Corporate Governance

The Director Compensation Project: Ford Motor Company

Posted on July 07, 2010
This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010's Fortune 500 and using information found in their 2010 proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence...

The Director Compensation Project: Chesapeake Energy

Posted on July 06, 2010
This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010's Fortune 500 and using information found in their 2010 proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence...

The Director Compensation Project: JP Morgan Chase & Co.

Posted on July 06, 2010
This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010's Fortune 500 and using information found in their 2010 proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence...

The Director Compensation Project

Posted on July 05, 2010
As part of The Race to the Bottom's focus on student collaboration, we are publishing the third annual "Director Compensation Project."  This student-developed project examines compensation for the Board of Directors of many of the top 2010 Fortune 500 companies...

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The Director Compensation Project: General Electric

Posted on July 05, 2010
This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2010's Fortune 500 and using information found in their 2010 proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence...

Corporate Governance, Executive Compensation and the Japanese Approach (Part 3)

Posted on July 02, 2010
So what impact will these disclosure requirements have on executive compensation?  The best case scenario is none.  The worst case scenario is a full blow escalation of executive compensation.  At least in the short term, however, cultural norms and, importantly, arm twisting by the Financial Services Agency will likely keep the worst case scenario from taking place...

Corporate Governance, Executive Compensation and the Japanese Approach (Part 1)

Posted on July 01, 2010
Some aspects of corporate governance are converging in the global markets.  Countries have increasingly turned to the use of independent directors to protect the interests of shareholders (usually, outside the United States, minority shareholders)...

Corporate Governance, Executive Compensation and the Japanese Approach (Part 2)

Posted on July 01, 2010
Until recently, Japan required public companies to disclose the compensation paid to officers as a group.  It did not require the disclosure of specific individuals leaving, in most cases, the actual compensation of the CEO a mystery.  The aggregate data provided only a crude basis for examining the compensation of top officers...

Mind Your Peas and Queues at the Supreme Court: Reconciling Rent-a-Center with Citizens United, Part III

Posted on June 30, 2010
'He brought this challenge to the delegation provision too late, and we will not consider it,' wrote Justice Scalia at the end of the majority opinion in Rent-a-Center, West, Inc.  v. Jackson . What is astonishing about that last piece of the opinion is the poor short-term memory of these same five justices...

The Benefits of Regulation and the Benefits of Sarbanes Oxley

Posted on June 30, 2010
By now, the big news out of the Supreme Court's decision in FEF v. PCAOB is that SOX survived essentially untouched.  It was always farfetched that even if the Court struck down the PCAOB it would somehow invalidate the rest of the law.  But what is more amazing is that the opposition to SOX, something that was far more virulent when the case was filed (for a discussion of the unfounded criticism, go here), continued in what can only be described as an often myopic view that refuses to take into account the benefits of the Act...

Mind Your Peas and Queues at the Supreme Court: Reconciling Rent-a-Center with Citizens United, Part I

Posted on June 29, 2010
On June 21, in Rent-a-Center, West, Inc.  v. Jackson, a slim 5-4 Supreme Court majority once again favored a corporate person over a real person.  The dissent called it a 'bizarre' decision, and it was. The majority held that an employee who believed that the arbitration agreement he signed was unenforceable, could only challenge its enforceability through arbitration...

Mind Your Peas and Queues at the Supreme Court: Reconciling Rent-a-Center with Citizens United, Part II

Posted on June 29, 2010
The majority in Rent-a-Center, West, Inc.  v. Jackson, focused in on the fact that in his motion to dismiss and in his appeal to the 9th Circuit, Mr. Jackson had challenged the whole arbitration agreement but had failed to single-out the specific language that compelled arbitration...

Little Incentive for Resentencing Appeal by Nacchio or Government

Posted on June 28, 2010
Nacchio's attorneys must view the resentencing decision reducing his time in prison two months from the original 72 months as an utter failure in materially mitigating their client's prison term.  After all, the Tenth Circuit's decision requiring a new resentencing hearing provided Nacchio's attorneys a clear roadmap to dramatically reduce Nacchio's sentence in half...

Matrixx v. Siracusana: Revisiting the Materiality Standard (Part 9)

Posted on June 28, 2010
So where does this leave the Supreme Court?  It was sold a pig in a poke.  The likelihood is that the majority of justices voting for this case expected to get an opportunity to draw a bright line in connection with the analysis of materiality under Rule 10b-5 (that statistically insignificant data never qualified as material)...

Supreme Court Strikes Down the PCAOB

Posted on June 28, 2010
Chief Justice Roberts in a 5-4 decision (conservatives v. liberals), declared as unconstitutional the "dual for-cause limitations on the removal of [PCAOB] Board members".   The opinion is here.  The Court did not enjoin operations of the PCAOB but did gut its authority...

Matrixx v. Siracusana: Revisiting the Materiality Standard (Part 8)

Posted on June 28, 2010
Will a finding of materiality in this case result in an increase in the number of lawsuits?  The Petitioners noted in their cert petition: The effects of the Ninth Circuit's rejection of the statistical significance standard are profoundly unsettling...

Supreme Court Strikes Down the PCAOB (Sort Of)

Posted on June 28, 2010
Chief Justice Roberts in a 5-4 decision (conservatives v. liberals), declared as unconstitutional the "dual for-cause limitations on the removal of [PCAOB] Board members".   The opinion is here.  The Court did not enjoin operations of the PCAOB but provide some relief...

Weakening Access and Weakening Corporate Governance Reform

Posted on June 26, 2010
There has been talk on the Senate side of adding a requirement to the financial reform bill that would limit access to shareholders owning 5% or more of the equity shares. The issue is hottly contested by both sides of the debate.  Lucian Bebchuk has written on the subject at Dealbook, predictably opposing the proposal...

Access without Limits

Posted on June 25, 2010
RiskMetrics has a nice discussion of the final negotiations over access.  In the end, the Conference agreed not to impose any ownership ceilings,  beating back an attempt by the Senate conferees that wanted to impose a highly unrealistic 5% ownership threshold...

Matrixx v. Siracusana: Revisiting the Materiality Standard (Part 7)

Posted on June 25, 2010
This case is also a duty to disclose case.   Just because information is material does not automatically mean it must be disclosed.  Instead, a company must have a duty to disclose.  Most duty arises out of the obligation to be complete...

Matrixx v. Siracusana: Revisiting the Materiality Standard (Part 5)

Posted on June 24, 2010
Much of the discussion in the Petition and Opposition concerns the impact of Basic, 485 U.S. 224 (1988).  This case does have a number of similarities to that case.   Petitioners argue that disclosure of the reports would affirmatively harm investors...

The 5% Access Threshold is Rejected in the House

Posted on June 24, 2010
Congressman Frank has just announced that the House is rejecting the 5% access threshold inserted by the Senate conferees into the financial reform bill.  He is instead recommending a set of instructions to the SEC that provide guidance on assorted considerations by the SEC in adopting access, including the long term interests of shareholders...

Morrison v. National Australia Bank: Protecting Foreign Shareholders and Discouraging Listings on the NYSE

Posted on June 24, 2010
The Supreme Court issued its opinion today in MORRISON ET AL. v. NATIONAL AUSTRALIA BANK.  Not surprisingly, the Court held (in an opinion by Justice Scalia) that Rule 10b-5 had no extraterritorial effect.  In resolving whether a company with headquarters in Florida could nonetheless be sued, the Court noted that "the presumption against extraterritorial application would be a craven watchdog indeed if it retreated to its kennel whenever some domestic activity is involved in the case...

Matrixx v. Siracusana: Revisiting the Materiality Standard (Part 6)

Posted on June 24, 2010
The emphasis in this case on statistical significance is misleading.  The only question is whether the information at issue is important to a reasonable investor. That in turn depends not upon the number of adverse health reports but upon the knowledge of the Company about the possible harmful effects of the drug...

Nacchio's Sentence Reduced by two months

Posted on June 24, 2010
Today, Judge Krieger re-sentenced former Qwest CEO Joseph Nacchio to 70 months in jail, which is two months shorter than his 2007 sentence of six years.  The court also imposed a fine of $19 million and forfeiture of $44.6 million. We will post on today's hearing in more detail soon.

Matrixx v. Siracusana: Revisiting the Materiality Standard (Part 3)

Posted on June 23, 2010
So what did Defendants assert in their cert petition?  The petition states the question as follows: Respondents filed suit under § 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5, alleging that petitioners committed securities fraud by failing to disclose 'adverse event' reports—i...

Matrixx v. Siracusana: Revisiting the Materiality Standard (Part 4)

Posted on June 23, 2010
Is there a circuit split?  Defendants rely on three cases: In re Carter-Wallace, Inc. Securities Litigation, 150 F.3d 153 (2d Cir. 1998), Oran v. Stafford, 226 F.3d 275, 284 (3d Cir. 2000), and New Jersey Carpenters Pension & Annuity Funds v...

Congress and the Regulation of Derivative Trading

Posted on June 23, 2010
For a clip on CNBC of my remarks about the regulation of derivatives in the financial reform act, particularly the benefits of requiring banks to use separate subsidiaries, go here.

Matrixx v. Siracusana: Revisiting the Materiality Standard (Part 1)

Posted on June 22, 2010
It seems these days that the US Supreme Court has rarely found a Rule 10b-5 case that it doesn't want to hear.  The Court just accepted cert in Matrixx v. Siracusana, a case involving the standard for materiality under Rule 10b-5.  This makes the seventh case involving Rule 10b-5 since 2001...

Matrixx v. Siracusana: Revisiting the Materiality Standard (Part 2)

Posted on June 22, 2010
This case inolves the alleged failure of Matrixx, a pharmaceutical company, to disclose that there was evidence that one of its cold products, Zicam Cold Remedy, caused anosmia, or the loss of smell.  As the case sets out, Matrixx received various modest indications that customers suffered anosmia when using Zicam...

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