Volume 8, Issue 3

This paper deals with the impact of tax-aggressive strategies on corporate governance by adopting an agency perspective of the firm and discusses how certain corporate tax governance measures may limit these kinds of managerial actions. The paper defines the regulative concept of effective tax planning as a tax strategy that minimizes not only explicit taxes, but also implicit taxes and non-tax costs, focusing on the agency problems emerging between shareholders and tax managers. This key concept is then used to identify what kind of tax-aggressive strategies pose relevant policy issues and to highlight important issues, such as: why and to what extent do managers pursue aggressive tax strategies, why are these strategies used in large companies, do these strategies advance shareholder value, and how can tax savings obtained through these strategies be measured? The conclusion os that aggressive managerial tax behaviour requires counterbalancing policies which are not limited to the traditional anti-avoidance rules but also include the tools of corporate tax governance; such as risk and metarisk management, disclosure rules, regulation of tax advisors, reporting

The dissociation of a share into voting and economic rights has made hidden ownership possible. This article underscores the benefits of hidden ownership and examines its impact on corporate governance. It then examines hedge fund activism as a means of revitalizing corporate governance and shows how hidden ownership incentivizes activism by rewarding expensive investments in developing private information. The article argues that mandatory disclosure of economic only ownership can have a deleterious effect on the financial markets as it will diminish the incentives to search for information which is a socially beneficial activity. Hidden ownership thus contributes to more efficient markets, better markets for corporate influence and corporate control and is an effective check on managerial rent seeking. It examines the existing disclosure regime and argues that the benefits of hidden ownership outweigh the costs and regulators ought to appreciate the political economy of the jurisdiction before mandating further disclosure. Hidden ownership is an effective check on errant managers, especially in regimes where the allocation of powers is skewed in favour of the directors. Finally, it posits that hedge fund activism has been beneficial and hidden ownership too has many positives, most of which are overlooked and in conjunction, it can be an effective check on managerial rent seeking and allow for greater shareholder oversight by incentivizing monitoring.

Listed companies may be liable to investors for misrepresentation. A causal connection between the investor's alleged harm and the misstatement or omission will need to be established for a successful damage claim. This article addresses causation, specifically the causal connection between the misstatement (or omission) and the investment decision. Proving this causal connection is often problematic, which raises the question how investors can be effectively protected without inviting excessive litigation. Recently, the Dutch Supreme Court has accepted an indirect causal connection as sufficient and has adopted a presumption on behalf of investors on favorable terms in a prospectus liability case. A showing of a material misstatement by investors activates the presumption. The Dutch Supreme Court justifies this by reference to the Prospectus Directive, which it interprets as requiring an effective protection of (potential) investors. The influence of the Prospectus Directive on the law of causation can be relevant for other European jurisdictions as well. The approach to adopt a presumption based on European disclosure directives could extend beyond prospectus liability cases to all lawsuits alleging misrepresentation on the secondary market. These developments are discussed and a comparison is made between the law of the Netherlands, the US and Germany.

The level of shareholder participation in the determination of executive compensation has emerged, in recent years, as one of the most intensively debated fields in the area of modern corporate governance. A say-on-pay regime was implemented, for the first time, in the UK in 2002, but a decisive tipping point may well have been reached in July 2010 when the US Congress adopted a new set of rules under which all US listed companies are required, starting in the 2011 proxy season, to put a vote with respect to executive compensation on the agenda of their annual meetings. The recent financial crisis also prompted the enactment of a say-on-pay vote requirement in Germany. By contrast, in Switzerland, the principle of such a shareholder vote is still being debated among experts and laymen alike. In all likelihood, Swiss voters will be consulted in 2012 or 2013 on whether or not a say-on-pay regime, whose terms are rather stringent in international comparison, should be carved into the Swiss Constitution. After a review of the rules implemented or discussed in the four jurisdictions mentioned above, the authors will argue that say-on-pay votes are, by and large, a convincing concept to enhance the corporate governance of the large public firm. It is crucial however that the modalities of such a shareholder vote be tailored to the different corporate governance structures prevailing in various jurisdictions. Finally, the authors comment on, and recommend a series of improvements with respect to, the say-on-pay provisions that have been implemented or discussed in the four jurisdictions which are addressed in this contribution.