From the first panel of the 2014 BCBLE and BBLJ Shareholder Activism Symposium: Three professors give a “bird’s-eye view” of shareholder activism.
Panelist:
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.
Does Mike Ashley, the UK billionaire businessman and owner of Sports Direct International PLC (and perhaps more famously Newcastle United soccer team), aspire to become the UK protégé of Carl Icahn, the US activist shareholder? Increasingly so, if recent events are anything to go by, but there remain differences between the two as wide as the Atlantic ocean itself, not least their comparative net worth.
On April 2, 2014, the Berkeley Business Law Journal in partnership with the Berkeley Center for Law, Business and the Economy hosted as part of its Speaker Series a presentation by Thomas Brown entitled “Regulation and the Future of Money: Mobile Payments and Virtual Currencies” to explore how mobile communications are changing the way we define value and authenticate transactions.
Thomas Brown, a subject matter expert on payment systems, provided valuable information and memorable insight about the current status and future of mobile payment systems and virtual currencies. Mr. Brown is currently a Partner at Paul Hastings in San Francisco, and he used to serve as Senior Counsel for Visa U.S.A. Inc.
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 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.
The greatest minds of American jurisprudence have recognized the high responsibility of a fiduciary, which Justice Cardozo characterized as “the punctilio of an honor the most sensitive.” (Meinhard v. Salmon, 164 N.E. 545, 546 (N.Y. 1928)). The relationship involves more than protecting the vulnerable; it requires the fiduciary to act in the best interest of the beneficiary, rather than in the fiduciary’s self-interest. A fiduciary who fails so to act may find himself liable to the beneficiary, even in the absence of scienter or intent. By the same token, just as the fiduciary may be liable for breaching his duty, or the “primary duty,” to the beneficiary, the common law has long recognized that one who assists a fiduciary’s breach of duty may be liable to the beneficiary. (Mertens v. Hewitt Assoc., 508 U.S. 248, 255 (1993) (stating that non-fiduciaries have common-law duty to beneficiaries not to assist in fiduciary’s breach)).
The Securities and Exchange Commission recently held a roundtable on the issues and challenges cybersecurity presents for market participants and public companies. The roundtable is a means by which the SEC Commissioners can hear a variety of viewpoints and become better informed. Armed with this knowledge, the Commissioners will consider whether the SEC should take additional steps, in terms of regulation or other guidance, either to public companies generally or to entities regulated by the SEC, such as exchanges, investment advisers, broker-dealers and transfer agents. There is no timetable for further SEC action.
On March 18, the Berkeley Center for Law, Business and the Economy (BCBLE) hosted a lunch presentation by Gregory C. Wajnowski, GE’s Managing Director of Mergers & Acquisitions and Chief Supervisor of Joint Ventures for GE Energy in Greater China and Mongolia. Wajnowski’s lecture on the “Compliance Risks and Pitfalls in China” provided an overview of the U.S. Foreign Corrupt Practices Act (FCPA) and its implications for doing business in China. Wajnowski explained how companies could manage risk and compete effectively within the confines of the FCPA and other domestic regulations.
An issue close to every lawyer’s heart: coffee. The caffeine fix most of us crave has been the subject of recent litigation. Keurig Green Mountain Inc, a company that produces single serve coffee makers and attendant capsules, announced in January 2014 that it would launch a new version of its popular coffee brewing system. But lawsuits quickly sprang up—Keurig faces allegations from consumers and competitors that the new system is in fact “just the latest of several allegedly unlawful tactics the company has used to maintain its dominant position in the U.S. market for single-serve brewers and cartridges of coffee.”