While all directors can contribute to the board’s success, the board chair has a unique set of responsibilities, both in the tone that they set, and their influence on how time and resources are deployed...
Shareholder resolutions filed in the 2022 proxy season reflect continuing investor concern over lobbying activities and whether they are consistent with a company’s public positions and aligned with shareholder interests...
The Securities and Exchange Commission presents its new climate proposal as a modest evolution in its longstanding rules requiring environmental disclosure. While supporters echo that pitch, most recognize the proposal as a large leap beyond the SEC’s traditional focus on material financial matters. Who has the better of it may be inferred from the breadth of comments the SEC’s proposal received during the three-month comment period that ended June 17...
In our new paper, Value Creation in Shareholder Activism, we measure value creation by activist investors via structural estimation of a model of the choice between passive investment and activism...
In Garfield v. Allen (May 24, 2022), the Delaware Court of Chancery accepted, “with admitted trepidation,” what it called a “novel theory” advanced by the plaintiff—namely, that a corporation’s directors may have breached their fiduciary duties to the stockholders by failing to reverse equity compensation awards made to the CEO after the board became aware, via the plaintiff’s litigation demand letter, that the awards violated a limitation set forth in the company’s equity compensation plan...
This post overviews a comment letter that was submitted to the SEC by Mr. Strine and five other academics and practitioners. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here ) and For Whom Corporate Leaders Bargain (discussed on the Forum here ), both by Lucian A. Bebchuk and Roberto Tallarita; Stakeholder Capitalism in the Time of COVID (discussed on the Forum here ), by Lucian Bebchuk, Kobi Kastiel, and Roberto Tallarita; Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy – A Reply to Professor Rock ...
On May 25, 2022, in a long-awaited move, the U.S. Securities and Exchange Commission (“SEC”) issued a pair of rule proposals related to the use of environmental, social and governance (“ESG”) investment practices by open-end and closed-end registered investment companies, as well as by business development companies...
Congress, having made a fundamental policy judgment to require “full and fair” disclosure to protect investors, directed the Commission to make ongoing subsidiary choices of precisely what details of disclosure to require and when, after engaging in fact-finding and analysis that Congress chose not to try to do itself...
No corporate director dreams of sitting on an ineffective board—yet many will find themselves serving on a board that underperforms relative to their expectations...
ESG adoption is on the rise, fuelled by client demand and a desire to make an impact. As ESG momentum continues to gain steam, investors are refining and evolving their strategies...
Executive compensation is one of the fundamental principles of Vanguard’s Investment Stewardship program. We believe that well-structured, transparent, performance-linked executive compensation policies and practices are fundamental drivers of sustainable, long-term value. We encourage portfolio companies to adopt pay plans that incentivize outperformance versus industry peers over the long term, aligning executive compensation outcomes with shareholder outcomes...
Investor and regulator focus on board composition and practices has evolved significantly over the past 20 years. In the wake of the Enron and WorldCom collapses, these stakeholders initially focused on strengthening board independence and oversight...
On May 13, 2022, Los Angeles Superior Court Judge Maureen Duffy-Lewis issued a ruling in Crest v.Padilla I finding that California Corporations Code Section 301.3 (SB 826), which requires publicly listed corporations in California to have women on their boards, violates the Equal Protection Clause of the California Constitution...
Last year we outlined our approach to evaluating Say on Climate proposals that encouraged companies to disclose climate transition plans. We have since observed a significant increase in management-proposed climate plans that are put to an advisory shareholder vote, primarily among European and Australian companies...
In 2021, 59 Fortune 500 companies appointed new General Counsels. Russell Reynolds Associates wanted to study what differentiates those 59 new hires from past appointees. To do so, RRA captured the route to the top of General Counsels in the Fortune 500 (N=480), including those appointed last year (N=59), with a particular focus on diversity, career trajectory, and key experiences...
With more attention to diversity in society, boardrooms are no exception. How to advance diversity, equity, and inclusion on boards is no one-size-fits all approach; however, with increasing attention to this issue, regulations in specific states have attempted to push diversity forward...
For many companies, 2021 signaled a return to normal business after the COVID-19 pandemic upended the economy and significantly disrupted financial forecasts established at the beginning of 2020. Given the difficulty in meeting financial targets set under short- and long-term incentive plans, CEO pay levels remained essentially flat in FY2020 for both S&P 500 and Russell 3000 (excl. S&P 500) companies...
In September of 2016, news broke that employees at Wells Fargo had been moving customers’ funds into newly created fake accounts—without customer consent—in order to boost their sales figures...
To understand market-specific challenges and equip companies with best practices for diversifying boards, we recently conducted an engagement campaign with portfolio companies in markets that have relatively high or low representation of women directors compared to their economic and regional peers. What follows are insights and best practices identified in these engagements...
By now we’ve heard a lot about the universal proxy card (UPC), and how it makes life easier for activist investors and harder for companies. We set forth the highlights earlier . Many observers note UPC will lower the cost of proxy contests, and thus encourage more of them...
Good governance is not just for public companies. Private companies today are also looking for ways to improve their board’s effectiveness—in part, by changing their board composition...
In August 2019, in the Business Roundtable’s Statement on the Purpose of a Corporation (the “BRT Statement”), numerous major company CEOs announced their commitment to deliver value to all stakeholders and not just shareholders...
“Climate change is an emerging risk to financial institutions, the financial system, and the economy,” Federal Reserve Chair Jerome Powell proclaimed in 2020. In doing so, Powell joined a growing chorus of policymakers, scientists, and scholars raising alarms about climate change’s potential to destabilize the global financial system...
The Proposed Rules are of three categories: Disclosure Rules, Audit Rules, and Prohibited Activity Rules. These comments relate solely to the Prohibited Activity Rules that would forbid the following terms and conditions in investor advisory agreements...