Monthly Archives: January 2024

Is There a Difference Between How US and European Investors Approach Stewardship?

Posted by George Cowlrick, AQTION, on
Sunday, January 7, 2024
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George Cowlrick is a Product Manager at AQTION. This post is based on an AQTION study by Mr. Cowlrick, Ali Saribas, and Andrew Brady. Related research from the Program on Corporate Governance includes Big Three Power, and Why it Matters (discussed on the Forum here), Index Funds and the Future of Corporate Governance: Theory, Evidence and Policy (discussed on the Forum here), and The Specter of the Giant Three (discussed on the Forum here) all by Lucian A. Bebchuk and Scott Hirst; The Agency Problems of Institutional Investors (discussed on the Forum here) by Lucian A. Bebchuk, Alma Cohen, and Scott Hirst; and The Limits of Portfolio Primacy (discussed on the Forum here) by Roberto Tallarita.

i. Introduction

AQTION, a subsidiary of SquareWell Partners, published its inaugural study – ‘Stewardship in AQTION’ – which details how the world’s largest 65 asset managers and owners steward their portfolio companies and how they incorporate extra-financial considerations into their investment decision-making processes.

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Engaged employees are asking their leaders to take climate action

Posted by Jennifer Steinmann, Kathryn Alsegaf, and Derek Pankratz, Deloitte Touche Tohmatsu Limited, on
Saturday, January 6, 2024
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Jennifer Steinmann is Global Sustainability & Climate Practice Leader, Kathryn Alsegaf is an Associate Director, and Derek Pankratz is a Senior Research Leader at Deloitte Touche Tohmatsu Limited. This post is based on a Deloitte memorandum by Ms. Steinmann, Ms. Alsegaf, Mr. Pankratz, David R. Novak, and Nirmal Kujur. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto Tallarita; Stakeholder Capitalism in the Time of COVID (discussed on the Forum here) by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita; and Lifting Labor’s Voice: A Principled Path Toward Greater Worker Voice And Power Within American Corporate Governance by Leo E. Strine, Jr., Aneil Kovvali, and Oluwatomi O. Williams.

Employees with strong environmental awareness can play a pivotal role in accelerating corporate sustainability plans, yet Deloitte survey data shows that leaders could be doing more to engage their full workforce around the need for action.

Addressing climate change will require both system-level changes and billions of individual ones: from how we get around, to what we eat, and how we do our jobs. Deloitte’s researchers have been tracking the world’s emerging eco-consciousness across generations, at the leadership levels of companies, among employees, and in society. A look across the landscape of these survey results shows that those with high climate awareness are ready to act in more sustainable ways at work, and they have been making their voices heard. Leaders are starting to heed the call for change, but are they doing enough to get everyone involved?

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Underrepresentation of Women CEOs

Posted by Li He (Erasmus University Rotterdam) and Toni M. Whited (University of Michigan), on
Friday, January 5, 2024
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Li He is an Assistant Professor of Economics at Rotterdam School of Management (RSM), Erasmus University Rotterdam; and Toni M. Whited is a Professor of Economics at the University of Michigan. This post is based on their recent paper. Related research from the Program on Corporate Governance includes Politics and Gender in the Executive Suite (discussed on the Forum here) by Alma Cohen, Moshe Hazan, and David Weiss; Will Nasdaq’s Diversity Rules Harm Investors? (discussed on the Forum here) by Jesse M. Fried; and Duty and Diversity (discussed on the Forum here) by Chris Brummer and Leo E. Strine, Jr.

Women are underrepresented in the top management of U.S. companies. According to Catalyst’s latest report, women occupied merely 41 or 8.2% of the CEO positions at S&P 500 companies in 2023.

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Weekly Roundup: December 29-January 4, 2024

Posted by the Harvard Law School Forum on Corporate Governance, on
Friday, January 5, 2024

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This roundup contains a collection of the posts published on the Forum during the week of December 29-January 4, 2024

The Dynamics of Corporate Governance: Evidence from Brazil

Posted by Antonio Gledson de Carvalho (Fundação Getúlio Vargas School of Business), Humberto Gallucci Netto (Federal University of São Paulo), and Bernard S. Black (Northwestern University), on Friday, December 29, 2023
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Talent management: an evolving board imperative

Posted by Matt DiGuiseppe, Maria Moats, and Gregory Johnson, PricewaterhouseCoopers LLP, on Saturday, December 30, 2023
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Corporate Board Diversity: A Comment from Thirty Percent Coalition

Posted by Julie Zuraw, Susan Angele, and Esther Aguilera, Thirty Percent Coalition, on Sunday, December 31, 2023
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The economic consequences of hedge fund regulation: An analysis of the effect of the Dodd-Frank Act

Posted by Fernán Restrepo (UCLA), on Tuesday, January 2, 2024
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2023 CxO Sustainability Report

Posted by Joe Ucuzoglu and Jennifer Steinmann, Deloitte Touche Tohmatsu Limited, on Tuesday, January 2, 2024
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A Blueprint for University Governance

Posted by Steven Davidoff Solomon (UC Berkeley) and David Berger, Wilson Sonsini Goodrich & Rosati, on Wednesday, January 3, 2024
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Thoughts for Boards: Key Issues in Corporate Governance for 2024

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on Wednesday, January 3, 2024
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The Impact of the Duty to Maximize Short-Term Value in Mergers and Acquisitions: An Analysis of Revlon

Posted by Fernán Restrepo (UCLA), on Thursday, January 4, 2024
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Activism Vulnerability Report

Posted by Jason Frankl and Brian G. Kushner, FTI Consulting, on Thursday, January 4, 2024
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Activism Vulnerability Report

Posted by Jason Frankl and Brian G. Kushner, FTI Consulting, on
Thursday, January 4, 2024
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Jason Frankl and Brian G. Kushner are Senior Managing Directors at FTI Consulting. This post is based on their FTI Consulting memorandum. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism (discussed on the Forum here) by Lucian A. Bebchuk, Alon Brav, and Wei Jiang; Dancing with Activists (discussed on the Forum here) by Lucian A. Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch; and Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System (discussed on the Forum here) by Leo E. Strine, Jr.

Introduction

As 2023 ends, we note that it has been a mixed year for activism and M&A activity. There has been an uptick in the number of campaigns year-to-date despite a rather challenging backdrop for M&A more broadly, as interest rates climbed to levels not seen since early 2001.[1] Interest rate-sensitive sectors experienced heightened attention from activist investors. Somewhat surprisingly, director turnover from shareholder activism has been less than anticipated.[2] In this edition of FTI Consulting’s Activism Vulnerability Report, we discuss these developments, as well as other notable trends in the world of shareholder activism.

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The Impact of the Duty to Maximize Short-Term Value in Mergers and Acquisitions: An Analysis of Revlon

Posted by Fernán Restrepo (UCLA), on
Thursday, January 4, 2024
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Fernán Restrepo is an Assistant Professor of Law at the UCLA School of Law. This post is based on his recent paper. Related research from the Program on Corporate Governance includes Allocating Risk Through Contract: Evidence from M&A and Policy Implications (discussed on the Forum here) by John C. Coates, IV; The New Look of Deal Protection (discussed on the Forum here) by Fernán Restrepo and Guhan Subramanian; and Toward a Constitutional Review of the Poison Pill (discussed on the Forum here) by Lucian A. Bebchuk and Robert J. Jackson, Jr.

Approximately four decades ago, in Revlon v. MacAndrews and Forbes, 506 A.2d 173 (Del. 1986), the Delaware Supreme Court required the directors of the target company in change-of-control mergers and acquisitions (M&A) to maximize short-term value – that is, to expose the company to a market canvass and refrain from favoring one bidder over another for reasons unrelated to immediate value maximization. The basic motivation behind this doctrine was the court’s desire to mitigate the conflicts of interest that may emerge in change-of-control transactions and the fact that those deals pose a “last period” problem: because the directors might have personal interests in a particular transaction, and because the selling shareholders will no longer exert any power over the directors after the company is sold, there is a significant risk that the directors will favor the deal that maximizes their personal interests rather than those of the shareholders.

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Thoughts for Boards: Key Issues in Corporate Governance for 2024

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on
Wednesday, January 3, 2024
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Martin Lipton is a Partner at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell memorandum by Mr. Lipton, Steven A. Rosenblum, Karessa L. Cain, and Carmen X. W. Lu.

Over the past year, expectations for directors have continued to evolve, bringing new challenges and responsibilities to the boardroom. The remarkable speed, volume and proliferation of channels through which information travels today continue to place more scrutiny on boards and heighten expectations regarding transparency and accountability. Director reputations that have been carefully built over decades are not immune from such pressures, particularly as activist investors hunt for underperformers and revisit former targets. The business environment has also become more complex: macroeconomic uncertainty, geopolitical tensions, regulatory unpredictability, political polarization, culture wars, cybersecurity threats, the growth of generative AI, and energy transition are among the issues that boards are now expected to navigate.

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A Blueprint for University Governance

Posted by Steven Davidoff Solomon (UC Berkeley) and David Berger, Wilson Sonsini Goodrich & Rosati, on
Wednesday, January 3, 2024
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Steven Davidoff Solomon is Alexander F. and May T. Morrison Professor of Law at the UC Berkeley School of Law and David Berger is a Partner at Wilson Sonsini Goodrich & Rosati. This post is based on their recent paper.

This is an Enron moment for university governance. In a Blueprint for University Governance (which we recently posted to SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4661313) we highlight the deficits of university governance and the need for reform.

We recognize that universities are different than for-profit corporations.  The governance model for corporations should not just be replicated whole-sale onto university boards. Similarly, as with for-profit companies, there is no “one-size fits all” corporate governance model that works for universities.

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2023 CxO Sustainability Report

Posted by Joe Ucuzoglu and Jennifer Steinmann, Deloitte Touche Tohmatsu Limited, on
Tuesday, January 2, 2024
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Joe Ucuzoglu is Global CEO and Jennifer Steinmann is Global Sustainability & Climate Practice Leader at Deloitte Touche Tohmatsu Limited. This post is based on their Deloitte memorandum. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto Tallarita; Does Enlightened Shareholder Value add Value (discussed on the Forum here) by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita; How Twitter Pushed Stakeholders Under The Bus (discussed on the Forum here) by Lucian A. Bebchuk, Kobi Kastiel, and Anna Toniolo; and Corporate Purpose and Corporate Competition (discussed on the Forum here) by Mark J. Roe.

Climate remains a top priority despite many pressing issues

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The economic consequences of hedge fund regulation: An analysis of the effect of the Dodd-Frank Act

Posted by Fernán Restrepo (UCLA), on
Tuesday, January 2, 2024
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Fernán Restrepo is an Assistant Professor of Law at the UCLA School of Law. This post is based on his paper forthcoming in the Journal of Legal Studies. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism (discussed on the Forum here) by Lucian A. Bebchuk, Alon Brav, and Wei Jiang; and Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System (discussed on the Forum here) by Leo E. Strine, Jr.

In response to concerns about excessive risk-taking and misleading valuation practices in the hedge fund industry, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “DFA” or “Dodd-Frank”) in July 2010. Dodd-Frank is one of the most significant pieces of legislation ever affecting the financial sector and the hedge fund industry in particular. Broadly speaking, Dodd-Frank subjects most hedge funds to government inspections, registration with the Securities and Exchange Commission (“SEC”), and a number of disclosure and compliance obligations. Under the DFA, for example, hedge funds are required to maintain and report information on conflicts of interest, ownership structure, clients and officers, disciplinary history, assets under management, performance, risk exposure, and financing, and the funds also became subject to the Presence Exam Initiative – a comprehensive federal examination program of the funds’ valuation methodologies, allocation of expenses to investors, and other business practices.

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