Category: Corporate law

Framework developed by the Investor Stewardship Group establishes common set of investor expectations for corporate governance

The Investor Stewardship Group—a group of the largest, most prominent institutional investors and global asset managers investing, in the aggregate, over $20 trillion in the U.S. equity markets—has developed the Framework for U.S. Stewardship and Governance, a “framework of basic standards of investment stewardship and corporate governance for U.S. institutional investor and boardroom conduct.” The stewardship framework identifies fundamental responsibilities for institutional investors, and the corporate governance framework identifies six fundamental principles that “are designed to establish a foundational set of investor expectations about corporate governance practices in U.S. public companies. Generally, the principles “reflect the common corporate governance beliefs embedded in each member’s proxy voting and engagement guidelines,” although each ISG member may differ somewhat on specifics. The ISG encourages company directors to apply these basic principles—while acknowledging that they are not designed to be “prescriptive or comprehensive” and can be applied in various ways—and indicates that it will “evaluate companies’ alignment with these principles, as well as any discussion of alternative approaches that directors maintain are in a company’s best interests.” The framework does not go “into effect” until January 1, 2018, so that companies will have “time to adjust to these standards in advance of the 2018 proxy season,”  the implication being that failure to “comply or explain” by that point could ultimately lead to shareholder opposition during proxy season.  Check out the countdown clock at the link above!

Does the health of the economy depend on getting the role of shareholders right?

Are shareholders really the “owners” of corporations? Even though shareholders have no responsibilities to the corporations they “own”? Should corporations be managed for the sole purpose of maximizing shareholder value?  Are shareholders even unanimous in that objective? Is shareholder centricity really the right model for good governance of corporations? What changes in corporate governance have been fueled by the shareholder primacy model?  Do those changes make sense?  What has been the adverse fallout from the current fastidious devotion to shareholder preeminence?  These are just some of the issues addressed in this terrific piece by two Harvard Business School professors, Joseph L. Bower and Lynn S. Paine, in the Harvard Business Review. In their view, the “health of the economic system depends on getting the role of shareholders right.”  Highly recommend.

Will dual-class structures torpedo the business judgment rule?

While there has certainly been a lot of debate about the merits and demerits of dual-class stock, one interesting angle was raised by Charles Elson, director of the University of Delaware’s John L. Weinberg Center for Corporate Governance Delaware Law. In an interview reported in Bloomberg BNA, Elson predicts that expanded use of dual-class corporate structures will lead the Delaware courts to reconsider the business judgment rule.  For companies with no- or low-vote classes of shares, is the business judgment rule in jeopardy?

Is there a fix for short-termism?

by Cydney Posner Much has been written about the problems associated with the prevalence of short-term thinking in corporate America.  As noted in a post from The Harvard Law School Forum on Corporate Governance and Financial Regulation, a recent academic study revealed that “three quarters of senior American corporate officials […]

Will “universal proxy” make it to the finish line?

by Cydney Posner With Congress and the Presidency soon to be under Republican control, it would not be surprising, unless the SEC acted with unusual speed, if the universal proxy rules never went into effect. Commissioner Piwowar, a Republican appointee, dissented from the vote to approve the proposal, arguing that […]

SEC proposes use of “universal proxy” in election contests and adopts changes to Rule 147 and Reg D (updated)

by Cydney Posner At an open meeting this morning, the SEC voted, by a vote of two to one, to propose amendments to the proxy rules that mandate the use of universal proxy cards in contested elections and relate to disclosure about voting options and voting standards in all director […]

New UK Prime Minister proposes “something radical.” Could it happen here?

by Cydney Posner She may be the new leader of the Conservative Party, but her party affiliation may not be entirely obvious from the speech delivered in July by UK Prime Minister Theresa May, launching her national campaign.  In her vision of creating “an economy that works for everyone,” May […]

The impact of Brexit

by Cydney Posner For those interested in the impact of Brexit — and who isn’t these days? — see this excellent post by Chris Finney of Cooley’s London office.  Also see this page on the Cooley website devoted to Cooley Alerts and posts on Brexit and its implications, including in areas such […]

Will the virtual-only shareholders’ annual meeting, once disparaged, be rejuvenated?

by Cydney Posner For many years, annual meetings of shareholders have been viewed as increasingly moribund rituals of corporate governance, as fewer and fewer shareholders are able or willing to overcome the logistical and financial burdens of attendance in person. As a result, in many cases, meetings have evolved into […]

Director resignation policies under fire

by Cydney Posner The originator of the “Pfizer model” of “plurality plus” voting for directors — Pfizer —  will be facing a shareholder proposal  (January 29, from the Chevedden folks) calling for a change to Pfizer’s governing documents and policies regarding majority voting. The “plurality plus” model requires directors to […]