Tues., Dec 1, 2009
John L. Weinberg Distinguished Speaker Series: Giovanni Prezioso
On December 1, 2009, the Weinberg Center for Corporate Governance hosted Giovanni Prezioso in it’s John L. Weinberg Distinguished Speakers Series. Giovanni Prezioso served as General Counsel of the Securities and Exchange Commission from 2002 to 2006. Mr. Prezioso, a partner based in Cleary Gottlieb’s Washington, D.C. office, is a leading voice on securities law and corporate governance.
Mr. Prezioso’s speech focused on the SEC’s role in a developing regulatory environment. The prominent issues were executive compensation, proxy access, and securities fraud. With respect to compensation, Mr. Prezioso discussed SEC enforcement of Sarbanes-Oxley’s “clawback” provision (Section 304). He also addressed recent SEC developments on proxy access. Federal reforms are likely, despite recent Delaware action on proxy access and new proxy reimbursement bylaw amendments at Health South. Lastly, Mr. Prezioso commented on securities fraud and the Madoff Scandal. He stated that inherent managerial structures in the SEC may impose limitations on the Commission’s efficacy.
Thurs., Nov 19, 2009
“Federal and State Corporate governance Standards”
On November 19th, 2009, the University of Delaware’s Weinberg Center for Corporate Governance hosted a seminar entitled “Federal and State Corporate Governance Standards.” The program was designed to address the proposed legislative changes on governance and to further the dialogue surrounding the various governance models being considered.
The panel addressed which of the two provided the most appropriate arena for responding to the evolving needs of corporations and their shareholders. Specifically, the panelists examined the long-term implications of recent reform legislation which will federalize many elements of both corporate governance and executive compensation, which had typically fallen under state law regimes.
The panel was moderated by Weinberg Center Director and Professor Charles Elson. Present were:
• The Honorable J. Travis Laster, Vice Chancellor, Delaware Court of Chancery
• John Castellani, President, Business Roundtable
• David Becker, General Counsel, Securities and Exchange Commission
• A. Gilchrist Sparks, Partner, Morris, Nichols, Arsht & Tunnell LLP
• William Clark, Senior Partner, Drinker Biddle & Reath LLP
• Harvey Goldschmidt, Dwight Professor of Law, Columbia Law School
• Ann Yerger, Executive Director, Council of Institutional Investors
• Norman Monhait, Member, Rosenthal, Monhait & Goddess, P.A.
• John Keenan, AFSCME
Interestingly, much of the debate centered on why the proposals changes were initiated, not what changes were included. Senator Schumer’s “Shareholder Bill of Rights”, Congressman Peters’ “Shareholder Empowerment Act”, and Senator Dodd’s “Restoring American Financial Stability Act of 2009” include the following; (1) majority voting, (2) independent compensation committees and consultants, (3) annual advisory vote on executive compensation, clawback provisions, elimination of golden parachutes, enhanced compensation disclosure requirements (4) split chairperson and CEO, and (5) elimination of staggered boards through annual elections.
Whether there remains a role for private ordering under state law under a federalized/SEC approach remains to be seen. What may be most evident, however, is that if the provisions on governance in the Dodd Bill become law, an already strapped for resources SEC will have a lot more on its plate. Given its current resourcing, and track record in the financial crisis, it is no surprise that critics challenge whether the agency will be up to the new tasks of governance cop for the nation’s public corporations.
Tues., Nov 3, 2009
The Pros and Cons of Separating the Chairman and CEO Positions
On November 3, 2009, the Weinberg Center for Corporate Governance at the University of Delaware hosted a Round Table entitled the “Pros and Cons of Separating the Chairman and CEO Positions.” Designed to review the state of play in leadership duality and to see what consensus, if any, could be achieved around this issue, the Round Table examined the issue from both a US and global perspective, and considered the theoretical and practical implications of one the bigger shifts in contemporary US corporate governance.
The panel featured some of the leading experts and with broad experience in governance issues. Present were:
- The Honorable William Chandler, Chancellor, Delaware Court of Chancery
- James D. Robinson, III, General partner, RRE Ventures; Retired Charman, Bristol Myers Squibb; Director, Coca-Cola, and Novell; Former Chair and CEO, American Express
- Robert Monks, advisor Trucost, founder of Lens Governance Advisors, founder of Institutional Shareholder Services, Inc. et. al.
- Jon Hanson, Founder & Chairman, The Hampshire Companies; Non-Executive Chairman, HealthSouth Corporation; Lead Director, Prudential Insurance
- Ira Millstein, Senior Partner, Weil, Gotshal & Manges
- Harry Kraemer, Executive Partner, Madison Dearborn Partners, Former Chair and CEO, Baxter International Inc.;
- Bess Joffe, Associate Director, Hermes Investment Management Limited
- Stuart Grant, Grant & Eisenhofer, Wilmington, DE
The panel was chaired and moderated by Weinberg Center Director and Professor Charles Elson, and was co-organized with Jim Christie of Director and Boards Magazine. Also present were Travis Laster, Vice Chancellor, Delaware Court of Chancery and Peggy Foran, of Prudential Insurance.
The discussion gravitated towards the idea that the evolution of governance to date, which the panel members experienced firsthand, pointed towards the inevitable separation of the chairman and CEO positions. Broad discussion was held about the differences between a non-executive chairman and a lead director, and the various models that lead to an enhancement of shareholder value.
Significantly, despite the differences in backgrounds and experiences of the panel, broad consensus was achieved around the following:
- Universal consensus was reached on the idea that should shareholders desire the roles be split, there should be no impediment to that structure. However, while many on the panel were in agreement that a “default position” could be a Chair and CEO split (and ability for shareholder override) all agreed that a legislative or judicial mandate is a mistake and a bad idea.
- The evolutionary trend toward a split in the US appears inevitable, certainly among larger corporations.
- The discussion was then directed towards guidance in selecting an effective independent chairman and how they should function. The panel agreed that additional work on the roles and responsibilities of an independent Chair would be a meaningful next step. It is clear what the role of a combined Chairman/CEO is, it is less clear where the duties of an independent chair begin and end.
Perhaps it is a sign of the times when a previously hot button issue has reached a level of acceptance and a resulting focus on implementation rather than on threshold issues of utility. A major take-away for policy makers is that a mandate by fiat is problematic, and would deprive companies and their owners with the necessary flexibility to create and run their business in the most effective manner. Sometime it’s best to allow private ordering under state regimes (proxy access?) before the federal government writes rules that may be difficult to administer and may actually hurt rather than help.