Corporate Governance

Subscribe to Corporate Governance

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

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

At the beginning of the COVID outbreak in the US, The Williams Companies adopted an unusually protective poison pill to thwart any activist campaigns that might arise in the then existing market conditions. Vice Chancellor McCormick struck down the pill in a decision published February 26. The Vice Chancellor’s decision is important in at least two regards. …
Continue Reading Chancery Court Strikes Down The Williams Companies “Activist Pill”

Any General Counsel who has been through a renewal of the company Directors and Officers Liability Insurance policy in the past couple of years has experienced a highly distressed market, with dramatic increases in prices, and challenges with respect to availability in many cases. I sat down (virtually) with Michael Welling, a partner at Meridian Risk Management to discuss the state of the market and strategies going forward.
…
Continue Reading D&O Insurance: State of the Market

In AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC et al., the Delaware Court of Chancery, held for the first time that reasonable measures aimed at combatting COVID-19 can violate the ordinary course of business covenant in a sale agreement if those measures “materially change [the] business or business practices” of the target company.  In connection with the attempted sale by AB Stable VIII LLC ( “Seller”) of a subsidiary holding 15 hotels to MAPS Hotel and Resorts One LLC ( “Buyer”), the Court held that by temporarily closing two hotels, limiting the capacity and amenities in others, and by furloughing and laying off workers in light of the COVID-19 pandemic, the Seller materially breached its covenant to operate in the ordinary course of business between the signing and closing of the transaction.  Accordingly, the Buyer was not required to complete the transaction.…
Continue Reading Reasonable COVID-19 Preventative Measures Can Breach Ordinary Course of Business Covenant

Just before year end, the Department of Labor finalized its new rules on ESG investing and voting for retirement and pension funds.  The rules sharply restrict the ability of the fiduciaries of retirement and pension funds to make investments based on ESG factors, or to vote shares held by such funds in favor of ESG issues.  The rules are unlikely to prove popular with the Biden administration, but regardless of how long they survive, the rules currently apply to trillions of dollars of investments, and raise interesting questions about who will ultimately control the placement of a huge amount of the public’s investment capital and the voting on ESG matters of shares held by fiduciaries. 
…
Continue Reading The Department of Labor, ESG and All Those Undirected Votes

On November 12, 2020, Institutional Shareholder Services (“ISS”) issued its proxy voting guidelines and policy updates for 2021.  These guidelines apply for shareholder meetings taking place on or after February 1, 2021.  The most noteworthy changes are described below.  Companies included in the S&P 500 index should also note that ISS will no longer provide drafts of its reports for company review prior to publication.
…
Continue Reading ISS Issues Proxy Voting Guidelines and Policy Updates for 2021