Board Process and Fiduciary Duty
Cornerstone Research has worked with clients and experts in numerous matters in which plaintiffs have alleged that corporate directors and/or officers acted imprudently or against the interests of the company’s shareholders. In these cases, we have evaluated the activities of directors and officers to determine whether they acted in a manner consistent with their roles and fiduciary duties. Our analyses have addressed corporate decisions, marketing statements, internal audit and process oversight, elections of directors, and independence of directors.
Proxy Statements, Internal Controls, and Disclosure Processes
Cornerstone Research has addressed a variety of issues that relate to the appropriateness and/or materiality of corporate disclosures. For example, we have worked with clients and experts to determine whether particular components of financial restatements would have been considered material by individual shareholders or potential corporate acquirers, and whether proxy statement disclosures made to shareholders were sufficient to allow them to cast informed votes. We have also helped clients address issues arising from Section 404 of the Sarbanes-Oxley Act of 2002 regarding internal controls. In addition to addressing the substantive question of whether an alleged disclosure or financial misstatement is material, Cornerstone Research has worked with experts to evaluate the actions of boards, board committees, and corporate officers in overseeing their companies’ internal controls and disclosure processes.
ERISA, Mutual Fund, and Advisor Fiduciary Duty
Cornerstone Research staff and experts have addressed a wide variety of claims made under ERISA standards that relate to oversight of companies’ 401(k) or pension plan benefits. In particular, claims made under ERISA can present direct challenges to the governance processes of such companies. Cornerstone Research has worked with experts who have testified on issues ranging from the suitability of certain investment decisions for retirement plan participants, to the adequacy of a board’s investigation of plan fees, to whether individual board members avoided potential conflicts of interest as they relate to particular retirement plan investments. We also have been asked to address allegations that individuals have breached their fiduciary duties when negotiating mutual fund fees with related corporate entities, or when providing investment advice.
Executive Compensation and Insider Trading
In recent years corporate boards and their compensation committees have faced heightened scrutiny of the compensation, benefits, and severance packages that they approve for top executives. In particular, shareholders and regulators may challenge incentive structures that involve options and other contingent components of executive pay that are difficult to value. Cornerstone Research has analyzed such matters as well as claims of inappropriate trading in company stock by insiders, even in the presence of approved trading windows or Rule 10b5-1 plans. We have worked with experts in analyzing alleged options “backdating” and other allegedly inappropriate or excessive elements of executive compensation packages, the incentive structure of executive pay, deferred compensation, and whether a company’s board and/or its compensation committee have acted appropriately in establishing compensation packages for corporate officers. We have also worked with experts on Rule 10b-5 and Section 11 matters to analyze allegations of inappropriate trading by insiders at times when they may have possessed material private information about their companies.
Parent/Subsidiary Relationships and “Piercing the Corporate Veil”
When a wholly owned corporate subsidiary is sued, its parent entity is often named as a separate defendant on the theory that the subsidiary was not sufficiently distinguishable from the parent at the time of the challenged actions. For many diversified companies, this so-called “piercing the corporate veil” or “alter ego” suit can place unrelated assets at risk. Cornerstone Research has worked with experts and counsel in several major matters of this type to determine whether the parent and subsidiary have established themselves as genuinely separate entities. This work covers not only the formalities of corporate structure and governance processes, but also numerous aspects of the operational, financial, and marketing relationships that exist between the parent and the subsidiary.