by Allen Y Chen, for Austinist, December 28, 2009.

Whole Foods‘ CEO and Board Chairman John Mackey announced that he is voluntarily relinquishing the latter position in a post to his blog on Christmas Eve.

“I have held the Chairman title since Whole Foods Market’s beginning in 1978, but the reality is that today it is merely a title with no authority or responsibilities,” wrote Mackey, who will retain his CEO role. “The authority and responsibilities normally associated with the Chairman position were all shifted over time to John Elstrott, after he became our Lead Director back in January 2001.”

Mackey cited ongoing efforts by “corporate governance activists” to split the CEO/chairman roles as the main reason behind his decision. John Elstrott, who’s served in the Lead Director position since 2001, will take over as Chairman, and his previous position will be retired…(continue reading)

by Peter Cohan, for Daily Finance, December 28, 2009.

One of the many problems that defenders of America’s free market system fail to address is the severe dysfunction at the top of the nation’s big public companies. Cases in point include some of the biggest bankruptcies of the last decade: Lehman Brothers, General Motors, WorldCom, Enron and many more. And at the core of the problems that led to these bankruptcies is a failure of directors to act on behalf of shareholders — at least in part because they have more of an incentive to work for the CEO than for public shareholders.

I was reminded of this again as I read a report in The New York Times on directors who glide from serving on the boards of failed enterprises to those of surviving ones. One example of such a director is Thomas P. Gerrity, who used to be my boss — he was president and co-founder of a technology consulting firm I worked for while studying at MIT. After selling that firm, Gerrity became dean of The Wharton School at the University of Pennsylvania, and currently serves as a professor there…(continue reading)

by ABS-CBN News, December 27, 2009.

MANILA, Philippines – Listed firms that exhibit good corporate governance are valued more by investors, a recent study by the Philippine Stock Exchange (PSE) showed.

The study examined corporate governance and firm value in the Philippines, and found “positive correlation” between the two.

According to the study, which was conducted by corporate governance expert Dr. Stephen Cheung of the Hong Kong Baptist University, investors are most concerned about the equitable treatment of shareholders, disclosure and transparency, as well as board responsibilities.

The study also revealed that investors reward Philippine firms for disclosing more than what is required of them. Listed firms are compelled to inform the exchange details that range from as simple as the names of key officials hired to more complicated ones like plans and execution of mergers and acquisitions. These information are vital in decisions to buy, sell or hold firms’ stocks.

“These findings prove that investors value corporate governance practices as well as affirm the PSE’s direction of promoting good corporate governance practices in listed companies,” noted PSE president and chief executive Francis Lim…(continue reading)

by J. Robert Brown, for The Race to the Bottom, December 28, 2009.

In the debate on corporate governance, its nice to know the facts.  Thus, when someone claims that the preferred system of regulation is one that involves private ordering, its nice to dispel the approach by noting that in practice it doesn’t seem to work.

Davis Polk has produced some intriguing empirical work with respect to the governance practice of companies that undertake IPOs.  The data is for companies with controlling shareholders and without.  The study of all companies (including the controlling ones) looked at 50 IPOs in 2007 and 2008, with the amounts ranging from $136.5 million to $17.86 billion.

These companies, like most large public companies, have staggered boards and combine the positions of CEO/Chairman.  Here are some of the stats…(continue reading)

by Jim Naughton, for The Harvard Law School Forum at Harvard Law School, December 28, 2009.

In our paper, Executive Compensation and the Maturity Structure of Corporate Debt, which was recently accepted for publication in the Journal of Finance, we investigate the role of short-term debt in reducing agency costs of debt arising from executive incentive contracts. Specifically, we examine the effect of the two portfolio sensitivities on the maturity structure of corporate debt. In addition, we analyze the effect of debt maturity on the relation between portfolio sensitivities and bond yields.

We study the causal link between CEO incentive compensation and corporate debt maturity using a sample of 6,825 firm-year observations during the 14-year period from 1992 to 2005. We employ alternative definitions of short-term debt, follow Core and Guay’s (2002) method for estimating option sensitivities, and then apply several empirical methodologies (e.g., pooled OLS and GMM simultaneous equation estimation, fixed-effect regressions, change-invariables regressions) and an alternative new debt issuance sample to analyze the predicted relations…(continue reading)

by Fibre2fashion, December 28, 2009.

Cabela’s Incorporated (NYSE: CAB) announced its Board of Directors amended the Company’s Bylaws to implement a majority vote standard for the election of directors.

Under the new standard, in an uncontested election, each nominee for election to the Board is required to receive a majority of the votes cast in order to be elected to the Board. The new standard replaces the Company’s plurality standard, which mandated that nominees receiving the most votes would be elected regardless of whether those votes constituted a majority of the shares voted at the meeting.

Under a corresponding change to the Company’s Corporate Governance Guidelines, director nominees are required to submit a contingent resignation to the Chairman of the Nominating and Corporate Governance Committee of the Board that will become effective if the director does not receive a majority of the votes cast in an uncontested election and the Board accepts the director’s resignation…(continue reading)

by KSEB Officers’ Association, December 24, 2009.

The National Thermal Power Corporation (NTPC) has been awarded ICSI National Award for Excellence in Corporate Governance 2009, the most prestigious National Award in the field of Corporate Governance in India. The award was presented by Heavy Industries and Public Enterprises Minister Vilashrao Deshmukh at a function held at Bombay Stock Exchange in Mumbai. NTPC Chairman and Managing Director R. S. Sharma received the award on behalf of NTPC. The award was bestowed on NTPC considering the success of its top management in envisioning and contributing to sustainable growth and excellence of the company, its robust image, its focus on triple bottom-line and its proven commitment to all stakeholders’ communities…(continue reading)

Pedoman Pembentukan Komite Audit yang Efektif-KNKCG

Pedoman Umum GCG-KNKCG-060906

Steps-Self Assesment Scorecard Sytem on GCG Practices

FCGISelfassessmentChecklist

A NYTimes Op-Ed considers the evolution of the corporate form from “an opaque shareholder centric model” to a “more transparent multi-stakeholder model”; a change driven by increased regulation over business entities and amplified calls for accountability from stakeholders.

The article notes that corporations are evolving in five key ways:

1. Adopting better governance with stronger shareholder rights, board rules, director accountability and pay for performance.
2. Integrating corporate integrity programs into business strategy and leadership development.
3. Pursuing dialogue with multiple and increasingly vocal stakeholders.
4. Engaging proactively with regulators intent on trans-border cooperation and enforcement (especially regarding anti-corruption, anti-money laundering, antitrust and anti-fraud).
5. Catering to two critical constituents — employees and customers — who have shown greater willingness, and ability, to “vote with their feet.”

The Right Respect commends corporations taking the lead in pushing for a more transparent, stakeholder-centric model.  From employees, creditors, trade unions, customers, supplies, the local community and future generations – a move away from a shareholder model empowers the corporation to make business decisions that properly recognize  the multiple interests and communities that their activity impacts.

To read the full article, click here.

It’s party time, but spare a tot for the independent directors of Sino-Environment.

They are not having a good time. They have gone to court to get orders to hold an EGM to remove the executive directors, and to restrict the EDs’ actions.

If at the EGM the EDs are not removed, the two IDs could find themselves personally  liable for a lot of  legal bills, including the cost of getting the court orders. And looking really dumb. But if they didn’t do anything, they might be sued by some investors or troubled by the authorities.

Already the EDs have complained, “The Independent Directors have apart from legal advice rendered to them by the solicitors to the Company, sought and obtained separate legal advice for themselves in their personal capacities, at the expense of the Company. We have informed them that they should do the right thing by not using Company’s funds to pay their own legal fees.”

“The fees charged by WP to the Company for acting for the IDs from April to date amount to the sum of S$268,946.00.”

Good news! Jim McRitchie has just created a corporate governance blog, so you can now subscribe to his insightful news feed there. You no longer have to keep checking his news page for updates.

If you’re not using a blog reader (like Google Reader), you could instead subscribe via email using feedmyinbox.com.

by Andrew Tuch, for The Harvard Law School Forum at Harvard Law School, December 24, 2009.

The Global Financial Crisis, recently published by Foundation Press, describes the basic causes of the financial crisis; analyzes the regulatory, political and market responses to it; and discusses the merits of various recent reform proposals. Written by Hal S. Scott, the Nomura Professor and Director of the Program on International Financial Systems at Harvard Law School, the book represents perhaps the most learned and succinct account of the financial crisis to date. Its careful focus on the terms of regulation – existing and proposed, U.S. and international – and its clear explanation and analysis of scholarly studies set it apart from many other recent offerings on this topic. The author offers rich, forthright insights and skillfully situates events in their historical and regulatory context. The book will likely hold strong appeal for scholars and policy makers and for others with an interest in rigorous, concise analysis of perplexing policy questions…(continue reading)

by Vimarsh Bajpai, for DARE, December 24, 2009.

I am sure none of us would have forgotten the heated debate on corporate governance and the role of independent directors after the Satyam fiasco last year. The IT company was left in shambles by its founder Ramalinga Raju as a result of an accounting fraud. The role of independent directors on the Satyam board came in under severe criticism from all sides leading the government, industry and accounting bodies to look at the corporate governance norms afresh.

The three musketeers – Kiran Karnik, Deepak Parekh and C. Achuthan – who revived the embattled Satyam, recently shared an award for the Best Business Leader given by a prominent TV channel. The team surely deserved appreciation for picking up the pieces to stitch together the firm that was once the cynosure of all eyes. The trio were brought in to put the Satyam house in order after Raju told the world that he and his associates cooked up accounting books and fraudulently siphoned off money. The company has finally been taken over by Tech Mahindra, the IT arm of Mahindra & Mahindra.

Fresh Guidelines

A set of fresh guidelines on corporate governance have been issued by industry association CII. Prepared by a task force chaired by Naresh Chandra, the report has made recommendations regarding the appointment of independent directors and non-executive directors, their duties, liabilities and remuneration, the separation of the office of a company’s chairman and the CEO, among others…(continue reading)

by Roshan, for My News In, December 23, 2009.

New Delhi: Institute of Cost and Works Accounts of India (ICWAI), an apex body to regulate the profession of cost and management accountancy in India, bagged recognition for itsexcellence and exemplary contributions in the field of corporate governance in India.

The President of India Ms Pratibha Devisingh Patil handed over the “Recognition for Excellence” to Mr. G N Venkataraman, President ICWAI, Mr. Kunal Banerjee, Past President ICWAI, Mr. Chandra Wadhwa, Past President, ICWAI and Mr. J P Singh, Director (Technical), ICWAI at a function in Vigyan Bhawan on Monday 21st December 2009 in the concluding function of the India Corporate Week 2009…(continue reading)

by Jim Naughton, for The Harvard Law School Forum at Harvard Law School, December 23, 2009.

In our recently updated working paper A Reference Point Theory of Mergers and Acquisitions, we propose a “reference point” view of mergers which holds that salient but largely irrelevant reference point stock prices of the target help to explain several aspects of mergers and acquisitions, involving both the pricing and the types and quantities of firms traded.

The standard textbook story on mergers emphasizes synergies. The offer price starts with an estimate of the increased value of the combined entity under the new corporate structure, deriving from a variety of cost reductions. This value gain is then divided between the two entities’ shareholders according to their relative bargaining power. In theory, all of this leads to an objective and specific price for the target’s shares. In practice, however, valuing a company is subjective. A large number of assumptions are needed to justify any particular valuation of the combination. In addition, relative bargaining power may not be fully established. These real-life considerations mean the appropriate target price cannot be set with precision, but established only to be within a broad range…(continue reading)

by Ted Allen, for RiskMetrics Group, December 23, 2009.

“Say on pay” proponents are hopeful that the U.S. House of Representatives’ approval of an annual advisory vote requirement and Goldman Sachs Group’s agreement to hold a shareholder pay vote will prompt more companies to follow suit.

“There will be an increase, as the waiters jump on board to try to get credit for doing it before being ‘forced’ to,” said John Keenan of the American Federation of State, County, and Municipal Employees, an advisory vote proponent. “Goldman did this to try and get away from being ‘public pay enemy number one,’ and this move only hastens the tipping point for other companies.”

Some of these voluntary adoptions likely will occur during the next three months before the proxy statement filing deadlines for companies with spring 2010 meetings. Once again, proponents plan to submit about 100 proposals seeking annual advisory votes on compensation. Those proposals averaged 45.6 percent support at 76 meetings in 2009, up from 41.5 percent in 2008, according to RiskMetrics Group’s proxy season scorecard.

Another pay vote proponent, Tim Smith, a senior vice president with Walden Asset Management, observes that some companies still are reluctant to take action because they don’t know whether the Senate will also approve advisory vote legislation. “It’s hard to predict the trends here, though we obviously feel the Goldman Sachs decision sets a significant precedent and adds pressure, especially on financial companies,” Smith said…(continue reading)

by Scott Hirst, for The Harvard Law School Forum at Harvard Law School, December 23, 2009.

Recently, Vice Chancellor Leo Strine, Jr. hosted two sessions on international aspects of mergers & acquisitions practice in his Mergers and Acquisitions class here at Harvard Law School.

In a presentation entitled Viva Là Difference: Anatomy Of A Cross-Border Deal, David Katz, a partner at Wachtell, Lipton, Rosen & Katz, discussed cross-border mergers and acquisitions, focusing on two French transactions that he’d been involved in, as well as discussing several recent developments relevant to cross-border mergers and acquisitions practice. In particular, he focused on Sanofi’s hostile acquisition of Aventis, and contrasted it with the merger of equals of Alcatel and Lucent. The video of this session is available here.

In the second panel, distinguished practitioners and academics discussed takeover transactions in Europe with the Vice Chancellor…(continue reading)

by Pankaj Doval, for The Times of India, December 22, 2009.

NEW DELHI: In a bid to strengthen corporate governance across India Inc, the government on Monday came out with a set of voluntary guidelines for the industry, making significant recommendations like separation of offices of chairman and CEO and a cap of seven on the number of directorships an individual can accept. Other important recommendations are rotation of audit firms every five years and an annual review of the effectiveness of the company’s internal controls, something considered crucial to prevent recurrence of Satyam-like fraud.

Corporate affairs minister Salman Khurshid said corporate governance norms required to be strengthened. “The existing set of corporate governance framework needs to be taken to a higher level to ensure greater level of accountability to shareholders,” the minister said at the concluding event of ‘India Corporate Week’ where President Pratibha Patil, who was the chief guest, asked companies to work for the development of rural economy…(continue reading)

by Steven Rosenblum, for The Harvard Law School Forum at Harvard Law School, December 22, 2009.

Never before in the history of American business has the role of the corporate director been more important or more challenging. Boards today must navigate a tremendously difficult business environment featuring intense competition from foreign manufacturers, weak consumer confidence, growing unemployment, volatility in financial and commodity markets and a host of other complex challenges. At the same time, directors are currently undergoing intense public and political scrutiny of their basic role and functioning at the helm of public companies. As we begin to emerge from the worst recession since the Great Depression, the search for root causes of the economic crisis and second-guessing of corporate decisions has generated a multitude of corporate governance reform proposals, legislative initiatives and rule-making that seek to shift decision-making authority from boards to institutional shareholders and shareholder activists. Despite the stated intention of these initiatives, this shift will impede the ability of boards to resist pressures for short-term gain and tie their hands at a time when the need for effective board leadership is particularly acute…(continue reading)

by IR Global Rankings, December 22, 2009.

On November 24, SEC approved a few changes to the corporate governance requirements for companies listed in the NYSE, including those with ADR programs, laid down by Section 303A of the NYSE Listed Company Manual.

All the changes come into force on January 1, 2010, with some of them important and others meant to eliminate red tape.

The main changes are:

• Allow greater use of the Company’s website as a communication tool (instead a the proxy statement or 20F annual report) to disclose, among others, the name of officer elected as chairman of the Board of Directors and the procedure adopted so that shareholders can contact him or other Board members;
• Listed companies will no longer be required to mention in their proxy statement or annual report that printed copies of the documents relating to corporate governance practices available on the website will be provided to any shareholder upon request;
• Companies no longer have to mention in their annual report that the CEO has submitted the declaration that the company has complied with all the corporate governance obligations of the NYSE and that the company sent the declarations from the CEO and CFO required by SEC;…(continue reading)

by Cornell Wright and Leslie McCallum, for Torys, December 22, 2009.

As lawyers who are fans of MU should know,when MU (when it was a listed company) became the target of a highly leveraged buy-out offer by the Glazers, the directors sought legal advice on their duties towards shareholders and MU.

They were advised that directors owe a duty to the company and not its individual shareholders. In many instances, the distinction is not significant, since what is good for the corporation will also benefit its shareholders. Maximising the return to shareholders (or creating “shareholder value”), in many cases, does not conflict with the interests of the company.

But there may be situations where the interests of the company and shareholders may conflict.

The interests of shareholders may lie in realizing a short-term gain on their investment, something which the directors may decide is not the in the interest of the company in the long term. For example, the debts that MU incurred in going private, might have prevented the club from buying the players MU needed to win trophies. It didn’t happen at MU; despite its debts MU has the wagga (dosh) to buy players. But the example of Liverpool FC shows that this fear was reasonable and legitimate.

The interests of majority shareholders may not also be the same as the interests of the company. Controlling shareholders may want the corporation to take certain action that may be in its interest, but not necessarily in the best interests of the corporation. Hedge funds, with a controlling stake, may want the company to pay a high dividend because they (the controlling shareholders) want to maximise the returns to their investors. But the company may need the cash to expand its production lines.

The correct answers to these kinds of issues depend very much on the facts of each situation: something the independent directors of Sin0-Environment are finding out the hard way.