Welcome to the Boardroom Governance Podcast. I’m your host, Evan Epstein. In this episode, I talk with Larry Cunningham, a Special Counsel in Mayer Brown’s New York office. Larry is a member of the firm’s Capital Markets and Public Companies & Corporate Governance practices where he advises public companies and boards of directors in those areas and advises investment managers and shareholders on investor relations. Larry is the Henry St. George Tucker III Research Professor of Law emeritus at George Washington University. This is his second appearance on my podcast, the first time was on E36 in June of 2021. In this podcast, we talk about his recent transition to private practice after 30 years of teaching and some of the take-aways from the speech he delivered earlier this year for the 37th Annual Francis Pileggi Distinguished Lecture in Law at Delaware Law School to the state’s corporate bench and bar. We also tackle some current trends, such as the directors’ role amid debates over corporate purpose, stakeholders and ESG. We address the SVB collapse and the ongoing financial crisis, and his advice for boards who have been or could be affected on the fundamentals of governance amid this heightened uncertainty. Finally, we talk about share buybacks and Warren Buffett's position in this financial crisis. If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media. You can find all the show notes on the website boardroom-governance.com and please feel free to subscribe to the Boardroom Governance Newsletter at evanepstein.substack.com
0:00 -- Intro.
1:51 -- Start of interview.
2:44 -- On Larry's move from academia to private practice as Special Counsel in Mayer Brown’s New York office. His writings in Mayer Brown's Across the Board's blog.
4:58 -- His message at the 37th Annual Francis G. Pileggi Distinguished Lecture in Law at Delaware Law School to the state’s corporate bench and bar.
9:02 -- Shareholder Typologies and demographics (long/short term, low/high conviction): Indexers, Transients, Activists and Quality Shareholders.
14:51 -- Attributes of directors: #1 requirement is business savvy, per Warren Buffett. | Pat formulas in corporate governance, ie. check-the-box approach "mandated by central command": why they should be viewed with great skepticism.
18:59 -- On the politicization of ESG, and Delaware's approach: "directors’ fiduciary duties run to shareholders, but they may promote the interests of others when those are rationally related to shareholder interests.” Delaware VC Laster's opinion in McDonalds II (dismissing all shareholder claims that directors violated their oversight duties amid a toxic corporate culture.)
25:00 -- Some reasons for increase in ESG debate: 1) Declining trust in government, 2) Rising concern about climate change, 3) Powerful social movements, and 4) Powerful institutional asset managers leaning on ESG. But Delaware remains a shareholder primacy state, "and that's a good thing", per former Chancellor of the Delaware Court of Chancery Andre Bouchard, now a partner at Paul Weiss partner, cited from a speech at a Directors' & Board event.
27:00 -- Directors' personal values "don't matter at all" when it comes to fiduciary duties, "what matters is only what is best for the company [corporate interests]."
30:58 -- On the SVB collapse, and the ongoing financial crisis (Silvergate, Signature, FRB, CS, etc). Larry's advice for boards who have been or could be affected, on the fundamentals of governance amid this heightened uncertainty. His firm's client alert: Maintaining Perspective: Governance and Disclosure Reminders for Public Companies.
In the Vicinity of Insolvency: "When a company is insolvent, creditors may obtain standing to bring a derivative action on behalf of the company for breach of fiduciary duties. Although the fiduciary duties of care and loyalty to the company remain the same, the beneficiaries of those duties shift. Since it can be hard to tell in real time when a company becomes insolvent, directors of a company in the vicinity of insolvency should view their duties through the lens of the different beneficiaries of those fiduciary duties."
36:07 -- The case of Credit Suisse's acquisition by UBS. The precedence of the US Government taking over AIG.
40:11 -- On his article: "Share Buybacks, Directors Should Stick with Economics, Avoid Politics."
46:32 -- On Warren Buffett, and whether the White House and/or bankers will seek him out for advise and/or dealmaking in this financial crisis: "He's waiting for the phone to ring with an attractive offer on the other end of the line."
50:27 -- Final words of advice for directors: "Directors of public companies are stewards of a business and they need to act with business judgement and not on personal preferences, political and social issues of the day."
Lawrence A. Cunningham is Special Counsel in Mayer Brown’s New York office. Larry is a member of the firm’s Capital Markets and Public Companies & Corporate Governance practices. Recognized as an authority on corporate governance and corporate law, Larry advises public companies and boards of directors in those areas and advises investment managers and shareholders on investor relations.
If you like this show, please consider subscribing, leaving a review or sharing this podcast on social media.
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You can follow Larry on social media at:
Twitter: @CunninghamProf
LinkedIn: https://www.linkedin.com/in/lawrence-cunningham-68b7574b/
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You can follow Evan on social media at:
Twitter: @evanepstein
LinkedIn: https://www.linkedin.com/in/epsteinevan/
Substack: https://evanepstein.substack.com/
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Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License