Corporate Law

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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

In December 2015, President Obama signed into law the Fixing America’s Surface Transportation Act (the “FAST Act”), which, among other legislation in its 1300+ pages, includes several bills designed to facilitate the offer and sale of securities. We believe that not only will these new provisions facilitate offerings by so-called emerging growth companies (“EGCs,” a category of issuer established by the JOBS Act in 2012), but that the SEC, using its rulemaking authority, may and should expand some of these accommodations to a much broader set of issuers, offerings and forms. The impact of this proposed expansion would, inter alia, make these changes significant for WKSI issuers and the use of the SEC’s M&A forms.  We set forth the arguments for extension of the scope of these accommodations in the linked comment letter, which we authored last week on behalf of the Securities Industry and Financial Markets Association (“SIFMA”) in response to the SEC’s FAST Act-related interim final rules and request for comment dated January 19, 2016.
Continue Reading Cleary Gottlieb and SIFMA Push for Broader Based Reform by SEC of Offering Process and Disclosure

On September 28, 2015, NYSE amendments to Section 202.06 of its Listed Company Manual will take effect. The Section governs the circumstances under which companies must notify the NYSE at least ten minutes before disseminating material news and gives the NYSE authority to halt trading in a listed company’s securities. The amendments require listed companies to now notify the NYSE of material news beginning at 7:00 am (instead of only during market hours) and give the NYSE additional discretion to impose trading halts.
Continue Reading Amendments to NYSE Material News and Trading Halt Policies

On Aug. 18, 2015, a divided panel of the D.C. Circuit Court of Appeals in National Ass’n of Manufacturers v. U.S. Securities and Exchange Commission (Minerals II) reaffirmed its April 2014 decision that the SEC’s conflict minerals rule, and the underlying provision of the Dodd-Frank Act, violate the First Amendment to the extent they require a company to report to the SEC, and to state on its website, that any of its products have “not been found to be ‘[Democratic Republic of the Congo] conflict free.’”[1]  The panel had agreed to reconsider the case because of an intervening en banc decision of the full D.C. Circuit in another case, American Meat Institute v. U.S. Department of Agriculture (Meat II),[2] which raised a similar First Amendment challenge to USDA requirements for labeling meat products.
Continue Reading Mixing Meat And Minerals On Compelled Commercial Speech

Following numerous speeches over the past several months by senior Department of Justice officials on their focus on the prosecution of individuals in investigations involving corporate misconduct and the importance of corporations disclosing evidence against individuals to receive cooperation credit in criminal investigations, on September 9, 2015, the U.S. Justice Department issued new guidelines aimed at prioritizing the Department’s focus on individual responsibility in both civil and criminal corporate wrongdoing cases.  The guidelines appear to reflect a push by the Department to strengthen efforts at obtaining penalties – including criminal penalties – against responsible individuals in addition to those that may be sought against the firms and companies involved in misconduct.  The guidelines supplement those set out in the 2007 memorandum from Deputy Attorney General Paul McNulty on “Principles of Federal Prosecution of Business Organizations.”  These new guidelines are a response to criticism that the Department has not been aggressive enough in prosecuting individuals post-financial crisis and are a must know for companies and individuals engaged in ongoing Department investigations others who could be the subject of investigation in the future, including companies and individuals in heavily-regulated industries.
Continue Reading U.S. Justice Department Issues New Guidelines Prioritizing Individual Liability For Corporate Wrongdoing

On May 5, 2015, Louise Parent, Of Counsel, was interviewed by Randy Milch about her ambitious path to general counsel of AMEX, how she successfully dealt with AMEX’s battle with Visa and Mastercard in the U.S., Europe, and Latin America, and how the role of general counsel has changed since 1993.
Continue Reading Podcast: Vertical Promotion is Not Always Route to General Counsel

Amendments to the Delaware General Corporation Law are now formally before the legislature. Two provisions – one relating to defective corporate authorizations and the other to mergers – will be of particular interest, as will the potential traps that may arise in connection with the merger statute amendment.
Continue Reading Traps to Consider: Delaware’s Merger Statute and Ratification Amendments

In the years since the financial reporting scandals and the Sarbanes-Oxley Act of 2002, and in particular following the financial crisis and the Dodd-Frank Act of 2010, boards of directors have faced greater burdens and more intense scrutiny of their activities and performance. One manifestation of this has been pressure to change the role of directors from one of partnership with and oversight of management to one of an almost quasigovernmental watchdog directly responsible for monitoring management’s performance, including its compliance with increasingly complex and burdensome regulation. In addition, activist investors continue to publicly push some boards to pursue strategies focused on short-term returns, even in instances where those strategies are inconsistent with the directors’ preferred, sustainable long-term strategies for the corporation.
Continue Reading Selected Issues for Boards of Directors in 2013