Corporate Governance

The Delaware Model and Preemption: Congress Begins to Act

Posted on April 25, 2009
We have long noted that the problems with corporate governance (most noticeably in the realm of executive compensation and risk oversight) have arisen because of the refusal of Delaware courts to impose meaningful standards on directors.  The problem has called for a federal solution, preempting the role of states incapable or unwilling to take the necessary governance steps...

Kistefos AS v. Trico Marine Services: A Lesson for the Securities and Exchange Commission

Posted on April 24, 2009
One of the most anti-shareholder actions taken by the Commission under the prior regime was to refer a shareholder proposal to the Delaware Supreme Court for an advisory opinion.  This occurred in connection with CA v. AFSCME.  The staff confronted a shareholder proposal that required mandatory reimbursement of proxy expenses for shareholders who nominated a short slate of directors and succeeded in electing at least one to the board...

The SEC, Access and the Need to Preempt Delaware Law

Posted on April 23, 2009
As the SEC considers an access proposal, Delaware has acted to cut off the anticipated federal right.  As we have discussed, legislative proposals were drafted (and recently adopted) that would allow companies to put in place bylaws that permit shareholders to have access to the proxy statement for their own nominees...

Majority Voting Requirements and Pyrrhic Victories

Posted on April 23, 2009
One of the most rapid shifts in corporate governance has been the side spread shift to majority rather than plurality voting for directors.  Plurality voting, still the common rule in US corporate law, allows directors to win as long as they are the recipients of the highest number of votes...

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Personal Use of Corporate Aircraft: The Debate

Posted on April 22, 2009
Justified or not, business aircraft use has become a symbol of corporate excess, and is generally under attack. The National Business Aviation Association, an industry trade group, is on the defensive. We have Blog opinions on the matter. But first, in the interest of clarifying the issues, it is useful to distinguish between private airplane use for business purposes and corporate plane use for personal travel...

Personal Use of Corporate Aircraft: What the Numbers Mean

Posted on April 22, 2009
  As part of SEC disclosure requirements, public companies are required to publish compensation for the top five executives and directors, including the value of personal use of corporate aircraft. For the most highly compensated executives, airplane use amount can be well over $100,000...

Separation of Chairman and CEO: The Case of BofA

Posted on April 21, 2009
Shareholders of Bank of America will consider a binding resolution to require the separation of chairman and CEO.  According to the proposal in the proxy statement: 'The Chairman of the Board shall be a director who is independent from the Corporation...

US News: Combining Full and Part Time

Posted on April 21, 2009
As expected, US News did combine full time and part time statistics (despite the separate ranking for part time divisions).  This may explain some of the movement in the rankings (the relatively large drop for George Washington, for example).  It suggests that next year, there will be yet another adjustment as law schools unprepared for this combination (many throw weaker students into the part time division) adjust and raise the median for that division.

Makor v Tellabs Class Certification

Posted on April 21, 2009
The Race to the Bottom has been covering the ongoing case of Tellabs and its progeny, a case mostly known for providing content to the pleading standards in the PSLRA.  You can can find the posts here. Although the Supreme Court reversed the Seventh Circuit, the appellate court on remand reaffirmed its decision to allow the case to go forward...

US v. Nacchio: The Final Chapter?

Posted on April 20, 2009
Joe Nacchio went to prison last Tuesday in Pennsylvania after the 10th Circuit and Justice Breyer denied his petition for certiorari. The only remaining issue, therefore, is whether the Supreme Court will hear the case.  A tantalizing suggestion in the Tenth Circuit opinion suggests that it will not...

US News Rankings

Posted on April 20, 2009
We thought that we'd at least have a day to start the discussion on the latest version of the rankings before they came out.  Wrong.  They have been leaked.  A copy can be found here.  While these may be fakes (this kind of thing happens all the time), they look real...

US News and Law School Rankings: The Countdown

Posted on April 20, 2009
The law school rankings put out by US News will be published this week (April 23), with leaks probably taking place around Wednesday.  These rankings have been vociferously criticized and Brian Leiter has called on blogs to avoid posting them when they come out...

SEC v. Tambone: Broadening Section 17(a) Beyond Rule 10b-5 (Imposing Primary Liability on a Non-Disclosing Participant)

Posted on April 18, 2009
In SEC v. Tambone, 550 F.3d 106 (1st Cir. 2008) the SEC filed a complaint against James R. Tambone and Robert Hussey, executives of Columbia Funds Distributor, Inc., for violations of § 17(a)(1) of the Securities Exchange Act of 1933, § 10(b) of the Securities Exchange Act of 1934, and SEC Rule 10(b)-5...

In re Chiquita Brands: Judge Marra Establishes Schedule for Discovery on Issues Raised by Motion to Dismiss

Posted on April 17, 2009
Plaintiffs and the Special Litigation Committee ('SLC') of Chiquita Brands International, Inc. filed a joint motion on March 11, 2009 requesting an order setting discovery relating to the SLC's motion to dismiss and a briefing schedule.  Judge Marra granted the joint motion the same day that it was filed...

The Eulogy for Diane Sanger at the Securities and Exchange Commission

Posted on April 17, 2009
I went to the eulogy for Diane Sanger, my former boss from the SEC who passed away last December at the age of 55.  It was held at the SEC's office in Washington at 100 F St.  Back in the 1980s, I was a staff attorney in the counseling section of the General Counsel's Office...

Special Litigation Committee of Chiquita Files Motions

Posted on April 17, 2009
On February 25, 2009, the Special Litigation Committee ('SLC') of nominal defendant Chiquita Brands International, Inc. ('Chiquita') filed motions to dismiss, to hold oral arguments in support of dismissal, and to file under seal unredacted portions of the Special Litigation Committee Report ('Report')...

SEC v. Mark Cuban: Memorandum in Support of Cuban's Motion to Dismiss

Posted on April 16, 2009
This post discusses the Memorandum of Law of Mark Cuban in Support of Motion to Dismiss for the case of SEC v. Cuban. In previous posts we introduced the case, discussed the complaint and summarized insider trading law. Cuban received information regarding an upcoming private investment in public equity ('PIPE') during a phone conversation with the CEO of Mamma...

Law in Opposition to Defendant Mark Cuban?s Motion to Dismiss -- A Review of the SEC?s Arguments

Posted on April 16, 2009
The SEC responded to Mark Cuban's motion to dismiss by taking the position that this case involved  a well-settled application of insider trading principles and that Cuban traded on material, non-public information after he agreed to keep the information confidential...

Jon Macey and Socializing the American Economy: A Missed Opportunity

Posted on April 15, 2009
Jon Macey at Yale published an editorial in this weeks WSJ contending that the recent spate of congressional interference in the economy (mostly bailout money) was the "first step in an ongoing porcess to socialize American finance."  Its a provocative thesis...

Heightened Pleading Standards Under Section 11 of the Securities Act of 1933: Rubke v. Capitol Bancorp, Ltd.

Posted on April 15, 2009
In Rubke v. Capitol Bancorp, Ltd., 551 F.3d 1156 (9th Cir. 2009), the Ninth Circuit Court of Appeals held plaintiff Rubke did not plead any claims with the level of specificity required by F.R.C.P 9(b) or the pleading standards of the Private Securities Litigation Reform Act ('PSLRA')...

Mutual Funds, Management Support, and Fiduciary Obligations

Posted on April 14, 2009
Shareholder proposals challenging excessive compensation practices often fail.  One would think that in general, shareholders are not overly concerned with these practices.  Yet the public outcry belies that notion.  What explains, then, this lack of success?One answer has been provided by AFSCME...

Recession Proof Profession

Posted on April 14, 2009
We have noted already that there is a recession free industry:  Graduate School.  With the economy in full recession, the WSJ reports that one strategy is to go to law school.  As the Journal notes: In seeming defiance of logic, many law schools are surging in popularity...

The SEC and Corporate Governance: Separating Chairman and CEO

Posted on April 13, 2009
Chairman Schapiro gave a speech to the Council of Institutional Investors and outlined some of the SEC's corporate governance agenda.  Some are important but relatively uncontroversial.  She mentioned the possibility of stepped up disclosure about director nominees, something long overdue...

US v. Nacchio: The Bail Petition and "A Hope of Attracting the Interest of the Supreme Court"

Posted on April 13, 2009
We have not been following closely the back and forth on whether Joe Nacchio should be released on bail pending the outcome of his petition for ceriorari in the US Supreme Court.  Nonetheless, we were aware of the 34 page opinion issued by Judge Krieger (federal district court in Denver and successor to Judge Nottingham) denying Nacchio bail and ordering him to appear at prison on Tuesday of this week...

Goldman Sachs and Challenging the Delaware Model

Posted on April 11, 2009
Lloyd Blankfein, the CEO of Goldman, gave a speech to the Council of Institutional Investors on Tuesday.  The speech recognized that, going forward, there had to be changes in the way executive compensation was set (noting that some of them might be forced on industry in the form of legislation)...

Private Use of Corporate Aircraft: The Case of Sprint

Posted on April 10, 2009
So Sprint disclosed, as it must, the personal use of corporate aircraft by the CEO and CFO.  The number for the CFO was an eyepopping $609,530.  That's a lot of trips to Palm Springs to play golf.  The board had to approve the practice...

Executive Compensation, AIG and the Consequences of the Delaware Model

Posted on April 09, 2009
By now, the payment of some $165 million in bonuses by AIG (apparently 73 people received bonuses of at least $1 million) has become widely known and generated enormous outrage.  The payments were apparently made, in many cases, under contracts that guaranteed bonuses similar to those paid in 2007 irrespective of performance...

No Salary for Vail CEO

Posted on April 09, 2009
As a Colorado blog, we take an interest in the actions of local corporations. On March 11th, Vail Resorts released a statement explaining changes in its employee, executive, and director compensation. The compensation reductions include 2.5% for seasonal employees, 10% for executives, and 20% for independent directors...

Executive Compensation: What Goes Up Hardly Comes Down

Posted on April 08, 2009
The WSJ has produced a study of executive compensation for 2008. The big news was that executive compensation had fallen. The study notes that total compensation for CEOs (including salary, bonsues, the awarded value of stock, stock options and other long-term incentives), dropped 3...

Executive Compensation and Perks

Posted on April 08, 2009
The WSJ did a study of executive compensation by CEOs.  One of the items examined was the payment of perks.  They were, in the study of 200 companies with sales over $5 billion, common, with, as usual, personal use of corporate aircraft the most common...

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