Tag: Social networks


Crowdfunding and the Digital Shareholder

Andrew A. Schwartz is an Associate Professor at University of Colorado Law School. This post is based on Professor Schwartz’s recent article published in The Minnesota Law Review, available here.

After several years of delay, Internet-based securities crowdfunding is finally poised to go live this year thanks to the SEC’s recent issuance of Regulation Crowdfunding. Through crowdfunding, people of modest means will for the first time be legally authorized to make investments that are currently offered exclusively to “accredited” (wealthy) investors. This democratization of entrepreneurial finance sounds great in theory, but will it work in practice? Will non-accredited investors really buy unregistered securities in speculative startups, over the Internet, with only the barest form of disclosure? The conventional wisdom among most legal scholars is, basically, no. In their view, securities crowdfunding is doomed to failure for myriad reasons, including fraud, [1] costs, [2] dilution, [3] adverse selection, [4] opportunism, [5] and more. [6]

READ MORE »

Political Values, Culture, and Corporate Litigation

Danling Jiang is Associate Professor of Finance at Florida State University. This post is based on an article authored by Professor Jiang; Irena Hutton, Associate Professor of Finance at Florida State University; and Alok Kumar, Professor of Finance at the University of Miami.

In our paper, Political Values, Culture, and Corporate Litigation, published in the latest issue of Management Science, we examine whether the political culture of a firm defines its ethical and legal boundaries as observed by the propensity for corporate misconduct. Using one of the largest samples of litigation data to date, we show that firms with Republican culture are more likely to be the subject of civil rights, labor, and environmental litigation than Democratic firms, consistent with the Democratic ideology that emphasizes equal rights, labor rights, and environmental protection. However, firms with Democratic culture are more likely to be the subject of litigation related to securities fraud and intellectual property rights violations than Republican firms whose Party ideology stresses self-reliance, property rights, market discipline, and limited government regulation.

READ MORE »

Ten Topics for Directors in 2016

Kerry E. Berchem is partner and head of the corporate practice group at Akin Gump Strauss Hauer & Feld LLP. This post is based on a summary of an Akin Gump publication authored by Ms. Berchem, Rick L. Burdick, Tracy Crum, Christine B. LaFollette, and J. Kenneth Menges, Jr. The complete publication is available here.

U.S. public companies face a host of challenges as they enter 2016. Here is our annual list of hot topics for the boardroom in the coming year:

  1. Oversee the development of long-term corporate strategy in an increasingly interdependent and volatile world economy
  2. Cultivate shareholder relations and assess company vulnerabilities as activist investors target more companies with increasing success
  3. Oversee cybersecurity as the landscape becomes more developed and cyber risk tops director concerns
  4. Oversee risk management, including the identification and assessment of new and emerging risks
  5. Assess the impact of social media on the company’s business plans
  6. Stay abreast of Delaware law developments and other trends in M&A
  7. Review and refresh board composition and ensure appropriate succession
  8. Monitor developments that could impact the audit committee’s already heavy workload
  9. Set appropriate executive compensation as CEO pay ratios and income inequality continue to make headlines
  10. Prepare for and monitor developments in proxy access

READ MORE »

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.

READ MORE »

Management Philosophies and Styles in Family and Non-Family Firms

William Mullins is Assistant Professor of Finance at the University of Maryland and Antoinette Schoar is Professor of Finance at MIT. This post is based on an article authored by Professor Mullins and Professor Schoar.

A growing body of evidence supports the view that there are substantial differences in the management styles and skill sets of individual CEOs, and these differences seem to translate into effects on firm performance and how firms operate. However, we know little about what drives these differences in CEO behavior. In particular, we do not know if the management philosophies and styles of CEOs vary with the governance structure or ownership of the firm (for example, whether it is a family firm or widely held firm), or even across countries. One view is that the extent to which they take a stakeholder approach to management—in opposition to a shareholder focused approach—is an important determinant of CEO behavior. Family members as CEO might be more likely to adopt a stakeholder view, since they have a longer horizon and care about the reputation of the family beyond profit maximization. An alternative view holds that greater emphasis on stakeholder management is a feature of entire countries, evolving in response to aspects of the economy as a whole, rather than to firm-specific characteristics.

In our paper, How Do CEOs See Their Roles? Management Philosophies and Styles in Family and Non-Family Firms, forthcoming in the Journal of Financial Economics, we explore how the interplay of firm level and country level factors shape CEO management styles and beliefs regarding their roles.

READ MORE »

Delaware Courts and the Law Of Demand Excusal

Justin T. Kelton is an attorney specializing in complex commercial litigation at Dunnington, Bartholow & Miller, LLP. 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. 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.

Delaware courts have recently issued critical guidance regarding the contours of the demand excusal doctrine. The following cases outline the Delaware courts’ recent analyses on the issue.

Delaware Supreme Court Clarifies Analysis For Determining Director Independence

In Del. Cty. Emps. Ret. Fund v. Sanchez, Del. No. 702, 10/2/15, the Delaware Supreme Court clarified that, in considering whether a complaint has sufficiently pleaded a lack of independence, the Court of Chancery should not parse facts pled regarding personal relationships and those pled regarding business relationships as categorically distinct issues. Rather, the Court of Chancery must “consider in fully context” all of the “pled facts regarding a director’s relationship to the interested party.” Taking all of the facts together, the Delaware Supreme Court found that the plaintiff’s allegations that “a director has been close friends with an interested party for a half century” was sufficient to raise a pleading stage inference of interestedness because “close friendships of that duration are likely considered precious by many people, and are rare.”

READ MORE »

Seven Myths of Boards of Directors

David Larcker is Professor of Accounting at Stanford University. This post is based on an article authored by Professor Larcker and Brian Tayan, Researcher with the Corporate Governance Research Initiative at Stanford University. Related research from the Program on Corporate Governance includes The Costs of Entrenched Boards by Lucian Bebchuk and Alma Cohen, and How Do Staggered Boards Affect Shareholder Value? Evidence from a Natural Experiment by Alma Cohen and Charles C. Y. Wang.

Corporate governance experts pay considerable attention to issues involving the board of directors. Because of the scope of the board’s role and the vast responsibilities that come with directorship, companies are expected to adhere to common best practices in board structure, composition, and procedures. Our paper, Seven Myths of Boards of Directors, which was recently made publicly available on SSRN, reviews seven commonly accepted beliefs about boards of directors that are not substantiated by empirical evidence.

READ MORE »

Building Effective Relationships with Regulators

Norm Champ is a lecturer at Harvard Law School and the former Director of the Division of Investment Management at the U.S. Securities & Exchange Commission. This post is based on a Keynote Address by Mr. Champ at the CFO Compliance & Regulation Summit.

Today [September 10, 2015] I will try to bring together my experience at the SEC in the Division of Investment Management and the Office of Compliance Inspections and Examinations to talk about how you can build effective relationships with regulators. Each business, no matter what the industry, must decide what strategy it is going to pursue with regulators. As a former CCO of an investment management business and a former regulator, I propose that you follow a strategy of constructive engagement with the regulator in your industry. I know there are those who disagree with that strategy and advocate a posture of avoidance of your regulator and even those who advocate a strategy of opposition to your regulator. I have dealt with that advice in my ten years in a regulated financial services business and seen it in action in five years as a regulator. I’m going to argue that the strategies of avoidance and opposition are misguided and that constructive engagement is the only viable choice for a business seeking an effective relationship with its regulator.

READ MORE »

Delaware Court Refinement of Director Independence Analysis

Ariel J. Deckelbaum is a partner and deputy chair of the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul Weiss client memorandum by Mr. Deckelbaum, Justin G. Hamill, Stephen P. LambJeffrey D. Marell, Frances Mi, and Matthew D. Stachel. 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 Delaware County Employees Retirement Fund, et al. v. Sanchez, et al., the Delaware Supreme Court held that stockholder plaintiffs in a derivative action adequately alleged facts to support a pleading-stage inference that a director was not independent from an interested director due to their close, 50-year friendship and significant business relationships consistent with that friendship. The court thus reversed the Delaware Court of Chancery’s holding on the defendants’ motion to dismiss that the plaintiffs had failed to adequately plead demand excusal. The court emphasized that Delaware courts must analyze all the particularized facts pled by the plaintiffs “in their totality and not in isolation from each other.”

READ MORE »

SCOTUS Declines Petition on Insider Trading Ruling

Brad S. Karp is chairman and partner at Paul, Weiss, Rifkind, Wharton & Garrison LLP. This post is based on a Paul Weiss client memorandum.

Today [October 5, 2015], the United States Supreme Court declined to hear the petition for a writ of certiorari (the “Petition”) filed by the United States Department of Justice (“DOJ”) in United States v. Newman, 773 F.3d 438 (2d Cir. 2014), a landmark decision that dismissed indictments against two insider trading defendants. By declining to hear the Petition, the Supreme Court ensured that the Second Circuit’s decision in Newman will remain binding in the Second Circuit and influential across the country.

As we explain below, two of Newman’s holdings are particularly important: first, that the government must prove that a remote tippee knew or should have known of the personal benefit received by a tipper in exchange for disclosing nonpublic information; and second, that the benefits alleged by the government in United States v. Newman were not sufficient to support a conviction, as they were not sufficiently “consequential.”

READ MORE »