Monthly Archives: January 2018

The Appointment of Senior Program Fellow Robert Jackson as SEC Commissioner

The U.S. Senate recently voted by unanimous consent to confirm Hester Peirce and Robert J. Jackson Jr. as SEC Commissioners (for a description of each commissioner’s background and experience, see their written statements submitted to the Senate committee, available here and here). The Forum congratulates both Commissioners and wishes them much success in their important work. The Forum is also pleased and honored to note Commissioner Jackson’s long-standing work for over a decade with the Harvard Law School Program on Corporate Governance and the Forum.

Jackson graduated from Harvard Law School in 2005. During his time as a student, Jackson worked at the Program on Corporate Governance and co-authored with Professor Lucian Bebchuk a study on Executive Pensions. The study documented the large amounts that CEOs of public companies were receiving in the forms of pensions that were not made transparent by then-existing disclosure rules. The Bebchuk-Jackson study (on which the authors also relied in a comment letter submitted to the SEC) contributed to the SEC’s 2006 reform of the rules governing disclosure of executive pensions.

After a year of clerking on the Second Circuit, Jackson returned to Harvard to work with Bebchuk as a postdoctoral fellow at the Program on Corporate Governance. During his postdoctoral fellowship, Jackson served as the Forum’s first editor during its initial and formative period. Interviewed for an article about the Forum’s anniversary in the Harvard Law School Bulletin, Jackson commented: “[Editing the Forum] gave me … an experience that convinced me that legal academia was the place for me…Ten years later, I still draw on those relationships and insights in my teaching and scholarship.”

Following his postdoctoral fellowship, Jackson practiced as an associate at Wachtell, Lipton, Rosen & Katz and then served as an adviser to senior officials at the Treasury Department during the financial crisis. He and Bebchuk advised Kenneth Feinberg in the Office of the Special Master for TARP Executive Compensation, helping to reform pay practices at firms like AIG and Citigroup. While at the Treasury, Jackson also helped produce the Obama Administration’s proposals and rulemaking on executive pay and corporate governance, including rules governing say on pay and compensation in financial institutions.

After the passage of Dodd-Frank, Jackson joined Columbia Law School and served on its faculty for six years until his confirmation as an SEC Commissioner. During this period, he continued to work with the Program, serving as a Senior Fellow, and to carry out joint research with Bebchuk. The Program issued five studies that Jackson co-authored with Bebchuk during this period—two articles on corporate political spending (Corporate Political Speech: Who Decides? and Shining Light on Corporate Political Spending), an article on the constitutional limits on the use of poison pills (Toward a Constitutional Review of the Poison Pill), and two articles on pre-disclosure stock accumulations by activist investors (The Law and Economics of Blockholder Disclosure, and, jointly with Alon Brav and Wei Jiang, Pre-Disclosure Accumulations by Activist Investors: Evidence and Policy).

In 2011, along with Bebchuk, Jackson co-chaired a bipartisan committee of academics urging the SEC to adopt rules requiring public companies to disclose to investors whether and how they spend shareholder money on politics. Their study Shining Light on Corporate Political Spending (discussed on the Forum here) subsequently put forward a comprehensive case for such disclosure. The petition has attracted more than 1.2 million comments urging the SEC to adopt such rules—more than any other petition in the SEC’s history—and a bipartisan group of three former SEC Commissioners wrote the SEC to explain that the petition’s proposal is a “slam dunk.” Jackson, together with Bebchuk, published a long series of posts on the Forum about the petition, including many posts responding to each of the objections to the petition opponents have raised (see the Forum posts here).

During his time as law professor, Jackson also founded a lab at Columbia Law School that used data-science techniques in the study of securities markets. In one study that has received considerable attention (How Quickly Do Markets Learn? Private Information Dissemination in a Natural Experiment), Jackson and co-authors Wei Jiang and Joshua Mitts identified and studied high-speed trading activity on SEC systems. In another study (How Does Legal Enforceability Affect Consumer Lending? Evidence from a Natural Experiment), Jackson and co-authors Colleen Honigsberg and Richard Squire carried out cutting-edge investigative work showing the effects of a surprising Second Circuit decision on the availability of consumer credit.

Reacting to Jackson’s confirmation, Program Director Bebchuk stated that “Rob Jackson will bring to the SEC a perfect blend of academic rigor, a keen understanding of the rich and complex texture of institutions, rules and markets, and a strong commitment to public service and the protection of investors.” The Forum wishes Jackson much success and looks forward to following his contributions to SEC work.

Top 10 Topics for Directors in 2018

Kerry E. Berchem and Christine B. LaFollette are partners at Akin Gump Strauss Hauer & Feld LLP. This post is based on an Akin Gump publication by Ms. Berchem and Ms. LaFollette, Daniel F. FeldmanLauren Helen LeydenMichelle A. Reed and Lauren O’Brien as well as several other lawyers from across the firm in a variety of practices.

1. Cybersecurity threats.

Cybersecurity preparedness is essential in 2018 as the risk of, and associated adverse impact of, breaches continue to rise. The past year redefined the upward bounds of the megabreach, including the Yahoo!, Equifax and Uber hacks, and the SEC cyber-attack. As Securities and Exchange Commission (SEC) Co-Directors of Enforcement Stephanie Avakian and Steven Peikin warned, “The greatest threat to our markets right now is the cyber threat.” No crisis should go to waste. Boards should learn from others’ misfortunes and focus on governance, crisis management and recommended best practices relating to cyber issues.

2. Corporate social responsibility.

By embracing corporate social responsibility (CSR) initiatives, boards are able to proactively identify and address legal, financial, operational and reputational risks in a way that can increase the company value to all stakeholders-investors, shareholders, employees and consumers. Boards should invest in CSR programming as an integral element of company risk assessment and compliance programs, and should advocate public reporting of CSR initiatives. Such initiatives can serve as both differentiating and value-enhancing factors. According to recent studies, companies with strong CSR practices are less likely to suffer large price declines, and they tend to have better three- to five-year returns on equity, as well as a greater chance of long-term success.


Opportunity Makes a Thief: Corporate Opportunities as Legal Transplant and Convergence in Corporate Law

Martin Gelter is professor of law at Fordham University School of Law and Genevieve Helleringer is associate professor of law at Oxford University and ESSEC Business School. This post is based on their recent article, forthcoming in the Berkeley Business Law Journal.

We have recently posted our forthcoming article, Opportunity Makes a Thief: Corporate Opportunities as Legal Transplant and Convergence in Corporate Law (forthcoming in the Berkeley Business Law Journal), on SSRN.

The article surveys the corporate opportunities doctrine in four jurisdictions: the US, the UK, Germany, and France. Our analysis enables us to trace the development of the doctrine, exposing the way in which certain models of dealing with a particular issue have arisen, and how these models have then spread. Fiduciary duties are often today held out as typical instruments of shareholder protection in the US and the UK, both of which are often held out as model jurisdictions in corporate governance internationally. However, fiduciary duties in these two jurisdictions often operate in strikingly different ways. While the US relies on an open-ended standard, the UK corporate opportunities doctrine effectively constitutes a rule. Rules and practices regarding the handling of directors’ personal interest in certain business opportunities encompass an economic as well as a moral dimension. Considering the differences in business ethics and corporate culture, it is no surprise that there is a large disparity in these rules and practices in different jurisdictions, especially considering clichéd distinctions between the common law and civil law worlds. The resulting balance may still differ from one jurisdiction to another, depending on the weight accorded to the duty of loyalty of directors.


Corporate Governance Survey—2017 Proxy Season

David A. Bell is partner in the corporate and securities group at Fenwick & West LLP. This post is based on portions of a Fenwick publication titled Corporate Governance Practices and Trends: A Comparison of Large Public Companies and Silicon Valley Companies (2017 Proxy Season); the complete survey is available here.

Since 2003, Fenwick has collected a unique body of information on the corporate governance practices of publicly traded companies that is useful for Silicon Valley companies and publicly‑traded technology and life science companies across the U.S. as well as public companies and their advisors generally. Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100) and the technology and life science companies included in the Silicon Valley 150 Index (SV 150). [1]


Analysis of Fund Voting at Utilities Companies

Casey Aspin is Communications Director at Preventable Surprises. This post is based on a recent publication authored by Ms. Aspin. 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).

Investors stampeded into passive strategies after the 2008 financial crisis, triggering an intense concentration in control of US assets. The top five fund complexes managed almost half of the $19.2 trillion sitting in mutual fund and ETF accounts in 2016, according to the Investment Company Institute. [1]

With increased control of the stocks and bonds of corporate America comes increased scrutiny of how investors use their leverage with the companies whose stocks they own. This is particularly true during proxy season, when the votes cast by the largest investors can conflict with the wishes of the clients whose proxies they are voting, raising questions about fiduciary duty.


Pre-IPO Analyst Coverage: Hype or Information Production?

Jay R. Ritter is the Cordell Eminent Scholar at the University of Florida’s Warrington College of Business. This post is based on a recent paper authored by Professor Ritter; Chunxin Jia, professor at the Guanghua School of Management at Peking University; Zhen Xie, Bank of Suzhou; and Donghang Zhang, associate professor at the University of South Carolina’s Darla Moore School of Business.

From 2009-2012, China’s initial public offering (IPO) market was characterized by a regulatory environment in which the government did not control offer prices. If there was excess demand, underwriters were required to allocate shares on a pro rata basis, without favoring one group of clients over another, in contrast to the bookbuilding procedure that is widely used in the West. Furthermore, coverage by a stock before it went public by analysts working for brokerage firms not involved in the underwriting of an IPO was widespread, with an average IPO having coverage from 10 unaffiliated analysts before trading starts.


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