Archive for January, 2011

Mesa Redonda Latinoamericana de Gobierno Corporativo: Capitalizando sobre una década de progreso

por el Foro Global de Gobierno Corporativo.

Hace 10 años se llevó a cabo la primera Mesa Redonda Latinoamericana de Gobierno Corporativo. Esta publicación proporciona un buen balance de lo que la Mesa Redonda y la región en su conjunto han logrado en términos de gobierno corporativo. Mientras que las numerosas reformas y mejoras adoptadas en los países de América Latina no se puede atribuir a una sola causa, es evidente que los debates de la Mesa Redonda, los informes y las redes de trabajo han proporcionado un fuerte aporte y apoyo a estos procesos. Leer mas…

Boardroom Focus in 2011: Growth

by Sarah Johnson for CFO, January 13th, 2011.

Directors will press CFOs about strategy and growth this year, as optimism returns to boardrooms.

Many CFOs can expect less stressful, more positive board meetings in 2011, with an emphasis on strategy and growth, say corporate-governance experts.

Take the issue of cash. For the past few years, anxious directors have been asking finance chiefs how they intend to raise or preserve it. Now, with an improving economy, directors increasingly want to know how companies plan to spend their cash. “The question is what is the best way to invest it or use it, particularly around strategy and growing the business,” says Catherine Bromilow, a partner at PricewaterhouseCoopers’ Center for Board Governance.

In general, directors will focus more on corporate strategy this year and less on the compliance issues that commanded their attention during the past decade, say experts. More than two-thirds of directors now view strategic planning and oversight as their number-one priority, according to the National Association of Corporate Directors’s (NACD) most recent governance survey. Just three years ago, only 24% of directors put strategy at the top of their priority list. (continue reading… )

 

The Latest Word on 2011 Say on Pay Vote Recommendations

by Charles M. Nathan, Latham & Watkins LLP for The Harvard Law School Forum, January 13th, 2011.

Dodd-Frank and Proposed Say on Pay Vote Rules

On October 18, 2010, the Securities and Exchange Commission (SEC) published proposed rules (Proposed Rules) implementing Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act). Section 951 generally requires US public companies to provide their shareholders the right to cast three types of pay votes: (i) a vote to approve the compensation of the named executive officers (say on pay vote); (ii) a vote on the frequency with which shareholders should be entitled to cast votes on the company’s executive compensation (frequency vote) and (iii) a vote to approve certain payments made in connection with an acquisition, merger or other specified corporate transaction (golden parachute vote). As of this date, the SEC has not adopted any final rules on the say on pay votes, but they are expected any day.

This Commentary provides a brief overview of the Proposed Rules and their effective dates, the current institutional and public company say on pay trends and what companies should be doing now to prepare for their 2011 say on pay votes. For a more detailed overview of the Proposed Rules, please see our Client Alert: SEC Announces Preliminary Say on Pay Rules, dated November 4, 2010.

Bottom Lines

The bottom lines are that US public companies are generally required to hold say on pay and frequency votes at their first meetings of shareholders occurring on or after January 21, 2011. Public companies are not required to hold golden parachute votes until the SEC promulgates the final rules. The SEC expects to issue the final rules between January and March of 2011. Until that time, public companies holding shareholder meetings on or after January 21, 2011 are only required to hold say on pay and frequency votes. Public companies may, however, ultimately avoid a golden parachute vote if they properly disclose their golden parachute arrangements and subject them to a general say on pay vote, provided that the arrangement is not modified after its prior approval. (continue reading… )

 

Tenet uses poison pill to fend off takeover: Hospital company exercises shareholder-rights initiative.

by Russ Britt for Market Watch, January 7th, 2011.

LOS ANGELES (MarketWatch) — Tenet Healthcare Corp. said Friday it adopted a poison-pill, shareholder-rights plan designed to fend off the unwanted takeover proposal offered last month by rival hospital operator Community Health Systems Inc.

Dallas-based Tenet’s (THC 6.89, -0.02, -0.29%) twofold plan involves adopting a rights agreement that would limit Community’s (CYH 37.16, -0.87, -2.29%) ability to use $2 billion in Tenet’s net loss carry-forwards for tax purposes. Income-tax rules limit the use of net operating losses for tax purposes if there is a change in ownership.

The poison-pill aspect of the plan involves the issuance of one preferred stock-purchase right for every common share of the company as part of a nontaxable dividend.

The plan with both tactics is to deter any shareholders from getting a stake of more than 4.9% of the company, or an “acquiring person.”

“A person who becomes an ‘acquiring person’ may be subject to significant dilution in their holdings. The board of directors may, in its sole discretion, exempt any person from being deemed an ‘acquiring person’ for purposes of the [rights agreement],” the company said in a statement. (continue reading… )



Forum’s Progress Report, Winter 2010

by The Global Corporate Governance Forum, July 2010.

Steering Committee Chairman Miguel Marques talks about Forum’s initiatives following the global financial crisis; Forum to establish Centers of Corporate Governance to facilitate regional contextualization; Patrick D. Chisanga talks about Africa’s advances in corporate governance; Regional Highlight – Latin America; Financial Markets Recovery Project delivers first results; insights on succession planning, and more…

Why Have a Board?

by Simone P. Joyaux for The Non-profit Quarterly, January 4th, 2011.

Because you have to. That’s what the law says.

Why else? Because having a board does add value – more value than raising or giving money.

Fundraisers and executive directors must be experts in corporate governance. It’s your job to understand corporate governance and explain it to your board members.

Go to workshops. Read books. Visit my website for lots of information about corporate governance.

First, keep in mind that corporate governance is a collective activity. No single individual board member matters – only the group (called the board) matters.

Second, remember that corporate governance only happens when the board is together at its meetings.

So what, exactly, is corporate governance? The process whereby a group of individuals (typically called a board) ensures the health and effectiveness of the organization (whether for-profit or nonprofit).

What does a board do at its meetings? The board talks about information – the trends and implications. The board asks essential and cage-rattling questions. With the support of staff, the board explores and argues. And, as appropriate, the board decides. And the board usually decides by voting.

What does the board talk about? The board talks about its core areas of responsibility. And what are those? Things like:

·         Relevancy, mission and impact

·         Financial sustainability

·         Legal and regulatory compliance

·         Risk management

·         Governance effectiveness and board member performance

Review the role of the board, posted on my website. Make sure your board adopts a policy defining the board’s role. And your policy must cover everything in my example. Corporate governance is corporate governance. There’s no distinction between different types of organizations. There’s no distinction based on size. (continue reading… )

2011 trends: Corporate governance and woman-power

by Urs. E. Gattiker for ComMetrics, January 6th, 2011.

Things have certainly changed in the last 20 years, as growing numbers of women are rising to the top executive level and joining corporate boards.

The FT saw fit to publish a magazine about the top 50 women in business. Using a panel of ‘experts’, inclusion in the list was based on such criteria as:

    “…biographical data, size, scope and complexity of the company (including turnover and number of employees, number of sectors and countries of operations) and the competitive landscape…”
    (2010-11-17 – FT Women at the top, p. 8)

The FT organized a Women at the Top conference, put Oprah Winfrey on the cover of the 2010-12-11/12 FT Weekend Magazine, and provided more coverage to address this popular topic, with the pleasant side-effect of generating revenue for the publication.

Learn what women’s increasing participation in global economic growth and legacy of drivers of innovation means for corporate governancerisk assessment and managing public relations disasters. (continue reading… )

 

Beyond Optics: Why Board Diversity Really Matters

by Lucy P. Marcus for The Huffington Post, January 4th, 2011.

Discussions around diversity in the board room often focus on gender, and indeed women are severely under-represented on boards. Importantly, though, the lack of women on boards is a reflection of a wider problem: it is one of color, age, international perspective, and more.

A lack of diversity is not simply a problem of “optics”. It looks skewed not to have a diverse board, but just because in the modern world it looks odd, does it make a difference in real economic terms? Does it actually affect the bottom line? To my mind the answer is a resounding yes. We do not need diversity for diversity’s sake, but because board diversity contributes to the profitability of the business.

There is a fundamental economic reason why diversity is important: diversity of thought, experience, knowledge, understanding, perspective and age means that a board is more capable of seeing and understand risks and coming up with robust solutions to address them. Businesses led by diverse boards that reflect the whole breadth of their stakeholders and their business environment will be more successful. They are more in touch with their customers’ demands, their investors’ expectations, their staff’s concerns, and they have a forum inside the board room where these different perspectives come together and successful future proofing business strategies can be devised.

An argument I have heard against actively seeking diversity on the board is a fear that too much diversity and independence of thought can be damaging to the cohesion of the board. Yet, for healthy boards with capable chairs the very opposite is true. Board cohesion is vital, and everyone needs to be moving in the same direction, but within that agreed direction, the modern board requires open, constructive, and dynamic discussion, rooted in respect and regard for the people around the table. (continue reading… )

The Role of Non-Executive Board Directors Today

by Lucy P. Marcus for The Huffington Post, December 20th, 2010.

As a non-executive board director, I have been thinking a great deal about what it means to do this role in today’s environment.

We exist in a dramatically different economic climate. With that comes increased scrutiny by stakeholders and governments alike, and with good reason. If our companies are the engine for bringing us out of the doldrums, then we need to have the best foundations and tools for them to do just that.

The nature of what it takes to be a responsible board member anywhere in the world has changed. Simply looking over the shoulder of the executive team and offering an occasional word of wisdom or direction is not sufficient. Non-executive board directors today need to be proactive in their approach to ensure that the organizations they serve do not simply survive but thrive. And nothing less should be demanded of them than that.

The best organizations of all sizes, in both the for-profit and not-for profit sectors, are looking for active, engaged, and independent board members, and they encourage a climate in which having those people on the board can bear fruit. These board rooms are environments in which board members are comfortable, and indeed required, to ask hard questions, challenge the status quo, and step up to assist in areas where they can. (continue reading… )

 

Thirteen Senators Tell Fed of Concerns with Implementation of Dodd-Frank Interchange Fee Provisions

By James Hamilton for CCH Financial Reform News Center, January 4th, 2011.

Thirteen US Senators, including leading members of the Banking Committee have expressed concern with the consequences of replacing a market-based system for debit card acceptances with a government-controlled system pursuant to Section 1075 of the Dodd-Frank Act. In a bi-partisan letter to Fed Chair Ben Bernanke, the senators said that having the government fix prices in any venue is a bad idea. As the Fed implements Section 1075, the senators want to ensure that all costs to the issuers and economic value to the merchants are considered in the regulations. The senators urged the Fed to take the time to consider all the implications of implementing Section 1075 and exercise the discretion granted by Dodd-Frank to minimize negative consequences. The letter was signed by Senator Richard Shelby (R-AL), the Banking Committee’s Ranking Member, and two influential members of the committee, Senators Mark Warner (D-VA) and Bob Corker (R-TN).

Section 1075 requires that the Fed issue by April 21, 2011 three final rules on interchange fees regarding a reasonable and proportional debit fee structure, fees for fraud prevention on debit transactions, and debit transaction network fees. There is a statutory exemption for small issuers under $10 billion in assets from the new debit fee rules.
During what the senators described as a “very limited debate’’ on the Senate floor, the debt interchange fee amendment was presented as a pro-consumer provision that would lower costs for customers who use debit cards. However, since passage of Dodd-Frank Section 1075, analyst reports for retailers likely to be affected by the provision make no mention of any benefits to consumers. Indeed, many predict that consumers will be faced with additional bank fees as the rule is implemented.

In addition, the senators said that there is a misconception that the small bank exemption will level the playing field for financial institutions under $10 billion. They are concerned that the statute will make small bank and credit union debit cards more expensive for merchants to accept that those issued by larger financial institutions and would likely put them at a disadvantage compared to large issuers.

 


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Blog da Governança


(in Portuguese) A weekly chronicle about shareholders' rights & duties, activism and capital markets regulation, by Renato Chaves.
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