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The Corporate Governance Lessons from the Financial Crisis
ISSN 1995-2864 Financial Market Trends © OECD 2009 Pre-publication version for Vol. 2009/1 The Corporate Governance Lessons from the Financial Crisis Grant Kirkpatrick * This report analyses the impact of failures and weaknesses in corporate governance on the financial crisis, including risk management systems and executive salaries. It concludes that the financial crisis can be to an important extent attributed to failures and weaknesses in corporate governance arrangements which did not serve their purpose to safeguard against excessive risk taking in a number of financial services companies. Accounting standards and regulatory requirements have also proved insufficient in some areas. Last but not least, remuneration systems have in a number of cases not been closely related to the strategy and risk appetite of the company and its longer term interests. The article also suggests that the importance of qualified board oversight and robust risk management is not limited to financial institutions. The remuneration of boards and senior management also remains a highly controversial issue in many OECD countries. The current turmoil suggests a need for the OECD to re-examine the adequacy of its corporate governance principles in these key areas. * This report is published on the responsibility of the OECD Steering Group on Corporate Governance which agreed the report on 11 February 2009. The Secretariat’s draft report was prepared for the Steering Group by Grant Kirkpatrick under the supervision of Mats Isaksson. FINANCIAL MARKET TRENDS – ISSN 1995-2864 - © OECD 2008 1 THE CORPORATE GOVERNANCE LESSONS FROM THE FINANCIAL CRISIS Main conclusions The financial crisis can This article concludes that the financial crisis can be to an be to an important important extent attributed to failures and weaknesses in corporate extent attributed to governance arrangements. -
Lehman Brothers Inc. and Barclays Agree to End Litigation and Resolve Claims Wind-Down of Estate Continues
Lehman Brothers Inc. and Barclays Agree to End Litigation and Resolve Claims Wind-Down of Estate Continues New York, June 5, 2015 – James W. Giddens, Trustee for the liquidation of Lehman Brothers Inc. (LBI) under the Securities Investor Protection Act (SIPA), and Barclays Capital Inc. and Barclays Bank PLC today agreed to resolve certain claims and end all ongoing and potential litigation between them. The agreement is consistent with past orders and judgments entered in the litigation and is subject to approval by U.S. Bankruptcy Judge, the Honorable Shelley C. Chapman. “It has always been our duty to prudently and diligently pursue every avenue of recovery for assets we believe belong to the estate, and we did so on behalf of creditors by taking the Barclays litigation all the way to the Supreme Court,” Giddens said. “This agreement ends years of litigation and achieves the best result under the circumstances as winding-down and closing out the estate continues in earnest.” Barclays purchased Lehman’s brokerage business following a hearing in Bankruptcy Court that began on September 19, 2008. Immediately after the purchase, the Trustee set in motion the transfer to Barclays of more than 110,000 customer accounts representing more than $92 billion in customer property. At the same time, the Trustee and Barclays engaged in complex and lengthy litigation over certain disputed assets. The Trustee was successful in Bankruptcy Court after 34 days of trial in a case that presented complex and novel legal issues. Subsequently, various appeals court rulings sided with Barclays. The litigation is now concluded as part of this agreement. -
The Immediate and Lasting Impacts of the 2008 Economic Collapse—Lehman Brothers, General Motors, and the Secured Credit Markets
DO NOT DELETE 4/22/2011 11:28 AM THE IMMEDIATE AND LASTING IMPACTS OF THE 2008 ECONOMIC COLLAPSE—LEHMAN BROTHERS, GENERAL MOTORS, AND THE SECURED CREDIT MARKETS Edward J. Estrada * I. INTRODUCTION Following the economic meltdown that began in the spring of 2008, immediate and longer term ramifications began to ripple through all aspects of the economy. Clearly, these tremors have not yet subsided, and continued fallout will be felt in the coming years. Importantly, even those companies and industries that have seemingly passed through the most immediate wave of im- pacts will be susceptible to the ongoing struggle to achieve sus- tainable growth. Many such companies may experience future de- faults, largely dependent upon the strength and vitality of economic growth in the coming year and their industry perfor- mance in that timeframe. In 2008, as the financial giants of the world began to struggle and collapse, some in the course of a few days, it was widely be- lieved that the credit markets, and in turn the global economy, would completely seize up, causing an economic catastrophe un- paralleled in modern history.1 While tumultuous, what did in fact happen was something far less dramatic, but it had a lasting negative impact, nevertheless. As often happens in crises, some impacts were to be expected and other events were complete surprises. For example, the re- sulting flight from risk by investors (both corporate and individu- * Partner in the Commercial Restructuring and Bankruptcy Group of the New York office of Reed Smith LLP. The author would like to thank Aaron Bourke, an associate in the Commercial Restructuring and Bankruptcy Group of the New York office of Reed Smith LLP, for his contributions to the article. -
Enforcement of Scc and Russian Arbitration Awards in the United States Courts: an Overview
Stockholm Arbitration Report, Volume 2003:2 ENFORCEMENT OF SCC AND RUSSIAN ARBITRATION AWARDS IN THE UNITED STATES COURTS: AN OVERVIEW Alexander S. Vesselinovitch* Several published decisions by U.S. federal and state courts have addressed SCC and Russian arbitration awards and proceedings. Some of these decisions, which came after the collapse of the Soviet Union in 1991, strongly suggest that a Russian arbitration award will be enforced against a U.S. party or citizen by a U.S. court. Moreover, the published decisions by U.S. courts lend support to the enforcement by a U.S. court of an arbitration award rendered by the Arbitration Institute of the Stockholm Chamber of Commerce (“SCC”) against a U.S. party. 1. Policy of New York Convention Favors Enforcement The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, commonly called the “New York Convention,” was adopted with several reservations by the United States in 1970. The enabling legislation incorporated the New York Convention into Chapter Two of the United States Federal Arbitration Act, 9 U.S.C. §§ 201-208. * Katten Muchin Zavis Rosenman, 525 West Monroe Street, Suite 1600, Chicago, Illinois 60661, (Telephone) 312-902-5660, (Facsimile) 312-577-4755, E-Mail: [email protected]. © 2003 Juris Publishing, Inc. Reprinted with Permission. All rights reserved. 37 Sweden, Russia, and the United States are signatories and contracting parties to the New York Convention. Moreover, Russian courts have applied provisions of the New York Convention under Russia’s Civil Code. Several commentators have already observed that the prospects for the enforcement of an SCC Institute award are very favorable in the courts of another party to the New York Convention.1 Because Sweden has generous rules regarding the validity of arbitration agreements, an arbitral award rendered on the basis of such an agreement will rarely be refused enforcement.2 Nevertheless, no published decision by a U.S. -
The Global Financial Crisis: Analysis and Policy Implications
The Global Financial Crisis: Analysis and Policy Implications Dick K. Nanto, Coordinator Specialist in Industry and Trade July 2, 2009 Congressional Research Service 7-5700 www.crs.gov RL34742 CRS Report for Congress Prepared for Members and Committees of Congress The Global Financial Crisis: Analysis and Policy Implications Summary The world has entered a global recession that is causing widespread business contraction, increases in unemployment, and shrinking government revenues. Some of the largest and most venerable banks, investment houses, and insurance companies have either declared bankruptcy or have had to be rescued financially. Nearly all industrialized countries and many emerging and developing nations have announced economic stimulus and/or financial sector rescue packages, such as the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). Several countries have resorted to borrowing from the International Monetary Fund as a last resort. The crisis has exposed fundamental weaknesses in financial systems worldwide, demonstrated how interconnected and interdependent economies are today, and has posed vexing policy dilemmas. The process for coping with the crisis by countries across the globe has been manifest in four basic phases. The first has been intervention to contain the contagion and restore confidence in the system. This has required extraordinary measures both in scope, cost, and extent of government reach. The second has been coping with the secondary effects of the crisis, particularly the global recession and flight of capital from countries in emerging markets and elsewhere that have been affected by the crisis. The third phase of this process is to make changes in the financial system to reduce risk and prevent future crises. -
The FRC's Enquiries and Investigation of KPMG's 2007 and 2008 Audits Of
Report Professional discipline Financial Reporting Council November 2017 The FRC’s enquiries and investigation of KPMG’s 2007 and 2008 audits of HBOS The FRC’s mission is to promote transparency and integrity in business. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality. The FRC does not accept any liability to any party for any loss, damage or costs howsoever arising, whether directly or indirectly, whether in contract, tort or otherwise from any action or decision taken (or not taken) as a result of any person relying on or otherwise using this document or arising from any omission from it. © The Financial Reporting Council Limited 2017 The Financial Reporting Council Limited is a company limited by guarantee. Registered in England number 2486368. Registered Offi ce: 8th Floor, 125 London Wall, London EC2Y 5AS Contents Page 1 Executive Summary ........................................................................................................ 3 2 Summary Background: HBOS and the contemporaneous banking and financial conditions ........................................................................................................................ 6 3 Accounting Requirements and Auditing -
Lehman Brothers Holdings Inc
Simpson Thacher & Bartlett LLP 900 G STREET, NW WASHINGTON, D.C. 20001 TELEPHONE: +1-202-636-5500 FACSIMILE: +1-202-636-5502 Direct Dial Number E-mail Address +1-202-636-5543 [email protected] August 12, 2019 VIA EMAIL Mr. Paul Cellupica Division of Investment Management Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 Re: No-Action Relief Under Section 7 of the Investment Company Act of 1940 Dear Mr. Cellupica: On behalf of Lehman Brothers Holdings Inc. ("Lehman"), we respectfully request that the staff ofthe Division ofInvestment Management (the "Staff') confirm that it will not recommend enforcement action to the Securities and Exchange Commission (the "SEC") against certain Lehman employee security companies (the "ESCs"), their Replacement GPs (as defined below) or Third-Party Advisers (as defined below), if such ESCs continue to operate in the fashion described below without registration as investment companies under the Investment Company Act of 1940, as amended (the "1940 Act"). Specifically, Lehman seeks assurance that each ESC for which Lehman or a Lehman affiliate serves as general partner and for which certain Third-Party Advisers serve as investment adviser may continue operations, without registering as an investment company under Section 8 ofthe 1940 Act, following the Lehman liquidation, discussed below, with the Replacement GPs serving as general partner, in reliance on the exemption in Section 7 of the 1940 Act for companies that are engaged in "transactions which are merely incidental to the dissolution of an investment company." 1 1 The ESCs for which Lehman seeks assurance are Co-Investment Capital Partners L.P.; Co-Investment Capital Partners Cayman AIV I, L.P.; Offshore Co-Investment Capital Partners Holdings L.P.; Secondary Opportunities Capital Partners II L.P.; Offshore Secondary Opportunities Capital Partners II L.P.; Crossroads Capital Partners II L.P.; NEW YORK BEIJING HONG KONG HOUSTON LONDON LOS ANGELES PALO ALTO SAO PAULO TOKYO Simpson Thacher & Bartlett LLP Mr. -
Ten Years After Lehman Brothers' Collapse: Why Due Diligence
Ten years after Lehman Brothers’ collapse: why due diligence remains essential Luca BERNARDI !2 ! Table of Contents Preface p. 4 1. Financial regulations entered into force between 2008 and 2018 p. 5 1.1. Basel III or the “clash” between technocrats and stakeholders p. 5 1.2. The Dodd-Frank Act and its collateral effect on Conflict Minerals p. 9 1.3. MiFID II and the sharpen notion of conflict of interest p. 11 2. Are regulators and governments addressing all issues? p. 14 2.1. From the Agora to covert meeting rooms p. 15 2.2. Too big to jail? p. 17 2.3. The necessary establishment of a culture of corporate compliance p. 19 3. Next Steps - Enhanced Due Diligence to mitigate risks p. 23 About us p. 25 !3 ! Preface Lehman Brothers’ failure will remain a remin- Hence, 10 years down the line, why does per- der of some of the dysfunctions in the banking forming enhanced due diligence remains es- and regulatory apparatus that drove the global sential? economy off a cliff. This paper seeks to discuss some of the finan- Thousands of financial market participants cial regulations entered into force in the USA were impacted. and EU after Lehman Brother’s collapse and its impacts on due diligence processes. The investment bank’s bankruptcy was, in terms of assets, the largest in the history of Second, a few arguments will be presented to corporate America. The consequences of the identify political and economic issues that go- 2008 deals regarding issuance of residential vernments and regulators have yet to address. -
Lehman Brothers Dismantles in Bankruptcy
Lehman Brothers Dismantles in Bankruptcy DAVID N. CRAPO The author reviews developments in the largest bankruptcy filing to date. eptember brought the largest bankruptcy filing in U.S. history. On September 15, 2008, after failed efforts at to obtain a federal bail- out or an out-of-court acquisition by Barclays Capital Inc. S(“Barclays”), failed, Lehman Brothers Holdings, Inc. (“LBHI”) filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code 1 in the United States Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”). Shortly thereafter, the Lehman Brothers entity that owned the Lehman Brothers headquarters in Manhattan also filed a Chapter 11 petition. On September 19, 2008, a liq - uidation proceeding under the Securities Investor Protection Act of 1979 (“SIPA”) was commenced against Lehman Brothers Inc. (“LBI”), the Lehman Brothers entity that operated, inter alia , the Lehman Brothers North American broker/dealer business ( see “the Stock-Broker Liquidation of Lehman Brothers, Inc., below). The SIPA case was trans - ferred to the bankruptcy court. In early October, 15 additional Lehman Brothers entities filed Chapter 11 petitions in the Bankruptcy Court. David N. Crapo, counsel in the Newark, N.J. office of Gibbons P.C., has exten - sive experience in the fields of bankruptcy, debtor/creditor law and commercial law. He can be reached at [email protected]. 702 LEHMAN BROTHERS DISMANTLES IN BANKRUPTCY THE SALE OF THE NORTH AMERICAN BROKER-DEALER BUSINESS One of the primary goals of the Lehman Brothers bankruptcy pro - ceedings has been to expeditiously liquidate various assets and lines of business of the Lehman Brothers entities to preserve value, and the pur - pose of the SIPA proceeding was the transfer of customer accounts so that customers would have access to their assets. -
The Baltic States and the Crisis of 2008-2011 Rainer Kattel and Ringa
The Baltic States and the Crisis of 2008-2011 Rainer Kattel and Ringa Raudla1 This essay explores how the Baltic republics responded to the crisis of 2008–2011.We argue that while there are significant differences in how the Baltic economies responded to the crisis, these responses not only remain within the neo-liberal policy paradigm characteristic of the region from the early 1990s, but that the crisis radicalised Baltic economies and particularly their fiscal stance. We show that there are a number of unique features in all three Baltic republics’ political economies that made such a radicalisation possible. However, these unique features make it almost impossible for the Baltic experience to be replicable anywhere else in Europe. 1. Introduction Europe, and the rest of the developed world along with it, seems to be mired in a debate over whether austerity brings growth or not. While there seem to be less and less candidates for actual European cases where fiscal retrenchment resulted in economic recovery and growth, the Baltic states persistently attempt to claim that austerity works. All three countries were painfully hit by the global financial crisis in 2008-2009 and topped the global charts in GDP contraction; all three responded to the crisis by adopting a series of austerity measures. In 2010, the Baltic states started to recover and recorded GDP growth between 5.5% and 7.6% in 2011. In the light of such temporal sequences of events, there has been a temptation in the policy circles both inside the Baltic states but also internationally to draw a causal conclusion and to claim that it was the austerity that led to growth. -
Sarbanes-Oxley and Corporate Greed Adria L
University of Connecticut OpenCommons@UConn Honors Scholar Theses Honors Scholar Program Spring 5-8-2011 Sarbanes-Oxley and Corporate Greed Adria L. Stigliano University of Connecticut - Storrs, [email protected] Follow this and additional works at: https://opencommons.uconn.edu/srhonors_theses Part of the Accounting Commons, and the Business Law, Public Responsibility, and Ethics Commons Recommended Citation Stigliano, Adria L., "Sarbanes-Oxley and Corporate Greed" (2011). Honors Scholar Theses. 207. https://opencommons.uconn.edu/srhonors_theses/207 Sarbanes-Oxley & Corporate Greed Adria L. Stigliano Spring 2011 Sarbanes-Oxley & Corporate Greed Adria L. Stigliano Spring 2011 Adria L. Stigliano Honors Thesis Spring 2011 Sarbanes-Oxley and Corporate Greed Sigmund Freud, the Austrian psychologist, believed that every human being is mentally born with a “clean slate”, known as Tabula rasa , where personality traits and character are built through experience and family morale. Other psychologists and neurologists believe individuals have an innate destiny to be either “good” or “bad” – a more fatalistic view on human life. Psychological theories are controversial, as it seems almost impossible to prove which theory is reality, but we find ourselves visiting these ideas when trust, ethics, reputation, and integrity are violated. The Sarbanes-Oxley Act is still a relatively new federal law set forth by the Securities Exchange Commission in 2002. Since its implementation, individuals have been wondering if Sarbanes-Oxley is effective enough and doing what it is meant to do – catch and prevent future accounting frauds and scandals. With the use of closer and stricter rules, the SOA is trying to prevent frauds with the use of a created Public Company Accounting Oversight Board. -
The Madoff Investment Securities Fraud: Regulatory and Oversight Concerns and the Need for Reform Hearing Committee on Banking
S. HRG. 111–38 THE MADOFF INVESTMENT SECURITIES FRAUD: REGULATORY AND OVERSIGHT CONCERNS AND THE NEED FOR REFORM HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS UNITED STATES SENATE ONE HUNDRED ELEVENTH CONGRESS FIRST SESSION ON HOW THE SECURITIES REGULATORY SYSTEM FAILED TO DETECT THE MADOFF INVESTMENT SECURITIES FRAUD, THE EXTENT TO WHICH SECURITIES INSURANCE WILL ASSIST DEFRAUDED VICTIMS, AND THE NEED FOR REFORM JANUARY 27, 2009 Printed for the use of the Committee on Banking, Housing, and Urban Affairs ( Available at: http://www.access.gpo.gov/congress/senate/senate05sh.html U.S. GOVERNMENT PRINTING OFFICE 50–465 PDF WASHINGTON : 2009 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Nov 24 2008 08:33 Jul 07, 2009 Jkt 048080 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 S:\DOCS\50465.TXT JASON COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS CHRISTOPHER J. DODD, Connecticut, Chairman TIM JOHNSON, South Dakota RICHARD C. SHELBY, Alabama JACK REED, Rhode Island ROBERT F. BENNETT, Utah CHARLES E. SCHUMER, New York JIM BUNNING, Kentucky EVAN BAYH, Indiana MIKE CRAPO, Idaho ROBERT MENENDEZ, New Jersey MEL MARTINEZ, Florida DANIEL K. AKAKA, Hawaii BOB CORKER, Tennessee SHERROD BROWN, Ohio JIM DEMINT, South Carolina JON TESTER, Montana DAVID VITTER, Louisiana HERB KOHL, Wisconsin MIKE JOHANNS, Nebraska MARK R. WARNER, Virginia KAY BAILEY HUTCHISON, Texas JEFF MERKLEY, Oregon MICHAEL F. BENNET, Colorado COLIN MCGINNIS, Acting Staff Director WILLIAM D.