The International Who’s Who of Corporate Governance Lawyers has brought together three of the leading practitioners in the world to discuss key issues facing lawyers today.
Lenz & Staehelin
Have there been any relevant regulatory developments or legislative changes over the past year? How have they affected your clients? Are any predicted for the near future?
Rudolf Tschäni: In Switzerland, there have not been any particular regulatory developments or legislative changes with respect to aspects of corporate governance. There is, however, a general revision of the Swiss Code of Obligations – the CO – pending. One of its main goals is to improve corporate governance in Switzerland by means of strengthening the position of shareholders as the owners of a company. For example, the rights of information for shareholders will be regulated more clearly and the thresholds for exercising different shareholders’ rights will be lowered. It is not yet known when these new regulations will be put into effect.
The core of corporate governance in Switzerland is driven by regulations governing Swiss public limited companies. The Swiss stock exchange and takeover law provide for a variety of corporate governance measures (ie, notification thresholds, ad hoc publicity, half-year reports) with a main focus on information that needs to be published so that investors can evaluate the quality of the securities and of the issuers. In connection with this, the regulatory board of the Swiss stock exchange published the directive on information relating to corporate governance several years ago. To further develop the transparency of Swiss public limited companies the regulatory board recently announced intentions to put another directive regarding a management commentary into effect. The objective of the new directive is to require issuers to provide users of financial statements with integrated information regarding the financial position, financial performance and cash flows in the context of the entity’s objectives and strategies in a meaningful format and to formulate the point of view of management.
Executive remuneration and directors’ pay are in fact still a focal point in Switzerland. The subject received particular attention in the media after an initiative against “fat-cat payouts” was launched which will have to be voted upon by the Swiss people. Besides this, rules relating to corporate governance are becoming more sophisticated, especially as regards general shareholders’ meetings. A number of providers support shareholders in the exercise of their voting rights by providing them with analyses or by offering them administrative support for voting by proxy.
Eduardo de Alba: In Panama, in the last year, there have been no significant developments affecting closely held companies. Non obligatory guidelines have been adopted by the Panama securities commission concerning publicly registered companies, on – for instance – conflicting director and officers’ positions, related parties transactions, incorporation of independent directors, integration and scope of duties of audit committees and other board committees, and the like. For banks, new, more stringent provisions of a similar nature have recently been adopted binding on board members of banks and bank holding companies. One can foresee that in future years, similarly binding provisions are likely to be adopted for public companies
Alan Klein: There have been several recent court decisions which have placed a greater burden on directors in situations where companies are being sold to be more aware of potential conflicts on the part of their financial advisors. In addition, a court blocked new regulations that had been issued by the US Securities and Exchange Commission which would have made it easier for shareholders to be able to propose resolutions for a public company’s annual meeting.
NAVIGATING THE REGULATORY LANDSCAPE
A common theme throughout our research was that directors and executives are becoming increasingly aware of the need for legal advice to help them navigate their growing regulation and compliance obligations. How does your firm educate and counsel your clients in the face of this harsher landscape?
Eduardo de Alba: In Panama, this is becoming more relevant – particularly in the banking sector. We educate our board member clients through newsletter disclosures, opinions, seminars and the like.
Rudolf Tschäni: We educate our clients in the course of client seminars and upon specific requests for advice.
Alan Klein: We hold seminars for directors to advise them of developments, provide them memos which we hope provide clear guidance and also speak at board meetings about both general and specific topics.
What are the current issues that clients are requiring advice on? Are executive remuneration and directors’ pay still a focal point? What other areas do you expect to see growing in significance in the future?
Alan Klein: Officer and director compensation is certainly a hot-button issue, particularly among stockholder activists. Boards obviously require a great deal of advice when either selling a company, making a significant acquisition or otherwise splitting up a company.
Rudolf Tschäni: Current issues still include advice on executive remuneration and directors’ pay. Other issues in particular relate to having articles of incorporation and regulations that are up to the current benchmark of corporate governance regulations. A frequent issue is to ensure that management transactions are properly reported and that the rules regarding ad hoc publicity are complied with. In this connection, questions of insider trading come up (the respective law is about to be changed) and, in certain cases, internal investigations are undertaken with a view to cooperate with the authorities and to safeguard the responsibility of the board of directors.
With shareholder activism a key concern for management, what legal advice has been required on your part to respond to these matters?
Alan Klein: In assisting a company which has been approached by stockholder activists, we will assist the board both in looking at the company’s organisational documents and the applicable corporate law to determine the defences that are available to it, prepare the appropriate documents, such as proxy statements responding to an activist who is attempting to get its own director nominees elected to the board, and negotiate a formal settlement agreement with an activist when a negotiated solution has been reached.
Eduardo de Alba: In Panama, as yet, shareholders have not become active, belligerent participants in proxy fights to elect boards of directors or to otherwise assert their rights as equity or stakeholders, either in publicly or privately held companies. Since shareholder activism is becoming a trend worldwide, one cannot rule out these issues coming to the forefront in Panama in the future.
Rudolf Tschäni: We have been retained on both the defence side and on the activist’s side. Numerous publicly listed companies have, in the meantime, prepared themselves for the situation that activist shareholders appear at their doorstep. In this connection the articles of incorporation and the regulations of the target company are reviewed and organisational measures are taken in order to be prepared and alert in case that an activist shareholder shows up. On the activist’s side, the usual matters that require legal advice relate to the rights of the shareholders and how these rights are effectively exercised. A particular issue under Swiss law is always to make certain that the activist shareholders and their allies are properly registered and in a position to exercise their voting rights.