It has been another busy year for the Delaware courts, with opinions issued in a number of key areas. The Delaware Supreme Court confirmed that Caremark claims, although generally very difficult to maintain, can survive a motion to dismiss...
Today, the accelerating pace and intensifying complexity of change are creating a fundamentally different operating reality that is putting the competitiveness and governance of many businesses to the test. NACD’s most recent Public Company Governance Survey found that looking forward to 2020, directors are most concerned about the impact of growing business-model disruptions, the slowing global economy, increased competition for talent, changing cybersecurity threats, and rapid technology changes...
As I explain below, the Economic Analysis does not provide an acceptable basis for SEC rulemaking in this area. The Economic Analysis fails to adequately analyze the costs and benefits of the proposed rule, as well as its effects on efficiency, competition and capital formation; overlooks significant effects and issues; and does not use evidence that is available or could be obtained...
Institutional investors and proxy advisory firms have paid increasing attention to the number of corporate boards on which directors serve. During the 2019 proxy season, 5.8% of directors received support levels below 80%, the highest rate in nine years, which can largely be attributed to investors’ changes to, and enforcement of, their overboarding policies...
The governance of public companies is profoundly important. Thirty years ago, CalPERS, a major institutional investor and leading corporate governance advocate, argued that corporate governance was “the grain in the balance that makes the difference between wallowing for long and perhaps fatal periods in the depths of the performance cycle, and responding quickly to correct the corporate course.” Time and again, research has borne out the link between good governance and strong shareholder returns...
Dear Chair Maloney:
Thank you for your July 15 letter regarding my research on the need for transparency in corporate political spending—and your leadership in urging the SEC to ensure that our rules protect American families who invest in public companies that spend investor money on politics. I very much appreciate the opportunity to share further details on this work...
Director pay programs are under greater scrutiny, and S&P 500 companies are striving to anticipate and adapt to this significant change. Compensation limits are at the forefront of this keen interest, with advisory firms Institutional Shareholder Services and Glass Lewis, and shareholders, becoming more vocal and taking direct action. This activism is framed by trends that include avid internal and external interest in board diversity and a shift in board compensation with greater emphasis on equity than on cash pay...
Despite longstanding complaints about governance and the tyranny of a few who may or may not hold a meaningful economic interest in the company they founded and/or now control, investors have continued to allocate to controlled or quasi-controlled companies. What has changed is that minority shareholders are no longer content to sit quietly and go along for the ride, increasingly demonstrating they are willing to pull on the few levers of activism and change available at these companies...
On December 18, 2018, the Securities and Exchange Commission (SEC) approved final rules requiring the disclosure of hedging policies in annual proxy statements. The rules, which became effective for proxy statements filed in fiscal years beginning on or after July 1, 2019, implement a Dodd-Frank mandate.
Cybersecurity attacks are among the gravest risks that businesses face today. The EY 2019 CEO Imperative Survey found that CEOs ranked national and corporate cybersecurity as the top global challenge to business growth and the global economy...
We recently published a paper on SSRN (“Loosey-Goosey Governance: Four Misunderstood Terms in Corporate Governance”) that examines four central concepts that are widely discussed—even foundational to the problem—but loosely defined and poorly understood. A reliable corporate governance system is considered to be an important requirement for the long-term success of a company...
Shareholder activism remains pervasive in the corporate landscape, as many companies continue to face new, and sometimes more sophisticated, activist situations. Recent activism-related trends indicate that the landscape is continually shifting, and companies’ strategies for dealing with activism should therefore also evolve and adapt...
The world’s largest asset managers BlackRock and Vanguard control the largest blocks of shares in nearly every publicly traded firm in the U.S. The pattern of ownership is seen in the energy and utility industries, and across the companies at which there were critical climate votes in 2019 (see Figure 13). The two asset managers were both in the top five common stock shareholders at all 28 companies with critical climate resolutions...
Effective board evaluations can drive better board performance. So how are today’s leading boards evolving their evaluations to enhance effectiveness, and what are their companies communicating to stakeholders about their board evaluation processes...
Vital to rebuilding trust in business is an effective accountability framework based on good stewardship, governance and reporting. Within this, transparency over stewardship of investments plays a fundamental role in providing confidence to a broad range of stakeholders. Pursuing greater transparency drives greater accountability, and promotes a critical shift from short-term thinking to creating long-term value...
The Delaware Chancery’s refusal to dismiss a derivative allegation in a suit claiming that Goldman Sachs directors were paid excessively may soon provide a decision that offers companies guidance on setting board of director pay (Stein v. Blankfein, Court of Chancery of the State of Delaware, C.A. No. 2017-0354-SG (Del. Ch. May. 31, 2019). This guidance may come despite the court’s initial doubts that the facts, when more fully developed, would yield a holding against Goldman...
Executive compensation is not only a consideration close to the pocket book of CFOs but also a topic of increasing importance to managements and boards. As major economies show signs of recovering from the 2008 recession, compensation can become more decisive to retaining and motivating critical senior executive talent...
In a recent bench ruling, the Delaware Court of Chancery enforced an advance notice bylaw and thereby precluded an activist investor from nominating a slate of directors and conducting a proxy contest at a company’s annual meeting. The court enforced the plain terms of the advance notice bylaw, which required that notice of the nominations had to be given by a stockholder of record...
On August 6, a group of three individual plaintiffs represented by Judicial Watch, Inc. filed suit in Los Angeles County Superior Court against California’s Secretary of State seeking to block the provisions of SB 826, which was signed into law in September 2018 and provides that: By December 31, 2019, every publicly traded company on a ...
There has recently been much debate and some confusion about a bedrock principle of corporate law—namely, the essence of the board’s fiduciary duty, and particularly the extent to which the board can or should or must consider the interests of other stakeholders besides shareholders...
Another day, another data breach. This time at Capital One, the fifth largest credit card issuer in the United States...
As reported by the WSJ, a new milestone has finally been reached for board gender diversity: there are no longer any companies in the S&P 500 with all-male boards! Reaching just that one milestone has not exactly been expeditious...
The final link in the chain of improving corporate accountability for sustainability is to tie improvements to pay. In a November 2018 article, we explained that companies should use incentives to motivate executives to tap big strategic opportunities related to environmental, social, and governance (ESG) goals...
