By Jim Barrall, Partner, Latham & Watkins LLP
Early last year, I wrote on the new wave of proxy injunction lawsuits and investigations which were aimed at enjoining shareholder votes on say-on-pay proposals and proposals to approve increases in shares authorized under company equity plans, alleging breaches of fiduciary duties by Boards of Directors and companies for failure to provide adequate disclosure about the votes. In that post I linked to Latham’s Corporate Governance Commentary on defending against these lawsuits and discussed the emerging trend as of that date. Subsequently, I wrote posts on two important company victories in lawsuits brought to enjoin say-on-pay votes in Natalie Gordon vs. Symantec Corporation and Paul Noble vs. AAR Corp. As of then, lawsuits seeking to enjoin votes by shareholders on say-on-pay and equity plan proposals had then been filed against more than 22 public companies by plaintiffs represented by the law firm of Faruqi & Faruqi LLP. Read the rest of this entry »
By Donna Dabney, Executive Director, Governance Center, The Conference Board
Two interesting developments on the shareholder proposal front arose this past week. SEC Commissioner Gallagher gave a speech (see below) giving a powerful voice to what many general counsels and corporate secretaries have been thinking for some time—the shareholder proposal process is out of control, with too many shareholders without a significant stake in a company making proposals that are not relevant to increasing sustainable value. Then, the next day, New York City Comptroller, Scott Stringer, issued a press release (see below) announcing that four companies took steps to increase diversity on their boards as a result of shareholder proposals submitted by New York City pension funds. These two developments are not inconsistent. Read the rest of this entry »
By Arthur Kohn, Partner, Cleary Gottlieb Steen & Hamilton LLP & Chuck Nathan, Partner & Senior Advisor, RLM Finsbury
The 2008 financial crisis and the slow recovery that has followed has brought further evidence tending to support the view that the structure of our corporate sector needs adjustment, and that its faults affect the competitiveness of our economy. The crisis has resulted, as would be expected, in a raft of new rules and regulations, which as usual have been implemented before there emerged any consensus about the nature of the problems. There has also been a vigorous competition of ideas over causes and remedies.
However, one principal “organic” focus of change has emerged, which is usually captured by the catchword “engagement,” the corporate governance concept du jour. It seems to us that the focus on engagement has been motivated by two principal factors. These are, first, a desire by interested stakeholders—including various types of institutional shareholders and other investors, directors, management, labor, politicians and others—to increase (or perhaps retain in some cases) their influence and leverage in the functioning of public corporations and, second, the idea that in the realm of corporate productivity, a collaborative, rather than adversarial, relationship between those stakeholders, based on broadly shared principles concerning the roles and objectives of the stakeholders is beneficial. Engagement is viewed as a means towards those ends. Read the rest of this entry »
By Martin Lipton, Partner, Wachtell, Lipton, Rosen & Katz; Michael W. Schwartz, Of Counsel, Wachtell, Lipton, Rosen & Katz; Theodore N. Mirvis, Partner, Wachtell, Lipton, Rosen & Katz; George T. Conway III, Partner, Wachtell, Lipton, Rosen & Katz; Jeffrey M. Wintner, Partner, Wachtell, Lipton, Rosen & Katz; William Savitt, Partner, Wachtell, Lipton, Rosen & Katz
||A Note from The Conference Board Governance Center: Earlier this month, Professor Lucian Bebchuck published a study with co-author Robert J. Jackson, Jr., Associate Professor of Law, Milton Handler Fellow, and Co-Director of the Millstein Center at Columbia Law School, titled Toward a Constitutional Review of the Poison Pill. A post outlining paper can be found here. The following is the response from Wachtell, Lipton, Rosen and Katz. At The Conference Board Governance Center, we have been closely following the debate on shareholder activism and have posted a recording of a live roundtable discussion between Professor Bebchuck and Martin Lipton, founding partner of the Wachtell Lipton law firm, regarding when activists should be required to disclose an accumulation of a large block of stock in a public company. You can view the full debate here.
In a recent paper, Professors Lucian Bebchuk and Robert Jackson have extended Professor Bebchuk’s extreme and eccentric campaign against director-centric governance into a new realm—that of the Constitution of the United States. They claim that “serious questions” exist about the constitutionality of the poison pill—or, more precisely, “about the validity of the state-law rules that authorize the use of the poison pill.” It is likely, they argue, that these state-law rules violate the Supremacy Clause of the Constitution, and are thus preempted, because they frustrate the purposes of the Williams Act, the 1968 federal statute that governs tender-offer timing and disclosure. Read the rest of this entry »
By Thomas Singer, Researcher, Corporate Leadership, The Conference Board
Despite a general acknowledgement that environmental, social, and governance (ESG) initiatives can affect a company’s brand value and reputation, the specifics of this relationship are not always well understood, leaving a number of questions and challenges to business leaders in charge of overseeing and reporting on sustainability. A new publication from The Conference Board explores the increasingly important link between sustainability, brand, and reputation to better understand how and when companies can leverage sustainability initiatives to drive brand value. Read the rest of this entry »