The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2023”.

The Securities and Exchange Commission (SEC) and Department of Justice (DOJ) ramped up their enforcement efforts in 2022, often in highly coordinated actions, including with other regulatory agencies such as the Commodity Futures Trading Commission (CFTC), Department of the Treasury’s Office of Foreign Assets Control (OFAC) and Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).  The DOJ also announced major policy changes regarding corporate criminal enforcement and took steps to convey its seriousness in pursuing actions against individual wrongdoers, recidivists and companies that fail to maintain effective compliance programs.  The SEC was particularly active, setting its record for civil penalties and continuing its enforcement focus on insider trading, digital assets and Environment, Social and Governance (ESG) disclosures.

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The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2023”.

2022 saw a flurry of activity to implement rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, a statute passed in reaction to the financial crisis of 2008 but for which enacting guidance had long been absent.

Two significant rules adopted this year in the area of executive compensation are the so-called “pay vs. performance” rules (PVP Rules) and rules on mandatory clawback of incentive compensation (the Clawback Rules). This memo focuses on insights and considerations that have arisen since the passage of the rules and highlights some practical takeaways for boards and management teams as we collectively work through compliance with rules that, in many cases, have created significant unanswered questions.

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The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2023”.

In March 2022, the U.S. Securities and Exchange Commission (SEC) issued for public comment a rule proposal regarding certain climate-related disclosures that reporting companies would need to include in their registration statements and annual reports filed with the SEC.

Although a majority of commenters generally expressed support for the proposed rule, many supporting parties, neutral parties and opposing parties alike requested changes (often significant ones) be made for the final rule.

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The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2023”.

In 2022, public companies witnessed a new kind of corporate governance activism.

New rules and regulations from the Securities and Exchange Commission (the SEC) use the lever of mandated disclosure to push for corporate governance actions, and in some cases what amounts to reforms.  The SEC’s broad foray into governance represents an expansion of historically more limited SEC rules in the governance space, mostly focused on audit committee and auditor independence and more general disclosure of board structures and oversight.  Many commenters note that investors were well able to push companies historically for disclosure on governance matters and that the proposed SEC disclosure mandates may impinge on decisions and policies that boards should be able to define and/or compel board structure and composition to move in directions that are not best suited to the effective functioning of the board.

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The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2023”.

Over the past year, public companies have faced an onslaught of external pressures, including an uncertain economy, an ongoing pandemic with changing rules and best practices and increasing demands from various stakeholders.

The coming year looks to continue the trend with a volatile market and economic/political conditions, increasing regulatory demands and shareholders looking for active engagement.  How prepared a company is to handle these external factors depends in no small part on the strength of its board of directors.  An effective board is critical for company success, even in the absence of such difficulties.  Increasingly, companies and their shareholders are focusing on selecting, evaluating and maintaining an effective board.

Entering 2023, here are key issues companies and boards should consider to enhance board effectiveness.

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The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2023”.

A number of U.S. public companies have recently found themselves in a surprising place: trapped in visible and charged debates with politicians over internal corporate and investment policies.

And when those policies strike different chords across the political spectrum, it increasingly brings boards of directors into new realms of controversy.  Can this trap be avoided or has corporate policy forever become entangled in a continuation of politics by other means?  Will public companies be forced to declare red or blue allegiances to match the polarized political environment of red and blue states? And will investors follow suit?

For companies that want to keep away from both the political debate and the allegiance question, the path is challenging but should start with fiduciary duty basics: develop policies under a clearly articulable rationale that enhances shareholder value.  Doing so removes the central argument cited by some observers against, for example, ESG-oriented policies: that they support a cause rather than a business objective and thereby undermine the classic corporate purpose.

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The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2023”.

Consensus opinion coming into 2022 was that high M&A volume would continue, albeit not quite at the record-setting pace of 2021. The market had other plans. Volume decreased much more sharply from the 2021 high than was commonly expected. While overall deal volume was generally in line with averages from 2017-2020, 2022 was a tale of two halves—there was a marked drop from H1 to H2, with Q4 representing the lowest Q4 global deal volume in the past six years. Significant stock market volatility wrought havoc on valuations. Higher interest rates and a retreat by large banks from the leveraged loan market chilled leveraged buyout financing. Macroeconomic and geopolitical uncertainty turned confidence to caution. Valuation disconnects scuttled deals as sellers continued to expect 2021 multiples. Regulatory scrutiny made execution more complex. Entering 2023, many of these headwinds continue.   

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The following post was originally included as part of our recently published memorandum “Selected Issues for Boards of Directors in 2023”.

Shareholder activism continued to rise in 2022, and is poised to bubble over in 2023. As we turn the page on 2022, the overall macroeconomic and geopolitical picture portends continued market volatility and recessionary-like conditions, and activists of all stripes will look to capitalize on valuation re-sets and broader disruption to push their agendas at companies at home and abroad.  While we expect many of the activism trends from recent years to continue, that does not mean activism in 2023 will necessarily reflect business as usual. A number of recent developments will likely cause meaningful shifts to the activism landscape and playbook, which companies should be prepared to navigate. Some of these key developments and likely forces of change in 2023 are discussed below.

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We have once again asked our colleagues from around our firm to boil down the issues in their fields that boards of directors and senior management of public companies will be facing in the coming year. In the following pages, we present the results for 2023 – focused updates on 18 topics that will surely feature at the top of board agendas throughout the year.

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