News
Senate Democrats Call for Executive Action to Stop Corporate Inversions
In a letter to President Obama, three Senate Democrats have urged the President to use executive action to end a growing trend in corporate inversions motivated by tax considerations. Senate Assistant Majority Leader Dick Durban (D-IL), Senate Assistant Majority Leader, and Senate Banking Committee members, Jack Reed (D-RI) and Elizabeth Warren (D-MA), called him to use necessary executive authority to end tax breaks for companies that enter into mergers that move their headquarters overseas to avoid paying U.S. taxes.
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.
Should Pension Funds Police Corporate Governance?
SEC Commissioner Luis A. Aguilar has long been a champion of empowering shareholders to enforce sound corporate governance. In a July 1, 2014 address before a meeting of the Latinos on Fast Track (LOFT) Investors Forum, Commissioner Aguilar once again addressed the role pension plans and other institutional investors play in ensuring that the companies they invest in make sound governance decisions.
BIS Sees the Financial System at a Crossroads
In their 84th Annual Report, the Bank for International Settlements examines the current state of global financial affairs and highlights some trends it sees emerging in the financial framework. While noting that the overall financial system has has gained some strength since the crisis, banks remain in a rebuilding phase, concentrating their business models towards traditional banking.
Fed Attention Turns to Wholesale Financing Activities
In a November 22, 2013 address before the Americans for Financial Reform and Economic Policy Institute Conference, Federal Reserve Board Governor Daniel K. Tarullo outlined a potential regulatory initiative to limit short-term wholesale funding risks.
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.
Blackrock Pushes Back on FSOC Concerns About Securities Lending
In a May 29, 2014 white paper, Blackrock responded strongly to the Financial Stability Oversight Council’s (FSOC) 2014 Annual Report which raised concerns about asset managers and securities lending. In particular, Blackrock’s paper takes issue with FSOC’s assertion that indemnity provided to lending clients by asset managers acting as securities lending agents created extra risk because asset managers do not face the same capital and liquidity requirements as their bank counterparts.
New York Fed Publishes A Primer on the GCF Repo® Service
The Staff of the Federal Reserve Bank of New York has published a “A Primer on the GCF Repo® Service,” the overall goal of which is to to quantify to what extent dealers pursue various strategies trading GCF Repo.
ICGN Proposes Revised Corporate Governance Principles
On March 28, 2014, the International Corporate Governance Network (ICGN), an investor-led organization of governance professionals interested in international corporate governance practices, published its a proposed draft revision to its Global Governance Principles.
FSOC’s 2014 Annual Report Addresses Some Securities Lending and Repo Risks
The US Financial Stability Oversight Council has published its 2014 Annual Report which highlights, among other things, the activities of the Council, significant financial market and regulatory developments, an assessment of those developments on the stability of the financial system, and potential emerging threats to the financial stability of the United States.