Yearly Archives: 2024

One Year Later: The Implications of SFFA for Corporate America

Posted by Ishan K. Bhabha, Erica Turret, and Peggy Xu, Jenner & Block LLP, on
Tuesday, August 6, 2024
, , ,
More from: , , ,

Ishan K. Bhabha is a Partner, and Erica Turret and Peggy Xu are Associates at Jenner & Block LLP. This post is based on a Jenner & Block memorandum by Mr. Bhabha, Ms. Turret, Ms. Xu, Lauren J. Hartz, and Marcus A.R. Childress.

On June 29, 2024, one year passed since the Supreme Court’s landmark decision in Students for Fair Admissions (SFFA), which overturned fifty years of legal precedent in striking down the race-conscious admissions programs at Harvard College and University of North Carolina Chapel Hill. Although the actual legal applicability of the decision was largely confined to educational institutions and recipients of federal funds, the rationale behind the Court’s decision—and its very stringent application of the strict scrutiny standard in particular—casts doubt on the legality of race-conscious programs well beyond college admissions. The obvious question, which many have asked, is how SFFA might impact the myriad DEI programs that exist in corporate America, programs that are already the subject of political backlash. Now is a good time to take stock.

READ MORE »

Summary of Shareholder Voting on Rule 14a-8 Proposals

Posted by Neil McCarthy, James Palmiter and G. Michael Weiksner, DragonGC, on
Monday, August 5, 2024
, , ,
More from: , , ,

Neil McCarthy is Co-Founder and Chief Product Officer, James Palmiter is CEO and Co-Founder, and G. Michael Weiksner is Co-Founder and Chief Technology Officer at DragonGC. This post is based on a DragonGC memorandum by Mr. McCarthy, Mr. Palmiter, Mr. Weiksner, and Jennifer Carberry.

This summary is focused on 14a-8 proposals that were voted on by shareholders during the 2023-2024 season.[1]

We refer to the accompanying charts which have the supporting detail for what follows. As you’ll see, we divide proposals into five categories consistent with our team’s tracking of this data for several proxy seasons.

632 proposals were voted on in the 2023-2024 season compared with 617 in 2022-2023, an increase of 2.4%. 2

Voting Analytics 2023/2024

READ MORE »

Lessons from the Biggest Business Tax Cut in US History

Posted by Gabriel Chodorow-Reich (Harvard University), Owen Zidar (Princeton University), Eric Zwick (University of Chicago), on
Monday, August 5, 2024
, , ,
More from: , ,

Gabriel Chodorow-Reich is the George Fisher Baker Professor of Economics at Harvard University, Owen Zidar is a Professor of Economics and Public Affairs at Princeton University, and Eric Zwick is a Professor of Economics and Finance at the University of Chicago Booth School of Business. This post is based on their working paper.

The Tax Cuts and Jobs Act (TCJA) of 2017 significantly overhauled the U.S. tax code, primarily by reducing the corporate tax rate from 35% to 21% and lowering individual tax rates across most income brackets. It also increased the standard deduction while eliminating personal exemptions and limiting deductions for state and local taxes. Additionally, the TCJA introduced measures to encourage repatriation of overseas profits and included provisions aimed at simplifying the tax filing process for many taxpayers.

In our recent article, we assess the business provisions of the TCJA, which represented the largest corporate tax cut in U.S. history. There are five key lessons of our analysis:

READ MORE »

2024 Proxy Roundup: ESG Metrics in Incentive Compensation Plans

Posted by Simone Hicks, Eric Juergens and Ulysses Smith, Debevoise & Plimpton LLP, on
Monday, August 5, 2024
, , ,
More from: , , ,

Simone Hicks and Eric Juergens are Partners, and Ulysses Smith is an ESG Senior Advisor at Debevoise & Plimpton LLP. This post is based on a Debevoise memorandum by Ms. Hicks, Mr. Juergens, Mr. Smith, Alison Buckley-Serfass, Tricia Sherno and Beatrice Techawatanasuk. 

In this year’s proxy roundup, we have analyzed the use of environmental, social and governance (“ESG”) metrics in cash and equity incentive plans among the largest 100 public companies.[1]

Incentive compensation plans, such as annual bonus and long-term equity awards, generally pay out on the basis of achievement of objective financial goals. However, incentive plans can also pay out in part or in full on the basis of nonfinancial metrics, including ESG metrics. In recent years, companies have increasingly linked ESG objectives to incentive compensation to support and advance their broader ESG strategies. Despite the growing politicization of ESG issues in the United States, ESG goals aimed at promoting environmental stewardship, social responsibility and robust governance frameworks remain important to many companies’ long-term strategic goals and value creation. By embedding ESG targets into compensation plans, companies reinforce their commitment to these goals and ensure that executive leadership remains accountable for achieving progress in these areas.

The proxy statements filed in 2024 by the companies in our sample generally disclose 2023 compensation plans and decisions. As discussed below, in light of the U.S. Supreme Court’s decision invalidating race-conscious admissions practices in higher education and the ongoing anti-ESG political backlash in the United States, the use of ESG metrics in incentive compensation plans in the 2024 compensation season may look quite different.

READ MORE »

The Delaware Court of Chancery Undertakes Exacting Calculations of Equitable Damages

Posted by Alex J. Kaplan and Kedrick Glinski, Sidley Austin LLP, on
Sunday, August 4, 2024
, , ,
More from: , ,

Alex J. Kaplan is a Partner and Kedrick Glinski is a Summer Associate at Sidley Austin LLP. This post is based on their Sidley memorandum and is part of the Delaware law series; links to other posts in the series are available here.

The Delaware Court of Chancery is of course a court of equity, focusing often on governance and contractual rights. The Court of Chancery also periodically issues damages opinions, and on May 28, 2024, Vice Chancellor Lori Will did just that in Brown v. Matterport, Inc. At issue in Matterport was whether the plaintiff stockholder—following an earlier trial ruling that the defendant corporation had wrongfully (albeit in good faith) prohibited the stockholder from selling his shares—was entitled to damages and, if so, the proper method for computing damages. Vice Chancellor Will held that damages were appropriate based on the facts at issue, and in issuing a damages award of approximately $79 million, the Court undertook a rigorous approach in determining both the appropriate method to compute damages as well as the inputs for that calculation.

READ MORE »

Court Dismisses Most of SEC’s Claims Against SolarWinds

Posted by Robert W. Downes, Nicole Friedlander and Paulena B. Prager, Sullivan & Cromwell LLP, on
Saturday, August 3, 2024
, , ,
More from: , , ,

Robert W. Downes and Nicole Friedlander are Partners and Paulena B. Prager is an Associate at Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell memorandum by Mr. Downes, Ms. Friedlander, Ms. Prager, and John B. Sarlitto.

Ruling Curtails SEC’s Authority to Bring “Internal Accounting Controls” Charges, and Rejects SEC’s Claims that Company’s Securities Filings Were False and Its Disclosure Controls Failed in Connection with a Cybersecurity Breach

SUMMARY

On July 18, 2024, Judge Paul A. Engelmayer of the United States District Court for the Southern District of New York granted, in large part, a motion by SolarWinds Corporation (“SolarWinds”) and its Chief Information Security Officer (“CISO”) to dismiss the fraud and internal controls charges brought against them by the Securities and Exchange Commission (“SEC”) in the aftermath of a compromise of the company’s software product that was disclosed in December 2020. The court allowed only the subset of claims alleging that the “Security Statement” on the company’s website was materially false to survive.

The case, which has been closely followed, is the first in which the SEC has charged a CISO individually in connection with alleged cybersecurity violations and the first in which it has charged scienter-based securities fraud in connection with a cybersecurity breach. The case also represents a rare instance in which a company has challenged the SEC’s expansive reading of its authority to charge a violation of the “internal accounting controls” provision of the Securities Exchange Act of 1934 (the “Exchange Act”) based on an alleged failure of internal corporate controls—in this case, cybersecurity controls—not limited to financial accounting. The court’s opinion has significant implications for public companies as they assess their cybersecurity risk management, governance and disclosure practices, and, beyond the cybersecurity context, in its finding that the SEC is not authorized to charge internal accounting controls violations that are not specifically tied to financial accounting controls.

READ MORE »

Chancery Finds 26.7% Stockholder Was Not a Controller

Posted by Gail Weinstein, Philip Richter, and Steven Epstein, Fried, Frank, Harris, Shriver & Jacobson LLP, on
Friday, August 2, 2024
, , ,
More from: , , ,

Gail Weinstein is a Senior Counsel, Philip Richter is a Partner, and Steven Epstein is a Managing Partner at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Richter, Mr. Epstein, Steven Steinman, Maxwell Yim, and Alison McCormick, and is part of the Delaware law series; links to other posts in the series are available here.

In Sciannella v. AstraZeneca (July 2, 2024), the Delaware Court of Chancery, at the pleading stage of litigation, dismissed claims that AstraZeneca UK, the 26.7% owner of Viela Bio, Inc. (the “Company”), and certain Company directors and officers, breached fiduciary duties in connection with the $3 billion arm’s-length sale of the Company to Horizon Therapeutics, Inc. The Plaintiff contended that AstraZeneca controlled the Company, and that, to facilitate securing antitrust clearance for AstraZeneca’s $38 billion acquisition of Alexion Pharmaceuticals, Inc. (the Company’s main competitor), AstraZeneca pushed the Company into a quick sale to Horizon by threatening to terminate its support agreements with the Company.

AstraZeneca, which had created the Company via a spinoff of its business, effectively had certain blocking rights (given the requirement in the Company’s charter of a 75% stockholder vote for certain actions); had designated AstraZeneca executives as directors on the Company’s board (and the Plaintiff alleged that the other directors also were “beholden” to AstraZeneca for various reasons); had appointed former AstraZeneca executives to key management positions (including the CEO); and had total control over the Company’s day-to-day operations through a “web” of support agreements. Also, the Company acknowledged in its public filings that it substantially relied on AstraZeneca and would face operational difficulties if AstraZeneca did not continue to provide support services to the Company.

The court found that (i) AstraZeneca was not a controller, and therefore owed no fiduciary duties to the Company and its stockholders; and (ii) the Company’s disclosure to the stockholders was adequate, and therefore any fiduciary breaches by Company directors and officers were cleansed under Corwin.

READ MORE »

Weekly Roundup: July 26-August 1, 2024

Posted by the Harvard Law School Forum on Corporate Governance, on
Friday, August 2, 2024

More from:

This roundup contains a collection of the posts published on the Forum during the week of July 26-August 1, 2024

The Potential Impact of the DGCL Market Practice Amendments on Activism Settlements

Posted by Keith E. Gottfried, Gottfried Shareholder Advisory, on Friday, July 26, 2024
Tags: , , ,

Advance Notice Bylaws After Kellner: Still Advisable and Require Not Flying Too Close to the Sun

Posted by Leonard Wood, Kai H. E. Liekefett, and Derek Zaba, Sidley Austin LLP, on Saturday, July 27, 2024
Tags: , , , ,

Is a delay in the cards for California’s climate accountability laws?

Posted by Cydney Posner, Cooley LLP, on Sunday, July 28, 2024
Tags: , , ,

Clawback Provisions that Go Beyond SEC Requirements are Prevalent Among Large-Cap Companies

Posted by Stephen Hom, Erin Bass-Goldberg, and Emma van Beek, FW Cook, on Sunday, July 28, 2024
Tags: , , ,

Not Even a Raging Bull Market Can Rescue SPACs

Posted by Michael Eisenband, FTI Consulting, on Monday, July 29, 2024
Tags: , , ,

Negative Trading in Congress

Posted by Peter Molk (University of Florida), and Frank Partnoy (UC Berkeley School of Law), on Monday, July 29, 2024
Tags: , , ,

Delaware Governor Signs Controversial “Market-Practice” Amendments to General Corporation Law

Posted by Mark Thierfelder, Eric Siegel, and Rick Horvath, Dechert LLP, on Tuesday, July 30, 2024
Tags: , , , ,

Business Judgment and Valuing Impacts

Posted by Dennis West (University of Oxford), and Dimitrij Euler (Value Balancing Alliance), on Tuesday, July 30, 2024
Tags: , , , ,

2024 Proxy Season Review: Five takeaways

Posted by Jamie Smith, EY, on Tuesday, July 30, 2024
Tags: , , ,

Director Wins In Claim of Improper Removal – But Still Loses

Posted by Robin E. Wechkin, Sidley Austin LLP, on Wednesday, July 31, 2024
Tags: , , ,

Multiple-voting shares in Europe – A comparative law and economic analysis

Posted by Klaus J. Hopt (Max Planck Institute) and Susanne Kalss (Alpen-Adria-University Klagenfurt), on Wednesday, July 31, 2024
Tags: , , ,

Anti-ESG Proposal Surged in 2024 But Earned Less Support

Posted by Heidi Welsh, Sustainable Investments Institute, on Wednesday, July 31, 2024
Tags: , , , , ,

Nasdaq toughens up suspension and delisting process for SPACs

Posted by Cydney Posner, Cooley LLP, on Thursday, August 1, 2024
Tags: , , , ,

Litigation Risk and Strategic M&A Valuation

Posted by Benjamin Yost (Boston College), on Thursday, August 1, 2024
Tags: , , ,

Governance of transformation amid an uncertain business climate

Posted by Carey Oven, Annie Adams, and Mauricio Garza Benavides, Deloitte LLP, on Thursday, August 1, 2024
Tags: , , ,

Governance of transformation amid an uncertain business climate

Posted by Carey Oven, Annie Adams, and Mauricio Garza Benavides, Deloitte LLP, on
Thursday, August 1, 2024
, , ,
More from: , , ,

Carey Oven is a National Managing Partner, and Annie Adams and Mauricio Garza are Managing Directors at Deloitte LLP. This post is based on their Deloitte memorandum.

Why it matters

It seems an understatement to characterize the current state of global affairs as “volatile.” If the past few years have shown anything, it’s that boards can be certain of at least one thing: an uncertain governance landscape. Volatility wrought by a pandemic, economic upheavals, and geopolitical conflict—to name just a few challenges of late—have added a suite of new risks for boards to navigate.[1] Finding a way through such turbulent waters isn’t easy. But according to Deloitte’s MarginPLUS 2024 Survey, a growing number of companies are charting a course with the help of transformation initiatives focused on margin improvement.[2]

Regardless of form, transformation initiatives may involve large-scale changes that aim to bolster efficiency, reduce manual processes, and otherwise modernize business operations. Their scale and scope (from individual business units to organizationwide) can be different across industry as can the governance processes. In this article, we highlight three areas of focus for boards when overseeing transformation initiatives.

> External pressures

Governing the (sometimes) turbulent transformation process.

> Targeted transformation

A possible emerging trend of focused initiatives is on the governance horizon.

> Vigilant governance

Proactive board oversight of strategy may help organizations realize transformation goals.

READ MORE »

Litigation Risk and Strategic M&A Valuation

Posted by Benjamin Yost (Boston College), on
Thursday, August 1, 2024
, , ,
More from:

Benjamin Yost is an Associate Professor of Accounting at Boston College Carroll School of Management. This post is based on an article forthcoming in the Journal of Accounting & Economics (JAE) by Professor Yost, Professor Claudia Imperatore, Professor Gabriel Pundrich, and Professor Rodrigo Verdi.

The vast majority of mergers and acquisitions (M&As) in recent decades employ fairness opinions (FOs). FOs are provided by an outside advisor (typically an investment bank), and reflect the advisor’s opinion that the terms of the transaction are “fair” to the shareholders from a financial perspective. Advisors support their opinion that the deal terms are fair using a range of valuation methodologies, the two most common being peer firm comparables and DCF analysis. However, despite the ubiquitous use of FOs in mergers, their role is not well understood. On the one hand, some studies argue that FOs provide new information to market participants and serve as a tool for managers to negotiate over transaction price. On the other hand, it has been conjectured (but not tested) that FOs are used primarily to protect managers and boards from litigation and ensure successful deal completion. In our study, “Litigation risk and strategic M&A valuations”, which is forthcoming in the Journal of Accounting & Economics, we explicitly test this conjecture, with a particular focus on the relation between M&A litigation risk and FO valuations.

READ MORE »

Page 30 of 78
1 … 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 … 78