In “To Exculpate, or Not to Exculpate: Is It Even a Question?,” Freshfields summarizes and analyzes the ISS recommendations and proxy vote outcomes to date on officer exculpation charter amendments that have been presented for a shareholder vote to effect recent amendments to the DGCL (we initially reported on here).
Of the 15 proposals voted between August 10, 2022, and February 23, 2023, ISS supported all but two, whose facts are distinguishable (as detailed in the post). Voting results have been reported for 14 of the 15 proposals voted during that time frame; of those 14, three have failed based on the company’s voting standard, two of which required a supermajority vote. Looking solely at voting results as a percentage of votes cast, including abstentions, all 14 proposals garnered supermajority support.
Looking forward, seven additional companies have filed definitive proxy statements to amend their charters for this purpose. Seemingly consistent with its approach to voted proposals, ISS has expressed its support for four of six proposals for which it has released its recommendations. The post notes that while Glass Lewis’s proxy voting guidelines (page 71) generally provide for a vote against such proposals, its recommendations don’t appear to have significantly affected the vote outcomes to date.
The firm touts numerous potential benefits to extending exculpation to officers, including a reduction in the prevalence and scope of litigation, avoidance of associated negative publicity, and lower D&O insurance premiums, and identifies other considerations relevant to determining whether and how to pursue a charter amendment.