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Innovation is the primary engine of growth in economies at the technological frontier, and a path to higher profits and growth for individual companies, as the likes of Apple, Alphabet, Microsoft, and Amazon make clear. CEOs play a crucial role in directing and overseeing their firms’ innovation efforts. This, however, creates a tension: The interests of the shareholders and the CEO might not be aligned, opening the door to agency frictions. In turn, such frictions…
Over the past three decades, shareholder proposals have transformed the corporate landscape in the U.S. by spurring the adoption of governance best practices. Annual director elections, majority vote rules for director elections, shareholder approval for poison pills, and proxy access bylaws are some of the critical governance practices that have become common practice thanks to investor support for shareholder proposal campaigns led by a wide variety of investors—some large; others small. Despite the advisory (non-binding)…
When it was enacted in August 2018, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) overhauled the US law governing CFIUS national security reviews for the first time in 11 years. Many of FIRRMA’s most significant changes, however, await implementing regulations or other action by the Trump Administration before going into force, a process that likely has been stalled due to the US Government shutdown. This CFIUS update focuses on what has been…
Innovation and its main output, technology, are changing the way we work, socialize, vote, and live. New technologies have improved our lives and made firms more productive, raising living standards across the world. Thanks to progress in information technology, the rate of change is accelerating. Disruption and disequilibrium are now commonplace. Our recent paper, prepared for the first phase of the British Academy’s ‘The Future of the Corporation’ initiative and published in…
A key policy of UK financial regulation since the financial crisis has been the ring-fencing of retail banks into separate and independently operated entities, so-called “ring-fenced bodies” (RFBs), distinct from entities that carry on other, and especially investment, banking activities within the same corporate group. Such structural regulation of the banking sector – which went into effect on January 1, 2019, for all UK banks with more than £25 billion of retail deposits  – was…
I had high expectations when I picked up Thom [Lambert’s] book on regulation shortly after it first came out several years ago.[1] Those expectations were exceeded by the clear and compelling way in which the book wrestles with the difficulties faced by regulators as they seek to design regulations that solve problems without creating larger problems in the process. As the book explains, “regulation . . . always involves trade-offs. The $64,000 question is…
Contrary to common belief, M&A transactions are not overwhelmingly initiated by acquirers. Target managers frequently put their firms up for sale before receiving any unsolicited bids. In fact, in our sample of U.S. domestic M&A deals completed between 1997 and 2012, target firms approached potential bidders more than one third of the time. One well known example of this is the transaction involved in the landmark decision of the Delaware Supreme Court in Smith v.…
The issue of mandatory arbitration provisions in the bylaws of U.S. publicly-listed companies has garnered a great deal of attention.  As I have previously stated, the ability of domestic, publicly-listed companies to require shareholders to arbitrate claims against them arising under the federal securities laws is a complex matter that requires careful consideration.[1] On various occasions, I have been asked about this issue in the hypothetical context of whether the staff of the Division…
Since 2018, U.S. public companies have had to calculate and report a new, unconventional statistic—a CEO pay ratio—which links CEO pay to the pay of rank-and-file workers. Based on a last-minute addition to the Dodd-Frank Act of 2010, the disclosure requirement generated significant controversy during the lengthy SEC rulemaking process. Companies and their executive compensation consultants spent years and considerable resources preparing to comply with the rule. Once the pay ratio figures started arriving in…
In the bizarre world that Washington politics has become, few stories are more fascinating than Jeff Bezos’ accusation that the National Enquirer and its parent, American Media Inc., committed blackmail and extortion by threatening to reveal nude pictures of him and his girlfriend unless he would “publicly affirm that The Enquirer’s reporting on his affair was not motivated by political concerns.”[1] Let’s assume that everything Bezos said is true. Most of us sympathize with…