Reliance on Experts from a Corporate Law Perspective. This post comes from Alexandros Rokas, LL.M. ’12, Corporate Governance Concentration.

August 22, 2013 in Uncategorized by Anastasia A. Tolu, M.Jur. CGC Site Administrator

Alexandros is currently an adjunct lecturer at the University of Athens. He recently published an article based on his LLM paper in the American University Business Law Review (Vol. 2:2, 2013, p. 323). The article is titled “Reliance on Experts from a Corporate Law Perspective”.

An overview:

In discharging their duty of care, directors of corporations are not expected to independently investigate all parameters affecting a decision they are about to make.  In fact, statutory provisions encourage or sometimes require directors to seek the advice of experts such as auditors, lawyers, investment bankers, and tax specialists.  In this Article, emphasis is placed on Section 141(e) of the Delaware General Corporation Law, according to which directors are entitled to rely on the advice of such experts as long as they believe that the advice was within the expert’s professional competence, the expert was selected with reasonable care, and reliance is in good faith. Apart from systematizing the elements of this rule, as they were interpreted by a significant number of court decisions, this Article sheds light on the interaction of the reliance defense with basic concepts of Delaware corporate law, mainly the business judgment rule as well as good faith after Caremark.  This Article does not examine whether directors will be eventually held liable (which, besides, is rarely the case in Delaware due to the business judgment presumption, exculpatory clauses, and insurance and indemnification provisions), but solely whether the additional defense of Section 141(e) should apply or not.

The article can be found here.

— Anastasia Tolu, Corporate Governance site administrator

August 26, 2013

New Book on Corporate Governance: Corporate Law and Economic Stagnation. This comes from Pavlos Masouros, LLM’09 Corporate Governance Concentration.

July 16, 2013 in Uncategorized by Anastasia A. Tolu, M.Jur. CGC Site Administrator

Pavlos is currently an Assistant Professor of Corporate Law at Leiden University.

The breakdown of the Bretton Woods system in the 1970s brought about “the Great Reversal in Corporate Governance”, i.e. the reorientation of corporate governance from the institutional logic of “retain and invest” to the logic of “downsize and distribute”, and “the Great Reversal in Shareholdership”, i.e. the shortening of shareholders’ time-horizons.

The Great Reversal in Corporate Governance coupled with the Great Reversal in Shareholdership have contributed to the low rates of GDP growth that are observed in France, Germany, The Netherlands, the UK and the US since the 1970s.

Corporate law has been an accomplice for the Great Reversal in Corporate Governance, and thus corporate law is an initiator of stagnation. A numerical legal index shows how the corporate laws of France, Germany, The Netherlands, the UK and the US incrementally became shareholder-friendlier the years 1973-2007.

Corporate law has acted as a repellent for long-termist investors and has, thus, sustained the Great Reversal in Shareholdership hence contributing to the maintenance of the second factor that brought about the observed low rates of growth over the past four decades.

As a remedy a “Long Governance” legislative agenda emerges that paves the way for the prioritization of long-termist shareholders in corporate governance.

— Anastasia Tolu, Corporate Governance site administrator

July 16, 2013

First Swiss-listed company seeks shareholder advisory vote on political and charitable spending. This post comes from Arie Gerszt, LLM’10, Corporate Governance Concentration.

May 17, 2013 in Uncategorized by Anastasia A. Tolu, M.Jur. CGC Site Administrator

On 9 April 2013, Swiss-listed Mobimo Holding AG held its Annual General Meeting. Among standard agenda matters, Mobimo’s board of directors proposed to request two advisory votes from its shareholders on political and charitable spending.

The first vote is on the amounts spent on charitable donations and on political donations for the past business year. The second vote seeks to allow the board of directors to spend up to CHF 100,000 in political and charitable donations in 2013.

The Swiss-based Ethos Foundation, a Swiss voting and proxy advisor, has commended Mobimo for allowing such advisory votes, on the grounds that only very few Swiss-listed companies feature similar transparency on the issue of political and charitable donations. According to Ethos, this is the first time that a Swiss listed company implements such a vote, allowing shareholders to give their opinion on a very sensitive issue.

Further information:

- Website Ethos:

- Press Release Ethos:

- Website Mobimo:

— Anastasia Tolu, Corporate Governance site administrator

May 17, 2013

This post comes from Prof. Mark Roe: on stock market short-termism.

May 3, 2013 in Uncategorized by Anastasia A. Tolu, M.Jur. CGC Site Administrator

“Project Syndicate, a syndicate of primarily economists who write for the international business press, such as Les Echos and Il Sole 24 Ore in Europe, distributed a series of columns I wrote on how best to think about stock market short-termism.  It’s a subject I’ve been interested in for some time, and with which over time I’ve discussed specifics with several of you, particularly Martin Bengtzen and Federico Raffaele.

In the first column, which can be found here , “Corporate Short-Termism in the Fiscal Cliff’s Shadow,” I looked at how we should think about short-termism in light of government policy instability, such as the American fiscal cliff and Euro stability.   In the second, “Are Stock Markets Really Becoming More Short Term?”, I examined whether the consensus that financial markets are becoming increasingly short-term is correct; much of the supporting data comes from averaging in a fringe of rapid program trading, while core shareholders in the United States, like Fidelity Investments and Vanguard, have actually increased their holding duration during recent decades. In the third, “Apple’s Cash-Flow Problem,” I looked at whether the criticism of investors seeking to have Apple let go of its $137 billion cash hoard are really as short-term focused as the critics have it.

The posts draw from a longer article, “Corporate Short-Termism—In the Boardroom and in the Courtroom,” which is scheduled to be published by Business Lawyer this August, and which is available as a manuscript here.”

— Anastasia Tolu, Corporate Governance site administrator

May 3, 2012

Say-on-Pay in Switzerland. Major overhaul of rules on executive compensation and other corporate governance matters for Swiss listed companies. This post comes from Arie Gerszt, LLM’10, Corporate Governance Concentration.

March 15, 2013 in Uncategorized by Anastasia A. Tolu, M.Jur. CGC Site Administrator

In March, Switzerland voted on a constitutional amendment regarding corporate governance and executive compensation matters that will apply to around 300 listed corporations incorporated in Switzerland (but not foreign corporations listed in Switzerland).

As a consequence, the following principles will become part of the corporate governance framework for listed Swiss corporations:

–  binding shareholder resolution on total compensation of the board and senior management;

–  annual election by shareholders of the chairman and the compensation committee members;

–  prohibition of severance payments, advance compensation, and transaction-based success fees;

–  institutional proxy voting in shareholders’ meetings only by independent proxies (elected by shareholders);

–  electronic shareholder voting;

–  pension funds must vote shares in the interest of their insured persons and disclose how they voted.

More specificities can be found in a Deloitte memo, PwC news and in this WSJ article.

Noteworthy (and peculiar) is that non-compliance with the new rules will be subject to substantial criminal sanctions.

While these rules on executive compensation will be much tougher than the current regime, two things seem important. First, the amendment leaves open a number of questions that the legislator will need to address. Second, the new rules primarily affect executive compensation, for which they foresee a relatively rigid framework. Rules on executive compensation must be seen, however, in the broader context (e.g., general company law, stock exchange law, tax law, etc.). In such a broader perspective, Switzerland will – irrespective of the new rules – retain a very flexible and attractive legal environment for corporates.

— Anastasia Tolu, Corporate Governance site administrator

March 29, 2013