Yearly Archives: 2019

Trends in Executive Compensation

Posted by Michael Kesner, Ed Sim, and Tara Tays, Deloitte Consulting LLP, on
Tuesday, September 17, 2019
, , , , , , , , ,
More from: , , ,

Michael Kesner is a Consultant, Ed Sim is a Senior Manager, and Tara Tays is a Managing Director at Deloitte Consulting LLP. This post is based on their Deloitte memorandum. Related research from the Program on Corporate Governance includes Paying for Long-Term Performance by Lucian Bebchuk and Jesse Fried (discussed on the Forum here).

Executive compensation is not only a consideration close to the pocket book of CFOs but also a topic of increasing importance to managements and boards. As major economies show signs of recovering from the 2008 recession, compensation can become more decisive to retaining and motivating critical senior executive talent. But, executive compensation also continues to be scrutinized by major investors, proxy advisory firms and increasingly regulators—given the losses incurred by shareholders over the last couple of years. Thus, companies will have to critically review their existing compensation plans and how they adapt these plans for a changing economy. CFOs can play a critical role in framing the financial impacts of compensation plans and influence the public perception of these plans. This CFO Insights article lays forth some critical considerations for CFOs.

READ MORE »

Modernizing Bank Merger Review

Posted by Jeremy C. Kress (University of Michigan), on
Tuesday, September 17, 2019
, , , , , ,
More from:

Jeremy Kress is Assistant Professor of Business Law at the Stephen M. Ross School of Business at the University of Michigan. This post is based on his recent article. forthcoming in the Yale Journal on Regulation.

The biggest irony of the 2008 financial crisis is that the market crash was both initially triggered and ultimately alleviated by massive bank mergers. A wave of mergers by Bank of America, Citigroup, JPMorgan, and Wells Fargo in the late 1990s created the “too big to fail” banks that became so central to the crisis. Less than a decade later, the federal government orchestrated multibillion-dollar emergency acquisitions by several of these firms to stem the panic. Thus, these four dominant banks—which control forty-two percent of the assets in the U.S. banking system—owe their existence to megamergers. Now, critics worry that that these firms are not only “too big to fail,” but also “too big to jail,” “too big to manage,” and “too big to supervise.”

Of course, this is not the first time that bank mergers have raised public policy concerns. In the 1950s, for example, a massive merger movement sparked fears of then-unprecedented consolidation in the financial sector. Many of these deals did not require federal approval. Several years later, Congress established a comprehensive oversight regime for bank mergers in an attempt to rein in unregulated consolidation. Under the Bank Merger Act of 1960, banks would have to get approval from their federal regulators before combining.

READ MORE »

2019 Proxy Season Recap and 2020 Trends to Watch

Posted by Lyndon Park, ICR Inc., on
Tuesday, September 17, 2019
, , , , , , , , , , , , ,
More from: ,

Lyndon Park is Managing Director at ICR Inc. This post is based on his ICR memorandum.

Overview

At first glance, the patterns and trends of the 2019 proxy season don’t seem to indicate shifts that are beyond marginal in terms of proxy voting impact. But in closer analysis, in conjunction with recent investor behavior and industry trends (e.g., Business Roundtable Statement on the Purpose of a Corporation signed by 181 CEOs disavowing shareholder-centrism in favor of greater commitment to stakeholders and society), the results of the 2019 proxy season evince an already-shifting pattern of voter behavior, and contain important clues as to what companies must do to prepare for the 2020 proxy season.

Throughout this post, we will note some of the specific issues to watch out for 2020 proxy season.

READ MORE »

Response to SEC Subcommittee Recommendations—Universal Ballot and Vote Confirmations

Posted by Dimitri Zagoroff, Glass, Lewis & Co., on
Monday, September 16, 2019
, , , , , , ,
More from: ,

Dimitri T.G. Zagoroff is Content Manager and Internal Consultant at Glass, Lewis & Co. This post is based on his Glass Lewis memorandum. Related research from the Program on Corporate Governance includes Universal Proxies by Scott Hirst (discussed on the Forum here).

If effecting change at a single institution is like reversing the course of an aircraft carrier, revamping the proxy system is something akin to turning around a whole fleet. Undaunted by the task, it appears that the SEC’s Investor Advisory Committee has gotten nearly all of its own boats pointed in the same direction. At a meeting September 5th, the IAC’s Investor-as-Owner Subcommittee recommendation on proxy plumbing received overwhelming support from all but two members of the bipartisan committee.

The IAC, chaired by Anne Sheehan, former director of governance for CalSTRS, was established by Dodd-Frank to provide the Commission with findings and recommendations on issues ranging from governance standards to the functioning of the market. Following last year’s SEC Roundtable, the Investor-as-Owner Subcommittee was tasked with disentangling the inefficiencies and complex interests of the proxy system.

READ MORE »

Reforming Pensions While Retaining Shareholder Voice

Posted by David Webber (Boston University), on
Monday, September 16, 2019
, , , , ,
More from:

David H. Webber is Professor of Law at the Boston University School of Law. This post is based on his recent article, recently published in the Boston University Law Review.

In my article, Reforming Pensions While Retaining Shareholder Voice, published in the Boston University Law Review as part of the symposium on Institutional Investor Activism in the 21st Century: Responses to A Changing Landscape, I argue that the ongoing shift in the public sector from defined benefit to defined contribution pension plans is taking place in the worst possible way, at least from a shareholder rights perspective, one that silences the shareholder voice of millions of workers. I also offer alternative defined-contribution formulations that would help retain that critically important shareholder voice.

Some background: across the country, states and cities face enormous pressure to reform traditional defined-benefit pension plans and replace them with defined-contribution plans. Defined-benefit pension plans promise workers fixed payments in retirement. Defined-contribution plans, like the familiar 401(k), do not guarantee any benefit, instead offering workers a chance to save and invest on their own. The push to shift from defined-benefit to defined-contribution funds is motivated by concern over underfunded pensions, shifting the risk of underfunding from the employer to individual workers. The extent and scope of such underfunding is highly controversial.

READ MORE »

Is Your Board Accountable?

Posted by Rusty O’Kelley and Anthony Goodman, Russell Reynolds Associates, on
Monday, September 16, 2019
, , , , , , , , ,
More from: , , , ,

Rusty O’Kelley III is the Global Head of the Board Consulting and Effectiveness Practice and Anthony Goodman is a member of the Board Consulting and Effectiveness Practice at Russell Reynolds Associates. This post is based on a Russell Reynolds memorandum by Mr. O’Kelley, Mr. Goodman, Andrew Droste, and Sarah Oliva.

Shareholders and regulators across the globe are demanding improvements in board oversight of corporate culture. Institutional investors seek to better understand companies’ approaches to human capital management (“HCM”), tone at the top, and the attendant reputational risks.

Corporate culture is a business issue for companies and their boards. The new generation of workers weighs workplace culture when choosing their jobs, and the protracted low rates of unemployment have added fuel to the talent war. Best-in-class companies are therefore seeking to distinguish their corporate cultures from those of their peers in ways that will attract and retain today’s top talent. Carefully focused, boards could play a significant role in this effort, even if they remain unmoved by the demands of their other stakeholders.

READ MORE »

No-Action Requests to Exclude Shareholder Proposals—A Change of Approach

Posted by Cydney Posner, Cooley LLP, on
Sunday, September 15, 2019
, , , , , , , , ,
More from: ,

Cydney S. Posner is special counsel at Cooley LLP. This post is based on a Cooley memorandum by Ms. Posner.

As foreshadowed by Corp Fin Director Bill Hinman at an event in July put on by the U.S. Chamber of Commerce (see this PubCo post), Corp Fin has announced that it is revisiting its approach to responding to no-action requests to exclude shareholder proposals. In essence, the staff may respond to some requests orally, instead of in writing and, in some cases, may decline to state a view altogether, leaving the company to make its own determination. How will companies respond?

Here is the substance of the announcement:

“The staff will continue to actively monitor correspondence and provide informal guidance to companies and proponents as appropriate. In cases where a company seeks to exclude a proposal, the staff will inform the proponent and the company of its position, which may be that the staff concurs, disagrees or declines to state a view, with respect to the company’s asserted basis for exclusion. Starting with the 2019-2020 shareholder proposal season, however, the staff may respond orally instead of in writing to some no-action requests. The staff intends to issue a response letter where it believes doing so would provide value, such as more broadly applicable guidance about complying with Rule 14a-8.

“The staff continues to believe, as noted in Staff Legal Bulletin 14I and Staff Legal Bulletin 14J, that when a company seeks to exclude a shareholder proposal from its proxy materials under paragraphs (i)(5) or (i)(7) of Rule 14a-8, an analysis by its board of directors is often useful.

“If the staff declines to state a view on any particular request, the interested parties should not interpret that position as indicating that the proposal must be included. In such circumstances, the staff is not taking a position on the merits of the arguments made, and the company may have a valid legal basis to exclude the proposal under Rule 14a-8. And, as has always been the case, the parties may seek formal, binding adjudication on the merits of the issue in court.”

READ MORE »

PE Sale of Portfolio Company to a SPAC

Posted by Douglas P. Warner and Dianna Lee, Weil, Gotshal & Manges LLP, on
Sunday, September 15, 2019
, , , ,
More from: , ,

Douglas P. Warner is a partner and Dianna Lee is an associate at Weil, Gotshal & Manges LLP. This post is based on their Weil memorandum.

SPAC activity has enjoyed a healthy uptick in recent years. More SPACs went public in 2018 than in any year since 2007, raising more than $10 billion in capital to deploy towards new investment opportunities. Private equity sponsors are increasingly finding themselves on the opposite side of the table from SPACs as the owner of a portfolio company considering a sale to a SPAC. A sale to a SPAC makes sense for certain portfolio companies, though it does raise certain issues for sellers that do not exist in a regular sale process and there have been some high profile “busted” sales of portfolio companies to SPACs. This article highlights certain key considerations for private equity sponsors in navigating a potential sale to a SPAC.

Is your Portfolio Company a Suitable Candidate for being a Public Company?

A sale to a SPAC is fundamentally an alternative to an IPO in terms of an exit strategy for your portfolio company. Like an IPO and unlike a regular way sale process it is unlikely you will be able to cash out 100% of your equity stake in the sale. You will therefore need to determine that your portfolio company is a suitable candidate for the public trading markets and that there will be enough investor support so that the company will trade well and allow you to sell the remainder of your equity stake in the company at an attractive valuation. Selling to a SPAC will also require that your company satisfy certain public disclosure requirements as part of the approval process for the transaction, akin to the level of information disclosed in an IPO prospectus, which includes preparing financial statements that meet certain SEC requirements.

READ MORE »

ISS 2019 Benchmarking Policy Survey—Key Findings

Posted by Betty Moy Huber and Paula H. Simpkins, Davis Polk & Wardwell LLP, on
Saturday, September 14, 2019
, , , , , , , , , , , ,
More from: , ,

Betty Moy Huber is counsel and Paula H. Simpkins is an associate at Davis Polk & Wardwell LLP. This post is based on their Davis Polk memorandum.

[On Sept. 11, 2019], Institutional Shareholder Services Inc. (ISS) announced the results of its 2019 Global Policy Survey (a.k.a. ISS 2019 Benchmark Policy Survey) based on respondents including investors, public company executives and company advisors. ISS will use these results to inform its policies for shareholder meetings occurring on or after February 1, 2020. ISS expects to solicit comments in the latter half of October 2019 on its draft policy updates and release its final policies in mid-November 2019.

While the survey included questions targeting both global and designated geographic markets, the key questions affecting the U.S. markets fell into the following categories: (1) board composition/accountability, including gender diversity, mitigating factors for zero women on boards and overboarding; (2) board/capital structure, including sunsets on multi-class shares and the combined CEO/chair role; (3) compensation; and (4) climate change risk oversight and disclosure. We previously provided an overview of the survey questions.

The ISS report distinguishes responses from investors versus non-investors. Investors primarily include asset managers, asset owners, and institutional investor advisors. In contrast, non-investors mainly comprise public company executives, public company board members, and public company advisors.

READ MORE »

Market Based Factors as Best Indicators of Fair Value

Posted by Jason Halper, Nathan Bull, and Sara Bussiere, Cadwalader, Wickersham & Taft LLP, on
Saturday, September 14, 2019
, , , , , , , ,
More from: , , , ,

Jason Halper and Nathan Bull are partners and Sara Bussiere is an associate at Cadwalader, Wickersham & Taft LLP. This post is based on a Cadwalader memorandum by Mr. Halper, Mr. Bull, Ms. Bussiere, and Monica Martin, and is part of the Delaware law series; links to other posts in the series are available here. Related research from the Program on Corporate Governance includes Using the Deal Price for Determining “Fair Value” in Appraisal Proceedings (discussed on the Forum here) and Appraisal After Dell, both by Guhan Subramanian.

Three recent Delaware Court of Chancery appraisal decisions offer a wealth of guidance not only regarding the determination of a merger partner’s fair value, but also regarding elements that potentially undermine a quality sale process and strategic considerations for litigating valuation and sale process issues.

Statutory appraisal litigation, initiated after virtually every sizeable merger, requires the Delaware Court of Chancery to determine the fair value of a target company’s shares, exclusive of any merger-created value, as of the effective date of the merger. Though the appraisal statute broadly empowers the Court to consider “all relevant factors” in determining fair value, the Delaware Supreme Court has clarified the particular importance of certain market-based factors, namely, unaffected market price and merger consideration. Though the unaffected market price is an “important indicator” of fair value (so long as the stock is trading in an efficient market), deal price that is the product of “a robust market check will often be the most reliable evidence of fair value[.]”

READ MORE »

Page 27 of 95
1 … 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 … 95