In a recent bench ruling, the Delaware Court of Chancery enforced an advance notice bylaw and thereby precluded an activist investor from nominating a slate of directors and conducting a proxy contest at a company’s annual meeting. The court enforced the plain terms of the advance notice bylaw, which required that notice of the nominations had to be given by a stockholder of record...
On August 6, a group of three individual plaintiffs represented by Judicial Watch, Inc. filed suit in Los Angeles County Superior Court against California’s Secretary of State seeking to block the provisions of SB 826, which was signed into law in September 2018 and provides that: By December 31, 2019, every publicly traded company on a ...
There has recently been much debate and some confusion about a bedrock principle of corporate law—namely, the essence of the board’s fiduciary duty, and particularly the extent to which the board can or should or must consider the interests of other stakeholders besides shareholders...
Another day, another data breach. This time at Capital One, the fifth largest credit card issuer in the United States...
As reported by the WSJ, a new milestone has finally been reached for board gender diversity: there are no longer any companies in the S&P 500 with all-male boards! Reaching just that one milestone has not exactly been expeditious...
The final link in the chain of improving corporate accountability for sustainability is to tie improvements to pay. In a November 2018 article, we explained that companies should use incentives to motivate executives to tap big strategic opportunities related to environmental, social, and governance (ESG) goals...
In the 2019 proxy season, “overboarding” became a center-stage issue for many companies and investors. Several large asset managers, including Vanguard, BlackRock, and LGIM, enhanced their voting guidelines to apply stricter criteria, while some directors serving on multiple public company boards faced significant opposition to their elections. The idea that directors should not serve on too many boards has been a key consideration for investors for many years...
Most publicly traded firms retain consultants to provide advice on executive compensation. Prior research documents, based on cross-sectional analyses, that firms retaining executive compensation consultants pay more to their CEOs (a “CEO pay premium”) than firms not using them....
The following table and pie charts summarize, by general category, the Rule 14a-8 shareholder proposals submitted in 2018 full-year and 2019 year-to-date, the number voted on and the rate at which they passed. Overall, the total number of shareholder proposals significantly declined, continuing a downward trend from 2015...
Index funds have democratized access to diversified investment for millions of savers who are investing for long-term goals, like retirement. The popularity of index funds has, however, drawn critics who claim that index fund managers may wield outsized influence over corporations due to the size of their shareholdings in public companies...
On June 27, 2019, the Delaware Chancery Court entered an injunction requiring the boards of trustees (the “Boards”) of two closed-end investment funds (the “Funds”) to count the votes in favor of director candidates nominated by shareholder Saba Capital at the annual meetings scheduled for July 8, 2019...
In Marchand v. Barnhill (“Blue Bell”) (June 18, 2019), the plaintiff-stockholder claimed that the directors of Blue Bell Creameries USA, Inc., an ice cream manufacturer (the “Company”), breached their fiduciary duty of loyalty under Caremark by having failed to oversee and monitor the Company’s food safety operations. The suit was brought after an outbreak of listeria contamination in the Company’s ice cream led to the sickening and (in three cases) the death of consumers who ate the ice cream—as well as the recall of all of the Company’s products, the shuttering of all of the Company ...
Technology can enable innovation and disrupt existing business models. Many corporate leaders are increasingly considering how technology can improve operational efficiencies, create new products and services, and help their organizations enter untapped markets. They are also surveying the landscape for competitive entrants seeking to disrupt their industry...
On May 31, 2019, Vice Chancellor Sam Glasscock of the Delaware Court of Chancery issued a decision refusing to dismiss a stockholder’s fiduciary duty claims challenging the compensation of Goldman Sachs’ board of directors. [1] The case highlights the type of claim potentially available to stockholders in challenging board (and sometimes executive) compensation, and it provides important guidance for boards when considering the possibility of such a challenge. The decision also reflects the relative uptick we have seen in demands and challenges from stockholders and plaintiffs’ attorneys relating to board compensation...
Directors have fiduciary duties, and the most litigated and most demanding of those duties is the duty of loyalty. The key questions for duty of loyalty litigation are director-by-director questions: Did this particular director have a conflict? Is it futile to make a demand on that particular director?...
Board Diversity by Term Limits? Posted by Yaron Nili (University of Wisconsin) and Darren Rosenblum (Pace University), on Monday, June 10, 2019 More from: Darren Rosenblum , Yaron Nili Yaron Nili is Assistant Professor of Law at the University of Wisconsin-Madison Law School; and Darren Rosenblum is Professor of Law at Pace University Elisabeth Haub School of Law. This post is based on their recent article , forthcoming in the Alabama Law Review .
The intensifying spotlight turned on boards of directors and management teams by investors prompts a fresh look at how public companies approach board development, director succession planning and refreshment in advance of an activist attack, shareholder unrest or a crisis that results in heightened scrutiny...
Pearl Meyer’s annual “Top Five” publication provides a roadmap for boards that are seeking to get ahead of emerging issues. More than ever, we are seeing the compensation committee’s scope of influence expand, while much attention is being paid to how directors themselves are compensated. Measuring and rewarding performance—both financial and non-financial—based on the specific goals of each company continues to be a complicated endeavor. Meanwhile, decisions must be made within a complex and uncertain business and geopolitical environment...
The question of the ideal composition of company boards is unlikely to have the perfect answer. While the need for independent directors was emphasized in the early nineties and continues to be emphasized even today, additional new ideas have crept in. The idea of board diversity and especially gender diversity has become popular in recent times. The rationale, at least in part, for most of these proposals is to ensure that the board is active, acts independently of management, and is able to consider various perspectives that might affect the company while making decisions. Could Artificial intelligence (AI) help solve ...
As the SEC continues its consultation into the proxy process, in particular its consideration of the role of proxy advisory firms in that process, it’s more important than ever to understand how this process affects average retail investors and what, if any, changes they’d like to see. To that end, I collaborated with wealth management research specialist Spectrem Group, to design a survey of retail investor to hear directly from the ultimate stakeholders of proxy voting...
Corporate culture is defined by the implicit, unwritten rules that create expectations for how people choose to behave. It is reflected by what people actually do every day, by what’s celebrated, emphasized and overlooked. Culture is also how companies create and protect value through people. A company’s intangible assets, which include talent and culture, are now estimated to make up 52% of a company’s market value...
Average Say on Pay support in 2018 declined to the lowest level observed since 2012, driven by an increase in the number of companies receiving vote support below 70%. Shareholder engagement increased on environmental proposals; other environmental, social, and governance (ESG) topics; Board diversity; and the use of GAAP versus non-GAAP performance metrics in compensation program design...
As we enter the peak of proxy season, we review executive compensation trends in the U.S. based executive pay disclosures so far this year. Our key findings include...
On the surface, the 2018 activism data is largely consistent with 2017, but with an uptick in overall activity. The amount of capital invested in new activist positions in 2018 was up approximately $2.5 billion from 2017, and activists won more board seats in 2018 than in 2017, mostly through settlements. Although several well-known activists (including Third Point, Pershing Square and Greenlight Capital) announced disappointing investment results in 2018, and the industry experienced negative net asset flows overall, activist funds continue to attract substantial new capital...