Directors’ Duties and Sustainable Corporate Governance
- 11 - 13 November 2020
- •
- Online Policy Workshop
The videos are available here
The summary report is available here
The programme can be downloaded here.
About this workshop
The European Commission recently published a study by Ernst & Young (EY) on directors’ duties and sustainable corporate governance commissioned in 2019. Studies of this type are usually a stepping stone for policy proposals that will be put forward for consideration by EU Member States and the European Parliament. In the words of the Commission:
“the Study found a clear trend of short-termism in the focus of EU companies. It identified key drivers of this issue, ranging from the narrow interpretation of directors duties and the company’s interest with the tendency to favour the short-term maximisation of financial value, through growing pressure from investors and the lack of a strategic perspective on sustainability all the way to the limited enforcement of the directors’ duty to act in the long-term interest of company. In order to lengthen the time horizon in corporate decision-making and to promote a corporate governance that is more conducive to sustainability, the Study also identified specific objectives that EU intervention could aim to reach".
The study identifies a number of policy options for the European Commission to consider (summarised at pp. 51-60), which may deeply impact corporate law and governance across the European Union. Topics include directors’ duties, the company’s purpose, corporate disclosures, executive compensation, and engagement with stakeholders. The European Commission has conducted a public consultation on these policy options, that closed on 8 October 2020, and is expected to issue proposals at the beginning of 2021, if not earlier.
ECGI will held an online roundtable to discuss the report, the academic literature, and recommendations on the topics referenced in the report.
Useful links:
Watch recordings of the workshop | Summary Report
EY Report: https://bit.ly/3jcBBUt
All Public Responses to the Consultation: https://bit.ly/3khuNGq
Submitted Response from Wolf-Georg Ringe: https://bit.ly/3jhTxgx
Submitted Response from Paul Davies and Rolf Skog (ECLE group): https://bit.ly/3dPqY95
Submitted Response from Mark Roe and Holger Spamann: https://bit.ly/2TdHRkp
Submitted Response from Alex Edmans: https://bit.ly/2TdxBIJ
Submitted Response from Steen Thomsen: https://bit.ly/3kfjuyJ and https://bit.ly/2Hb9Xui
Wednesday 11 November 2020 (CET)
Introduction
Speakers:
Introduction
Speakers
Extended Shareholder Liability for Systemically Important Financial Institutions
Regulators generally have tried to address the problems posed by the excessive risk-taking of Systemically Important Financial Institutions (SIFIs)...
Read more
Emergency Measures for Equity Trading: The Case Against Short-Selling Bans and Stock Exchange Shutdowns
After the Covid-19 crisis struck, equity prices abruptly plunged across the world. The clear prospect of an almost unprecedented decrease in supply and...
Read more
The Basic Governance Structure: The Interests of Shareholders as a Class
This paper is the third chapter of the third edition of The Anatomy of Corporate Law: A Comparative and Functional Approach, by Reinier Kraakman, John...
Read more
Bank-Fintech Partnerships, Outsourcing Arrangements and the Case for a Mentorship Regime
Fintech firms, once seen as ‘disruptors’ of the traditional banking world, are now increasingly seen as attractive partners for established...
Read more
Network-Sensitive Financial Regulation
Shocks that hit part of the financial system, such as the subprime mortgage market in 2007, can propagate through a complex network of interconnections...
Read more
The Case Against a Special Regime for Intragroup Transactions
Corporate groups with minority shareholders in one or more subsidiaries are common around the world, despite the risks such arrangements pose to those...
Read more
Creeping Acquisitions in Europe: Enabling Companies to Be Better Safe than Sorry
Creeping acquisitions - grabs of a company?s de facto control without the launch of a formal tender offer ? are an acquisition technique that presents...
Read morePresentation of the Report
Speakers:
Presentation of the Report
A link to the report can be found here.
Speakers
Conference Documents
The Case for an Unbiased Takeover Law (with an Application to the European Union)
Takeover regulation should neither hamper nor promote takeovers, but instead allow individual companies to decide the contestability of their...
Read more
The Voluntary Carbon Market: Market Failures and Policy Implications
Companies that have announced climate targets (for instance: becoming “net zero” by 2050) represent a market capitalization of over $20 trillion....
Read more
Network-Sensitive Financial Regulation
Shocks that hit part of the financial system, such as the subprime mortgage market in 2007, can propagate through a complex network of interconnections...
Read more
A New EU Business Combination Form to Facilitate Cross-Border M&A: The Compulsory Share Exchange
Facilitating cross-border mergers and acquisitions has long been one of the objectives of European company law directives and regulations. This...
Read more
The Benefits of Access: Evidence from Private Meetings with Portfolio Firms
We analyze over 4,700 private meetings between a large active asset manager and portfolio firms, unobservable to outsiders. These meetings are...
Read more
Green Pills: Making Corporate Climate Commitments Credible
Many of the world’s largest firms are now announcing plans to reduce their carbon emissions over the coming decades. Against the backdrop of...
Read more
Investor Choice in Global Securities Markets
This paper, which forms part of the first phase of the New Special Study of the Securities Markets Project, explores how globalization has affected the...
Read moreBreak
Keynote Briefing: “What Do Financial Economists Know About Short Termism?”
Speakers:
Keynote Briefing: “What Do Financial Economists Know About Short Termism?”
Speakers
Conference Documents
The Effects of Mandatory ESG Disclosure around the World
We compile a novel dataset on mandatory environmental, social, and governance (ESG) disclosure around the world to analyze the stock liquidity effects...
Read more
ESG Shareholder Engagement and Downside Risk
We show that engagement on environmental, social, and governance issues can benefit shareholders by reducing firms’ downside risks. We find that the...
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Climate Risk Disclosure and Institutional Investors
Employing disclosure theory, we develop hypotheses regarding the preferences of institutional investors with respect to firms’ climate risk...
Read more
Is History Repeating Itself? The (Un)predictable Past of ESG Ratings
The explosion in ESG research has led to a strong reliance on ESG rating providers. We document widespread changes to the historical ratings of a key...
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Institutional Investors and Corporate Governance
We provide a comprehensive overview of the role of institutional investors in corporate governance with three main components. First, we establish...
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The Importance of Climate Risks for Institutional Investors
According to our survey about climate risk perceptions, institutional investors believe climate risks have financial implications for their...
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Firm-level Climate Change Exposure
We develop a method that identifies the attention paid by earnings call participants to firms' climate change exposures. The method adapts a machine...
Read more
Do Investors Care About Biodiversity?
This paper introduces a new measure of a firm's negative impact on biodiversity, the corporate biodiversity footprint, and studies whether it is priced...
Read moreResponses to the European Commission’s Consultation by ECGI research members | Part 1
Speakers:
Responses to the European Commission’s Consultation by ECGI research members | Part 1
Georg Ringe (Hamburg University and ECGI) (Response)
Speakers
Conference Documents
Investor-led Sustainability in Corporate Governance
The transition to a sustainable economy currently involves a fundamental transformation of our capital markets. Lawmakers, in an attempt to overcome...
Read more
Stewardship and Shareholder Engagement in Germany
Corporate stewardship holds great promise for the improvement of shareholder engagement and the encouragement of more responsible and long-term...
Read more
European Company Law 1999-2010: Renaissance and Crisis
European corporate law has enjoyed a renaissance in the past decade. Fifteen years ago, this would have seemed most implausible. In the mid-1990s, the...
Read more
Net-Zero Transition and Divestments of Carbon-Intensive Assets
An unfamiliar term in the not-too-distant past, “net zero” has become a headline-maker in the business and financial world with the growing...
Read more
Bank-Fintech Partnerships, Outsourcing Arrangements and the Case for a Mentorship Regime
Fintech firms, once seen as ‘disruptors’ of the traditional banking world, are now increasingly seen as attractive partners for established...
Read more
The Politics of Capital Markets Union
EU policymakers are currently implementing the capital markets union (CMU) agenda—a collection of individual steps that, taken together, should...
Read more
Private Companies: The Missing Link on The Path to Net Zero
Global consensus is growing on the contribution that corporations and finance must make towards the net-zero transition in line with the Paris...
Read more
Bank Resolution in Europe: the Unfinished Agenda of Structural Reform
This chapter argues that the work of the European Banking Union remains incomplete in one important respect, the structural re-organization of large...
Read moreDiscussion
Speakers:
Discussion
The European Commission Considers “Short-Termism” (And “What Do You Mean By That?”) Statement made by Prof. John C. Coffee, Jr. : Available here
Speakers
Conference Documents
The Future of Disclosure: ESG, Common Ownership, and Systematic Risk
The U.S. securities markets have recently undergone (or are undergoing) three fundamental transitions: (1) institutionalization (with the result...
Read more
Litigation Governance: Taking Accountability Seriously
Both Europe and the United States are rethinking their approach to aggregate litigation. In the United States, class actions have long been organized...
Read more
The Agency Costs of Activism: Information Leakage, Thwarted Majorities, and the Public Morality
Few doubt that hedge fund activism has radically changed corporate governance in the United States -- for better or for worse. Proponents see activists...
Read more
Ratings Reform: The Good, The Bad, and The Ugly
Both in Europe and in the United States, major steps have been taken to render credit rating agencies more accountable. But do these steps address the...
Read more
Extraterritorial Financial Regulation: Why E.T. Can?t Come Home
Systemic risk poses a classic ?public goods? problem. All nations want systemic stability, but most would prefer that other nations pay for it, allowing...
Read more
Bail-outs and Bail-ins are better than Bankruptcy: A Comparative Assessment of Public Policy Responses to COVID-19 Distress
COVID-19 has severely disrupted the conduct of business around the globe. In jurisdictions that impose one or more ‘lockdowns’, multiple sectors...
Read more
Why Do Auditors Fail? What Might Work? What Won't?
Auditing failures and scandals have become commonplace. In response, reformers (including the Kingman Review in the U.K and a recent report of the...
Read more
Dispersed Ownership: The Theories, the Evidence, and the Enduring Tension Between 'Lumpers' and 'Splitters'
From a global perspective, the single most noticeable fact about corporate governance is the radical dichotomy between dispersed ownership and...
Read moreQ&A
Concluding remarks | Day 1
Speakers:
Concluding remarks | Day 1
Speakers
The Benefits of Access: Evidence from Private Meetings with Portfolio Firms
We analyze over 4,700 private meetings between a large active asset manager and portfolio firms, unobservable to outsiders. These meetings are...
Read more
Reciprocity in Takeovers
The European Commission has proposed a Takeover Directive that aims to make the control of European corporations more contestable. The European...
Read more
Outsourcing Active Ownership in Japan
This paper examines active ownership in Japan by an equity ownership service, Governance for Owners Japan (GOJ). GOJ engages with...
Read more
Returns to Shareholder Activism: Evidence from a Clinical Study of the Hermes U.K. Focus Fund
This article reports a unique analysis of private engagements by an activist fund. It is based on data made available to us by Hermes, the fund manager...
Read more
Corporate Governance and Control
Corporate governance is concerned with the resolution of collective action problems among dispersed investors and the reconciliation of conflicts of...
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Returns to Hedge Fund Activism: An International Study
This paper provides evidence on the incidence, characteristics, and performance of activist engagements across countries. We find that the incidence...
Read more
Loyalty Shares with Tenure Voting - Does the Default Rule Matter? Evidence from the Loi Florange Experiment
The contractual theory of the firm predicts that companies adopt charters that maximise firm value, regardless of the default rule. We test this...
Read more
Does Mandatory Shareholder Voting Prevent Bad Acquisitions?
Shareholder voting on corporate acquisitions is controversial. In most countries acquisition decisions are delegated to boards and shareholder...
Read moreThursday 12 November 2020 (CET)
Introduction
Speakers:
Introduction
Speakers
Outsourcing Active Ownership in Japan
This paper examines active ownership in Japan by an equity ownership service, Governance for Owners Japan (GOJ). GOJ engages with...
Read more
Does Mandatory Shareholder Voting Prevent Bad Acquisitions?
Shareholder voting on corporate acquisitions is controversial. In most countries acquisition decisions are delegated to boards and shareholder...
Read more
Does Paying Passive Managers to Engage Improve ESG Performance?
The paper studies a natural experiment in responsible investment conducted by the Japanese Government Pension Investment Fund (GPIF). In 2018 GPIF...
Read more
Corporate Governance Through Voice and Exit
How do active managers engage with portfolio firms? And, what role does monitoring and engagement play in their trading decisions? We use proprietary...
Read more
Should Shareholders Have a Say on Acquisitions?
Shareholders of U.S. corporations have lost billions of dollars in acquisitions they never approved. In the United Kingdom the listing...
Read more
Where Do Firms Incorporate? Deregulation and the Cost of Entry
We study how deregulation of corporate law affects the decision of entrepreneurs of where to incorporate. Recent rulings by the European Court of...
Read more
The Benefits of Access: Evidence from Private Meetings with Portfolio Firms
We analyze over 4,700 private meetings between a large active asset manager and portfolio firms, unobservable to outsiders. These meetings are...
Read more
Hedge Fund Activism in Europe
The paper analyzes 362 European activist interventions by hedge funds, focus funds and other activist investors from 2000 to 2008. The sample includes...
Read moreResponses to the European Commission’s Consultation by ECGI research members | Part 2
Speakers:
Responses to the European Commission’s Consultation by ECGI research members | Part 2
Paul Davies (University of Oxford and ECGI) (Response)
Mark Roe (Harvard Law School and ECGI); Holger Spamann (Harvard Law School and ECGI) (Response)
Speakers
Conference Documents
Corporate Purpose: Theoretical and Empirical Foundations/Confusions
Does it matter if corporate leaders pursue a broader, social corporate purpose rather than a narrow, shareholder-centric one, and can legal and...
Read more
Shareholders in the United Kingdom
This paper, a version of which will appear in Research Handbook on Shareholder Power (Randall Thomas & Jennifer Hill eds, forthcoming 2015)...
Read more
Implementation of the SRD II Provisions on Related Party Transactions
In 2017 the European Union adopted amendments to the Shareholder Rights Directive enacted a decade earlier. Among the changes was a new Article 9c...
Read more
Related Party Transactions: UK Model
This paper analyses the regulation of related party transactions in the UK through two comparative lenses, one external, the other internal. The...
Read more
The Wages of Failure: Executive Compensation at Bear Stearns and Lehman 2000-2008
The standard narrative of the meltdown of Bear Stearns and Lehman Brothers assumes that the wealth of the top executives of these firms was largely wiped...
Read more
The European Commission's Sustainable Corporate Governance Report: A Critique
In July 2020, the European Commission published the “Study on directors’ duties and sustainable corporate governance” by EY. The Report...
Read more
Principles of Financial Regulation
Inadequate regulation of the financial system is widely thought to have contributed to the financial crisis. The purpose of the book is to articulate a...
Read moreBreak
Discussion
Discussion
Reading material
Buyback Derangement Syndrome by Clifford Asness, Todd Hazelkorn, and Scott Richardson. The Journal of Portfolio Managemant, Vol. 44, no. 5. Available here
Are Buybacks Good for Long-Term Shareholder Value? Evidence from Buybacks around the World by Alberto Manconi, Urs Peyer, and Theo Vermaelen. Journal of Financial and Quantitative Analysis, Vol. 54, No. 5, Oct. 2019, pp. 1899–1935. Available here
Speakers
Conference Documents
Will Nasdaq's Diversity Rules Harm Investors?
In December 2020, Nasdaq asked the Securities and Exchange Commission to approve new diversity rules. The aim is for most Nasdaq-listed firms to...
Read more
Stock Investors' Returns are Exaggerated
The stock market generates less wealth than it appears. We show that total shareholder return (TSR), the standard measure of stock investor...
Read more
Dispersed ownership and asset pricing: An unpriced premium associated with free float
We explore differences in the levels of dispersed ownership that lead to a second returns-based free float hedging factor, which augments the capital...
Read more
Insider Trading, News Releases and Ownership Concentration
This paper investigates the market's reaction to UK insider transactions and analyzes whether the reaction depends on the firm's ownership. There are...
Read more
Good Activist/Bad Activist: The Rise of International Stewardship Codes
This paper focuses on recent trends in shareholder participation in corporate governance in a number of major developed countries. Conflicting...
Read more
The Protection of Investors and the Compensation for their Losses: Australia
The concept of ‘investor protection’ has a long-standing legal pedigree in relation to the business corporation. Since the early 20th century,...
Read more
The Market for Non-Executive Directors: Does Acquisition Performance Influence Future Board Seats?
This paper investigates whether non-executive directors associated with good (bad) board decisions are subsequently rewarded (penalized) in the...
Read moreQ&A
Concluding remarks | Day 2
Speakers:
Concluding remarks | Day 2
Speakers
Institutional Investor Activism in a Context of Concentrated Ownership and High Private Benefits of Control: the Case of Italy
This is a draft chapter for a forthcoming volume, The Research Handbook on Shareholder Power, edited by Randall Thomas and Jennifer Hill...
Read more
The Promise and Perils of Crowdfunding: Between Corporate Finance and Consumer Contracts
‘Crowdfunding’ — raising capital through large numbers of small contributions — is a burgeoning phenomenon, spurred by the internet’s...
Read more
Enforcing Rules on Related Party Transactions in Italy: One Securities Regulator’s Challenge
In the wake of the corporate scandals of the early 2000s, Italian policymakers tackled tunnelling via related party transactions (RPTs) by enacting a...
Read more
Emergency Measures for Equity Trading: The Case Against Short-Selling Bans and Stock Exchange Shutdowns
After the Covid-19 crisis struck, equity prices abruptly plunged across the world. The clear prospect of an almost unprecedented decrease in supply and...
Read more
Dual Class Shares in the Age of Common Ownership
Dual class shares and the anticompetitive effects of common ownership are two of the most discussed corporate governance issues of our time. In this...
Read more
Putting Technology to Good Use for Society: the Role of Corporate, Competition and Tax Law
Innovation and its main output, technology, are changing the way we work, socialise, vote, and live. New technologies have improved our lives and made...
Read moreFriday 13 November 2020 (CET)
Introduction
Speakers:
Introduction
Speakers
Responses to the European Commission’s Consultation by ECGI research members | Part 3
Speakers:
Responses to the European Commission’s Consultation by ECGI research members | Part 3
Alex Edmans (London Business School and ECGI) (Response)
Steen Thomsen (Copenhagen Business School and ECGI) (Response)
Speakers
Conference Documents
Managerial Distance and Virtual Ownership: The Governance of Industrial Foundations
Industrial foundations are autonomous nonprofit entities that own and control one or more conventional business firms. These foundations are common...
Read more
Feedback Effects, Asymmetric Trading, and the Limits to Arbitrage
We analyze strategic speculators' incentives to trade on information in a model where firm value is endogenous to trading, due to feedback from the...
Read more
The Informativeness Principle Without the First-Order Approach
Holmström (1979) provides a condition for a signal to have positive value assuming the validity of the first-order approach. This paper extends...
Read more
The Real Costs of Financial Efficiency When Some Information Is Soft
This paper shows that improving financial efficiency may reduce real efficiency. While the former depends on the total amount of information...
Read more
Contracting With Synergies
This paper studies multi-agent optimal contracting with cost synergies. We model synergies as the extent to which effort by one agent reduces his...
Read more
Governance Under Common Ownership
Conventional wisdom is that diversification weakens governance by spreading an investor too thinly. We show that, when an investor owns multiple firms...
Read more
Socially Responsible Divestment
Blanket exclusion of "brown" stocks is seen as the best way to reduce their negative externalities by starving them of capital. We show that a more...
Read more
Industrial Foundations as Long-Term Owners
Short-termism has become a serious concern for corporate governance, and this has inspired a search for institutional arrangements to promote...
Read moreBreak
Discussion
Discussion
Speakers
Corporate Law of Israel
This chapter provides a concise survey of Israeli corporate law. The chapter opens with a description of the law’s approach to corporate legal...
Read more
Liability for Transnational Securities Fraud, Quo Vadis?
This Chapter evaluates the state of affairs with regard to liability for transnational securities fraud in the post-Morrison era, to find that it is in a...
Read more
The Costs and Benefits of Shareholder Democracy: Gadflies and Low-Cost Activism
We show that there is cross-sectional variation in the quality of shareholder proposals. On average, the proposals submitted by the most active...
Read more
Supply Chain Risk: Changes in Supplier Composition and Vertical Integration
Using textual analysis of earnings conference calls, we quantify firms’ supply chain risk and explore how firms react when supply chain risk...
Read more
Corporate Scandals and Household Stock Market Participation
We show that after the revelation of corporate fraud in a state, household stock market participation in that state decreases. Households decrease...
Read more
Costs and Benefits of Financial Conglomerate Affiliation: Evidence from Hedge Funds
This paper explores how affiliation to financial conglomerates affects asset managers’ access to capital, trading behavior, and performance....
Read more
Implementation of the SRD II Provisions on Related Party Transactions
In 2017 the European Union adopted amendments to the Shareholder Rights Directive enacted a decade earlier. Among the changes was a new Article 9c...
Read more
Do Cultural Differences Between Contracting Parties Matter? Evidence from Syndicated Bank Loans
We investigate whether cultural differences between professional decision-makers affect financial contracts in a large dataset of international...
Read moreQ&A
Concluding remarks | Day 3
Speakers:
Concluding remarks | Day 3
Speakers
Conference Documents
Justifications for Minority-Co-Owned Groups and Their Corporate Law Implications
Corporate groups with listed subsidiaries are common around the world, despite the risks they pose to minority shareholders. Shaping a firm as a web of...
Read moreThe Case for an Unbiased Takeover Law (with an Application to the European Union)
Takeover regulation should neither hamper nor promote takeovers, but instead allow individual companies to decide the contestability of their...
Read more
Disclosure and Financial Market Regulation
This is a draft chapter for a forthcoming volume, The Oxford Handbook on Financial Regulation, edited by Eilís Ferran, Niamh Moloney, and Jennifer...
Read more
Corporate Governance and Control
Corporate governance is concerned with the resolution of collective action problems among dispersed investors and the reconciliation of conflicts of...
Read more
Does Paying Passive Managers to Engage Improve ESG Performance?
The paper studies a natural experiment in responsible investment conducted by the Japanese Government Pension Investment Fund (GPIF). In 2018 GPIF...
Read more
Outsourcing Active Ownership in Japan
This paper examines active ownership in Japan by an equity ownership service, Governance for Owners Japan (GOJ). GOJ engages with...
Read more
Constraining Dominant Shareholders’ Self-Dealing: The Legal Framework in France, Germany, and Italy
All jurisdictions supply corporations with legal tools to prevent or punish asset diversion by those, whether managers or dominant shareholders, who...
Read moreSpeakers
