Corporate Governance

BRIC Project -- China -- Regulatory Structures in China (Part 1 cont.) (UNPUBLISHED

Posted on May 26, 2010
Introduction Part one of the blog's BRIC Project's China Series seeks to illuminate the regulatory structures, agencies, and institutions that make up corporate governance (gongsi zhili) in China.  This continued posting on the regulatory structures in China looks at the (A) Stock Exchanges and Agency Regulation in China, and (B) Voluntary Regulations in China...

Colorado Bar Association, Legal Blogs in Colorado Series: The Race to the Bottom

Posted on May 25, 2010
As a result of our coverage of the 42nd Annual Rocky Mountain Securities Conference, the CBA profiled The Race to the Bottom in their series on legal blogs in Colorado.  We appreciate the CBA taking the time to acknowledge our work and for continuing to include us in their events...

The SEC, the Inspector General, and A Professional Response

Posted on May 25, 2010
Reports have surfaced that the SEC and Justice Department have opened investigations into allegations of improper disclosure of nonpublic information by government officials concerning the insider trading investigation into the Galleon Group and its founder, Raj Rajaratnam...

No Longer Nasty Brutish and Short: The Growing Organization of the Legal Blogosphere

Posted on May 24, 2010
The legal blogosphere began, as we have discussed, as a Hobbsian state of nature.  See Of Empires, Independents, and Captives: Law Blogging, Law Scholarship, and Law School Rankings.  The Blogosphere was originally populated by individual faculty who for one reason or another started a law blog...

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Non-Random Assignment of Federal Cases and Bank of America

Posted on May 20, 2010
As anyone knows who tracks the judiciary, the particular judge assigned to a case (or the panel of judges in the case of an appeal) can be outcome determinative.  Sometimes its because of personality and sometimes because of ideology.  The integrity of the system is maintained not by ensuring uniformity among judges but by ensuring that cases are assigned to decison makers in a neutral manner...

Independent Directors and the Japanese Experience (Part 1)

Posted on May 19, 2010
We were alerted by GovenanceMetrics on recent information about Japanese corporate governance practices, particularly the Inter-Corporate Network Dealings and Minority Shareholder Protection — Cases in Japan, published by the Asia-Pacific Office of CFA Institute/CFA Society of Japan...

Independent Directors and the Japanese Experience (Part 2)

Posted on May 19, 2010
As noted, listed companies on the Tokyo Stock Exchange must have one independent director.  They have until 2011 to conform to the requirement.  Progress, even for this modest requirement, has been slow.  As GovernanceMetrics reports: According to data from the TSE, almost one in ten of the 2,094 companies that reported as of March 31, 2010 had no independent directors...

The Arrival of Say on Pay: Occidental & Motorola (Part 3)

Posted on May 18, 2010
So what impact is say on pay likely to have in the United States?  It is hard to say how it will affect management (the vote is advisory, after all) but recent evidence indicates that shareholders will not be afraid to register their opposition.  Although say on pay votes remain rare in the US, shareholders this month in two companies (Occidental and Motorola) voted no on the compensation matter submitted to them...

The Arrival of Say on Pay (Part 1)

Posted on May 17, 2010
Say on Pay is coming and it looks likely to alter the compensation debate. Some companies voluntarily put in place a say on pay provision (Aflac was the first).  Others were required under TARP.  See Rule 14a-20, 17 CFR 240.14a-20.  But financial reform will make say on pay much more comprehensive...

The Arrival of Say on Pay (Part 2)

Posted on May 17, 2010
What has been the experiences in other countries with say on pay?  Great Britain has had in place say on pay since 2002.  In 2003, shareholders voted down the pay package for Jean-Pierre Garnier, the chief executive of GlaxoSmithKline.  Things remained uneventful until the financial crisis in 2009...

Diversity and the Securities and Exchange Commission

Posted on May 15, 2010
At the Rocky Mountain Securities Conference held in Denver on Friday, May 7, I asked Commissioner Walter how things had changed at the Commission over her long experience with the agency.  Commission Walter joined the SEC in the 1970s and, in the 1980s and 90s, served as Associate General Counsel (and as my boss) and Deputy Director of the Division of Corporation Finance...

Former KB Home CEO Found Guilty

Posted on May 14, 2010
On April 21, 2010, a federal jury in the Second Circuit found Bruce Karatz, the former CEO of KB Home, guilty of four felonies in a stock backdating scam.  Karatz was found guilty of two counts of mail fraud, one count of lying to company accountants, and one count of making false statements in reports to the Securities and Exchange Commission...

SEC v. Benger: Charging the Escrow Agent

Posted on May 14, 2010
In Securities Exchange Commission v. Benger, et al., No. 09 CV 676, 2010 WL 918065 (N.D. Ill. Mar. 10, 2010), the SEC brought an action against defendants for assorted violations of the Securities Act of 1933 and the Securities Exchange Act of 1934, as well as equitable relief, in connection with an allegedly fraudulent securities offerings under Regulation S...

The SEC, Congress, and the Harm of a Rogue Inspector General (Part 1)

Posted on May 13, 2010
The SEC's Inspector General, David Kotz, did substantial damage to his position and the SEC by recently announcing on Fox News that he would investigate the timing of the SEC's decision to bring an action against Goldman Sachs.  There is no evidence that the matter was deliberately timed...

The SEC, Congress, and the Harm of a Rogue Inspector General (Part 5)

Posted on May 13, 2010
So where does this leave David Kotz?  Reports quote him as opposing presidential appointment.   In a statement issued by the Center for Public Integrity, he provided his reasons:      'If I were to be an inspector general that was appointed by the president and cleared by the White House, it might be difficult to convince the public that I could conduct an independent or credible investigation into alleged improper connections between outside forces, including the White House, and the SEC,' SEC Inspector General David Kotz said in an interview with the Center for Public Integrity...

The SEC, Congress, and the Harm of a Rogue Inspector General (Part 4)

Posted on May 13, 2010
One thing is for certain, however, the approach by Senator Grassley is a wrong one. His proposal, according to reports, would essentially allow for an Inspector General without accountability.  He would create a position that was accountable to noone, the President, Congress, or the Chair of the Commission...

The SEC, Congress, and the Harm of a Rogue Inspector General (Part 3)

Posted on May 13, 2010
So who should appoint the Inspector General?  The chair of the SEC or the President? At some level, it hardly matters.  The President has the power to appoint the chair of the SEC.  Thus, in most cases, the President's interests and those of the Chair will be in rough allignment...

The SEC, Congress, and the Harm of a Rogue Inspector General (Part 2)

Posted on May 13, 2010
So, who ought to appoint and remove the Inspector General?   There are currently 69 Inspector Generals.  Many are appointed by, and subjected to the removal of, the President.  With respect to appointment, an Inspector General must be "appointed without regard to political affiliation and solely on the basis of integrity and demonstrated ability in accounting, auditing, financial analysis, law, management analysis, public administration, or investigations...

Board Diversity and the Need for Access (Part 1)

Posted on May 12, 2010
At the Rocky Mountain Securities Conference last Friday, Commissioner Walter gave a thoughtful speech that touched upon a number of corporate governance issues, including access.  She indicated support but also noted that it was better to be a bit slower and get it right than the other way around...

Board Diversity and the Need for Access (Part 2)

Posted on May 12, 2010
So what's the problem with a legislative imposition?  In Norway, boards must have 40% women.  This approach would be an anathema in the United States where the reigning culture leaves these things to the market (despite the obvious evidence of market failure)...

42nd Annual Rocky Mountain Securities Conference: Mutual Funds, Broker Dealers and Investment Advisors: Risks and Approaches to a Changing Market

Posted on May 12, 2010
Last Friday, May 7, 2010, the Rocky Mountain Securities Conference featured a panel that discussed the changing risk and regulatory market as it affects Mutual Funds, Broker Dealers and Investment Advisors.  The panel consisted of John McDermott (Brownstein Hyatt Farber Schreck), Steven Stone (Morgan, Lewis & Bockius), Carlo di Florio (SEC), and moderated by Kevin Goodman (SEC)...

In re Chiquita Brands International: Chiquita?s Motion to Dismiss Amended Complaints

Posted on May 11, 2010
We have been following the Chiquita Brands International, Inc. ('Chiquita') case since 2007.  In an earlier post, we reported the court set a deadline of February 26 for any amended complaints to be filed.  On April 9, Chiquita filed its Motion to Dismiss the Amended Complaints...

The Rocky Mountain Securities Conference and Reconfiguring a Regional Office at the SEC

Posted on May 10, 2010
With all of the talk about the reforms in the Division of Enforcement, particularly the creation of five speciality units, we thought it would be interesting to hear the specifics that came out at the Rocky Mountain Securities Conference. The five new units include:  Asset Management, Market Abuse, Structured & New Products, Foreign Corrupt Practices and Muni Securities and Public Pensions...

The Rocky Mountain Securities Conference and Some Enforcement Insights

Posted on May 10, 2010
Loren Reisner, the Deputy Director of Enforcement, sat on the Enforcement panel at the Rocky Mountain Securities Conference.  While he had plenty to say, we want to point out a few interesting remarks. First, he was asked about the relationship between the SEC and the criminal authorities...

42nd Annual Rocky Mountain Securities Conference: Defense Panel Skeptical of Cooperation Agreements

Posted on May 10, 2010
Last Friday's Rocky Mountain Securities Conference featured a defense counsel panel that commented on the recent changes in the SEC's structure and how it has affected their practice.  The panel consisted of Daniel F. Shea (Hogan & Lovells), Randall Fons (Morrison & Forester), David A...

Schwab Settles $200 Million Federal Class-Action Lawsuit, Suffers Diminished First-Quarter Net Profit

Posted on May 07, 2010
On April 20, 2010, in one of the largest settlements in a securities case in the northern district of California, Charles Schwab Corp. ('Schwab') settled a federal class-action lawsuit for $200 million.  The plaintiffs to the suit are shareholders of the Schwab YieldPlus Fund, an ultra-short bond fund that invested primarily in fixed income instruments, including mortgage-backed securities and corporate bonds...

42nd Annual Rocky Mountain Securities Conference Today

Posted on May 07, 2010
The Race to the Bottom is covering the 42nd Rocky Mountain Securities Conference happening today in Denver, Colorado.  We will provide thoughts throughout the day along with more detailed remarks about the issues over the course of the next few days...

Goldman v. SEC: The Settlement Talks Begin

Posted on May 07, 2010
Settlement talks have apparently begun. Those who believed that Goldman would fight to the bitter end in its case against the SEC were either  engaging in wishful thinking or were unaware of the dynamics of securities litigation with the Commission...

Cuban v. SEC: SEC Moves to Bifurcate and Stay Proceedings in FOIA Suit

Posted on May 06, 2010
In response to Mark Cuban's  ('Cuban') Freedom of Information Act ('FOIA') suit to compel documents from the Securities and Exchange Commission ('SEC'), the SEC filed a motion to partially bifurcate and stay the proceedings (the 'Motion'), as well as a motion for partial summary judgment...

SEC v. Cuban: Attorney?s Fees Battle Continues

Posted on May 06, 2010
Mark Cuban ('Cuban') continues to attempt to recover attorney's fees under § 2412(b) or the inherent power of the court by asserting the Securities and Exchange Commission ('SEC') filed a lawsuit in bad faith.   The Blog previously posted on the briefs filed in support and opposition of this bad faith suit regarding awarding attorney's fees...

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