Corporate Governance

Corporate Disclosure and the Role of Outside Directors: SEC v. Krantz (Stock Exchanges and the Definition of Independent Director) (Part 2)

Posted on March 11, 2011
We have noted often on this Blog that the definition of "independent" director used by the various stock exchanges is not robust enough to capture all of the relationships that can impair independence.  The definitions do not, for example, speak to friendship...

ABA Business Law Section?s Spring Meeting & The Race to the Bottom

Posted on March 10, 2011
The Race to the Bottom is pleased to announce it will be attending ABA Business Law Section's Spring Meeting in Boston April 14 through April 16, 2011.  At the Spring Meeting in Denver last year, we covered this event with great success and discussed many issues, which can be found here...

Corporate Disclosure and the Role of Outside Directors: SEC v. Krantz (Part 1)

Posted on March 10, 2011
When a company violates the law, outside directors are almost never liable for breach of their fiduciary duties, irrespective of the harm to the company.  This is because, under Caremark and its ilk (see Stone v. Ritter), there is, in Delaware, no meaningful duty to monitor...

The Failure of Private Ordering and the Need for Shareholder Access

Posted on March 09, 2011
Access, so the argument goes, is a categorical rule that should be replaced with a more flexible approach that allows for private ordering.  As we have noted, Delaware law does not do a good job at allowing private ordering.  See Opting Only in: Contractarians, Waiver of Liability Provisions, and the Race to the Bottom...

To access this complete feed in the blog feed reader login or register for free.

Diversity and the Board of Directors: The Inadequate Pool of Candidates for the Board

Posted on March 09, 2011
We have been writing recently about the dismal record by US boards when it comes to the representation of women.  In the US, about 12-14% of directors are women.  The usual explanation of this low percentage is the dearth of qualified candidates...

Diversity and Law Schools: A Problem Not Limited to Corporate Boards

Posted on March 09, 2011
We have been discussing diversity on corporate boards.  How is diveristy in law schools doing?  Not well, apparently.  On the one hand, the numbers look favorable.  The number of African Americans and Mexican Americans "have been applying to law schools in relatively constant numbers...

Gender Diversity on the Board: The US Falls Further Behind (And Why We Need Shareholder Access) (Part 4)

Posted on March 08, 2011
What are some of the observations made in the report on gender diversity sponsored by the British Government?  First, its good for business. This business case [of more women] is backed by a growing body of evidence. Research has shown that strong stock market growth among European companies is most likely to occur where there is a higher proportion of women in senior management teams...

Gender Diversity on the Board: The US Falls Further Behind (And Why We Need Shareholder Access) (Part 5)

Posted on March 08, 2011
The government sponsored study had issued a number of recommendations designed to improve gender diversity on the boards of listed companies.  Mostly the recommendations call for public pressure.  The recommendations include:  A public commitment from the boards of the largest companies to increase the number of women to 25% by 2015 and to announce the aspirational goals within six months; Changes to the UK Corporate Governance Code to require listed companies to establish a policy concerning boardroom diversity; , A call for greater pressure from investors, particularly that they consider diversity when "considering ...

Gender Diversity on the Board: The US Falls Further Behind (And Why We Need Shareholder Access) (Part 3)

Posted on March 07, 2011
The problem of inadequate gender representation is not limited to the United States.  It is effectively a global issue.  Recognizing the failure of the market in this area, some countries have adopted a legislative solution.  Norway was the first to do so...

Gender Diversity on the Board: The US Falls Further Behind (And Why We Need Shareholder Access) (Part 2)

Posted on March 05, 2011
The real explanation for the dearth of women is the closed system for determining nominees for the board of directors.  As we have noted often on this Blog, shareholders rarely receive a choice when electing directors.  In all but a very small number of cases, shareholders are asked to vote on the slate of directors submitted by the board of directors...

Gender Diversity on the Board: The US Falls Further Behind (And Why We Need Shareholder Access) (Part 1)

Posted on March 04, 2011
In crafting a system of regulation, there is no question that the preference should be in favor of allowing markets to effectively function.  In general, markets make better decisions than regulators.  But that is not always true and sometimes the existence of market failure is easy to see...

Executive Compensation, a Divided Commission, and the Consequences of Dissent (Part 1)

Posted on March 03, 2011
We had planned today to start a series of posts on board diversity, keyed to the recent government sponsored study in Britain about women on the board.  But we thought a delay was warranted by the events at the Commission yesterday. The Commission proposed a rule on executive compensation...

Executive Compensation, a Divided Commission, and the Consequences of Dissent (Part 2)

Posted on March 03, 2011
The proposed rules (those commanded by Dodd-Frank and jointly written in conjunction with other banking agencies) were proposed by the Commission yesterday.  The rules passed by a 3-2 vote.  The reasoning of the dissenting commissioners is here and here...

56John Q. Hammons: The Unfairness of Proving Fairness

Posted on March 02, 2011
Our second comment on John Q. Hammons is more in the nature of an observation about Delaware law.  As we have noted on this Blog often (and described at lengh, see Disloyalty Without Limits: 'Independent' Directors and the Elimination of the Duty of Loyalty) Delaware has quietly and without significant analysis severely weakened the duty of loyalty by substituting process for fairness...

John Q. Hammons: An Unfair Method of Proving Fairness

Posted on March 02, 2011
In re John Q. Hammons Hotels Inc. Sec. Litig., 2011 Del. Ch. 1 (Del. Ch. Jan. 14, 2011) was the first Chancery Court opinion of the new year.   We are a bit overdue in offering a comment. The case involved a mostly straight forward application of entire fairness to a transaction between the company and a controlling shareholder...

John Q. Hammons: The Unfairness of Proving Fairness

Posted on March 02, 2011
Our comment on John Q. Hammons is more in the nature of an observation about Delaware law.  As we have noted on this Blog often (and described at lengh, see Disloyalty Without Limits: 'Independent' Directors and the Elimination of the Duty of Loyalty) Delaware has quietly and without significant analysis severely weakened the duty of loyalty by substituting process for fairness...

In Delaware, Plaintiffs Lose Even When They Win: In re Del Monte (Part 1)

Posted on March 01, 2011
We have noted this phenomena in Delaware before.  Plaintiffs demonstrate untoward behavior by management -- no small accomplishment in the Chancery Court -- yet end up with a remedy that effectively penalizes them rather than the established malefactors...

In Delaware, Plaintiffs Lose Even When They Win: In re Del Monte (Part 2)

Posted on March 01, 2011
We are discussing In re Del Monte, where shareholders succeeded in obtaining an injunction that delayed the acquistion of Del Monte for 20 days, providing an opportunity for a "topping" bid. In granting the injunction, the court found that shareholders confronted the risk of irreparable harm...

Reis v. Hazelett Strip-Casting: Mistaken Analysis or Freudian Slip?

Posted on February 28, 2011
Reis is a recent decision issued by the Delaware Chancery Court and involved a reverse stock split.  VC Laster rightfully applies the entire fairness analysis.  The opinion contains a nicely written discussion of the different standards applied by Delaware courts when reviewing the actions of management...

Nacchio Withdraws Final Appeal

Posted on February 26, 2011
Former Qwest CEO Joseph Nacchio withdrew the final appeal of his criminal conviction on February 11, 2011.  After being sentenced to five years and 10 months in prison following a jury trial, Nacchio originally indicated through court filings that he intended to appeal his criminal sentence...

Morrison, Tourre, and the Misguided Interpretation of Rule 10b-5 (The Impact of Dodd-Frank) (Part 7)

Posted on February 25, 2011
Whatever the court decides in SEC v. Tourre, the decision will likely have little broad impact.  The same may be the case for the Supreme Court's analysis in Morrison. In the Commission's reply to Tourre's motion to dismiss, footnote 1 takes the position that Dodd-Frank in Section 929P effectively reversed Morrison in actions brought by the Commission...

Gender Diversity on the Board: The US Falls Further Behind

Posted on February 25, 2011
A report sponsored by the British Government has called on British companies to increase the number of women on the board.  The report is here.  It is an attempt by Britain to deal with a well known problem (women amount to only 12% of directors of large public companies, similar to the percentage in the US) but stopping short of legally mandating quotas, an approach taken by Norway and Spain and being considered by other countries...

Lack of Judgment does not Constitute Insider Trading: SEC v. Obus

Posted on February 25, 2011
In Securities and Exchange Commission v. Obus, 2010 WL 3703846 (S.D.N.Y. Sept. 20, 2010), the Securities and Exchange Commission ('SEC') alleged that defendant Nelson J. Obus ('Obus') along with codefendants Peter F. Black and Thomas Bradley Strickland were guilty of insider trading – a violation of the prohibition of deceptive conduct under section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5...

Morrison, Tourre, and the Misguided Interpretation of Rule 10b-5 (SEC v. Tourre, Redux) (Part 6)

Posted on February 24, 2011
We are discussing Morrison v. National Australia Bank, 130 S. Ct. 2869 (June 24, 2010), the Supreme Court case that held Rule 10b-5 does not have extraterritorial effect and the misreading of the decision by the lower courts. The analysis in this series of posts started with the SEC's case against Fabrice Tourre...

Morrison, Tourre, and the Misguided Interpretation of Rule 10b-5 (The Exclusion of ADRs from the Protections of Rule 10b-5) (Part 5)

Posted on February 23, 2011
We are discussing Morrison v. National Australia Bank, 130 S. Ct. 2869 (June 24, 2010), the Supreme Court case that held Rule 10b-5 does not have extraterritorial effect and the misreading of the decision by the lower courts. The misreading of Morrison can be seen most clearly in connection with the treatment of ADRs...

Morrison, Tourre, and the Misguided Interpretation of Rule 10b-5 (The Lower Courts and The Misapplication of Section 10(b) (Part 4A)

Posted on February 22, 2011
We are discussing Morrison v. National Australia Bank, 130 S. Ct. 2869 (June 24, 2010), the Supreme Court case that held Rule 10b-5 does not have extraterritorial effect and the misreading of the decision by the lower courts. Lower courts have had to deal with a muddled Supreme Court opinion but they have also added to the confusion on their own accord...

Morrison, Tourre, and the Misguided Interpretation of Rule 10b-5 (The Reverse Conduct and Effects Test) (Part 4B)

Posted on February 22, 2011
We are discussing Morrison v. National Australia Bank, 130 S. Ct. 2869 (June 24, 2010), the Supreme Court case that held Rule 10b-5 does not have extraterritorial effect and the misreading of the decision by the lower courts. Those courts holding that foreign securities are not subject to Section 10(b) leave a gaping hole in the US securities laws...

Morrison, Tourre, and the Misguided Interpretation of Rule 10b-5 (Protecting Foreign Exchanges) (Part 3)

Posted on February 21, 2011
We are discussing Morrison v. National Australia Bank, 130 S. Ct. 2869 (June 24, 2010), the Supreme Court case that held Rule 10b-5 does not have extraterritorial effect and the misreading of the decision by the lower courts. So Morrison dictated that that applicability of Rule 10b-5 depended upon the type of security (traded on a domestic stock exchange) or the location of the trade (domestic transaction)...

Morrison, Tourre, and the Misguided Interpretation of Rule 10b-5 (The Non-Transactional Transactional Test) (Part 2)

Posted on February 18, 2011
We are discussing Morrison v. National Australia Bank, 130 S. Ct. 2869 (June 24, 2010), the Supreme Court case that held Rule 10b-5 does not have extraterritorial effect and the misreading of the decision by the lower courts. The test employed by the Court, however, was confusing, not the least because it was described as transactional when, at best, that was only partially true...

Morrison, Tourre, and the Misguided Interpretation of Rule 10b-5 (Part 1)

Posted on February 17, 2011
We are discussing Morrison v. National Australia Bank, 130 S. Ct. 2869 (June 24, 2010), the Supreme Court case holding that Rule 10b-5 did not have extraterritorial effect and the misreading of the decision by the lower courts.  As we have previously discussed on this Blog, the Supreme Court lacks meaningful expertise on issues implicating the federal securities laws...

Bloggers, promote your law blog by nominating your blog for inclusion in USLaw.com's Law Blog Directory and RSS Reader. Benefits described.