THE IMPACT OF THE SEC’S NEW WHISTLEBLOWER PROGRAM ON CORPORATE GOVERNANCE
Robert Khuzami, Director of Enforcement, U.S. Securities and Exchange Commission
COACHING: THE CEO AND THE BOARD
Bill Campbell, Chairman, Intuit
Bill Campbell is widely referred to as “Coach” within the Silicon Valley community, in part because he was one (Columbia, 1974-79), and in part because he has served in that role–coach and mentor–for a large number of hi-tech companies, from small start-ups to some of the largest companies in the country, while also serving as Chairman of Intuit. This will be an open-ended Q & A with the Coach–a chance to get his unique perspective on some of the corporate governance issues that face all companies.
ISS AND THE PROXY ADVISORY INDUSTRY: DOES PROXY VOTING ADVICE ENHANCE SHAREHOLDER VALUE?
David F. Larcker, James Irvin Miller Professor of Accounting; Director, Corporate Governance Research Program; Senior Faculty of the Arthur and Toni Rembe Rock Center for Corporate Governance at Stanford; Co-director of the Directors’ Consortium Executive Program, Stanford Graduate School of Business.
Many institutional investors rely on a proxy advisory firm to assist them in voting the company proxy and fulfilling their fiduciary responsibility to vote in the interest of beneficial shareholders. The largest and most influential proxy advisory firm is Institutional Shareholder Services (ISS). The recommendations of ISS are not inconsequential. Academic and professional research suggests that a recommendation by ISS can change the outcome of a vote by 15 to 20 percent, depending on the matter of the proposal. At the same time, there is little evidence that proxy advisory recommendations are correct or that they improve corporate outcomes. In fact recent research suggests that they might actually decrease shareholder value.
Prof. Larcker and Brian Tayan recently examined these issues as they relate to ISS guidelines for exchange offers and option repricings: Do proxy advisors have appropriate incentive to verify that their recommendations are correct? Should board members require evidence that ISS guidelines are value increasing before they adjust their policies to gain a favorable recommendation? Proxy advisory firms enjoy significant barriers to entry and little competition. Is this desirable for shareholders?