Tuesday, October 20, 2009
Monday, October 19, 2009
Sunday, October 18, 2009
Great change in US Corporate Law: Rights heavily weighted in favour of top corporate executives, is now shifting in the direction of shareholders
With public pressure boiling over, investors are on the verge of getting a greater share of the rules governing company directors -- or at least a bigger say in the changes that are made. These all are due to the biggest financial crisis since the Great Depression, coupled with Bernard Madoff's $50 billion Ponzi scheme and ire over Wall Street bonuses has lit a fire under Congress and the nation's investor watchdog, the Securities and Exchange Commission.
SEC is undertaking an array of actions to empower investors in their interaction with managements and boards. That includes new powers which could make it easier for investors to oust chief executives and other management-backed directors. Now investors could have an easier and cheaper way to nominate director candidates to boards -- a policy sure to transform shareholder-board relations.
New law provides more power to investors seeking to oust CEOs from boards will be more effective due to new SEC rules prohibiting so-called "ballot-stuffing," the long-held practice of broker-dealers casting undirected retail investor votes for management director candidates.
These are major steps. The SEC has discussed giving investors a more central role in corporate director elections for decades, to no avail. But the credit crunch has given weight to arguments that corporate boards must be more accountable to shareholders, driving this round of reform efforts.
Now there is a huge increase in the amount of rights that shareholders have as a result, the playing field, so heavily weighted in favour of top corporate executives, is now shifting in the direction of shareholders, including retail investors, public and corporate pension plans, hedge funds and other institutional stockholders.
It is expected that new powers to result in greater behind-the-scenes negotiations between investors and corporate boards, as directors seek to avoid embarrassment by privately negotiating with shareholders over pay packages and other policies.
Many reforms have already taken place. Others are still under consideration on Capitol Hill and at the SEC. Strengthening shareholder rights, anticipates that much of the investor-friendly legislation on Capitol Hill will be approved. The proposed changes are part of a broad movement that is transforming shareholder-corporation relations in a post-financial crisis period.
Here are initiatives underway in Washington aimed at empowering shareholders in dealings with corporations and their boards: Giving shareholders an easier way to nominate a minority slate of directors has been on and off the agenda at the SEC since the 1940s, but has never come to fruition. Most recently in 2004, under the helm of then SEC chairman William Donaldson, efforts to give investors more power in board elections failed to gain traction. Despite the long odds, the winds are shifting, said David Sirignano, partner at Morgan Lewis & Bockius in Washington, and former chief of the SEC's M&A office. The vast majority of investors, particularly retail shareholders, have a tough time influencing how corporations operate. That is changing. Both Congress and the SEC are taking steps to give investors a non-binding but powerful vote on the compensation of executives. The SEC has drafted a rule expected to be approved before year-end that would subject financial institutions receiving bank bailout funds to a shareholder vote on the pay of their executives. Moreover, a key congressional committee has approved a provision -- which is expected to become law later this year as part of broad bank reform legislation -- that would apply this measure to all U.S. corporations.
Corporations in the U.K. are subject to the same salary rule, it is expected that in the U.S. it could drive management and board compensation committees into behind-the-scenes negotiations with investors over corporate pay.
SEC is undertaking an array of actions to empower investors in their interaction with managements and boards. That includes new powers which could make it easier for investors to oust chief executives and other management-backed directors. Now investors could have an easier and cheaper way to nominate director candidates to boards -- a policy sure to transform shareholder-board relations.
New law provides more power to investors seeking to oust CEOs from boards will be more effective due to new SEC rules prohibiting so-called "ballot-stuffing," the long-held practice of broker-dealers casting undirected retail investor votes for management director candidates.
These are major steps. The SEC has discussed giving investors a more central role in corporate director elections for decades, to no avail. But the credit crunch has given weight to arguments that corporate boards must be more accountable to shareholders, driving this round of reform efforts.
Now there is a huge increase in the amount of rights that shareholders have as a result, the playing field, so heavily weighted in favour of top corporate executives, is now shifting in the direction of shareholders, including retail investors, public and corporate pension plans, hedge funds and other institutional stockholders.
It is expected that new powers to result in greater behind-the-scenes negotiations between investors and corporate boards, as directors seek to avoid embarrassment by privately negotiating with shareholders over pay packages and other policies.
Many reforms have already taken place. Others are still under consideration on Capitol Hill and at the SEC. Strengthening shareholder rights, anticipates that much of the investor-friendly legislation on Capitol Hill will be approved. The proposed changes are part of a broad movement that is transforming shareholder-corporation relations in a post-financial crisis period.
Here are initiatives underway in Washington aimed at empowering shareholders in dealings with corporations and their boards: Giving shareholders an easier way to nominate a minority slate of directors has been on and off the agenda at the SEC since the 1940s, but has never come to fruition. Most recently in 2004, under the helm of then SEC chairman William Donaldson, efforts to give investors more power in board elections failed to gain traction. Despite the long odds, the winds are shifting, said David Sirignano, partner at Morgan Lewis & Bockius in Washington, and former chief of the SEC's M&A office. The vast majority of investors, particularly retail shareholders, have a tough time influencing how corporations operate. That is changing. Both Congress and the SEC are taking steps to give investors a non-binding but powerful vote on the compensation of executives. The SEC has drafted a rule expected to be approved before year-end that would subject financial institutions receiving bank bailout funds to a shareholder vote on the pay of their executives. Moreover, a key congressional committee has approved a provision -- which is expected to become law later this year as part of broad bank reform legislation -- that would apply this measure to all U.S. corporations.
Corporations in the U.K. are subject to the same salary rule, it is expected that in the U.S. it could drive management and board compensation committees into behind-the-scenes negotiations with investors over corporate pay.
Friday, October 16, 2009
Surprising Turn in Enron Case by US Court
The US Supreme Court announced on 14th October that it would hear an appeal from Jeffrey Skilling, the former CEO of Enron who was convicted of fraud in 2006. This is a sign that the high court is considering curbing use of the “honest services” fraud statute to prosecute corporate corruption.
In fact, the idea that Skilling and other top executives at Enron did not benefit from the fraud personally is absurd. According to the government’s own indictment, “Between 1998 and 2001, Skilling received approximately $300 million from the sale of Enron stock options and restricted stock, netting over $89 million in profit, and was paid more than $14 million in salary and bonuses. The move is very surprising because the court had already agreed to hear two other cases involving the relevant law, which makes it a crime to “deprive another of the intangible right of honest services.” These include cases brought by former Alaskan legislator Bruce Weyhrauch and media mogul Conrad Black. The law has been frequently used to prosecute executives for corporate corruption. Generally when appeals in similar cases are already pending the court is to hold the later cases until the earlier ones have been decided.
As we know that the Enron collapsed into bankruptcy in December 2001, four months after Skilling resigned as CEO. This was the largest bankruptcy in US history. As per the facts Enron made fictitious earnings, by the insider dealings of Enron’s top executives. More than 20,000 workers lost their jobs and life savings as a result of Enron’s fall. The government showed anger over Enron and a series of further corporate corruption scandals by prosecuting a number of executives, including Skilling and Lay. Because Skilling was found guilty in May 2006 of 12 counts of securities fraud, five counts of making false statements to auditors, one count of insider trading, and one count of conspiracy. Skilling was convicted along with Kenneth Lay, the longtime chairman and CEO of Enron. Lay died in July 2006, and his charges were subsequently vacated. The rise of Enron in the 1990s was bound up with the deregulation of the energy markets, which the company was able to exploit in part thanks to its political connections. It was hailed as a poster company for the “new economy,” and when it collapsed it exposed the rot of much of American capitalism, based on fraud, speculation, and debt even much more.
Skilling’s lawyer Dan Petrocelli was arguing along similar lines in his closing arguments in 2006 said that if the government’s arguments were accepted, “We might as well put every CEO in jail.” The essential argument is that corporate wrongdoing is pervasive and should not be the subject of criminal prosecution. As the court has declined to hear some 2,000 cases filed for its fall term, including several that involve fundamental questions of democratic rights. However, the well-financed attempt by the former Enron executive to get out of prison is, for the court, deserving of a special hearing. The prosecutions were from the beginning conducted on a very narrow basis, intended to cover over the fundamental questions and leave the underlying roots of criminality intact. In particular, the prosecution and the media sought to deliberately obscure the deep political ties between Lay, Enron, and the Bush administration. In the course of the trial, the government made the concession that the fraud carried out by Skilling was not intended for private gain. Skilling’s lawyers are seizing on this admission in their appeal, arguing that the Supreme Court should rule that it unconstitutional to prosecute employees at private companies for fraud where no private gain is proven. They are also arguing that Skilling could not receive a fair trial in Houston because of the widespread hostility to Enron and its executives.
As per the brief filed in Supreme Court by Skilling’s lawyers states that, if broadly interpreted, the law has the effect of “impermissibly criminalizing whatever wrongful or unethical corporate acts a given prosecutor decides to attack.” Those who want to limit even further the ability to prosecute executives already attacked the honest services statute. In February, Justice Antonin Scalia wrote a protest over the court’s decision not to hear another challenge to the law, saying that it had “been invoked to impose criminal penalties upon a staggeringly broad swath of behavior.”
Scalia denounced the law for allowing “headline-grabbing prosecutors in pursuit of local officials, state legislators and corporate CEOs who engage in any manner of unappealing or ethically questionable conduct.”
If the court upholds a narrower reading of the fraud statute, it could have far-reaching implications. Attorneys for HealthSouth CEO Richard Scrushy and former Alabama governor Don Siegelman, for example, hailed the court’s decision. The two were convicted of corruption and insider dealing in 2006.
Justice Scalia’s dissent, which was vigorous even by his own muscular standards, seems to have had an impact. In the following months, the Supreme Court agreed to hear not one but two cases exploring the honest services law.” This will be the third Enron-related case the Supreme Court has decided. In 2005, the court reversed the 2002 conviction of Enron’s accounting firm, Arthur Andersen. The company had shredded vast amounts of paperwork after the initiation of the fraud investigation into Enron. In a unanimous ruling, the court said that jury instructions given by the judge were flawed. As Andersen had already declared bankruptcy, the government did not reprosecute the case.
Earlier this year, the court ruled that Enron broadband executive Scott Yeager could not be retried on some charges because he was previously acquitted on similar charges in another case.
Enron’s collapse reflecting that the company was not an aberration, but basic tendencies of capitalist development in the United States—including the immense growth of speculation and fraud, in which the accumulation of massive sums of money was largely or entirely divorced from actual production.None of those who are responsible for the crisis have been convicted. Indeed, many of these firms, the most powerful banks in the country, were also instrumental in facilitating Enron’s crimes. Far from being held to account, they are now doing better than ever, posting record profits and bonuses even as the conditions for millions of people continue to deteriorate. Even Obama administration, has not shown any interest in curbing the speculative activities of these individuals.
In fact, the idea that Skilling and other top executives at Enron did not benefit from the fraud personally is absurd. According to the government’s own indictment, “Between 1998 and 2001, Skilling received approximately $300 million from the sale of Enron stock options and restricted stock, netting over $89 million in profit, and was paid more than $14 million in salary and bonuses. The move is very surprising because the court had already agreed to hear two other cases involving the relevant law, which makes it a crime to “deprive another of the intangible right of honest services.” These include cases brought by former Alaskan legislator Bruce Weyhrauch and media mogul Conrad Black. The law has been frequently used to prosecute executives for corporate corruption. Generally when appeals in similar cases are already pending the court is to hold the later cases until the earlier ones have been decided.
As we know that the Enron collapsed into bankruptcy in December 2001, four months after Skilling resigned as CEO. This was the largest bankruptcy in US history. As per the facts Enron made fictitious earnings, by the insider dealings of Enron’s top executives. More than 20,000 workers lost their jobs and life savings as a result of Enron’s fall. The government showed anger over Enron and a series of further corporate corruption scandals by prosecuting a number of executives, including Skilling and Lay. Because Skilling was found guilty in May 2006 of 12 counts of securities fraud, five counts of making false statements to auditors, one count of insider trading, and one count of conspiracy. Skilling was convicted along with Kenneth Lay, the longtime chairman and CEO of Enron. Lay died in July 2006, and his charges were subsequently vacated. The rise of Enron in the 1990s was bound up with the deregulation of the energy markets, which the company was able to exploit in part thanks to its political connections. It was hailed as a poster company for the “new economy,” and when it collapsed it exposed the rot of much of American capitalism, based on fraud, speculation, and debt even much more.
Skilling’s lawyer Dan Petrocelli was arguing along similar lines in his closing arguments in 2006 said that if the government’s arguments were accepted, “We might as well put every CEO in jail.” The essential argument is that corporate wrongdoing is pervasive and should not be the subject of criminal prosecution. As the court has declined to hear some 2,000 cases filed for its fall term, including several that involve fundamental questions of democratic rights. However, the well-financed attempt by the former Enron executive to get out of prison is, for the court, deserving of a special hearing. The prosecutions were from the beginning conducted on a very narrow basis, intended to cover over the fundamental questions and leave the underlying roots of criminality intact. In particular, the prosecution and the media sought to deliberately obscure the deep political ties between Lay, Enron, and the Bush administration. In the course of the trial, the government made the concession that the fraud carried out by Skilling was not intended for private gain. Skilling’s lawyers are seizing on this admission in their appeal, arguing that the Supreme Court should rule that it unconstitutional to prosecute employees at private companies for fraud where no private gain is proven. They are also arguing that Skilling could not receive a fair trial in Houston because of the widespread hostility to Enron and its executives.
As per the brief filed in Supreme Court by Skilling’s lawyers states that, if broadly interpreted, the law has the effect of “impermissibly criminalizing whatever wrongful or unethical corporate acts a given prosecutor decides to attack.” Those who want to limit even further the ability to prosecute executives already attacked the honest services statute. In February, Justice Antonin Scalia wrote a protest over the court’s decision not to hear another challenge to the law, saying that it had “been invoked to impose criminal penalties upon a staggeringly broad swath of behavior.”
Scalia denounced the law for allowing “headline-grabbing prosecutors in pursuit of local officials, state legislators and corporate CEOs who engage in any manner of unappealing or ethically questionable conduct.”
If the court upholds a narrower reading of the fraud statute, it could have far-reaching implications. Attorneys for HealthSouth CEO Richard Scrushy and former Alabama governor Don Siegelman, for example, hailed the court’s decision. The two were convicted of corruption and insider dealing in 2006.
Justice Scalia’s dissent, which was vigorous even by his own muscular standards, seems to have had an impact. In the following months, the Supreme Court agreed to hear not one but two cases exploring the honest services law.” This will be the third Enron-related case the Supreme Court has decided. In 2005, the court reversed the 2002 conviction of Enron’s accounting firm, Arthur Andersen. The company had shredded vast amounts of paperwork after the initiation of the fraud investigation into Enron. In a unanimous ruling, the court said that jury instructions given by the judge were flawed. As Andersen had already declared bankruptcy, the government did not reprosecute the case.
Earlier this year, the court ruled that Enron broadband executive Scott Yeager could not be retried on some charges because he was previously acquitted on similar charges in another case.
Enron’s collapse reflecting that the company was not an aberration, but basic tendencies of capitalist development in the United States—including the immense growth of speculation and fraud, in which the accumulation of massive sums of money was largely or entirely divorced from actual production.None of those who are responsible for the crisis have been convicted. Indeed, many of these firms, the most powerful banks in the country, were also instrumental in facilitating Enron’s crimes. Far from being held to account, they are now doing better than ever, posting record profits and bonuses even as the conditions for millions of people continue to deteriorate. Even Obama administration, has not shown any interest in curbing the speculative activities of these individuals.
UAE May Have New Corporate Law in 2010
The new corporate law intended to ensure that the UAE’s listed companies exercise full transparency might be introduced in 2010. As UAE already have rules and regulations covering corporate governance. But the new proposed law will make it compulsory for listed companies to abide by all ESCA (Emirates Securities and Commodities Authority) rules and regulations.”
According t Mariam Al Suwaidi, deputy CEO for Issuance, Research and Legal Affairs at the (ESC), Spoke in the first Abu Dhabi Corporate Governance Conference, organised by the capital's Centre for Corporate Governance that the new law would be more transparent and seek full clarity from listed companies. Al Suwaidi said that there are some ambiguities in the current rules and regulations, and also with regards to the interpretation of some articles.
UAE is still at the stage where these rules are voluntary. The need for greater transparency laws for companies has been felt more acutely in recent times. The current crisis has underlined the need to reinforce good governance in the country. There are lots of companies adopting improved standards of corporate governance and all this shows a new culture is being created in the country.” UAE may also introduce a law to better protect foreign investors, amid an increase in civil court cases in the wake of the global financial crisis.
Strengthening the corporate laws in the UAE and increasing accounting transparency would enhance the UAE’s reputation as a safe financial and business destination to entrust investors’ money.
According t Mariam Al Suwaidi, deputy CEO for Issuance, Research and Legal Affairs at the (ESC), Spoke in the first Abu Dhabi Corporate Governance Conference, organised by the capital's Centre for Corporate Governance that the new law would be more transparent and seek full clarity from listed companies. Al Suwaidi said that there are some ambiguities in the current rules and regulations, and also with regards to the interpretation of some articles.
UAE is still at the stage where these rules are voluntary. The need for greater transparency laws for companies has been felt more acutely in recent times. The current crisis has underlined the need to reinforce good governance in the country. There are lots of companies adopting improved standards of corporate governance and all this shows a new culture is being created in the country.” UAE may also introduce a law to better protect foreign investors, amid an increase in civil court cases in the wake of the global financial crisis.
Strengthening the corporate laws in the UAE and increasing accounting transparency would enhance the UAE’s reputation as a safe financial and business destination to entrust investors’ money.
Sunday, October 4, 2009
America's Best Corporate Law Firms
America's Best Corporate Law Firms
from Second Quarter 2009
Corporate Board Member
They are ready to come to your rescue. And in today’s tough financial climate, who better to have at your side than one of the 20 corporate law firms selected as the best in the nation by almost 300 directors who took part in the 2009 Corporate Board Member/FTI Consulting annual survey?
Skadden Arps Slate Meagher & Flom ranks No. 1 nationally for the ninth straight year. And two firms that didn’t make last year’s Top 20—Sidley Austin and Fried Frank Harris Shriver & Jacobson—vaulted onto the 2009 list. They replaced Simpson Thacher & Bartlett and Akin Gump Strauss & Feld.
In addition to the directors’ list of national champions, some 240 general counsels picked the law firms they rank tops in 25 metropolitan areas.
The Top 20 Firms Last Year's Ranking
1. SKADDEN ARPS SLATE MEAGHER & FLOM New York 1
2. JONES DAY Washington, D.C. 7
3. CRAVATH SWAINE & MOORE New York 2
4. WACHTELL LIPTON ROSEN & KATZ New York 3
5. SULLIVAN & CROMWELL New York 5
6. WEIL GOTSHAL & MANGES New York 9
7. GIBSON DUNN & CRUTCHER Los Angeles 13
8. KIRKLAND & ELLIS Chicago 8
9. LATHAM & WATKINS Los Angeles 6
10. FULBRIGHT & JAWORSKI Houston 17
11. BAKER & MCKENZIE Chicago 14 (tie)
12.O'MELVENY & MYERS Los Angeles 19
13. DAVIS POLK & WARDWELL New York 4
14. WILSON SONSINI GOODRICH & ROSATI Palo Alto 14 (tie)
15. SIDLEY AUSTIN New York -
16. SHEARMAN & STERLING New York 11 (tie)
17. PAUL WEISS RIFKIND WHARTON & GARRISON New York 11 (tie)
18. COVINGTON & BURLING Washington, D.C. 16
19. HOGAN & HARTSON Washington, D.C. 20
20. FRIED FRANK HARRIS SHRIVER & JACOBSON New York -
Source: Corporate Board Member/FTI Consulting
from Second Quarter 2009
Corporate Board Member
They are ready to come to your rescue. And in today’s tough financial climate, who better to have at your side than one of the 20 corporate law firms selected as the best in the nation by almost 300 directors who took part in the 2009 Corporate Board Member/FTI Consulting annual survey?
Skadden Arps Slate Meagher & Flom ranks No. 1 nationally for the ninth straight year. And two firms that didn’t make last year’s Top 20—Sidley Austin and Fried Frank Harris Shriver & Jacobson—vaulted onto the 2009 list. They replaced Simpson Thacher & Bartlett and Akin Gump Strauss & Feld.
In addition to the directors’ list of national champions, some 240 general counsels picked the law firms they rank tops in 25 metropolitan areas.
The Top 20 Firms Last Year's Ranking
1. SKADDEN ARPS SLATE MEAGHER & FLOM New York 1
2. JONES DAY Washington, D.C. 7
3. CRAVATH SWAINE & MOORE New York 2
4. WACHTELL LIPTON ROSEN & KATZ New York 3
5. SULLIVAN & CROMWELL New York 5
6. WEIL GOTSHAL & MANGES New York 9
7. GIBSON DUNN & CRUTCHER Los Angeles 13
8. KIRKLAND & ELLIS Chicago 8
9. LATHAM & WATKINS Los Angeles 6
10. FULBRIGHT & JAWORSKI Houston 17
11. BAKER & MCKENZIE Chicago 14 (tie)
12.O'MELVENY & MYERS Los Angeles 19
13. DAVIS POLK & WARDWELL New York 4
14. WILSON SONSINI GOODRICH & ROSATI Palo Alto 14 (tie)
15. SIDLEY AUSTIN New York -
16. SHEARMAN & STERLING New York 11 (tie)
17. PAUL WEISS RIFKIND WHARTON & GARRISON New York 11 (tie)
18. COVINGTON & BURLING Washington, D.C. 16
19. HOGAN & HARTSON Washington, D.C. 20
20. FRIED FRANK HARRIS SHRIVER & JACOBSON New York -
Source: Corporate Board Member/FTI Consulting
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