Corporate Governance

VC Strine and Access

Posted on December 23, 2008
We have devoted a number of posts on this Blog to criticisms of VC Strine's views, whether expressed in law review articles, speeches, or opinions.  So we also deem it appropriate to disclose moments of agreement.  VC Strine is nothing but prolific...

The Bailout and Executive Compensation: Further Evicence of the Toothlessness of Toothless Restrictions

Posted on December 22, 2008
The Washington Post points out the toothless nature of the executive compensation provisions in TARP.  The requirements (clawbacks, limits on golden parachutes, restrictions on compensation that encouraged excessive risk taking) apply to companies that received bailout funds through the purchase of troubled assets...

The Bailout of the Automakers

Posted on December 20, 2008
The White House has agreed to a short term bailout of Chrysler and GM.  In addition to providing around $17 billion in loans, the terms require the car companies to accept limits on executive compensation and eliminate perks such as corporate jets...

US v. Stockman: Agreement (Sort Of) on the Briefing Schedule

Posted on December 19, 2008
At a status hearing held in October, the main topic once again was the problem of discovery, the concern arising out of the need to review something like 15 million documents.  In addition, the trial judge (Barbara S. Jones) took care of a number of housekeeping measures...

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US v. Stockman: Discovery Issues Resolved

Posted on December 19, 2008
The Stockman case has involved millions of document (fifteen million to be semi-precise).  The fight over discovery in contrast has involved a relatively modest number.  According to an order filed in early Novemember, the government has conceded one discovery issue and agreed to provide: (1)  the entire set of interview memoranda from the 2005 Audit Committee Investigation, and (2) the notes of witnesses interviewed during the Government's investigation...

Obama and the First Hundred Days: Institutional Investors Weigh In

Posted on December 18, 2008
With the new Chairman of the SEC decided, the next issue is the Agency's reform agenda. A collection of 60 or so institutional investors have sent a letter to President Elect Obama addressing this matter.  The letter asked the president elect to take actions in the first 100 days designed to increase the voice of shareholders in risk disclosure, including not only credit risks associated with the mortgage crisis, but also environmental and social issues that have large financial implications...

Corporate Governance and Carly Fiorina

Posted on December 18, 2008
Corporate governance got a bit of a plug from an unexpected source, Carly Fiorina, the former CEO of HP who was rumored to be one of the people considered as a possible running mate for John McCain.  For one thing, she called for an increased role by shareholders in the compensation process...

The SEC, Inspections, and Bernard Madoff: The Chairman Speaks

Posted on December 17, 2008
As we have noted, the SEC is taking considerable heat for the failure at having picked up the massive fraud by Bernard Madoff despite a number of investigations and inspections.  The Chairman has spoken on the matter, calling for an investigation by the Inspector General of the SEC...

Obama and the Chairman of the SEC

Posted on December 17, 2008
It seems likely that when the transition team started its job, filling the top position at the SEC was rather low on the list.  While the SEC was one of the major players in the financial markets, it had no real role in the financial turmoil, including the bailout of banks and auto makers...

The SEC, Inspections, and Bernard Madoff

Posted on December 17, 2008
The WSJ noted that the SEC had looked into the activities of Bernard Madoff on a number of occasions without spotting the alleged fraud that public sources are describing as a $50 billion ponzi scheme.  The article noted that Madoff's market making business had been inspected by the SEC in 2005...

The New Chair(wo)man of the SEC

Posted on December 17, 2008
Reports are floating around that the new chair of the SEC will be Mary Schapiro, a former chair of the CFTC and a former acting chair of the SEC. She knows the SEC and the CFTC and from her current perch as CEO of FINRA, she knows regulated industries (read Madoff)...

Delaware Courts and the Influence of Federal Preemption (part 3)

Posted on December 16, 2008
We are discussing whether we will see, as we did in the aftermath of SOX (take a look at footnote 382 in The Irrelevance of State Corporate Law in the Governance of Public Companies), a shift in the Delaware courts that suggests it will temporarily reduce its pro-management bias in an effort to head off possible federal preemption...

Delaware Courts and the Influence of Federal Preemption (part 2)

Posted on December 16, 2008
As an example, lets take a quick look at Oss v. Ross, 2008 Del. Ch. LEXIS 175 (Del. Ch. Nov 26, 2008).  This was not a traditional corporate law case but a derivative suit for breach of fiduciary duty by the Board of Trustees of a Delaware statutory trust...

Delaware Courts and the Influence of Federal Preemption (part 4)

Posted on December 16, 2008
Are there other examples of a reduced managerial bias?  Lyondell is another possibility.  In that case, the Chancery Court held that the waiver of liability provision did not apply to the alleged conduct (approval of a merger involving a 45% premium)...

Delaware Courts and the Influence of Federal Preemption (part 1)

Posted on December 15, 2008
Many who pay attention to the Delaware courts noted that, in the aftermath of Enron (and, more importantly, federal intervention in the form of SOX), that the decisions seemed to have a somewhat less pro-management bias.  It was during this period that Disney for the first time gave content to the concept of "good faith," largely defining the standard as "conscious disregard...

Chris Cox and the Financial Bailout

Posted on December 15, 2008
The Chairman of the SEC, Chris Cox, gave a speech last week on the need for the government to have an exit strategy in connection with its current spate of involvement in the market place.  The speech was given before a Joint Meeting of the Exchequer Club and Women in Housing and Finance in Washington, DC...

Bear Stearns, the Shotgun Merger, and Fiduciary Duties

Posted on December 13, 2008
The NY Supreme Court ruled on the class action brought by shareholders alleging that the forced merger between Bear Stearns and JP Morgan violated the board's fiduciary duties.  The case dismissed the suit on a motion for summary judgment.  It is hard to argue with the decision and, frankly, presents a good example of how the business judgment rule ought to work...

Shareholder Proposals and the North Dakota Public Corporations Act

Posted on December 12, 2008
North Dakota, as we have written about on this Blog, has taken a unique approach to the corporate governance race.  Rather than following Delaware in the downward spiral (the so called race to the bottom), it has tried to go in the other direction...

Starbucks and Social Responsibility: Free Flavors Aren't Working

Posted on December 12, 2008
The news at Starbucks keeps getting worse. Starbucks has been suffering, with declining sales and anticipated competition from the likes of McDonalds.  How has the company been doing?  Not well. As the WSJ has noted:  New figures released by the company show that, instead of the bottoming out Starbucks predicted in October, the company's same-store sales have gotten worse...

Law Teaching and Technology: Views from the Academy (More Specifically Steve Bainbridge)

Posted on December 11, 2008
Steve Bainbridge at UCLA has a short paper out, Reflections on Twenty Years of Law Teaching. There are a host of interesting observations, including his conclusion that "the Socratic Method does not really teach one to think like a lawyer.  At best it teaches one to think like a litigator...

The Auto Bailout and Corporate Governance

Posted on December 11, 2008
As the showdown over the Auto Bailout Bill continues (it passed in the House but Republican opposition in the Senate seems to be on the increase, a particular problem given the potential for a filibuster), most of the attention is on the amount involved and the authority of the Car Czar...

The Oversight Committee Studies the Implementation of TARP (And Doesn't Like What It Sees)

Posted on December 10, 2008
TARP included a provision for periodic review by an Oversight Committee.  The Committee has issued its first report and has found that Treasury has administrated the program "without seeking to monitor the use of funds provided to specific financial institutions...

The GAO Studies TARP

Posted on December 10, 2008
The GAO has issued a preliminary report on the implementation of TARP.  It is a bit early to make much of an assessment but the report contains a list of the financial institutions receiving capital infusion and a list of consultants hired to assist with implementation...

Executive Compensation and CEO Involvement in the Process

Posted on December 10, 2008
As we have noted (and as has been discussed in the paper, Returning Fairness to Executive Compensation), both the Delaware courts and the NYSE rely on approval of independent directors to validate executive compensation decisions.  Delaware courts extend the protections of the business judgment rule to decisions approved by independent directors...

IPOs and Executive Compensation

Posted on December 10, 2008
The Journal has noted that some companies incur "culture shock" when they decide to go public and have to confront the executive compensation disclosure requirements.  The article compared the level of compensation disclosure in the MasterCard IPO (before the 2006 changes) and the Visa IPO (after the 2006 changes), with the former providing 15 pages of disclosure, the latter 30 pages...

Jon Macey on Corporate Governance (Part 9)

Posted on December 09, 2008
Jon Macey, Deputy Dean and Sam Harris Professor of Corporate Law, Corporate Finance, and Securities Law at Yale, has recenlty published a book titled Corporate Governance, Promises Kept, Promises Broken.  This is the last post. Macey rightfully views the central problem of corporate governance as capture of the board by management...

Jon Macey on Corporate Governance (Part 8)

Posted on December 09, 2008
Jon Macey, Deputy Dean and Sam Harris Professor of Corporate Law, Corporate Finance, and Securities Law at Yale, has recenlty published a book titled Corporate Governance, Promises Kept, Promises Broken. We are discussing the book in a series of posts...

Automobile Manufacturers and Corporate Governace Reform

Posted on December 08, 2008
The planned bailout for the auto makers looks like it may include a seat on the board for the unions, a payback for worker concessions.  This was done back in the era of the bailout of Chrysler when Douglas Fraser sat on the Chrylser board from 1980 until 1984...

The Automobile Manufacturers Return to Washington (Pressure Builds for Regime Change) (Part 3)

Posted on December 08, 2008
The auto companies have been seeking a bailout.  The first trip to Washington was a public relations disaster, arriving with no plan and leaving in private jets after asking for $25 billion in loans.  On the second trip, the heads of the three auto makers came with a plan...

The Auto Manufacturers and the Failure of the Market for Corporate Control

Posted on December 08, 2008
We are talking about a recent book written by Jon Macey at Yale titled Corporate Governance, Promises Kept, Promises Broken.  Ultimately Macey believes that the solution to the corporate governance problems in the United States is a more vigorous market for corporate control...

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