Monthly Archives: February 2018

The Changing Face of Shareholder Activism

Paula Loop is Leader, Catherine Bromilow is Partner, and Leah Malone is Director of the Governance Insight Center at PricewaterhouseCoopers LLP. This post is based on a PwC publication by Ms. Loop, Ms. Bromilow, and Ms. Malone. Related research from the Program on Corporate Governance includes Dancing with Activists by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch (discussed on the Forum here); 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); and The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here).

Activism is about driving change. Shareholders turn to it when they think management isn’t maximizing a company’s potential. Activism can include anything from a full-blown proxy contest that seeks to replace the entire board, to shareholder proposals asking for policy changes or disclosure on some issue. In other cases, shareholders want to meet with a company’s executives or directors to discuss their concerns and urge action. The form activism takes often depends on the type of investor and what they want.

Institutional investors and hedge funds typically have the most impact. Individual investors may submit lots of shareholder proposals, but they usually lack the backing to drive real change.

To prepare for—and possibly to even avoid—shareholder activism, companies and their directors need to understand today’s landscape. Who are the activists? What are they are trying to achieve? When are activists more likely to approach a company? What tactics do they use? We break down the answers by the two main types of investors. Read on.


Disasters and Disclosures

Donald Langevoort is Thomas Aquinas Reynolds Professor of Law at the Georgetown University Law Center. This post is based on his recent paper.

Corporate disasters happen with unnerving frequency. These can be visibly dramatic events like the BP Deepwater Horizon oil rig catastrophe, with loss of life, environmental damage, and great consequential economic loss. Many are (or are also) legal compliance disasters: a massive fine or penalty imposed on the company after government authorities determine that the corporation surreptitiously had violated the law. Others may be on a smaller scale yet still painful, as with a defective product on which the company had pinned its hopes or the departure of a key leader under questionable circumstances. In a working paper entitled Disasters and Disclosures, I explore the legal risks associated with corporate disclosures before, during and after these kinds of events, focusing mainly on Rule 10b-5 fraud-on-the-market litigation.


The Highest-Paid Boards

Courtney Yu is Director of Research at Equilar, Inc. This post is based on an Equilar publication by Mr. Yu, available here.

Since the enactment of Say on Pay following the passage of Dodd-Frank, executive compensation has been closely watched and scrutinized by corporate shareholders. However, the compensation of those who represent shareholders—the board of directors—often flies under the radar. While no mandated check or balance like Say on Pay currently exists for director compensation, recent events may change the current governance landscape.

As covered in a recent Equilar post, Institutional Shareholder Services (ISS) published annual updates to its proxy voting guidelines. With respect to director pay, the new guidelines state:


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