Many have recently lamented the decline in the number of IPOs and public companies generally (from about 8,000 in 1996 to about 4,000 now, according to EY), and numerous reasons have been offered in explanation, from regulatory burden to hedge-fund activism. (See this PubCo post and this PubCo post.) In response, some companies are exploring different approaches to going public, leading to a recent resurgence in SPACs (see, e.g., this WSJ article), while others are flirting with the possibility of “direct listings,” which avoid the underwritten IPO process altogether (see, e.g., this article discussing the pending NYSE rule change to facilitate direct listings). At the same time, companies are seeking ways to address some of the perceived afflictions associated with being public companies—including the pressures of short-termism, the risks of activist attacks and potential loss of control of companies’ fundamental mission—through dual-class structures and other approaches. Changing dynamics are not, however, limited to companies. And one of the most interesting proposals designed to address these issues is being introduced on completely different turf—a novel concept for a stock exchange, the Long-Term Stock Exchange. According to the LTSE blog, “[w]hile other proposed solutions target the IPO process, the LTSE’s mission is to transform the public company experience by relieving the short-term pressures that plague today’s businesses and laying the foundation for a healthier public market ecosystem.”
Notwithstanding the deregulatory emphasis of the current administration, two campaigns are currently being waged to convince the SEC to adopt new regulations mandating more disclosure—one related to human capital management and the other related to a frequent target, corporate political spending. Are these just pipe dreams? Is it time for a reality check? Or might there be some basis for believing that this SEC might act on these requests?
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.
by Cydney Posner In this February 2017 article in the Harvard Business Review, “Finally, Evidence That Managing for the Long Term Pays Off,” a team from McKinsey and associated consultants attempt to prove empirically what has often seemed intuitively must be true — that companies that manage for long-term value […]
Just as the U.S. seeks to roll back regulations, the European Parliament adopts new corporate governance rules
by Cydney Posner Just when the U.S. is looking at how to roll back its regulations on corporations (among others) (see, e.g., this PubCo post, this PubCo post and this PubCo post), the rest of the world seems to be headed in the opposite direction. On Tuesday, the EU Parliament approved a […]
by Cydney Posner Asset management firm BlackRock (reportedly the largest, with $5.1 trillion under management) has identified its “Investment Stewardship” priorities for 2017-2018, intended to help companies prepare for engaging with BlackRock. Among the hot topics are governance (including board composition and diversity), corporate strategy for long-term value creation in […]
by Cydney Posner An interesting topic of discussion at a meeting last week of the SEC’s Investor Advisory Committee was “unequal voting rights of common stock” — the trend over the last decade (plus) for a small number of IPO companies, particularly tech companies, to offer low-vote or, more recently, no-vote […]