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Glass Lewis recently released its 2020 proxy voting guidelines and shareholder initiatives.[1]  The following is a summary of Glass Lewis’ proposed changes and updates for 2020.  Most significantly, the updated guidelines reflect a response to the Securities and Exchange Commission’s recent announcement that it may decline to take a view or may respond orally to no-action requests for shareholder proposals under Rule 14a-8 of the Exchange Act.[2]  Starting in 2020, Glass Lewis generally will recommend a vote against members of a company’s governance committee if a company omits a shareholder proposal from its proxy statement without evidence of receiving no-action relief from the SEC, as described in more detail below.…
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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]…
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The CEOs of 150 major US public companies recently pledged to act for all of their “stakeholders” – customers, employees, suppliers, communities and yes, even stockholders.[1] Much commentary ensued. But before we get too excited about whether these CEOs are grasping the mantle of government to act on behalf of the citizenry and other people who aren’t paying them, there is the prior question of whether, as a matter of Delaware law, they can.…
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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.…
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Institutional investors are howling for US public companies to focus more on the long-term.[1]  This is unsurprising. Long-term focused companies produce significantly better results over time, reporting far greater revenue growth with less volatility, far higher levels of economic profit, and greater total return to shareholders.[2] So if you are holding stock for a long time, a long-term focus for your portfolio companies is critical.…
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Last week, the Delaware Supreme Court reversed the Delaware Court of Chancery’s dismissal of a Caremark claim[1] that arose out of the Blue Bell ice cream listeria outbreak in the mid-2010s.  See Marchand v. Barnhill, No. 533, 2018 (Del. June 18, 2019).  The Delaware Supreme Court’s opinion in this closely watched case provides useful guidance to directors on the proper role of the board in overseeing risk management.…
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Recently, Vanguard updated its Vanguard Fund proxy voting guidelines, disclosing a proxy voting policy relating to what Vanguard considers to be overboarded directors, based on the evolving role of directors and its assessment of the time and energy required to effectively fulfill director responsibilities. …
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The German Federal Court of Justice (Bundesgerichtshof) recently had the opportunity to clarify a number of important practical questions of corporate law in connection with asset disposals, the allocation of responsibilities among directors and transactions concluded with board members. We summarize the three relevant decisions from 2018/2019 below.…
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In late March 2019, the Hertz Corporation and Hertz Global Holdings, Inc. (collectively, “Hertz”), filed two complaints (the “Damages Proceedings”) against its former CEO, CFO, General Counsel and a group president seeking recovery of $70 million in incentive payments and $200 million in consequential damages resulting from Hertz’s 2015 decision to restate its financial statements and an ensuing SEC settlement against Hertz and federal class action lawsuit (which was dismissed).  At the same time, the defendants in those actions each filed separate complaints (which have been consolidated in the Delaware Chancery Court) demanding advancement of their legal fees in the Damages Proceedings (the “Advancement Proceedings”).  The litigation between Hertz and its former executives raises novel questions about whether executives have a legally cognizable duty to set the right “tone at the top” and the consequences if they fail to do so.  The litigation also raises important and interesting questions regarding clawbacks and indemnification.[1]    …
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In the wake of the Securities and Exchange Commission’s proposed clawback rules under the Dodd-Frank Wall Street Protection and Consumer Reform Act of 2010, many US public companies began implementing clawback policies.[1]  Although the proposal was originally issued in 2015 and the SEC has yet to adopt final clawback rules, instances of alleged executive misconduct in recent years has begun leading to claims under the clawback policies.  Increased scrutiny from legislators, institutional investors, shareholders and the general public has put significant pressure on boards of directors and compensation committees to exercise their rights to claw back compensation in the event of a corporate scandal.[2]

This post discusses two recent developments related to the exercise of compensation clawbacks.  The first confirms that boards should have broad discretion in deciding when to exercise a clawback, and the second discusses important indemnification and advancement issues that can arise in connection with a claim for the enforcement of a clawback policy.…
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