2017 began with a heightened level of uncertainty as the beginning of the year brought significant change in the legal environment, including a change in administration that promised to significantly alter the tenor of regulation. While certain changes did occur in 2017, in many respects, 2018 is setting itself up as the year to watch for continuing developments in areas that are likely to fundamentally transform how companies operate and interact with an increasingly larger number of vocal stakeholders. The trends discussed in each of the sections of this memorandum will increasingly be a focus of boards of directors and companies in the United States and across the globe, particularly as boards consider how best to assess and assist in mitigating associated risks. The role that the board and its oversight plays in guiding companies in these times will be critical and a strong understanding of the issues and challenges facing boards and companies over the next year and beyond will assist boards in addressing the issues and complexities that will undoubtedly arise in 2018.

We invite you to review these topics by clicking on the links below.

For a PDF of the full memorandum, please click here.

Selected Issues for Boards of Directors 2018 (Home Page)

Developments in Best Practices in the Boardroom

Significant Regulation and Reform Under the Trump Administration

Activism in 2018

Cybersecurity and Data Privacy Updates

The New DOJ FCPA Corporate Enforcement Policy Highlights the Continued Importance of Anti-Corruption Compliance

Evolution or Revolution for Companies with Multi-Class Share Structures

Corporate Governance in the Context of Brexit and Political Uncertainty in the United Kingdom and Europe


On November 1 2017, the Securities and Exchange Commission (“SEC”) released guidance (Staff Legal Bulletin No. 14I (“SLB 14I”)) clarifying the scope and application of the ordinary business and economic relevance grounds for excluding a shareholder proposal under Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) from a company’s proxy statement.[1]  On November 20, Apple Inc. became the first corporation to attempt to use this guidance in a request for no-action relief from the staff of the SEC’s Division of Corporation Finance (the “Staff”), in response to governance activist Jing Zhou’s proposal that Apple create a board committee focused on human rights (the “Proposal”).  On December 21, 2017, the Staff responded, denying Apple’s request to exclude the Proposal from its proxy materials.

Continue Reading Apple’s Unsuccessful Test of the SEC’s Recent Guidance on Shareholder Proposals

The SEC recently approved a proposal by NYSE to amend NYSE Listed Company Manual Rule 202.06 to prohibit NYSE-listed companies from issuing material news after the NYSE close of trading until the earlier of the publication of the company’s official closing price on the NYSE or five minutes after the NYSE’s official closing time (which is 4:00PM ET) for the placement of orders.

Continue Reading NYSE Requires Companies to Delay Release of Material Information After Market Close

On November 15, 2017, the Securities and Exchange Commission Division of Enforcement released its annual report detailing its priorities for the coming year and evaluating enforcement actions that occurred during Fiscal Year 2017.   The Report captures the SEC during a period of transition and provides insight into changes in the SEC’s approach to enforcement actions and a glimpse into its priorities for the coming year.  The following summarizes key shifts from FY 2016, outlines the Enforcement Division’s current priorities, and, in view of its stated focus on the conduct of investment professionals and protection of retail investors, provides guidance to the investment management industry as it gears up for the coming year.

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Just as companies are starting to gear up for the 2018 proxy season, on November 1, 2017, the staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) released new guidance on shareholder proposals that seems to indicate the Staff will be taking a more company-friendly approach in its review of no-action letter requests.

Specifically, Staff Legal Bulletin No. 14I (“SLB 14I”) clarifies the scope and application of two grounds for excluding a shareholder proposal from a company’s proxy statement – the “ordinary business” exception (Rule 14a-8(i)(7)) and the “economic relevance” exception (Rule 14a-8(i)(5)) – and provides guidance on proposals submitted on behalf of shareholders (“proposals by proxy”) and the use of graphs and images in proposals. The following is a summary of the guidance.

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Last month, we published a blog post explaining the basis for our view that Regulation G does not require a GAAP reconciliation when M&A disclosure documents present the management projections used by financial advisors to opine on the financial fairness of merger consideration.  We argued that these projections are not the type of information that Regulation G was adopted to police and that, in view of the bases in Delaware case law and Regulation M-A for including disclosure of these projections, they should be considered exempt from the reconciliation requirements of Regulation G and Item 10(e) of Regulation S-K.  Accordingly, we urged the SEC staff to provide guidance confirming our view.   Continue Reading New SEC Interpretation Helps Limit Reg G as an Enabler of Merger Litigation

On September 12, 2017, Governance Watch and Cleary Gottlieb Steen & Hamilton LLP hosted a panel discussion on “Recent Whistleblower Issues.”  Participants in the panel discussion included Matthew Solomon, a partner at Cleary Gottlieb and former Chief Litigation Counsel at the SEC’s Division of Enforcement; Emily Pasquinelli, Deputy Chief of the SEC’s Office of the Whistleblower; David Huntley, Chief Compliance Officer of AT&T; and Steven Durham, a Partner at Labaton Sucharow LLP who specializes in plaintiffs-side whistleblower representations.  The panelists discussed issues critical to U.S. public companies and foreign private issuers relating to federal whistleblower programs.  Below are the key takeaways from the discussion. Continue Reading Recent Whistleblower Issues: Key Takeaways from the Conference Board’s Governance Watch Webcast

On September 21, 2017, the Securities and Exchange Commission (“SEC”) issued helpful guidance to assist companies in complying with the CEO/median employee pay ratio disclosure requirement (the “Rule”) under Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K. The guidance also addresses the issue of SEC enforcement action in respect of pay ratio disclosure.

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Last year Cleary Gottlieb published a blog post and an alert memorandum highlighting the SEC staff’s renewed focus on whether the use of non-GAAP financial measures (NGFMs) by domestic registrants complies with the requirements of Regulation G.  Recently, a number of plaintiff-stockholders of target companies in M&A transactions have brought purported class actions in federal court alleging that the “Forecasts” section in M&A disclosure documents violates Regulation G.  In support of these M&A disclosure related claims, plaintiffs have been citing our post and memo about these SEC staff initiatives, which relate to earnings releases and periodic reports, even though our prior publications did not address the application of Regulation G to M&A disclosure documents. Continue Reading Setting the Record Straight: Regulation G Does Not Apply to Non-GAAP Financial Projections in M&A Transactions

The Securities and Exchange Commission (the “SEC”) recently sent a warning to the burgeoning market for initial coin offerings (“ICOs”): assets that exist only on the blockchain may be securities subject to registration, anti-fraud and other requirements under the U.S. federal securities laws.  The outcome of the SEC’s analysis was unsurprising, representing a reasonably straightforward application of longstanding securities law principles.  However, the SEC’s discussion left several key questions and potential paths forward for ICO issuers and other participants in the ICO marketplace to consider. Continue Reading Open Questions and Potential Paths Forward Following the SEC’s Analysis of Digital Assets as Securities