Last week, the Delaware Supreme Court reversed the Delaware Court of Chancery’s dismissal of a Caremark claim[1] that arose out of the Blue Bell ice cream listeria outbreak in the mid-2010s.  See Marchand v. Barnhill, No. 533, 2018 (Del. June 18, 2019).  The Delaware Supreme Court’s opinion in this closely watched case provides useful guidance to directors on the proper role of the board in overseeing risk management. Continue Reading Not So Sweet: Delaware Supreme Court Revives <i>Caremark</i> Claim, Provides Guidance On Directors’ Oversight Duties

I. The Transparency Register – A Recap

The 4th EU-Money-Laundering Directive (2015/849), which entered into force in mid-2015, required national legislators of EU Member States to establish, in each jurisdiction, a register for information on the beneficial owners of companies and other undertakings located in such jurisdictions (“Transparency Register”).  Echoing Justice Louis D. Brandeis’ famous metaphor of publicity as a remedy for social and industrial diseases, the Directive states that information on the beneficial ownership of companies is a key factor for tracing criminals who might otherwise hide their identity behind corporate structures. Continue Reading A Hint of Brandeis: Proposed Amendments to the German Transparency Register

On January 1, 2019, the German Act on the Strengthening of Company Pensions (Betriebsrentenstärkungsgesetz) leading to an amendment of the German Company Pensions Act (Betriebsrentengesetz), including its provisions regarding deferred compensation (Entgeltumwandlung), entered fully into force.

Deferred Compensation

Under the German Company Pensions Act, each employee is generally entitled to request from the employer that a certain part of the employee’s gross salary (up to an amount equal to 4% of the social security contribution ceiling (Beitragsbemessungsgrenze), i.e., currently EUR 3,216 per year) is used as deferred compensation for company pension purposes.  According to the newly implemented changes, employers are now obliged to provide their employees with an employer-paid top-up to the employees’ contributions to the deferred compensation.  Continue Reading Changes to Deferred Compensation in Germany

Recently, Vanguard updated its Vanguard Fund proxy voting guidelines, disclosing a proxy voting policy relating to what Vanguard considers to be overboarded directors, based on the evolving role of directors and its assessment of the time and energy required to effectively fulfill director responsibilities.  Continue Reading How Many Directorships is Too Many? Vanguard’s Evolving View

The German Federal Court of Justice (Bundesgerichtshof) recently had the opportunity to clarify a number of important practical questions of corporate law in connection with asset disposals, the allocation of responsibilities among directors and transactions concluded with board members. We summarize the three relevant decisions from 2018/2019 below. Continue Reading Recent Important Corporate Law Decisions by German Federal Court of Justice

On Friday, the SEC proposed extensive amendments to the rules governing financial disclosures by registrants about businesses they buy or sell.

The proposed amendments primarily relate to disclosures required by Rule 3-05 and Article 11 of Regulation S-X in registration statements and 1934 Act reports, and, for the most part, they would reduce the burden of preparing historical financial statements and pro forma financial information. The proposal follows a broader 2015 concept release on financial disclosures about entities other than the registrant, and it represents another step by the SEC to reduce the burdens on registrants in a careful way that does not take away information that is material to investors.

Please click here to read the full alert memorandum.

The modus operandi of shareholder activism is to agitate for change, often involving campaigns to convince other shareholders to support proposals to change the composition of the board and the company’s strategy.

Under UK law a shareholder activist, in its capacity as shareholder, can attack the board and its strategy in the press and in discussions with other shareholders free from the constraints of corporate law duties.  However, in a recent UK High Court decision, Stobart Group v Tinkler, the High Court considered a number of issues which are pertinent to the criticism of boards by shareholder activists who have nominated a director to the board.  This case is a clear warning of the risks to board nominees of shareholder activists who in furtherance of an activist campaign brief against the board in discussions with other shareholders and misuse the company’s confidential information.

Please click here to read the full alert memorandum.

In late March 2019, the Hertz Corporation and Hertz Global Holdings, Inc. (collectively, “Hertz”), filed two complaints (the “Damages Proceedings”) against its former CEO, CFO, General Counsel and a group president seeking recovery of $70 million in incentive payments and $200 million in consequential damages resulting from Hertz’s 2015 decision to restate its financial statements and an ensuing SEC settlement against Hertz and federal class action lawsuit (which was dismissed).  At the same time, the defendants in those actions each filed separate complaints (which have been consolidated in the Delaware Chancery Court) demanding advancement of their legal fees in the Damages Proceedings (the “Advancement Proceedings”).  The litigation between Hertz and its former executives raises novel questions about whether executives have a legally cognizable duty to set the right “tone at the top” and the consequences if they fail to do so.  The litigation also raises important and interesting questions regarding clawbacks and indemnification.[1]     Continue Reading Hertz Pursues Novel Theory to Hold Former Management Team Personally Liable for Restatement and Ensuing Legal Proceedings

In the wake of the Securities and Exchange Commission’s proposed clawback rules under the Dodd-Frank Wall Street Protection and Consumer Reform Act of 2010, many US public companies began implementing clawback policies.[1]  Although the proposal was originally issued in 2015 and the SEC has yet to adopt final clawback rules, instances of alleged executive misconduct in recent years has begun leading to claims under the clawback policies.  Increased scrutiny from legislators, institutional investors, shareholders and the general public has put significant pressure on boards of directors and compensation committees to exercise their rights to claw back compensation in the event of a corporate scandal.[2]

This post discusses two recent developments related to the exercise of compensation clawbacks.  The first confirms that boards should have broad discretion in deciding when to exercise a clawback, and the second discusses important indemnification and advancement issues that can arise in connection with a claim for the enforcement of a clawback policy. Continue Reading Courts Considering Clawback Claims

As discussed in our most recent blog post, on April 30, 2019, the Criminal Division of the U.S. Department of Justice (“DOJ” or “the Department”) announced updated guidance for the Criminal Division’s Evaluation of Corporate Compliance Programs (“the Guidance”).  The Guidance is relevant to the exercise of prosecutorial discretion in conducting an investigation of a corporation, determining whether to bring charges, negotiating plea or other agreements, applying sentencing guidelines and appointing monitors.[1]  The Guidance focuses on familiar factors: the adoption of a well-designed compliance program that addresses the greatest compliance risks to the company, the effective implementation of the company’s compliance policies and procedures, and the adequacy of the compliance program at the time of any misconduct and the response to that misconduct.  The Guidance makes clear that there is no one-size-fits-all compliance program and that primary responsibility for the compliance program will lie with senior and middle management and those in control functions. Continue Reading DOJ Guidance on Corporate Compliance Programs: A Checklist for Directors