Corporate Governance

The United States' Response to Barnaba's Motion to Dismiss

Posted on October 27, 2008
The claims of Paul C. Barnaba and the problems with the discovery process have delayed prosecution of United States v. Stockman, 07-0220 (S.D.N.Y. filed Mar. 21, 2007) . On April 8th, Paul C. Barnaba filed a motion to dismiss the conspiracy to commit securities fraud, wire fraud, and bank fraud in the United States v...

The Director Compensation Project: Freddie Mac

Posted on October 27, 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...

The Almost Disappearance of Goldman

Posted on October 27, 2008
We learn in the WSJ today that back in September, Goldman approached Citigroup about a possible merger.  The call apparently came shortly after Lehman filed for bankruptcy.  Nothing apparently came of the effort.  In some respects, Goldman, as an indepedent investment banking firm, has already disappeared...

The Director Compensation Project: JPMorgan Chase

Posted on October 26, 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...

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Corporate Governance Quote of the Week

Posted on October 25, 2008
According to presidential candidate Barak Obama: "Let's be clear who John McCain is fighting for. He is not fighting for Joe the Plumber. He's fighting for Joe the Hedge Fund Manager."  

The Director Compensation Project: Fannie Mae

Posted on October 25, 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...

Joe Biden, Director Self Interest, and a Challenge to the Delaware Model

Posted on October 24, 2008
Politico has a nice piece (taking mostly from earlier posts on blogs like the Delaware Corporate and Commercial Litigation Blog written by Francis Pileggi) on the impact on corporate governance of Joe Biden leaves the Senate for the White House.  The article focuses mostly on Biden's efforts to protect Delaware's interests in the bankruptcy area...

Chairman Cox, Director Self Interest, and a Challenge to the Delaware Model

Posted on October 24, 2008
The Chairman of the SEC yesterday again forcefully indicated in his testimony before the House Committee on Oversight and Government Reform that "voluntary" regulation doesn't work.  As he noted: We have learned that voluntary regulation does not work...

Chairman Levitt, Director Self Interest, and a Challenge to the Delaware Model

Posted on October 24, 2008
Earlier today, we comment on Alan Greenspan's testimony.  In it he more or less took the position that the Delaware approach that excessive deference to management was the best way to protect shareholders. We turn to the views of Arthur Levitt, the former Chairman of the SEC...

Alan Greenspan, Director Self Interest, and a Challenge to the Delaware Model

Posted on October 24, 2008
Alan Greenspan, the former head of the Federal Reserve Board, testified yesterday before the House Committee of Government Overisght and Reform.   The testimony was extraordinary both in his admission to having misjudged basic premises of the US economy and, most importantly for this Blog, the acknowledgement that the pro-management bias evidenced in our system of corporate governance was completely inadequate to protect shareholders...

The Director Compensation Project: AIG

Posted on October 23, 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...

The Compensation Project (Reprise)

Posted on October 23, 2008
Last spring, students on The Race to the Bottom examined the proxy statements of some of the largest companies in the United States and stripped out the information about director and CEO compensation.  The Director Compensation Project was made possible by amendments to Item 402 of Regulation S-K that now required compensation tables (and the "total compensation" column) for directors...

The Resignation of Judge Nottingham and the Nacchio Appeal

Posted on October 23, 2008
So, what impact with Judge Nottingham's resignation have on the Nacchio appeal?  Following oral argument before the en banc court, the tradition is for the judges to take a tentative vote on the outcome.  The case has, therefore, probably been decided, with the delay coming from the need to draft an opinion (and the inevitable dissent)...

Nacchio Judge Resigns

Posted on October 22, 2008
Judge Edward W. Nottingham, the federal judge who presided over the insider trading trial of former Qwest Communications CEO, Joseph Nacchio, has resigned effective October 29, 2008. The resignation comes amidst an investigation by the 10th Circuit's judicial counsel regarding complaints of judicial misconduct...

Backdating, Apple, and Legal Counsel

Posted on October 22, 2008
Scott James, a student editor on The Race to the Bottom, has written a post about the recent settlement in the Apple backdating case with Nancy R. Heinen, the former General Counsel of Apple.  It is a case that illustrates, among other things, that while CFOs have probably been in the eye of the backdating storm, responsibility has sometimes fallen on counsel...

Former Apple General Counsel Settles for $2.2 Million After SEC Backdating Allegations

Posted on October 22, 2008
This post is about former Apple General Counsel, Nancy R. Heinen’s $2.2 million settlement stemming from the SEC's complaint alleging fraudulent stock option backdating. Former CFO, Fred D. Anderson was also allegedly involved. Heinen and Anderson received some of the backdated options, along with other high level Apple executives including Steve Jobs...

The SEC, the APA and Naked Short Selling: A Continued Failure to Follow Legal Requirements

Posted on October 22, 2008
The SEC recently promulgated Rule 10b-21, Exchange Act Release No. 58774 (Oct. 14, 2008), an antifraud rule designed to prevent abusive naked short selling.  Specifically, the Rule makes it a violation for a short seller to deceive a broker about the ability to deliver the shares needed to cover the short position...

Corporate Governance Failures and the Bailout Bill

Posted on October 22, 2008
With the US Government willing to bailout financial institutions through capital infusions, it is becoming increasingly apparent that the largess will not be accompanied by reform of the corporate governance process.  As noted in a recent issue of MarketWatch:  But the Treasury isn't replacing any of the directors on the boards of the banks it's investing in, or adding new directors to represent taxpayer interests...

Bear Stearns and the SEC: The Enforcement Proceeding that Never Was (Part 4)

Posted on October 21, 2008
We are discussing the Report issued by the Inspector General at the SEC on the decision by the Miami Office to drop a case involving Bear Stearns.  A copy can be found at the Miami Herald web site. With a $500,000 settlement against Bear Stearns in hand, why did the Enforcement Division decide to terminate the case?  The two reasons given the Report were litigation risk and delay...

Bear Stearns and the SEC: The Enforcement Proceeding that Never Was (Part 3)

Posted on October 21, 2008
We are discussing the Report of the Inspector General of the SEC on the termination of a case against, among others, Bear Stearns, by the Miami Office. A copy can be found at the Miami Herald web site. Much of the Report explores the reasons for the decision not to bring the case...

Bear Stearns and the SEC: The Enforcement Proceeding that Never Was (Part 2)

Posted on October 20, 2008
We are discussing the Report of Investigation by the Inspector General at the SEC on the decision by Miami Office of the SEC to not bring an action against, among others, Bear Stearns.  The Report is a must read for anyone wanting some insight into the investigatory process...

Bear Stearns and the SEC: The Enforcement Proceeding that Never Was (Part 1)

Posted on October 20, 2008
Ten days or so ago the Inspector General of the SEC issued yet another critical report involving the SEC's interaction with Bear Stearns.  Titled "Failure to Vigorously Enforce Action Against W. Holding and Bear Stearns at the Miami Regional Office," the Report has yet to be posted on the SEC's web site...

Lessons from the Crisis

Posted on October 19, 2008
The Denver Post has a nice article on the current financial turmoil and corporate governance, titled "Lessons from the Crisis." 

Graduate Education: The Recession Free Profession

Posted on October 18, 2008
As the economy pitches into a recession, applications to business school, according to the WSJ, seem to be climbing.  With the assorted layoffs and bankruptcies, apparently some in the financial industry are deciding that this is a good time to go back to school...

Bank Charters and Forum Selection

Posted on October 17, 2008
Banks in the United States can be chartered by the federal government or the state government.  Banks, therefore, can select among multiple possible regulators.  This choice allows for the possibility of a regulatory race to the bottom.  Whether this in fact is taking place is unclear...

Executive Compensation Limits and the Likely Effect

Posted on October 17, 2008
The Journal has suggested that the compensation limits in the bailout could "cost wall street."  Aside from some tax consequences, the limits involve clawbacks (the return of compensation if it turns out the metric used to determine the amount was wrong) and limits on golden parachutes (payments to departing CEOs)...

Blogs and Profitability

Posted on October 16, 2008
We normally write about law blogs.  We were, however, tipped off (from our ever vigilant librarian at the University of Denver Sturm College of Law) about the annual survey of the blogosphere (not just those with legal subject matter) undertaken by Technorati...

Delaware and Responsibility for the Current Financial Turmoil

Posted on October 16, 2008
Marcia Coyle from the National Law Journal has written a nice piece,  Delaware in the Crosshairs, an examination of the responsibility of Delaware and its courts for the current crisis in the financial markets.  As the article notes:  "The federal financial bailout contained a small inroad on the national dominance by Delaware law and courts on corporate governance issues, but that state and its courts soon may see larger federal vehicles barreling toward them because of the economic crisis...

Connolly v. Gasmire and Director Independence

Posted on October 16, 2008
The Race to the Bottom presupposes that while Delaware controls in its anti-shareholder decision making, other jurisdictions will follow suit in order to hold onto the modest number of companies who have opted to remain incorporated in the jurisdiction...

Connolly v. Gasmire: ?Independent and Disinterested? Under the Aronson Test

Posted on October 16, 2008
In Connolly v. Gasmire, 2008 Tex. App. LEXIS 4930 (July 2, 2008) shareholders John Connolly and Anne Molinari filed a derivative suit against several current and former Odyssey Healthcare, Inc. board members.  The 14th District Court in Dallas County dismissed the suit because plaintiffs failed to show that demand was futile...

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