An earlier post had discussed a recent Australian judgment on the role and duties of a non-executive director, Australian Securities and Investment Commission v. MacDonald. More recently, according to a report on the Corporate Law and Governance blog, the Inner House of the Court of Session of Scotland has again commented on the role of non-executive directors. (The Court of Session is Scotland’s...
Corporate Frauds and Regulatory Shortcomings: SEC’s Madoff Report
A few days ago, the U.S. SEC’s Office of Inspector General (OIG) released a report (over 450 pages) identifying various lapses that led to SEC’s failure to uncover Madoff’s Ponzi scheme much earlier than December 2008 when the scandal broke out. To the interested reader, the executive summary might be more manageable given the length of the main report. The principal findings of SEC’s...
Swiss Accounts and Banking Secrecy: Contrasting Outcomes
After prolonged discussions, the US and Swiss authorities came to an agreement earlier this month whereby UBS would disclose details of certain US account holders who are suspected of evading US taxes. The Time Magazine outlines the terms: Under the terms of the new agreement, the IRS will submit a request to Swiss tax authorities to divulge within one year the names of clients suspected of...
SEC Issues Permanent Ban on Abusive Short Sales
In the aftermath of the financial crisis, the US Securities and Exchange Commission (SEC) had issued a temporary ban on the practice of “naked” short sales. By way of a recent press release, SEC has now made the ban permanent. The Press Release defines a “naked” short sale as one where “the investor sells shares “short” without first having borrowed them”. While the Indian securities...
The Efficacy of Conventional Corporate Governance Instruments
Each time there is a corporate governance scandal (whether in India or elsewhere), the response has been to use a set of instruments (implemented through regulation or best practices) to avoid a repetition of such occurrences. It appears that these instruments have not always been successful as they come with certain innate limitations, but they are often applied in situations that are different...
The Tale of the Resigning Director
In the aftermath of events that occurred at Satyam and Nagarjuna Finance, there has been a mass exodus of independent non-executive directors from boards of Indian listed companies. More often that not, there is no apparent reason offered for resignation by such directors. As we had discussed in an earlier post, the SGX in Singapore has specified a template for notice of resignation of directors...
The Duties of Non-Executive Directors
Earlier discussions on corporate governance norms have raised questions about the role of independent non-executive directors in maintaining appropriate standards of governance. In this context, a recent Australian judgment indicates the nature of duties which a non-executive director may be required to discharge. Australian Securities and Investment Commission v. MacDonald involved a situation...
A Call for Greater Shareholder Rights under U.S. Law
The proposed Shareholder Bill of Rights Act of 2009 in the U.S. that comes in the wake of the financial crisis gives rise to an important debate regarding the rights of shareholders in companies. The rationale for the Bill is the perceived failure of corporate governance that led to the crisis. It is worthwhile to set out the larger objective behind the Bill: Congress finds that— (1) among the...
Obama’s ‘Taxing’ Proposals
On Monday (4th May, 2009), the United States President, Barrack Obama announced the proposed implementation of another one of his election promises, targeted towards improving the domestic economic climate, and freeing up financial resources for investment in areas of pressing importance. The proposal is to withdraw the scheme of deferred tax for foreign income, currently in place in the U.S...
Law Firm Practices and the Global Financial Crisis
The current issue of Knowledge@Wharton carries an article Legal Strategy 101: It’s Time for Law Firms to Re-think Their Business Model that looks at the impact of the global financial crisis on law firm practices around the world, and considers possible strategies available to law firms and their clients to weather the storm. The fundamental issue the article identifies relates to the...
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