Yearly Archives: 2021

Going Dark: Speech by Commissioner Lee on The Growth of Private Markets and the Impact on Investors and the Economy

Posted by Allison Herren Lee, U.S. Securities and Exchange Commission, on
Wednesday, October 13, 2021
, , , , ,
More from: ,

Allison Herren Lee is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on her recent remarks at The SEC Speaks in 2021. The views expressed in the post are those of Commissioner Lee, and do not necessarily reflect those of the Securities and Exchange Commission or the Staff.

Perhaps the single most significant development in securities markets in the new millennium has been the explosive growth of private markets. We’ve become all too familiar with the statistics: more capital has been raised in these markets than in public markets each year for over a decade [1] with no signs of a change in the trend. The increasing inflows into these markets have also significantly increased the overall portion of our equities markets and our economy that is non-transparent to investors, markets, policymakers, and the public. [2]

The vast amount of capital in these markets, attributable in part to policy choices made by the Commission over the past few decades, has also created a new, but no longer rare or mythical, kind of business known as Unicorns—private companies with valuations of $1 billion or more. So christened in 2013 when their existence and number was more fittingly associated with fairy tales, they have since grown dramatically in both number and, importantly, in size, reaching dizzying valuations nearing and even exceeding $100 billion. [3] In today’s markets, companies can and do stay private far longer than ever before, despite the fact that they often dwarf their public counterparts in size and influence.

READ MORE »

Speech by Commissioner Roisman on the U.S. Capital Markets

Posted by Elad L. Roisman, U.S. Securities and Exchange Commission, on
Wednesday, October 13, 2021
, , ,
More from: ,

Elad L. Roisman is a Commissioner at the U.S. Securities and Exchange Commission. The following post is based on his recent remarks at The SEC Speaks in 2021. The views expressed in this post are those of Mr. Roisman and do not necessarily reflect those of the Securities and Exchange Commission or its staff.

Good morning. To open, I have to note that my remarks are my own and do not reflect the views of the Commission or my fellow Commissioners.

I. Introduction

The last 18 months have been unprecedented and while we have all had to make changes and adapt I have found that the purpose of my job has been consistent. I have been going to the office throughout the pandemic and every morning, when I walk into my office, the first thing I see is a slightly faded piece of computer paper on the wall that reads “it’s a privilege.” I printed it over a decade ago and I have carried it to every job I have had since. It has never been more true of any job than it is of the job I have now: it is truly a privilege and an honor to serve on the U.S. Securities and Exchange Commission. Today, I want to focus my remarks on one aspect of this great responsibility: preserving and expanding opportunities for businesses in our economy to raise capital and for investors to share in their success.

There is little disagreement that the U.S. capital markets remain the envy of the world. Their depth, liquidity, and transparency are unmatched. Their remarkable quality is not merely a point of pride; it fundamentally affects how our economy runs, and therefore how our people, and people all over the world, are able to live their lives. These are the markets I have the privilege of overseeing.

READ MORE »

Just Say No? Shareholder Voting on Securities Class Actions

Posted by Albert H. Choi (University of Michigan), Stephen J. Choi (NYU), and Adam C. Pritchard (University of Michigan), on
Wednesday, October 13, 2021
, , , , , ,
More from: , ,

Albert H. Choi is Paul G. Kauper Professor of Law at the University of Michigan; Stephen J. Choi is Bernard Petrie Professor of Law and Business at New York University; and Adam C. Pritchard is Frances and George Skestos Professor of Law at the University of Michigan. This post is based on their recent paper.

When a publicly-traded company releases misleading information that distorts the price of the company’s stock, investors who purchase at the inflated price suffer harm from the misleading information when it is corrected. Under Rule 10b-5 of the Securities Exchange Act of 1934, investors may bring a private cause of action against corporations and their officers who make materially misleading statements on which the investors rely when buying or selling a security.

Litigation can benefit investors by deterring managers from committing fraud. Discouraging fraud can improve market efficiency and various corporate governance mechanisms that rely on accurate securities prices. In an individual lawsuit, however, while the deterrence benefit accrues to all investors, the plaintiffs must bear the entire cost of the lawsuit. The class action mechanism provides a collective solution to the disincentives discouraging investors from bringing a securities fraud suit. In a class action, a collectivizing agent, the class representative, represents the interests of the class. Individual class members do not need to expend their own resources to obtain a recovery. Indeed, they do not even need to pay attention to the litigation until a settlement or a judgment is reached. All they need to do is submit a claim form once the litigation is concluded.

READ MORE »

Sustainability Impact in Investor Decision-Making

Posted by David Rouch and Juliane Hilf, Freshfields Bruckhaus Deringer LLP, on
Tuesday, October 12, 2021
, , , , , ,
More from: , ,

David Rouch and Juliane Hilf are partners at Freshfields Bruckhaus Deringer LLP. This post is based on their Freshfields memorandum. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here); Companies Should Maximize Shareholder Welfare Not Market Value by Oliver Hart and Luigi Zingales (discussed on the Forum here); and Reconciling Fiduciary Duty and Social Conscience: The Law and Economics of ESG Investing by a Trustee by Max M. Schanzenbach and Robert H. Sitkoff (discussed on the Forum here).

In A Legal Framework for Impact: Sustainability Impact in Investor Decision-making, published by Freshfields Bruckhaus Deringer LLP in July for the United Nations Environment Programme Finance Initiative, the UN PRI and the Generation Foundation, we look at the adoption of positive sustainability outcomes as goals of institutional investment management and how far the law supports it.

The issue

The goal most associated with institutional investment management is earning a financial return. But earning money is obviously not the only goal we have for our lives or for our world. It exists alongside broader goals concerning the quality of the social and natural environment we inhabit, or at least its sustainability.

There may have been a time when it was possible to approach the goal of earning a financial return largely in isolation from the others. In reality, however, financial and economic systems are part of wider social and natural ecosystems, the health of which is vital to broader goals. Financial and economic systems can help these ecosystems flourish. However, they also depend upon and can adversely affect them. They can both strengthen and undermine the systems on which they rely.

READ MORE »

Banking-Crisis Interventions, 1257-2019

Posted by Andrew Metrick and Paul Schmelzing (Yale), on
Tuesday, October 12, 2021
, , , , , ,
More from: ,

Andrew Metrick is the Janet L. Yellen Professor of Finance and Management at the Yale School of Management and the Director of the Yale Program on Financial Stability; and Paul Schmelzing is a Postdoctoral Research Associate at Yale School of Management. This post is based on their recent paper.

Banking crises are pervasive. Even mature economies with stable governments cannot escape them. These crises are costly for economies, for public trust, and for political stability. These social costs motivate government action, but what form should that action take? What kinds of interventions work? How exactly should they be structured and sequenced? To answer these questions we would like to learn from history, and to do this well requires a database of past actions. Despite considerable progress by scholars since the 1990s in building chronologies of banking crises, no comprehensive overview cataloguing and analyzing crisis interventions exists. In a newly released working paper, we present such a comprehensive database for the first time, describe our construction process, and analyze the patterns of crisis interventions across time and space. A dedicated database website (to be updated regularly) contains full documentations, bibliographies, and excel sheets for researchers and the general public.

To construct our database we first compiled a master list of canonical crises from four major crisis-chronology projects: Reinhart and Rogoff (2009), Schularick and Taylor (2012), Laeven and Valencia (2020), and Baron, Verner, and Xiong (2021). The union of these four sources includes 494 canonical crises. Next, for each canonical crisis, we consult the sources cited by the original authors, along with an extensive primary and secondary literature. These two steps yield a list of 1187 specific interventions.

READ MORE »

Mega-Cap and Large-Cap Consumer Companies Vary in Adoption of Governance Practices

Posted by Audra Cohen and Melissa Sawyer, Sullivan & Cromwell LLP, on
Tuesday, October 12, 2021
, , , , , , , , ,
More from: , , , ,

Audra Cohen and Melissa Sawyer are partners at Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell memorandum by Ms. Cohen, Ms. Sawyer, Eric Krautheimer, and Matthew Goodman.

Executive Summary

Within the consumer industry, mega-cap (>$70B market cap) and large-cap ($20B to $45B market cap) companies show varying degrees of conformity in corporate governance practices. Notably, slight differences between mega-cap and large-cap consumer companies exist regarding board composition, committee structure, diversity, shareholder rights, shareholder composition and corporate disclosures. [1]

In regard to board composition, mega-cap consumer companies have less board refreshment, greater recruitment of board members with consumer or retail industry knowledge, and greater likelihood of having separate CEO and Chair positions when compared to large-cap consumer companies. Furthermore, although each consumer company has at least an audit committee, a compensation committee, and a corporate governance committee pursuant to stock exchange rules, mega-cap consumer companies on average have more committees dedicated to discrete oversight areas, such as innovation or technology development, than large-cap companies. Mega-cap companies also tend to make more public disclosures regarding their diversity, equity, and inclusion data, though they have a slightly lower percentage of their boards composed of female directors and have a slightly higher percentage of their boards composed of racially or ethnically diverse directors. Regarding shareholder rights, mega-cap consumer companies are slightly more likely to grant the right to call a special meeting of their shareholders and have lower shareholder ownership thresholds for calling special meetings. They are also more likely to grant shareholders the right to act by written consent. However, mega-cap consumer companies have lower say-on-pay approval rates compared to large-cap companies. Notably, as compared to large-cap consumer companies, mega-cap consumer companies are also less often controlled by their founders’ family members and tend to have more dispersed share ownership. Finally, while both mega-cap and large-cap consumer companies commonly publish disclosures and reports concerning various metrics, including metrics related to sustainability and social responsibility, there are differences in the types of disclosure frameworks used and kinds of information disclosed.

READ MORE »

2022 Proxy and Annual Report Season

Posted by Laura Richman, David Schuette, and Christina Thomas, Mayer Brown LLP, on
Monday, October 11, 2021
, , , , , , , , , ,
More from: , , ,

Laura Richman is counsel, and David Schuette and Christina Thomas are partners at Mayer Brown LLP. This post is based on their Mayer Brown memorandum.

Once again, it is time to prepare for the proxy and annual report season. There are many issues to take into consideration when crafting required regulatory disclosures in a manner that conveys effective messaging to the company’s investors. Advance planning, careful drafting and multi-faceted review greatly contribute to a successful proxy and annual report season, culminating in a productive annual shareholders’ meeting.

This post provides an overview of key issues that companies should consider as they get ready for the upcoming 2022 US proxy and annual report season (2022 Proxy Season), including:

  • Virtual Meetings
  • Compensation Issues
  • Shareholder Proposals
  • Environmental, Social and Governance (ESG) Matters
  • Human Capital Management
  • Board Diversity
  • Proxy Voting Advice
  • Related Person Transaction Approvals
  • Dodd-Frank Rulemaking
  • Risk Factors
  • Management’s Discussion and Analysis
  • Holding Foreign Companies Accountable Act Disclosure
  • ITRA Compliance
  • Electronic Signatures on SEC Filings
  • Director and Officer Questionnaires

READ MORE »

Should SPAC Forecasts be Sacked?

Posted by Michael Dambra (SUNY at Buffalo), Omri Even-Tov (University of California at Berkeley), and Kimberlyn George (University of California at Berkeley), on
Monday, October 11, 2021
, , , , , , , , , , ,
More from: , ,

Michael Dambra is Associate Professor of Accounting and Law at SUNY Buffalo School of Management; Omri Even-Tov is Assistant Professor of Accounting at the University of California at Berkeley Haas School of Business; and Kimberlyn George is a PhD candidate at the University of California at Berkeley Haas School of Business. This post is based on their recent paper.

Since 2020, the number of initial public offerings (IPOs) by Special Purpose Acquisition Companies (SPACs) has outpaced the number of traditional IPOs. SPACs are blank-check companies that raise capital from investors with the intent of finding a private target to merge with, effectively taking it public through a process known as a de-SPAC merger. For private firms, one of the benefits of going public through a de-SPAC merger rather than a traditional IPO is the ability to provide forward-looking statements. Under the Private Securities Litigation Reform Act of 1995, public companies are provided qualified safe harbor from liability for forward-looking statements, provided they issue appropriate cautionary language. However, given skepticism of the information integrity of private firms, Congress excluded IPOs from the safe harbor. Thus, SPACs provide private firms an alternate route to going public that permits disclosure of forward-looking information without facing an increase in litigation risk.

READ MORE »

Crisis Management in the Era of “No Normal”

Posted by Paul Washington and Lindsay Beltzer, The Conference Board, on
Monday, October 11, 2021
, , , , , , , ,
More from: , ,

Paul Washington is Executive Director and Lindsay Beltzer is Program Manager at The Conference Board ESG Center. This post is based on their Conference Board memorandum.

One common definition of a corporate crisis is an unplanned event that directs a significant amount of management’s attention away from its ordinary business. [1] But that assumes an ordinary baseline exists. While people are hoping for a “new normal,” corporations may need to prepare for an era of “no normal,” reflecting the ever-evolving health impact of the COVID-19 pandemic, the associated economic and social disruptions, and the tectonic shifts underway in the role of corporations in addressing environmental and social issues as well as the shift from stockholder to stakeholder capitalism. As one Fortune 100 corporate director said at the most recent The Conference Board ESG Center Summit, “I haven’t seen a confluence of this many intersectional crises in my 30 years on boards.”

This heightened level of uncertainty changes the way boards and CEOs should view, and prepare for, crisis management. During the past year and a half, boards have stepped up to the plate in addressing the pandemic with increased attention to the areas that mattered most, holding special meetings, receiving frequent briefings, and making the physical, emotional, and financial health of employees a top priority. [2] Despite these efforts, a year-end survey of over 550 C-suite executives found that only 30 percent say their board is able to respond well in a crisis.

READ MORE »

Questions to Ask Before Forming a New Board Committee

Posted by Paul DeNicola, PricewaterhouseCoopers LLP, on
Sunday, October 10, 2021
, , , , ,
More from: ,

Paul DeNicola is Principal at the Governance Insights Center, PricewaterhouseCoopers LLP. This post is based on his PwC memorandum.

It’s clear that corporate boards have a lot on their plate. From climate change to cybercrime, there is no shortage of emerging risks that demand directors’ attention. How can boards best oversee these matters while balancing existing obligations? Could a new committee be the solution?

How you answer that question depends on your own company and board’s unique circumstances. But before making a decision, there are some universal considerations that every board should think over. Creating a committee can signal that directors are taking the issue it will focus on seriously, but it’s not without its costs. Before moving ahead, it’s wise to put all the options on the table.

Expanding needs

Most boards of large, mature companies have four or more standing committees. That’s the case for 71% of S&P 500 companies, according to Spencer Stuart. Audit, compensation, and nominating/governance are ubiquitous. Executive, risk (mandatory for some financial services companies), and finance committees are the most common beyond those three.

READ MORE »

Page 20 of 90
1 … 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 … 90