Corporate Governance

Access and Its Opponents: An Overview

Posted on August 25, 2009
There are once again hundreds of letters submitted to the SEC on its access proposal.  A number of letters are unusual, including one by the Delaware Bar Association, another by 80 law professors (including this one), and one by seven major law firms (with Wachtell agreeing to the group approach rather than file its own letter)...

BofA, the SEC, and the Merrill Lynch Bonuses: The Costs of Legal Representation

Posted on August 25, 2009
Attached to the BofA memorandum filed yesterday was an affidavit from Morton Pierce, the chairman of the Mergers and Acquisitions Group at Dewey & LeBoeuf LLP.  He was asked "to analyze how compensation disclosures of the type that are the subject of the Complaint are customarily made in transaction documents of this nature...

Wayne County Employee's Retirement v. Corti: The Conflict of Interest that Wasn't (Part 1)

Posted on August 24, 2009
In the compensation area, we have often talked about how the Delaware courts took a traditional duty of loyalty claim (compensation paid to another director, the CEO) and transformed it into a duty of care case.  The effect was to eliminate any examination of the substantive fairness of the payments...

Wayne County Employee's Retirement v. Corti: The Conflict of Interest that Wasn't (Part 2)

Posted on August 24, 2009
We are discussing Wayne County Employees' Retirement System v. Corti, a recent Delaware case that concluded that directors simultaneously negotiating over the sale of the company and subsequent employment arrangements did not have a conflict of interest...

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

BofA, the SEC, and the Merrill Lynch Bonuses: BofA Responds

Posted on August 24, 2009
BofA has filed its "MEMORANDUM OF LAW ON BEHALF OF BANK OF AMERICA CORPORATION", a document filed at the court's direction in connection with the proposed settlement between the SEC and BofA over the disclosure of the bonuses paid by Merrill Lynch just before the merger closed...

Liquidity and the Collapse of Bear Stearns

Posted on August 22, 2009
We have followed the financial crisis in part because of the relationship to executive compensation and current efforts at reform.  We have also followed it because of the structural shift that has occurred in the securities markets, particularly the elimination of indepependent investment banks as financial intermediaries, an inevitable byproduct of the repeal of Glass-Steagall...

Department of Justice Declines to Pursue Nacchio Resentencing Appeal

Posted on August 21, 2009
As part of the Race to the Bottom's continuing coverage of Joseph Nacchio's legal saga, Professor O'Brien posted on the 10th Circuit's decision on Nacchio's sentence. A three-judge panel remanded the calculation of Nacchio's sentence to U.S. District Court for being excessive...

Access and the Delaware Bar Association

Posted on August 20, 2009
The Delaware State Bar Association has written a comment letter on the SEC's proposal to give shareholders access to the company's proxy statement for nominees to the board.  The letter was apparently unique ("To the best of our knowledge, this is the first time that the Delaware State Bar Association or any of its membership groups has ever submitted a formal written comment to the Commission...

Corporate Profits and Corporate Political Spending: Why Companies Care and Corporate Legal Academics Should Too

Posted on August 20, 2009
First, I applaud the Harvard Corporate Governance blog for posting the Cooper, Gulen & Ovtchinnikov paper on Corporate Political Contributions and Stock Returns. Documenting the ways that companies influence federal Congressional campaigns -- and hence shape the broader political and legal system to maximize corporate profit --  is a crucial endeavor if we are going to have a meaningful discussion of what we mean by "free markets...

It?s a Wonderful Lie: Mutual Fund Advocacy for Shareholders? Rights, part 5

Posted on August 19, 2009
Seventy-five years after Berle and Means, we still examine corporate governance problems within their agency framework. Specifically, we see shareowners at the mercy of distant managers. Yet, the mutual fund example should show us at least one more layer...

The Chancery Court Decision Is In: Travis Laster

Posted on August 19, 2009
Reports percolating around indicate that Travis Laster has been designated as the replacement for Vice Chancellor Lamb on the Delaware Chancery Court.  While there is little dispute about his intellect or his disposition, there is also little dispute that he meets the traditional profile of those on the Delaware Chancery Court...

It?s a Wonderful Lie: Mutual Fund Advocacy for Shareholders? Rights, part 3

Posted on August 18, 2009
Many investors are surprised to learn that they profit from genocide in Sudan through mutual fund investments. You might be one of those investors. Accordingly you might expect your mutual fund adviser to challenge the corporations for you. But this happens rarely, if at all...

It?s a Wonderful Lie: Mutual Fund Advocacy for Shareholders? Rights, part 4

Posted on August 18, 2009
Approximately 77.7 million individuals in the United States invest in equities through stock mutual funds. When these investors put their money to work and at risk, they depend upon strong corporate governance structures at corporations (portfolio companies) held by the mutual funds that they own...

Jennifer Taub Posts on The Race To the Bottom

Posted on August 17, 2009
For the second time in two weeks, we are please to announce another contribututor to The Race To the Bottom.  Jennifer Taub is a a Lecturer and Coordinator of the Business Law Program within the Isenberg School of Management at the University of Massachusetts, Amherst...

It?s a Wonderful Lie: Mutual Fund Advocacy for Shareholders? Rights, part 1 (UNPUBLISHED)

Posted on August 17, 2009
Halfway through the American film classic, It's a Wonderful Life, there is a run on the Bailey Building and Loan in fictional Bedford Falls. The lobby teems with panicked customers, demanding cash for their shares. Attempting to discourage redemptions, George Bailey, played by Jimmy Stewart, implores: No, but you...

It?s a Wonderful Lie: Mutual Fund Advocacy for Shareholders? Rights, part 2

Posted on August 17, 2009
Mutual funds benefit market participants differently. For direct shareholders who hold shares through the retail or intermediary channel, and for indirect shareholders who hold fund shares through a retirement plan, benefits include the ability to invest a relatively small amount of money and yet have access to the expertise of professional money managers...

The Continuing Problem of Executive Compensation

Posted on August 15, 2009
The House has passed an executive compensation reform proposal and the SEC has continued to bring enforcement actions.  In the real world, however, things seem little different than before the crisis began.  As the London Times noted, "Big bonuses, small changes...

Overturning Stoneridge and the Symbolic Passing of an Era

Posted on August 14, 2009
Stoneridge, as we have written, was an overt policy decision made by the conservative justices on the Supreme Court who interpreted Section 10(b) and Rule 10b-5 in a manner divorced from Congressional intent, the language of the statute, and common law fraud principles...

The Nominees for the Chancery Court Are In

Posted on August 14, 2009
According to the Delaware Grapevine, the nominees for the Chancery Court are Travis Laster, Judge Mary Johnston, and Richard Forsten.  We called two of the three, with Joel Friedlander not making the cut.  The loss of Friedlander is likely a disappointment for the plaintiff's bar...

The Inevitability of Say on Pay

Posted on August 13, 2009
Whatever happens with respect to corporate governance reform, the most likely piece to emerge is "say on pay."  Its included in HR 3269, the ‘‘Corporate and Financial Institution Compensation Fairness Act of 2009," which recently passed the House of Representatives...

Reform Efforts in Shareholder Paradise

Posted on August 13, 2009
Those fighting governance reform must confront the fact that many of the proposed changes are already in use overseas.  This is particularly true in Great Britain, a country sometimes derisively called a "shareholder's paradise."  Great Britain allows access and provides say on pay...

The SEC Requests Chief Judge Close Case Against Mark Cuban

Posted on August 13, 2009
Yesterday the SEC requested Chief Judge Sidney Fitzwater close the case against Mark Cuban. Last month the Chief Judge ruled against the agency in its insider trading charges and granted Cuban's motion to dismiss. However, the SEC had thirty days to re-file a new complaint with stronger charges...

The Permanent Solution: HR 3269 and the Regulation of Executive Compensation (Part 1)

Posted on August 12, 2009
With so much activity and so little time, we have not had a chance to comment on the ‘‘Corporate and Financial Institution Compensation Fairness Act of 2009," legislation introduced by Barney Frank in the House and recently passed by the House Committee on Financial Affairs but what was apparently a relatively straight party vote of 40 to 28...

The Permanent Solution: HR 3269 and the Regulation of Executive Compensation (Part 2)

Posted on August 12, 2009
We are examining HR 3269, corporate governance legislation that recently passed the House of Representatives by a vote of 230 to 185.   The broad approach of the legislation is to solve the excessive compensation problem by reforming the process...

Changing the Guard in the Delaware Chancery Court

Posted on August 11, 2009
Vice Chancellor Lamb has opted to step down from the Chancery Court.  Francis Pileggi at the Delaware Corporate and Commercial Litigation Blog has listed the seven folks who have apparently applied for the position.  They include: Richard ForstenJoel FriedlanderJudge Mary JohnstonRichard KigerTheodore "Ted" Kittila Travis LasterBruce Silverstein The number will apparently be narrowed to three and sent to the governor for the final appointment...

The SEC, Enforcement Actions, and Substantive Regulation of Executive Compensation

Posted on August 11, 2009
We have noted often on this Blog that executive compensation is a matter of state law.  That means Delaware.  The amount of compensation is a discretionary decision by the board of directors and is tested under the board's fiduciary obligations...

The SEC, Public Pressure and a Case of Bad Timing for Bank of America

Posted on August 10, 2009
Last week, the SEC brought an action against Bank of America in connection with the bonuses paid to Merrill Lynch officials shortly before completion of the merger.  It was, however, a case of bad timing for Bank of America rather than real evidence of improper behavior...

Another Bad Day for the Bank of America

Posted on August 10, 2009
For an almost transcript like rendition of the hearing on the settlement by BofA with the SEC in connection with the bonuses paid by Merrill before the merger closed, see the report by Thom Weidlich at Bloomberg.  Judge Rakoff refused to approve the settlement, indicating that he needed additional information...

SEC Investigates Staff Members for Insider Trading

Posted on August 08, 2009
Two United States SEC employees are currently under investigation for suspected insider trading and other SEC regulatory violations. The investigation, which the SEC Office of the Inspector General ('SEC OIG') turned over to the United States Attorney's Office and the Federal Bureau of Investigation, focuses on two currently unnamed Enforcement Division attorneys...

Berger v. Pubco: What does Pubco add to our understanding about the interconnectedness of corporate law substantive rights and corporate law procedural rules? And where does this decision come out in adjusting process rules so they are strongly or weakly ?minority friendly??

Posted on August 07, 2009
Corporate litigators, I am sure, would never miss the fact that substantive rights mean little apart from the process through which they can be asserted, defended and elaborated in court (and by implication, in settlement negotiations). Remarkably, this is something that corporate legal academics often overlook in discussing the nature of corporate law rights...

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