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CII: Public Companies Endangered Species?

Public Companies Endangered Species: CII Panel

Are public companies an endangered species? If so, why? How can we solve that problem? At last week’s Council of Institutional Investors (CII) Fall Conference there as an informative panel discussion entitled Public Companies: An Endangered Species?

Panelists were David BrownMichael Mauboussin, and Robert McCooey moderated by the always erudite and entertaining Frank Partnoy, one of the best facilitators in the corporate governance industry. Continue Reading →

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Corporate Directors Forum: Day 1, Part 2

Below are some relatively quick notes I took at the Corporate Directors Forum 2013, held on the beautiful campus of the University of San Diego, January 27-29, 2013. See materialsCorporate Directors Forum 2013: Bonus Session, and Corporate Directors Forum 2013 – Day 1, Part 1.

The program was subject to the Chatham House Rule, so there will be little in the way of attribution below but I hope to provide some sense of the discussion. I throw in a lot of opinions. Some are those of panelists, some are mine, and some came from the audience.  I still get a little lost in some of the financial discussions but think we need to raise public understanding, so I don’t shy away from trying to learn or from offering opinions. I had fun, learned from various perspectives, renewed acquaintances and made some new ones. If corporate governance is your thing, I hope to see you there in 2014. Continue Reading →

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Video Friday: Clawback Invoked

With the passage of the Dodd-Frank and the Sarbanes Oxley Acts, clawback policies have become increasingly prevalent among public companies. However, it is rare to find a company actually put a clawback policy into effect. Citing Equilar’s findings from the 2012 Clawback Policies Report, we review what a clawback policy is and we examine what triggered one major U.S. bank to put their clawback policy into action. Continue Reading →

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The Role of Independent Directors in Corporate Governance: A "Must Have" Reference for Every Corporate Director

When I reviewed the first edition of The Role of Independent Directors after Sarbanes-Oxley by Bruce F. Dravis I called it an entire reference library in a thin volume. For the second edition, entitled The Role of Independent Directors in Corporate Governance, the number of pages has gone up from about 170 to 250 and the typefont is slightly smaller but the guidance remains the most readable I have encountered for providing directors, their advisors, and shareowners with a solid understanding of the primary legal and governance issues faced by independent directors.

The accompanying CD links to legal source material underlying the text, so those interested in drilling deeper are certainly given the resources. Upload the CD to your iCloud account so that you don’t have to go looking for it. Of course one thin volume and a CD can’t cover the entire universe of materials and the field is ever evolving, so minor sections, such as that on proxy access, are already slightly out-of-date. However, Dravis’ succinct coverage of a broad range of topics is unparalleled.

Here’s one I never noticed before: NYSE rules use the term immediate family member to include, as a disqualifying relationship for independence, “a person’s spouse, parents, children, siblings, mother and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person’s home.” Thank god you can still appoint your live-in maid to the board and have them be considered independent. Something Rupert Murdoch might want to consider? However, maybe such a person would be Continue Reading →

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Regulatory Reforms on Board Composition Have Been a Plus

New research from Cesare Fracassi of the Department of Finance at the University of Texas at Austin and Geoffrey Tate of the Department of Finance at the University of California, Los Angeles finds that board composition should be a continuing target of regulatory reforms.

Our results suggest that having directors with external network ties to the CEO may undermine the effectiveness of corporate governance.

We find that firms in which a high percentage of independent directors have external network ties to the CEO make more frequent acquisitions than firms with fewer CEO-director connections. Moreover, these acquisitions destroy shareholder value on average, particularly in firms which also have weak shareholder rights..

We find evidence that external governance mechanisms can substitute for weak internal governance. The negative reaction to merger bids among firms with many network ties between independent directors and the CEO and the reduction in Tobin’s Q are strongest in firms with weak shareholder rights.

More at External Networking and Internal Firm Governance, HLS Forum on Corporate Governance and Financial Regulation, June 29, 2011.

 

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Corporate Governance Legal Requirements

Morgan, Lewis & Bockius LLP produced a good legal primer, Corporate Governance: An Overview of Public Company Requirements, last month. Read it now before it is out of date. Covers Sarbanes-Oxley, Dodd-Frank, and listing requirements in eleven sections:

  1. Director Independence
  2. Audit Committees
  3. Compensation Committees
  4. Nominating Committees
  5. Compensation
  6. Codes of Conduct
  7. Certifications
  8. Directors/Officers
  9. Disclosure
  10. Foreign Issuers
  11. Miscellaneous

Great resource for any corporate governance library. Hat tip to long-time stakeholder Ralph Ward and his Boardroom Insider for bringing to our attention myCorporateResource.com, which compiles client alerts.

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October 2002

Webster Named

The US Securities and Exchange Commission voted to approve five members of a new national accounting oversight board to be headed by ex-FBI-CIA chief William Webster whose only experience in accounting, as far as we know, was heading the auditing committee of U.S. Technologies, now bankrupt and facing fraud accusations. Shortly before Webster was appointed he told Harvey Pitt but Pitt chose not to tell the other four commissioners prior to their vote.

Webster edged out the much better qualified pension fund chief John Biggs, who would have done much to restore trust. The vote was 3-2. Webster becomes the first chairman of the Public Company Accounting Oversight Board, expected to get up and running early next year.

In addition to Webster, the commission approved former CalPERS attorney Kayla Gillan; accountant and former SEC general counsel Daniel Goelzer; former congressman Willis Gradison; and SEC Enforcement Division Chief Accountant Charles Neimeier. Continue Reading →

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