Corporate Governance

TARP and Some Statistics

Posted on June 20, 2009
We take a one post breather from our coverage of Merck, the case recently taken on by the Supreme Court that will help determine when the statute of limitations begins to run under Rule 10b-5.   The GAO in May put out a report that included some stats on TARP...

The Supreme Court and the Mission to Restrict Investor Protection: Merck v. Reynolds (Part 5: An Initial Assessment of the Arguments)

Posted on June 19, 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. We take a minute to discuss the implications of the analysis put forward by the defendants in this case.  They, along with the district court and Judge Roth on the Third Circuit, would presumably begin the statute of limitations at the time when investors became aware that the statements by Merck concerning the naproxen hypothesis might be wrong...

The Supreme Court and the Mission to Restrict Investor Protection: Merck v. Reynolds (Part 4: The Arguments on Appeal)

Posted on June 18, 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. Merck sought cert and argued that there was considerable dispute among the assorted circuits about the standard for commencing the statute of limitations under Rule 10b-5...

The Pay Czar and Government Intervention: Further Evidence on the Need for Federal Preemption

Posted on June 18, 2009
We are doing a series of posts on the Merck case, a decision recently accepted by the Supreme Court that will examine the standard for starting the statute of limitations period under Rule 10b-5. The WSJ reported a poll that suggested the American people had concern with government involvement in the economy...

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The Supreme Court and the Mission to Restrict Investor Protection: Merck v. Reynolds (Part 3: The Third Circuit Decision)

Posted on June 17, 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 district court dismissed the case, concluding that plaintiffs had been on inquiry notice at least since the date of the FDA letter...

The Supreme Court and the Mission to Restrict Investor Protection: Merck v. Reynolds (Part 2: The Facts)

Posted on June 16, 2009
We are discussing the Supreme Court's decision to grant cert in Merck v. Reynolds, a case addressing the statute of limitations under Rule 10b-5.  Merck disclosed the results of a study about the effects of Vioxx in March 2000.  The study, a comparison between Vioxx and naproxen, showed that Vioxx users had a higher incidence of cardiovascular events (a category that can include heart attacks) than the users of naproxen...

The Supreme Court and the Mission to Restrict Investor Protection: Merck v. Reynolds (Part 1)

Posted on June 15, 2009
Vioxx has been in the news recently but not because of the alleged adverse health effects of their pain medication drug.  The Supreme Court granted cert in Merck v. Reynolds to address the statute of limitations under Rule 10b-5. The plaintiff class filed suit in November 2003...

Shareholder Access and the SEC

Posted on June 13, 2009
The Commission voted 3-2 to make a rule proposal that would provide certain shareholders with the company's proxy statement.  The Agency has just issued the proposal release.  We will provide some comments in later posts.

Director Compensation and the "Best Interests of Shareholders"

Posted on June 12, 2009
We return to an issue that we have raised a number of times on this Blog.  Directors of public companies make hefty fees.  This is born out by data from larger samplings.  In one study of 300 companies, directors saw their compensation increase by 4...

Executive Compensation and the Search for a Solution: Its the Board of Directors Stupid

Posted on June 11, 2009
The debate over the right framework for regulating executive compensation has drawn increasing attention from regulators.  There have been proposals designed to cap compensation but those seem to have fallen by the wayside.  Instead, as we have written time and time again on this Blog, the focus seems to be on improving the process at the board level...

Board Diversity and Governance Reform

Posted on June 11, 2009
As we debate increased regulation, we return to one of the most common shibboleths raised by opponents.  Additional regulation will cause the pool of eligible directors to shrink.  Certainly, the stories of departing directors have increased, with companies like General Motors and AIG cleaning house...

Shareholder Access and Shareholder Value: The Benefit of Dissident Directors on the Board (Part 2)

Posted on June 10, 2009
We are discussing recent data on the value of dissident directors on the board.  There have been plenty of studies done on the value of "independent" directors on the board but as we have noted, these directors are legally independent but often not independent in fact...

Shareholder Access and Shareholder Value: The Benefit of Dissident Directors on the Board (Part 1)

Posted on June 09, 2009
There have been plenty of studies that have purported to study the "value" of independent directors on the boards of public companies.  The evidence is, predictably, uneven.  This is no surprise.  For one thing, there is no guarantee that "independent" directors are in fact independent...

Law Schools and the Goliath Syndrome

Posted on June 08, 2009
While this is a corporate governance blog, we also occasionally touch on matters pertaining to legal education, particularly rankings.  With that in mind, we turn to a recent piece in The New Yorker, How David Beats Goliath.  The article indicates, counter intuitively, that David often beats Goliath but mostly when David responds to Goliath with unconventional strategies...

The Shareholder Bill of Rights of 2009

Posted on June 06, 2009
We have written posts on this piece of legislation and each time linked to a draft version of the bill.  For anyone wanting to look at the actual language of the bill, it is labeled Senate Bill 1074, May 19, 2009, and is posted here.

The Cox Commisson and the Legacy of Anti-Shareholder Bias: In re Intech Investment Management (A Perspective)

Posted on June 05, 2009
We are discussing In re Intech Investment Management, a recent administrative proceeding brought by the Commission against an adviser with pro-shareholder voting practices. Intech put in place a system of voting that tracked an approach apparently developed by ISS in consultation with the AFL-CIO...

Churchill: The Replies to the Responses to the Motions

Posted on June 05, 2009
We have previously summarized the motions and responses filed in the Churchill v. CU case. Churchill has a motion for reinstatement that CU objects to on the basis, primarily, that litigation has irreparably damaged the relationship between the parties...

The Cox Commisson and the Legacy of Anti-Shareholder Bias: In re Intech Investment Management (The Law)

Posted on June 04, 2009
We are discussing In re Intech Investment Management, a recent administrative proceeding brought by the Commission against an advser with pro-shareholder voting practices. The case involved the first apparent enforcement action under Rule 206(4)-6 (adopted back in 2003)...

The Cox Commisson and the Legacy of Anti-Shareholder Bias: In re Intech Investment Management (The Facts)

Posted on June 04, 2009
We are discussing In re Intech Investment Management, a recent administrative proceeding brought by the Commission against an adviser with pro-shareholder voting practices. According to the release, Intech had responsibility for voting shares of an assortment of clients, some connected to public companies (pension plans and the like) and others connected to unions...

The Director Compensation Project: Verizon

Posted on June 03, 2009
This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation. We are including companies from 2009's Fortune 100 and using information found in their 2009 proxy statements. In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence...

The Cox Commisson and the Legacy of Anti-Shareholder Bias: In re Intech Investment Management (Introduction)

Posted on June 03, 2009
By now it is clear that the Commission under the prior Chairman tied the hands of enforcement, interfering with the Division's ability to perform its function.  Certainly this was the point of an article in the Washington Post (In Cox Years at the SEC, Policies Undercut Action)...

Poison Puts, Shareholder Voting Rights and the Need for an Even Stronger Shareholder Bill of Rights: San Antonio Fire & Policy v. Amylin Pharmaceuticals (The Lessons)

Posted on June 02, 2009
This case contains several lessons.  It shows the resolute refusal of the Delaware courts to make the obligations of the board meaningful. Under the rational of the opinion, boards can approve transactions that have serious adverse consequences on the voting rights of shareholders without being aware of these consequences...

Poison Puts, Shareholder Voting Rights and the Need for an Even Stronger Shareholder Bill of Rights: San Antonio Fire & Policy v. Amylin Pharmaceuticals (Upholding The Puts)

Posted on June 02, 2009
We are discussing San Antonio Fire & Policy v. Amylin Pharmaceuticals, a Delaware court that upheld the use of coercive contractual terms that effectively denied shareholders their voting rights. Management of the company negotiated an indenture in 2007...

Poison Puts, Shareholder Voting Rights and the Need for an Even Stronger Shareholder Bill of Rights: San Antonio Fire & Policy v. Amylin Pharmaceuticals (The Fiduciary Out)

Posted on June 01, 2009
We are discussing San Antonio Fire & Policy v. Amylin Pharmaceuticals, a Delaware court that upheld the use of coercive contractual terms that effectively denied shareholders their voting rights. The Chancellor concluded that the inclusion of a poison put in an indenture did not implicate the duty of care because the board had outside counsel and the provision was common place...

"Crazy Compensation" and the Source of the Problem

Posted on May 30, 2009
On Thursday, Alan Blinder, an economics professor and former vice chairman of the Fed, published an editorial in the WSJ titled "Crazy Compensation and the Crisis."  In the course of his challenge to the system of executive compensation, he rhetorically asked, "Whoever dreamed up this crazy compensation system?"  In later characterizing the problem, he describes the system this way:  "The source of the problem is really quite simple: Give smart people go-for-broke incentives and they will go for broke...

Crazy Compensation and the "Solution"

Posted on May 29, 2009
We are doing a series on San Antonio Fire & Policy v. Amylin Pharmaceuticals, a decision by the Delaware Chancery Court approving poison puts.  Nonetheless, we couldn't help but notice the editorial in the WSJ yesterday by Alan Blinder on "Crazy Compensation and the Crisis...

Poison Puts, Shareholder Voting Rights and the Need for an Even Stronger Shareholder Bill of Rights: San Antonio Fire & Policy v. Amylin Pharmaceuticals (Introduction)

Posted on May 28, 2009
We have been writing about the Shareholder Bill of Rights, legislation soon to be introduced by Senator Schumer.  As we have noted, the legislation would largely preempt large segments of Delaware corporate law.  Among other things, it constitutes a recognition that Delaware and its courts have put in place a system of corporate governance that does not protect shareholders and results in excessive risk taking designed to maximize short term executive compensation...

Poison Puts, Shareholder Voting Rights and the Need for an Even Stronger Shareholder Bill of Rights: San Antonio Fire & Policy v. Amylin Pharmaceuticals (The Facts)

Posted on May 28, 2009
We are discussing San Antonio Fire & Policy v. Amylin Pharmaceuticals, a Delaware court that upheld the use of coercive contractual terms that effectively denied shareholders their voting rights. In 2007, the Amylin board assigned to members of senior management to negotiate the terms and conditions for the 2007 Notes (terms ultimately approved by the Finance Committee of the board)...

The Myth of Majority Vote Provisions

Posted on May 27, 2009
Last week, when Commissioner Paredes voted against submitting an access proposal for comment, he gave as one of the reasons the raft of majority vote provisions that have been put in place by a majority of the largest companies.  Likewise, in opposing The Shareholder Bill of Rights, the memorandum issued by Wachtell Lipton pointed to the same development...

The Problem of Blank Votes

Posted on May 26, 2009
As we debate access, it seems like every time shareholders turn around they find another design flaw in the system that, oddly, favors management.  The latest is blank votes. It seems that when a shareholder executes a proxy and decides not to cast a vote for a particular matter, the proxy tabulator apparently fills it in in a pro-management manner (or, more accurately, in conformity with the recommendations of the soliciting committees)...

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