In the current “black swan” era of heightened economic turmoil, social unrest, and the COVID-19 pandemic, boards of public companies have had to explore a range of issues in response to rapidly emerging risks.
A Biden Administration can be expected to have a notable impact on corporate governance, both through specific proposals and by how its policies influence state legislation, “best practices” formulation and board conduct. During the long presidential campaign, progressive candidates floated several proposals with significant potential impact on corporate governance, including the Accountable Capitalism Act, the Ending Too Big to Jail Act and the Corporate Executive Accountability Act...
On November 12, Institutional Shareholder Services (“ISS”) published its annual policy updates in its 2021 global proxy voting guidelines, which are effective for shareholder meetings held on or after February 1, 2021. Social and environmental issues, board diversity, shareholder litigation rights and COVID-19 recovery era policies emerged as ISS’ main areas of focus for its policy updates...
Sometimes a corporate director who’s the main source of a company’s reputational problems is the last one to recognize it. That’s why, in order to protect the company from unwanted controversy and reputational harm, boards benefit from discreet tools to remove problematic officers and directors before their terms are up, and without going through a formal removal process...
In the world of corporate governance and proxy voting, 2020 has been a remarkable year, not only because annual general meetings took place in the midst of a global pandemic that forced the abrupt transition to a virtual proxy season, but also because this year marked the beginning of the new decade at a time when companies and investors experience a major shift in how they engage on the topic of corporate governance...
As life dramatically changed in 2020, so did shareholder rights. In the United States, we witnessed a dramatic and substantial change to how companies conduct annual meetings, a reignited debate on the purpose of the corporation, new defensive strategies for companies, as well as a reshaping of the shareholder activist model, as some activists adopted tactics historically associated with private equity. Below we note some of the major developments that took place over the past year...
On September 21, 2020, the U.S. Federal Trade Commission (the “FTC”) published a notice of proposed rulemaking that would, among other things, create a new de minimis exemption under the Hart-Scott-Rodino Antitrust Improvements Act of 1986 (the “HSR Act”), which subjects proposed acquirers of an issuer’s voting securities to notification, filing and waiting period requirements...
At the end of 2019 (which now seems so long ago), my book CEO Leadership: Navigating the New Era in Corporate Governance was published by The University of Chicago Press. My target audience is current and future CEOs and board members, those who advise them and those who teach law and business school students who aspire to those positions...
As we approach the first anniversary of the Business Roundtable’s abandonment of shareholder primacy and embrace of stakeholder governance, and the fourth anniversary of our development for the World Economic Forum of The New Paradigm: A Roadmap for an Implicit Corporate Governance Partnership Between Corporations and Investors to Achieve Sustainable Long-Term Investment and Growth, we thought it useful to consider in broader context the key issues of corporate governance and investor stewardship today...
Corporate Social Responsibility and Environmental, Social & Governance (ESG) issues have become increasingly important over the past few years, and evaluating a company’s ESG disclosures has become a key tool used by many investors in making investment and engagement decisions. Many companies are, with increasing frequency, publishing ESG reports on their websites and incorporating ESG disclosure into mandatory filings with the U.S. Securities and Exchange Commission...
Activist investors seek to unlock value. For example, hedge fund Elliot Management in 2016 campaigned for Samsung Electronics to return US$10 billion to shareholders...
Environmental stewardship, including efforts to mitigate climate change and other impacts on the natural environment, is an important and controversial topic in today’s world. Politicians, companies, investors, consumers and the public all have a stake in how businesses approach environmental stewardship...
This spring, New York City Comptroller Scott Stringer and the New York City Retirement Systems (NYCRS) announced the successful initial results of Boardroom Accountability Project 3.0. Building on the “Rooney Rule” pioneered by the National Football League (NFL), Boardroom 3.0 calls on major companies to adopt search policies requiring the consideration of women and racially/ethnically diverse candidates for board directors and chief executive officers (CEOs)...
With the 2020 proxy season now concluded, thousands of U.S. public companies have filed their proxy statements highlighting key trends with regards to their governance practices. Among the many trends captured from this year’s proxy season are those related to Say on Pay and the CEO Pay Ratio. In this post, Equilar analyzes Say on Pay voting results and the effects of the CEO Pay Ratio on Say on Pay among Equilar 500 companies—the 500 largest U.S. public companies by revenue...
American investors pay $100 billion every year in mutual fund fees. These fees are deducted from their savings and reduce future investment returns. Over 20 years, the compounded drag on investment returns is well into the trillions, which begs the question: Is even one dollar of these fees “excessive” under the fiduciary standards of the Investment Company Act?...
The focus on human capital and talent in corporate governance is intensifying, as more stakeholders—led by large institutional investors—seek to understand how companies are integrating human capital considerations into the overarching strategy to create long-term value. After all, a company’s intangible assets, which include human capital and culture, are now estimated to comprise a significant portion of a company’s market value...
The lines between shareholder activist strategies and traditional private equity strategies are starting to become blurred.
Historically, private equity firms have adhered to the “rules of the road” set out by companies looking to explore strategic alternatives or realise monetisation events for their equity holders...
As the world reacts to the COVID-19 pandemic, directors on corporate boards play a vital role in navigating the path forward. Key issues facing corporate directors include:
Climate change poses systemic risks to the global financial system and specific risks to financial institutions with exposure to the fossil fuel sector. JPMorgan Chase (“JPM”), the largest US bank, is by far the largest global lender and underwriter to the fossil fuel sector, providing nearly $196 billion in lending and underwriting in the three years (2016-2018) since the Paris Agreement was adopted in 2015...
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...