Tag: Corporate governance


Corporate Governance Survey—2015 Proxy Season

David A. Bell is partner in the corporate and securities group at Fenwick & West LLP. This post is based on portions of a Fenwick publication titled Corporate Governance Practices and Trends: A Comparison of Large Public Companies and Silicon Valley Companies (2015 Proxy Season); the complete survey is available here.

Since 2003, Fenwick has collected a unique body of information on the corporate governance practices of publicly traded companies that is useful for Silicon Valley companies and publicly-traded technology and life science companies across the U.S. as well as public companies and their advisors generally. Fenwick’s annual survey covers a variety of corporate governance practices and data for the companies included in the Standard & Poor’s 100 Index (S&P 100) and the high technology and life science companies included in the Silicon Valley 150 Index (SV 150). [1]

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Where are the Best (Corporate) Law Professors Teaching?

Marco Ventoruzzo is a comparative business law scholar with a joint appointment with the Pennsylvania State University, Dickinson School of Law and Bocconi University. This post is based on an article authored by Professor Ventoruzzo.

Are the best law professors teaching at the best law schools in the United States? And how can the best law schools around the world be evaluated in terms of the scholarship their professors produce? On this website we talk a lot about corporate governance, but what about the governance of scholars of corporate governance? Is the Emperor naked?

I recently wrote an essay that contributes to addressing these questions by examining empirically a specific issue: whether the top-ranking law schools employ the most productive, authoritative and influential scholars of corporate law. For the reasons I explain in the paper, corporate law can be used as an effective and useful proxy also for other areas.

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The Soviet Constitution Problem in Comparative Corporate Law

This post comes to us from Leo E. Strine, Jr., Chief Justice of the Delaware Supreme Court, the Austin Wakeman Scott Lecturer on Law and a Senior Fellow of the Harvard Law School Program on Corporate Governance. This post is based on Chief Justice Strine’s recent essay, The Soviet Constitution Problem in Comparative Corporate Law: Testing the Proposition that European Corporate Law is More Stockholder Focused than U.S. Corporate Law, issued as Discussion Paper of the Program on Corporate Governance and forthcoming in the Southern California Law Review. Related research from the Program on Corporate Governance includes Toward Common Sense and Common Ground? Reflections on the Shared Interests of Managers and Labor in a More Rational System of Corporate Governance, by Chief Justice Strine; and The Case for Increasing Shareholder Power, by Lucian Bebchuk.

Leo E. Strine, Jr., Chief Justice of the Delaware Supreme Court, the Austin Wakeman Scott Lecturer on Law and a Senior Fellow of the Harvard Law School Program on Corporate Governance, recently issued an essay that is forthcoming in the Southern California Law Review. The essay, titled The Soviet Constitution Problem in Comparative Corporate Law: Testing the Proposition that European Corporate Law is More Stockholder Focused than U.S. Corporate Law, is available here. The abstract of Chief Justice Strine’s essay summarizes it as follows:

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Bankruptcy Versus Bailout of Socially Important Non-Financial Institutions

Shlomit Azgad-Tromer is a visiting scholar at Berkeley Law School. This post is based on the article Too Important to Fail: Bankruptcy Versus Bailout of Socially Important Non-Financial Institutions.

Systemically important financial institutions are broadly considered to pose a risk to the entire economy upon failure. Thus governments act upon their failure, providing them with an implied insurance policy for ongoing liquidity. Yet governments frequently provide de facto liquidity insurance for non-financial institutions as well. For example, recently in the U.K., 35 hospital trusts were sharing £536 million in non-repayable bailouts in order to keep services running smoothly during 2013-2014. A decade earlier, a federal bankruptcy judge approved California’s multibillion-dollar bailout of Pacific Gas & Electric Corporation. In an effort to stabilize and sustain air transportation after 9/11, the U.S. Congress passed the Air Transportation Safety and System Stabilization Act, which provided the airline industry with financial aid valued at as much as $10 billion. In all of these cases, taxpayer money was used to rescue non-financial institutions.

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Corporate Governance Responses to Director Rule Changes

Cindy Vojtech is an Economist at the Federal Reserve Board. This post is based on an article authored by Dr. Vojtech and Benjamin Kay, Economist at the U.S. Treasury’s Office of Financial Research.

Much of the corporate governance literature has been plagued by endogeneity problems. In our paper, Corporate Governance Responses to Director Rule Changes, which was recently made publicly available on SSRN, we use a law change as a natural experiment to test how firms adjust the choice and magnitude of governance tools given a floor level of monitoring from independent directors. Through this analysis, we can recover the structural relationship between inputs in the governance production function. We study these relationships with a new board of director dataset with a much larger range of firm size.

In 2002, U.S. stock exchanges and the Sarbanes-Oxley Act established minimum standards for director independence. These director rules altered firm choice of other tools for mitigating agency problems. On average, treated firms do not increase the size of their board, instead inside directors are replaced with outside directors.

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Securing Our Nation’s Economic Future

Leo E. Strine, Jr. is Chief Justice of the Delaware Supreme Court, the Austin Wakeman Scott Lecturer on Law and a Senior Fellow of the Harvard Law School Program on Corporate Governance. This post is based on Chief Justice Strine’s recent keynote address to the Fellows Colloquium of the American College of Governance Counsel, available here. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here), The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here), and Can We Do Better by Ordinary Investors? A Pragmatic Reaction to the Dueling Ideological Mythologists of Corporate Law, by Leo E. Strine (discussed on the Forum here).

These days it has become fashionable to talk about a subject some of us have been addressing for some time: [1] whether the incentive system for the governance of American corporations optimally encourages long-term investment, sustainable policies, and therefore creates the most long-term economic and social benefit for American workers and investors. Many commentators have come to the conclusion that the answer to that question is no. They bemoan the pressures that can lead corporate managers to quick fixes like offshoring, which might give a balance sheet a short-term benefit, but cut our nation’s long-term prospects. They lament the relative tilt in corporate spending toward stock buybacks and away from spending on capital expenditures. They look at situations where corporations took environmental or other regulatory short-cuts, which ended up in disaster, and ask whether anyone is thinking about sustainable approaches. They rightly point to the accounting gimmickry involved in several high-profile debacles and ask what it has to do with the creation of long-term wealth for human investors.

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Comparative Corporate Law Casebook

Marco Ventoruzzo is a comparative business law scholar with a joint appointment with the Pennsylvania State University, Dickinson School of Law and Bocconi University.

Comparative Corporate Law is at the center of the scholarly debate, has a growing practical importance, and has become a staple course offered by most law schools and universities around the world, often in English independently of their location. The theoretical and practical reasons for this development are too obvious and well-known to be listed here. Yet there are few teaching resources that offer a systematic, in-depth, but also enjoyable analysis of the subject.

With our new book, Comparative Corporate Law (West Academic Press, 2015), we have tried to fill this gap. The book has been designed to be used in different legal systems and for different courses, primarily for law students, but not only: also students of business administration, economics, political science and international relationships might benefit from it. The book can be used in the basic course on corporations, as a complement to add a comparative and international dimension, and it can—more likely—be used in an upper-division course specifically dedicated to Comparative Corporate Law, or similar courses (Comparative Corporate Governance, Comparative Business Law, Comparative Corporate Finance, etc.).

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Getting to Know You: The Case for Significant Shareholder Engagement

F. William McNabb III is Chairman and CEO of Vanguard. This post is based on Mr. McNabb’s recent keynote address at Lazard’s 2015 Director Event, “Shareholder Expectations: The New Paradigm for Directors.”

I’ll begin my remarks with a premise. It’s a simple belief that I have. And that is: Corporate governance should not be a mystery. For corporate boards, the way large investors vote their shares should not be a mystery. And for investors, the way corporate boards govern their companies should not be a mystery. I believe we’re moving in a direction where there is less mystery on both sides, but each side still has some work to do in how it tells its respective stories.

So let me start by telling you a little bit about Vanguard’s story and our perspective. I’ll start with an anecdote that I believe is illustrative of some of the headwinds that we all face in our efforts to improve governance: “We didn’t think you cared.” A couple of years ago, we engaged with a very large firm on the West Coast. We had some specific concerns about a proposal that was coming to a vote, and we told them so.

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Harmony or Dissonance? The Good Governance Ideas of Academics and Worldly Players

Robert C. Clark is University Distinguished Service Professor at Harvard Law School. His article, Harmony or Dissonance? The Good Governance Ideas of Academics and Worldly Players, was recently published in the Spring 2015 issue of The Business Lawyer and is available here.

There are numerous players who have ideas about what are good or best corporate governance practices, but different players have different themes. My article, Harmony or Dissonance? The Good Governance Ideas of Academics and Worldly Players, originally delivered as a special lecture and recently published in The Business Lawyer, asks questions concerning ideas about what constitutes good corporate governance that are espoused by different players.

The article dwells briefly on seven categories of players: (1) academics, such as financial economists and law professors who resort heavily to empirical studies; and more worldly players such as (2) legislators, (3) governance rating firms, (4) large institutional investors, (5) corporate directors, (6) law firms that represent corporate clients on the defensive, and (7) courts. Are there discernible trends and patterns in the views espoused by these different categories of actors, despite all the differences among individual actors within each category? I believe there are such patterns, and offer some initial thoughts about the characteristic themes and different patterns of ideas about good corporate governance that we observe among the different categories of players. I then hypothesize about the reasons for these differences. My approach focuses on the motives and incentives driving the different players and how they take shape in the occupational situations inhabited by the players.

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Guiding Principles of Good Governance

Stan Magidson is President and CEO of the Institute of Corporate Directors and Chair of the Global Network of Directors Institutes (GNDI). This post is based on a recent GNDI perspectives paper, available here.

The Global Network of Director Institutes (GNDI), the international network of director institutes, has issued a new perspectives paper to guide boards in looking at governance beyond legislative mandates.

The Guiding Principles of Good Governance were developed by GNDI as part of its commitment to provide leadership on governance issues for directors of all organisations to achieve a positive impact.

Aimed at providing a framework of rules and recommendations, the 13 principles laid out in the guideline cover a broad range of governance-related topics including disclosure of practices, independent leadership and relationship with management, among others.

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