Directors' Cut Archive

“Oversight of special investigations” from the Audit Committee Leadership Network provides guidance to boards and audit committees on the multiple considerations involved in determining whether and how to conduct a special investigation.

Skadden’s “Ten Key Factors for Boards To Consider When Weighing an Internal Investigation” identifies criteria the audit committee or board should consider when determining whether and how to respond to allegations of wrongdoing in the form of an internal investigation.

Corporate Secretary’s “Board Refreshment: Finding the right directors to move forward” reveals benchmarking data on board refreshment oversight, candidate identification and selection, investor interest, and disclosure, based on the results of a recent survey of 211 governance professionals worldwide (50% North America) across public companies. North America-specific findings are here.

Bloomberg reported on the rise in directors aged 66-70 and concurrent decline in directors aged 56-60 and in their 40’s among S&P 500 boards over the past five years. Board refreshment policies reflect or support the changing demographics, with mandatory retirement ages (for those companies with such policies) trending up and the prevalence of such policies trending down.

Spencer Stuart’s “2023 S&P 500 New Director and Diversity Snapshot” reveals numerous statistics on the profile of new directors and the representation of diverse directors on S&P 500 boards based on proxy statements filed between May 1, 2022, and April 30, 2023.

PwC’s “The value of age diversity: Companies with age diverse boards are less risky and more resilient” makes a strong case for actively pursuing an optimal level of age diversity on the board to promote the company’s financial performance and resilience.

The Society and certain other organizations have long maintained listings of reputable, established director/board education program offerings. The latest Society listing, which was most recently updated in August 2023, is here. See also the most current listings from Gibson Dunn, Cooley, and Woodruff Sawyer.

PwC’s “Conducting effective board assessments” and “Individual director assessments” address the key components of the board and director evaluation processes and include suggested board, committee, and individual director evaluation topics; advantages and disadvantages associated with different assessment approaches; and sample board and individual director assessment questionnaires.

Although aimed at companies subject to the UK Corporate Governance Code, a series of resources released by The Chartered Governance Institute UK & Ireland provides broadly applicable guidance to all companies seeking to engage an independent board facilitator and disclose the undertaking of a board evaluation.

“ESG Incentive Practices at S&P 500 Companies” from Meridian Compensation Partners benchmarks the use of ESG-related metrics in short- and long-term incentives granted to S&P 500 CEOs based on recent proxy statements.

Semler Brossy's "ESG + Incentives report" benchmarks the prevalence and types of ESG metrics used by the S&P 500 in their executive compensation programs.

FW Cook's report reveals the results of its analysis of ESG measures in incentive plans of the 250 largest companies (by market cap) within the S&P 500.

The Wall Street Journal elaborated on the slow rise in the number of companies tying executive compensation, in part, to cybersecurity goals, based on a recent EY report that revealed nine companies disclosing such links in 2023 vs. zero in 2018.

Semler Brossy’s report: “The Compensation Committee’s Evolving Role in Human Capital Management” is a roadmap for Compensation Committees seeking to expand their remit to encompass aspects of human capital management (HCM). The report includes actionable guidance for committee members and management who support the committee, along with sample committee charter language; examples of key committee and the board-level involvement with regard to discrete ESG and HCM oversight responsibilities; and a sample quarterly calendar of committee activities addressing core/traditional, as well as HCM, agenda topics.

Deloitte’s “The complex role of the board in setting executive compensation” raises a series of questions for the Compensation Committee about executive compensation strategy, objectives, and process, for discussion among committee and board members to ensure internal alignment, consensus, and intentionality of decision-making on an increasingly complex board responsibility.

Among other director compensation practices and trends, Compensation Advisory Partners reported that 75% of the largest 100 US public companies disclosed shareholder-approved director compensation limits in their 2023 proxy statements, a bare majority of which apply to both cash and equity-based compensation. 

Woodruff Sawyer’s “How to Review Committee and Board Minutes: A Guide for Directors” suggests practice and process pointers for minute drafters and reviewers to ensure that the board’s oversight activities are timely and properly documented and reduce the likelihood of successful litigation challenging the board’s decision-making.

This post: “Disney, Fiduciary Duties, Business Judgment, and Corporate ESG-Related Actions” summarizes the bases for the court’s decision to reject a books & records request relating to Disney’s public opposition of Florida’s “Don’t Say Gay” bill that restricted classroom instruction on sexual orientation or gender identity. Among other relevant factors, the judge determined based on the record that the board was actively engaged in the company’s decision-making and undertook a thorough deliberative process that included the consideration and balancing of both stakeholder and stockholder interests to promote long-term value creation.

Perkins Coie’s “Navigating Difficult Social & Political Issues:  Lessons Learned from Disney v. Simeone” outlines key takeaways—and provides guidance for boards and corporate secretaries— associated with the court’s decision that effectively sanctioned the board’s consideration of non-stockholder stakeholders on controversial social or political issues in the context of proper process and circumstances.

Milbank’s post: “Activist Settlements: Fiduciary Questions for Boards” discusses directors’ fiduciary duties in considering a settlement with an activist that encompasses the appointment of one or more activist nominees to the board in the context of the Delaware Supreme Court’s two-pronged Unocal standard.

Aimed at boards of directors, KPMG’s “Acceleration of AI ups the ante on governance” discusses key aspects of a good AI governance framework.

Society public company members responding to the Society / Deloitte survey: “Future of tech: Artificial intelligence (AI)” provided insights on various aspects of their companies’ AI practices, including where in the organization AI resides, use policies/frameworks, risk mitigation measures, education and training, and board oversight.

In this post: “Assessing the Risks and Opportunities of Generative AI,” KPMG identifies directors’ most commonly articulated generative AI themes and suggests relevant considerations for each.

This survey report: “Refocus the Agenda” from Corporate Board Member and EY provides valuable insights and tips for boards, corporate secretaries, and other members of management, about board and committee meeting schedules, agenda content and time allocation, and meeting presentations and materials.

According to Spencer Stuart’s director survey of public and private company directors, while public and private company boards are generally aligned in terms of how they structure the board’s responsibility for CEO succession planning, they differ in their approach to other important CEO succession planning practices.

The NACD reported highlights from its annual Public Company Board Practices and Oversight Survey of 328 public company directors.

“Trends and Updates from the 2023 Proxy Season” from Freshfields includes a plethora of benchmarking information on board practices as they relate to ongoing and trending investor focus areas, including board oversight structure, composition, and refreshment, and board and management diversity, as well as major institutional investor and proxy advisor policies on board diversity, director overboarding, and other key topics.

Practical Law reported on the key terms of a settlement agreement between a city pension fund and Tesla prompted by a shareholder derivative suit alleging a breach of fiduciary duty and unjust enrichment relating to Tesla’s non-employee directors’ robust compensation. While all of the terms of the agreement are noteworthy, several agreed-upon corporate governance reforms can be characterized as broadly applicable best practices that all companies should consider on an ongoing basis.

In this post, Alston & Bird gives guidance to boards regarding executive session practices, including frequency, structure, scope, attendees, and documentation.

Bank Director’s “2023 Governance Best Practices Survey" includes a plethora of benchmarking data on core governance practices among banks under $100 billion in assets based on an Spring 2023 survey of 195 independent directors, board chairs, and CEOs.

Protiviti’s “Is Your Board Technology-Engaged?” discusses trends in the establishment of board-level standalone Technology Committees, reasons why boards establish such committees, and alternative board technology oversight structures and approaches.

PwC’s “Why corporate purpose statements often miss their mark” reveals the purportedly disappointing results of an analysis of nearly 2,000 CEO statements of corporate purpose and illustrates by example the elements such statements should include to be meaningful and effective.

eneo’s “Thriving in the Social Issuesphere: Guidance for Corporate America” recommends companies implement practices to facilitate their response (or lack of response) to the broad array of potentially divisive social issues. The resource provides guidance on developing a social issue action framework, an ESG materiality assessment, and a social issues register, and explains how these tools can ease and support management’s decision about whether and how to weigh in on these topics.

A U.S. District Court granted Starbucks' motion to dismiss a shareholder suit alleging that the company’s publicly articulated DEI policies violate state and federal civil rights laws. Reporting on the case, this Wachtell Lipton memo reiterates the importance of the business judgment rule and boards’ ability to address DEI in the context of company strategies and initiatives that promote long-term shareholder value and in a manner consistent with applicable laws.

Orrick advises companies that integrate DEI-related goals into their executive compensation programs to review their programs and related disclosures in light of the recent Supreme Court decision in Student for Fair Admissions case—which has triggered a focus on DEI initiatives in the private sector—to mitigate the potential for unlawful reverse discrimination claims.

Semler Brossy’s “With Ambiguity Comes Opportunity” suggests companies use the heightened focus on corporate DEI initiatives to review and refine the alignment between their practices and communications. In addition to providing broadly applicable business case examples to support DE&I-related initiatives and sample incentive compensation metrics, the article suggests how to promote actual and perceived alignment between DEI practices and shareholder or stakeholder value.

T. Rowe Price’s “2022 Stewardship Report” includes in Appendix D a tabular summary of all of its Environmental, Social, and/or Governance engagements by company by quarter for the 2022 calendar year.

CalSTRS announced that inadequate climate risk disclosures triggered its vote against directors at a record-breaking 2,035 companies globally. Its minimum climate-related disclosure expectations for all portfolio companies consist of TCFD-aligned reporting and Scopes 1 and 2 GHG emissions disclosure.

In its voting report for the first half of 2023, Norges Bank Investment Management (NBIM) attributed its significant level of opposition to shareholder proposals on environmental and social topics to concerns about proposals’ prescriptiveness and scope.

Norges Bank Investment Management identified board accountability and other key elements of responsible AI, which it expects from all portfolio companies.

BlackRock's 2023 global voting spotlight (abbreviated report here) reveals a plethora of noteworthy statistics, case studies, and instructive commentary. See key takeaways here.

Vanguard's U.S. Regional Brief captures its US-specific investment stewardship activities for the 12 months ended June 30, 2023. See key takeaways here. Its concurrently published Quarterly Key Votes Report (Q2 2023) illustrates Vanguard’s perspective on particular topics.

T. Rowe Price released proxy voting summaries for the 12-month period ended June 30, 2023, for T. Rowe Price Associates, Inc. (TRPA) and T. Rowe Price Investment Management, Inc. (TRPIM). See key takeaways here.

Norges Bank Investment Management (NBIM) posted stringent, updated expectations for companies on climate change and its views on companies’ voluntary use of carbon credits.

This report from Public Holdings aims to provide directional perspective on the retail investor market based on recent survey data reflecting individual investors who have accounts on the Public platform. See key takeaways here.

Corporate Board Member’s “Catastrophic Risk: 5 Questions Every Board Should Ask Its CEO About Regulatory Threats” fleshes out this amorphous risk with key questions aimed at boards, but equally instructive for members of management tasked with sizing up the risks and potential opportunities.

McKinsey’s “Geopolitical resilience: The new board imperative” provides guidance to boards on how to develop a geopolitical risk oversight structure and process that accommodates the uncertainties, timing sensitivities, and potentially wide-ranging business implications associated with the evolving geopolitical environment.

KPMG’s “Midyear observations on the 2023 board agenda” stresses the importance of effective coordination and communication across board committees and suggests tactics that foster those aims, such as overlapping committee memberships; cross-attendance practices; joint committee meetings; meetings of committee chairs; and robust committee reports.

Insightia’s “ESG 2023” report generally reveals a declining success rate since 2021 for activists pursuing ESG demands, as shown on page 8. Kirkland & Ellis’s analysis of activist campaigns from the effective date of the new universal proxy rule informs our understanding of the impacts of the rule on the prevalence, attributes, and success rate of activist campaigns. Skadden’s “Changes in the Market and the Emergence of New Players Together Are Impacting Activism” discusses notable activism developments and trends, accompanied by practical suggestions, to mitigate adverse consequences associated with an activist challenge and significantly reduce the likelihood of an unforeseen attack.

In “Making board disclosure a peacetime priority,” Vinson & Elkins provides sound guidance to companies on how to enhance their disclosure about their directors in the proxy statement to reduce the likelihood that they will be targeted by activist investors.

Sidley’s “The Board as Activist” (Directors & Boards) succinctly and effectively summarizes for boards the leading risk mitigation and response practices and tactics that should inform companies’ ongoing shareholder activism preparedness.

EY’s “How Directors Can Optimize Shareholder Engagement in 2023” (NACD BoardTalk) offers guidance on the board’s oversight of, and involvement in, the company’s shareholder engagement program, including a director preparation checklist for board members who may be unaccustomed to engaging with investors directly.

EY’s “What directors need to know about the 2023 proxy season” suggests (among other things) key actions for boards aimed at increasing the likelihood of shareholder support for directors and reducing director-focused activism.

Wachtell Lipton's memo: "Dealing with Activist Hedge Funds and Other Activist Investors" offers a sobering, but realistic, checklist of action items and processes companies should consider to mitigate the potential for— or respond to—a hedge fund or other activist attack.

Spencer Stuart and Diligent revealed the results of their annual survey of 992 public and private directors worldwide (44% U.S.) about their boards’ ESG oversight practices. Notably, 23% of US respondents reported having changed their board ESG oversight structure in the past year. See Diligent’s release.

Society public company members across sizes and industries responding to a Society / Persefoni survey provided insights on their practices relating to climate and environmental disclosure and assurance, board oversight, and management organizational responsibility.

Among the takeaways from this Heidrick & Struggles, et al. report: “The Role of the Board in the Sustainability Era,” which is based on a survey of nearly 900 seasoned board members worldwide (31% North America): More than 70% of directors cited the need to prioritize non-sustainability topics as the biggest obstacle to their board spending time or more time on sustainability strategy. Comparatively, 35% (the next leading response) said their board doesn’t know enough about the long-term strategic implications of sustainability to have a meaningful discussion. 

The Wall Street Journal reported on the results of a recent collaborative survey with the NACD of more than 500 public, private, and not-for-profit directors of companies across industry sectors regarding sustainability practices and views.