednesday, February 14, 2018
, , , , , , , , , , , , , ,
More from: ,

Steve W. Klemash is EY Americas Leader at the EY Center for Board Matters. This post is based on an EY publication by Mr. Klemash.

As boards and executives work to identify strategic opportunities and address shifting risk and business environments, institutional investors too are seeking to strengthen and protect their holdings for the long-term. With this in mind, investors are increasingly engaging with companies.

At the same time, the historically diverse priorities of the wide range of institutional investors appear to be aligning on key topics—board composition and environmental and social matters, in particular. Importantly, the shift in investor views is affecting their policies, and engagement and voting practices.

READ MORE »

Derivative Litigation and Stockholder Preclusion

Posted by David Berger, Amy Simmerman, and Brad Sorrels, Wilson Sonsini Goodrich & Rosati, on
Tuesday, February 13, 2018
, , , , , , , ,
More from: , , , , , ,

David Berger, Amy Simmerman, and Brad Sorrels are partners at Wilson Sonsini Goodrich & Rosati. This post is based on a WSGR publication by Mr. Berger, Ms. Simmerman, Mr. Sorrells, Katherine Henderson, Ignacio Salceda, and Lindsay Kwoka Faccenda, and is part of the Delaware law series; links to other posts in the series are available here.

The Delaware Supreme Court recently unanimously affirmed the Delaware Court of Chancery’s dismissal of a stockholder derivative claim against directors of Wal-Mart, holding that these claims were precluded because a federal court in Arkansas had already dismissed a derivative claim filed by different Wal-Mart stockholders. [1] The Supreme Court held that an exception to the general rule against nonparty preclusion was appropriate in derivative cases because the interests of the plaintiffs in Arkansas and Delaware were sufficiently aligned, and the Arkansas plaintiffs were adequate representatives. The Supreme Court determined the preclusive effect of the Arkansas federal court’s dismissal was governed by Arkansas state law, subject to Constitutional standards of Due Process, and that all of the requisite elements for preclusion under Arkansas law, including privity and adequacy of representation, had been satisfied. At the same time, the court also declined the Court of Chancery’s invitation to adopt a different rule that would only give preclusive effect to a judgment by a sister court in some circumstances.

READ MORE »

BlackRock Talks … and U.S. Companies Must Listen

Posted by Ed Batts, Orrick, Herrington & Sutcliffe LLP, on
Tuesday, February 13, 2018
, , , , , , , , , , ,
More from: ,

Ed Batts is partner and Chair of the M&A and Private Equity groups at Orrick, Herrington & Sutcliffe LLP. This post is based on an Orrick publication by Mr. Batts. Related research from the Program on Corporate Governance includes The Agency Problems of Institutional Investors by Lucian Bebchuk, Alma Cohen, and Scott Hirst; and Social Responsibility Resolutions by Scott Hirst (discussed on the Forum here).

In BlackRock CEO and Co-founder Larry Fink’s annual letter to companies on January 16, he issued a call to action for companies to have “a clear sense of purpose.” To BlackRock, having “a clear sense of purpose” means much more than simply delivering quarterly financial results—companies will be expected to have a strong commitment to evolving Environmental, Social and Governance (ESG) issues.

This letter matters both because BlackRock is an important large investor of actively managed assets and—more importantly—because we are living in a new world order of many fewer public companies with, at the same time, a continued crescendo of passive investment allocation. These changes in the U.S. equities markets have been underway for some time, but with the recent significant bull market run they are being magnified at an accelerated pace.

READ MORE »

High-Frequency Measures of Informed Trading and Corporate Announcements

Posted by Michael J. Brennan (UCLA), Sahn-Wook Huh (SUNY at Buffalo), and Avanidhar Subrahmanyam (UCLA), on
Tuesday, February 13, 2018
, , , , , , , , ,
More from: , ,

Michael J. Brennan is Professor Emeritus of Finance at the UCLA Anderson School of Management, and Professor of Finance at the University of Manchester Business School; Sahn-Wook Huh is Associate Professor of Finance at the University (SUNY) at Buffalo School of Management; and Avanidhar Subrahmanyam is Professor of Finance at the UCLA Anderson School of Management. This post is based on their recent article, forthcoming in The Review of Financial Studies.

While the activities of privately informed traders have been studied extensively, it remains a challenge to obtain empirical evidence on trading by informed investors because of the difficulty of determining when trades result from private information. In this article, we use comprehensive transactions datasets to analyze informed trading around three unscheduled corporate announcements (M&As, SEOs, and dividend initiations), as well as around pre-scheduled earnings announcements. We also examine the links between our informed-trading measures and stock returns around the announcements.

READ MORE »

Picking Friends Before Picking (Proxy) Fights: How Mutual Fund Voting Shapes Proxy Contests

Posted by Alon Brav (Duke University), Wei Jiang (Columbia University), and Tao Li (University of Florida), on
Monday, February 12, 2018
, , , , , , , , ,
More from: , ,

Alon Brav is Robert L. Dickens Professor of Finance at Duke University Fuqua School of Business; Wei Jiang is Arthur F. Burns Professor of Free and Competitive Enterprise at Columbia Business School; and Tao Li is Assistant Professor of Finance at University of Florida Warrington College of Business. This post is based on their recent paper. Related research from the Program on Corporate Governance includes The Agency Problems of Institutional Investors by Lucian Bebchuk, Alma Cohen, and Scott Hirst; Dancing with Activists by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch (discussed on the Forum here); and Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System by Leo E. Strine, Jr. (discussed on the Forum here).

Over the past two decades the frequency of proxy contests for board representation or control has increased as shareholder activism has become both an established investment strategy and an important form of corporate governance. Since dissidents are typically minority stockholders, a successful campaign, such as Trian Partners’ intervention at Procter and Gamble Co., requires support from their fellow shareholders. The general apathy of retail investors towards voting matters implies that it is usually necessary that dissidents win the support of a majority of institutional shareholders. Hence, “picking friends”—the selection of a target with a pro-activist shareholder base—is a crucial element in an activist’s decision on whether to launch a proxy contest.

READ MORE »

2017 Delaware Corporate Law Year in Review

Posted by David Berger, Amy Simmerman, and Brad Sorrels, Wilson Sonsini Goodrich & Rosat, on
Monday, February 12, 2018
, , , , , , , , , , , , ,
More from: , , , , , ,

David Berger, Amy Simmerman, and Brad Sorrels are partners at Wilson Sonsini Goodrich & Rosati. This post is based on a WSGR publication by Mr. Berger, Ms. Simmerman, Mr. Sorrells, Katherine Henderson, Lori Will, and Shannon German, and is part of the Delaware law series; links to other posts in the series are available here.

In 2017, the Delaware courts once again issued many substantive corporate law decisions covering a wide range of issues critical to boards, stockholders, and officers. In addition, decisions from recent years continued to impact Delaware litigation, especially in the reduction of disclosure-based, settlement-driven M&A litigation as a result of the Court of Chancery’s Trulia decision. At the same time, the Delaware judges’ dockets remained so busy with other types of litigation that a proposal to increase the five-member Court of Chancery by two judges is currently under consideration. Alongside developments from the Delaware courts, we continue to see various trends in practice relating to Delaware law issues.

This post covers these important trends, which will shape practice in 2018.

READ MORE »

CEO Tenure Rates

Posted by Dan Marcec, Equilar, Inc., on
Monday, February 12, 2018
, , , ,
More from: , , ,

Dan Marcec is Director of Content & Communications at Equilar, Inc. This post is based on an Equilar publication by Mr. Marcec and Equilar Research Analysts Kyle Benelli and Amanda Schulhofer.

In the past five years, CEOs transitions have become more common than they had been in the preceding five years. As a result, median tenure has fallen a full year since 2013.

According to a recent Equilar study, the median tenure for CEOs at large-cap (S&P 500) companies was 5.0 years at the end of 2017. Looking back historically at the companies included in the study, that figure has fallen from 6.0 since 2013. Average tenure, which is weighted by long-standing CEOs with several decades of service, also dropped in that timeframe, but to a lesser degree—decreasing from 7.5 in 2013 to 7.2 in 2017.

READ MORE »

Page 75 of 86
1 … 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86