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

Online Traffic and The Race to the Bottom

Posted on November 08, 2008
How are we doing as a Blog? The Race to the Bottom has been up and running for a bit over 18 months, not long relative to the other corporate governance blogs. One way to measure success is through traffic. Our platform keeps the statistics...

Chiquita Shareholder Derivative Action: Summarizing the Complaint

Posted on November 07, 2008
The Race To The Bottom is following developments in actions against Chiquita Brands International, Inc., including a number of shareholder derivative actions that are being treated as a consolidated action in the Southern District of Florida. This is a summary of the allegations contained in the Shareholder Derivative Complaint...

Covering the Chiquita Derivative Litigation

Posted on November 07, 2008
The Race to the Bottom is a collaboration between faculty and students. One of the roles played by students is to follow ongoing cases that address important issues in the realm of corporate governance. Students form a team and monitor any activity in the case...

Derivative Actions Against Chiquita

Posted on November 07, 2008
We will be following the multidistrict litigation In re: Chiquita Brands International, Inc., pending in the Southern District of Florida. The multidistrict litigation consists of four shareholder derivative lawsuits (“Derivative Actions”), five tort lawsuits brought under the federal Alien Tort Statute and various state laws, and one tort lawsuit brought under the federal Antiterrorism Act and state tort laws...

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SEC Proposes Roadmap Toward Global Accounting Standards

Posted on November 06, 2008
On August 27th, 2008, in a long anticipated move, the U.S. Securities and Exchange Commission voted unanimously to issue a proposed roadmap for the potential transition by U.S. issuers from U.S. Generally Accepted Accounting Principles (“ GAAP ”) to International Financial Reporting Standards (“ IFRS ”)...

Regime Change and Executive Compensation

Posted on November 06, 2008
We have already noted that Barak Obama is a strong supporter of say on pay. Pundits are, however, already calling for more with respect to executive compensation. Calling the current state of affairs an "ethical embarrassment to our country," an editorial in Business Week by Leo Hindery Jr...

SOX and Private Equity

Posted on November 06, 2008
With impending regime change in the White House, we take a moment to reminisce. The one significant corporate governance accomplishment of the Bush administration was the adoption of Sarbanes Oxley. Its almost hard to remember the vehement outpouring of criticism that swirled around Sarbanes-Oxley for the first three or four years after its adoption...

In re: American Express Co. Securities Litigation

Posted on November 05, 2008
In a case that may become increasingly important as the market crisis continues, the Southern District of New York in In re: American Express Co. Sec. Litig., 02 cv 5533 (S.D. N.Y. Sept. 26, 2008) dismissed a shareholder complaint that alleged Amex fraudulently misrepresented its high risk - high yield investments...

Anjan Sahni Joins the Prosecution Against Stockman

Posted on November 05, 2008
United States v. Stockman, 07-0220 (S.D.N.Y. filed Mar. 21, 2007), is moving forward. Recently, Judge Barbara set the trial date for May 4, 2009. On September 4, the United States Attorney's office for the Southern District of New York filed a Notice of Appearance and Request for Electronic Notification...

Regime Change and Corporate Governance

Posted on November 05, 2008
Regime change has arrived. The Democrats have taken the White House and increased their margins in the House and Senate. What impact will it have for the corporate governance debate? It's unlikely to be a high priority in the short term (although economic reform and reform of the financial markets might be)...

Communicating with the Division of Enforcement (Part 4)

Posted on November 04, 2008
So what did the Inspector General conclude about these communications between Morgan Stanley and the top echelons at the SEC? The Report concluded that "relevant information was imparted to representatives of Morgan Stanley by both Berger and Thomsen regarding the nature of the evidence that the Enforcement Division had aagainst Mack in connection with the Pequot investigation...

Communicating with the Division of Enforcement (Part 3)

Posted on November 04, 2008
The Inspector General's Report contained a section that discussed Morgan Stanley's access to the top levels of the Division of Enforcement. Some officials noted that "this practice is not actually that uncommon." Indeed, Mary Jo White noted that it was "known to the securities bar" that "if you've got an issue and you do not think you are getting a fair hearing on something ...

Communicating with the Division of Enforcement (Part 2)

Posted on November 03, 2008
Berger's comments (whatever they were) were, apparently, not comforting enough. Mary Jo White opted to reach out to the Director of the Division of Enforcement, Linda Thomsen. The call came after Berger and Dinallo had spoken. According to White: I told [Thomsen] that what my assignment was [and] who I was representing...

Communicating with the Division of Enforcement (Part 1)

Posted on November 03, 2008
We have been slow in digesting the reports issued by the Inspector General at the SEC. Today we look at the report on Gary Aguirre, the staff attorney who was working on an insider trading investigation centering around purchases of shares by Pequot Capital Management, a hedge fund...

The Internet and Political News

Posted on November 02, 2008
We are always interested in the online universe and so read with interest the analysis by the Pew Research Center on the source of campaign information. Turns out that the percentage of those describing the Internet as the "principal source" of campaign news has grown from 10% in 2004 to 33% in 2008, second only to television...

The Director Compensation Project: Wells Fargo

Posted on November 01, 2008
This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2007’s Fortune 100 and using information found in their 2008 proxy statements. In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence...

In re Loral Communications and the Possible Antipathy Towards Activist Shareholders (Part 3)

Posted on October 31, 2008
We are discussing In re Loral and examining the trial judge's search for a fifth director who failed to meet the independence standard and therefore resulted in a board with a majority of non-independent directors. The court found a fifth director, John Harkey, to be too connected to MHR to be independent...

Shareholder Communications Coalition

Posted on October 31, 2008
We are pleased to note the entry of the Shareholder Communications Coalition to the blogosphere. The Coalition is an advocacy organization "dedicated to improving the ability of individual investors to vote their shares and communicate with the publicly traded companies in which they invest...

In re Loral Communications and the Possible Antipathy Towards Activist Shareholders: A Prognostication (Part 4)

Posted on October 31, 2008
We don’t disagree with the determination about independence in Loral. The evidence, even if conclusory, suggested at least the possibility that the directors were too closely connected to MHR to be considered independent. There were preexisting personal relationships and some (albeit conclusory) evidence of outside business relationships...

In re Loral Communications and the Possible Antipathy Towards Activist Shareholders (Part 1)

Posted on October 30, 2008
Perhaps we have an excessively jaundiced eye when it comes to Delaware decisions. In In re Loral Space and Communications, VC Strine produced a 91 page opinion essentially allowing shareholders to recover where the board allegedly entered into a sweetheart financing deal with the company's largest shareholder, MHR Fund Management...

In re Loral Communications and the Possible Antipathy Towards Activist Shareholders (Part 2)

Posted on October 30, 2008
We are discussing the Chancery Court's opinion in In re Loral. In Delaware, the standard of review doesn’t depend upon the conduct involved but on the approval mechanism. For plaintiffs to successfully challenge the board’s behavior, they have to show that the board was not independent...

Corporate Governance Practices and the Failure of the Delaware Model: The Evidence (Part 1)

Posted on October 29, 2008
The current financial turmoil challenges the Delaware model of governance. This is an approach that declines to impose meaningful standards on directors and takes a highly deferential approach to the decisions of management. As Alan Greenspan noted in his testimony last week, this approach has not worked to protect shareholders...

Corporate Governance Practices and the Failure of the Delaware Model: The Last Word (For Today)

Posted on October 29, 2008
The transcript of Greenspan's testimony before the House Committee on Oversight and Government Reform is posted. Here is what he said on Thursday about the Delaware model: Mr. GREENSPAN. I made a mistake ín presuming that the self-interest of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms...

Corporate Governance Practices and the Failure of the Delaware Model: The Need for Reform

Posted on October 29, 2008
When this Blog started almost two years ago, we listed ourselves as a Pro-SOX Blog. In other words, one of our stated purposes was to defend Sarbanes Oxley against the withering criticism from much of the legal blogosphere. The efforts generated an article: Criticizing the Critics: Sarbanes Oxley and Quack Corporate Governance...

Corporate Governance Practices and the Failure of the Delaware Model: An Example

Posted on October 29, 2008
By now, the saga of AIG is familiar to almost everyone. The Company teetered on the edge of failure until the government had to agree to a bailout in return for an almost 80% interest in the company. Despite the need for public assistance, AIG has been in the news constantly because of its policies with respect to executive compensation and other seemingly extravagant expenditures...

Corporate Governance Practices and the Failure of the Delaware Model: The Evidence (Part 2)

Posted on October 29, 2008
Sherman and Sterling conducts periodic surveys of corporate governance practices among the 100 largest companies that have shares traded on an exchange. The firm has come out with one for 2008. It is a highly useful survey. The data allows those debating corporate governance issues to operate on a firm empirical footing...

The "Benefits" of Repealing Glass Steagall

Posted on October 28, 2008
It's always nice to take a counterintuitive approach. Doing so will often attract attention and may sometimes even be right. With that in mind, we noticed the editorial by Charles Calomiris, a professor at the Columbia Business School, who contends that in fact, repealing Glass Steagall was, according to an editorial in the WSJ, a good thing...

Director Compensation Survey

Posted on October 28, 2008
Here at Race to the Bottom we frequently discuss director compensation, as in The Compensation Project (Reprise) and The Race to the Bottom and Student Participation: The Director Compensation Project . This post concerns a recent study by independent compensation consulting firm Frederic W...

The Director Compensation Project: Citigroup

Posted on October 28, 2008
This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2007’s Fortune 100 and using information found in their 2008 proxy statements...

Covering the Criminal Trial of David Stockman

Posted on October 27, 2008
The Race to the Bottom is a collaberation between faculty and students. One of the roles played by students is to follow ongoing cases that address important issues in the realm of corporate governance. Students form a team and monitor any activity in the case...

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