As The D & O Diary has previously noted (here and here), earlier this month the National Economic Research Associates (NERA) and Cornerstone Research (in conjunction with the Stanford Law School Securities Class Action Clearinghouse) released their respective studies of the 2006 securities class action lawsuit filings. The NERA study can be
“Empty Voting” and Other Web Notes
One of the essential tenets of modern corporate governance is that shareholders control corporate managers through shareholder voting. This notion is founded on the premise that shareholders will vote their economic interests, and the weight of their vote will be proportionate to their economic interest. However, research by University of Texas law professors Henry Hu
The Content and Timing of the PCAOB’s Big Four Inspection Reports
The Public Company Accounting Oversight Board (PCAOB) has been the target of extensive criticism for the timing and content (or lack thereof) of the public reports for its inspections of the Big Four accounting Firms. (Prior D & O Diary posts on this issue can be found here and here.) This issue is reviewed
Revised Options Backdating Litigation Count
Regular D & O Diary readers know that I have been maintaining a running tally of options backdating related litigation (here). According to the most recent count, so far there have been 23 securities class action lawsuits raising allegations of options grant manipulations. (The Stanford Law School Securities Class Action Clearinghouse maintains its
PCAOB Says Auditors Should Sharpen Fraud Detection
Based on the accumulated observations of its inspections of public company audits, the Public Company Accounting Oversight Board is concerned that auditors may not be doing all they could (or even all that is required) to detect the possibility of fraud at the companies they are auditing. In a January 22, 2007 release entitled “Observations
Global Forces Undercut Case for Regulatory Reforms
In prior posts (here, here and here), I argue that the Committee on Capital Markets Regulation (popularly known as the Paulson Committee) made a "weak case" in its Interim Report for regulatory reform. Virtually all of my points apply equally to the recently released Bloomberg/Schumer report as well. The themes I sounded
The Bloomberg/Schumer Report on U.S. Capital Market Competitiveness
On Monday January 22, 2007, Republican New York City Mayor Michael Bloomberg and Democratic New York Senator Charles Schumer released the joint report they commissioned from McKinsey & Company, entitled "Sustaining New York’s and the U.S.’s Global Financial Services Leadership." The report can be found here, and the joint press release describing the
Looking at Auditor Liability Caps
When the Committee on Capital Markets Regulation (popularly known as the Paulson Committee) in its Interim Report (here) recommended "setting a cap on auditor liability," the Committee relied for support on the steps in that direction that have been taken by the European Commission. In its latest effort along those lines, the
Cash Bonuses for Backdated Options
According to a January 20, 2007 Wall Street Journal article entitled “Executives Get Bonuses As Firms Reprice Options” (here, subscription required), some of the companies ensnared in the options backdating scandal are paying cash bonuses to executives whose options are being repriced, as the option exercise price is shifted to the actual grant
Executive Compensation, Legal Fees, and the Grasso Case
Eliot Spitzer sued former NYSE Chairman and CEO Richard Grasso to compel him to return the bulk of his nearly $190 deferred compensation and pension package, alleging that the pay package was “objectively unreasonable” under New York law governing nonprofit institutions and that Grasso had improperly influenced or misled the NYSE’s board directors to obtain