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09/21/20 [UPDATED] Federal Forum Selection

NEW:  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?

09/16/20 [UPDATED] Duty of Oversight

NEW:  Boards Should Care More About Recent “Caremark” Claims and Cybersecurity discusses recent Delaware case law addressing the Caremark duty of oversight and their implications for potential risk of liability related to cybersecurity risk.

Potter Anderson discusses recent Delaware decisions in which claims for oversight liability survived motions to dismiss, noting dissimilarities in the analyses that do not support interpretation of multiple such decisions as constituting a trend in Three Is Not A Trend: Another Caremark Claim Survives A Motion To Dismiss, But Does Not Reflect A Change In The Law.

McDermott Will & Emery discusses criminal prosecution of the CEO of Blue Bell seeking to prove specific intent, and its implications for board oversight obligations in The Blue Bell Dairy CEO Indictment and its Implications for Executive Liability.

Sidley discusses recent Delaware decisions in which claims for oversight liability survived motions to dismiss, suggesting heightened risk associated with the coronavirus pandemic supports greater board emphasis on oversight in Board Oversight in Light of COVID-19 and Recent Delaware Decisions.

Kaplan & Walker discusses recent Delaware decisions addressing board oversight of compliance systems, noting the particular need of attention in high-risk and highly-regulated industries in Insights from the Delaware courts on board oversight of compliance programs.

Sheppard Mullin discusses recent Delaware caselaw involving the duty of oversight, noting directors’ obligations to inform themselves of fundamental business issues impacted by the coronavirus pandemic in  COVID-19 Directors’ Duties of Oversight: Reporting and Monitoring.

Akerman discusses recent Delaware case law and trends in federal regulation involving oversight of legal, ethical, and reputational risks, illustrating that boards can be held legally accountable for oversight failures.

Drinker Biddle discusses recent Delaware decisions involving claims for breach of the duty of oversight under Caremark, and suggests steps that corporate directors can take to help protect themselves from oversight liability in They Had One Job.

Foley & Lardner discusses takeaways from recent Delaware decisions addressing the duty of oversight under Caremark, presented as relevant specifically to directors and officers of health care providers, in Health Care Provider Director and Officer Liability: Important Takeaways from Clovis and Marchand.

McDermott Will & Emery’s Michael Peregrine discusses the recent release of former WorldCom CEO Ebbers from prison, noting aspects of Ebbers’ conscious marginalization of WorldCom in-house counsel as part of the conduct that led to his conviction, as relevant to duty of oversight concerns raised in recent Delaware case law in Bernie Ebbers’ and Board Oversight of the Office of Legal Affairs.

Corporate Oversight and Disobedience discusses the duty of oversight in connection with the obligation of obedience, under 8 Del. C. § 101(b), which requires that corporations serve a lawful purpose.

McDermott Will & Emery proposes a plan of action for corporate boards responsive to recent Delaware case law addressing the duty of oversight under Caremark in The Board’s Marchand/Clovis Reaction Plan.

Richards Layton & Finger discusses the nature and scope of directors’ duty of oversight under recent Delaware case law in What Is Oversight? Del. Courts Continue to Provide Clarification Post-‘Marchand’.

CorpGov.com discusses directors’ duties with respect to environmental, social, and governance risk in relation to recent Delaware Court decisions involving the duty of oversight under Caremark in ESG and Mission-Critical Issues for Director & Officer Liability.

Davis Polk discusses recent decisions of the Delaware Court of Chancery addressing the duty of oversight in Recent Delaware Cases Reinforce Director Accountability for Risk Oversight.

Wachtell summarizes emerging and recent developments involving the duty of oversight, including recent Delaware case law, the importance of engaged board oversight of corporate risk, and the record of such oversight, presented in Risk Management and the Board of Directors (WLRK November 2019), in Risk Management and the Board of Directors.

[$$$] Bloomberg Law discusses recent decisions of the Delaware Court of Chancery addressing Caremarkclaims in Corporate Boards May Face Higher Legal Hurdle in Risk Oversight.

Boston College Professor Brian JM Quinn notes that recent case law addressing Caremark claims has changed his view of the likelihood that duty of oversight claims involving Boeing’s 737 Max, asserted in Kirby Family Partnership, LP v. Dennis Muilenburg, et al. and Boeing Co., C.A. No. 2019-0907-, compl. (Del Ch. Nov. 8, 2019; red. Nov. 18, 2019), could survive a motion to dismiss.

Paul Weiss discusses recent decisions of the Delaware Court of Chancery addressing Caremark claims in Recent Delaware Decisions Signal Renewed Focus on Board Level Compliance Oversight.

08/25/20 [UPDATED] D&O Insurance

NEW: 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.

08/21/20 [UPDATED] Standard Shifting

$$$ Richards Layton & Finger discusses Court of Chancery decisions addressing the ab initio requirement that transactional mechanisms that, under with M&F Worldwide, will shift the standard of review applicable to controlling stockholder transactions from entire fairness to business judgment be implemented before substantive economic negotiations take place, since the Supreme Court last addressed the issue in Nicholas Olenik v. Frank A. Lodzinski, et al. and Earthstone Energy, Inc., No. 392, 2019, opinion (Del. Apr. 5, 2019), in Court of Chancery’s Post-‘Olenik‘ Interpretation of the ‘Ab Initio’ Requirement.

Did Delaware Really Kill Corporate Law? Shareholder Protection in a Post-Corwin World empirical examines transactions following the Delaware Supreme Court’s decision in Robert A. Corwin, et al. v. KKR Financial Holdings, LLC, et al., No. 629, 2014, opinion (Del. Oct. 2, 2015), finding no evidence that it has led to an increase in flawed deal processes.

08/12/20 [UPDATED] ESG

NEW:  Cooley discusses the issuance of a Government Accountability Office study on investor demand for Environmental, Social, & Governance-related disclosure, current company disclosure practices, and policy implications in GAO finds lack of consistency in ESG disclosure — how will the SEC respond?

Caremark and ESG discusses Employee, Environmental, Social, & Governance concerns as related to the duty of corporations and directors to implement and monitor compliance programs and the requirement that corporations operate lawfully, noting that by adopting EESG standards that require more than the legal minimum required to benefit employees, its consumers, the environment, and society, companies ensure compliance with minimum requirements.

Wachtell discusses proposed Department of Labor rules that would limit Employee Retirement Income Security Act-governed investment based on Environmental, Social, & Governance factors rather than solely on stockholder returns, noting that ESG funds have demonstrated superior performance, and speculating that the proposed rules would increase demand for ESG-related data to support investment decisions in DOL Proposes New Rules Regulating ESG Investments.

Tulane Law’s Professor Ann Lipton notes that the Department of Labor approved inclusion of private equity investments in 401(k) plans and proposed new rules that discourage Employee Retirement Income Security Act-regulated retirement plan investment based on Environmental, Social, & Governance factors by requiring that investments be based “solely on pecuniary factors that have a material effect on the return and risk of an investment” in Private Equity In, ESG Out.

FTI Consulting reports, based on communications with companies and investors, that attempts to address “Social” considerations under an Environmental, Social, & Governance framework have contributed to business risk and caused reputational damage in Time to Rethink the S in ESG.

The New York Times reports that the Department of Labor has proposed rules governing investments under the Employee Retirement Income Security Act preventing investments based on Environmental, Social, & Governance factors that “subordinate return or increase risk for the purpose of nonfinancial objectives” in Labor Dept. seeks to Restrict Social Goals in Retirement Investing.

Davis Polk discusses a proposed Department of Labor rule proposed rule governing investments under the Employee Retirement Income Security Act requiring that only “pecuniary factors” be used to evaluate investments, to the exclusion of Environmental, Social, & Governance factors that sacrifice return or increase costs or risk in Department of Labor Proposes Investment Duties Rule Affecting ESG Investments.

The Need for Employee Buy-in for ESG to Work examines the relationship between Environmental, Social, & Governance considerations, employee satisfaction, and financial value, finding that neither ESG practices nor employee satisfaction alone improve financial value, but the combination of ESG practices and employee satisfaction had a large effect on financial value.

Wachtell’s Kirby Smith and Leo E. Strine, Jr. propose the use of compensation committees having responsibility for a company’s entire workforce rather than just senior management, tasked with ensuring that workers are fairly compensate in How A Reconceived Compensation Committee Can Help Tackle Inequality.

The Board Director Training Institute of Japan’s Nicholas Benes discusses possible means of effecting sustainability-oriented corporate governance, noting potential limitations of Environmental, Social, & Governance as insufficiently tied to incentives, and proposing inventive-based reforms in Redesigning Corporations: Incentives Matter.

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.

How Corporate and Securities Laws Affect Social Responsibility and Corporate Purpose discusses the role of state corporate law and federal securities regulation in promoting the role of corporates social responsibility and environmental, social, and governance concerns, and advocates for ways in which the law can better accommodate corporate promotion of such concerns.

UCLA’s Professor Stephen Bainbridge discusses research in Environmental & Social Voting at Index Funds, which supports the conclusion that passively managed index funds, despite touting commitments to Environmental, Social, and Governance objectives, do not meaningfully participate in ESG activism in ESG Voting by Index Funds.

How Committed Are Active-Investment Managers to ESG? examines active fund managers’ commitments to Environmental, Social, and Governance principles based on compliance with voluntary commitments to the United Nations 2006 Principles for Responsible Investment, concluding that only certain funds improve ESG while many others use their commitment to the Principles for Responsible Investment to attract capital without notable changes to ESG, and suggest the need of metrics to assess compliance, greater investor oversight of investment managers, and greater transparency by investment managers.

Wachtell discusses Environmental, Social, and Governance-related scenario analysis disclosures and the need to take precautions to ensure that such disclosures are not misleading, providing examples of such disclosures in ESG Disclosures and Litigation Concerns.

Schulte Roth & Zabel discusses the EU regulation on Sustainability-Related Disclosures, scheduled to take effect in March 2021, and related legislation that establishes a framework for classifying financial products as “sustainable investments,” in New ESG Disclosure Obligations.

Is Managerial Entrenchment Always Bad and Corporate Social Responsibility Always Good? examines simultaneous adoption of managerial entrenchment and corporate social responsibility governance provisions, finding evidence that in the absence of entrenchment provisions, market discipline reduces managers’ incentives to invest in long-term relationships with stakeholders and increases incentives to spend company resources generously on symbolic CSR activities.

ShareAction explores the role and influence of proxy advisors, analyzing their recommendations on Environmental, Social, & Governance shareholder resolutions compared to asset managers’ voting decisions in Another Link in the Chain: Uncovering the Role of Proxy Advisors in Investor ESG Voting.

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).

NEW: Wachtell discusses board legal obligations, and adjustment to board functions, communications, and engagement in response to increasing investor concern over Environmental, Social, & Governance, stakeholder interests, and sustainable long-term investment strategies in Spotlight on Boards.

NEW: FTI Consulting discusses issues of likely importance to companies in connection with anticipated adoption of Environmental, Social, & Governance-related practices in Top 10 ESG Trends for the New Decade.

Wachtell discusses the relevance of corporate income tax to Environmental, Social, and Governance disclosure, noting the likelihood of tax arbitrage — shifting profit among jurisdictions — as a focus, and possible governance risks that may arise in response to aggressive tax planning in Tax and ESG.

Morrow Sodali’s John Wilcox discusses approaches to defining corporate purpose and corporate culture in the evolving governance environment that increasingly emphasizes Environmental, Social, and Governance, sustainability, and stakeholder interests in Corporate Purpose and Culture.

Wachtell suggests that Environmental, Social, and Governance considerations will increasingly impact M&A activity, discussing their relevance to due diligence and communications regarding transactions, as well as differential concerns between acquirer and target concerns, and the relationship between ESG performance and cost of capital in The Coming Impact of ESG on M&A.

Stewardship and Collective Action: The Australian Experience discusses collective action of investors in promoting corporate stewardship utilizing Australian stewardship codes, and suggests considerations for development of policy guiding investor participation in corporate governance in other jurisdictions.

Eric Scheiner and Jennifer Quinn Broda of Kennedys discuss risks that companies may assume in efforts to satisfy or failure to meet corporate social responsibility objectives having potential implications for D&O insurers and policyholders in Potential D&O Risks Arising from Corporate Social Responsibility.

Wachtell discusses BlackRock’s recent announcements regarding its commitment to sustainability as a key focus of its investment strategy in Sustainability in the Spotlight.

The CFA Institute discusses the results of surveys addressing how finance professionals and investors believe investments can support environmental, social, and governance objectives without undermining their monetary value in Sustainable Value for Money: How to reconnect finance with the needs of society.

McKinsey discusses socioeconomic risks attributable to climate 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.

BlackRock discusses the ways in which it is accelerating integration of sustainability into technology, risk management, and investment in Sustainability as New Standard for Investing.

Cooley discusses BlackRock’s recent announcements regarding its commitment to sustainability as a key focus of its investment strategy in BlackRock puts sustainability at the center of investment strategy, expects more transparency in sustainability disclosure.

BlackRock discusses the economic consequences of climate change and its commitment to making sustainability the center of its investment strategy in A Fundamental Reshaping of Finance.

The Role of ESG in the Financial Performance of Banks finds a positive correlation between the return on assets and Environmental, Social, & Governance performance for European banks.

ISS discusses the link between Environmental, Social, & Governance performance and financial performance, presenting evidence that firms with favorable ESG performance ratings are more profitable, less volatile, good allocators of capital, and less cyclical, in ESG Matters.

Morningstar discusses “encouraging” findings from proxy votes of large asset managers in 2019 demonstrating support for shareholder-proposed sustainability resolutions, while noting that the largest fund providers were significantly less supportive of such resolutions, in How Can Fund Providers Protect the Future for Worker-Investors?

State Street discusses the results of a global survey of Environmental, Social, & Governance investing, noting factors affecting adoption and barriers to adoption of ESG factors by institutional investors Into the Mainstream: ESG at the Tipping Point.

08/12/20 [UPDATED] Controlling Stockholders

NEW:  Alibaba: A Case Study of Synthetic Control discusses a large corporation’s governance structure in which a partnership appoints a majority of a board’s directors, the partnership is controlled by a partnership committee, and the partnership committee is effectively controlled by an entity that is controlled by a 5% stockholder, giving the 5% stockholder effective control over the large corporation.

Pillsbury Winthrop discusses recent Delaware case law finding that minority stockholders exercised control over corporations in My Brother’s Keeper: When Do Minority Stockholders Risk Being Considered “Controllers” of a Delaware Corporation?

Why Controlling Shareholders Are Not Fiduciaries argues that Delaware corporate law’s imposition of fiduciary duties on majority stockholders is conceptually flawed, and that recognition of a remedy for shareholder oppression would permit more limited, flexible corrective intervention.

Tulane Law’s Professor Ann Lipton discusses the trend in Delaware fiduciary duty case law that increasingly considers corporate control, and increasingly finds that minority stockholders may be controllers, in A study in evolution.

Controlling Shareholders in the Twenty-First Century: Complicating Corporate Governance Beyond Agency Costs discusses a rise in concentration of corporate ownership, which is contrary to predictions of more diverse ownership prevalent twenty years ago.

07/02/20 [UPDATED] Disclosures

NEW:  Cooley discusses recent research regarding company disclosures regarding business impact of the coronavirus pandemic in Study looks at COVID-19 disclosure.

Reuters reports that a study of corporate disclosures on management of social and environmental risk required under the European Union’s 2018 Non-Financial Reporting Directive revealed “big gaps between many companies’ words and action,” in Sustainability disclosures by European companies generally poor: study.

ESG Performance and Disclosure: A Cross-Country Analysis examines the relationship between ESG factors, disclosure, and financial performance across countries with varying policies imposing ESG disclosure requirements, finding correlation between quantity of disclosures and quality of data, and no relationship between ESG and risk-adjusted returns, but a small effect on volatility.

The U.S. Chamber of Commerce discusses proposed guidelines for Environmental, Social & Governance disclosures in ESG Reporting Best Practices.

Ernst & Young discusses corporate disclosures relating to human capital and culture in How and Why Human Capital Disclosures are Evolving.

Davis Polk discusses best practice guidelines for Environmental, Social & Governance disclosures proposed by the U.S. Chamber of Commerce. Chamber of Commerce Releases Best Practices for Voluntary Environmental, Social & Governance (ESG) Disclosure.

06/22/2020 [UPDATED] Corporate Purpose

NEW:  SquareWell Partners  discusses the results of a survey of investors’ views on the relevance of the concept of corporate purpose in Making Corporate Purpose Tangible – A Survey of Investors.

Bernard Sharfman responds to On the Purpose of the Corporation, which proposes a corporate purpose requiring “lawful and ethical conduct” and permitting consideration of stakeholder interests, as ignoring social value created by profitable businesses and relying on a pretextual relationship between institutional investors and management, in A Fuller Sense of Corporate Purpose: A Reply to Martin Lipton’s ‘on the Purpose of the Corporation’.

Skadden responds to On the Purpose of the Corporation, which proposes a corporate purpose requiring “lawful and ethical conduct” and permitting consideration of stakeholder interests, noting that the proposed purpose risks loss of director protection under the business judgment rule in An Alternative Paradigm to “On the Purpose of the Corporation”.

Can a Broader Corporate Purpose Redress Inequality? criticizes current debate on stakeholderism as a distraction from the more important issue of inequality, arguing that corporate directors and officers back stakeholderism because it allows them to retain control, and that regulation, rather than corporate governance, is needed to address inequality.

Should Corporations Have a Purpose? argues that current debate regarding corporate purpose bypasses questions of whether and why corporations should have a purpose, explores theoretical, historical, and practical reasons for corporate purpose, and concludes that corporate purpose should be understood — as a default protecting expectancy interests — as maximizing economic value; but that pursuit of long-term economic value requires managers to consider the effects of corporate operations on stakeholders and society.

More on corporate purpose describes Professor Dalia Tsuk Mitchell’s article From Dodge to eBay: The Elusive Corporate Purpose.

06/04/20 [UPDATED] Poison Pills

NEW:  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.