The Race to the Bottom: Corporate Governance

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Corporate Governance

The Race to the Bottom

A student-faculty collaboration discussing all areas of corporate governance including: methods for improving, the role of the Securities and Exchange Commission, the role of Delaware, and independent directors, impact of Sarbanes-Oxley.
By J Robert Brown Jr et al.

Post Frequency: 21.6/day

Last Entry: April 01, 2011 at 09:00:35

No Limit on Reverse Termination Fees: Pfizer to pay out $4.5 billion to Wyeth if Financing Fails

Posted on February 04, 2009
This post discusses whether Delaware courts would uphold the $4.5 billion, 6.6% reverse termination fee in Pfizer's proposed acquisition of Wyeth if shareholders were to challenge the fee. The WSJ reported that Pfizer will pay Wyeth the break-up fee if “Pfizer’s ratings are cut and the banks don’t lend...

GMAC, Treasury and the Answer to the Corporate Compensation Conundrum

Posted on February 03, 2009
As we have discussed on this Blog, the bailout bill contained provisions that regulated executive compensation. Treasury drafted regulations that implemented these provisions. The Treasury regulations are, however, noticeable in their vagueness...

Shameful, Perhaps, But Treasury's Response Will Likely Cause More Harm Than Good

Posted on February 02, 2009
Barack Obama labeled the bonuses paid to officials at financial institutions taking funds under TARP as "shameful." Senator McCaskill introduced a bill to cap compensation at the amount paid to the President ($400,000). On Saturday, he described the payments this way: “we learned this week that even as they petitioned for taxpayer assistance, Wall Street firms shamefully paid out nearly $20 billion in bonuses for 2008...

Treasury and Limitations on Executive Compensation: The Board's Responsibility

Posted on February 02, 2009
Treasury (before Geithner's arrival) recently issued an updated "interim final rule" updating a similar provision that had been issued in October. The rule contains technical amendments and imposes specific time periods on certain certification obligations...

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Treasury and Limitations on Executive Compensation: The CEO's Responsibility

Posted on February 02, 2009
The Treasury rules implementing the executive compensation provisions of TARP essentially impose on the compensation committee the obligation to consider the arrangements and to determine whether they cause excessive risk taking. Nonetheless, the rules go further and essentially impose on the CEO the obligation of certifying that the compensation committee has performed its prescribed task...

Shameful, Perhaps, But Treasury's Response Will Likely Cause More Harm Than Good (Redux)

Posted on February 02, 2009
Treasury is considering new limits on executive compensation for certain companies participating under TARP. Treasury is considering limits on bonuses and severance paid at companies that receive "exceptional" aid under TARP. The problem is not the limitations but the companies subject to the limitations...

The SEC and CFTC Merger: An Uphill Struggle?

Posted on February 01, 2009
The Speculative Debauche has a nice post on the source of possible opposition to an SEC/CFTC merger. There is some potential opposition from agricultural interests in the US Senate. Mary Schapiro has her work cut out for her.

Shameful (The Growing Consequences)

Posted on January 31, 2009
The fallout from President Obama's reference to the payment of bonsues as "shameful" is already being felt. Claire McCaskill, Senator from Missouri, has already introduced legislation that would limit salaries of all company officials to no more than the salary of the President of the United States (which is $400,000 by the way)...

Thain, Fiduciary Duties, and the Problem of an Effective Regulator

Posted on January 30, 2009
The latest on Merrill Lynch is that Andrew Cuomo is barrelling ahead in his investigation of the unexpectedly large losses in December and the payment of employee bonuses. As part of the investigation, he has already sent a subpoena to John Thain, the former CEO...

Shameful

Posted on January 30, 2009
When would one imagine a president of the United States describing executive compensation using the word "shameful"? President Obama did so on Thursday. It came after a study was issued by Tomas P. DiNapoli, the NY State Comptroller, indicating that $18...

Derivatives and Lead Plaintiff Status: In re Crocs Securities Litigation

Posted on January 29, 2009
In the class action suit In re Crocs, Inc. Securities Litigation, No. 07-cv-02351-REB-KLM, 2008 U.S. Dist. LEXIS 87524 (Colo. Dist. Ct. Sept. 17, 2008), the United States District Court of Colorado held the presumptive lead plaintiff adequate to represent the class because its “contracts for difference” (“CFD) were “securities” under the Securities Exchange Act...

Access is Coming

Posted on January 29, 2009
As we have discussed at length on this Blog (and in this Paper: The SEC, Corporate Governance, and Shareholder Access to the Board Room), the Commission's decision to not provide shareholders with access to the proxy statement was an incorrect interpretation of the law, inconsistent with the Agency's pro-investor, shareholder mission and, in the end, short sighted...

Summary of United States v. Stockman

Posted on January 28, 2009
This post concludes and summarizes our coverage of the case United States v. Stockman. The government filed the Indictment in March of 2007 in the Southern District of New York. The named Defendants were David Stockman, Paul Barnaba, David Cosgrove, and J...

South Africa and Stakeholder Rights

Posted on January 28, 2009
This Blog tries, when the opportunity is presented, to shed light on corporate governance practices from other countries that vary from those in the United States. In part this illustrates the lack of uniformity in the area. In addition, however, it demonstrates that there may be ways the US can learn from the experience in other countries in reforming its own governance process...

Starbucks and Social Responsibility: The Right Direction

Posted on January 27, 2009
We have written often on this Blog about the wrong headed business approach by Starbucks in combating its declining revenues. In addition to a decline of business from the recession, Starbucks has had to confront growing competition, most noticeably from McDonalds...

Delaware Courts and the Continued Erosion of Fiduciary Duties

Posted on January 27, 2009
In the world of fiduciary duties for corporate directors, Delaware courts diminish them case by case. Take a look at the evisceration of the duty of loyalty with respect to decisions on executive compensation. (Returning Fairness to Executive Compensation)...

Executive Compensation and John Thain

Posted on January 26, 2009
By now, everyone is aware of John Thain's dismissal from B of A last week, at least in part, according to the press, because of "poor communications" about Merrill's unexpectedly large losses in December. As he departs, its safe to say that his press is getting worse...

Compensation without Limits

Posted on January 26, 2009
Does it ever stop? Executive compensation is determined by the board of directors. The obligations of the board of directors are determined mostly by state law. State law in this area means Delaware. Delaware benefits from having companies incorporate in its state, a form of tax revenue from entities that otherwise make little or no use of local services...

Executive Compensation and John Thain (Part 2)

Posted on January 26, 2009
We wrote earlier today about John Thain's remodeling of his office. Our post raised fewer questions about his behavior and more about the board's. We note that he has issued a memorandum where he has agreed to repay the expenses associated with the remodeling...

A Recession Proof Area of Legal Practice

Posted on January 26, 2009
The WSJ notes that the recession is coming to law firms, listing the litany of firms laying off lawyers. One thing of note. While plenty of areas were hard hit, including corporate, securities is not one of them. Perhaps we all have Sarbanes-Oxley to thank for this...

Funding the Race to the Bottom

Posted on January 25, 2009
The Race to the Bottom is dedicated to providing our readers with high quality content while remaining advertisement free. Nonethless, we are not revenue neutral but have occasional modest expenses. We pay for this platform and have to maintain our URL...

Corporate Governance, Iceland and Independent Directors

Posted on January 23, 2009
This Blog tries, when the opportunity is presented, to shed light on corporate governance practices from other countries that vary from those in the United States. In part this illustrates the lack of uniformity in the area. In addition, however, it demonstrates that there may be ways the US can learn from the experience in other countries in reforming its own governance process...

Eliminating Fairness from the Duty of Loyalty: Hokanson v. Petty

Posted on January 23, 2009
We have often discussed on this Blog the gradual elimination of fairness by the Delaware Courts in the context of the duty of loyalty. The courts often cite Guth v. Loft, 5 A.2d 503 (Del. 1939) for the proposition that the duty of loyalty is "broad and encompassing" and demands from the director "the most scrupulous observance...

Steve Jobs, Health Issues, and the SEC

Posted on January 22, 2009
Apparently the SEC has opened an "inquiry" into the disclosure by Steve Jobs concerning his health issues. Inquiry here likely means an investigation that has not yet reached the formal order stage. Formal orders must be approved by the full Commission and give the staff, among other things, the power to issue subpoenas...

Obama, the Courts, and Governance

Posted on January 22, 2009
We have noted on this Blog on several occasions that one of the biggest impediments to improved investor protection and corporate governance is the judiciary. It is the DC Circuit that struck down the SEC's nascent attempts to regulate hedge funds in Goldstein by requiring increased reporting, leaving the market and regulators largely in the dark when the crash came...

A Securities Lawyer in the Senate?

Posted on January 22, 2009
With Caroline Kennedy bowing out of the contest for the New York Senate seat vacated by Hillary Clinton, Kristen Gillibrand, a congresswoman from upstate, is one of the front runners. She is a former partner at Boies Schiller. The NY Times described her as a "securities attorney...

Stay of Proceedings in Chiquita Derivative Actions

Posted on January 21, 2009
This post updates the Derivative Actions against Chiquita Brands International, Inc. (“Chiquita”). In sum, the Derivative Actions remain stayed until February 28, 2009, when Chiquita is required to report to the Court on its investigation of the claims filed in the Verified Consolidated Shareholder Derivative Complaint (“Complaint”)...

Chairman Cox Departs

Posted on January 21, 2009
With little fanfare, Chairman Cox has stepped down. There is no press release posted on the SEC web site but his picture no longer appears on the site. His term went until the summer but his tenure as chairman was over (the chair of the Commission serves at the discretion of the President)...

Fifth Circuit Affirmed Skilling?s Conviction

Posted on January 21, 2009
Last week, the United States Court of Appeals for the Fifth Circuit affirmed Jeffrey Skilling’s convictions for conspiracy, securities fraud, making false representations to auditors, and insider trading. The court, however, vacated his 24-year sentence and remanded it for resentencing...

Corporate Jets and Corporate Compensation (redux)

Posted on January 20, 2009
The Economist has a nice little piece on the current waive of companies selling their corporate jets. Corporate jets have become the current example of wastefulness by corporations. The result has been public pressure on companies, particularly those with their hands out in Washington, to get rid of the luxury...

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