In the wake of numerous corporate scandals in recent years, many factors have been suggested as possible indicators of fraud, including outsized compensation, questionable accounting and failed oversight. But a recent paper by three Canadian academics proposes a surprising alternative indicator of fraudulent misconduct they suggest is more reliable – the size of the CEO’s
Yes, BofA is Advancing Mozilo’s Defense Expenses – As It Should
A variety of news articles and blogs have expressed surprise and even outrage that Bank of America is advancing the legal expense that former Countrywide CEO Angelo Mozilo is incurring in defending against the various claims that have been raised against him, including the recent SEC enforcement action.
There is no particular reason for
Institutional Investors, Securities Litigation, and Corporate Monitoring
One of Congress’ goals when it instituted the "lead plaintiff" provisions of the PSLRA was to encourage institutional investors to become more involved in controlling and monitoring securities class action lawsuits. But now that institutional investors are indeed more involved in securities lawsuits, the question has become – what difference has it made? A recent
The Limitations of Governance Ratings
As governance ratings have become ubiquitous, they have also attracted an increasing about amount of attention, not all of it positive. As I noted in a prior post (here), one academic study questions the "predictive validity" of the governance ratings. A more recent academic study questions the applicability of uniform governance standards to
Corporate Governance: Separating the CEO and the Chairman Roles
A growing chorus of voices is calling for public companies to make the separation of the Chairman and CEO functions the default governance structure. This movement, which may have the support of the new SEC Chair, appears likely to lead to some type of "adapt or explain" approach. Increasing evidence that the companies where the
Executive Compensation: The New Front Line in the Litigation Wars?
Litigation over executive compensation is nothing new. The long-running clash over Richard Grasso’s $187 million NYSE pay package is only one of many titanic legal battles compensation issues produced in the past. But executive compensation litigation recently seems to have entered a new phase, fueled by moral outrage.
Drawing on popular anger evidenced most
Credit Crisis: Are Boards to Blame?
As the difficulties and challenges from the global economic crisis continue to mount, one recurring question has been – how could things possibly have gone so wrong?
One way to try to answer this question is to look at the root causes – that is, the financial and economic conditions that produced the current
Bailouts, Bonuses and Clawbacks
The recent news about the eleventh hour award of nearly $4 billion in bonuses to Merrill Lynch employees is only the latest in a series of events exciting enthusiasm for "clawbacks" of allegedly excessive or undeserved Wall Street bonuses. Reports that New York City financial firms disbursed $18.4 billion in cash bonuses is 2008 added
Corporate Governance for Non-Listed Firms
One of the legacies of the era of corporate scandals earlier in this decade is a heightened awareness of corporate governance issues. This development is most obvious for publicly traded companies in the United States, with the governance requirements embodied in the form of the Sarbanes-Oxley Act. The heightened governance awareness has also had spill-over effects
Governance Ratings: How Good Are They?
One of the received truths from the era of corporate scandals earlier this decade is that corporate governance matters. As a result, a high-profile part of the current assessment of any company is whether or not the company practices “good” governance. Even though the evaluation of any particular company’s governance has an eye-of-the-beholder aspect, several