Directors' Cut Archive

“The PCAOB’s "2022 Conversations with Audit Committee Chairs" provides an overview of feedback it received the past year from over 200 engagements with audit committee chairs of companies whose audits were inspected. The publication provides insight into common themes, including staffing of the financial reporting function, auditor/audit committee communications, and CAMs, as well as audit committees’ dialogue with auditors about information outside the financial statements, such as non-GAAP measures.

The CAQ/Ideagen Audit Analytics: “Audit Committee Transparency Barometer” (CAQ’s highlights here) reveals, in addition to 10-year trend data, these (among other) upticks in S&P 1500 voluntary audit committee disclosure practices and associated examples of effective proxy disclosure.

In “State of Cyber Awareness in the Board Room Report,” NightDragon and Diligent revealed the results of their analysis of the backgrounds of S&P 500 directors with reference to cybersecurity experience or exposure. Key takeaways from the report and a separate analysis conducted by the WSJ are here.

The Conference Board’s collaborative report: “Taking a Long-Term Approach to Board Composition” documents a potentially concerning decline in business strategy experience and rise in ESG-related experience among all and new S&P 500 and Russell 3000 directors. See the release and key takeaways.

Labrador’s report: “Accentuating Director Strengths in the Era of the Universal Proxy Card” illustrates by example how companies demonstrate via their proxy disclosure that their director nominees are well-suited to serve based on their particular facts and circumstances.

Seeking to encourage greater inclusiveness, Disability:IN’s “Boards Are IN – Modernizing the Corporate Board to Include People with Disabilities” illustrates by example how companies expressly incorporate consideration of disability in their board candidate diversity language in their corporate governance documents.

The Conference Board’s collaborative report: “How Board Diversity Can Contribute to Board Effectiveness” documents S&P 500 and Russell 3000 board diversity disclosure trends. The report also offers some atypical insights from directors, governance professionals, and C-suite executives about how to frame and consider the board diversity discussion.

KPMG’s Board Diversity Disclosure Benchmarking Tool allows companies to benchmark their board/director diversity disclosure practices by GICS sector, index (Russell 3000 and S&P 500), and company size.

Based on input from directors representing more than 100 companies, EY’s “How boards can sharpen their focus on innovation” identifies ways in which boards can oversee and engage on innovation to promote the company’s long-term viability.

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

Bennett Jones’ “Special Committees: Frequently Asked Questions” addresses the who, what, when, where, how, and why of special committees in the form of reader-friendly, logically categorized FAQs.

PwC's "How the best boards approach CEO succession planning" supports with statistics and trends the need for board focus on CEO succession planning and shares leading practices to help facilitate a smooth CEO transition. The publication also suggests other trending topics that may be logically considered at the time of a succession event, including CEO-director overboarding, board leadership structure, and board/executive diversity.

Woodruff Sawyer’s “Tears of a Director: The Tightrope of Director Conflicts” explains the relationship between directors’ fiduciary duties, conflicts of interest (COI), and director independence; provides an overview of relevant Delaware case law; and suggests practice pointers for companies to mitigate the potential for inadvertent COI scenarios. The post includes links to sample standalone director COI guidelines, as well as COI provisions incorporated into corporate governance guidelines.

Spencer Stuart’s “The Independent Board Chair” discusses how the independent chair role differs from that of the typical lead director; the primary responsibilities of the role and how that manifests in practice; processes used to select the independent chair; and desirable qualifications for the individual filling that role.

PwC’s “Talent management: an evolving board imperative” suggests how boards can extend their oversight responsibilities to future C-suite successors and middle management without inappropriately assuming the roles and responsibilities of management. The piece includes suggested key performance indicators for management to report to the board, as well as other inputs, action items, and discussion topics, to help facilitate the board’s oversight responsibilities.

BDO’s “Study of CEO and CFO Compensation Practices of Private Companies” provides benchmarking data on private company CEO and CFO executive compensation based on a survey of ~750 respondents across industries and sizes, a plurality of which represented ESOPs. The report includes insights on how to use the data going forward to help calibrate pay.

The 2023 Private Company Board Compensation Survey” from Private Company Director and Compensation Advisory Partners reveals select benchmarking data on director pay and governance practices based on a survey of 1,500 primarily family-owned or family-controlled private companies.

Pearl Meyer’s “Assessing the Impact of Director Compensation on Board Culture and Agility” discusses how various components of the director pay program can influence or drive particular behaviors such as board diversity, director tenure, and committee rotation, and suggests boards consider tweaks to their program that are aligned with their specific objectives.

“Issues Facing Compensation Committees in 2024” from Pay Governance summarizes numerous trending developments and provides guidance to inform the Compensation Committee’s agenda and shape its perspective and approach to executive compensation design, implementation, and pay-out.

Semler Brossy’s “When Should Companies Consider an Adjustment to Executive Incentive Payouts?” provides guidiance on whether and how to consider executive incentive pay adjustments—particularly upward adjustments—coupled with benchmarking data for the Fortune 100.

Spencer Stuart's annual S&P 500 Board Index imparts robust benchmarking data for the S&P 500 on numerous aspects of board composition, organization, and process-related practices. Select key takeaways are here. Access to highlights, industry sector comparisons, and benchmarking results by topic is here.

The Society joined Equilar, Ellig Group, and Nasdaq to survey public companies on their first-time director onboarding practices. Among the findings: the onboarding process is most commonly led by the GC or Corporate Secretary, and the GC or Corporate Secretary is also the most engaged in the process as compared to the CEO, CHRO, or board or board committee leadership.

Meridian’s review of the proxy disclosures of the reportedly representative 200 largest companies within the S&P 500 revealed noteworthy data regarding disclosure and governance practices among this company group. See select takeaways here.

Corporate Secretary’s “Corporate transactions and the board: Governance across M&A” reveals benchmarking data on board M&A oversight practices based on the results of a survey of over 200 governance professionals worldwide (50% US | 17% Canada) across public companies. See North America-specific takeaways here.

Among the takeaways revealed by PwC's "2023 Annual Corporate Directors Survey" of 619 public company directors are these relating to board composition, peer perceptions, board evaluations, board effectiveness, ESG oversight, and cybersecurity. See PwC’s key takeaways online here.

BDO's annual board compensation report details director compensation practices of 600 mid-market public companies across industries. In addition to compensation, the report reveals benchmarking data on board structure, stock ownership guidelines, and board gender diversity by company size and industry. See select takeaways here.

This NACD post reveals some key takeaways from its 2023 Private Company Board Practices and Oversight Survey of 218 private company directors, which we summarized here.

Shearman & Sterling's annual “Corporate Governance & Executive Compensation Survey" contains an abundance of benchmarking data for the 100 largest US public companies, as well as a focused review of—and practical guidance on—numerous hot topics, including AI, disclosure controls, and evolving notions of board effectiveness. See key sustainability disclosure practice takeaways here.

The Conference Board’s report: “Board Leadership and Structure” provides insights on S&P 500 and Russell 3000 board leadership structure; board and committee meeting frequency; board committee structure; and select committee responsibilities. See key takeaways here.

Society public company members responding to the Society / Deloitte Board Practices Quarterly survey: “CEO succession planning processes” provided insights on their companies' CEO succession-related practices, including succession plan content and review, succession planning responsibility and involvement, and public disclosure.

CNBC summarized the 10 recommendations developed by the NACD’s 2023 Blue Ribbon Commission to strengthen board culture and Yahoo! Finance shared examples of board culture red flags. Both the recommendations and examples are included in the NACD’s member-only report: “Culture as the Foundation: Building a High-Performing Board.”

PwC’s “New director orientation to the board” suggests topics that should be addressed with new directors, potential internal players involved in each briefing, and relevant resources for inclusion in a hard copy or online manual, with due consideration for tailoring orientations to individual directors’ experiences and backgrounds.

In “ESG metrics in compensation plans,” Vanguard cautions its portfolio companies against the use of ESG pay metrics for the wrong reasons, e.g., in response to external pressures and/or to signal the company’s commitment to sustainability values. The piece outlines several sound criteria for the use of such metrics that engender Vanguard’s support and provides equally helpful examples of likely unsupportable uses.

According to LGIM’s Deforestation Policy, companies in “deforestation-critical” sectors that fail to meet its minimum expectations to have a deforestation policy and program should expect a vote against the board chair’s re-election. The Appendix includes examples of suggested governance, risk management, disclosure, and other best practices that LGIM will monitor and engage on with targeted companies.

Goldman Sachs’ “2023 Proxy Season Highlights” included important reminders about select board composition-related proxy voting policies for US companies, which we blogged here.

LGIM’s post articulates baseline governance, risk management, and transparency expectations for its portfolio companies that make AI systems and that use AI—with the former group of companies expected to encounter a higher level of scrutiny than the latter.

BNY Mellon’s fall 2023 “Proxy Voting Report” includes numerous case examples that purportedly represent its stewardship approach to shareholder proposals relating to governance (including compensation), environmental, and social issues..

According to its Nature Roadmap, starting in 2024, Fidelity International (as distinguished from the much larger, US-focused Fidelity Management & Research, or FMR) plans to vote against directors of companies in high-risk sectors that do not meet its minimum expectations of deforestation-related oversight, practices, disclosure, and activities.

State Street added a true “vote with the board” policy to its proxy voting choice program policy options available through ISS. The new policy provides for voting in accordance with the board’s recommendations on all items in the proxy statement where a recommendation is provided and an “abstain” action in the absence of any board recommendation. See additional information here.

According to its “Sustainable Investments 2030 Strategy,” in addition to portfolio company engagement, CalPERS will develop a process to divest from the securities of high-emitting companies without credible net zero plans as part of its efforts to transition to net zero within its fund’s portfolio. See CalPERS’ release.

Vanguard’s approach to shareholder proposals related to worker health and safety” discusses its decisions to vote against four 2023 proxy season shareholder proposals that sought workplace safety practice audits to explain its perspective on companies’ management, board oversight, and disclosure of workforce health and safety risks.

According to the CAQ’s “Perspectives on Corporate Reporting, the Audit, and Regulatory Environment,” North America-focused institutional investors generally have a favorable view of US corporate reporting and perceive governance as the most essential element of ESG.

PWC's “The director’s guide to ERM fundamentals” aims to help boards evaluate, give guidance to management on, and oversee the company’s ERM program. Among other takeaways, the guide includes examples of risk profiles, ERM frameworks, risk response plan templates, and risk reporting dashboards, as well as suggested board and board committee oversight roles and responsibilities.

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.

Sheppard Mullen’s “5 Things Corporate Boards Need to Know About Generative AI Risk Management” discusses five areas of risk associated with generative AI with a view toward informing board oversight. Enumerated risks are accompanied by board action items in the form of key takeaways.

KPMG's “Shifting geopolitics and the role of the board” shares core components of a board geopolitical risk oversight framework and provides guidance to boards on how to tackle each, together with associated considerations that take into account companies’ different risk exposures.

EY’s “How boards can support resiliency in the face of constant crisis” focuses on an evolved approach to crisis management and mitigation. The report outlines limitations associated with conventional crisis management perspectives and behaviors and suggests other approaches for board consideration that are aligned with longer term organizational resilience rather than short-term, one-off, crisis response.

KPMG’s “Risk oversight: Reassessing board and committee structure” discusses alternative ways to structure the board’s risk oversight responsibilities and associated considerations based on experiences and learnings shared by large company lead directors.

Edelman Smithfield’s “Directors: Take Activist Threats to Your Reputation with a Grain of Salt” addresses common misperceptions about the impacts of director-targeted shareholder activism on director reputation with a view toward encouraging a better informed and more measured company response. The post also suggests ways in which companies can better prepare—and mitigate the potential—for director-targeted campaigns.

More than 50 institutional investors representing over $10 trillion in AUM and comprising the Investor Initiative on Hazardous Chemicals reportedly requested the 50 largest publicly traded chemical companies enhance their disclosure about, and publish a plan to phase out, their production and use of hazardous chemicals (PFAS) and develop safer alternatives. An excerpt of the letter is here.

The ICCR released a statement signed by investors representing $4.5 trillion in AUM calling on US companies to move toward payment of a “living wage” for their direct and contract workers as a basic human right, as well as to mitigate the potential for significant reputational and financial business risks purportedly associated with non-living wage workers.

Farient’s “Ethics, Compliance, and the Role of Compensation” discusses the heightened scrutiny of ethical and compliant business practices; the use of incentive pay (among other tools) to incentivize ethical and compliant behavior; and the prevalence, design, and structure of ethics and compliance metrics in S&P 500 compensation programs.

Farient launched an ESG Tracker for S&P 1500, S&P 500, S&P MidCap 400, and S&P SmallCap 600 companies based on proxy disclosures to date. The regularly updated Tracker benchmarks the prevalence of various types of ESG measures in executive incentive pay plans by company industry and index, as well as prevalence trends over a 5-year period. Data as of October 5 is here.

The Sustainability Board’s “2023 Annual ESG Preparedness Report” benchmarks select board ESG oversight practices and director engagement among the world’s largest 100 public companies and the 100 largest US public companies.