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...
The Equilar Gender Diversity Index (GDI) has now increased for a fifth straight quarter. The percentage of women on Russell 3000 boards increased from 18.0% to 18.5% in Q4 2018. This acceleration once again moved the needle, pushing the GDI to 0.37, where 1.0 represents parity among men and women on corporate boards across the Russell 3000...
In 2015, As You Sow embarked on a mission to identify and report on the most overpaid CEOs of the S&P 500 and whether or not pension funds and financial managers held companies accountable for such excessive compensation. At the time, we found that far too many funds and managers were rubber stamps for these excesses...
Despite strong full-year 2018 financial results, shareholder returns were dampened by investor skepticism and potential headwinds heading into 2019. This trend is no surprise given our observations through the third quarter (see “S&P 1500 pay-for-performance update: Third quarter results beg the question, “Will 2018 be the high water mark for incentive payouts?” Executive Pay Matters, December 17, 2018)...
Hester M. Peirce is a Commissioner at the U.S. Securities and Exchange Commission. her recent remarks before the Council of Institutional Investors Spring Conference, available here...
In the U.S., shareholder proposal filings have historically played an important role in advancing corporate governance and in highlighting key risks related to environmental and social issues. Some of the major shifts in governance practices during the past two decades—including the annual elections of directors, the adoption of majority vote standard for director elections, and the adoption of proxy access among large firms—were largely prompted by shareholder resolution campaigns. Shareholder proposals have also served as a driving force for greater corporate awareness of environmental and social risks, such as climate change risk management, diversity and inclusion in ...
A brief glance at activism in 2018 shows that, after a brief dip in 2017, things are back on track. The number of companies publicly targeted hit record highs in the U.S., Canada, Japan, Australia, and the U.K. Non-U.S. targets made up a record haul of 47%, passing 400 for the first time. Prior to the end-of-year volatility, high valuations in U.S. markets and disruptive forces elsewhere clearly had an impact—as well as swelling activity in Australian and Canadian basic materials industries, only 53% of companies targeted in the Brexit-hit U.K. were targeted by ...
Institutional investors tell us they want boards to help set the tone at the top for diversity and culture and better articulate how the company is investing in talent and transformation. They want to understand how companies are integrating business-relevant environmental and social considerations into a sustainable strategy that creates long-term value for a wide range of stakeholders. And they want to know how the board is overseeing emerging threats and opportunities amid continued market volatility and evolving risks...
Under SB-826, California became the first state to pass legislation to require that publicly traded companies have at least one woman on their board. Specifically, companies in California will need to achieve this by 2019. Starting in 2021, the required number of women on boards will increase based on the overall size of the board. For example, if a board has five directors, two of them must be women, and if it has six or more directors, three of them must be women. Companies that fail to recruit the requisite number of women will face a $100,000 fine for ...
Notwithstanding that shareholder activist funds themselves continue to have below-market returns, shareholder activism continues to expand and intensify. While many commentators have cited 2018 as a “record year” for activism in terms of number of campaigns, capital deployed, number of activists involved, first-time activists, and board seats obtained, the growth of activism from 2017 to 2018 was modest, particularly when campaigns against an announced merger and short seller campaigns are excluded. In addition, first time targets in the U.S. represented less than 43% of financial activist’s targets...
The interests of shareholders are too often subjugated to those of interested parties. This circumstance has resulted in the transference of significant value from the rightful owners, the shareholders, to those unentitled. Institutional fund managers have undertaken commendable initiatives toward improving compliance with environmental, social and governance...