Tuesday, March 3, 2015
Webcast - 4:00 PM EST
Delaware Law Primer:
Documenting Compensation Decisions and Compensation Committee Hot Topics
Leo E. Strine, Jr., Chief Justice of the Delaware Supreme Court, recently wrote a thoughtful note, entitled "Documenting the Deal: How Quality Control and Candor Can Improve Boardroom Decision-Making and Reduce the Litigation Target Zone", in which he provides common sense guidance for practitioners in the M&A process to avoid litigation. Many of the ideas in the note apply equally to executive compensation decision-making. This webcast is intended as a primer for directors, inside and outside counsel, corporate secretaries and HR professionals on documentation and related issues in the compensation context, as well as other compensation committee hot topics. Chief Justice Strine's note, in its current unpublished form, can be found here.
Panelists will discuss:
- Effective communication among directors and between directors and advisors
- Communications between advisors and management
- Documenting compensation consultant recommendations
- Compensation committee minutes
- "Compensation Discussion and Analysis" disclosure
- Conflicts of interest and independence
- Pay Ratio and Peer Groups
Charles M. Elson, Edgar S. Woolard, Jr. Chair in Corporate Governance, Director of the John L. Weinberg Center for Corporate Governance, and Professor of Finance, University of Delaware
Steven Hall, Partner and Managing Director, Steven Hall & Partners
Arthur Kohn, Partner, Cleary Gottlieb Steen & Hamilton LLP
To register for the event, click here.
Tuesday, March 17, 2015
2015 CORPORATE GOVERNANCE SYMPOSIUM
9:00 am ~ 4:00 pm
Room 125, Clayton Hall
University of Delaware Campus
The focus of the 2015 Corporate Governance Symposium will be “Governance Issues of Critical Importance to Boards and Institutional Investors in 2015.” The Symposium will begin with a panel of institutional investors comprised of large institutional investors, proxy advisory firms, proxy solicitors, as well as representatives from the corporate and investor community. In addition, we are delighted that we will have The Honorable Karen Valihura, Justice from the Supreme Court of Delaware, to provide her views. During the panel each panelist will share what matters most to them. The Panel will include:
- Glenn Booraem, Principal and Fund Controller, Vanguard
- Donna Dabney, Executive Director, Governance Center, The Conference Board
- Jon Lukomnik, Executive Director, IRRC Institute
- Robert M. McCormick, Chief Policy Officer, Glass Lewis
- Patrick S. McGurn, Special Counsel, Institutional Shareholder Services
- Allie Rutherford, Principal, CamberView Partners, LLC
- Linda E. Scott, Senior Vice President and Associate Corporate Secretary, JPMorgan Chase & Co.
- William Ultan, Senior Managing Director, Morrow & Co., LLC
- The Honorable Karen L. Valihura, Justice, Delaware Supreme Court
Moderator: Charles M. Elson, Edgar S. Woolard, Jr., Chair of Corporate Governance, Director of the Weinberg Center and Professor of Finance
The Symposium will then continue with the presentation of four academic papers on topics that are of critical importance to boards and institutional investors today. The Symposium will provide attendees with cutting edge governance discussion and debate.
A short description of each of the papers being presented and their respective authors and the paper discussants follows:
- “A Corporate Culture Channel: How Increased Shareholder Governance Reduces Firm Value”
Jillian Popadak, Fuqua School of Business, Duke University (Presenter)
The paper examines how shareholder governance influences firm culture and value. The author develops new measures of firm culture through textual analyses of employee reviews and find stronger governance significantly changes four aspects of culture:it increases results-orientation but decreases customer-focus, integrity, and collaboration. Shareholders initially realize financial gains from the governance-induced changes in culture: increases in sales, profitability, and payout occur. However, over time, the author finds intangible assets associated with customer satisfaction and employee integrity deteriorate, partly reversing the initial gains. The author’s findings are consistent with a multitasking hypothesis where stronger governance incentivizes managers to concentrate on easy-to-observe benchmarks at the expense of the harder-to-measure intangibles, even though such actions can reduce long-term value.
Discussant: Jon Lukomnik, IRRC Institute
To read the paper, click Here
- “Board Groupthink”
Jeffrey L. Coles, David Eccles School of Business, University of Utah; Naveen D. Daniel, LeBow College of Business, Drexel University; Lalitha Naveen, Fox School of Business, Temple University (Presenter)
Corporate boards are comprised of individual directors but make decisions as a group. The quality of their decisions affects firm value. In this study, the authors focus on one particular aspect of group dynamics, groupthink. Groupthink is described as a mode of thinking by highly cohesive groups where the desire for consensus and agreement by the group members overrides critical thinking and correct judgment. While board groupthink has been criticized by both academic and practitioners, the authors’ is the first study to undertake a systematic investigation of the effect of groupthink on firm value. They develop four proxies for groupthink, based on the idea that greater interaction among group members leads to greater group cohesiveness which in turn leads to greater groupthink. The authors hypothesize that (i) groupthink negatively affects firm value, and (ii) groupthink will have a more negative effect on firm value for firms in dynamic industries (industries that are rapidly growing, are highly innovative, are experiencing increase in competitive environment, or have high merger activity). While they do not find support for the first prediction, they do find results consistent with their second prediction. The results have Implications for the appropriate design of corporate boards.
Discussant: James A. Fanto, Brooklyn Law School
- “Understanding Director Elections: Determinants and Consequences”
Yonca Ertimer, University of Colorado at Boulder; Fabrizio Ferri, Columbia University (Presenter); David Oesch, University of Zurich
This paper examines determinants and consequences of the voting outcomes at uncontested director elections. As in prior studies, proxy advisors’ recommendations strongly predict shareholder votes. Based on novel hand-collected data from proxy advisors’ reports, the authors document the reasons behind negative recommendations and their association with shareholder votes. For example, board-level and committee-level issues trigger more negative votes than individual-level concerns. While high votes withheld rarely result in director turnover, firms often respond to shareholder dissatisfaction by addressing the underlying concern, with the rate of responsiveness increasing in voting dissent. Responsive and unresponsive firms do not differ in subsequent performance.
Discussant: Jill E. Fisch, University of Pennsylvania Law School
To read the paper,click Here
- “Growth through Rigidity: An Explanation for the Rise in CEO Pay”
Kelly Shue, Booth School of Business, University of Chicago (Presenter); Richard Townsend, Tuck School of Business, Dartmouth College
The authors explore a rigidity-based explanation of the dramatic and oﬀ-trend growth in US executive compensation during the 1990s and early 2000s. They show that executive option and stock grants are rigid in the number of shares granted. In addition, salary and bonus exhibit downward nominal rigidity. Rigidity implies that the value of executive pay will grow with firm equity returns, which averaged 30% annually during the Tech Boom. Rigidity can also explain the increased dispersion in pay, the diﬀerence in growth rates between the US and other countries, and the increased correlation between pay and firm-specific equity returns. Regulatory changes requiring the disclosure of the value of option grants help explain the moderation in executive pay in the late 2000s. Finally, the authors find suggestive evidence that number-rigidity in executive pay is generated by contracting frictions, money illusion, and rule-of-thumb decision-making.
Discussant: Robert J. Jackson, Jr., Columbia Law School
To read the paper, click Here
DE CLE credits are being offered (Approved for 5.30 credits)
To go to the Registration site, click Here
May 5, 2015
Program co-sponsored with the Center for Audit Quality. More details to follow.