- WSJ, How Much Do CEOs Make? (May 9, 2018)
Top 10 Corporate and Securities Articlesについて、2017年の結果を追加しました。
- SEC, Press Release, SEC Proposes to Enhance Protections and Preserve Choice for Retail Investors in Their Relationships With Investment Professionals (Apr. 18, 2018)
Under proposed Regulation Best Interest, a broker-dealer would be required to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities to a retail customer. Regulation Best Interest is designed to make it clear that a broker-dealer may not put its financial interests ahead of the interests of a retail customer in making recommendations.
In addition to the proposed enhancements to the standard of conduct for broker-dealers in Regulation Best Interest, the Commission proposed an interpretation to reaffirm and, in some cases, clarify the Commission’s views of the fiduciary duty that investment advisers owe to their clients. By highlighting principles relevant to the fiduciary duty, investment advisers and their clients would have greater clarity about advisers’ legal obligations.
Next, the Commission proposed to help address investor confusion about the nature of their relationships with investment professionals through a new short-form disclosure document — a customer or client relationship summary. Form CRS would provide retail investors with simple, easy-to-understand information about the nature of their relationship with their investment professional, and would supplement other more detailed disclosures. For advisers, additional information can be found in Form ADV. For broker-dealers, disclosures of the material facts relating to the scope and terms of the relationship would be required under Regulation Best Interest.
Finally, the Commission proposed to restrict certain broker-dealers and their financial professionals from using the terms “adviser” or “advisor” as part of their name or title with retail investors. Investment advisers and broker-dealers would also need to disclose their registration status with the Commission in certain retail investor communications.
- Fernan Restrepo, Judicial Deference, Procedural Protections, and Deal Outcomes in Freezeout Transactions: Evidence from the Effect of MFW
This work next explores the effect of MFW on the gains of the target shareholders, as measured by the premium over market prices, the cumulative abnormal returns around the announcement of the transaction, and the change from the buyer’s first offer to the final offer. This part of the analysis considers two hypotheses. The first hypothesis predicts that the gains of the target should be higher after MFW because shareholder voting acts as a check against negligent or captured boards, and even if boards discharged appropriately their fiduciary duties, the target shareholders can still use the threat of a veto to push acquirers to raise their offer (Subramanian, 2005, 15; Edelman and Thomas, 2015, 468; Jiang, Li, and Mei, 2016). As a result, the fact that MFW effectively incentivized MOM conditions should lead to an upward pressure on deal prices. The second hypothesis suggests, in contrast, that the target gains should remain similar after MFW because freezoeuts were already subject to significant scrutiny before 2013, and judicial scrutiny appears to be an effective substitute for procedural protections (Subramanian, 2007; Restrepo, 2013; Restrepo and Subramanian, 2015). As discussed in Section 4, the results generally support this hypothesis.
An Uber Technologies Inc. self-driving car struck and killed a pedestrian in Arizona in the first known fatality involving an autonomous vehicle, an accident that could stir regulators to action and damage the public perception of the young industry.
- Yair Listokin & Inho Andrew Mun, Rethinking Corporate Law During a Financial Crisis, Harvard Business Law Review (forthcoming)
Since the Financial Crisis of 2008, most reform measures and discussions have asked how the law of financial regulation could be improved to prevent or mitigate future crises. These discussions give short shrift to the role played by corporate law during the Financial Crisis of 2008 and in other financial crises. One critical regulatory tool during the Crisis was “regulation by deal,” in which healthy financial firms (“acquirers”) would hastily acquire failing firms (“targets”) to mitigate the crisis. The deals were governed by corporate law, so corporate law played an outsize role in the response to the Crisis. But few observers have asked how corporate law — in addition to financial regulation — should govern dealmaking in financial crises. To fill in this gap, this Article focuses on the role played by corporate law during the Financial Crisis, and asks whether corporate law should be different during a financial crisis than in ordinary times. Using an externality framework — the failure of large financial firms harms the entire economy, and not just the shareholders of the failed firm — this Article identifies a key problem with the current corporate law regime as applied in financial crises: the shareholder value maximization principle as applied to failing target companies. This principle, manifested in the form of shareholder voting rights on mergers and board fiduciary duties to shareholders, is inapplicable to systemically important target firms whose failure would have enormous negative externalities on the rest of the economy. This Article contends that corporate law as applied to systemically important and failing target firms during crises should change as follows: (1) replace shareholder merger voting rights with appraisal rights, and (2) alter fiduciary duties so that directors and officers of those failing target firms consider the interests of the broader economy.
- Davis Polk, First Wave of Pay Ratio Disclosures Filed
Financials: 1:1 – 429:1
Health Care: 6.4:1 – 388:1
Industrials: 50:1 – 428:1
Real Estate: 14.84:1 – 111:1
Utilities: 55:1 – 190:1
Energy: 0.9:1 – 25:1
Information Technology: 46:1
Telecommunications Services: 85:1
Statistical Sampling. No companies disclosed the use of statistical sampling for purposes of identifying their median employee.
Virtual-only annual meetings seem to be gaining traction – as Broc blogged last summer, despite opposition from a number of prominent investor groups, the number of companies going virtual-only increased significantly in 2017. However, this Bloomberg article says that some big companies are having second thoughts about the virtual-only approach:
Railroad operator Union Pacific Corp. will revert to an in-person annual meeting this year, after its 2017 virtual-only gathering drew a shareholder rebuke and a proposal to end the practice, a company lawyer told the Securities and Exchange Commission in a letter dated Monday. ConocoPhillips is also backpedaling after investors objected to the oil producer’s online meeting last year.
“A virtual-only meeting is a totally disembodied event online — there’s no exchange or opportunity for investors to look the board in the eye,” said Tim Smith, a director at Boston-based Walden Asset Management who worked with shareholders of ConocoPhillips and Comcast Corp. opposed to virtual-only meetings.
The article points out that some investors prefer the hybrid meeting approach – where shareholders can attend in-person or online. However, according to Broadridge, only 1-in-5 virtual meetings last year adopted the hybrid approach.
This is an important case for its comments on the Dell decision of the Delaware Supreme Court. The Court declined to use the deal price as evidence of the fair value despite the favorable comments on the use of deal price in Dell. Hence, this may mean that some commentators are wrong in their views that deal price is conclusive in valuation cases in the Delaware courts. Note, however, that again the fair value determined by the Court is less than the deal price, a loss for petitioners.
The decision is also important for its review of when the “operative reality” of a company includes the value of a new deal not yet concluded but sufficiently certain that its value needs to be part of the fair value of the company.
via Morris James