STANFORD ROCK CENTER PROGRAM FOR JOURNALISTS:
A PRIMER IN CORPORATE GOVERNANCE
June 9, 2016
Location: Skadden, Arps, Slate, Meagher & Flom LLP
New York City, NY
8:30 a.m. Breakfast
9:00 a.m. The Corruption Business
Joseph Grundfest, W. A. Franke Professor of Law and Business; Senior Faculty, Arthur and Toni Rembe Rock Center for Corporate Governance; and Co-director, Director’s College
Corruption is big business. This session explores corruption primarily through the lens of US enforcement activity, and its implications for corporate governance. The Foreign Corrupt Practices Act serves as a focal point for this inquiry, as does the Justice Department’s new policy on cooperation, which seeks to induce corporations to self-investigate and self-report instances of corruption, and then to turn over evidence sufficient to implicate individual employees implicated in the wrongdoing. The recent criminal prosecutions of municipal officials in Ramapo has not been widely covered in the press, and could herald a potentially significant new front in the battle against corruption, with intriguing political implications. The Panama Papers and the debate over confidentiality in corporate chartering at the state level, particularly in Delaware, fuel further controversy, and raise the question of whether the US legal regime can help conceal ill-gotten gains.
10:00 a.m. Break
10:15 a.m. Accounting
Roman L. Weil, V. Duane Rath Professor of Accounting Emeritus at the Chicago Booth School of Business; Program Fellow, Stanford Law School; Co-Director, Directors’ Consortium
This session will cover what journalists should know about requirements for financial literacy by corporate board members. The purpose of the income statement is not to report income; once you understand this, you’ll have mastered the basics. Topics will include controversies over revenue recognition; the single most important understanding about cash flow analysis; how some lie with accounting statistics; the convergence of US GAAP with International Financial Reporting Standards (IFRS); the important measure of income that journalists hide from their readers; and wreaking havoc with executory contracts.
11:30 a.m. Lunch Break
11:45 p.m. CEO and Exec Comp: How Much it Too Much?
Paul Oyer, The Fred H. Merrill Professor of Economics, Graduate School of Business, Stanford University
CEOs and other top executives make headlines regularly through their eye-popping compensation packages. But does that mean the system is broken? Can basic finance and economics justify paying a top executive tens of millions of dollars per year for just doing his or her job? This session will consider the evidence from both angles. Many analysts think the system is broken and rigged. But some economists and others justify observed executive pay levels as being in the best interests of shareholders and the economy overall. The session will show that this is not as simple a question as many think, that both sides are right in many cases, and that it is too simplistic to look for a one-word answer to “Are CEOs Overpaid?”
1:00 p.m. Break
1:30 p.m. Founder Board Control: Dual Class Shares and other Voting Rights Structures
Evan Epstein, Executive Director, Rock Center for Corporate Governance, Stanford University
Dual-class share structures used to be rare in the US and confined largely to family-run businesses or media companies, such as NYT or WSJ, where they could be justified as protecting the company’s editorial independence. Google bucked convention when, in 2004, it adopted the dual-class structure for its I.P.O. Since then, most tech companies have gone public with dual class share structures, including LinkedIn, Groupon, Zynga, Facebook, Box, GoPro, Square, etc. The latest crop of “unicorns” have also adopted this structure, with some data indicating that 9 out of the 10 most highly valued U.S. unicorns have instituted “supervoting” shares. This presentation will discuss the corporate governance implications of this control structure and other voting right structures, relevant both for private and public markets.
2:30 p.m. Break
2:45 p.m. Corporate Finance
F. Daniel Siciliano, Professor and Associate Dean for Executive Education and Special Programs, Stanford Law School; Faculty Director, Arthur and Toni Rembe Rock Center for Corporate Governance; and Co-director, Director’s College
This session will evaluate and deconstruct the key issues of corporate finance that confront directors and review how managers should make investment decisions and what tools capable directors (and journalists) might use to study and evaluate those decisions. Topics include simple and complex discounting, cash flow analysis; free cash flows, and the incorporation of probability analysis in investment decisions. The discussion will include the role of the cost of capital, how to measure the cost of capital, and how directors (and others) might think more clearly about risky projects.
4:00 p.m. Adjournment