(Here is my final term paper for a legal studies course in ethics and morality – yes, it’s long, I know.  I figured I’d let you have it, though.  Comment if you have questions about the sources/original arguments.  The paper assumes some familiarity with the concepts.  Enjoy)

Onchocerciasis – more commonly known as river blindness – affected over 18 million people in South America, Africa, and the Middle East in the 1980s (World Health Organization).  The disease is spread by the bite of the black fly, an insect that tends to gather along riverbanks in the developing world.  The flies host a microscopic worm in their bodies, which they pass onto humans through their bite.  These worms mature and grow inside the human body before making their way through the host body until they reach the skin, where they will be ingested once again by black flies (WHO).

As these worms grow inside the body, the people they are infecting begin to experience excruciating itching and cannot help tearing at the unseen infection.  Eventually, their skin will lose its pigmentation, covering their bodies with spots and blemishes.  Soon after this occurs, the worms will begin to grow again, triggering a reaction from the immune system.  But the body cannot differentiate these “microfilaria” from much of the rest of its internal tissue, and so the immune system overreacts and begins defending the body from itself.  The focus of these attacks tends to be on the area in and around their eyes.  Evidently, the tissue located here is most easily confused for the microfilaria, and the immune system destroys it.  This leads to irreparable blindness (WHO).

Thankfully, river blindness is preventable and curable – as long as the treatment is received prior to the onset of blindness, all the ill effects can be erased (WHO).  But there was a problem: how could those being affected pay for the drugs needed to combat the disease?

The treatment was expensive to manufacture, and there wasn’t a pharmaceutical company willing to incur the profit loss that would come from producing it; no feasible market equals production costs but no offsetting sales.  And so, river blindness would continue to run rampant.

This all changed in 1987, when Merck & Company – one of the largest pharmaceutical companies in the world – announced that it would begin producing the necessary drugs to cure the disease and it would distribute them for free at the request of any country (Merck). By the early 2000s, over 200 million people at risk for the disease had either been spared or cured and projections now target 2020 for the complete eradication of the disease (WHO).

The actions of Merck & Company – actions of pure social conscience – have benefited millions, offering hope to those that had lost it, new life to those that had theirs shattered.  It literally gave sight to the blind.  And it did so without concern for profits or earnings.  Many felt this an admirable thing, the “right” thing to do in the situation.

But according to Milton Friedman’s argument for shareholder primacy, detailed in his 1970 article “The Social Responsibility of a Business is to Increase Its Profits,” Merck had acted irresponsibly by giving away the drugs and taking a loss.  It had violated the terms of its existence; for a corporation – according to Friedman – is not a social entity and therefore has no responsibility to increase social welfare.  Rather, corporations have “one and only one social responsibility [...] to use its resources and engage in activities designed to increase its profits” (Friedman).

Whether this is exactly precise is debatable – yes, a corporation is intended to make a profit, but is its sole objective to maximize profit, thereby rendering any social act as a violation of its existence?  Viewing this argument through a moral looking glass raises many objections.  By examining Friedman’s argument against a corporation acting socially responsible through both business and moral frameworks and then comparing their merits with those of Friedman’s own argument, it can be reasonably ascertained that the actions Merck & Company took concerning river blindness were morally justifiable, and ultimately correct.

Friedman argues that a corporation’s sole purpose – as an extension of its owners, the stockholders – is to maximize profits for those stockholders.  To do anything less, he argues, is to essentially steal from them.  He targets his argument at corporate executives, who, for all intents and purposes, are the decision makers placed in that position in order to increase the value of the shareholders.  Since those owners technically employ the executive, it is his duty to then act as an agent of their interests (Friedman).

This is crucial to Friedman’s theory – since executives are not the principal actors, but merely agents of the owners, they have no right to perform any act which, at the time of performing, they do not believe will maximize the wealth of those that they represent.  With this in mind, Friedman’s theory charges Dr. Roy Vagelos (then Merck’s CEO) for effectively stealing from the owners of Merck & Company by adversely affecting profits due to his decision to provide the drugs free of charge.  According to Friedman, Vagelos’ decision as an agent of the shareholders was the equivalent of either stealing from them or imposing a tax on their decision to place him in charge.  And since this does not comply with the notion of maximizing profits for the stockholder, Merck acted incorrectly and unethically.

Friedman also makes the argument that it is ridiculous to even consider the notion that a corporation should act responsibly.  After all, responsibility is strictly concerned with people, and while a corporation is an “artificial” person, it has no “artificial” responsibility.  Even in vaguest of conceptions, corporations share none of the legitimate responsibilities that a person does – it can only be concerned with what it was created for: the pursuit of profit.

While this argument does not necessarily apply to the decision that Merck made, it is useful in analyzing the initial demand or outcry that a corporation should even step to the task of providing drugs at a loss.  After all, this is not the “responsibility” of a corporation, as business, in general, has no responsibilities.  It’s futile to even consider the notion.  Therefore, Friedman’s argument criticizes Merck for even initially contemplating the decision that was eventually made.

Friedman’s argument can be challenged in a variety of ways.  In evaluating Merck’s decision strictly from a business perspective, one can turn to the American Law Institute to refute Friedman’s initial argument that a corporation’s sole reason for existence is to maximize profits.  According to the institute, a corporation “should have as its objectives the conduct of business activities with a view to enhancing corporate profit and shareholder gain” (American Law Institute).  The law, therefore, does not coincide with Friedman’s view that a corporation should only be concerned with maximizing profits and shareholder wealth, but rather simply enhancing them.  This is a subtle – but distinct – difference.  To argue that performing a socially responsible act in lieu of the steadfast, dogged pursuit of profits is wrong is legitimate only to the extent that such a pursuit is the be-all-end-all reason for existence.  The law, however, does not make this point.  Yes, a corporation should act in a manner that will enhance – that is, increase either wealth or equity – but not necessarily maximize.  As such, performing a socially responsible act such as Merck is not unethical, nor incorrect, as long as that decision stayed within the realm of enhancing shareholder gain.  Hence, Merck’s decision to donate the drugs is ethical and within the realms of corporate responsibility as defined by the American Law Institute.

Friedman’s first argument can also be contended in the realm of business by using Edward Freeman’s Stakeholder Theory.  According to Freeman, corporations are not simply responsible to act in the best interest of its shareholders, but also its stakeholders.  These stakeholders are defined as “groups and individuals who benefit from or are harmed by, and whose rights are violated or respected by corporate actions” (Freeman).  With this in mind, an evaluation of Friedman’s argument demonstrates that the single-minded goal of strictly pursuing profits violates the relationship a corporation has with the rest of its stakeholders (of which shareholders are included).  By neglecting doing something socially responsible, a corporation may be violating the rights of its stakeholders.  Therefore, performing a socially responsible act such as Merck’s decision to give away the needed drugs is perfectly legitimate, insofar as that action does not neglect the stakeholders.  In the case of Merck, no stakeholder outside of the shareholder could argue against its decision to offer aid where aid was needed.  Its employees would not willingly allow people to perish or be disfigured, the suppliers of its research in which its drugs are based would agree with the decision to use the research to its fullest extent, its customers would support the decision – no reasonable and rational person would deny the same treatment if they happened to be in a similar situation – and the communities that Merck is integral to would understand and willingly accept its decision.

Finally, at a moral level, Friedman’s argument would fail Kant’s Categorical Imperative.  Kant’s moral framework operates under the notion that “an action is morally right for a person in a certain situation if, and only if, the person’s reason for carrying out the action is a reason that he or she would be willing to have every person act on, in any similar situation” (Velasquez).  Under this concept of moral law, Friedman’s argument against social responsibility is of no value, as in a situation such as the one faced by those infected by river blindness, there is no reasonable stockholder or executive that would willingly denounce Merck’s action.  Rather, they would accept the drugs, and being as it is, they would respect that action if it were performed in each and every situation.  If, on the other hand, they were denied the treatment, they could not reasonably extrapolate such an action and accept it in all similar situations.

Kant’s second formulation of the Categorical Imperative also poses a problem for Friedman.  “An action is morally right for a person if, and only if, in performing the action the person does not use others merely as a means for advancing his own interests, but also both respects and develops their capacity to choose freely for themselves” (Velasquez).  This is much more difficult an argument for Friedman to circumvent, as the notion of solely pursuing profits inherently violates this maxim, as people are never the ends in such a situation: they are always the means.  And in applying this argument specifically to the Merck case, Shareholder Primacy again violates the principle.  By deliberately refusing help when they themselves can offer it, Merck would have limited the capacity for the sick individuals to freely choose for themselves, as a debilitating illness inherently limits this.  Therefore, Merck had to provide the drugs – anything less would have violated Kant’s Categorical Imperative.

As for Friedman’s contention that a corporation has no responsibilities, as it is not a person, it is an argument based solely in semantics, with no relevant facts to strengthen the claim.  In fact, a corporation is defined as “a body formed and [...] to act as a single person although constituted by one or more persons” (Merriam-Webster).  Regardless, a corporation is merely the name given to a collective of persons operating with the same pursuits – it is still a reflection of those persons, and therefore retains all of the responsibilities those particular individuals have in regards to their pursuit of business.  Being so, it is difficult to give weight to Friedman’s initial argument concerning the actual responsibilities of a corporation.

Now, Friedman’s argument addresses each of these contentions in a particular way, framing the issue in order to negate their points.  Friedman would contend with the American Law Institute’s remarks that a corporation is not necessarily meant to maximize profits, but rather enhance them, is merely another example of semantics in terminology.  Moreover, the American Law Institute’s objectives are not binding, and therefore, maximizing profits is technically enhancing them.  And since no investor would reasonably purchase shares in a company that was not going to maximize their own value, the very act of investing is an indication that the owners of the company are seeking optimized gains.

This is not necessarily true – how is it that anyone can truly ascertain why a shareholder invests?  Yes, it may be reasonable that it is strictly for financial gain, but again, this can never be certain.  With that said, it still remains the basis for the original founders of the corporation to set its goals – therefore, if they did not originally state that their objective through incorporating was to maximize profits, no investor can argue with an act that is deemed socially responsible that does not optimize their gains.  After all, they freely and willing chose to invest in the company, and hence have no reason to feel “cheated” or “robbed” if said company chooses to act in a manner that doesn’t necessarily pursue only revenue.

In response to Freeman’s Stakeholder Theory, Friedman’s Shareholder Primacy simply asks: whose money is it?  By all accounts, executives are in charge of what the shareholders technically own.  As such, they answer to those owners, and those owners alone.  There are no stakeholders, as the stake they have in the company is moot: all additional stakes are contingent solely upon the stake held by the shareholders.

With that said, since a corporation is a representation of a group of people, should it not actually act in such a way that people would?  A person that strictly lives his life according to what is best for him – disregarding those he depends upon and those that depend on him – lives a shallow life indeed.  At whatever heights he reaches, he could have always climbed higher by being sensitive to those around him, being supportive and humanistic, so that his relationships achieve synergy.  If that occurs, he will be better in the end than otherwise.  Under this notion, Stakeholder Theory operates under the notion that profits are strictly the means to support and develop those relationships, whereas in Shareholder Primacy, the profits are the ends themselves.

Finally, Freidman would find fault with Kant’s argument, citing the fact that anyone in a position to be stolen from would find that action unjust, each and every time.  Therefore, the reverse argument is true: executives must act in a way that maximizes shareholder value – anything else would effectively be stealing, and this act can never be condoned.  Therefore, according to Kant, by acting in a socially responsible manner that influences the bottom line, corporations are being unethical.

Kant would have struggled to defend this line of reasoning due to the Categorical Imperatives difficulty in accounting for sly universalizers – those that frame acts within Kant’s system to strictly benefit themselves and their thinking.  However, no reasonable person could compare the two concurrent acts – to cure millions or to take some money from investors – and conclude that the latter bests the former.  Even so, Kant’s argument is not intended to provide guidance in the case of conflicting rights, but rather lay the framework for acting morally correct.  That being said, it seems unethical to claim equality or more for the two competing acts; it is undoubtedly clear that drastically saving millions of lives outweighs the cost of a few cents or dollars on a stock trade.

In the end, the arguments from existing theories are ample enough to cast some doubt on Friedman’s reasoning.  However, his argument still appears to hold some merit, especially when one strictly concentrates on the economics of the argument.  It cannot be determined definitively whether acting purely for profits or acting for the good of stakeholders ensures the continued existence of a corporation more efficiently, and the laws concerning the objectives of a corporation are flexible enough to allow Shareholder Primacy.  So is Friedman’s argument ultimately correct?

It is without a doubt that Friedman’s argument is reasonable, but if, and only if, it is the pure choice of the corporation.  It is not, however, something set in stone, something that corporations must do, as he contends.  The aforementioned arguments are enough to conclude as much.  But the issue can be looked at yet another way in order to surmise whether or not Friedman’s principle is a rule rather than an option.

First and foremost, when did economics become the basis for existence?  Human nature is intrinsically concerned with a variety of things – economic security being just one of them.  And since corporations are, for all intents and purposes, reflections of those that run and own them, should they not have the ability to exercise those other needs?  Altruism has a place in society and business – and if a business operates responsibly solely to maximize its profits (something Friedman accepts within his argument, though he condemns it as “approaching fraud”), so be it (Friedman).  But it must have the freedom to choose to act so either way.  It is a fundamental aspect of humanity to serve humanity, and if that entails decreasing the bottom line, that is perfectly acceptable.  Whether or not a corporation does so is irrelevant, but it must have that option.  Friedman’s argument does not allow that to happen.

Shareholder Primacy also ignores the financial implications a socially responsible act may have.  Sure, Friedman would cite any socially responsible act taken to increase profits as being within his proposed framework, but that argument resides in the motivation for acting.  If profits were the main goal of the act, then Friedman would agree with it.  But what if any profits – equal or not to the profits of inaction – were simply the result of acting socially responsible, even if they were not the intention?  In that case, Friedman argues that the act was unethical and unacceptable.

But this seems to be a narrow view.  Since it is difficult to measure the public relations boost that comes from performing a social act, it can be reasonable to assume that any corporation acting responsibly is doing so because it believes that action is the right action, rather than believing profits will be the result.  If that is the case, Shareholder Primacy rejects almost all socially responsible acts: Merck’s actions (which seem to have benefitted them financially in the long run) would be unacceptable.  This seems peculiar.  And since it cannot be truly known whether or not corporate responsibility has long-term financial implications, should such acts not be done, all things being equal (Vogel)?

In the end, does it not seem unreasonable that the sole purpose of business is to earn profit?  It seems that this is incorrect.  Rather, the purpose of business is to provide products or services to benefit people, with profits being the result of providing said products efficiently.  If a company makes profits in excess to those needed to continue to provide and develop its services, then this is perfectly fine.  But that is auxiliary to its actual purpose.  Yes, it is the means to provide those services, but the services themselves are not intended to maximize profits.  This appears to be a trivial distinction, but it is not.  If a corporation was intended to do the latter, then Friedman’s argument is correct: social responsibility is only acceptable in situations that performing such acts optimizes earnings.  But if a corporation’s intent is the former, then performing such acts is acceptable and even encouraged, so long as being socially responsible allows them to provide the best services and products to its customers.

If Friedman’s argument were to be trusted, then Merck & Company would not have engaged in the operations that have nearly eradicated river blindness in the world.  Over 200 million people would be in dire positions today.  But they aren’t, owing to Merck recognizing it was in a position to help and acting with the best interests of society in mind.  Now no company should be forced to do what Merck did willingly, but to claim that corporations should do nothing but maximize profits is ridiculous.  It doesn’t make infallible business sense, and it certainly will lead business into moral grey areas.  And when it’s all said and done, isn’t that the more relevant factor?  Conducting operations that are unethical and immoral simply because there is the belief that pursuit of profit is the only basis for business ignores countless other factors.  It’s similar to saying that a person’s only true purpose is to ensure the survival of the human race, so he should ignore all other social norms in order to procreate as much as possible.  After all, that is the true, biological purpose of a person.  But that definition is too narrow, as is Friedman’s definition of a corporation.  Sure, a person can live solely to breed, if he so chooses.  But he must have the choice to act in all other matters.  So must business.

Milton Friedman’s Shareholder Theory does not offer this choice – it does not allow for Merck & Company to take it upon itself to rid the world of river blindness.  And by limiting that choice, Friedman ignores the rules of the free market capitalism he so loudly trumpets: if there is such regulation that a company is acting irresponsibly by not single-mindedly pursuing profits, is it not still regulation?  Friedman’s argument doesn’t acknowledge this fact, and in doing so fails to offer a reasonable argument.  Whether or not a business chooses to act responsibly is irrelevant: it is its choice and its choice alone.  Friedman would limit this choice, and no matter the argument, it can be certain that to do so is to act unethically and incorrectly.

by Eduardo Gallardo, for The Harvard Law School Forum at Harvard Law School, December 21, 2009.

At an open meeting held on December 16, 2009, the Securities and Exchange Commission (”SEC”) approved a set of proposed rules to enhance the information provided to shareholders in company proxy statements regarding a number of risk oversight, compensation, board leadership and composition and other corporate governance matters.  The SEC approved the final rules by a 4-to-1 vote, with Commissioner Kathleen Casey dissenting.  The SEC released the text of the final rules on the same date they were adopted, with the 129 page adopting release available here.

The new rules have an effective date of February 28, 2010, except that a rule change on how equity awards are reported in the Summary Compensation Table applies to all companies with fiscal years ending after December 20, 2009.  Because all of the rule changes other than the equity reporting rule call for enhanced disclosures, companies presumably could, but would not be required to, voluntarily comply with all of the new rules even if they file their definitive proxy statements before February 28, 2010…(continue reading)

by Satvik Varma, for The Financial Express, December 21, 2009.

As the corporate affairs ministry celebrates India Corporate Week, one’s attention is again drawn to corporate governance. Broadly defined, this is the standard adopted by corporations to regulate and manage internal processes. Although not a new function of society, corporate governance, as a measure of corporate functioning, has gained significant importance over the past decade. Corporations have become complex beings as have their systems of governance.

Simultaneously, academics and lawmakers have undertaken substantial research to develop ways to quantify and devise objective criterion for evaluating corporate governance. The objective of all research has been to identify ways of achieving a system of ‘better’ governance.

Historically, two models of corporate governance exist: the shareholders model and the stakeholders model. The first caters only to shareholders’ needs and individual interests. This is often critiqued when there exists a shareholder that directs decision-making in its own favour. By contrast, the stakeholder model is broader. It’s structured to protect interests of employees, creditors, customers and all other persons that have a stake in a corporation, aside from just the shareholders…(continue reading)

by Francis H. Byrd, for The Harvard Law School Forum at Harvard Law School, December 20, 2009.

Over the course of several forums on governance, director leadership and engaging with shareholders, a number of board advisors have intoned mightily against the notion of having corporate directors involved in a company’s shareholder engagement efforts. The foremost rationale offered for holding directors apart from discussions with investors is that Regulation FD creates insurmountable problems for companies whose directors could potentially be involved in engagement and outreach to shareholders. While there are legitimate concerns about the shareholder engagement process for company officers and directors, fear of Regulation FD need not be among them – if due diligence and care are properly undertaken.

To be clear, Regulation FD requirement can create difficulties for companies in communicating with investors, but engagement with shareholders can be much different than the relationships companies maintain with equity and credit analysts. Whether you need to have your board members involved depends on the answer to four questions: 1) who is the shareholder making the request, 2) what are the circumstances surrounding the engagement request (or need), 3) a determination as to whether director involvement will add value; and 4) which director or directors need to be involved…(continue reading)

Shareholders of Cossette Inc. meeting in Quebec City on Friday voted to approve a friendly takeover bid by the U.S.-based private equity firm Mill Road Capital L.P.

The deal means Mill Road will privatize the Quebec advertising company, after 10 years as a publicly traded company.

Cossette 3-month chart

Mill Road is paying $8.10 per share for Cossette in a deal that values the company at about $135.4 million.

Senior executives, including CEO Claude Lessard, said they eventually will step aside once the sale is complete to make way for a younger management team, said Marcel Barthe, vice-president of corporate strategy.

“In our business of communication,” he said, “it needs innovation, it needs new trends,” Barthe said in an interview after the meeting.

Cossette shareholders voted 99.9 per cent in favour of the bid. The deal to privatize Cossette is expected to close on Tuesday.

Cossette was known for its ad campaign with talking beavers Frank and Gordon for Bell Canada during the 2006 Winter Olympics in Turin, Italy. The furry creatures were retired last year by Bell.

The firm has more than 1,400 employees with offices across Canada and around the world with customers including General Mills of Canada, Bell, Coca-Cola Ltd., Hydro-Québec and Sony Ericsson and Virgin Travel and Virgin Trains.

With files from The Canadian Press

Nashville Business CalendarBCE hikes dividend by 7%

One on the best ways to protect your business is to have watertight legal business agreements in place and an example of one of these is a shareholder agreement.

Shareholder agreements record who and how many shareholders there are in the company. They may require departing employees/shareholders to sell their shares to remaining employee/shareholders so that the shares remain in-house. They may also specify what happens to the shares if a shareholder dies or becomes disabled and shareholder agreements may also give shareholders an option to force the company to purchase their shares in certain situations.

A shareholder agreement can be used for large and small companies because even small businesses have to operate under the same company rules as the larger ones. Using a shareholders agreement allows you the best of both worlds.

But beware: It can be expensive obtaining shareholder agreements through the offices of a solicitor. Most solicitors’ fees are calculated by the minute and they also bill for their travel time and parking charges.

The best place to obtain legal forms, for a fraction of the cost, is from Net Lawman – an online company with a dedicated team of legal professionals. All of Net Lawman’s legal documents are in English, easy to read and come with explanatory notes.

So go to www.scotlawman.co.uk for shareholder agreements and shareholder templates.

Kraft’s bid to buyout Cadbury may seem remarkable, but it’s not surprising.  Kraft, Cadbury, Mars, Nestlé and others have been at this for ages.  Here’s a map that shows just how global the reach of these companies is and how long they have been working to attain this reach.  Click on the detail for a view of the full map.

View high resolution image HERE.

(CFD.net.au – Contract for Difference, Share, Forex, ETFs, Commodities Traders) –

The surfwear retailer said the group was reaffirming prior guidance.

“Of five per cent net profit growth in constant currency terms for the 2009/10 financial year, when excluding the prior years impairment charge, or 10 per cent when including the impairment charge,” Billabong said.

Billabong said earlier guidance of five per cent net profit guidance in constant currency terms translated to flat net profit growth on currency assumptions in August of an Australian/US dollar exchange rate of 83 cents and an Australian dollar/Euro exchange rate of 58 cents.

Given currency volatility and higher spot rates reported net profit was now likely to be don on the prior year by about six per cent when excluding the prior year’s impairment charge, Billabong told shareholders at the annual general meeting.

Each one cent movement in the average monthly Australian/US dollar exchange rate for the remaining eight months of the year above or below 92 cents would move reported net profit by about $500,000, the company said.

For each one cent movement in the average monthly Australian dollar/Euro exchange rate for the rest of the year above or below 61 cents will move the profit by about $1 million.

Source: Billabong reiterates guidance | Business Breaking News | News.com.au

(CFD.net.au – Contract for Difference, Share, Forex, ETFs, Commodities Traders) –

The listed property information provider also said that while it would not give any earnings guidance for 2009/10, it expected to gain market share as the economic recovery gathered pace.

“The company continues as a market leader and as such will be in a position to gain market share as the general market improves and real estate activity increases in line with the market,” chairman Ian Fraser told shareholders at the company’s annual general meeting today.

Mr Fraser said RP Data saw several positive signs that market conditions are improving.

“Property sales transaction volumes are increasing, home price affordability remains at historic lows, housing demand is high with a growing population and an undersupply of new housing, (and) improving consumer and business confidence,” he said.

Chief executive Graham Mirabito said the encouraging outlook would drive demand for RP Data services.

He noted also that Australian banks are in good shape and continue to provide funding to the Property market, albeit cautiously.

In August, RP Data reported a 45 per cent fall in net profit for 2008/09 to $5.58 million, after revenue increased five per cent to $49.09 million.

RP Data shares were untraded at 1250 AEDT, after last trading at 89 cents.

Source: RP Data sees property sales rise | Business Breaking News | News.com.au

by Javier Canosa, for Global Corporate Governance News, December 11, 2009.

Introduction

The concept of “Corporate Governance” as such, came about in Argentina in 2000 (just before the massive devaluation of the Argentine peso and crisis of its stock market) with the enactment of decree No 677/2001 (the “Transparency Decree”). Before, the concept of “Corporate Governance” had not been envisaged in Argentine legislation.

The idea of the Transparency Decree was to strengthen the argentine stock market (and boost confidence in such market) by setting forth certain rules (corporate governance rules) that would provide more security to investors.

Such Transparency Decree provided for a “Transparency Regime in the Public Offering of Securities”. The purpose of this Transparency Decree was to adjust the current local legislation to the main international rules on corporate governance for the improvement of the protection of investors. Unfortunately, despite the Transparency Decree, Argentine faced a large devaluation of its currency and the Argentine stock market crashed in December 2001…(continue reading)

by Nick Rees on December 8, 2009

Fuad El-Hibri

The Office of the Biomedical Advanced Research and Development Authority has advised Emergent BioSolutions that while BARDA’s Request for Proposal has been canceled, Emergent is encouraged to submit a proposal for the office’s Broad Agency Announcement.

BARDA canceled the RFP for the procurement for rPA vaccines after a technical evaluation panel determined that no proposals submitted by vaccine developers could meet the ProjectBioShield statutory requirement of having the product ready for licensure within eight years.

An amendment issued by BARDA to BAA 09-34 at the same time, however, enable companies to submit proposals to obtain development funding for rPA vaccine candidates, which Emergent has been strongly encouraged to do by BARDA.

Emergent plans to submit its proposal to the BAA by the end of this year, in front of the due date of February 1, 2010 for the proposals.

This announcement also does not impact Emergent’s $400 million procurement with the Centers for Disease Control and Prevention to manufacture and deliver 14.5 million doses of BioThrax for the Strategic National Stockpile.

“With this action, BioThrax remains a critical and long-term countermeasure for the US government,” Fuad El-Hibri, chairman and chief executive officer of Emergent BioSolutions, said. “In addition, based upon encouragement by the USG, we believe our rPA vaccine is well-positioned to obtain a development contract under this BAA. Our anthrax franchise solidifies Emergent as a leader in the development and supply of anthrax medical countermeasures.”

BioThrax is currently being delivered under this contract with an expected completion of deliveries by September 2011. BioThrax is the only FDA licensed vaccine for the prevention of anthrax diseases.

“We believe that BioThrax will remain a premier product based on its recent enhancements, such as four-year dating, a reduced vaccination schedule and intramuscular route of administration, together with the potential for a further reduction in the vaccination schedule to a 3-dose primary series with a 3-year boost,” Daniel J.Abdun-Nabi, president and chief operating officer of Emergent BioSolutions, said. “BioThrax continues to be the product of choice for the USG and other customers seeking to address the anthrax threat.”

BARDA and Emergent are also in separate talks for a contract that would see BARDAA fund scale-up and related activities to obtain FDA licensure for large-scale production of BioThrax at Emergent’s new 50,000-square-foot Lansing, Mich., manufacturing facility.

“I am proud that Lansing remains home to America’s first line of defense against what experts say is the single biggest bioterror threat, anthrax,” U.S. Rep. Mike Rogers, MI-08, said. “The good news about the cancellation of this particular proposal is HHS recommitted itself to the Lansing-made anthrax vaccine and has opened a new proposal for a next-generation anthrax vaccine for which Emergent has indicated it will compete.

“Rest assured, I will continue working to strengthen our nation’s existing bioterror preparedness measures and protect national security jobs in Lansing.”

Written by Staff and Wire Reports
Tuesday, 08 December 2009 01:28

Key news developments will affect shares of these two companies who help meet the critical needs of the United States and its allies by developing and commercializing medical countermeasures against biological and chemical weapons.

The two companies which waited until late after hours on Monday to announce that the Biomedical Research and Development Authority had informed them of some negative news.

After hours on Monday, PharmAthene, Inc. (NYSE Amex: PIP) a biodefense company specializing in the development and commercialization of medical countermeasures against chemical and biological threats, announced that the Department of Health and Human Services Biomedical Research and Development Authority (BARDA) has canceled its request for proposal (RFP) for Recombinant Protective Antigen Anthrax Vaccine for the Strategic National Stockpile (RFP BARDA 08-15).

PharmAthene was informed of BARDA’s decision during a meeting late Monday afternoon with BARDA representatives. BARDA issued a press release after the close of the securities markets announcing that it will cancel RFP BARDA 08-15 because it did not believe vaccine developers submitting proposals in response to the request for proposal (RFP) could have product ready for FDA licensure within 8 years.

In similar news…

Emergent BioSolutions Inc. (NYSE:EBS) announced today that it has been advised by the Office of the Biomedical Advanced Research and Development Authority (BARDA) that the Request for Proposal (RFP) for the procurement of rPA vaccines has been cancelled in favor of a Broad Agency Announcement (BAA) for rPA vaccine development. According to BARDA officials, BARDA took this action after a technical evaluation panel determined that none of the vaccine developers submitting proposals could meet the Project BioShield statutory requirement of having a product ready for licensure within 8 years.

Simultaneously, BARDA issued an amendment to BAA 09-34 to enable companies to submit proposals to obtain development funding for rPA vaccine candidates. The due date for all proposals is February 1, 2010. During a meeting with company officials today, BARDA strongly encouraged Emergent to submit a proposal to this BAA. Emergent intends to submit its proposal by the end of this year.

While the decision by BARDA has no impact on the company’s $400 million procurement contract with the Centers for Disease Control and Prevention (CDC) for the manufacture and delivery of 14.5 million doses of BioThrax® into the Strategic National Stockpile (SNS). Investors are still likely to react negatively to the news.

After selling dies down, there may be a bounce trade opportunity for EBS followers since the company feels that “BioThrax remains a critical and long-term countermeasure for the US government,” said Fuad El-Hibri, chairman and chief executive officer of Emergent BioSolutions. “In addition, based upon encouragement by the USG, we believe our rPA vaccine is well-positioned to obtain a development contract under this BAA. Our anthrax franchise solidifies Emergent as a leader in the development and supply of anthrax medical countermeasures.”

Source :: http://biomedreports.com/articles/most-popular/20870-bad-news-clouds-move-in-on-these-stocks.html

NEWS

First Vevo Review
December 9th, 2009

Vevo is an online music video website owned by Sony BMG, Universal, EMI and Abu Dhabi Music Company, that is developed and hosted by YouTube, Sony, and Google, with content being initially provided by Universal Music Group. It has begun operations from the midnight of 8th December, 2009. Google and Universal will split ad revenues. Google’s YouTube video service will host Universal content on the satellite website, making this the first time that YouTube hosts content off its main website. Through this partnership, Google and Universal will split ad revenues. It is expected to become the largest music oriented website on the Internet. Vevo is not designed to be exclusive to Universal, but currently only Universal is signed up to offer its content. Universal CEO Doug Morris claims it plans to work with other record companies to host content from elsewhere.

A possible major reason behind the project is the competition that music videos have on YouTube. Warner Music Group apparently removed its content from YouTube in March 2009 for just this reason, but is said to be considering hosting its content on this new service. The concept for the site is described as being a Hulu for music videos and the plan may have arisen from the goal of attracting more high-end advertisers. Currently, it is believed that many advertisers are ambivalent to hosting advertising on YouTube’s site alongside user-generated video. In the future, the site could host more than just music videos, such as editorials, other types of videos, and user-generated content.

Universal registered the domain name vevo.com on 20 November 2008. As of 4 June, 2009 , the website is in operation, and updates are provided to those who enter their email address, or who follow the site’s Twitter page, which is linked from the Vevo homepage. On 18 November 2009, Vevo announced via email that the service would be launched at a party in New York on 8 December.

Availability

First of all, Vevo is not available world wide, it currently is only available in the US. People from other countries get message that Vevo is currently not available in their country. They can leave their email address to be informed when Vevo will be available in their region.

Vevo Not Available in all Countries

The main page

On the Vevo mainpage you can search for music videos by artist, song or playlist. There are also links to Videos, Artists, Genres, Channels and Playlists as well as a Login and Signup link. Below that you will see the most popular searches on the Vevo site for today (which are clickable links which bring you right to the result page for those searches). Below that is a big slideshow that promotes some of Vevos exclusive videos and content.

In the center of the main page you can find an overview of the Top Videos, Top Playlists and Popular Artists.

At the bottom of the page is your personal playlist. You can load your own videos in it or select a pre-defined playlist (more about this below). The playlist can be minimized.

The Vevo Main Page

Sponsors / Ads

The first thing you notice when you watch a video on the Vevo site is that the first Video you watch starts with short advertisement (commercial) before the video starts playing. The page itself is also themed by the sponsor.

Vevo Sponsored Video

The Vevo Video Player

The Video Player is pretty decent. It’s a Flash player (just like YouTube) that plays the videos at 850×480 (850 pixels width and 480 pixels height). The video quality is great. In the player you will find a sidebar with buttons to add the video to your playlist,  get a direct video link, get the code to embed the video on your website and to purchase the song you are watching on Itunes or Amazon. Below the video users can comment and there is also a Credits tab. There are also some recommendations listed for other videos and playlists you might like.

Vevo Video Player Sidebar

The Playlist

This is a great feature of Vevo. With one click you can add and remove videos from your playlist. The Playlist stays available at the bottom of the site while you browse trough the website. It can be minimized and maximized. You can easily skip between tracks in your playlist and you can save the playlist so you can access it again the next time you enter the Vevo site. There are also predefined playlists which you can watch, for example “Rock Favorites”, “Hits”, etc.

The Vevo Playlist

The Artists Page

When you click on an Artist’s name you will get a page that shows all available videos from that artist as well as playlists featuring that artist. It also lists the tweets about the artist from twitter.

The Vevo Artist Page

Vevo Channels

Video channels feature videos by Genre or theme. For example there is a Michal Jackson Legacy channel, a Hit List Channel, A country Channel, A Latino Channel, Old School Hip Hop Channel a channel with Vevo Shows.

Vevo channels page

Vevo Genres

On the Genres page you can find videos by genre such as Blues, Alternative, Children’s Music, Gospel, Classical, Humor, Country, Easy Listening, Electronic/Dance, Jazz, Holiday, etc.

Vevo Genres

Vevo Launch Problems
December 9th, 2009

Vevo was just launched, but it seems they didn’t do their capacity planning very well as the site is very unstable. It is currently hard to connect to the Vevo site and when you manage to connect the pages load very slow and most videos won’t play. Some page’s won’t load at all, like the signup page to create an account. Another thing is that Vevo is not available worldwide. Just like Hulu it only works in the US. People from other countries get a message that Vevo is not available in their country.

Vevo announces Agreement with EMI
December 8th, 2009

Vevo announced an agreement with EMI yesterday, which means that Vevo will now feature content from Universal Music Group, Sony Music Entertainment and EMI Music. As part of the EMI agreement, music fans will be able to view video content from artists on EMI’s labels including Astralwerks, Blue Note, Capitol and Virgin, as well as the independent artists and labels represented by EMI Label Services and EMI’s Caroline Distribution unit. Across the Vevo network, users will now enjoy the largest selection of premium music content featuring the broadest array of chart-topping artists found anywhere on the Web. Don’t forget that tonight (December 8 at 11.59pm) Vevo will go live! A few days ago Vevo also published their official blog at blog.vevo.com.

Vevo Launch Date set to December 8 2009
November 26th, 2009

The official launch date for the Vevo site is December 8 2009 at 12 midnight. The site will go open to anyone, so there won’t be any invite only beta test first. We don’t have any more details about the Vevo site yet and how it will look when it launches. It could just be a collection of all licensed music videos that are available on Youtube with a top 10 and  stuff like that, combined with exclusive Vevo only content. We expect the site to be integrated a lot within YouTube as all videos will be available on both platforms. As soon as we have any more news regarding the Vevo launch or the Vevo site we will post it.

Vevo Teams up with AT&T
October 27th, 2009

Vevo announced today that they have created a unique branding and marketing partnership with AT&T to support VEVO across a variety of connected platforms. The announcement was made today by Rio Caraeff, president and CEO of VEVO, and Chris Schembri, vice president of media services for AT&T. AT&T’s decision to join Vevo at such an early stage is another milestone on the path to the launch of VEVO.com and VEVO at YouTube in December.

Abu Dhabi Media Company invests in Vevo
October 20th, 2009

Today Vevo announced an investment from the Abu Dhabi Media Company, who now joins Sony Music Entertainment and Universal Music Group as founding shareholders in VEVO.  According to Vevo “It’s an honor to bring in such a solid investment partner”.  Vevo is confident that ADMC has the vision and experience to help guide them through the many opportunities that lay ahead of Vevo. Vevo’s President & CEO Rio Caraeff said “It’s a credit to the music community, and to the global opportunity that VEVO represents, that we have been able to attract such a solid investment partner with the vision and track record of Abu Dhabi Media Company.”

Vevo is a Giant Step Forward for the Music industry
October 19th, 2009

According to Jimmy Iovine (Interscope’s chariman) Vevo is going to be a giant step forward for the music industry. He mentioned Vevo several times in an interview he did about the future of online music distribution. Interscope has plans to launch an online music distribution platform code-named “Timberland,” which vision can be compared to Vevo “It’s similar in vision to Vevo—which for the first time, will give labels the ability to push out our product without having to go through radio or TV stations. Before, we had to make it, ship it and pray for a hit. Now, with Vevo, we can create the content, sell the ads, and even use the data to market new music to people alongside things they already like. When Vevo launches in December, it will be a giant step forward for the industry. And Interscope is trying to create something similar with our Timberland project.” You can read the full article at paidcontent.org.

Warner music videos back to Youtube
September 30th, 2009

Good news, Warner Music Group and Youtube have come to an agreement about their music videos. This means the Warner music videos will return to Youtube. With Warner on board, YouTube now features artists from all four of the major music labels along with hundreds of independent labels. But this is probably also good news for Vevo, as it’s very likely now that Warner will also be part of Vevo and have all Warner Music Group’s artists videos included in the Vevo website. Unfortunately the specific launch date for Vevo is still unknown, but as soon as there is any news you will read it here first.

© 2009 VEVO

© 2009 Dominic Stoughton

by Idaho Public Policy, December 9, 2009.

I am privileged to serve on the Board of Directors of two outstanding publicly traded companies that serve customers in the great state of Idaho – Avista Corporation and Idaho Independent Bank.

In October, I was asked by my colleagues at Avista to attend a Board Committee Peer Exchange meeting in New York City.  The purpose of the intense one day session was focused on how directors, especially those that serve on corporate board audit committees (which I do for both companies), can better manage risk – for the company, its shareholders and its customers.  Over 200 directors who serve on audit committees participated from a variety of Fortune 500 companies, such as Abercrombie and Fitch, Chiquita Brands International, American Electric Power Company, Barnes and Noble, Consolidated Edison and Anadarko Petroleum Corporation, to name a few.

The 200 directors were subdivided into committees composed of 15 persons representing a cross section of companies from a geographic, industry segment and capitalization standpoint.  The committees spent the entire day discussing topics such as risk management, the current economic environment, and audit committee interactions with other board committees, auditors, regulators, shareholders and management.  At the end of the day, a representative from each committee presented the key points coming out of the discussions to the entire group of directors…(continue reading)

A list of 26 liabilities that attach to a Director in his potential roles within a company

Shareholding Companies Generally

Debts and other property obligations of the Company to the extent of the value of shares withdrawn by a shareholder on a non-lawful manner[1]

Any damage to the Company and to other persons due to late notification or untruthful, inaccurate or incomplete notification to the Business Registrar of the contribution of share capital[2].

Any damage incurred by the Company as a result of errors in the contents and form of a share certificate issued by the Company[3].

Any damage incurred by the Company as a result of his/her failure of destroying or delayed destruction of share certificates with respect to redeemed shares[4].

The accuracy and truthfulness of the legal capital of the Company upon its establishment[5].

Operation of conditional business lines without sufficient qualification of such conditional business lines[6].

Any damage incurred by the Company and to the laws as a result of his/her failure of convening a General Meeting of Shareholders (the General Meeting or GMS) as stipulated in the Enterprise Law[7] (applicable only if acting as the Board Chairman).

Any damage incurred by the Company and to the laws as a result of his/her failure of convening a Board’s meeting as stipulated in the Enterprise Law[8] (applicable only if acting as the Board Chairman).

Any damage incurred by the Company and to the laws as a result of any performance of his/her delegated duties and exercise of his/her powers inconsistent with any of the law, the charter of the company, the employment contract signed with the Company and the Board’s resolutions[9].

Debts of the Company to the extent of the monies or assets which have been paid to a Shareholder in a manner inconsistent with the laws or the charter of the Company but cannot or fails to be surrendered back to the company[10] in case the payments for redeemed shares or dividends to such Shareholder is contrary to Articles 92.1[11] or 93 of the Enterprise Law.

Together with the person who supervised the counting of votes, bear personal liability for any damage arising from a resolution of General Shareholders’ Meeting which is passed due to an untruthful or inaccurate counting of votes collected by the Board via written opinions[12].

A resolution passed which is contrary to law or contrary to the provisions of the charter of the company.[13]

Unpaid debts, taxes and company employees’ benefits as well as legal liability for any consequence which may arise within three (03) years of submission of an inaccurate and/or fraudulent dissolution dossier to the authority in the event of the Company’s dissolution[14].

For the truthfulness and accuracy of the application file for dissolution of a branch of the company.[15]

If acting as the chair of a General Meeting be liable for the truthfulness and accuracy of the contents of the minutes of the meeting[16].

If acting as the chair of a Board meeting be liable for the accuracy and truthfulness of the minutes of the meeting[17].

Listed Companies

Day-to-day management that is inconsistent with Article 116 of the Enterprise Law and causes damage to the company.[18]

All items of profit earned from the conduct of purchase and sale, or sale and purchase, of securities in the company within a period of six (6) months from the date of the purchase or sale.[19]

Fabrication of an item in an application file for registration of a public offer of securities.[20]

In relation to the issuance of securities, deliberate disclosure of erroneous information or deliberate concealment of the truth, or use of information outside the prospectus for market research purposes, or distribution of securities contrary to the registered items of the offer in terms of the type of securities, the stipulated time for the issue and the minimum volume of securities; announcement of the issue on the mass media incorrectly in terms of the stipulated contents and duration.[21]

Fabrication of any item in the application file for listing that causes a serious misunderstanding.[22]

Taking advantage of business opportunities which could reap benefits for the company for their own personal purposes; use of information obtained by virtue of their position in order to gain any personal benefit or a benefit for other individuals and organizations.[23]

Failure to notify the board of management of any contract between the company with such member or with an affiliated person of such member.[24]

Loans or guarantees to management or affiliated persons or to any other legal entity with which the above-named have a financial interest, unless otherwise decided by the general meeting of shareholders.[25]

Use of information which has not yet been announced in order to reveal it to others or to carry out the relevant transaction on their own behalf.[26]

[2] Article 84.2 of the Enterprise Law

[3] Article 85.2 of the Enterprise Law

[4] Article 92.3 of the Enterprise Law

[5] Article 7.2 of Decree 139

[6] Article 8.2 of Decree 139

[7] Article 97.4 of the Enterprise Law

[8] Article 112.5 of the Enterprise Law

[9] Article 116.4 of the Enterprise Law

[10] Article 94 of the Enterprise Law

[11] Article 92.1 provides that “A company may only pay shareholders for redeemed shares … if, after such redeemed shares are paid for, the company shall still be able to satisfy in full its debts and other property obligations”

[12] Article 105.5 of the Enterprise Law

[13] Article 108.4 of the Enterprise Law

[14] Article 28.5 of Decree 139

[15] Article 29.3 of Decree 139.

[16] Article 106.3 of the Enterprise Law

[17] Article 113 of the Enterprise Law

[18] Article 116.3 of the Enterprise Law

[19] Article 31 of the Securities Law

[20] Article 121.1 of the Securities Law

[21] Article 121.2 of the Securities Law

[22] Article 123.1 of the Securities Law

[23] Article 23.1 of Decision 12.

[24] Article 23.2 of Decision 12.

[25] Article 23.3 of Decision 12.

[26] Article 23.5 of Decision 12.

…just a short and sweet message from a faithful Cadbury chocolate bar eater.

I’m sure I’ve even blogged about the total godsend of the Return of the Wispa at some point, such is my love of the chocolate… no hiding the fact.

Just… bugger it, I hate to generalise, but Americans just can’t make chocolate! I went on holiday there once. Great place. But something about the use of sugar cane – or their recipe is just a bit wrong? Has anyone in the UK actually ever chosen to buy themselves Galaxy chocolate rather than being given one as a gift that was bought on special?

So, that’s it, my blog on the subject. It strikes fear and sadness into my brown chocolatey heart to contemplate a world where all the good things – the quality, the subtlety and the history deeply ingrained into the great recipes and the great trade secrets – get lost in the mire of corporate profit.

Those damned Americans, they took away my oat krunchies, now they threaten my Wispas. What next? James Bond? Oh yeah… too late.

Long live the Cadbury chocolate bar as it currently stands, and a warning to Cadbury – your brand is respected and loved for a reason. Do not succumb to greed.

(CFD.net.au – Contract for Difference, Share, Forex, ETFs, Commodities Traders) –

Citing a senior administration official, the newspaper said the measure would be proposed this week by Representative Barney Frank, chairman of the House Financial Services Committee, after extensive consultations with Treasury Department officials.

The legislation would make it easier for the government to throw out the financial company’s management, wipe out the shareholders and change the terms of existing loans held by the institution, the report said.

treasury secretary Timothy Geithner was planning to endorse the changes in testimony before the House Financial Services Committee on Thursday, the paper noted.

The White House plan as outlined so far would make the existence of a large financial company whose failure would put the US financial system and the economy at risk much costlier, the report said.

It would force such institutions to hold more money in reserve and make it harder for them to borrow too heavily against their assets,

The Times

said.

Setting up the equivalent of living wills for corporations, the plan would also require that companies come up with their own procedure to be disentangled in the event of a crisis, the paper said.

This plan, according to administration officials, ought to be made public in advance, said

The Times.

“These changes will impose market discipline on the largest and most interconnected companies,” the paper quotes Michael Barr, assistant treasury secretary for financial institutions, as saying.

One of the biggest changes the plan would make, he said, is that instead of being controlled by creditors, the process will be controlled by the Government.

Some regulators and economists in recent weeks have suggested that the administration’s plan does not go far enough,

The Times

noted.

They say that the Government should consider breaking up the biggest banks and investment firms long before they fail, or at least impose strict limits on their trading activities – steps that the administration continues to reject.

Source: New US Bill would make government takeovers easier | Business Breaking News | News.com.au

by Robert Goddard, for Corporate Law and Governance , December 7, 2009.

The study report commissioned by the European Commission on corporate governance monitoring and enforcement practices within the Member States has been published: see here (pdf). The study was commissioned to describe within each Member State: the relationship between legislation and codes; the existing monitoring and enforcement mechanisms for codes and their effectiveness; companies’ perceptions of the codes; the quality of companies’ disclosure regarding governance principles and ‘comply or explain’.

The study found widespread support amongst regulators and institutional shareholders for the ‘comply or explain’ approach but identified clear scope for improving its operation with regard to the quality of information disclosed and enforcement…(continue reading)

by Nick Sim, for The Straits Times, December 7, 2009.

I read with interest Goh Eng Yeow’s commentary, ‘Clarify role of independent director’ (Nov 30). The call to clarify the role of an independent director is timely. Independent directors are generally expected to bring fresh perspectives on the board’s direction, constructively challenge management, and chair and sit on key watchdog committees.

Whether they should be expected to advocate the interests of minority shareholders in conflicts is unclear. Indeed, Section 157 of the Companies Act, which provides for directors’ duties, does not charge them with this affirmative duty. Directors are generally expected to act in the company’s best interests, not just for the benefit of any particular group.

Nevertheless, few would disagree that independent directors should not turn a blind eye when there is flagrant oppression of minority shareholders. After all, minority shareholders’ interests are recognised and protected under various codes of corporate governance.

Independent directors, by virtue of their board membership and independence from management, are in a good position to ensure fairness and equality across the entire shareholder spectrum…(continue reading)

http://www.guardian.co.uk/business/2009/nov/20/goldman-sachs-bonus-shareholder-row

by Jim Naughton, for The Harvard Law School Forum at Harvard Law School, December 2, 2009.

Editor’s Note: This post comes to us from Anusha Chari and Paige Ouimet, Assistant Professors of Finance at the University of North Carolina at Chapel Hill, and Linda Tesar, Professor of Economics at the University of Michigan.

Foreign acquisitions extend the boundaries of the firm across national borders. In the context of emerging markets, these boundaries are extended across countries with vast asymmetries in institutions and property rights protection. If developed-market firms can extend the benefits associated with superior institutions to their operations in emerging markets by acquiring control, the stock price of the acquiring firms should reflect these value gains. In our forthcoming Review of Financial Studies paper, The Value of Control in Emerging Markets, we examine the returns to shareholders of developed-market firms that undertook acquisitions in emerging markets.

We find that when developed-market acquirers gain control of emerging-market targets, they experience positive and significant abnormal returns of 1.16%, on average, over a three-day event window. In the context of the well-documented underperformance of acquiring firms in U.S. mergers and acquisitions (M&A) transactions, this return is somewhat anomalous. It is also fairly substantial when viewed in relation to the size of acquiring firms in these transactions. The acquirer stock price reaction suggests a median (mean) dollar value gain of $4.07 ($30.15) million for the acquirer. In comparison, the median (mean) transaction value in an emerging-market acquisition where control is acquired is $42.41 ($308.57) million. In contrast, acquisitions of minority stakes do not deliver significant acquirer returns…(continue reading)

by David F. Larcker, for The Harvard Law School Forum at Harvard Law School, November 30, 2009.

David F. Larcker is the Director of the Corporate Governance Research Program at the Stanford Graduate School of Business.

In our forthcoming Journal of Accounting Research paper, Chief Executive Officer Equity Incentives and Accounting Irregularities, we examine the relationship between chief executive officer (CEO) equity incentives and accounting irregularities (e.g., restatements, Securities and Exchange Commission Accounting and Auditing Enforcement Releases, and shareholder class action lawsuits). Although equity holdings may alleviate certain agency problems between executives and shareholders, concerns have arisen among researchers, regulators, and the business press that “high-powered” equity incentives might also motivate executives to manipulate accounting information for personal gain. This view assumes that stock price is a function of reported earnings and that executives manipulate accounting earnings to increase the value of their personal equity holdings. If this allegation is true and the economic cost of accounting manipulation is large, this idea has important implications for executive-compensation contract design and corporate monitoring by both internal and external parties…(continue reading)