How Board Observers Are Improving Corporate Governance
CLS Blue Sky Blog » Corporate Governance
by Nizan Geslevich Packin, Anat Alon-Beck
4d 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
1w 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
1w 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
2w 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
3w 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
3w 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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Does Being Ethical Pay for Companies?
CLS Blue Sky Blog » Corporate Governance
by Saurabh Ahluwalia, Linda Ferrell, O.C. Ferrell and Priyank Gandhi
1M ago
Most businesses follow an explicit or implicit code of conduct that guides their operations, their relations with the public, and their treatment of customers, employees, and other stakeholders. These rules often go beyond what is legally required, and businesses often refer to them as their code of business ethics, treating them as an important part of their social and corporate governance. However, as the debate over ESG requirements (i.e., environment, social, and governance goals of a firm) highlights, the costs and benefits of requiring businesses to have clear social goals, or of followi ..read more
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Sullivan & Cromwell Discusses Delaware Supreme Court Ruling on MFW’s Application to Controller Transactions
CLS Blue Sky Blog » Corporate Governance
by Eric M. Krautheimer, Melissa Sawyer, Matthew A. Schwartz, Matthew L. Strand and Mimi Wu
1M ago
In the important 2014 case of Kahn v. M & F Worldwide Corp., the Delaware Supreme Court held that freeze-out mergers, in which a controlling stockholder takes a company private, are subject to Delaware’s heightened “entire fairness” standard of review unless subject, at the outset, to approval by both (i) an independent special committee, and (ii) an uncoerced, fully informed majority of the minority stockholder vote (“MFW Framework”). If the MFW Framework is satisfied, the freeze-out will be subject to Delaware’s more deferential “business judgment” standard of review. Since that ruling ..read more
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