Director Independence Reconceived
CLS Blue Sky Blog » Corporate Governance
by Claire A. Hill, Yaron Nili
2d ago
Independent directors were originally conceived as guardians of shareholder interests who could safeguard a corporate board’s ability to check management’s power. They have since become a marquee feature of modern corporate governance. What, though, makes a director independent? Scholars, regulators, and investors have grappled with this question for decades.   Independence has traditionally been defined by reference to ties: An independent director does not have personal, business, or financial ties to management. But does this conception of independence serve its intended purpose ..read more
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Autonomy Defaults in Contract Law
CLS Blue Sky Blog » Corporate Governance
by Hanoch Dagan, Michael Heller
1w ago
You can scribble an agreement on a napkin or hire lawyers to negotiate a contract that is hundreds of pages long. Either way, most of your contractual obligations won’t be in your agreement. They will be in the background rules contract law applies without your express consent. Some of these rules are mandatory, fixed even if both parties prefer otherwise. But most rules are defaults, changeable if both parties choose. Getting the defaults right is a core task of contract law; justifying those defaults is a core task of contract theory. In a new article, we provide the first conceptually coher ..read more
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How Board Observers Are Improving Corporate Governance
CLS Blue Sky Blog » Corporate Governance
by Nizan Geslevich Packin, Anat Alon-Beck
2w ago
In the complex world of corporate governance, a novel mechanism has remerged: board observers. Operating without the conventional voting rights of board members, these individuals have become pivotal in bridging the gap between ambitious startups and their venture capital (VC) backers, representing investor interests  without the formalities and direct liabilities of board membership. Board observers have the privilege of attending board meetings without the liabilities associated with board membership. They participate in the meetings but do not have voting rights or the core responsibil ..read more
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Faculty Governance Requires Faculty Accountability: A Response to David Pozen
CLS Blue Sky Blog » Corporate Governance
by Joshua Mitts
3w ago
In a recent Balkinization post, my colleague and friend Professor David Pozen critiques the power held by the office of Columbia University President Minouche Shafik and argues for a more “democratic model of internal governance.”  Alongside his broader critique of the powers of Columbia’s presidency, David raises questions concerning the removal of the encampment at Columbia and clearing of Hamilton Hall. Along with my research and teaching on corporate governance, I have closely advised Jewish and Israeli students at Columbia over the past year, and I serve as faculty adviser to the Law ..read more
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Stakeholder Governance and the Eclipse of Shareholder Primacy
CLS Blue Sky Blog » Corporate Governance
by Martin Lipton, Kevin S. Schwartz
3w ago
For decades, advocates of “shareholder primacy” as the North Star of corporate governance have steered our leading corporations and our Nation’s economic engine perilously off-course.  Since the 1970s, when the work of Milton Friedman, Michael Jensen, and Frank Easterbrook took hold in business schools, activists and raiders in high-profile proxy fights and hostile takeovers on Wall Street have wrapped their arms around the shareholder-primacy narrative to advance their own short-termist objectives.  Far from shared scholarly interest, their objective was plain:  To justify cutt ..read more
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The Governance Implications of DOJ’s New Voluntary Self-Disclosure Program for Individuals
CLS Blue Sky Blog » Corporate Governance
by Michael W. Peregrine, Ashley C. Hoff
3w ago
The Department of Justice recently announced a new policy on voluntary self-disclosure for individuals (the Pilot Program) that is likely to create significant challenges for a board of director’s audit and compliance committees, as well as tension among employees — and especially managers. The Pilot Program, formally announced by Principal Deputy Assistant Attorney General Nicole Argentieri on April 15, represents the latest initiative in DOJ’s effort to combat corporate fraud.  The announcement followed on the heels of comments made by senior DOJ officials in early March about existing ..read more
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Skadden Discusses Proposed DGCL Amendments’ Impact on Stockholder Agreements, M&A Practices
CLS Blue Sky Blog » Corporate Governance
by Allison L. Land, Edward B. Micheletti and Lauren N. Rosenello
1M ago
On March 28, 2024, the Council of the Corporation Law Section of the Delaware State Bar Association (DSBA) approved proposed amendments to the Delaware General Corporation Law (DGCL) in order to align the DGCL’s provisions with current market practices following several recent Court of Chancery decisions. The proposed amendments must be approved by the DSBA’s Corporation Law Section and Executive Committee at meetings expected to be held in April, and then submitted to Delaware’s General Assembly for its consideration. If adopted by the General Assembly and signed into law by the governo ..read more
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Do Investors Care Who Led the Audit?
CLS Blue Sky Blog » Corporate Governance
by Daniel Aobdia, Vincent Castellani and Paul Richardson
1M ago
Following a lengthy and contentious standard setting process, the Public Company Accounting Oversight Board (PCAOB), the U.S. regulator overseeing the auditors of publicly traded companies, implemented Rule 3211 in 2017. This rule requires audit firms to disclose the name of the engagement partner responsible for each of their public company audits on a public filing with the PCAOB known as Form AP. The rule’s advocates argued that public disclosure of the audit partner’s identity would make the partner more accountable and allow investors to more easily judge the partner’s track record for pr ..read more
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How Delegated Corporate Voting Advances Corporate Democracy
CLS Blue Sky Blog » Corporate Governance
by Sarah C. Haan
1M ago
Starting in the 1930s with the earliest version of its proxy rules, the Securities and Exchange Commission gradually increased the proportion of instructed votes on a shareholder’s proxy card until, for the first time in 2022, it required a fully-instructed proxy card — the universal proxy. This evolution shifted the exercise of the shareholder’s vote from the shareholders’ meeting to the vote delegation that occurs when the shareholder completes the proxy card. In corporate elections today, the voting choice is executed when the binding instruction is made on the proxy card; proxyholders mere ..read more
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Kirkland Discusses Proposed Regulations for Excise Tax on Share Repurchases
CLS Blue Sky Blog » Corporate Governance
by Mike Carew, P.C., Sara B. Zablotney, P.C., Adam Kool, P.C., JoAnne Mulder Nagjee, Joseph Tootle and Michael P. Alcan
1M ago
On April 12, 2024, the U.S. Department of Treasury and the Internal Revenue Service published proposed regulations regarding the 1% excise tax on certain stock redemptions and economically similar transactions (corporate “repurchases”) by publicly traded U.S. corporations (“Covered Corporations”) on or after January 1, 2023, described in Section 4501 of the Internal Revenue Code (the “Excise Tax”). The proposed regulations effectively replace Treasury’s and the IRS’s prior guidance in Notice 2023-2 (the “Notice”) and may generally be relied upon by taxpayers until the regulations are finalized ..read more
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