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11/26/20 [UPDATED] Federal Forum Selection

NEW:  Seyfarth Shaw discusses the California Superior Court’s decisions in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), and In re Uber Technologies, Inc. Securities Litigation, C.A. No. 19-579544, order (Cal. Super. Nov. 16, 2020), dismissing securities class actions based on federal forum selection charter provisions, in California Superior Courts Enforce Delaware Corporations’ Federal Forum Provision For Securities Act Lawsuits.

D&O Diary’s Kevin LaCroix discusses the California Superior Court’s ruling in In re Uber Technologies, Inc. Securities Litigation, C.A. No. 19-579544, order (Cal. Super. Nov. 16, 2020), dismissing a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in State Court Securities Suit Against Uber Dismissed Based on Federal Forum Provision.

Tulane Law’s Professor Ann Lipton discusses the federal forum selection charter provision that DoorDash, Inc. adopted in advance of an anticipated initial public offering in DoorDash’s Forum Selection Clause and the Exercise of Some Restraint – For Now.

Seyfarth Shaw discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in California Superior Court Enforces Delaware Corporation’s Federal Forum Provision For Securities Act Lawsuits.

John Laide of Deal Point Data concludes that, following the Delaware Supreme Court’s decision in Matthew B. Salzberg, et al. and Blue Apron Holdings, Inc., et al. v. Matthew Sciabacucchi, No. 346, 2019, opinion (Del. Mar. 18, 2020; rev. Apr. 14, 2020), that Federal Forum Selection Provisions are becoming standard in the governing documents of IPO companies and existing companies, and that few companies seek shareholder input on such provisions, in Companies’ Response to Delaware Supreme Court Upholding Federal Forum Provisions.

Goodwin Procter discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in California State Court Upholds Exclusive Federal Forum-Selection Charter Provision for 1933 Act Suits.

Akin Gump discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in Judge Rules California State Law Does Not Prohibit Federal Forum Provisions That Seek To Avoid Cyan’s Bar on Removal of Securities Claims.

Dechert discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in California Superior Court Enforces Federal Forum Selection Provision Under California Law.

Freshfields discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in Get thee to Federal Court: California court enforces federal forum provision for IPO securities lawsuits.

Orrick discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in Dismissing Securities Act Claims, California State Court Holds That Federal Forum Selection Provision in Delaware Corporate Charter Is Enforceable.

Fenwick & West discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in California Judge Rules That Federal Forum Provisions May Be Permitted.

Kramer Levin discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in California Superior Court Dismisses Securities Act Claims in Favor of Federal Forum Selection Provision in Company’s Charter.

Cooley discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation in California court enforces Delaware exclusive federal forum provision.

Reuters’ Alison Frankel discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation, finding that use of the forum provision was not illegal under California law in Are Delaware federal forum selection clauses unconstitutional?

Keith Bishop discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation, finding that use of the forum provision was not illegal under California law in California Court Rules Federal Forum Bylaw Provision To Be “Procedurally unconscionable. Indeed, glaringly so.”

$$$ Law 360 discusses the California Superior Court’s ruling in Sunny C. Wong v. Restoration Robotics, Inc., et al., C.A. No. 18-2609, order (Cal. Super. Sept. 1, 2020), declining jurisdiction over a securities class action where the corporation included a federal forum selection provision in its certificate of incorporation, finding that use of the forum provision was not illegal under California law in Calif. Judge Rules Cyan Loophole ‘Not Illegal’ Under State Law.

Cooley discusses the Delaware Supreme Court’s Blue Apron decision upholding the validity of charter provisions requiring that federal securities claims that are subject to the jurisdiction of both state and federal courts be brought only in federal courts, and a current action challenging the validity of a federal forum selection bylaw in a California State Court securities action in Will the California courts enforce a Delaware exclusive federal forum provision?

Reuters’ Allison Frankel discusses Seafarers Pension Plan v. Robert A. Bradway, et al. [Boeing], C.A. No. 2020-0556-, compl. (Del. Ch. July 8, 2020), in which stockholder plaintiff, whose derivative securities claims were dismissed by a Federal Court under a Delaware forum selection bylaw, brings suit in the Court of Chancery alleging that the bylaw is invalid and unenforceable, and that nominal defendant’s board breached the bylaw by enforcing the forum selection clause to dismiss the federal action in Boeing shareholder challenges forum selection clause for barring federal derivative claim.

Reuters’ Allison Frankel discusses former Delaware jurist’s submission of an amicus brief supporting the validity of a federal forum selection bylaw in a California State Court securities action in Ex-Dela. judges defend Securities Act forum clauses in Calif. Dropbox case.

Tulane Law’s Professor Ann Lipton discusses the U.S. District Court for the Northern District of Illinois’ ruling in Seafarers’ Pension Plan v. Robert A. Bradway, et al. and The Boeing Company, C.A. No. 19-8095, order (N.D. Ill. June 8, 2020), which dismissed a stockholder’s derivative securities action under Section 14(a) of the Exchange Act on forum non conveniens grounds, finding that Boeing’s forum selection bylaw providing that the Delaware Court of Chancery is the exclusive forum for any derivative action brought on behalf of the Corporation, and the sole forum for any action asserting a claim for breach of fiduciary duty owed to the corporation in And the Salzberg v. Sciabacucchifallout begins.

Amending the Delaware Corporate Code by Going to Court: Some Thoughts on Sciabacucchi v. Salzberg argues that Delaware statutory law governing corporate charter provisions and bylaws should not be interpreted in light of the internal affairs doctrine, but amend the statute to expressly provide that it applies only to powers of stockholders that arise under Delaware law.

Professor Joseph A. Grundfest discusses the recent appeal from Matthew Sciabacucchi v. Matthew B. Salzberg, et al. and Blue Apron Holdings, Inc., et al., C.A. No. 2017-0931-JTL, memo. op. (Del. Ch. Dec. 19, 2018), which found charter provisions requiring that claims under the Securities Act of 1933 be brought in Federal Court impermissible under Delaware law, arguing why the provisions should be upheld in “If I Agreed With You, We’d Both Be Wrong:” Section 11 Claims as “Internal Corporate Claims” Under DGCL 115.

Cooley discusses the recent appeal from Matthew Sciabacucchi v. Matthew B. Salzberg, et al. and Blue Apron Holdings, Inc., et al., C.A. No. 2017-0931-JTL, memo. op. (Del. Ch. Dec. 19, 2018), which found charter provisions requiring that disclosure claims under the Securities Act of 1933 be brought in Federal Court impermissible under Delaware law in Will the Delaware Supreme Court revive exclusive federal forum provisions for ’33 Act claims?

11/26/20 Stakeholderism

NEW:  Is Stakeholder Value an Excuse for Underperfoming Managers? examines corporate communications following earnings announcements, finding managers are significantly more likely to cite stakeholder value maximization after earnings fall short of market expectations, and those results, given the inability to measure stakeholder value, may reduce managers’ accountability for financial performance.

Cooley reports that the World Economic Forum’s International Business Council, in cooperation with the Big Four accounting firms, released the results of a previously-announced initiative to develop common metrics to track environmental and social responsibility — the IBC Stakeholder Capitalism Metrics, presented in Measuring Stakeholder Capitalism – Towards Common Metrics and Consistent Reporting of Sustainable Value Creation — in World Economic Forum and Big Four present new framework for stakeholder capitalism metrics.

Wachtell discusses how corporate directors should incorporate Environmental, Social, & Governance and stakeholder-oriented considerations into board decision-making processes in A Framework for Management and Board of Directors – Consideration of ESG and Stakeholder Governance.

Is Stakeholderism Bad for Stakeholders? responds to recent academic arguments that corporate focus on stakeholder interests will harm stakeholders and that shareholder value maximization remains the proper purpose of the corporation, asserting that objections are not inherently harmful to stakeholders, and depend on proper implementation of stakeholder-oriented reforms.

Wachtell responds to The Illusory Promise of Stakeholder Governance — a critical analysis of stakeholder primacy proposed in the Business Roundtable’s 2019 Statement that questions its efficacy and warns against its adoption — in Professor Bebchuk’s Errant Attack on Stakeholder Governance.

Cooley discusses a recent report by Morningstar — Proxy Voting by 50 U.S. Fund Families — on institutional investor voting on Environmental, Social, and Governance-related proposals, noting that support has increased over a five-year period but the largest funds have consistently voted against such proposals in How do the largest fund families vote on shareholder proposals related to ESG?

The Illusory Promise of Stakeholder Governance critically examines stakeholder primacy proposed in the Business Roundtable’s 2019 Statement, distinguishing between two versions of “stakeholderism” — “enlightened shareholder value” and “pluralistic” — and conducts economic and empirical analyses of their expected consequences, concluding that stakeholderism will not benefit stakeholders, but would impose substantial costs on shareholders, stakeholders, and society (disagreeing with academics signatories of the Corporate Governance for Sustainability Statement).

11/18/20 [UPDATED] ESG & Greenwashing

NEW:  Greenwashing examines the practices and performance of among hedge funds that have endorsed the United Nations Principles for Responsible Investment, signaling commitment to including Environmental, Social, and Governance factors in investment decisions, but not honoring that commitment (i.e. “greenwash”), finding funds that endorse Responsible Investment on average underperform other hedge funds, performance differences between funds that endorse and honor Responsible Investment commitments and those that do not endorse Responsible Investment are modest, and funds that greenwash underperform both genuinely green and non-green funds, among many other findings.

Reuters discusses “greenwashing” — corporate attempts to benefit from positive investor sentiment toward environmental, social, and governance initiatives by misrepresenting commitment to sustainability — which is described as rampant, and of interest to short-selling investors in Villains or visionaries? Hedge funds short companies they say ‘greenwash’.

11/18/20 [UPDATED] Board Diversity

NEW:  Goodwin Procter discusses the recent filing of stockholder challenging allegedly misleading disclosures regarding commitments to diversity by companies that have failed to achieve board diversity in Talking the Talk Versus Walking the Walk: Shareholder Suits Aim to Push Board Diversity and Punish Companies Supposedly Failing to Make Meaningful Change.

Racial Diversity and Corporate Governance: Assessing California’s New Board Diversity Mandate – discusses California’s recently-enacted law requiring boards of directors of public companies headquartered in California to have a minimum number of directors from underrepresented communities on their boards, likely legal challenges to the law under the internal affairs doctrine and equal protection, and related process and political economy concerns it raises.

Troutman Pepper discusses the recent filing of stockholder derivative actions for alleged breach of fiduciary duty and for proxy solicitation violations under Section 14(a) of the federal Securities Exchange Act based on failure to achieve board diversity and misleading disclosures regarding commitments to diversity in A New Wave of Board Diversity Derivative Litigation.

D&O Diary’s Kevin LaCroix discusses the California Partners Project’s Progress Report on Women’s Representation on California Corporate Boards, which tracks the changes in gender diversity on California boards, in Progress Report on California Public Company Board Gender Diversity Requirements.

Cooley discusses A Progress Report on Women’s Representation on California Corporate Boards, which tracks the changes in gender diversity on California boards since enactment of a state law requiring companies headquartered in California to add women to their boards of directors, citing research purportedly showing that companies with women on their boards outperform companies without them, in New report looks at board gender diversity in California.

D&O Diary’s Kevin LaCroix discusses California’s adoption of a new law requiring boards of directors of public companies headquartered in California, whether or not incorporated in California, to have a minimum number of directors from underrepresented communities on their boards, and a lawsuit — Robin Crest, et al. v. Alex Padilla, C.A. No. 20-37513, compl. (Cal. Super. Sept. 30, 2020) — challenging the constitutionality of the law in California Board of Directors Diversity Bill Signed Into Law, Challenged by Lawsuit.

Fenwick & West discusses California’s adoption of a new law requiring boards of directors of public companies headquartered in California, whether or not incorporated in California, to have a minimum number of directors from underrepresented communities on their boards in New Law Requires Racial, Ethnic or LGBT Diversity on Boards of California-Based Public Companies.

Richa Joshi at Truvalue Labs discusses California’s adoption of a new law requiring boards of directors of public companies headquartered in California, whether or not incorporated in California, to have a minimum number of directors from underrepresented communities on their boards in Board Diversity: No Longer Optional.

Deloitte discusses the results of survey data regarding company, board, and management practices related to diversity, equity, and inclusion and advancement of diversity and inclusion in their organizations in Diversity, equity, and inclusion. 

Cooley reports that parties who previously brought suit challenging the constitutionality of California’s gender diversity statute, which requires that foreign and domestic public corporations headquartered in in California appoint women to their boards of directors have filed a new lawsuit challenging the constitutionality of the state’s more recently adopted statute requiring that California headquartered companies appoint members of “underrepresented communities” to their boards in Crest v. Padilla redux – conservative activist group challenges AB 979, California’s board diversity law for “underrepresented communities”.

Jones Day discusses several recent stockholder derivative actions that challenge alleged material misstatements and omissions to investors regarding companies’ professed commitment to diversity in Shareholder Derivative Litigation Concerning Diversity in Corporate Leadership Is an Emerging Trend.

Arnold & Porter Kaye Scholer discusses California’s adoption of a new law requiring boards of directors of public companies headquartered in California, whether or not incorporated in California, to have a minimum number of directors from underrepresented communities on their boards in California Becomes First State to Require Members of Underrepresented Communities on Boards of Directors.

Wilson Sonsini discusses the passage of a new California law requiring that publicly held corporations having their principal place of business in California to have at least one director from an underrepresented community by the end of 2021, and up to three, depending on board size, by the end of 2022, in California Expands Board Diversity Mandate.

D&O Diary’s Kevin LaCroix discusses a stockholder action challenging alleged failures to achieve board diversity and misleading disclosures regarding commitments to diversity filed against Cisco in Cisco Systems Hit With Board Diversity Lawsuit.

D&O Diary’s Kevin LaCroix discusses a stockholder action challenging alleged failures to achieve board diversity and misleading disclosures regarding commitments to diversity filed against Monster Beverage in Monster Beverage Hit With Latest Board Diversity Lawsuit.

Olshan Frome Wolosky discusses passage of a bill by the California legislature that would require increased racial and ethnic diversity on corporate boards of directors for domestic and foreign corporations having their principal place of business in California in California State Legislature Passes Bill Requiring Each Public Company Headquartered in the State to Include a Minimum Number of Directors from Underrepresented Communities on its Board.

Reuters discusses challenges of increasing diversity on corporate boards posed by lack of disclosure and self-reporting of ethnicity in Color blind? How boardroom diversity data eludes advocates.

D&O Diary’s Kevin LaCroix discusses the Board Challenge, pursuant to which corporate Pledge Partners agree to add a Black director in the next twelve months in Growing Number of Companies Pledge to Address Board Diversity Issues.

D&O Diary’s Kevin LaCroix discusses a stockholder action challenging alleged failures to achieve board diversity and misleading disclosures regarding commitments to diversity filed against Danaher in Yet Another Board Diversity Derivative Lawsuit, This Time Against Danaher’s Board.

D&O Diary’s Kevin LaCroix discusses a stockholder action challenging alleged failures to achieve board diversity and misleading disclosures regarding commitments to diversity filed against The Gap in The Gap Hit with Board Diversity Derivative Lawsuit.

Keith Bishop discusses passage of a bill by the California legislature that would require racial, ethnic, gender, and gender role diversity in the composition of corporate boards of directors for domestic and foreign corporations having their principal place of business in California in California Legislature Passes Corporate Board Racial/Ethnic/Gender Quota Bill.

Cooley discusses companies’ increasing concern with expanding board diversity, and considerations raised in the study Why Do Boards Have So Few Black Directors? and the Black Corporate Directors Time Capsule Project survey in Addressing the challenge of board racial diversity.

D&O Diary’s Kevin LaCroix discusses the latest stockholder action challenging alleged failures to achieve board diversity and misleading disclosures regarding commitments to diversity filed against NortonLifeLock in NortonLifeLock Hit with Board Diversity Derivative Suit.

Cleary Gottlieb discusses stockholder actions challenging alleged failure to uphold commitments to diversity at Oracle, Facebook, and Qualcomm in 3 Cases Spotlight Shareholder Interest In Public Co. Diversity.

The Origins and Real Effects of the Gender Gap: Evidence from CEOs’ Formative Years examines demographic data on the socioeconomic backgrounds of CEOs, finding CEOs raised in male-dominated families—those where the father was the only income earner and had more education than the mother—hire fewer women and allocate smaller capital budgets to female managers.

Shearman & Sterling discusses stockholder breach of fiduciary duty actions suits recently filed against directors and officers of Oracle, Facebook, and  Qualcomm based on failure to uphold commitments to diversity in Shareholder Derivative Complaints Allege Lack Of Board And Senior Executive Diversity.

Gender and Executive Job Mobility: Evidence from Mergers and Acquisitions – examines gender differences in job mobility based on senior managers displaced when their employers are acquired, finding a significant “gender penalty” for women.

Wachtell discusses increasing pressures public companies face to increase gender and racial diversity on boards in Corporate Governance Update: Raising the Stakes for Board Diversity.

D&O Diary’s Kevin LaCroix discusses ra ecent derivative breach of fiduciary duty and securities actions challenging alleged failures to achieve board diversity and misleading disclosures to stockholders regarding commitments to internal policies regarding diversity filed against Qualcomm in Qualcomm Hit with Board Racial Diversity Derivative Lawsuit.

D&O Diary’s Kevin LaCroix discusses recent derivative breach of fiduciary duty and securities actions challenging alleged failures to achieve board diversity and misleading disclosures to stockholders regarding commitments to internal policies regarding diversity filed against Oracle and Facebook in Oracle Directors Hit with Derivative Suit on Board Diversity Issues, and Facebook Board Hit with Derivative Lawsuit on Board Diversity and Other Race-Related Issues.

Barington Capital Group discusses its activist investor perspective on board diversity that companies benefit most from demographically diverse directors who also help improve cognitive diversity in the boardroom in Maximizing the Benefits of Board Diversity: Lessons Learned From Activist Investing.

Keith Bishop discusses a bill introduced in the California legislature that would require domestic and foreign publicly held corporations having their principal place of business in California to include individuals who are African-American, Hispanic, or Native American on their board of directors in Bill Would Impose Minimum Number Of “Directors From An Underrepresented Community”.

The New York City Office of the Comptroller discussed progress of its Boardroom Accountability program in obtaining commitments from companies with which it does business to engage in search processes that ensure that women and people of color are considered for executive and board positions in NYC Comptroller’s Boardroom Accountability 3.0 Results.

Shearman & Sterling reports that a recent amendment to Washington State corporation law require that public companies have a “gender-diverse board” by January 1, 2022 or provide board diversity disclosures in Washington State Becomes Next to Mandate Gender Diversity on Boards.

Jackson Lewis discusses measures that twelve states have enacted or are considering to enhance diversity on corporate boards in States are Leading the Charge to Corporate Boards: Diversify!

Cooley discusses research suggesting that, despite recent efforts to promote diversity on corporate boards, diversity in corporate executive positions remains low, in The sorry state of C-suite diversity.

Wachtell reports the dismissal of a lawsuit challenging California’s law mandating gender diversity on corporate boards for lack of standing in Creighton Meland v. Alex Padilla, C.A. No. 19-2288, compl. (E.D. Cal. Nov. 13, 2019), noting that plaintiff has already appealed the ruling, in Federal District Court Dismisses Challenge to Board Diversity Statute.

Davis Polk reports that the New York City Comptroller announced 75% of companies have approved stockholder proposals establishing diversity search policies seeking to increase board representation by women and people of color, submitted by the New York City Retirement Systems as part of the city’s Boardroom Accountability Project 3.0, which seeks to foster diversity in leadership of companies in which the Retirement System invests, in NYC Comptroller Stringer Reports Progress on Project to Boost Board/CEO Diversity.

Cooley reports that Creighton Meland v. Alex Padilla, C.A. No. 19-2288, compl. (E.D. Cal. Nov. 13, 2019), a lawsuit challenging the constitutionality of California’s board gender diversity statute filed by a conservative legal organization on behalf of a public company stockholder has been dismissed for lack of standing in  Federal District Court dismisses a challenge to California board gender diversity statute.

Cooley reports findings that California’s California’s SB 826 board gender diversity statute has led to significant gains in board diversity, and discusses other states that have introduced similar legislation in Will other states follow California in adopting board gender diversity mandates?

Reuters reports Goldman Sachs’ announcement that from June 30, it will only help take companies having at least one diverse member company, citing superior performance of such companies after going public, in Goldman Sachs to companies: Hire at least one woman director if you want to go public.

Spencer Stuart discusses key takeaways from the 2019 U.S. Spencer Stuart Board Index finding that boards have increasingly added new directors with diversity of gender, age, race/ethnicity and professional backgrounds, but that board turnover remains low, with new directors representing only 8% of all S&P 500 directors. 2019 U.S. Spencer Stuart Board Index.

Deloitte discusses the latest statistics on global boardroom diversity, efforts to increase gender diversity in 66 countries, and political, social, and legislative trends. Women in the Boardroom: A Global Perspective.

Keith Paul Bishop discusses a study of negative effects of California’s SB 826, imposing gender quotas on the boards of publicly traded companies headquartered in California. Business Professors Find “Large Negative Stock Market Reaction” To California’s Board Quota Law.

The New York City Comptroller calls on boards of directors to adopt a policy requiring that searches for director and officer candidates include qualified female and racially/ethnically diverse candidates, and candidates from non-traditional environments such as government, academic, or non-profit. NYC Comptroller Boardroom Accountability 3.0.

Davis Polk’s Betty Moy Huber and Paula H. Simpkins report findings from the 2019 U.S. Spencer Stuart Board Index that S&P 500 companies are accelerating the addition of women and minority directors. Spencer Stuart Shows How Boards Are Transforming.

11/18/20 [UPDATED] Climate Risk

NEW:  Kevin Stiroh, of the Federal Reserve Bank of New York, and co-chair of the Basel Committee on Banking Supervision’s Task Force on Climate-related Financial Risks (TFCR), which is part of the work of the Basel Committee on Banking Supervision, discussed the Committee’s investigation of climate change risk and financial stability implications for the banking system in The Basel Committee’s Initiatives on Climate-Related Financial Risks.

Cooley discusses SEC Commissioner Allison Herren Lee’s speech highlights how the role that the SEC plays in protecting investors, facilitating capital formation, and maintaining markets intersect with climate change, which she characterizes as a systemic risk, in SEC Commissioner Lee: SEC must address systemic financial risk posed by climate change.

SEC Commissioner Allison Herren Lee discusses climate change risk as having “more grave human and economic costs” than the coronavirus pandemic, and the SEC’s role as involving working with other regulators to understand and address systemic economic risk posed by climate change in Playing the Long Game: The Intersection of Climate Change Risk and Financial Regulation.

D&O Diary’s Kevin LaCroix discusses SEC Commissioner Allison Herren Lee’s speech warning that climate change poses systemic risk to markets and the economy, and its implications for corporate disclosure in Climate Change as a “Systemic Risk”: Markets, Regulation, and Disclosure.

Columbia University’s Millstein Center, in cooperation with LeaderXXchange (“a purpose-driven organization that advises and promotes diversity and sustainability in governance, leadership & investment”) released the results of a survey of directors and investors illustrative of demographic and regional differences in expectations regarding climate-related issues and disclosure, in Global Investor-Director Survey on Climate Risk Management.

Majority Action discusses contributions, or lack thereof, of the world’s 12 largest asset managers in holding companies accountable for combatting climate change and risks climate change pose to long-term shareholders and other stakeholders in Climate in the Boardroom – How Asset Manager Voting Shaped Corporate Climate Action in 2020.

Davis Polk discusses the U.S. Commodity Futures Trading Commission’s report — Managing Climate Risk in the U.S. Financial System — which explains disruption to the U.S. economy expected if U.S. financial systems and market participants fail to address and adapt to climate risks, in CFTC Identifies Climate-Related Financial Risks and Urges Action from Financial Regulators and Legislators.

Cooley discusses the Business Roundtable’s issuance of principles and policies regarding corporate action on climate change in The Business Roundtable shifts position on action to address climate change.

The Business Roundtable discusses its release of Addressing Climate Change – Principles and Policies proposing a market-based strategy to incentivize development and use of technologies for reduction of greenhouse gas emissions in Market-Based Solutions Best Approach to Combat Climate Change.

The Wall Street Journal discusses the Business Roundtable’s support for measures to slash greenhouse gas emissions, and issuance of principles for support of that goal in Business Shifts From Resistance to Action on Climate.

Changing Expectations for Financial Disclosure of Climate-Related Information discusses changing conceptions of what constitutes a “reasonable investor” and how companies make materiality determinations with respect to disclosures of climate-related information.

Columbia Law School’s Millstein Center discusses demographic and regional differences in directors’ and investors’ expectations around climate-related issues and disclosure and how boards and companies are engaging on climate issues internally and externally in The Results Are in: Global Investor-Director Survey on Climate Risk Management.

Cooley discusses statements by SEC Commissioners regarding the issue of climate disclosure, noting that the debate should be understood in the context of increased investor interest in sustainability disclosure, and challenges created by the absence of common standards for Environmental, Social, & Governance reporting, in SEC debate on climate disclosure regulation gets heated.

Cleary Gottlieb reports that the SEC chose not to include specific disclosure requirements on climate change or other Environmental, Social, & Governance issues in proposed amendments to Management Discussion and Analysis regulations in SEC Maintains the Status Quo on Climate Change Disclosures.

Commissioner Allison Herren Lee of the Securities and Exchange Commission objects to the Commission’s failure to address disclosure around climate change risk in its recent proposed amendments to Regulation S-K disclosure requirements in Statement by Commissioner Lee on “Modernizing” Regulation S-K: Ignoring the Elephant in the Room.

Davis Polk reports that SEC Chairman Jay Clayton issued a January 30, 2020 statement supporting proposed amendments to financial disclosure requirements, noting that the statement includes additional, unrelated Discussion of Environmental and Climate-Related Disclosure Efforts, which is summarized in SEC Chairman Releases Statement on Proposed Changes to Financial Reporting and Discusses Climate-Related Disclosure.

McKinsey discusses socioeconomic risks attributable to clime change, and considerations for companies and governments Integrating climate risk into decision-making in Climate risk and response: Physical hazards and socioeconomic impacts.

Cooley discusses a McKinsey study of the economic effects of climate change as a possible impetus supporting increased focus of financial investors on issues of sustainability in McKinsey looks at socioeconomic impact of climate risk.

11/13/20 [UPDATED] Poison Pills

NEW: $$$ Richards Layton & Finger discusses the use of “wolf pack” poison pill triggers based on aggregate ownership positions of multiple stockholders acting in concert in Recent Developments Regarding ‘Wolf Pack’ Provisions in Rights Plans.

Wilmer Hale provides an overview of the purpose and advantages of Net Operating Loss stockholder rights plans in COVID-19: Renewed Interest by Public Companies in NOL Rights Plans.

Mark S. Nelson reports on recent research by the Council of Institutional Investors, examining poison pills adopted in 2020, which finds some pro-shareholder developments but also questions whether implementation of poison pills during the coronavirus pandemic will benefit stockholders in CII report examines the reemergence of the poison pill.

The Return of Poison Pills: A First Look at “Crisis Pills” examines renewed adoption of poison pills during the coronavirus pandemic, noting trends relating to industry and time of adoption.

King & Spalding suggests that a comprehensive, proactive corporate strategy designed to mitigate company-specific risks is superior to traditional defensive measures such as the poison pill in A New Era For Activist Defense: Going Beyond the Relics of the 80s.

Freshfields discusses the extent to which companies that have adopted poison pills in 2020 as compared with the same period in 2019, and use of currently implemented pills versus “on the shelf” pills based on market capitalization in Not so fast! A revealing look at the data behind recent poison pill adoptions and what boards should be doing now.

DLA Piper discusses the number of adoptions of traditional and Net Operating Loss poison pills in March 2020, and terms that traditional pills have used, in Rise of the aggressive poison pill.

Cleary Gottlieb discusses Net Operating Loss poison pills used to deter acquisitions of stock that could limit a company’s NOL carryforwards and have other negative tax consequences in Is Now a Good Time to Adopt an NOL Rights Plan?

Glass Lewis clarifies its policies on adoption of poison pills and its application during current depressed market conditions Poison Pills and Coronavirus: Understanding Glass Lewis’ Contextual Policy Approach.

Sidley discusses recent guidance by Institutional Shareholder Services regarding the use of poison bills in the current economic environment in ISS Signals More Understanding for Poison Pills and Skepticism for Activist Campaigns During the COVID-19 Crisis.

Fried Frank observes that companies are increasingly considering adoption of stockholder rights plans in due to volatility in financial markets, and discusses characteristics of plans that some companies have recently adopted in A Turn Back to “Poison Pills” in Response to the Coronavirus Pandemic.

Latham & Watkins suggests that market conditions may favor adoption of a stockholder rights plan, and discusses terms of a plan that should be tailored to circumstances that justified its adoption in Proactively Adopting a Poison Pill in Response to the COVID-19 Crisis.

Cleary Gottlieb notes the uniquely threatening nature of current depressed market conditions for unsolicited acquisition or activist agitation, suggesting defensive measured including implementation of “on the shelf” poison pills in Rewriting the Poison Pill Prescription: Consider Active Defenses During COVID-19.

Wachtell, well-known as the creator of the stockholder rights plan popularly known as the “poison pill,” discusses the possible desirability of adopting an “on the shelf” plan in view of recent declines in equity value Rights Plans (“Poison Pills”) in the COVID-19 Environment — On the Shelf and Ready to Go.

Gibson Dunn notes activist accumulation of stakes in publicly traded companies during recent declines in stock prices, and suggests that boards and advisors consider implementation of a stockholder rights plan in Reconsidering Poison Pills.

Davis Polk suggests that, in light of severely depressed stock prices, companies prepare for the possibility of a hostile campaign with an “on the shelf” poison pill ready for adoption in Should companies play strong defense in these hostile times?

Akin Gump discusses adoption of poison pills to deter exploitation of recent declines in stock prices by hostile bidders and activists in Preserving Stockholder Value in a Volatile Market.

Morgan Lewis discusses the potential utility of takeover defense or Net Operating Loss poison pills given extreme drops in market capitalization, noting the prevalent use of such measures during the 2008-2009 financial crisis in As COVID-19 Disrupts Financial Markets, is it Time to Consider a Poison Pill?

Boston College’s Professor Brian JM Quinn discusses the “shadow pill” — a company’s ability to adopt a stockholder rights plan at any time — in the context of bargaining between Hewlett Packard and Xerox in The Shadow Pill is a Powerful Thing.

The Consequences to Directors of Deploying Poison Pills examines career outcomes for directors on boards that adopt poison pills, and whether pills have negative, positive, or inconsequential effects on firms that adopt them.

11/11/20 [UPDATED] Fiduciary Duties

NEW:  Don’t Go Chasing Waterfalls: Fiduciary Obligations in the Shadow of Trados discusses In re Trados, Inc. Shareholder Litigation, C.A. No. 1512-VCL (consol.), opinion (Del. Ch. Aug. 16, 2013), and its implications for directors’ discharge of fiduciary duty in venture capital backed companies that have preferred and common classes of stock.

Skadden provides an overview of fiduciary duties applicable to corporate directors under Delaware law in Directors’ Fiduciary Duties: Back to Delaware Law Basics.

The Three Fiduciaries of Delaware Corporate Law — and Eisenberg’s Error discusses variations of the duties of care and loyalty and beneficiaries of the duties owed by officers, directors, and controlling shareholders.

11/04/20 [UPDATED] Institutional Investors

NEW:  Shareholder Value(s): Index Fund ESG Activism and the New Millennial Corporate Governance examines the means by which large index fund managers in promote Environmental, Social, and Governance issues at major companies, presenting evidence that contrary to perceptions of index funds as remaining silent corporate governance issues, fund managers aggressively press companies to address ESG concerns, especially board diversity and climate change by withholding votes from directors in uncontested elections.

Former Chief Justice of the Delaware Supreme Court Leo E. Strine, Jr. offers policy recommendations intended to align the responsibilities of institutional investors with the best interests of investors and stakeholders in sustainable wealth creation and environmental responsibility in The Central Role of Institutional Investor Regulation in Restoring a Fair and Sustainable American Economy.

Corporate Governance Through Exit and Voice presents empirical evidence from the private engagements of a large active UK asset manager suggesting that asset manager derived benefits from monitoring portfolio companies and investment in stewardship, contrary to academic arguments that index funds have little incentive to monitor and engage with portfolio companies.

Reversing the Fortunes of Active Funds observes that passive funds recently surpassed active funds in total assets under management, noting that active funds participate in and bear the costs of monitoring portfolio companies but passive funds to not, the trend will tend to reduce monitoring, and proposes the use of tax mechanisms to help defray active funds’ monitoring costs.

BlackRock founder Barbara Novick spoke at the Harvard Law School Program on Corporate Governance on index fund managers’ corporate stewardship, responding to academic arguments that funds exert too much or too little influence over portfolio companies. Video of Barbara Novick Keynote Presentation.

Tulane’s professor Ann Lipton discusses current academic disputes regarding index funds’ incentives to participate in the governance of their portfolio companies, and consequences of concentrated stock ownership by mutual funds in Index Funds in Corporate Governance: Once More Unto the Breach.

Asset Management, Index Funds, and Theories of Corporate Control challenges recent academic articles that argue index funds exert too much, or, conversely, too little, but in either case, socially sub-optimal influence over portfolio companies, as ungrounded in the realities of the asset management business.

Index Funds and the Future of Corporate Governance: Theory, Evidence, and Policy examines how index fund managers monitor, vote, and engage with portfolio companies, and expected impact of concentrated index fund ownership on corporate governance and performance, and the economy.

10/30/20 [UPDATED] D&O Insurance

NEW:  Rolnick Kramer Sadighi discusses the Delaware Supreme Court’s decision in In re Solera Insurance Coverage Appeals, Nos. 413, 418, 2019, opinion (Del. Oct. 23, 2020), holding that that a statutory appraisal proceeding was not covered by a D&O insurance policy under terms that limited coverage to alleged “violations” of law, in Appraisal Action Leads to Insurance Action: D&O Doesn’t Cover Appraisal.

D&O Diary’s Kevin LaCroix discusses the Delaware Supreme Court’s decision in In re Solera Insurance Coverage Appeals, Nos. 413, 418, 2019, opinion (Del. Oct. 23, 2020), holding that that a statutory appraisal proceeding was not covered by a D&O insurance policy under terms that limited coverage to alleged “violations” of law, in Delaware Supreme Court: Appraisal Action Not a “Securities Claim” and Therefore Not Covered by D&O Insurance.

Wachtell discusses the California Superior Court’s ruling in Onyx Pharmaceuticals Inc. v. Old Republic Insurance Co., et al., C.A. No. 538248, order (Cal. Super. Oct. 1, 2020), finding that a D&O insurance policy’s “bump-up” exclusion permitted excess carriers to disclaim coverage for sums paid to settle a class action against a merger target’s directors challenging the consideration paid stockholders as inadequate in “Bump-Up Exclusion” Bars Coverage of Settlement of Deal Litigation Claims.

D&O Diary’s Kevin LaCroix discusses dynamics of the D&O insurance marketplace and challenges that frustrate insurers’ ability to engage in active loss prevention in Mandating D&O Insurer Rotation? A Critique.

Changing the Guard: Improving Corporate Governance with D&O Insurer Rotations discusses proposes mandatory rotation of D&O insurers as a means of alleviating agency costs and relational contracting that result in D&O insurers’ failure to engage in active loss prevention and contribute to moral hazard.

10/22/20 [UPDATED] Stockholder Meetings

NEW:  Back to the Future? Reclaiming Shareholder Democracy Through Virtual Annual Meetings examines stockholder voting turnout and voting outcomes at annual meetings between March and June 2020 in comparison with prior years, noting differences in turnout and approval rates depending on use of hybrid, in-person, telephonic, or interactive video, market capitalization; and proposal topics.

Mayer Brown discusses implications of the coronavirus pandemic, including the likelihood that companies may wish to use virtual stockholder meetings in 2021, proxy disclosures regarding the effects of the pandemic, and other likely proxy disclosure issues for which companies may wish to begin preparation in 2021 Proxy and Annual Report Season: Time to Prepare.

Skadden suggests, given uncertainty to the ongoing consequences of the coronavirus pandemic in 2021, that companies begin to consider and plan for effective use of virtual stockholder meetings in the 2021 in Planning Ahead: Virtual Shareholder Meetings in the 2021 Proxy Season.

How Shifting from In-Person to Virtual Shareholder Meetings Affects Shareholders’ Voice evaluates the conduct of virtual stockholder meetings following shifts from in-person meetings in response to the coronavirus pandemic, finding decreases in meeting length and discussion of various topics that suggest virtual meetings increase potential stockholder participation by reducing costs, but that in practice, less time has been spent addressing stockholder concerns.

Stockholder and sustainable investment organizations write to the SEC to raise concerns based on recent experience with widespread use of remote virtual platforms to conduct stockholder meetings in Letter to Clayton and Hinman on Virtual and Hybrid Meetings.

Soundboard Governance discusses use of remote, virtual platforms to conduct stockholder meetings following recent increases in use in Key Takeaways and Best Practices from Virtual Shareholders Meetings in 2020.

Vorys discusses the use of virtual board meetings, their management, and how mitigate  additional risks they pose in Virtual board meetings and risk mitigation during Covid-19.

Broadridge provides statistics on virtual stockholder meetings it hosted between January 1 and May 22, 2020, representing a more than 6X increase over the same period in 2019, at Broadridge Virtual Shareholder Meetings (“VSMs”): Preliminary Statistics.

Wachtell discusses increases in the use of virtual annual meetings during the coronavirus meeting, and the first virtual meeting used in a proxy contest in Lessons From the Future – The First Contested Virtual Annual Meeting.

Cleary Gottlieb reports that New York’s Governor Cuomo has issued Executive Order 202.18, Continuing Temporary Suspension and Modification of Laws Relating to the Disaster Emergency (New York, Apr. 16, 2020), extending his previous Executive Order 202.8, Continuing Temporary Suspension and Modification of Laws Relating to the Disaster Emergency (New York, Mar. 23, 2020), which suspended New York’s Business Corporation Law Sections 602(a) — requiring physical stockholder meetings — and 605(a) and (b) — requiring prior notice of annual meetings and adjournments — “to the extent they require meetings of shareholders to be noticed and held at a physical location.” Cuomo Executive Order Gives New York Corporations Relief on Physical Annual Meetings.

Olshan discusses Delaware Governor Carney’s a Tenth Modification of the Declaration of a State of Emergency for the State of Delaware Due to a Public Health Threat (Apr. 6, 2020), which authorized Delaware corporations to switch noticed in-person stockholder meetings to remote virtual meetings of adjourn them in favor of a later remote meeting, which it commended as preferable to a proposed emergency amendment to 8 Del. C. § 110, which would give broads discretion to postpone annual meetings irrespective of whether an emergency prevented a quorum from being convened in Delaware Emergency Order: Remote Shareholder Communication Meetings.

Sheppard Mullin discusses considerations regarding the use of virtual stockholder meetings, including hybrid meetings that can be attend either in-person or remotely, in Virtual and Hybrid Shareholder Meetings in the Era of COVID-19: What Public Companies Need to Know.

UCLA Law Professor Stephen Bainbridge discusses recent sources of authority for conducting virtual stockholder meetings, and suggests a platform offered by Broadridge for conducting virtual meetings in Conducting the Annual Shareholder Meeting during the COVID19 Pandemic.

ISS discusses SEC guidance regarding the conduct of virtual stockholder meetings in Annual General Meetings & COVID-19.

Delaware Governor John Carney, in a Tenth Modification of the Declaration of a State of Emergency for the State of Delaware Due to a Public Health Threat (Apr. 6, 2020), noting that the Delaware General Corporation Law does not address certain aspects of stockholder meetings implicated by a public health emergency, provides rules governing notice of changes of physical meetings to meetings conducted by remote communications, and adjournment of scheduled meetings.

Cleary Gottlieb discusses adjournment of scheduled stockholder meetings and conversion of scheduled stockholder meetings to virtual meetings, and related notice and procedural requirements under Delaware and New York law in Coronavirus & Postponing/Adjourning Annual Meetings and Coronavirus & Virtual Annual Meetings.