Corporate Governance Research and Resources

The business case for board diversity is not new and may no longer be forward-thinking. While organizations – and other parties – have introduced initiatives to encourage boardroom diversity, developing the next generation of board members is a persistent challenge for many business leaders. Beyond current initiatives to increase boardroom diversity, organizations with subsidiaries are […] Read more
2023-02-05
In recent years a variety of market disrupting events have underscored the importance of active ownership and the analysis of material environmental, social and governance (ESG) factors in fundamental credit research as well as investment decision-making. In our view, asset managers who leverage their relationships with issuers are best positioned to manage these ESG risks […] Read more
2023-02-04
Over the past seventy years, institutional investors’ ownership of publicly traded U.S. companies has increased dramatically, from just 6 percent in 1950 to 65 percent in 2017. As a result, a large fraction of the U.S. economy is now in the hands of a relatively small number of asset management companies. The “Big Three” of […] Read more
2023-02-03
Preparing for the 2023 Proxy Season Posted by David M. Lynn, Scott Lesmes, and John Hensley, Morrison & Foerster LLP, on Friday, January 27, 2023 Tags: Clawbacks, pay versus performance, Proxy season, Say on frequency, SEC, Shareholders Update on ESG, Stakeholder Governance, and Corporate Purpose Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on […] Read more
2023-02-03
With all the SPAC activity and scrutiny over the past several years, it was only a matter of time before the Delaware courts had an opportunity to weigh in on SPAC stockholder litigation. Early last year, in January 2022, Vice Chancellor Lori Will of the Delaware Court of Chancery issued a groundbreaking opinion in MultiPlan Corp. Stockholders Litigation that paved the way for SPAC stockholders to bring direct breach of fiduciary duty claims against SPAC boards and sponsors. Among the notable aspects of the decision, MultiPlan clarified that “well-worn fiduciary principles” under Delaware law would apply to Delaware SPAC board … Read more Read more
Summary of the Rule In late 2022, the Department of Labor under President Biden promulgated a new rule on “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights,” superseding the Department’s 2020 rule promulgated under President Trump. Numerous media reports suggested that the 2022 Biden Rule permits or even encourages ESG investing, in […] Read more
2023-02-02
Court of Chancery Holds Stockholder Is Not Third-Party Beneficiary Under Merger Agreement and Buyer Was Not Controller In Crispo v. Musk, the Delaware Court of Chancery, in an opinion by Chancellor McCormick, held that the plaintiff stockholder of Twitter, Inc. was not a third-party beneficiary under the company’s merger agreement with Elon Musk and therefore lacked […] Read more
2023-02-02
Foreword The role of today’s CEO is evolving, paralleling the shifting global financial, geopolitical and social landscapes in which they operate. Teneo is fortunate to work with and advise leading CEOs around the world as they navigate this environment. As the calendar turns from a tumultuous 2022 to the uncertainties of 2023, we surveyed more […] Read more
2023-02-01
Introduction In 2013 the Delaware Court of Chancery’s came to a final decision regarding the by-now-famous Trados case. Trados involved claims against the board of a startup company that was sold in a merger transaction.  Plaintiffs, who held common stock of the company, alleged that board members affiliated with the company’s VC investors were conflicted […] Read more
2023-02-01
In a new paper, we investigate the relationships between institutional ownership, board diversity, and corporate innovation in U.S.-listed firms. Institutional investors play a crucial role in a firm’s operation and exert considerable influence on the efficient monitoring of innovative investment. Theory predicts that institutional ownership has a positive effect on innovation investment. However, after separating the institutional investors into eight types and two categories – active (investment company, independent investment adviser, public pension fund) and passive (bank trust, insurance company, private pension fund, university and foundation endowments, miscellaneous) — we find that active institutional investors drove this positive relationship. A … Read more Read more
As boards continue to evaluate how environmental, social and governance (“ESG”) considerations factor into corporate operations, some lawmakers and regulators have raised potential antitrust concerns about coordinated efforts.  For example, several U.S. Senators sent letters to law firms admonishing them to advise clients of increased congressional scrutiny of “institutionalized antitrust violations being committed in the […] Read more
2023-01-31
Voting rights became the subject of sharp legal wrangling in American political elections when the U.S. Supreme Court decided Bush v. Gore in 2000, and again thirteen years later with its decision in Shelby County v. Holder. The result has been legal action, academic debate, and media attention focused on Americans’ voting rights. Something similar has been happening to shareholder voting […] Read more
2023-01-31
Are we in an age of “permacrisis” that is characterized by extended instability, insecurity, and lurching from one pressing challenge to the next? Read more
2023-01-31
Source: NACD Blog
In recent years, major institutional investors in the U.S. have combined their efforts on environmental, social, and governance (“ESG”) matters. Large institutional investors now vote in lockstep on a variety of corporate issues, jointly lead governance initiatives, and often adopt mutually supportive stances on social and environmental campaigns. This unprecedented cooperation has been boosted by the emergence of institutional investor consortia – advocacy groups and trade associations that represent their members’ collective interests. Chief among these organizations are the Council of Institutional Investors (CII), a trade association that represents asset managers, pension funds, and union funds with combined assets of … Read more Read more
In a January 25, 2023 decision (In Re McDonald’s Corp. S’Holder Litig., C.A. No. 2021-0324-JTL (Del. Ch. Jan. 25, 2023)), the Delaware Court of Chancery declined to dismiss claims that a corporate officer, who led the company’s human resources function, breached his fiduciary duties by “allowing a corporate culture to develop that condoned sexual harassment and misconduct.” The plaintiffs claimed that the officer breached a “Caremark” duty by consciously ignoring “red flags” signaling misconduct. Despite the fact that no prior Delaware case had applied Caremark duties to an officer, the court declined to dismiss the claims, … Read more Read more
Abstract In this statement, we assess the role and power of proxy advisors and asset managers in corporate governance, an industry that is characterized by a limited number of voting advisory firms (ISS and Glass-Lewis), accompanied by the growing dominance of index investing in an industry with a few large asset managers, such as BlackRock, […] Read more
2023-01-30
SUMMARY The European Union has finalized the Corporate Sustainability Reporting Directive (“CSRD”) that will introduce more detailed sustainability reporting requirements for EU companies, non-EU companies meeting certain thresholds for net turnover in the EU and companies with securities listed on a regulated EU market. The CSRD entered into force on January 5, 2023 and is […] Read more
2023-01-30
In In re McDonald’s Corporation, defendant David Fairhurst, who formerly served as Executive Vice President and Global Chief People Officer of McDonald’s Corporation, contested a stockholders’ claim that he had breached his fiduciary duty of oversight by arguing that there is no fiduciary duty of oversight for officers, only for directors. VC Laster of the Delaware Chancery Court responded this way: “That observation is descriptively accurate, but it does not follow that officers do not owe oversight duties. For centuries dating back to the Roman satirist Juvenal, Europeans used the phrase ‘black swan’ as a figure of speech for something that did not exist. Then in the late eighteen century, Europeans arrived on the shores of Australia, where they found black swans. The fact that no one had seen one before did not mean that they could not or did not exist…. Framed in terms of the issue in this Read more
2023-01-30
Source: Cooley
In response to growing concern about the effects of climate change, different regions of the world have adopted mandatory greenhouse gas (GHG) disclosure rules, including Australia, the European Union, and the United Kingdom. Notably, the U.S. Securities and Exchange Commission (SEC) proposed an extensive climate reporting rule in 2022. The goal of these programs is frequently to inform stakeholders of the climate change-related risks faced by emitters. For example, the SEC’s proposed rule aims to inform investors. Although the explicit intent is rarely to affect emissions, the law and economics literature highlights various cases (e.g., restaurant hygiene and mine safety) … Read more Read more
In late 2021 and early 2022, two decisions from the Court of Chancery addressing advance notice bylaws reiterated, consistent with long-standing Delaware law, that clear and unambiguous advance notice bylaws will be enforced. These decisions also noted that application of such bylaws remains subject to equitable review to determine if the incumbent board acted manipulatively […] Read more
2023-01-29
As we previously described (most recently here and here), environmental, social, and governance (ESG) topics have become prominent (and polarized) political issues in recent months.  In the two months since our last update, significant developments in the attack on ESG have occurred in a few areas, as illustrated in the examples set out below.  In providing this update, […] Read more
2023-01-28
Public companies need to consider recent developments when preparing for the 2023 proxy and annual reporting season. We summarize key regulatory developments, recent guidance, important disclosure considerations and updates to the voting guidelines of the proxy advisory firms. Pay Versus Performance In August 2022, the SEC adopted the pay versus performance disclosure requirements that the […] Read more
2023-01-27
Compensation Season 2023 Posted by Adam J. Shapiro, Michael J. Schobel, and Erica E. Bonnett, Wachtell, Lipton, Rosen & Katz, on Friday, January 20, 2023 Tags: Clawbacks, Dodd-Frank Wall Street Reform, Human capital, ISS, Proxy advisors, SEC Get boardroom ready: five ways to improve executive interactions with the board Posted by Maria Castañón Moats, Paul […] Read more
2023-01-27
In 2022, public companies witnessed a new kind of corporate governance activism. New rules and regulations from the Securities and Exchange Commission (the SEC) use the lever of mandated disclosure to push for corporate governance actions, and in some cases what amounts to reforms. The SEC’s broad foray into governance represents an expansion of historically more limited SEC rules in the governance space, mostly focused on audit committee and auditor independence and more general disclosure of board structures and oversight. Many commentors note that investors were well able to push companies historically for disclosure on governance matters and that the … Read more Read more
In this paper, Ann Lipton, an Associate Professor at Tulane Law School, contends that the “internal affairs” doctrine has gradually expanded its reach and, perhaps as a result, is now facing new challenges. As applied in Delaware—where it is applied most often—the doctrine, she argues, is “on a collision course with the legitimate regulatory interests of other states (and indeed the federal government).” Of course, many will strongly disagree with her argument, especially given the practical implications. Still, it may be worthwhile to gain some insight into her perspective.  Is it time to rethink the internal affairs doctrine? The author suggests that a more balanced, targeted approach would be more appropriate and more effective. Read more
2023-01-26
Source: Cooley
The proxy voting advisory and research industry, which includes leaders ISS and Glass Lewis, are increasingly at the center of a whipsaw debate between those who urge that investor stewardship be constrained and those who advocate for it to be enhanced. Regulators have long been drawn into the vortex. But until recently two of the […] Read more
2023-01-26
On Dec. 14, 2022, the Securities and Exchange Commission (the “SEC”) adopted amendments to Rule 10b5-1 under the Securities Exchange Act of 1934 (the “Exchange Act”), that include, among other things, changes to Rule 10b5-1(c)(1)’s affirmative defense to insider trading liability under Section 10(b) and Rule 10b-5 under the Exchange Act. These changes are aimed […] Read more
2023-01-26
Our Goals Protecting the Investing Public; Maintaining a Robust, Relevant Regulatory Framework; Supporting a Skilled and Diverse Workforce The United States has the largest, most sophisticated, and most innovative capital markets in the world. U.S. capital markets represent about 40 percent of the global capital market. Companies and investors access the U.S. capital markets at […] Read more
2023-01-25
ISS recently issued Frequently Asked Questions (FAQs) documents related to equity compensation plans, the peer group selection methodology and issuer submission process, and compensation policies. The equity compensation plan FAQs cover topics under the rubric of ISS’ Equity Plan Scorecard (EPSC) and the compensation policies FAQs cover compensation topics more broadly. This update highlights select […] Read more
2023-01-25
The 2023 debut of the universal proxy card, following a US Securities and Exchange Commission (SEC) rule effective Jan. 31, 2022, making it easier for dissidents to campaign for a seat on a board, has inspired some boards to review and strengthen the change-of-control provisions in their bylaws or other corporate policies. Read more
2023-01-25
Source: NACD Blog

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