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

Restoring American Financial Stability Act of 2009: The Regulation of Executive Compensation

Posted on November 30, 2009
The Financial Stability Act contains a number of provisions designed to address the problem of excessive compensation. Most are procedural. A huge exception is the prohibition on "excessive" compensation by financial institutions subject to FDIC insurance...

Restoring American Financial Stability Act of 2009: Repealing the PSLRA

Posted on November 28, 2009
The Private Securities Litigation Reform Act was a severe response to congressional dislike for securities class action fraud suits. Congress sought to restrict the suits in part by imposing exceedingly tough pleading standards. Thus, a complaint would be dismissed unless plaintiffs alleged a "strong inference" of scienter...

Reforming the SEC: Relevancy and Reallocating Resources

Posted on October 01, 2009
Robert Khuzami, the Director of the Division of Enforcement, has wasted little time in disrupting the status quo. He has proposed a series of reforms, many of them set out in a speech before the New York City Bar back in early August. One of the critical problems and goals is to increase the relevancy of the Commission...

Reforming the SEC: Turnover at the Top

Posted on September 30, 2009
All of the heads of the SEC's operating divisions have changed either shortly before or shortly after the arrival of Mary Schapiro. That in fact is not a particularly unusual phenomena at the Commission. Those running the Divisions use the change in supervisor as a catalyst to move on, usually into the private sector...

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Reforming the SEC: A List of the Directors of the Division of Enforcement

Posted on September 30, 2009
We are discussing reform at the SEC. The prior post discussed the appointment of Robert Khuzami, only the second head of the Division of Enforcement to have no direct experience inside the Division. We thought it would be appropriate to provide a list of all of the Division Directors and a bit of information about their background before they joined the Commission...

Reforming the SEC: Large Settlements

Posted on September 29, 2009
We are discussing the condition of the SEC and some proposed reforms. We'll have a number of posts on the subject over the next week or so. While much of this discussion is about things that have gone wrong, we take a moment to note some things that have gone right...

Reforming the SEC: Dodging A Legislative Bullet

Posted on September 29, 2009
The SEC did not cause the current financial crisis. Nonetheless, there was some sense that the SEC was fiddling while Rome burned. The five large investment banking firms that were at the heart of the crisis -- Morgan, Goldman, Merrill, Lehman and Bear Stearns -- were subject to the oversight of the SEC...

Reforming the SEC: The Humbling of a Proud Agency

Posted on September 28, 2009
Bureaucracies, over time, become, well, bureaucratic. As William O. Douglas, the third chairman of the SEC, wrote in a speech only four years after the creation of the SEC (the SEC only came into existence with the adoption of the Exchange Act; the Securities Act of 1933 left to the FTC the initial obligation to enforce the securities laws): 'Flexibility in any institution is difficult to obtain...

Shareholder Access and the Charade of Majority Voting Provisions

Posted on September 28, 2009
In arguing against shareholder access, commentators and pundits often point to majority vote provisions. These are given as an example that private ordering really works. It is used to suggest that access should be left to private ordering rather than a mandatory rule issued by the Commission...

The Race to the Bottom and "Fodder for those Who Seek a Federal Takeover of Delaware Corporate Law"

Posted on September 25, 2009
The debate on Blogging and its role in the academy is an ongoing one. Nonetheless, it seems clear to The Race to the Bottom that blogging can play an important role on the continuum of scholarship. It provides a mechanism for commenting on legal developments on a semi-real time basis...

Foreign-Cubed Securities Actions and the Supreme Court: A Petition for Certiorari Is Filed In Morrison v. Nat'l Austl. Bank (Introduction)

Posted on September 24, 2009
In the coming weeks and months, The Race to the Bottom will feature a series of posts that will discuss the petition for certiorari, merit, and amicus briefs filed to the Supreme Court in Morrison v. Nat'l Austl. Bank Ltd., No. 07-0583-cv, 2008 U.S. App...

Morrison v. Nat'l Austl. Bank Petition for Certiorari: An Opportunity to Fix the Circuit Split

Posted on September 24, 2009
This post is the first of a series looking into the certiorari, merit, and amicus briefs filed in Morrison v. Nat'l Austl. Bank Ltd., No. 07-0583-cv, 2008 U.S. App. LEXIS 21986, (2d Cir. 2008). As mentioned in my introduction, the blog covered the decision of the Second Circuit...

Limited Partnership Units As Securities: Liberty Property Trust v. Republic Properties Corp.

Posted on September 23, 2009
In Liberty Property Trust v. Republic Properties Corporation, 2009 U.S. App. LEXIS 18880 (D.C. Cir. Aug. 21, 2009), plaintiffs sued Republic Properties Corporation and its only two shareholders, Grigg and Kramer, alleging securities fraud under Rule 10b-5, control person liability, and various infractions under state law...

SEC v. BofA: Let the Litigation Begin

Posted on September 22, 2009
We called it (although, in fairness, we had a 50-50 chance). The SEC plans to litigate the case against Bank of America in connection with the non-disclosure of the bonuses paid by Merrill Lynch. And, from the statement issued about the matter, will consider adding defendants (read individuals) if the facts uncovered in discovery warrant it...

SEC v. Cuban and Mark Cuban's Patriotism

Posted on September 22, 2009
We have a nice student post today on the motion filed by Mark Cuban for attorneys fees against the Commission alleging bad faith in connection with the investigation. In the brief, there are the following quotes which the brief represents came from emails sent by an SEC attorney to Cuban: March 28, 2007 – '...

Mark Cuban Wants Attorneys' Fees and Expenses for SEC's Bad Faith Lawsuit

Posted on September 22, 2009
On August 28, 2009, Mark Cuban filed a Motion for Attorneys' Fees and Expenses ('the Motion') in the Northern District of Texas – Dallas Division. The Motion contends Cuban is entitled to Attorneys' fees and expenses he incurred defending against the Securities and Exchange Commission's ('SEC') complaint against Cuban for insider trading...

Churchill v CU: Judge Denies Churchill's Motion to Amend Judgment

Posted on September 21, 2009
Not surprisingly, Judge Naves denied Churchill's Motion to Amend Judgment Pursuant to C.R.C.P 59. The two-sentence Order issued September 18th came after the motion and response summarized by this Blog and posted on the DU Corporate Governance site...

Overturning the Delaware Model: Going Beyond Financial Institutions

Posted on September 21, 2009
The current proposals to regulate executive compensation, particularly the Fed's efforts to regulate compensation practices that threaten financial soundness, are limited to banks. The same limits ought to apply to all public companies, not just those operating in the financial markets...

The Fed Proposals and Upending the Delaware Model

Posted on September 21, 2009
The Fed is considering rules that would effectively regulate compensation practices by the 5000 or so banks subject to its oversight. Federalization of the compensation process, in short, and a death knell to the Delaware model of determining compensation...

Bank of America and Judge Rakoff: A Strategic Profession of Innocence?

Posted on September 20, 2009
We have noted on this Blog the curious decision by BofA to adopt a strategy of complete innocence when attempting to explain the agreement to pay a $33 million penalty. Its nothing new for a company to think that it has the better of the merits in any case and there is plenty of room to make that case here...

Bank of America and Judge Rakoff: A Strategic Profession of Innocence?

Posted on September 19, 2009
We have noted on this Blog the curious decision by BofA to adopt a strategy of complete innocence when attempting to explain the agreement to pay a $33 million penalty. Its nothing new for a company to think that it has the better of the merits in any case and there is plenty of room to make that case here...

The Role of Stock Exchanges in Corporate Governance: The Matter of Enforcement (Part 8)

Posted on September 18, 2009
We are discussing The Role of Stock Exchanges in Corporate Governance, a report issued by the OECD. As we noted in the last post, most exchanges eschew mandatory listing standards and instead rely on "comply or explain." In these countries, a voluntary code of corporate governance exists and companies may "opt in" if they like...

The Role of Stock Exchanges in Corporate Governance: A Conclusion of Sorts

Posted on September 18, 2009
The study indicates a wide variation of practices. There is, however, a significant split, not between common and civil law jurisdictions but between the US and the rest of the world. It seems that the US is the one country that consistently looks, on an exclusive basis, to the stock exchanges to establish and enforce mandatory listing standards...

The Role of Stock Exchanges in Corporate Governance: Shielding the Regulatory Function from Profit Maximization (Part 6)

Posted on September 17, 2009
We are discussing The Role of Stock Exchanges in Corporate Governance, a report issued by the OECD. What about listing standards, particularly in a "for-profit" environment? For those that do retain a regulatory role, the model varies. The NYSE relies on a separate non-profit subsidiary, NYSE Regulation, for surveillance and enforcement...

The Role of Stock Exchanges in Corporate Governance: The Source of the Cross-Listing Premium (Part 7)

Posted on September 17, 2009
We are discussing The Role of Stock Exchanges in Corporate Governance, a report issued by the OECD. The table on p. 11 of the report also notes whether the various exchanges impose mandatory disclosure requirements on listed companies. Of course, in the US, Section 12(b) requires exchange traded companies to conform to the reporting regime under Section 13...

The Role of Stock Exchanges in Corporate Governance: The Regulatory Role of For Profit Exchanges (Part 4)

Posted on September 16, 2009
We are discussing The Role of Stock Exchanges in Corporate Governance, a report issued by the OECD. The role of the stock exchanges varies considerably. Some are little more than trading platforms, with regulatory requirements largely emanating from the government...

The Role of Stock Exchanges in Corporate Governance: The Role in Determining Listing Standards (Part 5)

Posted on September 16, 2009
We are discussing The Role of Stock Exchanges in Corporate Governance, a report issued by the OECD. On p. 11 of the report is a table showing a number of stock exchanges and their role in the governance process. The table explains whether the stock exchange has any role in setting listing standards and in surveillance...

SEC v. BofA: Judge Rakoff Rejects the Settlement (part 2)

Posted on September 15, 2009
Judge Rakoff's concern were two fold. First, was his concern with the Commission's side of things, centering on the decision to charge the Bank but not any responsible individuals. He did not buy the Commission's justification for imposing the penalty on Bank of America...

SEC v. BofA: Judge Rakoff Rejects the Settlement (Part 1)

Posted on September 15, 2009
In what has to be a stinging rebuke to both sides, Judge Rakoff refused to approve the settlement between the Securities and Exchange Commission and the Bank of America over the alleged failure to adequately disclose the Merrill Lynch bonuses paid just before the merger...

SEC v. BofA: Judge Rakoff Rejects the Settlement (Part 5)

Posted on September 15, 2009
The opinion was remarkable in its candor. In characterizing what he believed really happened, Judge Rakoff had this to say: Overall, indeed, the parties' submissions, when carefully read, leave the distinct impression that the proposed Consent Judgment was a contrivance designed to provide the S...

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