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Program on Corporate Governance Advisory Board
- William Ackman
- Peter Atkins
- David Bell
- Kerry E. Berchem
- Richard Brand
- Daniel Burch
- Paul Choi
- Jesse Cohn
- Arthur B. Crozier Christine Davine
- Renata J. Ferrari
- John Finley
- Andrew Freedman
- Ray Garcia
- Byron Georgiou
- Joseph Hall
- Jason M. Halper
- Paul Hilal
- Carl Icahn William P. Mills
- David Millstone
- Theodore Mirvis
- Philip Richter
- Elina Tetelbaum
- Sebastian Tiller
- Marc Trevino Jonathan Watkins
- Steven J. Williams
- Daniel Wolf
HLS Faculty & Senior Fellows
Author Archives: Harvard Law School Forum on Corporate Governance and Financial Regulation
Delaware Innovates to Create a World-Class Arbitration Regime
Editor’s Note: The following post comes to us from Greg Varallo, Director and Executive Vice President at Richards, Layton & Finger. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.
On March 11, 2015, the Delaware State Bar Association gave its formal approval to HB 49, which was filed yesterday in the Delaware Legislature. If passed by the Legislature, the bill, which bears the title the Delaware Rapid Arbitration Act, will establish Delaware as a cutting-edge seat for business arbitrations. Building on the best of the state’s earlier experiment with judicially annexed arbitration, the new legislation was crafted with extensive consultation and input from constituencies around the US and internationally. One thing became clear as a result of those consultations: businesses and their advisors are alarmed at the marked drift in arbitration practice away from timely, efficient dispute resolution.
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Posted in Legislative & Regulatory Developments, Practitioner Publications
Tagged Arbitration, Corporate disputes, Delaware law, Delaware legislation
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Correcting Corporate Benefit: Curing What Ails Shareholder Litigation
Editor’s Note: The following post comes to us from Sean J. Griffith, T.J. Maloney Chair in Business Law at Fordham University School of Law, and is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.
Sometimes the remedy is worse than the disease. This, it seems, is the implicit view of the Delaware State Bar Association’s Corporation Law Council (the “Council”) with regard to fee-shifting in shareholder litigation. The Council’s second proposal on fee-shifting, circulated in early March 2015, [1] is much like their first, circulated in May 2014 in the wake of ATP Tour v. Deutscher Tennis Bund. [2] Both would prevent corporations from seeking to saddle shareholders with the cost of shareholder litigation by means of a fee-shifting provision, whether adopted in the charter or the bylaws.
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Posted in Academic Research, Mergers & Acquisitions
Tagged Attorneys' fees, Charter & bylaws, Delaware articles, Delaware law, Merger litigation, Mergers & acquisitions, Settlements, Shareholder suits
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When Executives Fail: Managing Performance on the CEO’s Team
Editor’s Note: The following post comes to us from Mark Nadler, Principal and co-founder of Nadler Advisory Services, and is based on a Nadler white paper.
Picture, if you will, the chief executive officer of a Fortune 500 company slumped over a conference table, holding his head in his hands, anguishing over whether the time had come to pull the plug on one of his most senior executives. “Tell me,” he asks in despair, “is it this hard for everybody?”
Yes, it is.
Of all the complex, sensitive, and stressful issues that confront CEOs, none consumes as much time, generates as much angst, or extracts such a high personal toll as dealing with executive team members who are just not working out. Billion-dollar acquisitions, huge strategic shifts, even decisions to eliminate thousands of jobs—all pale in comparison with the anxiety most CEOs experience when it comes to deciding the fate of their direct reports.
To be sure, there are exceptions. Every once in a while, an executive fouls up so dramatically or is so woefully incompetent that the CEO’s course of action is clear. However, that’s rarely the case. More typically, these situations slowly escalate. Early warning signs are either dismissed or overlooked, and by the time the problem starts reaching crisis proportions, the CEO has become deeply invested in making things work. He or she procrastinates, grasping at one flawed excuse after another. Meanwhile, the cost of inaction mounts daily, exacted in poor leadership and lost opportunities.
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Posted in Practitioner Publications
Tagged Corporate culture, Executive performance, Executive turnover, Executive value, Management
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SEC Enforcement Developments in 2014, and a Look Forward
Editor’s Note: The following post comes to us from Bill McLucas, partner and chair of the securities department at Wilmer Cutler Pickering Hale and Dorr LLP, and is based on a WilmerHale publication by Mr. McLucas; the complete publication, including footnotes, is available here.
As we noted last year in our memorandum focused on 2013 developments, Securities and Exchange Commission Chair Mary Jo White has called for the SEC to be more aggressive in its enforcement program. By all accounts, the Enforcement Division has responded to that call. The past year saw the SEC continue the trend, started under Enforcement Director Robert Khuzami in 2009, of transforming the SEC’s civil enforcement arm into an aggressive law enforcement agency modeled on a federal prosecutor’s office. This should not come as a surprise since both Andrew Ceresney, the current Director, and George Cannellos, Ceresney’s Co-Director for a brief period of time, like Khuzami, spent many years as federal prosecutors in the Southern District of New York. And the Commission itself is now led for the first time by a former federal prosecutor, Mary Jo White, the US Attorney for the Southern District of New York from 1993 to 2002. Given the events of the past decade involving the Madoff fraud and the fallout from the 2008 financial crisis, we believe both the aggressive tone and positions the SEC has taken in recent years will continue.
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Posted in Accounting & Disclosure, Practitioner Publications, Securities Litigation & Enforcement
Tagged Accountability, Accounting, Compliance & ethics, Corporate fraud, Financial reporting, Insider trading, Private equity, SEC, SEC enforcement, Securities enforcement, Securities litigation, Settlements
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Agencies Release New Volcker Rule FAQ
Editor’s Note: The following post comes to us from Sullivan & Cromwell LLP, and is based on a Sullivan & Cromwell publication by Whitney A. Chatterjee, H. Rodgin Cohen, C. Andrew Gerlach, and Eric M. Diamond; the complete publication, including footnotes and appendix, is available here.
On February 27, 2015, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the Commodity Futures Trading Commission (collectively, the “Agencies”) provided an important addition to their existing list of Frequently Asked Questions (“FAQs”) addressing the implementation of section 13 of the Bank Holding Company Act of 1956, as amended (the “BHC Act”), commonly known as the “Volcker Rule.”
The Volcker Rule imposes broad prohibitions on proprietary trading and investing in and sponsoring private equity funds, hedge funds and certain other investment vehicles (“covered funds”) by “banking entities” and their affiliates. The Volcker Rule, as implemented by the final rule issued by the Agencies (the “Final Rule”), provides an exemption from the covered fund prohibitions for foreign banking entities’ acquisition or retention of an ownership interest in, or sponsorship of, a covered fund “solely outside of the United States” (the “SOTUS covered fund exemption”).
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Posted in Banking & Financial Institutions, Financial Regulation, Practitioner Publications
Tagged Bank Holding Company Act, Banks, CFTC, FDIC, Federal Reserve, Financial institutions, Financial regulation, Foreign banks, OCC, Proprietary trading, SEC, Volcker Rule
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The (Neglected) Value of Board Accountability in Corporate Governance
Editor’s Note: The following post comes to us from Marc Moore, Director of the Centre for Corporate and Commercial Law at University of Cambridge.
The term “accountability” is virtually ubiquitous within literature and debates on organizational governance, and especially within corporate governance. However, as a social phenomenon it is frequently misunderstood, particularly by corporate lawyers.
To a large extent, this is unsurprising. After all, it is to be expected that complex sociological issues posed by the historically peculiar scale and structure of public companies—such as decisional power, accountability and legitimacy—will be received somewhat uneasily within orthodox corporate law discourse. Indeed, with limited exceptions, Anglo-American corporate law scholarship today remains rooted in the traditional conceptual habitat of private law, with its characteristic focus on the discrete relational transaction. A latent but nonetheless significant consequence of this has been the definitional “fudging” by corporate lawyers of some inherently public-governmental phenomena that are relevant to corporate governance, in an attempt to render them consistent with the logic and language of private law. This is true nowhere more than with respect to the difficult concept of accountability.
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Posted in Academic Research, Boards of Directors
Tagged Accountability, Agency model, Boards of Directors, Decision-making, Transparency
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Delaware Court: Minority Stockholders Did Not Waive Appraisal Rights
Editor’s Note: Toby Myerson is a partner in the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP and co-head of the firm’s Global Mergers and Acquisitions Group. The following post is based on a Paul Weiss memorandum. Justin A. Shuler contributed to this post. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.
In Halpin v. Riverstone National, Inc., a controlling stockholder caused the company to complete a merger, but did so without exercising drag-along rights that would have compelled the minority stockholders to vote in favor of the merger and thereby waive their statutory rights to judicial appraisal. After receiving notification of the merger, the minority stockholders filed an action for statutory appraisal of their shares, and in response the company sought an order requiring the minority stockholders to vote in favor of the merger so that the company could avail itself of the benefits of the drag-along rights. The Delaware Court of Chancery held that because the company failed to properly exercise its drag-along rights in advance of the merger, the minority stockholders were not required to vote in favor of the merger and thus could pursue their appraisal rights.
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Posted in Court Cases, Mergers & Acquisitions, Practitioner Publications
Tagged Appraisal rights, Change in control, Delaware cases, Delaware law, Merger litigation, Mergers & acquisitions, Minority shareholders
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Enhancing Prudential Standards in Financial Regulations
Editor’s Note: The following post comes to us from Franklin Allen, Professor of Economics at the University of Pennsylvania and Imperial College London; Itay Goldstein, Professor of Finance at the University of Pennsylvania;
and Julapa Jagtiani and William Lang, both of the Federal Reserve Bank of Philadelphia.
The recent financial crisis has generated fundamental reforms in the financial regulatory system in the U.S. and internationally. In our paper, Enhancing Prudential Standards in Financial Regulations, which was recently made publicly available on SSRN, we discuss academic research and expert opinions on this vital subject of financial stability and regulatory reforms.
Despite the extensive regulation and supervision of U.S. banking organizations, the U.S. and the world financial systems were shaken by the largest financial crisis since the Great Depression, largely precipitated by events within the U.S. financial system. The new “macroprudential” approach to financial regulations focuses on both the risks arising in financial markets broadly and those risks arising from financial distress at individual financial institutions.
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Posted in Academic Research, Banking & Financial Institutions, Bankruptcy & Financial Distress, Financial Crisis, Financial Regulation
Tagged Banks, Dodd-Frank Act, Financial crisis, Financial institutions, Financial reform, Financial regulation, Financial reporting, Mortgage lending, Prudence, Recovery & resolution plans, Stress tests, Systemic risk, Too big to fail
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Key Points from 2015 Dodd-Frank Act Stress Test (DFAST)
Editor’s Note: The following post comes to us from Dan Ryan, Leader of the Financial Services Advisory Practice at PricewaterhouseCoopers LLP, and is based on a PwC publication by Mike Alix and Steve Pearson.
For the first time all banks passed DFAST this year, but this unfortunately told us nothing about their chances of passing last week’s CCAR qualitative assessment.
The DFAST results published March 5, 2015 are the Federal Reserve’s (Fed) first stress test results released in 2015. On March 11th, the Fed released the more important Comprehensive Capital Analysis and Review (CCAR) results which told us whether the banks passed the Fed’s qualitative and quantitative assessments in order to return more capital to shareholders. [1]
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Posted in Banking & Financial Institutions, Financial Regulation, Practitioner Publications
Tagged Banks, Capital requirements, Dodd-Frank Act, Federal Reserve, Financial institutions, Financial regulation, G-SIB, SIFIs, Stress tests
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