Corporate Governance

Sensationalized Criticism (redux)

Posted on May 30, 2008
On the Harvard Corporate Governance Blog, JW Verret, a recent addition to the faculty at George Mason, writes his "own personal response" to my post criticizing his article and the practice in Delaware that he calls the "guidance function...

The Stockman Case: Paul Barnaba Wants Out

Posted on May 30, 2008
We are following the criminal case filed against David Stockman, the former head of OMB under President Reagan. Among the other defendants is Paul Barnaba. The indictment describes him as "employed by [Collins & Aikman] in the Purchasing Department...

Current Reports, Disclosure and Stoneridge

Posted on May 29, 2008
One of our observations about the deplorable reasoning in Stoneridge was that the element of actual reliance would place control over liability not on the vendor but on the customer making the disclosure.  In other words, the Court dismissed the case against the vendors in Stoneridge because the market did not rely on the allegedly fraudulent contracts...

Current Reports and the Resignation of Directors

Posted on May 29, 2008
One of the topics we have discussed on this Blog has been the efforts by the Securities and Exchange Commission to influence the substance of corporate governance through the use of disclosure requirements.  A paper on the subject is here.  One example is the requirement that the company file a current report on Form 8-K whenever a director resigns or refuses to stand for reelection because of a disagreement (or had been removed because of the disagreement)...

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Exxon and the Shareholder Meeting: The Results Are In

Posted on May 28, 2008
One advantage to Regulation FD is the continued increase in the number of companies that webcast their annual meetings. Exxon held its meeting today, allowing the public, including this blog, to listen. I came in late and apparently the CEO, Rex Tillerson, made a statement acknowledging the importance of renewable energy, a substantial concession to those concerned about global warning and an apparent attempt to demonstrate that the concerns of shareholders were being heard...

Bear Sterns and a Sleeping Board?

Posted on May 28, 2008
The WSJ ran a story about the waning days of Bear Sterns and the concerns expressed within the investment banking firm in the days and months leading to its ultimate demise.  At one point, buried in the piece, the WSJ described the board as "12 men largely handpicked by Mr...

Blogging and the Securities Laws: The Curious Case of John Mackey and Whole Foods (redux)

Posted on May 28, 2008
Mackey is back.  With the controversy over his anonymous blogging receding, the CEO of Whole Foods has returned to the blogosphere with a vengeance, although this time out front and not hiding behind a screen name (having used “rahodeb" in the past)...

Bear Stearns and a Sleeping Board?

Posted on May 28, 2008
The WSJ ran a story about the waning days of Bear Stearns and the concerns expressed within the investment banking firm in the days and months leading to its ultimate demise.  At one point, buried in the piece, the WSJ described the board as "12 men largely handpicked by Mr...

The Race to the Bottom and the Entry in the Lexis/Nexis Data Base

Posted on May 27, 2008
As we have written on this Blog before, one of the most significant problems confronted by law blogs is the inability of those conducting serious research to retrieve information over the Internet.  Online search engines, on the whole, are not up to the task...

Stock Loans, Shareholders, and Finders

Posted on May 27, 2008
We have written about a number of problems that arise in the context of shareholder voting.  One of them concerns the problem of overvoting, when shareholders vote more shares than they actually possess.  This often occurs where brokers lend shares (the shares are actually sold) and provide voting rights to the lenders and borrowers...

Exxon and the Rockefellers

Posted on May 26, 2008
The Exxon shareholder meeting is next week, with shareholders in a surly mood.  Despite the immense profit making machine, the company has been in the eye of a shareholder revolt, in large part because of a tone deaf approach to issues important to the owners...

Will say on pay play at all companies?

Posted on May 24, 2008
Will say on pay play at all companies? We have recently noted the increase “say on pay” proposals and the experience of Aflec, which granted its shareholders say on pay only to have them approve by 93% the management proposed executive compensation...

SEC and Confirmation of the Vacant Seats on the Commission

Posted on May 23, 2008
Senator Dodd has indicated a desire to move forward on the three open slots on the SEC.  President Bush has nominated two democrats (Elisse Walter and Luis Aguilar) and one republican (Troy Paredes).  Despite recommendations from former Chairman Levitt that the nominations be delayed after the presidential elections, Senator Dodd indicated a need for expediency:  ``I want to get people in place and start making decisions...

Proxy Contests, Shareholder Access and "Special Interest Directors"

Posted on May 23, 2008
One of the most vociferous arguments against shareholder access to the company's proxy statement under Rule 14a-8 was the prospect of "special interest" directors.  Put aside that the term lacks any real definition and that all directors have fiduciary obligations to all shareholders...

Delaware, Independence and Director Compensation: Sutherland v. Sutherland (Part 2)

Posted on May 22, 2008
We are examining the reasoning in Sutherland v. Sutherland, a case involving a challenge to a special litigation committee that recommended the dismissal of a derivative action.Plaintiff, among other things, challenged the independence of the lone director on the SLC...

Qwest and an Exemplary Legal Department

Posted on May 21, 2008
We are a corporate governance blog and do not typically comment on corporate legal departments.  Nonetheless we make an exception today to note the article by Amy Miller from Corporate Counsel on the Best Legal Department of 2008.  The award went to the legal department at the telecommunications giant, Qwest, headquartered right here in Denver...

Delaware, Independence and Director Compensation: Sutherland v. Sutherland (Part 1)

Posted on May 21, 2008
On this Blog, we follow relatively closely the Delaware decisions that address director independence. Most often the issue comes up in the context of deriviative suits, usually on motions to dismiss for failure to make demand on the board.  In those circumstances, the board is presumed independent...

Exxon and Mirror Image Boards

Posted on May 20, 2008
The corporate governance at Exxon has once again been in the news.  As the WSJ has reported, the company is engaged in a campaign to defeat a shareholder proposal calling for the separation of chairman and CEO.  As the article noted, Exxon "took the unusual step Monday [May 12] of sending an email to institutional investors asking them to reject a shareholder measure to shake up the company by pushing it to name an independent chairman...

Executive Compensation and the CEO Residence

Posted on May 19, 2008
We have noted assorted aspects of executive compensation such as the use of the corporate aircraft for personal reasons, including by spouses and children.  We note with interest the article in the WSJ on the purchase of homes held by CEOs who relocated...

The Motion for Rehearing En Banc: Nacchio Responds

Posted on May 17, 2008
The Defense has replied to the Government's motion for a rehearing en banc. The brief makes a number of points (all opposing en banc reconsideration). The most salient argument seems to be the contention that the Defendant was denied an opportunity to provide evidence under the Daubert standard...

Home Depot Settlement: Corporate Governance Changes

Posted on May 16, 2008
Over the past two years Home Depot has faced multiple derivative lawsuits by stockholders. These suits allege that former and current officers and directors breached their fiduciary duties in multiple ways, including: backdating of stock-option, engaging in illicit return-to-vendor practices, and approving excessive compensation for its former CEO, Robert Nardelli...

Proxy Contests and Access

Posted on May 16, 2008
We have a student post today on the aborted proxy contest with respect to the board of Office Depot.  The effort demonstrates the costs imposed on insurgents (both solicitation fees and litigation expenses) and the practical difficulties incurred when management opposes the efforts...

Office Depot and the Evolution of a Proxy Contest

Posted on May 16, 2008
As noted on The Race to the Bottom, proxy contests are uncommon among large companies due to the time and money required for a legitimate campaign.  The circumstances surrounding Office Depot illustrate some of the reasons why this is the case.  In the months leading up to the Office Depot board meeting, Woodbridge Equity Fund LLLP and Levitt Corporation (“Woodbridge”) sought to elect two new directors in place of Steve Odland (CEO and President) and David Fuente...

SEC Chairmen and the Presidential Election

Posted on May 15, 2008
The WSJ reported yesterday that three former Chairmen of the SEC (Ruder, Donaldson, and Levitt) have endorsed Barak Obama.  In other words, they are not endorsing John McCain.  Most interesting is that two of the endorsing chairmen were appointed by Republicans (Ruder by Reagan and Donaldson by Bush Jr)...

Profit Maximization and Social Responsibility

Posted on May 15, 2008
The Journal on Monday included a story titled "Does Being Ethical Pay."  The thrust of the article concerned companies acting in a socially responsible manner and whether consumers would pay more as a result.  We have been harping on this subject with particular attention paid to Starbucks...

A Comment on Portnoy

Posted on May 14, 2008
We received an interesting comment on our post on Portnoy, a case where the Delaware Chancery Court found that management abused the voting process but ultimately imposed a remedy that essentially penalized the plaintiff.  It is worth a read.

E Proxies and the Need for Access

Posted on May 14, 2008
The Commission recently adopted Rule 14a-16, requiring companies to post their proxy materials on the Internet.  Internet posting is mandatory.  Some have used this requirement as a justification for denying or downplaying the importance of shareholder access...

40th Annual Rocky Mountain Securities Conference: SEC Enforcement Panel

Posted on May 13, 2008
The second panel of the morning of the 40th Annual Rocky Mountain Securities Conference was SEC Enforcement in 2008, with Linda Thomsen (Director, SEC Division of Enforcement), Walter Ricciardi (Deputy Director, SEC Division of Enforcement), Lou Mejia ( SEC Chief Trial Counsel), Dan Shea (SEC Former Regional Director, currently with Hogan & Hartson) and moderated by John McDermott (Holme Roberts & Owens)...

The Rocky Mountain Securities Conference: Judge Stanley Sporkin and Ethics

Posted on May 13, 2008
As part of the 40th annual Rocky Mountain Securities Conference, former U.S. District Court Judge Stanley Sporkin presented a keynote address on current issues in professional ethics titled “Ethics in a Turbulent Marketplace.” With participation from SEC Regional Director George Curtis, Baker Botts LLP’s James Doty, and Gibson, Dunn & Crutcher LLP’s John F...

Rocky Mountain Securities Conference: Overview

Posted on May 13, 2008
Last Thursday and Friday were a couple of days in Denver that securities lawyers truly appreciate.  On Thursday, May 8, the SEC Historical Society held a reception at the Denver Regional Office to celebrate the 75th Anniversary of the Securities and Exchange Commission...

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