Yearly Archives: 2019

Dilution, Disclosure, Equity Compensation, and Buybacks

Posted by Bruce Dravis (American Bar Association), on
Wednesday, October 30, 2019
, , , ,
More from:

Bruce Dravis is Chair of the Corporate Governance Committee of the Business Law Section at the American Bar Association. This post is based on his article, recently published in The Business Lawyer. Related research from the Program on Corporate Governance includes  Short-Termism and Capital Flows by Jesse Fried and Charles C. Y. Wang (discussed on the Forum here)  and Share Repurchases, Equity Issuances, and the Optimal Design of Executive Pay, by Jesse Fried (discussed on the Forum here).

Buybacks and equity compensation are two sides of a single coin. In a buyback, a company spends cash to repurchase its own shares, reducing its total outstanding share count. In the case of equity compensation, a company issues shares, receiving cash and tax benefits, increasing its total outstanding share count.

The two kinds of transactions—buybacks and equity compensation—are complementary, but their connection is obscured by the asymmetries in the timing, approval processes, and securities and financial disclosures for each. The article Dilution, Disclosure, Equity Compensation, and Buybacks (published The Business Lawyer, Vol. 74, 631-658, Summer 2019) describes those differences, and quantifies the share-denominated and dollar-denominated effects of buyback and equity compensation transactions over a 10-year period for selected Fortune 100 companies.

READ MORE »

Response to the Chamber of Commerce’s Outrageous Comment to DOL

Posted by Nell Minow, ValueEdge Advisors, on
Wednesday, October 30, 2019
, , , , , , , , ,
More from: ,

Nell Minow is Vice Chair of ValueEdge Advisors. This post is based on her recent comment letter to the Department of Labor.

VEA Vice Chair Nell Minow has submitted a comment to the Department of Labor on proxy advisory firms and proxy voting by pension fiduciaries. This is a follow-up to two previous letters on the issue and in response to a letter from the Chamber of Commerce calling for the same kinds of restrictions on proxy voting and proxy advisors they are pushing for at the SEC.

October 19, 2019

Assistant Secretary Preston Rutledge
EBSA
Department of Labor
200 Constitution Ave, NW, Ste S-2524
Washington DC 20210

Re: Executive Order on Energy Infrastructure/Rulemaking

Dear Assistant Secretary Rutledge,

READ MORE »

Private Equity’s Governance Advantage: A Requiem

Posted by Elisabeth de Fontenay (Duke University), on
Tuesday, October 29, 2019
, , , , , , ,
More from:

Elisabeth de Fontenay is Professor of Law at Duke University School of Law. This post is based on her article, recently published in the Boston University Law Review.

Is private equity still special? Although the industry’s returns have been envied for decades, recent studies show that they have declined over time and converged with public-market returns. In Private Equity’s Governance Advantage: A Requiem, I document that the means by which private equity generates those returns have changed as well.

Private equity’s original value proposition was optimizing companies’ governance and operations. Reuniting ownership and control in corporate America, the leveraged buyout (or the mere threat thereof) undoubtedly helped reform management practices in a broad swath of U.S. companies. In a leveraged buyout, the private equity fund acquires a public or private company, adds a heavy debt load to its capital structure, makes operational improvements, and then sells the company or takes it public after a few years. The potential governance advantages of LBOs are many, including the sponsors’ willingness to cut costs and replace management, the disciplining effect of high leverage, and the careful monitoring provided by a small, incentivized board that meets frequently.

READ MORE »

The Beneficial Owner

Posted by Jeff Lubitz, Institutional Shareholder Services, Inc., on
Tuesday, October 29, 2019
, , , , , , , , , , ,
More from: , ,

Jeff Lubitz is Head of ISS Securities Class Action Services, Institutional Shareholder Services, Inc. This post is based on an ISS publication by Elisa Mendoza, Vice President with ISS Securities Class Action Services.

Well versed in claims filing for over fifteen years, ISS Securities Class Action Services (ISS SCAS), along with other third-party filers, has experienced new challenges due to a seemingly new requirement on the part of law firms and claim administrators for precise beneficial owner information. Previously, claim administrators accepted the account name and account number to begin processing claims without requiring the beneficial owner information specifically. Now, submitted claims will not even be processed by many claim administrators without precise, unabbreviated identification of the beneficial owner for each claim. Claims administrators have made clear they will no longer accept the account name as sufficient. This post explores the impact the increased scrutiny of the beneficial owner name has had on the claims filing process, how the increased scrutiny came about, and the challenges and benefits of requiring this information.

READ MORE »

The New Paradigm

Posted by Martin Lipton and William Savitt, Wachtell, Lipton, Rosen & Katz, on
Monday, October 28, 2019
, , , , , , , ,
More from: , ,

Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy, and William Savitt is a partner at Wachtell, Lipton, Rosen & Katz. This post is based on their Wachtell memorandum.

With the adoption this week of The UK Stewardship Code 2020, to accompany The UK Corporate Governance Code 2018, the UK Financial Reporting Council has promulgated corporate governance, stewardship and engagement principles closely paralleling The New Paradigm issued by the World Economic Forum in 2016.

While the FRC codes are “comply and explain,” they fundamentally commit companies and asset managers and asset owners to sustainable long-term investment. As stated by the FRC:

The new Code sets high expectations of those investing money on behalf of UK savers and pensioners. In particular, the new Code establishes a clear benchmark for stewardship as the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society (emphasis added).

There is a strong focus on the activities and outcomes of stewardship, not just policy statements. There are new expectations about how investment and stewardship is integrated, including environmental, social and governance (ESG) issues ….

READ MORE »

The Myth of Creditor Sabotage

Posted by Vincent S.J. Buccola (University of Pennsylvania), on
Monday, October 28, 2019
, , , , , , , , ,
More from: , ,

Vince Buccola is an assistant professor at the Wharton School at the University of Pennsylvania; Jameson Mah is an Investment Analyst at Cyrus Capital Partners; and Tai Yi Zhang is an economics undergraduate student at the Wharton School at the University of Pennsylvania. This post is based on their recent article forthcoming in the University of Chicago Law Review.

Net-short creditor activism isn’t real. The fact that people talk as though it were real is, however, deeply interesting as a matter of economic sociology. So we claim in our new article, The Myth of Creditor Sabotage.

Readers of this blog are likely familiar at least in outline with the Windstream case. In 2017, Aurelius acquired a majority position in some of Windstream’s notes. Aurelius used the customary authority of a majority holder to assert that a spin-off transaction Windstream had closed some two years earlier was in fact an incurable breach of its sale-leaseback covenant. The matter went to trial, Aurelius prevailed, and Windstream filed for bankruptcy relief. That much is fact. But it is a theory of Aurelius’s motivation rather than the bare facts that has intrigued market participants as well as scholars. According to a widely rehearsed story (for example, here, here, and here), Aurelius did not believe its lawsuit would maximize the value of its notes. On the contrary, it believed (and hoped) the lawsuit would reduce the notes’ value. Having established a short position in CDS bigger in magnitude than its long position in Windstream’s notes, Aurelius had, the story goes, found a way to profit from value destruction.

READ MORE »

2019 Proxy Season Review

Posted by Chuck Callan (Broadridge Financial Solutions, Inc.) and Paul DeNicola (PwC), on
Monday, October 28, 2019
, , , , , , , , ,
More from: , , , , , , ,

Chuck Callan is Senior Vice President of Regulatory Affairs at Broadridge Financial Solutions, Inc.; and Paul DeNicola is Managing Director of the Governance Insights Center at PwC. This post is based on a joint Broadridge and PwC publication by Mr. Callan, Mr. DeNicola, Mike Donowitz,Theresa Harvin, Paula Loop, and Catie Hall.

This post provides insights into key corporate governance and shareholder voting data for the 2019 proxy season, as well as the five-year trends. It covers the results of 4,059 public company annual meetings held between January 1 and June 30, 2019.

Overview & Key Takeaways

We continue to see substantial differences in voting between institutional and retail investors. This analysis shows how institutional and retail investor segments voted on a number of different proposal types. The data highlights how important it is for companies to engage with all of their shareholders. In general, retail shareholders were less supportive of shareholder proposals than institutional voters.

READ MORE »

Recruiting ESG Directors

Posted by Steven A. Seiden, Seiden Krieger Executive Search, on
Sunday, October 27, 2019
, , , , , , , , ,
More from: ,

Steven A. Seiden is President at Seiden Krieger Executive Search. This post is based on his Seiden Krieger memorandum. Related research from the Program on Corporate Governance includes Socially Responsible Firms by Alan Ferrell, Hao Liang, and Luc Renneboog (discussed on the Forum here).

The pressure is now greater to populate boards with directors whose backgrounds satisfy ESG (Environmental, Social, Governance) standards. Agitation for ESG boardroom reform is emanating from a variety of quarters and is taking on an even broader definition than originally. Indeed The Business Roundtable’s recent liberal “Statement on the Business of a Corporation” would appear to align with such cohorts.

“Environmental” now includes how a company’s board is graded on its policies impacting climate change, sustainability, carbon footprint, water usage, pollutants, conservation, and its stewardship of nature in general. A highly respected international banker makes the case for “Mark-to-Planet Finance.” The environment now extends to company property, i.e. land, manufacturing facilities, offices, transportation modalities, and especially safety.

READ MORE »

A Common-Sense Approach to Corporate Purpose, ESG and Sustainability

Posted by John Wilcox, Morrow Sodali, on
Saturday, October 26, 2019
, , , , , , , ,
More from: ,

John C. Wilcox is Chairman of Morrow Sodali. This post is based on a Morrow Sodali memorandum by Mr. Wilcox. Related research from the Program on Corporate Governance includes Socially Responsible Firms by Alan Ferrell, Hao Liang, and Luc Renneboog (discussed on the Forum here).

With publication of the Business Roundtable’s “Statement on the Purpose of a Corporation,” [1] America’s top business and financial leaders now officially support the rapidly evolving ESG/sustainability movement, confirming that environmental, social and corporate governance policies are inextricably linked to business risk, value creation, financial performance and sustainability. [2]

The global push for sustainability has already proven to be a game changer that is altering the behavior of both institutional investors and companies. While investors struggle with the challenge of integrating ESG factors into their investment decisions, companies willing to define a meaningful corporate purpose and exploit the full potential of sustainability reporting can achieve important goals:

  • Do a more effective job managing relations with institutional investors and shareholders;
  • Reshape corporate reporting to provide a holistic picture of the business and its value drivers;
  • Direct shareholders’ attention to the company’s unique characteristics and values;
  • Designate company-specific performance metrics linked to business strategy and value creation;
  • Reduce investors’ reliance on external one-size-fits-all standards and inappropriate metrics;
  • Reduce vulnerability to shareholder activism

READ MORE »

Less Aggressive SEC Sanctions on Violations by Crypto Issuers

Posted by Robert Rosenblum, Amy Caiazza, and Taylor Evenson, Wilson Sonsini Goodrich & Rosati, on
Saturday, October 26, 2019
, , , , , , , , ,
More from: , , , ,

Robert Rosenblum is a partner and Amy Caiazza and Taylor Evenson are associates at Wilson Sonsini Goodrich & Rosati. This post is based on a Wilson Sonsini memorandum by Mr. Rosenblum, Ms. Caiazza, Mr. Evenson, and Katherine Mann.

Until September 30, 2019, Securities and Exchange Commission (“SEC”) enforcement actions in the crypto industry conveyed a consistent message: most crypto is a security, and if a token issuer does not follow the registration requirements of the Securities Act of 1933 (“1933 Act”), the issuer would face significant consequences in the form of substantial penalties, a mandated rescission offer to US investors, a requirement to register the tokens under Section 12(g) of the Securities Exchange Act of 1934 (the “1934 Act”), and bad actor disqualifications preventing the issuer from future Regulation A and Regulation D offerings.

On September 30, the SEC announced a settlement with Block.one that did none of these things. Despite finding that Block.one issued tokens that were securities in the United States without complying with registration requirements of the 1933 Act, the SEC: imposed a financial penalty on Block.one that was minor in the context of the total size of Block.one’s capital raise; did not require Block.one to make a rescission offer to investors; did not require Block.one to register its tokens under the 1934 Act; and did not impose bad actor disqualifications under Regulation A and Regulation D. And, as discussed below, the Block.one Settlement Order omitted any mention of key factual information necessary to support the SEC’s conclusion that the tokens were in fact securities. Equally surprising, the SEC did not address, in any respect, whether new tokens issued being used on a blockchain supported by Block.one are securities, and the SEC took no action (and offered no discussion) with respect to the issuance of those tokens.

READ MORE »

Page 16 of 95
1 … 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 … 95