Director and Executive Compensation
I recently read a New York Times article that discussed investor reactions to a successful chief executive deciding to exit a company. The article discussed how Manchester United’s coach, Alex Ferguson, announced Wednesday that he will retire at the end of the season. As a result, Manchester United’s shares fell nearly five percent Wednesday morning. Today’s post explores the impact of Ferguson’s exit, as well as the general impact of exiting executives.
A Brief Background
Manchester United, the English soccer club, raised $232 million in its IPO last… Read the rest
In today’s post we continue exploring the depths of the due diligence phase of purchasing a business. We’ve already discussed the financial issues and the legal issues, and today we’ll look at the operational issues surrounding due diligence. We’ve highlighted four important questions to answer regarding operational issues of a business you’re looking to purchase.
What products or services does the company offer?
It may seem like a no-brainer to most, but it is important to acquire an in-depth knowledge of… Read the rest
Mergers and Acquisitions
Avis Purchasing Zipcar for $500 Million
The Avis Budget Group announced Wednesday that it will purchase Zipcar for $500 million cash. The deal signals a new direction for Avis. The car rental industry has become more and more competitive with Hertz recently purchasing Dollar Thrifty, and several car rental companies jumping on the hourly rental bandwagon.
Avis is seeking to attract a younger, progressive market with its recent acquisition of Zipcar, as Zipcar members tend to be younger, more urban individuals as opposed to the traditional business or tourist market… Read the rest
Two recent Delaware cases confirm that the Court of Chancery will not substitute its judgment for that of a disinterested and informed board on executive compensation decisions, including severance, so long as there is a rational basis for the board’s decision. Reaffirming its reliance on the business judgment rule, the court decided in favor of the board’s decision in two recent derivative actions challenging severance/retirement packages for departing employees.
Zucker v. Andreessen
In Zucker, the court granted defendant Hewlett-Packard’s motion to dismiss on… Read the rest
Venture Capital
VC Firms Changing Promotional Tactics
Nicole Perlroth wrote an interesting article in the New York Times this week on the changing approach VC firms are taking to public relations.
“A number of V.C. firms ranging from some of the oldest, like Bessenmer Venture Partners to some of the youngest, like Peter Thiel’s Founders Fund, are now seeking full-time marketing experts. Even Sequoia, which sniffed at the notion when the trend began, has hired P.R. staff.”
Ms. Periroth suggests that the paradigm shift is the result of a… Read the rest
On June 20, the SEC released a statement announcing that it has approved a rule (Rule 10C-1) that requires national securities exchanges to adopt listing standards for boards of directors and compensation advisers of public companies. You can view the Final Rule.
The new rule requires the listing standards to include:
- The independence of the individual members of the compensation committee;
- The committee’s authority to retain compensation advisers;
- The committee’s consideration of the independence of any compensation advisers; and
Corporate Governance
CEO Resigns After Erroneous Academic Credentials Discovered
Yahoo CEO Scott Thompson stepped down after admitting that he misstated his academic credentials. His resume reported that he had degrees in both accounting and computer science, however he has no degree in computer sciences. The misstated credentials were discovered by Dan Loeb, a manager of Third Point, a New York hedge fund that owns 6% of Yahoo’s outstanding stock. Third Point, had been contending that Yahoo was being mismanaged, and was attempting to get three of its nominees elected to the Yahoo board of directors. Apparently Yahoo did not… Read the rest
Deferred compensation is compensation to employees or independent contractors that is paid after the income is earned. Examples of deferred compensation include stock options, retirement plans, agreements to defer salary or bonuses, severance agreements, and deferred payments in connection with covenants not to compete.
Qualified Deferred Compensation Plans
Under qualified deferred compensation plans, contributions by employers are not taxed to the employees at the time of the contribution. The full amount of the untaxed contribution can be invested. Employers get an immediate deduction for contributions to qualified plans, even though the employee is not taxed at that time. Eventually… Read the rest
Executive Pay Packages Soar
GMI Ratings’ recent report details second consecutive year of double digit pay increases
GMI Ratings released their 2012 Preliminary CEO Pay Survey that examines pay changes in the Russell Index and the S&P Index. The survey provides a look into the ten highest paid CEOs of 2012 and examines the executive pay packages. Some important highlights from the survey include a second consecutive year of double digit compensation increases at both the median and average level for the Russell 3000, with a median increase of about… Read the rest
Securities Law
SEC Cracks Down on Sales of Private Securities
The Securities and Exchange Commission has filed civil charges against three brokerage firms, Felix Investments, EB Financial, and SharesPost, that trade shares of privately held technology securities. According to the SEC, fund managers at Felix and EB Financial misled investors and took undisclosed fees and commissions. SharesPost, an online exchange for private shares, reportedly brokered transactions and failed to register as a broker-dealer. EB Financial settled for about $310,000, and SharesPost and its founder will… Read the rest
