Mergers and Acquisitions, Corporate Governance, Shareholder Activism
Introduction
A traditional method of offering securities (as discussed in Chapters 1 and 2) may not be desirable or feasible due to challenging conditions in the capital markets or factors particular to an issuer. A variety of alternative methods, however, are available.
Continue Reading Alternatives to Traditional Securities Offerings
On January 10, 2013, the Federal Trade Commission (“FTC”) announced new thresholds for pre-merger notifications under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“the HSR Act”). Most significantly, the FTC announced that the minimum “size-of-transaction” threshold has increased from $68.2 million to $70.9 million. The new thresholds will take effect on Monday, February 11, 2013. Continue Reading FTC Announces Revised Hart-Scott-Rodino Notification Thresholds Effective as of February 11, 2013
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
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On November 14, 2012, the European Commission adopted a proposal for a directive (the “Proposed Directive”) that aims to substantially increase the number of women on EU corporate boards. In the Commission’s view, non-binding efforts to enhance female board representation1 have proven ineffective. The proposed measures are intended to be of a transitory nature (i.e., until sustainable progress has been reached in the gender composition of boards). Accordingly, the Proposed Directive would expire on December 21, 2028. Continue Reading EU Proposes Gender Balance Quotas for Listed Company Boards
On October 16, 2012, proxy advisory firm Institutional Shareholder Services (ISS) issued for comment proposed changes to its U.S. voting policies for 2013. ISS’s proposed changes focus primarily on compensation-related matters. Of particular note in that regard is a modest revision to ISS’s approach to peer group selection for purposes of its pay for performance analysis. ISS also proposed a change that highlights its concern with companies’ responsiveness to majority-supported shareholder proposals. Continue Reading ISS Focuses on Pay and Majority-Supported Shareholder Proposals in Proposed Changes to U.S. Voting Policies for 2013
At its open meeting on August 15, 2012, the Public Company Accounting Oversight Board adopted Auditing Standard No. 16, Communications with Audit Committees, and related amendments to other PCAOB standards.[1] AS 16 requires auditors to engage in certain communications with audit committees and is intended to foster a meaningful dialogue on important audit and financial statement matters. The PCAOB expects more effective two-way communications to enhance audit quality and strengthen audit committee oversight. The new standard is subject to approval by the Securities and Exchange Commission. Continue Reading PCAOB Adopts Standard on Auditor Communications with Audit Committees
A recent opinion of the Delaware Chancery Court, Seinfeld v. Slager,[1] addresses the legal standard applicable to directors’ decisions about their own pay under Delaware law, an important topic as to which there is little prior law. In an opinion by Vice Chancellor Glasscock, the Court held that a derivative claim alleging that directors breached their fiduciary duties by granting themselves excessive compensation survived a motion to dismiss.[2] In so concluding, the Court also found that the directors’ action did not have the protection of the business judgment rule and was instead subject to “entire fairness” review. Continue Reading Delaware Case Raises Question About Structuring Director Compensation
In 2002, the UK began requiring an advisory shareholder vote on the annual executive and non-executive director compensation practices of UK-incorporated quoted companies (“UK Companies”). Eight years later, in July 2010, the US followed suit when President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), providing for an advisory say-on-pay vote for most large US public companies.[1],[2] Continue Reading Binding Shareholder Say-on-Pay Vote on Route to Reality in the UK: US Companies Take Note
On June 20, 2012, the U.S. Securities and Exchange Commission (the “SEC”) released its final rules (the “Final Rules”) implementing Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Section 952 of the Dodd-Frank Act (“Section 952”) added Section 10C to the Securities Exchange Act of 1934 (the “Exchange Act”) and contains a number of provisions generally relating to the independence of compensation committees and their advisers. The Final Rules are in most respects identical to the proposed rules released on March 30, 2011 (the “Proposed Rules”).[1] Below is a summary of the provisions of the Final Rules, noting the key changes from the Proposed Rules. Continue Reading Dodd-Frank Corporate Governance Final Rules: Compensation Committee and Adviser Independence
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