Monday, June 7, 2021

RESTORING TRUST IN MARKETS: RMA Podcast Series

Creating ESG Models to Change Negative Views of Financial Markets

Author: Ed Blount

Good morning, this is Ed Blount and I am speaking to you from the Center for the Study of Financial Market Evolution here in Washington, D.C. I've been asked by my good friends at the Risk Management Association, RMA, just up the road in Philadelphia, to offer some thoughts on "how data-based models can be used to change the negative views of financial markets that are held by some bank customers and regulators, especially in the wake of the pandemic."  So, that is an interesting question.

I'm going to approach the answer in two parts:

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Sunday, December 20, 2020

Compliance with the DOL's New Proxy Rules May Stump ERISA Fiduciaries

A counter-revolution in ESG Investing?

Author: David Schwartz

On Friday, December 11, the Department of Labor (DOL) issued its final rules on proxy voting by ERISA fiduciaries. As proposed last August 30, the draft rules drew hundreds of responses by the ESG-directed investing community, many of which criticized as unworkable the DOL proposal. The final version of the rules eliminates the need for plan sponsors to weigh the economic vs. non-economic effects before casting their proxy votes. Yet that softer, principles-based approach may itself create compliance problems for ERISA fiduciaries -- and may not even survive the first hundred days of the Biden administration.

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Monday, September 22, 2014

UK's Financial Reporting Council Issues New UK Corporate Governance Code

Better Corporate Governance and Risk Management Through Shareholder Engagement

Author: David Schwartz

The Financial Reporting Council (FRC), UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment, has issued a revised UK Corporate Governance Code.  The changes to the Code are designed to strengthen the focus of companies and investors on the longer term and the sustainability of value creation. One aspect of this refocusing is shareholder engagement.  The revised code seeks to ensure better communication between boards and shareholders by improving disclosure and transparency on proxy voting issues.  

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Wednesday, July 23, 2014

Does Mandatory Shareholder Voting Prevent Bad Acquisitions?

Paper studies how much power shareholders should delegate to the board of directors.

Author: David Schwartz
In the United Kingdom, corporate acquisition deals larger than 25% in relative size are subject to a mandatory shareholder vote, while in most of continental Europe there is no vote, and in Delaware voting is largely discretionary. In a new paper by Marco Becht, Professor of Corporate Governance at the Université libre de Bruxelles; Andrea Polo of the Department of Economics and Business at the Universitat Pompeu Fabra and Barcelona GSE; and Stefano Rossi of the Department of Finance at Purdue University studies the effect shareholder engagement has on preserving shareholder value in these kinds of large-scale acquisition transactions. Their study concludes that mandatory voting makes boards more likely to refrain from overpaying or from proposing deals that are not in the interest of shareholders.
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Sunday, June 15, 2014

Italy’s Mediobanca Equity Sell-off and Privatization Spark Renaissance in Corporate Governance

Author: David Schwartz
The Economist reports that Mediobanca, an Italian investment bank formed in 1946 assist in the reconstruction of Italian industry, has commenced a planned sell-off of $2.2 billion in equity holdings as part of an effort to refocus the firm on its core mission of providing medium-term financing in the Italian sector. Mediobanca’s sales of these shares as part of its unwinding of webs of cross-shareholdings and pacts among big shareholders, as well as the privatization of Fincantieri and Poste Itliane, have released large volumes of shares on to the markets, allowing institutional and other investors to add them to their portfolios. This sudden flow of Italian equities in to the hands of new investors has, it seems, increased participation in corporate governance.
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