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
Restatements, Clawbacks and CFO Career Consequences
If the facts don’t fit, you must remit. That seems to be the view of an increasing number of companies, as they have adopted provisions requiring repayment of executive compensation found to have been based on incorrect financial statements.
The concept of compensation clawbacks was actually built into the Sarbanes Oxley Act. Section 304 requires
Rule 10b5-1 Plan Disclosure: Litigation Risk and Trading Benefit
In October 2000, the SEC promulgated Rule 10b5-1 to provide company insiders with a way to trade their shares in company stock without incurring securities law liability, through the pre-trading adoption of a written trading plan. Despite the Rule’s protective purpose, concerns have arisen more recently about Rule 10b5-1 plan abuses, as I noted in
The CEO’s “Pay Slice”, Corporate Governance, and Corporate Performance
One of the legacies from the era of the corporate scandals is the lasting image of certain corporate leaders as “imperial CEOs” (refer here) – that is, as greedy, power hungry overlords who exploited their companies to their own enrichment and to the shareholders’ detriment. Excessive CEO pay remains a widely perceived marker for poor
Former Directors, Advancement Rights, and D&O Insurance
It is generally understood that under Delaware law, directors enjoy broad rights of indemnification and advancement. The Delaware statutory regime does allow corporations a great deal of flexibility in how they adapt these provisions to their own circumstances. But while these principles are generally understood, it may nevertheless come as a surprise to many that
Check the CFO’s Pay Packet, Too
Commentators have long focused on CEO compensation as a leading corporate governance concern. Indeed, the Corporate Library has even suggested (here) that CEO compensation practices that “are poorly-aligned with shareholder interests” are “a powerful indicator of potential securities litigation.” While CEO compensation unquestionably is an important issue, academic research recently published by three
International Affairs
It is nothing new for corporate America to have to contend with activist investors. But an activist international institutional investor, backed by a sovereign nation and burgeoning oil wealth and committed to a broadly-based social and environmental agenda, represents a different level of activist pressure. The prototype for this international institutional investor is the Norwegian
“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
What Should Boards Worry About?
According to an article in the January/February 2007 issue of Corporate Board Member entitled “Is Your Company Prepared for Bird Flu?” (here), boards should be anticipating and preparing for the potential impact of a bird flu pandemic. The article quotes former Secretary of Health and Human Services Tommy Thompson as saying that smart
Why Aren’t D & O Insurers Better Corporate Governance Monitors?
One of the great things about having a blog is that it has brought me into contact with a host of people I might otherwise never have gotten to know. Among the most interesting and colorful people I have met through my blog is Sammy Antar, Crazy Eddie’s cousin, and the author of the White