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The New York Times DealB%k reports today on the role women are playing in shaping corporate governance at the largest mutual funds.

 “The corporate governance heads at seven of the 10 largest institutional investors in stocks are now women, according to data compiled by The New York Times. Those investors oversee $14 trillion in assets.”  

Mutual and pension funds are some of the largest stock block holders casting crucial votes in director elections and on shareholder resolutions that will span the gamut from environmental policy to political spending to supply chain transparency.  While ISS and other proxy advisory firms have a firm hand shaping proxy votesFN1 (and have released new guidelines for the 2017 proxy season), that $14 trillion in assets are voted at the behest of women is new and noteworthy.  As the spring proxy season approaches– it’s like New York fashion week, for corporate law nerds, but strewn out over months and with less interesting pictures–these asset managers are likely to vote with management. FN2 Still, there is growing consensus that institutional investors’ corporate governance leaders are “working quietly behind the scenes to advocate for greater shareholder rights” fighting against dual class stock and fighting for gender…

The late December announcement of Carl Icahn as a special advisor overseeing regulation piqued my professional interest and raises interesting tension points for both sides of the aisle, as well as for corporate governance folks.  

Icahn’s deregulatory agenda has the SEC in his sights.  Deregulation, especially of business, is a relatively safe space in conservative ideology.  Several groups such as the Chamber of Commerce and the Business Roundtable may be pro-deregulation in most areas, but, and this is an important caveat– be at odds with Icahn when it comes to certain corporate governance regulations.  Consider the universal proxy access rules, which the SEC proposed in October, 2016.  The proposed rules would require companies to provide one proxy card with both parties’ nominees–here we don’t mean donkeys and elephants but incumbent management and challengers’ nominees.  Including both nominees on a single proxy card would allow shareholders to “vote” a split ticket—picking and choosing between the two slates.  The split ticket was previously an option only available to shareholders attending the in-person meeting, which means a very limited pool of shareholders.  “Universal” proxy access– a move applauded by Icahn–is opposed by House Republicans, who passed an appropriations bill – H.R. 5485 –that would eliminate SEC funding…

Ethics has been a recurrent news headline from questions of President-elect Trump’s business holdings to the Republican House’s “secret” vote on ethics oversight on Monday.  

I want to share research from a seminar student’s paper on financial regulation and the role of ethics.  She made a compelling argument about the role of ethics to be a gap filler in the regulatory framework.  Financial regulation, as many like Stephen Bainbridge have argued, is reactionary and reminds one of a game of whack-a-mole.  Once the the regulation has been acted to target the specific bad act, that bad act has been jettisoned and new ones undertaken.  Her research brought to my attention something that I find hopeful and uplifting in a mental space where I am hungry for such morsels.

In 2015, in response to a perceived moral failing that contributed to the financial crisis, the Netherlands required all bankers to take an ethics oath.  The oath states: “I swear that I will endeavor to maintain and promote confidence in the financial sector, so help me God.”  The full oath is available here.  Moreover, “by taking and signing this oath, bank employees declare that they agree with the content of the statement…

Ten days ago, I posted on conflicts of interest and the POTUS.  Today, friend-of-the-BLPB Ben Edwards has an Op Ed in The Washington Post on conflicts of a different kind–those created by brokerage compensation based on commissions for individual orders.  The nub:

In the current conflict-rich environment, Wall Street gorges itself on the public’s retirement assets. While transaction fees are costs to the public, they’re often juicy paydays for financial advisers. A study by the White House Council of Economic Advisers found that Americans pay approximately $17 billion annually in excess fees because of such conflicts of interest. The high fees mean that the typical saver will run out of retirement money five years earlier than he or she would have with better, more disinterested advice.

The solution posed (and fleshed out in a forthcoming article in the Ohio State Law Journal, currently available in draft form on SSRN here):

[S]imply banning commission compensation in connection with personalized investment advice would put market forces to work for consumers. This structure would kill the incentive for financial advisers to pitch lousy products with embedded fees to their clients. While the proposal might sound radical, Australia and Britain have…

U.S. Securities and Exchange Commission Chair Mary Jo White has vowed to press on in her efforts to adopt new rules related to derivatives and mutual funds, among other issues, says a Reuters report.  The Senate Banking Committee’s top two Republicans, Chairman Richard Shelby and Mike Crapo of Idaho, sent a letter asking her to stop the rule making process while the Trump administration reviews the SEC’s agenda. She declined. 

Chair White replied that the SEC must “exhibit a spirit of firm independence” in continuing its work “without fear or favor.” She further wrote,  “I am not insensitive to the issues raised by your letter and have carefully considered what impact, if any, the election should have on the current work of the Commission.” (Reuters saw the letter, but I have not found a copy.) 

I am on record as saying (e.g., here and here) I’d like to see the SEC and Congress take a break from new regulations and focus on enforcement, though I know some of the proposed rules are (at least in some form) required by Dodd-Frank. Still, even where I disagree with some of the proposals, I think it’s right for independent agencies to continue on with their work. Each such agency can be respectful…

I have been thinking about the long-short term investment horizon debate, definitions, empirics and governance design consequences for some time now (see prior BLPB post here and also see Joshua Fershee’s take on the topic).  This has been on mind so much  that I am now planning a June, 2017 conference on that very topic in conjunction with the Adolf A. Berle Jr. Center on Corporations, Law & Society (founded by Charles “Chuck” O’Kelley at Seattle University School of Law). In planning this interdisciplinary conference where the goal is to invite corporate governance folks, finance and economics scholars, and psychologists and neuroscientist, I have had the pleasure of reading a lot of out-of-discipline work and talking with the various authors.  It has been an unexpected benefit of conference planning.   I also want some industry voices represented so I have reached out to Aspen Institute, Conference Board and a new group, Focusing Capital on the Long Term (FCLT), which I learned about through this process.

I share this with BLPB readers for several reasons.  The first is that the FCLT, is a nonprofit organization, a nonprofit organization for BUSINESS issues created and funded by BUSINESSES.  In July 2016, the…

Last week on the eve of the election, I shared a series of predictions regarding the market’s response to a Trump or Clinton presidential election victory.  Almost all of the predictions were for a swift and negative reaction to a Trump victory.  Immediate market predictions, like polling predictions, were, in a word: WRONG.  

From the Wall Street Journal:

Dow Posts Best Week Since 2011

Stocks were mixed on Friday, taking a pause to end an eventful week that pushed the Dow industrials to their best week since 2011.

The Dow climbed 0.2% on Friday to 0.2%, pushing the index up 5.4% for the week to 18847.66.

The S&P 500 dipped 0.1% on Friday to 2164.45, while the Nasdaq Composite jumped 0.5% to 5237.11.

I find myself so disorientated in this post-election reality.

Anne Tucker

I have been on hiatus for a few weeks, and had planned to post today about the compliance and corporate governance issues related to Wells Fargo. However, I have decided to delay posting on that topic in light of the unexpected election results and how it affects my research and work.

I am serving as a panelist and a moderator at the ABA’s annual Labor and Employment meeting tomorrow. Our topic is Advising Clients in Whistleblower Investigations. In our discussions and emails prior to the conference, we never raised the election in part because, based on the polls, no one expected Donald Trump to win. Now, of course, we have to address this unexpected development in light of the President-elect’s public statements that he plans to dismantle much of President Obama’s legacy, including a number of his executive orders.

President-elect Trump’s plan for his first 100 days includes, among other things: a hiring freeze on all federal employees to reduce federal workforce though attrition (exempting military, public safety, and public health); a requirement that for every new federal regulation, two existing regulations must be eliminated; renegotiation or withdrawal from NAFTA; withdrawal from the Trans-Pacific Partnership; canceling “every unconstitutional executive action…

As we gear up for the final show down and hopefully the end of the 2016 election (please, please, please let it end) I write today about the relationship between the markets and politics.  It is apparently THE business angle in the news cycle this week. This is an admitted punt on substantive work and am instead providing you with a host of hyperlinks to nervously check and re-check in between nervously checking and re-checking polling estimates and vote counts.  Please note, I am passing along a compilation of articles, a list that I have not editted to reflect a certain viewpoint.

Historical Accounts of the Relationship between politics and the markets

Call Levels, History of Past Presidential Elections and Their Effect On Stock Market

Merrill Lynch, How Presidential Elections Affect the Markets

ABC, History on how presidential elections affect stock markets

Predictions regarding market reactions to the outcome of the 2016 election

Forbes, Trump Vs. Clinton: How Will The Stock Market React To The Election?

CNBC, Wall Street reacts: Here’s what the markets will do after the election  

The Street, If Hillary Clinton Is Elected President, Here’s What Will Happen to the U.S. Economy

Market Watch, Here are all…

The Association of American Law Schools (AALS) Annual Meeting will be held Tuesday, January 3 – Saturday, January 7, 2017, in San Francisco.  Readers of this blog who may be interested in programs associated with the AALS Section on Socio-Economics & the Society of Socio-Economics should click on the following link for the complete relevant schedule: 

Download Socio-Economic AALS Participants + Descriptions 161018

Specifically, I’d like to highlight the following programs:

On Wednesday, Jan. 4:

9:50 – 10:50 AM Concurrent Sessions:

  1. The Future of Corporate Governance:
    How Do We Get From Here to Where We Need to Go?
    andre cummings (Indiana Tech)                            Steven Ramirez (Loyola – Chicago)
    Lynne Dallas (San Diego) – Co-Moderator        Janis Sarra (British Columbia)
    Kent Greenfield (Boston College)                        Faith Stevelman (New York)
    Daniel Greenwood (Hofstra)                                 Kellye Testy (Dean, Washington)
    Kristin Johnson (Seton Hall)                                 Cheryl Wade (St. John’s ) Co-Moderator
    Lyman Johnson (Washington and Lee)
  2. Socio-Economics and Whistle-Blowers
    William Black (Missouri – KC)                                 Benjamin Edwards (Barry)
    June Carbone (Minnesota) – Moderator             Marcia Narine (St. Thomas)

1:45 – 2:45 PM Concurrent Sessions:

1. What is a Corporation?
Robert Ashford (Syracuse) Moderator                             Stefan Padfield (Akron)
Tamara Belinfanti (New York)                                             Sabeel Rahman (Brooklyn)
Daniel Greenwood (Hofstra)

On Thursday, Jan. …