Daily Archives: Thursday, May 31, 2018

Spotlight on Boards 2018

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on
Thursday, May 31, 2018
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Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton publication by Mr. Lipton.

The ever-evolving challenges facing corporate boards prompt an updated snapshot of what is expected from the board of directors of a major public company—not just the legal rules, but also the aspirational “best practices” that have come to have equivalent influence on board and company behavior. Today, boards are expected to:

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Stock Market Short-Termism’s Impact

Posted by Mark Roe (Harvard Law School), on
Thursday, May 31, 2018
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Mark J. Roe is the David Berg Professor of Law at Harvard Law School. This post is based on a recent paper by Professor Roe, available here.

Related research from the Program on Corporate Governance includes Corporate Short-Termism—In the Boardroom and in the Courtroom by Mark Roe (discussed on the Forum here); The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here); and Can We Do Better by Ordinary Investors? A Pragmatic Reaction to the Dueling Ideological Mythologists of Corporate Law by Leo E. Strine (discussed on the Forum here).

Stock-market driven short-termism is crippling the American economy, according to legal, judicial, and media analyses. Firms are forgoing the R&D they need, sharply cutting capital expenditures, and buying back their own stock so feverishly that they starve themselves of cash. The stock market is the primary cause: corporate directors and senior executives cannot manage for the long-term when their shareholders furiously trade their company’s stock, they cannot make long-term investments when stockholders demand to see profits on this quarter’s financial statements, they cannot even strategize about the long-term when shareholder activists demand immediate results, and they cannot keep the cash to invest in their future when stock market pressure drains away that cash in stock buybacks.

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Principles and Best Practices for Virtual Annual Shareowner Meetings

Posted by Anne Sheehan and Darla C. Stuckey, The Best Practices Committee for Shareowner Participation in Virtual Annual Meetings, on
Thursday, May 31, 2018
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Anne Sheehan and Darla C. Stuckey are Co-Chairs of The Best Practices Committee for Shareowner Participation in Virtual Annual Meetings. This post is based on a report by The Best Practices Committee for Shareowner Participation in Virtual Annual Meetings. The Committee consists of interested constituents, comprised of retail and institutional investors, public company representatives, and proxy and legal service providers.

State laws require companies to hold annual meetings of their shareowners to elect directors and to allow their shareowners to vote on matters in which a vote by shareowners is required for approval. In that context shareowners may be permitted to ask questions about items on the ballot prior to voting. The annual meeting often also serves as an opportunity for management to update the company’s shareowners on company developments and to review the company’s performance. It also can be an opportunity for shareowners to ask questions of management and directors about the business of the company if they wish to do so. It is generally accepted that shareowner participation should be welcomed and encouraged at a company’s annual meeting of shareowners.

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CEO Pay Ratio: A Deep Data Dive

Posted by Jessica Phan, Equilar, Inc., on
Thursday, May 31, 2018
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Jessica Phan is a research analyst at Equilar, Inc. This post is based on an Equilar publication by Ms. Phan.

The introduction of the CEO Pay Ratio has created interest not only in how CEO compensation compares against pay for a company’s median employee, but also how employee pay compares across companies and industry sectors. The SEC required companies with a fiscal year beginning on or after January 1, 2017 to disclose their CEO pay ratio for the first time, and with the proxy filing deadline for these companies passing on April 30, a critical mass of data is now available for analysis.

The Equilar CEO Pay Ratio Tracker aggregates weekly and provides cumulative results on the lowest, median, and highest CEO pay ratios. With over 2,000 data points available as of May 10, 2018, the median pay ratio was 70:1 for all Russell 3000 companies and 166:1 for all Equilar 500 companies.

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