Corporate Governance

A Vice Chancellor Plans to Step Down

Posted on July 15, 2009
Vice Chancellor Lamb is stepping down from the Chancery Court in Delaware. Although pro-management in his outlook, we have been less critical of his decisionsthan others on the Chancery Court. There is, apparently, great interest in the opening. We don't know who will be selected but wehave a prediction: the replacement will look like all the rest...

Stock Exchange Practices in Iraq

Posted on July 14, 2009
The need for capital markets have become di rigueur everywhere, including in some unexpected emerging markets. Apparently one legacy of the US presence in Iraq will be US style capital markets.  The WSJ reported back in April that the Iraq Stock Exchange (ISX) started electronic trading for five of the 91 exchange traded companies...

Treasury and the Regulation of Executive Compensation

Posted on July 13, 2009
There is simply not enough time to write about the corporate governance issues that seem to surface on a daily basis.  A few weeks back, Treasury issued an interim regulation dealing with executive compensation.  There are a few gems in the regulation that are interesting and extraordinary...

The SEC and California and Solving the Mortgage Crisis

Posted on July 10, 2009
One issue that remains yet to be addressed is how to prevent the mortgage crisis from happening again.  One of the many problems was the origination of loans by putting homeowners into mortgages that they couldn't afford.  Well, it seems that two organizations taking lumps these days may have developed a solution...

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Executive Compensation and the Need for a Permanent Solution

Posted on July 09, 2009
Ten or so financial institutions have paid back their TARP money.  The most immediate effect is that they have gotten out from underneath the temporary restrictions on compensation.  It seems from reports that some of them (Goldman and Morgan Stanley) have taken advantage of this freedom to go back to their old ways...

Board Diversity and the Norwegian Experience

Posted on July 08, 2009
We have discussed from time to time the sad state of board diversity in the United States.   Boards in the US are often mirror image boards, with membership looking much like the CEO.  The boards tend to be male, with members having similar experiences, and tend to be undiverse in age...

A Ruling in the Churchill Case

Posted on July 08, 2009
The trialjudge has ruled for the University of Colorado, declining to reinstate Ward Churchill or award him front pay.  The case is here.  We will have more commentary later.

Judge Naves Rules in the Churchill Case

Posted on July 08, 2009
Kevin O'Brien has a post on Judge Naves' decision in the Churchill trial.  It can be found here.  The opinion is posted on the DU Corporate Governance web site.

The SEC's Access Proposal: Some Observations (The Need for Proxy Rule Reform)

Posted on July 07, 2009
The access proposal does more than provide access.  It fixes a gaping hole in the securities laws that the prior administration left in place in its rush to eliminate shareholder access. The prior administration prohibited access bylaws.  It did not, however, resolve the disclosure requirements that needed to be met whenever a shareholder included a nominee in the company's proxy statement...

The SEC, TARP, and the Expanded Role in the Corporate Governance Process

Posted on July 07, 2009
Section 111 of TARP (as amended by the Stimulus Bill) mandated say on pay for all TARP recipients.  The Obama Administration has indicated that it intends to make say on pay mandatory for all companies. At the open meeting held on July 1, 2009, the Commission proposed Rule 14a-20 in an effort to implement say on pay...

The SEC's Access Proposal: Some Observations (The Confusion of a Control Motive)

Posted on July 06, 2009
The provision limits the number of directors to 25% of the board.  Nonetheless, the Commission proposed that no one relying on Rule 14a-11 can "acquire or hold the securities for the purpose of or with the effect of changing control of the company or to acquire more than a limited number of seats on the board...

The SEC's Access Proposal: Some Observations (Preempting Director Qualification Requirements)

Posted on July 06, 2009
The access proposal does more than provide for access.  It overturns an untransparent system of rendering nominees ineligible through board imposed qualifications.  Delaware permits the setting of qualifications for the board of directors.  See 8 Del...

Commissioner Paredes and His Anti-Governance Stance: Opposition Rather than Cooperation

Posted on July 03, 2009
We are discussing the recent speech given by Commissioner Paredes before the conference sponsored by the Center for Capital Markets Competitiveness at the Chamber of Commerce.  The speech is conveniently posted on the Harvard Corporate Governance site...

Commissioner Paredes and His Anti-Governance Stance: Rule 452 and the Inconvenience of State Law

Posted on July 02, 2009
We take a break from the commentary on the Commission's shareholder access proposal to discuss some of the events from the open meeting yesterday. The Commission considered a long overdue amendment to Rule 452 of the NYSE to classify the election of directors as non-routine...

Commissioner Paredes and His Anti-Governance Stance: Opposition Rather than Cooperation

Posted on July 02, 2009
Commissioner Paredes was appointed by President Bush, a compromise arrangement that also brought Commissioners Walters and Aguilar to the Commission. As such, its no great surprise that he doesn't particularly favor the corporate governance agenda of the current Chairman and the Democratic Administration...

The SEC's Access Proposal: Some Observations (The Impact on Board Nomination of Insurgent Directors)

Posted on July 01, 2009
Access is designed not to affect control.  The number of access nominees is limited to 25% of the board and nominees can only be submitted by those shareholders without a control purpose.  On the other hand, there is at least one circumstance where access could still result in a change of control...

The SEC's Access Proposal: Some Observations (Preempting the NYSE)

Posted on July 01, 2009
We have been talking about the SEC's access proposal and its efforts to preempt state law.  The proposal also, however, overrides the requirements of the NYSE, effectively "preempting" them.   The effort highlights the weaknesses in the standards used to determine director independence...

Coverage of the Trial of Ward Churchill (Continued)

Posted on July 01, 2009
Charlene Hunter attended the hearing today on the motion filed by Churchill for reinstatement.  She has written two excellent posts located in the tab on the Churchill trial.  For coverage of the hearing, go here.  For a prognostication, go here.

The SEC's Access Proposal: Some Observations (The Myth of Private Ordering)

Posted on June 30, 2009
We have  been discussing the SEC's access proposal and its impact on state law.  Some who oppose access (Commissioner Paredes for one) give as a justification the dislike for a federal requirement that imposes uniform standards on all companies (put aside that access has multiple standards depending upon the size of the company)...

The SEC's Access Proposal: Some Observations (The Relationship to State Law)

Posted on June 30, 2009
The most interesting issue concerns the SEC's efforts to preempt state law in the area of access.  It is a partial but likely effective approach. Delaware recently amended its state statute to permit access bylaws.  Many have represented that this is a positive step whereby Delaware will permit companies to voluntarily allow access...

The SEC's Access Proposal: Some Observations

Posted on June 29, 2009
We are overdue in commenting on the SEC's access proposal.  We will provide some thoughts over the next few days. The SEC has put out a lengthy release (250 pages) that addresses access.  The release involves a new rule, 14a-11, that would allow large shareholders to include nominations in the company's proxy statement...

Shareholder Access: The High Cost of Proxy Solicitations

Posted on June 29, 2009
This Blog often comments on the cost imposed on shareholders of mounting a proxy campaign. These costs make a proxy contest prohibitively expensive, largely eliminating the ability of shareholders to nominate directors. It is one reason why the current rule proposal to give certain shareholders access to the company's proxy statement for nominees to the board makes sense...

Regime Change and Rule 10b-5: Betz v. Trainer

Posted on June 26, 2009
We  have been writing about Merck v. Reynolds, a case addressing the commencement of the statute of limitations under Rule 10b-5. The same day the Supreme Court took cert in Merck, it denied cert in Betz v. Trainer Wortham. Both cases to some degree asserted that the law governing the commencement of the statute of limitations was hopelessly confused (the petitioners in Betz received an assist from Judge Kozinski who wrote a colorful dissent in the case)...

The Supreme Court and the Mission to Restrict Investor Protection: Merck v. Reynolds (Part 9: An Initial Conclusion)

Posted on June 25, 2009
We are discussing the decision by the Supreme Court to grant cert in Merck v. Reynolds to address the statute of limitations under Rule 10b-5. The case will now go before the US Supreme Court.  We will do our best to follow it, acquiring the relevant briefs...

The Financial Crisis and Executive Compensation: The Word from Istanbul

Posted on June 25, 2009
On Friday, I will give a talk on the financial crisis and the problem of executive compensation.  A link to the conference is here.

The Supreme Court and the Mission to Restrict Investor Protection: Merck v. Reynolds (Part 8: The Importance of Justice Sotomayor)

Posted on June 24, 2009
The Supreme Court granted cert in Merck v. Reynolds to address the statute of limitations under Rule 10b-5. We take a minute to observe the importance of the most recent nomination to the Supreme Court, Judge Sotomayor.  She will be replacing Justice Souter on the Court...

The Race to the Bottom, the Royal Bank of Scotland, and the Law and Economics Movement

Posted on June 24, 2009
We will resume our discussion of Merck, the case pending before the Supreme Court on the standard for determining the onset of the statute of limitations under Rule 10b-5. In the 20 or so years before the new millennium, the corporate law area was overrun by the law and economics movement...

The Supreme Court and the Mission to Restrict Investor Protection: Merck v. Reynolds (Part 7: The Misguided Notion of Inquiry Notice)

Posted on June 23, 2009
The Supreme Court granted cert in Merck v. Reynolds to address the statute of limitations under Rule 10b-5.  To the extent any of the Justices want to shorten the statute of limitations by hastening the onset of the two year period, they will need to address unaccommodating language in the statute and the legislative history...

The Supreme Court and the Mission to Restrict Investor Protection: Merck v. Reynolds (Part 6: The Misguided Concept of Inquiry Notice)

Posted on June 22, 2009
We are discussing Merck v. Reynolds, a case in which the Supreme Court recently accepted cert.  This case will likely turn on when "storm warnings" put plaintiffs on notice of the possibility of fraud. The broader issue in the case, however, is the entire storm warnings standard...

Suing the SEC over Access: Short Sightedness Reigns in the Anti-Access Community

Posted on June 22, 2009
We are doing a series of posts on the Merck case, a decision recently taken by the Supreme Court that will examine the standard for commencing the statute of limitations under Rule 10b-5.  Nonetheless, we have been hearing rumblings of a law suit by business interests against the SEC should the current access proposal be adopted...

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