The COVID-19 pandemic is likely a watershed moment for the traditional structure of America’s business workforce.  Although there is much uncertainty and opaqueness about the future, it seems clear that in the short term “remote” work arrangements – remote from large commercial office complexes and from concentrated city centers – will become more common for a substantial part of the workforce.

In the medium and longer terms, the pandemic may also support trends toward a more gig-based workforce in sectors of the labor market that are not currently significantly gig-based, specifically for workers in white-collar, business service industries.  We lay out below a few of the reasons to anticipate that result and briefly explore the principal legal implications for business.  As virtually all companies are considering the impact of the pandemic on their businesses, and specifically the cost-saving potential tied to remote work where feasible, they should take the opportunity now to also consider the possibility that gig-based workforce trends will impact them and how the steps they take in the short term may influence any such impact.  For many public companies, the trends and issues discussed below fall under the umbrella of human capital management strategy, as to which the board of directors may be expected to exercise oversight.[1]
Continue Reading The Gig is Up? COVID-19 & Remote Work Trend Toward Growth in Gig Labor*

While much of the focus today is on restarting segments of the economy and developing action plans to reopen businesses, history outside of corporate America teaches us important lessons on how incentives can play a role in driving effective outcomes.  It shows us that incentives, not just rules, may be the solution businesses need.  Consider the British prisoner dilemma over two centuries ago as a powerful lesson in incentives and how these lessons can be applied to the current pandemic.
Continue Reading Incentives in the Pandemic

This is an updated version of our prior post to address Governor Cuomo’s most recent Executive Orders.

In response to the COVID-19 pandemic, Governor Cuomo declared a disaster emergency and ceased operation of all non-essential businesses in New York state with the March 7 Executive Order 202 and its successor Executive Orders.  In particular, the March 20th Executive Order 202.8 provided temporary suspension of several state law regulatory requirements, including with respect to shareholder meetings of New York corporations.
Continue Reading UPDATE: Cuomo Executive Order Gives New York Corporations Relief on Physical Annual Meetings

Executive pay in the midst of the pandemic presents an obvious dilemma.  On the one hand, it would be a stretch to blame fairly management teams for most of the adverse financial performance that will stretch across a broad range of industries.  On the other, they cannot escape the consequences either.

Consider that while stock values may bounce back for many companies in the reasonably short term, it is unlikely that business will quickly return to the status quo ante.  In some industries, the markets for products and services may change permanently; in other industries, supply chain and inventory management may also be permanently affected.  Not least, rank and file employees and other stakeholders across the economy will suffer.  Many executives will take short-term salary cuts in recognition of the hardship, but that is a preliminary and largely symbolic step and compensation committees need to find the right overall balance between reward and respect for the economic environment.
Continue Reading The Executive Pay Dilemma

The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2020”.

Corporate Purpose

On August 19, 2019, the Business Roundtable released its latest Statement on the Purpose of a Corporation, emphasizing commitment to all stakeholders.[1] The Statement received a lot of attention

Section 162(m) of the Internal Revenue Code limits the deductibility of compensation paid by public companies to certain of their executives in any year to $1 million. The 2017 Tax Cuts and Job Act amended Section 162(m) to expand the number of executives at a public company whose compensation may be non-deductible by reason of

On November 22, 2019, the First Circuit Court of Appeals held in Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, that two private equity funds, Sun Capital Partners III, LP and Sun Capital Partners IV, LP were not liable for approximately $4.5 million in multiemployer pension

A week after Glass Lewis issued its 2020 proxy voting guidelines,[1] Institutional Shareholder Services (ISS) released its final updates to its 2020 proxy voting policies.  The updated policies will be applied to shareholder meetings beginning on February 1, 2020, and the changes to U.S. polices are summarized below.
Continue Reading ISS Updates its 2020 Proxy Voting Policies

Vice Chancellor Slights, of the Delaware Court of Chancery, included a slightly self-effacing, and only slightly humorous, note in his recent opinion in a fiduciary claim against the directors of Tesla, Inc., to the effect that the defendants have reason to believe that they drew the wrong judge in the case.  The case relates to the 2018 incentive compensation award to Tesla’s CEO, Elon Musk, that caps out at about $55 billion (that “b” is not a typo).  The footnote concerns, in part, Vice Chancellor Slights’ determination, in a separate recent claim alleging fiduciary breaches by the Tesla board, that members of Tesla’s board were not independent.[1]
Continue Reading Update on Director Independence

Monday’s Business Roundtable Statement on the Purpose of a Corporation is significant, mostly because it opens the door for more discussion of the idea of “corporate purpose”.  While there are many ways that conversation could go, there are good reasons to believe the discussion will lead to a shift in corporate governance towards more authority and responsibility for corporate boards.  Specifically, boards will be expected to lead on corporate social responsibility issues.
Continue Reading The Purposes of a Corporation and the Role of the Board