Post-Doctoral and Doctoral Corporate Governance Fellowships

The Program on Corporate Governance at Harvard Law School (HLS) is seeking applications from highly qualified candidates who are interested in working with the Program as Post-Doctoral or Doctoral Corporate Governance Fellows.

Applications are considered on a rolling basis, and the start date is flexible. Appointments are commonly for one year, but can be extended for additional one-year period/s contingent on business needs and funding.

To be eligible to apply candidates should (i) have a J.D., LL.M., or S.J.D. from a U.S. law school, (ii)  by the time they commence their fellowship, (ii) be pursuing an S.J.D. at a US law school, provided that they have completed their program’s coursework requirements by the time they start, or (iii) have a doctoral degree in law, or have completed much of the work toward such a degree, in a law school outside the U.S.

During the term of their appointment, Fellows will be in residence at HLS and will be required to work on research and other activities of the Program, depending on their skills, interests, and Program needs. Fellows will also be able to spend significant time on their own projects. The position will provide a competitive fellowship salary and Harvard University benefits.

Interested candidates should submit to [email protected]: CV; transcripts; any research papers they have written or a writing sample; and a cover letter. The cover letter should describe the candidate’s experience, reasons for seeking the position, career plans, and the period during which they would like to work with the Program.

Minimum Capital and Cross-Border Firm Formation in Europe

Martin Gelter is Professor of Law at Fordham University School of Law. This post is based on his article forthcoming in the Journal of Law, Finance, and Accounting. Related research from the Program on Corporate Governance includes The Elusive Quest for Global Governance Standards (discussed on the Forum here) by Lucian A. Bebchuk and Assaf Hamdani.

Company laws in many European countries have traditionally adhered to a legal capital system, and most countries have required founders to contribute a minimum amount of capital to form a private limited company. During the past 20 years, scholars, policymakers, and international organizations such as the World Bank have increasingly criticized these requirements as inefficient. Many countries have begun to modify or abolish minimum capital requirements in private limited companies or have created capital-less forms of limited liability business entities for new firm formations. A contributing factor to this development has been that, at least in theory, since the early 2000s, business founders in EU and European Economic Area (EEA) countries have been able to choose in which EU or EEA Member State to incorporate. Many prospective founders in Continental European countries initially selected the UK, which has no minimum capital requirement. During the mid-2000s, scholars in some countries observed an increasing number of UK companies controlled by non-UK citizens or residents.

This paper empirically looks at the impact of minimum capital on cross-border firm formation, specifically the pre-Brexit phenomenon of setting up UK-based private limited companies for the purpose of business elsewhere in Europe. The analysis is based on a panel of minimum capital and minimum pay-in requirements from 1995 to 2020 for 31 countries, including all EU and EEA member states, and Switzerland.

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Fiduciary Duties of Controller Exercising Stockholder-Level Powers to Block Board Action

Gail Weinstein is Senior Counsel, and Philip Richter and Steven Steinman are Partners at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Richter, Mr. Steinman, Steven EpsteinRandi Lally and Mark Lucas and is part of the Delaware Law series; links to other posts in the series are available here.

In re Sears Hometown and Outlet Stores Stockholder Litigation (Jan. 24, 2024), the Delaware Court of Chancery, in an important, post-trial opinion, for the first time clearly set forth the fiduciary duties and standard of review applicable when a controller uses its stockholder-level voting power to block action that the company’s board of directors has determined to be in the company’s best interest.

The court held that Eddie Lampert, the controller of Sears Hometown and Outlet Stores, Inc. (the “Company”), had fiduciary duties, albeit of a “limited” nature, when he acted by written consent to amend the Company’s bylaws and remove two directors (the “Controller Intervention”) in an effort to block a plan, adopted by an independent committee of the board (the “Committee”), to liquidate the company’s non-profitable business segment (“Hometown”) and continue its other, profitable segment (“Outlet”). The court, applying enhanced scrutiny review, found that Lampert had complied with his fiduciary duties.

The court also addressed a transaction (the “End-Stage Transaction”) that the Company negotiated with Lampert after the board became convinced that Lampert would block the liquidation plan and that it would not be sustainable for the Company to continue to operate with both business segments. The End-Stage Transaction involved a sale of the Company to Lampert, eliminating the minority stockholders’ interests (although Outlet was sold to a third party under the go-shop process in the merger agreement). As Lampert was self-interested in the End-Stage Transaction, the standard of review was entire fairness. The court found that Lampert “sincerely believed” that the transaction was fair, but the transaction did not satisfy entire fairness. The court ordered Lampert to pay damages (over $18.3 million) to the minority stockholders. On January 31, 2024, Lampert’s counsel filed a motion for reargument with respect to the End-Stage Transaction, arguing that correction of an alleged error in the court’s valuation analysis should lead to the conclusion that the price fell within the range of reasonableness or at least would result in a substantial decrease in the damages awarded by the court.

In this Briefing, we discuss the court’s controller fiduciary duty analysis relating to Lampert’s Controller Intervention to block the board’s plan to liquidate Hometown; and we offer related Practice Points.

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Looking ahead: The audit committee agenda in 2024

Maureen Bujno is a Managing Director, Bob Lamm is an Independent Senior Advisor, and Krista Parsons is an Audit & Assurance Managing Director and Audit Committee Program Leader at Deloitte Touche Tohmatsu Limited. This post is based on a Deloitte memorandum by Ms. Bujno, Mr. Lamm, Ms. Parsons, Carey Oven, and Jamie McCall.

Many wise people have noted the importance of planning. For example, Benjamin Franklin stated, “By failing to prepare, you are preparing to fail.” Abraham Lincoln said, “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” And, of course, Yogi Berra said: “If you don’t know where you are going, you’ll end up someplace else.”

These adages certainly apply to the audit committee. Planning ahead can help ensure that the required items are on the agenda for each meeting and that over the course of the year the committee addresses everything on its “to do” list, while leaving time to tackle new matters that invariably come up.

To advise audit committees on planning for 2024, we have considered some of the major items that we believe are likely to be on audit committee agendas this year.

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SEC set to adopt climate disclosure rules on March 6

Michael Littenburg is Partner and Global Chair of the ESG, CSR and Business and Human Rights Practice, and Marc Rotter is Counsel in the Capital Markets Practice at Ropes & Gray LLP. This post is based on their Ropes & Gray 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; How Twitter Pushed Stakeholders Under The Bus (discussed on the Forum here) by Lucian A. Bebchuk, Kobi Kastiel, and Anna Toniolo; Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy – A Reply to Professor Rock (discussed on the Forum here) by Leo E. Strine, Jr.; and Stakeholder Capitalism in the Time of COVID (discussed on the Forum here) by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita.

The wait is almost over! The SEC has published its Sunshine Act Notice for the open meeting at which its climate disclosure rules will be considered.

Proposed almost two years ago in March 2022, the proposed rules include disclosures relating to the following (see our Alert here):

  • Oversight and management of climate risk.
  • Impacts of climate-related risks on the registrant’s business, financials, strategy, business model and outlook over the short-, medium- and long-terms.
  • Processes for identifying, assessing and managing climate-related risks.
  • Historical greenhouse gas (GHG) emissions data: Scopes 1 and 2, and in many cases Scope 3. As proposed, third-party assurance of Scope 1 and 2 data would be required, initially limited assurance and then reasonable assurance.
  • Climate-related targets and goals, if set.
  • Financial statement disclosure on the financial impacts of physical and transition risks.

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Cybersecurity Disclosure Report

James Palmiter is CEO and Co-Founder of DragonGC. This post is based on a DragonGC memorandum by Neil McCarthy, Mr. Palmiter, G. Michael Weiksner, Natalie Richardson, and Evan Quille.

DragonGC is a legal intelligence platform leveraging comprehensive ‘Authoritative Intelligence’ to offer curated, verified, and original sources. Our mission is to simplify compliance for public company legal teams.

We tackle information overload by precisely pinpointing the source material necessary to address important financial disclosure inquiries. Additionally, we furnish topic summaries, precedents, and examples of public company disclosures. Our goal is to empower teams in crafting relevant shareholder communications effortlessly.

Many prominent companies have already filed their 2023 10Ks. These early 10-K filers provide insight into disclosures about Cybersecurity required by new S-K Item 106.

DragonGC’s dragonFind identified the early filers listed below and has linked to the specific cybersecurity disclosures included in their recently filed 10-Ks:

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Weekly Roundup: February 23-29, 2024


More from:

This roundup contains a collection of the posts published on the Forum during the week of February 23-29, 2024


Additional Proxy Vote Disclosure is Coming for the 2024 Proxy Season


Technology Advances Facilitate Pass-Through Voting




DEI in an era of unrest: a few truths and a path forward


Oregon State Treasury Nomination Neutrality




Tornetta v. Musk is the Rule of Law at Work


PJT Partners 2024 Proxy Season Preview


2024 Proxy Season Trends: Zenith or Nadir?


Summary of Activism in 2023 and a Preview of Activism in 2024


8 Hot Topics in Activism


BlackRock Updated 2024 U.S. Proxy Voting Guidelines


Trends in S&P 500 Board of Director Compensation


Trends in S&P 500 Board of Director Compensation

Linda Pappas is Principal, Christine Skizas is a Managing Partner, and Olivia Wakefield is a Partner at Pay Governance LLC. This post is based on their Pay Governance memorandum. Related research from the Program on Corporate Governance includes The Perils and Questionable Promise of ESG-Based Compensation (discussed on the Forum here) by Lucian A. Bebchuk and Roberto Tallarita and Paying for Long-Term Performance (discussed on the Forum here) by Lucian A. Bebchuk and Jesse M. Fried.

Executive Summary

  • Over the last three years, median S&P 500 pay level increases for non-employee directors of the board (“directors”) have been minimal compared to prior years, with total cash compensation (TCC or cash retainers plus meeting fees) remaining flat, annual equity retainers up by +3%, and total direct compensation (TDC or sum of cash plus equity) up by +1%.
  • When observed over the longer term, S&P 500 director TDC has increased +2% on an annualized basis since 2015.
  • Structural director pay trends observed since 2015 include the decrease of meeting fee prevalence: used by 18% of the S&P 500 in 2015 compared to 9% as reported in proxy filings to date.
  • Premiums for both Non-Executive Board Chair roles and Lead Director roles have also increased in prevalence and quantum since 2015, potentially indicating an increased emphasis of these roles on corporate governance matters.
  • Of S&P 500 companies, 70% have established director pay limits with a median value of $750,000.

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BlackRock Updated 2024 U.S. Proxy Voting Guidelines

Daniel Chang is Senior Institutional Analyst, and Rajeev Kumar is Senior Managing Director at Georgeson LLC. This post is based on their Georgeson memorandum.

In January 2024, BlackRock released its updated U.S. proxy voting guidelines, outlining its 2024 stewardship approach and expectations. A summary of these policy updates is detailed in our report below.

Introduction

BlackRock updated its proxy guideline introductory section to include an emphasis on understanding the drivers of risk and financial value creation in companies’ business models via its three-tiered approach for long-term investment stewardship:

  1. Engaging with companies to build their understanding of a company’s approach to corporate governance and business risks and opportunities.
  2. Voting at shareholder meetings on management and shareholder proposals on behalf of clients who have delegated voting authority to BlackRock. Voting is the formal mechanism through which BlackRock signals its support for, or concerns about, how companies serve BlackRock’s clients’ long-term financial interests.
  3. Contributing to emerging topical and stewardship issues that BlackRock believes may impact clients’ financial interests as long-term investors. BlackRock intends to share its perspectives on such issues with clients, policymakers, and others in the corporate governance ecosystem.

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8 Hot Topics in Activism

Tiffany F. Campion is a Senior Attorney, and Christopher R. Drewry and Joshua M. Dubofsky are Global Co-Chairs of the Shareholder Activism & Takeover Defense Practice at Latham & Watkins LLP. This post was prepared for the Forum by Ms. Campion, Mr. Drewry, and Mr. Dubofsky. 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.

As stockholder activists wind up for a new proxy season, prepared companies stay ready to respond to the first indication of activist interest by identifying their activism defense teams, updating their “break glass” memos, and considering the following hot topics for 2024:

Next-Gen Advance Notice Bylaws

Over 60% of the S&P 500 have amended their bylaws to address the universal proxy rules, often adopting other advance notice enhancements simultaneously. However, while recent Delaware litigation has continued to uphold a board’s enforcement of advance notice bylaws, it also called into question the enforceability of certain disclosure requirements and the appropriate scope of entities making disclosures (e.g., Kellner v. AIM ImmunoTech Inc., et al., C.A. No. 2023-0879-LWW (Del. Ch. Dec. 28, 2023)).  There also has been an uptick in Delaware books and records demands regarding certain bylaw provisions. Companies must balance adopting provisions that provide beneficial information while being informed of the  potential backlash through litigation, activist PR response (e.g., Crown Castle) or shareholder proposals.

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