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Lender Directed Voting

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

A counter-revolution in ESG Investing? 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 the proposal as unworkable. The final version of the rules […]

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

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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Does Mandatory Shareholder Voting Prevent Bad Acquisitions?

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

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.

In the hands of new investors, these equities that were previously locked up in voting trusts or held by the government seem to have fueled a renewed interest in participation in the governance of Italian firms.

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Are Institutional Investors Voting Proxies with the Correct Mindset?

The federal government is not now and has never been in the business of telling you how you should vote your proxies. But it seems that through regulatory creep, the government may have indirectly given the power to tell investors how to vote their proxies to someone else entirely. Regulating disclosures and mechanics by which we vote proxies is plainly within the scope of the Securities and Exchange Commission’s mission.

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With Power Comes Responsibility. Institutional Investors’ Role In Corporate Governance.

Over the past sixty years, as more and more people in the US have begun to participate in the capital markets through retirement plans, mutual funds, ETFs and other pooled investment vehicles, institutional investors have grown from bit players in the markets, owning about 5% of US equities prior to 1945, to being major players today, owning greater than 67% of US equities. This growth in the proportion of assets managed by institutional investors has also been accompanied by a dramatic growth over the same period in the market capitalization of US listed companies.

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Should We Be Alarmed About Empty Voting?

Should we be alarmed about empty voting? According to a recent article, “A Call to Arms on Empty Voting!” by Andrew MacDougall, Robert M. Yalden and Jeremy Fraiberg, yes, we should indeed. Using a proxy battle over a proposal by Canadian company, TELUS to eliminate its dual class share structure earlier this year as an example, MacGougall, Yalden, and Fraiberg assert that as “the number of public M&A transactions increases, and if U.S. hedge funds continue to look for opportunities in Canada to engage in strategic gamesmanship, concerns about empty voting will also increase.”

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