Eric Talley at Berkeley, and the Berkeley Business Law Journal, put together a great conference on April 4, 2014 on shareholder activism, and I scratched out the following thoughts for our panel. We were supposed to talk about the prospects for further regulatory and legal developments governing or motivating shareholder activism. First, though, consider what legal rules facilitate activism – and when you do that, you discover that any change is likely to be marginal at best. Given my working definition of shareholder activism – using share ownership to promote concerted action, by large numbers of shareholders, to exercise the legal rights of shares – the following are key legal rules that enable this to occur.
2014 Symposium: A Panelist’s Review of Shareholder Activism Discussion
A Potentially Hostile Tax Environment for Private Equity Firms
On February 26, 2013, the House Ways & Means Committee Chair Dave Camp released a comprehensive tax reform proposal that would categorize private equity funds’ carried interest as ordinary income instead of capital gains. It contends that carried interest, the profit interest in the fund, is a partnership interest held in connection with the performance of a service and should be taxed as ordinary income, since private equity funds are in the active trade or business of developing and selling businesses.
Shareholder Activism: Improving Board-Shareholder Relations
Shareholder activism is playing an increasingly important role in corporate America and the world. Major activism campaigns involve board representation, shareholder rights, and M&A matters, mainly including mergers and spin-offs. According to a publication by Linklaters, since 2010 shareholder activism rose by 80% and 62% in the U.S. and Europe, respectively. Corporate governance and shareholder activism has recently been in the spotlight as a result of various high profile activist campaigns including Carl Icahn’s push for eBay to spin off PayPal. Amended U.S. Securities and Exchange Commission (“SEC”) rules concerning shareholder engagement and the Dodd-Frank Act have also brought shareholder activism into the public eye. Several independent agencies are taking interest and publishing guidelines to that effect. The Shareholder-Director Exchange and the Conference Board have recently released a set of suggestions to improve investor relations.
Supreme Court To Reconsider “Fraud-on-the-Market” Presumption in Securities Fraud Class Actions
On March 5, 2014, the U.S. Supreme Court heard oral arguments in the much anticipated case of Halliburton Co. v. Erica P. John Fund, Inc., No. 13-317. The Halliburton case presents a critical issue regarding the viability of maintaining a private securities fraud lawsuit as a class action: whether the plaintiffs are permitted to invoke the “fraud-on-the-market” presumption to establish that there are common issues of reliance sufficient to certify a class.
Event Recap: Systemic Risk and the Financial Crisis
On February 25, 2014, the Berkeley Center for Law, Business and the Economy (BCLBE) hosted a lunchtime talk on Systemic Risk and the Financial Crisis by Prof. Steven L. Schwarcz. Prof. Schwarcz is a Professor of Law & Business at Duke University and is well known for his research and scholarship in the area of financial regulation and systemic risk. In his lecture, Prof. Schwarcz focused on how regulations should address systemic risk – “the risk that the failure of financial markets or firms harms the real economy by increasing the cost of capital or decreasing its availability.”
Chairman Camp’s Proposals Place REITs in the Crosshairs
On February 25, House Ways and Means Committee Chairman David Camp (R. Mich.) proposed a dramatic overhaul of the U.S. tax code (the Code). While the “Tax Reform Act of 2014,” (the Proposals) contains a number of previously released tax law changes, it also includes an unexpected and unwelcome strike on many public REITs.
Google Responds to Clean Energy Tax Incentives
In this age of innovation, when a majority of prominent companies are moving towards a greener, cleaner world, Google seems to be at the forefront of the initiative. One of the world’s largest technology companies has invested over $1 billion on wind and solar projects. Google believes these innovative, large-scale energy projects can become major sources of power in the future.
Valuing Tech Acquisition Deals: Signal of a New Trend or a Recurring Tech Bubble?
Tech start-ups are proliferating around the world. They introduce technology to every aspect of our lives, from the way we communicate, to the way we care about our health, to the way we store our data. As a result, almost one third of the recent NYSE and NASDAQ IPO filings involved a tech-related corporation. However, when it comes to evaluating their potential, there is plenty of extravagancy involved, and some may say, accidentally turns young start-up founders into millionaires.
Google Poised to Execute Long-Delayed Stock Split
Google’s 2-for-1 stock split, which was first floated to investors almost two years ago but delayed by a shareholder lawsuit, has finally been approved by Google’s board on January 30, 2014, following a settlement of the lawsuit.
U.K. Government Moves Towards Ratification of 2001 Cape Town Convention for Airline Industry
Following a public consultation during the latter half of 2010, on December 6, 2013 the U.K. Department for Business Innovation & Skills published its response to a call for evidence on the proposed ratification by the U.K. of the 2001 Convention on International Interests in Mobile Equipment and the associated Protocol on Matters Specific to Aircraft Equipment (together, “the Convention”).