The focus on environmental, social and governance (ESG) matters at public companies continues to grow despite, or perhaps in part because of, the COVID-19 pandemic. ESG continues to mean many things, including company considerations around sustainability, diversity, human capital, corporate purpose and governance. While best practices, disclosure requirements and ESG ratings are developing, boards should continue to prioritize ESG issues, particularly as they relate to long-term company strategy and risk.
Continue Reading Increased ESG Focus Shows No Signs of Slowing Down in 2021

In 2020, the COVID-19 pandemic, economic uncertainty, divisive politics and a historic social justice movement presented unprecedented challenges for boards. While the pandemic eliminated the concept of an in-person boardroom, as well as investor site visits, one-on-one meetings at conferences and strategy retreats, work did not slow, and most directors reported devoting significantly more time to their duties.
Continue Reading Shareholder Engagement Trends and Considerations

Last week, the Delaware Supreme Court affirmed the Delaware Court of Chancery’s decision in Lebanon Cnty. Emps. Ret. Fund v. AmerisourceBergen Corp.,[1] a closely watched appeal in which the court clarified the circumstances in which stockholders are entitled to demand books and records to investigate allegations of mismanagement pursuant to Section 220 of the Delaware General Corporation Law.  In a decision that will likely continue the recent trend of an increasing number of Section 220 demands being made, particularly in the wake of allegations of corporate wrongdoing, the Delaware Supreme Court ruled that:
Continue Reading Delaware Supreme Court Clarifies Section 220’s “Proper Purpose” Test

Much has been written of late about the growing prevalence of books and records demands by stockholders under Section 220 of the Delaware General Corporation Law, and the increased willingness of Delaware courts to expand the boundaries of stockholders’ inspection rights conferred by that statute.[1]  A recent decision from the Delaware Court of Chancery exemplifies this trend and introduces an additional risk that companies should consider when determining how to respond to a Section 220 demand.  Specifically, the court’s suggestion that it would consider awarding attorneys’ fees to plaintiffs’ counsel for its costs to litigate the Section 220 action adds a new twist to the already delicate balance that companies must strike when deciding whether (and to what extent) to comply with a stockholder’s Section 220 demand.

Continue Reading Fee-Shifting—A Potential New Tool In Stockholders’ Toolbox When Seeking Books And Records

ISS and Glass Lewis have arrogated to themselves the power to make law, promulgating a civil code of astounding breadth and detail, ruling over decisions on board composition, director qualifications, term limits, majority voting standards, executive compensation, capital structure, poison pills, staggered boards, the advisability of  mergers, spin-offs and recapitalizations, and, increasingly, ESG policies ranging from animal welfare to climate change, diversity, data security and political activities.  They enforce this civil code by advising their clients, institutional investors with huge, varied and increasingly concentrated holdings across the economy, to vote against proposals or against directors if any aspect of the new civil code is disobeyed.  The vote of these clients is often decisive, and the implications of the votes – especially when considered in the aggregate – have far-reaching consequences for the operation and performance of US public corporations.
Continue Reading The New Civil Code: Obey

On July 10, 2020, the Securities and Exchange Commission (the “SEC”) proposed changes that would substantially reduce the number of investors required to file quarterly reports showing their holdings of U.S.-listed equities on Form 13F. The SEC’s proposal would increase the 13F reporting threshold 35 fold — from $100 million to $3.5 billion — and

Last month, we described the increased threat of activists and acquirors seeking to capitalize on the COVID-19 sell-off to build positions in high-value companies at depressed prices.  Even before the current crisis emerged, we recommended that all U.S. public companies regularly review their defense profile and have a shareholder rights plans “on the shelf.” For companies uniquely impacted by the crisis—especially those whose market capitalization has fallen below $1 billion—we suggested they re-assess their vulnerabilities in this new environment and consider whether now was the right time to adopt a rights plan to ward off potential opportunistic behavior. Some companies have done just that—since March 1, 2020, 24 U.S. public companies have adopted a defensive shareholder rights plan (6 other U.S. public companies have adopted NOL rights plans).
Continue Reading ISS and Glass Lewis Issue Guidance for Poison Pills in COVID-19 Pandemic

On April 2, 2020, Glass Lewis announced the global expansion of its Report Feedback Statement (“RFS”) service.[1] This service operates separately from the process for companies reporting factual errors or omissions in a research report and instead focuses on differences of opinion, allowing companies and shareholder proposal proponents to respond directly to Glass Lewis’s research and recommendations.[2]
Continue Reading Glass Lewis Expands Report Feedback Statement Service