Orrick Unveils Major Study on Corporate Governance of Nation’s Tech Sector


Corporate Governance | Technology Sector

Orrick today released a groundbreaking new study examining the corporate governance structures of every U.S. incorporated company in the Dow Jones Technology Sector Index. Led by partner Ed Batts, the study encompasses a who’s who of the tech sector, ranging from industry leaders such as Apple, Facebook and Microsoft to Oracle, eBay and Twitter.

The study, which comes amid heightened public scrutiny on corporate governance practices, broke down the boardroom structures of the 128 largest companies in the nation’s tech sector. The key trends identified in the report included:

  • Dual class companies, while increasingly under a microscope, remain a small minority among the tech industry’s largest players. Just 13 of 128 companies – including industry titans such as Google and Facebook – have these structures.

  • Proxy access is a fast-growing phenomenon. This practice, which allows stockholders to nominate their own candidates in a director election rather than relying on the vetting of a company’s board-backed nominating committee, was novel three years ago. Now, over 25 percent of tech companies allow stakeholders to submit director candidates in some form.

  • More than 80 percent of companies have adopted majority voting provisions for uncontested director elections over the past decade.

  • Delaware remains the overwhelming choice for companies to organize and establish exclusive jurisdiction for class-action shareholder lawsuits. Ninety-percent of companies in the study were incorporated in Delaware, and 40 percent of companies in the study mandated that Delaware as the exclusive forum for stockholder lawsuits.

Surprisingly, 30 percent of companies still have staggered boards, a high number given that proxy advisory firms have frowned on the practice.

The Orrick study is the firm’s latest venture designed to provide the nation’s boards with a portrait of corporate governance practices evolving among public companies. Earlier this year, Ed and an Orrick team unveiled a study examining the corporate governance structures of the largest public companies in the San Francisco Bay Area, focusing on 153 publicly-traded companies with market capitalizations exceeding $750 million. That study can be found here.

“By assembling this information, we hope to answer a question about corporate governance practices we often get from our clients, which is, ‘What do other companies do?’” Ed said. “We believe this data captures trends that serve as a guidepost to boards as they confront new challenges, particular in the fast-changing tech sector.”

Ed is global head of an Orrick M&A team that is widely recognized as an industry leader. The practice group advised on more than 230 deals throughout 2016 for clients around the world, including U.S.-based IronPlanet, Microsoft and Pinterest, Europe-based AVG Technologies, Asia-based JD.com and Nitto Denko and France-based Thales and StudioCanal.

In addition to Ed, the Orrick team on the corporate governance study included major contributions from law clerk Sara Gates, as well as assistance from law clerks Janice Dow, Cristine LeVasser, Brigid McCurdy and Ariel Winawer.