On Thursday, August 25th, 2022, the Securities and Exchange Commission (the “SEC”) adopted amendments that will require registrants to disclose information reflecting the relationship between executive compensation actually paid by a registrant and the registrant’s financial performance.  These rules implement the so-called “pay-versus-performance” disclosure requirements prescribed by Section 953(a) of the Dodd Frank Act. This rule was first proposed in 2015 and the comment period was reopened in January 2022, nearly twelve years after Congress directed the SEC to create such a rule.   This rule is intended to provide shareholders with a more clear and digestible understanding of the relationship between “executive compensation actually paid” (described below) by a company and the company’s overall financial performance.

Continue Reading SEC Releases Final Pay Versus Performance Rules

The Delaware General Assembly recently adopted amendments to the Delaware General Corporation Law (the “DGCL”), effective as of August 1, 2022.  Among other changes, the amended DGCL provides for exculpation of officers from liability for breaches of the duty of care and also expands the ability of boards to delegate authority to members of management in connection with the issuance of shares of common stock and options.  The change with the most potential for far-reaching impact is with respect to officer exculpation.  For existing corporations, a charter amendment is required to take advantage of the new officer exculpation, and it is an open question as to whether shareholders (and proxy advisory firms) will support extending exculpation to officers.

Continue Reading 2022 Amendments to the Delaware General Corporation Law

On Monday, March 21, 2022, the U.S. Securities and Exchange Commission (“SEC”) released its long-awaited proposed rules on climate-risk disclosures. The proposed rules would amend and build upon existing climate-change disclosure rules and guidance (collectively, the “Proposed Rules”). Under the Proposed Rules, publicly traded companies and other issuers of securities that are required to file a registration statement with the SEC (collectively referred to by the SEC as “Registrants”) would be required to make climate-related disclosures to investors in their registration statements (Forms S-1, S-3, F-1, and F-3) and periodic reports (Forms 10-K, 10-Q, and 20-F).

The Proposed Rules aim to enhance and standardize disclosures on climate-related risks that are likely to have a material impact on a company’s business and financial performance over the short-, medium-, and long-term. The release of the Proposed Rules has triggered impassioned debate, illustrating both strong support for, and fervent opposition to, the proposed climate-related disclosure framework. Thus, any final rules adopted following the comment period could vary significantly from the proposals by the SEC discussed herein.

Continue Reading The SEC Proposes Enhanced Climate Disclosure Rules

The SEC has been increasingly scrutinizing companies’ voluntary climate change disclosures as it moves closer to mandating reporting on greenhouse gas emissions (“GHGs”) and climate risks. Mandatory reporting of these risks is widely expected to be a component of the SEC’s anticipated Environmental, Social and Governance (“ESG”) disclosure rules, but the SEC has also taken the position that climate change risks already fall within the realm of a number of its disclosure rules.

Continue Reading SEC Increasingly Scrutinizing Companies’ Voluntary Climate Change Disclosures

Aiding and abetting claims against a buyer for a target’s breach of fiduciary duties are meant to be rare, given the “long-standing rule that arm’s-length bargaining is privileged and does not, absent actual collusion and facilitation of fiduciary wrongdoing, constitute aiding and abetting . . .”[1] (emphasis added). Yet to survive a motion to dismiss, plaintiff must show only that it is “reasonably conceivable” that buyer “knowingly participated” in the breach of fiduciary duties.[2] This may explain why there were at least three cases last year in which aiding and abetting claims against buyer survived a motion to dismiss.[3]

Continue Reading Buyers Beware – Aiding and Abetting Claims Based on Target’s Proxy Disclosure

Milbank LLP Environmental partner Matt Ahrens, Global Project, Energy & Infrastructure Finance partner Allan Marks and associates Allison Sloto (Environmental) and Pinky Mehta (Global Risk & National Security) recently co-authored a chapter titled “ESG Considerations in Project, Energy and Infrastructure Finance” in the International Comparative Legal Guide: Environmental, Social & Governance Law 2022, Second Edition. Global Corporate partners Iliana Ongun and Neil Whoriskey also contributed.

Continue Reading Milbank Attorneys Co-Author Chapter on ESG Considerations in <i>ICLG: Environmental, Social & Governance Law 2022</i>

A universal proxy card, listing both company and activist nominees on a single proxy card, will be mandatory for shareholder meetings with contested director elections occurring after August 31, 2022. This will allow shareholders to “split the ticket,” making their own ad hoc selection of board members. By contrast, under the current proxy rules, holders voting by proxy card (rather than in person) must vote for the entire slate proposed by the company or by the activist.

Continue Reading Key Takeaways from New SEC Universal Proxy Card Rules – Major Changes Make Activism Easier, Cheaper and Probably More Chaotic

As a result of the SEC’s most recent Staff Legal Bulletin[1] (“SLB”), shareholder proposals that focus on a “significant social policy” will not be excludable simply because the policy issue is not, in fact, “significant” to the company receiving the proposal. The SEC has decided it will no longer “focus on the nexus between a policy issue and the company.”  Previously, shareholder proposals that did not raise a “policy issue of significance for the company” were excludable under the “ordinary course of business” exception to Rule 14a-8.[2] The new Staff Legal Bulletin is a departure from past SEC practice, and led the SEC to simultaneously rescind three previous Staff Legal Bulletins on the same subject.

Continue Reading SEC Guidance on Shareholder Proposals – Staff Legal Bulletin 14L – Is This the Way to Regulate Climate Change?

Milbank Litigation & Arbitration partners Antonia M. Apps and Adam Fee, and special counsel Matthew Laroche, have authored “A Guide for Boards and Companies Facing Ransomware Demands.” The article was first published on October 16, 2021 in the Harvard Law School Forum on Corporate Governance, a leading online resource on corporate governance issues. 

Continue Reading Milbank Litigators Publish A Guide for Boards and Companies Considering Whether to Pay a Ransom Following a Cyber Attack in the Harvard Law School Forum on Corporate Governance