SEC Commissioner Allison Herren Lee opened the Society’s National Conference today with this keynote address: "Climate, ESG, and the Board of Directors: 'You Cannot Direct the Wind, But You Can Adjust Your Sails,’” which focused largely on the evolution of climate and other sustainability matters and the board’s associated oversight role and responsibilities. Among other things, Commissioner Herren Lee suggested: (i) increasing board refreshment and diversity, i.e., adding new perspectives, to prompt or enhance the board’s focus on climate and ESG governance; (ii) ensuring or enhancing board expertise to effectively oversee these topics via, e.g., targeted director recruitment, education and training, and/or retention of outside experts; and (iii) linking executive compensation to ESG metrics to incentivize management’s attainment of strategic goals.
In the Q&A session following her prepared remarks, Commissioner Herren Lee expressed an interest in pursuing “proxy plumbing” issues; expressed her belief that mandatory, standardized ESG disclosure would reduce (but likely not eliminate) the burden on companies of responding to the myriad of ESG rater/ranker surveys, questionnaires, and other requests for ESG-related information; and indicated that, based on investor interest, the SEC should at least consider mandatory board diversity demographics disclosure via the formal rulemaking process. As previously reported, proxy plumbing was moved to Long-Term Actions on the SEC’s Spring 2021 from the Proposed Rule Stage on the SEC’s Fall 2020 Agenda, and corporate board diversity was moved from the Long-Term Actions on the SEC’s Fall 2020 Agenda to the SEC’s current agenda. She understandably declined to comment on the Nasdaq board diversity listing proposal, which is still pending before the SEC (we reported on here – see “Nasdaq”).