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Pamela L. Marcogliese’s practice focuses on corporate and financial transactions, particularly capital markets matters and corporate governance matters.

Maintaining a workplace environment free of discrimination, sexual harassment and other misconduct is critical to both the short-term productivity and long-term health of a business.  Reports of sexual harassment allegations at public corporations can have material negative effects on stock price, with some corporations seeing double digit single day drops after accusations are made public.  As we have written elsewhere, the primary obligation to manage these risks on a day-to-day basis falls to executive leadership.[1]  But the #MeToo movement also has raised questions about the role of boards of directors to provide oversight of management and, to the extent that senior management may be a source of the problem, the board’s obligation to take more direct action.

This note discusses some key issues for General Counsel to consider as they advise corporate boards about how to navigate their responsibilities in this environment. 
Continue Reading Bringing The #MeToo Movement Into The Board Room

In recent months, sexual harassment allegations against well-known figures across a growing number of industries have become a common feature in news headlines.  In the wake of these allegations, many companies have concluded that their current policies and procedures related to sexual harassment and discrimination are inadequate.  Against the backdrop of this rapidly evolving landscape,

The Securities and Exchange Commission (the “SEC”) recently sent a warning to the burgeoning market for initial coin offerings (“ICOs”): assets that exist only on the blockchain may be securities subject to registration, anti-fraud and other requirements under the U.S. federal securities laws.  The outcome of the SEC’s analysis was unsurprising, representing a reasonably straightforward application of longstanding securities law principles.  However, the SEC’s discussion left several key questions and potential paths forward for ICO issuers and other participants in the ICO marketplace to consider.
Continue Reading Open Questions and Potential Paths Forward Following the SEC’s Analysis of Digital Assets as Securities

Questions for Boards and Management

On April 10, 2017 Wells Fargo released the independent directors’ report on sales practices at its community bank. While the report covers familiar elements of the widely-publicized accounts-creation  problems at the bank, it also takes an inside look at the organization to determine what caused the problems in the first place and what allowed them to persist for years before last fall’s regulatory enforcement actions.  The report cites the following as principal causes:
Continue Reading With the Benefit of Hindsight: The Wells Fargo Sales Practices Investigation Report

President Trump has repeatedly used his Twitter account to single out companies for criticism of their business practices, raising the question for a broad range of public companies of how to prepare for and potentially respond to such criticism. Of course, rhetorical attempts by politicians to influence the conduct of private enterprise – commonly referred

Playing a Zynga game often requires patience.  Patience, and persistence, were a winning combination for the plaintiff Thomas Sandys who brought a derivative suit against Zynga for alleged breaches of fiduciary duties after the Zynga Board approved a secondary sale of company stock by insiders, including Zynga’s controlling shareholder and then-CEO (“controlling shareholder/CEO”) during a blackout period.  Shortly after the sale, a disappointing earnings announcement resulted in a significant stock price drop.
Continue Reading From the Game Room to the Board Room – Reconsidering the Independence of Independent Directors

The practice of reporting non-GAAP earnings is back on the SEC’s radar, highlighted in recent speeches by SEC Chair Mary Jo White (see here) and SEC Chief Accountant James Schnurr (see here).  A series of news articles focusing on the increasing number of companies that report non-GAAP earnings (often confusingly called “pro forma” earnings) and the widening gap between these companies’ reported GAAP and non-GAAP earnings have also shed negative light on using NGFMs (see, e.g., here (paywall), here (paywall) and here).
Continue Reading Non-GAAP: The Pendulum Swings Back

Over the past few years there has been a significant amount of attention to the issue of director tenure, particularly focused on the intersection between tenure and entrenchment and its impact on board diversity.  On the one hand, certain stakeholders advocate for experience and continuity of culture and on the other, there is the fear that a lack of turnover and refreshment prevents boards from balancing skills, strategy and diversity and adversely affects a director’s independence.  Institutional investors, proxy advisory firms, shareholder activists and governance advocates have all been publicly weighing in on the debate.  Recently, The California Public Employees’ Retirement System (“CalPERS”) solidified its position in the recent update of their Global Governance Principles (the “Principles”).  CalPERS’ revised Principles state that “director independence can be compromised at twelve years of service”.  As a result, the Principles call for companies to conduct “rigorous evaluations” of director independence, which it believes should result in either (i) classification of the director as non-independent or (ii) annual inclusion of a detailed explanation regarding why the director continues to be independent. In addition to the evaluation of individual directors, CalPERS believes there should be routine discussions and succession planning regarding board refreshment to ensure that boards continue to have the necessary mix of skills, diversity and other strategic objectives over time.
Continue Reading Considerations for Companies After Changes to CalPERS Global Governance Principles, Inc. (“Overstock”) recently filed a shelf registration statement with the Securities and Exchange Commission (the “SEC”) allowing for the issuance of “digital securities.”[1]  The SEC declared that registration statement effective on December 9, 2015.   The digital securities described in Overstock’s registration statement will be evidenced only by entry into a publicly distributed ledger and transfers of the digital securities can only be effected on that ledger.  They will not be evidenced by physical certificates or notes, recorded in book-entry system of the type typically used by issuers and transfer agents today, traded through a traditional securities exchange or cleared through an established clearing system.    Instead, ownership of digital securities and trades will be reflected in a publicly distributed proprietary ledger maintained by an alternative trading system (“ATS”) run by Pro Securities LLC using the technology of tØ, a subsidiary of Overstock.  In June 2015, Overstock completed the first placement of corporate bonds in the form of digital securities pursuant to Rule 506(c) of Regulation D using the technology of tØ.
Continue Reading Bitcoins and Blockchain – The Use of Distributed Ledger Technology for the Issuance of Digital Securities