While the duties of directors of unlisted private companies often coincide with the strategy and requirements of the subsidiary’s parent company, this is not always the case, and the circumstances may require a director to act independently of the parent. Directors may risk personal liability as regulators are taking tougher stances especially toward bribery, corruption and anti-competitive behavior, particularly cartel abuses. Directors and prospective directors will therefore want to know the extent to which they can protect themselves against these risks.
Topic: Corporate Governance
Recent Trends in Joint Venture Governance
For the last decade, governance issues have been a priority at public companies and companies planning to go public. Recent joint venture activity reflects a carryover from the public company arena of this intense focus on improving governance. Venture partners are increasingly concentrating on developing and implementing governance best practices within their joint venture vehicles. This summary provides a brief discussion of recent trends in joint venture governance.
Considerations for Public Company Directors in the 2012 Proxy Season
The past year has been one of change and challenge for public companies and their boards, as companies have moved to implement "say-on-pay" and other provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). With the 2012 proxy season on the horizon, public companies and their directors will continue to feel the impact of Dodd-Frank as the Securities and Exchange Commission ("SEC") proceeds with its ongoing efforts to implement the law. At the same time, public companies and their boards are operating in an environment where the balance of power between boards and shareholders continues to shift. The traditional, board-centric model of corporate governance continues to gravitate toward a paradigm that includes an increased role for shareholders. Activist shareholders are seeking greater participation in companies’ governance and operations, and they are exerting increased pressure on companies to adopt so-called corporate governance "best practices."
Delaware Court of Chancery Issues Temporary Restraining Order To Postpone Annual Meeting of Stockholders
On December 20, 2011, Vice Chancellor Parsons of the Delaware Court of Chancery issued an opinion and entered a temporary restraining order enjoining ChinaCast Education Corporation from holding its annual meeting, scheduled for later that day, until January 10, 2012. See Sherwood, et al. v. Chan Tze Ngon, et al., No. 7106-VCP (Delaware Court of Chancery). The Court found that ChinaCast’s actions, having removed incumbent director Ned Sherwood[1] from its slate of nominees less than two weeks before the scheduled annual meeting, did not "comport with the ‘scrupulous fairness’ required of corporate elections." The opinion serves as an important reminder for companies that while Delaware law provides significant latitude to create processes intended to facilitate the orderly conduct of annual stockholder meetings and election contests, actions that improperly infringe upon the shareholder franchise will be viewed skeptically by Delaware courts.
ISS Issues White Paper on New Approach in Evaluating Pay for Performance Alignment
On December 20, 2011, Institutional Shareholder Services ("ISS"), a leading proxy advisory firm, published a white paper titled "Evaluating Pay for Performance Alignment: ISS’ Quantitative and Qualitative Approach." The white paper provides greater guidance on ISS’ new approach to establishing peer groups when conducting the pay-for-performance test described in its U.S. Corporate Governance Policy 2012 Updates and provides a detailed summary of and rationale for the new quantitative and qualitative methodology ISS will implement, beginning February 1, 2012, when assessing executive compensation. The white paper is available at
ISS Releases Policy Updates for 2012 Proxy Season
On November 17, 2011, Institutional Shareholder Services ("ISS"), a leading proxy advisory firm, released its U.S. and international corporate governance policy updates for the 2012 proxy season. For details, please see the U.S. Corporate Governance Policy 2012 Updates ("2012 Policy Updates"), available at http://www.issgovernance.com/policy/2012/policy_information. The 2012 Policy Updates apply to shareholder meetings held on or after February 1, 2012. This client alert reviews the most significant U.S. policy updates and additional detail on the policies provided by Patrick McGurn, Special Counsel at ISS, at the November 18, 2011 meeting of the American Bar Association’s Business Law Section’s Subcommittee on Shareholder and Investor Relations. The client alert concludes with commentary and recommendations in light of the ISS policy updates.
Handling Internal Investigations in the Executive Compensation Area
Los Angeles partner Michael Farhang and associate James Zelenay are the authors of "Handling Internal Investigations in the Executive Compensation Area" [PDF] published in the November 7, 2011 issue of BNA’s Pension & Benefits Daily.
Deals With Controlling Stockholders: 5 Tips for Boards
New York partner Rashida La Lande is the author of "Deals With Controlling Stockholders: 5 Tips for Boards" [PDF] published on November 2, 2011 on Boardmember.com.
California Adopts Two New Corporate Forms to Advance Social Benefits
On October 9, 2011, California Governor Jerry Brown signed into law competing bills that create two new corporate forms in California — a "flexible purpose corporation" and a "benefit corporation" — intended to allow entrepreneurs and investors the choice of organizing companies that can pursue both economic and social objectives. The new corporate forms differ from traditional for-profit corporations that are organized to pursue profit (and not social purposes) and non-profit corporations that must be used solely to promote social benefits. These laws will take effect on January 1, 2012.
Delaware Court of Chancery Issues Important Guidance for Special Committees Negotiating M&A Transactions with Controlling Stockholders
On October 14, 2011, Chancellor Strine of the Court of Chancery of the State of Delaware issued a decision in In re Southern Peru Copper Corp. Shareholder Derivative Litig., C.A. No. 961-CS. In the 105-page decision, Chancellor Strine ultimately found that the controlling stockholder defendants had breached their fiduciary duty of loyalty and awarded damages of over $1.2 billion, which may be paid by the controlling stockholder by returning some of the stock consideration received from the controlled company in the transaction. The decision provides important guidance for companies engaging in M&A transactions with their controlling stockholders.