Directors' Cut Archive

Deloitte and the Center for Audit Quality released "Audit Committee Practices Report: Common Threads Across Audit Committees" based on a late 2023 survey of 266 predominantly US-based, public company audit committee chairs and members across industries. Results are reported in the aggregate, as well as broken out by financial services (28%) and non-financial services company responses. See key takeaways here.

Wachtell Lipton’s “Audit Committee Guide” provides information for audit committees and their advisors on regulatory requirements, leading practices and trends, and core committee roles and responsibilities, and practical guidance on how to best discharge them. Model exhibits include charters for NYSE and Nasdaq companies, a responsibilities checklist, a Financial Expertise and Independence Questionnaire, an auditor services pre-approval policy, a related party transactions policy, whistleblower procedures, and a committee self-assessment checklist.

Deloitte summarized audit committee meeting practices based on select benchmarking data from its collaborative report with the CAQ (noted above). Results in response to some questions are broken out by financial services and non-financial services companies. See key takeaways here.

The PCAOB released "2023 Conversations with Audit Committee Chairs," which provides an overview of feedback it received over the past year from its engagements with more than 300 audit committee chairs of companies whose audits were inspected.

From Mayer Brown’s Across the Board series, “Good Practices for Board Searches for New Directors” outlines a methodical, well-considered approach to identifying and vetting candidates and appointing new directors to the board.

KPMG revealed board gender, racial/ethnicity, and sexual orientation diversity disclosure statistics and associated director search criteria stats for the S&P 500 and Russell 3000 as of December 2023. See key takeaways here.

“How independent directors can add value to private company boards” (p8) from KPMG shares CEO and private company director perspectives on how one or more independent directors may add value to a private company board and potential interim steps for private companies not yet ready to jump on that bandwagon.

Spencer Stuart’s pulse survey on specialized directors emphasizes the perceived value of well-rounded directors who are favorably positioned to meaningfully weigh in on the increasing number of topics that are deemed to fall within the board’s purview over “issue-expert” or “specialized” directors, who may enhance the board’s oversight in a particular area, but are perceived by some directors to be limited in their ability to contribute to board discussions and deliberations across numerous matters outside their expertise. See key takeaways here.

Heidrick & Struggles' annual "Board Monitor" revealed a plethora of director profile trend data among new appointments to Fortune 500 boards in 2023. See the key takeaways.

DiversIQ recapped the average board size and average age and tenure of directors on S&P 500 boards and provided examples of recent proxy statement disclosures about board waivers of director retirement age policies that may help inform other companies’ disclosures.

Wachtell Lipton's “Compensation Committee Guide" provides an overview of the key duties, laws, rules, regulations, and standards applicable to listed company compensation committees and compensation-related disclosures; compensation methods and types and associated legal considerations; shareholder and shareholder-related proposals & developments; suggested compensation committee practices; and more. A model compensation committee charter, which also suggests provisions for committees with broad management development and culture responsibilities, is included as an exhibit for reference and/or tailoring to company-specific facts and circumstances.

Skadden's "Compensation Committee Handbook" provides information for listed company compensation committees and their advisors about core committee duties and responsibilities—including instructive primers on the use of outside advisors, equity compensation, employment agreements and executive benefit plans, IRC §162(m) and other relevant tax provisions, Section 16, committee composition requirements, and director compensation—and practical guidance on how to best discharge them. The Appendix includes a sample calendar of committee meetings and responsibilities and a glossary of commonly used terms.

WTW’s analysis of executive perks among the S&P 500 based on 2023 proxy statements revealed these (among other) key takeaways regarding the number, prevalence, and value of CEO and NEO perks.

According to ISS’s analysis of proxy statements filed from September 2022 to September 2023, 15% of the S&P 500 disclose some level of board oversight of AI. For this purpose, the existence of AI oversight was based on disclosure of one or more of the following: (i) board or committee responsibility over AI; (ii) a director(s) with AI expertise; and/or (iii) an AI ethics board or similar governing body tasked with overseeing related topics. See key takeaways here.

According to KPMG’s generative artificial intelligence (Gen AI) survey of more than 100 US board members across company types, sizes, and industries, nearly two-thirds of boards represented by respondents task the full board (in lieu of or in addition to one or more board committees) with Gen AI oversight responsibilities. See additional governance-related takeaways here.

EY’s “Four ways boards can support the effective use of AI” shares insights based on its discussions with directors on key areas of focus to support and oversee the use, integration, optimization, and risk mitigation of generative AI and other emerging technologies. Coverage includes board support of a company-specific responsible AI framework and structure considerations to ensure the board is equipped with the information and expertise to effectively oversee this area.

PwC’s “Key priorities for “early days” GenAI strategy” promotes facilitating or encouraging management to undertake activities that promote the responsible use of generative AI in a way that is holistic and consistent with the company’s long-term strategies and risk profile. An overview of recommendations is here.

KPMG’s “Board oversight of GenAI” leverages data from two surveys to provide guidance to boards on Gen AI oversight responsibilities. Coverage encompasses board oversight structure; board access to knowledge and expertise; and numerous practical and strategic considerations, including use and internal governance policies and practices, identification and mitigation of a vast array of risks, and anticipated near-term and longer-term benefits and impacts.

Society public company members across sizes and industries responding to the Society / Deloitte Board Practices Quarterly survey: “Evolving lines of responsibility between the board and management” provided insights on the roles and responsibilities of their board. See key takeaways here.

CPA’s “Primer on Corporate Political Spending for Incoming Directors” is aimed at educating new directors on corporate election-related spending and related oversight responsibilities. The publication includes links to various other resources that address the basics of political spending and offer guidance to management and boards on effective management of political spending and risk mitigation, in addition to benchmarking data.

Wilson Sonsini’s “Delaware's Status as the Favored Corporate Home: Reflections and Considerations” discusses factors that Delaware-incorporated companies should consider in exploring reincorporation in other states. The piece summarizes multiple reasons why Delaware has historically been perceived to be the most favorable jurisdiction and compares and contrasts Delaware law to Nevada, Texas, and California corporate law, while also offering more broadly applicable guidance for those companies that may be considering a move to other states.

Semler Brossy’s “Paths and Implications for Navigating CEO Transitions” provides a succinct overview of four CEO transition scenarios—executive chair, senior advisor, board member, and no affiliation (complete disengagement)—and common associated compensation implications.

Freshfield’s “Q1 2024 Governance Updates: Takeaways on What Directors and Officers Need to Know” discusses key trending topics that will likely impact the board agenda for many companies, including the SEC’s climate and cybersecurity disclosure rules, AI, human capital, a challenging antitrust regulatory environment, and recent Delaware litigation developments on controlling stockholder fiduciary duties.

EY’s “How board oversight of capital allocation can drive strategy” offers guidance to boards on how to better execute their capital allocation oversight responsibilities in the normal course, as well as in the context of an extremely challenging macro environment, heightened activism, and competitive pressures to invest heavily in emerging technologies.

“Developments and Trends in Delaware Officer Exculpation Charter Amendments” reveals Mayer Brown’s analysis of management-sponsored officer exculpation proposals from the August 1, 2022, effective date of the amendment to Delaware’s General Corporation Law permitting such exculpation through May 31, 2024. See key takeaways here.

he Society and certain other organizations have long maintained listings of reputable, established director/board education program offerings. The latest Society listing is here. See also these listings from Cooley, Gibson Dunn, and Woodruff Sawyer.

This report: “How Today’s Boards are Transforming for Tomorrow” from Corporate Board Member and EY reveals noteworthy data and insights regarding board practices and priorities in response to a rapidly changing business and macro environment based on a 2023 survey of 250 US corporate directors across company sizes and industries. See select key takeaways here.

Leveraging data from PwC’s annual corporate directors’ survey, "Board Effectiveness: A Survey of the C-Suite" from PwC and The Conference Board reveals the results of a fall 2023 survey of more than 600 public company C-suite executives on their views of the performance of their board of directors as compared to (where relevant) directors’ perspectives on the same topics. Key takeaways are here.

Protiviti, Board Prospects, and Broadridge surveyed more than 1,000 directors and C-suite executives worldwide (83% US) across company types, industries, and sizes to understand perspective variations and opportunities for improving board performance. Results are reported by respondent group, i.e., board members, C-suite, and those serving in both a director and C-suite capacity (dual role). See key takeaways here.

Heidrick & Struggles' report: “Board Monitor US 2024: Navigating shifting sands” shares insights from CEOs and non-executive directors about how they are navigating the increasingly challenging macro environment based on a recent global survey (38% North America). US-specific takeaways are here.

In “Director Commitments Policies, Overboarding, and Board Refreshment,” Glass Lewis discussed the increasing focus by investors and shareholder advocates on directors’ time commitments and associated expectations that companies restrict directors’ other board service to reduce the potential for overcommitment. As of 2024, Glass Lewis is tracking and displaying in its Proxy Papers whether Russell 1000 companies have a director commitments policy that includes numerical limits on other board service and will consider disclosed policies in its analysis of overcommitted directors. See key takeaways here.

Sidley’s “Roundup of Overboarding Policies Applicable to U.S. Public Company Directors” summarizes in a tabular format proxy advisor and numerous institutional investor policies on director overboarding for non-executive directors and public company CEOs and NEOs/executive officers.

BlackRock's “Investment Stewardship Annual Report” (summary here), which captures its proxy voting-focused stewardship activities for the 12 months ended December 31, 2023, reveals a plethora of noteworthy statistics, engagement examples, and instructive commentary that should help inform companies' engagement and disclosure going forward. See key takeaways here.

Per its updated "Governance and Voting Policy," from and after 2025, BNP Paribas Asset Management will vote against directors on US boards that don’t have at least 40% representation by women, following a 35% threshold in 2023 and 2024. The investor reportedly voted against nearly half of directors in 2023 for failure to meet its board gender diversity policy.

BNY Mellon published its 2024 proxy voting guidelines. Key takeaways compared to the 2023 guidelines are here.

Boston Trust Walden's (BTW) “Annual ESG Impact Report" summarizes its shareholder proposal filing, engagement, and voting activity for the 2023 proxy season ended June 30, 2023.

CalSTRS announced its focus areas for the 2024 proxy season in the context of its three stewardship priorities. We reported on CalSTRS’ updated Corporate Governance Principles and Stewardship Priorities here.

JPMorgan Asset Management posted its 2024 Global proxy voting guidelines. Substantive changes from the 2023 guidelines for North America (redlined here) relate to virtual only meetings, PSUs, non-GAAP measures, and climate risk, as outlined here.

Legal & General Investment Management Active Ownership report includes a plethora of statistics surrounding its engagement and voting stewardship activities for 2023, as well as its strategic priorities for the current year.

Legal & General Investment Management reported that it will vote against board chairs of companies in the Oil & Gas sector (CIP Oil & Gas sector except Oil & Gas refining and marketing sub-industry), Mining sector, and Utilities sector (CIP Electric Utilities and CIP Multi-utilities sectors except water and gas utilities sub-industries) that fail to meet its baseline climate expectations, which consist of methane emissions disclosure for Oil & Gas companies and no new investments in thermal coal mining or power generation expansion for Mining and Utilities companies.

Legal & General Investment Management released its 2024 North America Corporate Governance and Responsible Investment Policy, which sets forth its expectations of portfolio companies on a broad range of environmental, social, and governance topics. Changes from the 2023 policy encompass board leadership and composition, board effectiveness, shareholder proposals, sustainability disclosure, and other topics, as summarized here.

The New York State Common Retirement Fund released its 2024 stewardship priorities and proxy voting guidelines. The manifestation of the updated stewardship priorities in the proxy voting guidelines is captured in the stewardship priorities publication in the form of sidebars that include the corresponding pages of coverage in the proxy voting guidelines.

On behalf of the New York State Common Retirement Fund, the New York State Comptroller recounted his engagement with portfolio companies on their LGBTQIA+ equity and inclusion practices, which has consisted of two targeted shareholder proposals and requests to 17 companies to provide specific information purportedly bearing on long-term shareholder value.

T. Rowe Price's report: “For or Against? The Year in Shareholder Resolutions—2023” largely reflects its company-specific approach to evaluating shareholder proposals in light of particular facts and circumstances and their alignment with long-term value creation. See key takeaways here.

T. Rowe Price released select proxy voting case studies and a summary of its 2024 proxy voting guidelines. Each case study includes the company and meeting date, the reason why T. Rowe selected it for highlighting, the firm’s analysis of the proposal, and its vote decision. We previously reported on the firm’s updated proxy guidelines here.

See noteworthy updates to UBS’s 2024 proxy voting guidelines here.

UBS’s annual stewardship report revealed noteworthy engagement and voting statistics for 2023. See key takeaways here.

Vanguard’s approach to evaluating executive pay plans addresses three areas of focus—alignment of pay and performance, compensation plan structure (including quantitative and nonfinancial metrics), and compensation plan governance, accompanied by one or more expected or preferred criteria that support pay/performance alignment, a sound structure, and good governance.

Vanguard’s updated commentary on its approach to climate risk governance reaffirms its commitment to focusing on company-specific material risks (climate or otherwise) that have the potential to undermine long-term shareholder value. For those companies confronted with material climate-related risks, the piece outlines Vanguard’s expectations for boards in relation to overall board competence, risk oversight and mitigation, and disclosure oversight.

Weil’s “The Big Three & ESG: A Guide to BlackRock, State Street & Vanguard Proxy Voting Policies & Guidance on Key ESG Issues” summarizes the expectations and policy positions of the Big Three across a wide range of ESG topics.

Wachtell Lipton's “Nominating and Corporate Governance Committee Guide” provides an overview of the key rules/regulations, exchange standards, and proxy advisor and institutional investor policies applicable to listed company nominating & governance committees, and key topics and suggested practices that committees should consider. In addition to a comparison of NYSE and Nasdaq corporate governance standards, the appendix includes samples of the following: director resignation policy, advance notice bylaw provisions, D&O Questionnaire, and committee charter.

PwC’s "Serving on and chairing the nominating/governance committee" provides guidance to boards and management on the Nom/Gov Committee’s role and responsibilities, including committee composition, collaboration, and refreshment; primary ongoing responsibilities; agenda topics and planning tips; and best practice reminders and tips in relation to other select areas of focus. The resource includes pertinent benchmarking data and samples/examples of new director onboarding topics, resources, and discussion points; an annual committee calendar/agenda; a committee charter; and a board skills matrix.

Wachtell Lipton's "Risk Management and the Board of Directors" identifies legal, regulatory, and best practice guidance sources underlying the board's risk oversight responsibilities; common practices; and tangible recommendations for improved effectiveness. The memo includes discussions on risk oversight vs. risk management and the board risk oversight structure, and special considerations relative to sustainability-related risks, cybersecurity, and data privacy risks.

Seyfarth Shaw’s “Avoiding Duty of Oversight and Fiduciary Duty Breach Claims” reviews relevant case law on duty of oversight claims against directors and officers and provides guidance on how to mitigate the risks of a successful claim.

Alston & Bird’s “Board Oversight and Cyber Breach Response: What Involvement Strikes the Right Balance?” discusses the evolving expectations surrounding board oversight of cybersecurity generally, and cyber incident response in particular. In addition to providing an overview of the board’s oversight responsibilities and trending practices, the memo suggests sound practical tips to promote effective oversight and mitigate risk, including memorializing the incident escalation process and timely documenting the timing and nature of the board’s involvement in any particular incident response.

In Corporate Board Member’s “Shareholders: The New Rules Of Engagement,” public company directors weigh in on whether, how, and under what circumstances they engage directly (proactively and reactively) with investors and other relevant considerations, including management’s role and selective disclosure. Most notably, directors’ views and board practices differ widely on this topic.

PwC’s “The director’s guide to shareholder activism” portrays and explains shareholder activism in a way that takes into account the significant pressures companies are facing from all types of investors, with activism taking the form of not only traditional proxy contests, but also less aggressive activities including shareholder engagement, shareholder proposals, and “vote no” campaigns. The guide explains the activist tactics most commonly used by each of the main activist types (including retail activists, advocacy groups, institutional investors, and hedge funds), common activist triggers, and how companies can mitigate their risks.

Mayer Brown’s “Global Climate Change Disclosure Initiatives and Board Corporate Governance Considerations” suggests disclosure, governance, and risk management and oversight practices, principles, policies, and procedures that boards and management should consider to become and remain compliant and reduce the risk of personal or corporate liability associated with multi jurisdictional disclosure requirements. A standalone Quick Reference Chart of the various jurisdictional requirements is here.

Farient’s “The Impressive Rise of Climate Goals in Executive Compensation” discusses the prevalence of environmental measures in incentive plans among the largest US companies (S&P 100) and largest companies globally with reference to its “2024 Global Trends in Stakeholder Incentives: What’s Next?” released in March 2024. The Global Trends report also includes other noteworthy trend data on the use of ESG incentives across company sizes, well-known company case studies, and associated insights.