What Do Shareholders Propose?

Ali Saribas is a Partner, and Carmen Ng is a Director at SquareWell Partners. This post is based on their SquareWell memorandum.

i. Introduction

SquareWell published the inaugural edition of “What do Shareholders Propose“, a comprehensive review of all shareholder proposals related to environmental, social, and governance (“ESG”) topics in Europe and the United States for 2022 and 2023, including the “Anti-ESG” movement. The full paper can be downloaded from here.

Broadly speaking, shareholder proposals can either focus on “values” or “value.” However, the distinction between the two has become increasingly blurred over the years. The study aims to understand the transatlantic differences in proposals filed and voted on by shareholders on topics related to their values on “ESG” issues at the AGMs of S&P 500 and STOXX Europe 600 companies.

In 2023, a record 490 “Pro-ESG” shareholder proposals were filed across the S&P 500 and STOXX Europe 600 indices, marking an 8 percent year-on-year increase. However, the adoption rate for such proposals at S&P 500 companies halved to 5.4 percent compared to 2022. Additionally, no “Pro-ESG” proposals passed at STOXX Europe 600 companies in 2023.


Dissecting the Long-Term Performance of the Chinese Stock Market

Jun Qian (QJ) is Professor of Finance and Executive Dean at the Fanhai International School of Finance (FISF), Fudan University. This post is based on a forthcoming article in the Journal of Finance by Franklin Allen, Professor Qian, Chenyu Shan, and Julie Lei Zhu.

The Chinese stock market started in 1990 with the establishment of two domestic stock exchanges (the “A share” market): the Shanghai Stock Exchange (SSE hereafter) and the Shenzhen Stock Exchange (SZSE). The number of listed firms has been growing since then, with more than 5,000 firms now listed in the two exchanges and the newly established Beijing Stock Exchange. The A share market is the second largest in the world in terms of total market capitalization, trailing only the US equity markets. Due to stringent listing requirements in the domestic market, among other reasons, a large number of Chinese firms are listed externally, mostly in the Hong Kong exchange (HKEX), which follows regulations similar to those in the US and is open to global investors. The second most popular external IPO destination for Chinese firms is the US.

During the period of 2000-2018, the Chinese economy grew by a factor of 4.8 in real terms, much faster than the rest of the large economies, including India, Brazil, Japan and the US. Firm-level, cross-country regressions indicate that A share firms underperform a large set of listed firms from both developed and developing countries by 15.0% per year, while externally listed Chinese firms’ performance is on par or better than the same set of listed firms from other countries. In terms of cumulative, ‘buy and hold’ returns, the performance of the A share market is the worst among the group of large countries (see Figure 1). The cumulative returns of the A share market are lower than those of five-year bank deposits or three- and five-year government bonds in China, and investors in the domestic stock market earned essentially zero net return in real terms.


Cybersecurity, audit, and the board: How does board oversight impact cybersecurity performance?

Edna Twumwaa Frimpong is Director of International Research and Dottie Schindlinger is Executive Director at Diligent Institute; and Derek Vadala is Chief Risk Officer at Bitsight. This post is based on a recent report by Ms. Frimpong, Ms. Schindlinger, Mr. Vadala, Kira Ciccarelli, Jacob Olcott, and Jeff Barnett.


The rapid escalation in the frequency and severity of cyber incidents has positioned cyber risk as one of the foremost challenges confronting boards.[1] With cyber threats becoming increasingly sophisticated and pervasive, boards are under mounting pressure to effectively address cybersecurity risks to safeguard their organizations’ interests. With projected financial losses from data breaches estimated to reach approximately USD 10.5 trillion by 2025, and new pressure from regulators like the SEC, the oversight role of the board becomes even more crucial.[2]


HLS Corporate Faculty Excels in SSRN’s 2023 Citation Rankings

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Statistics released by the Social Science Research Network (SSRN) indicate that, as of the end of 2023, Harvard Law School Corporate Faculty featured prominently on SSRN’s law author rankings. These professors captured seven of the top 100 slots among the top 100 law authors in all legal areas in terms of citations to their work.

Professor Lucian Bebchuk was ranked second among all law school professors in all fields. His papers, available on his SSRN page here, were reported to have a total of 4,123 citations.

In addition to Professor Bebchuk, six other professors associated with the Harvard Law School Program on Corporate Governance are included among SSRN’s 2023 top 100 law authors:

No corporate faculty group at any other law school matches this level of citation prominence. After Harvard comes Columbia with five faculty members on the top-100 list (Justin McCrary, Ranked 19, Ron Gilson, ranked 34, John Coffee, Ranked 41, Jeff Gordon, Ranked 94, and Katharina Pistor, Ranked 94). NYU is represented by two faculty members (Steven Choi, Ranked 63, and Marcel Kahan, Ranked 65). Finally, several other law schools are represented by one faculty member each – Northwestern (Bernard Black, Ranked 5), Vanderbilt (Randal Thomas, Ranked 21), Berkeley (Frank Partnoy, Ranked 30), Stanford (Ron Gilson, ranked 34), Virginia (Mitu Gulati, Ranked 40), Yale (Roberta Romano, Ranked 56), Michigan (Adam Pritchard, Ranked 71), UCLA (Stephen Bainbridge, 78), and Penn (Jill Fisch, Ranked 99).

SSRN is the leading electronic service for social science research. As of the end of 2023, its electronic library contained over 1,321,476 full-text documents by more than 1,512,000 authors. SSRN’s 2023 rankings in terms of citations are available here.

The Shortseller Enrichment Commission?: Whistleblowers, Activist Short Sellers, and the New Privatization of Public Enforcement

Alexander I. Platt is an Associate Professor at the University of Kansas School of Law. This post is based on his recent paper, forthcoming in the Washington Law Review. 

Two developments have transformed the detection of corporate fraud since the global financial crisis: the SEC whistleblower bounty program (WBP) and the rise of activist short sellers. Considered separately, these are generally understood to be two valuable innovations that help detect and deter fraud.

But, it turns out, they are not so separate.

In a new paper, I document extensive activist short involvement in the WBP, show why this involvement may undermine deterrence, and offer reforms.

Drawing on data obtained under the Freedom of Information Act, I find that activist shorts and other outsiders account for about 40% of awards issued by the WBP in the most recent years. In addition to supplying their own tips directly to the SEC, activist shorts also frequently recruit insider tipsters to participate – in some cases offering up trading profits in exchange for cooperation. These well-financed outsider tipsters often go far beyond providing factual evidence, and also provide the SEC with legal analysis, expert reports, witness lists, and draft pleadings.

The WBP is now an outsourcing program: the SEC uses the WBP to pay private professionals to do work that traditionally would have been done by its own staff. In recent years, this outsourcing amounts to the equivalent of roughly 12% of the SEC enforcement budget.


Comparing the SEC Climate Rules to California, EU and ISSB Disclosure Frameworks

Emma Bichet and Michael Mencher are Special Counsels and Beth Sasfai is a Partner at Cooley LLP. This post is based on a Cooley memorandum by Ms. Bichet, Mr. Mencher, Ms. Sasfai, Jack Eastwood, and Charlotte Yin.

The Securities and Exchange Commission (SEC) adopted its long-awaited climate disclosure rules on March 6, 2024. (For more information, see our recent Cooley client alertwebinar and resource page.) The final rules require US domestic companies and foreign private issuers (FPIs) to disclose qualitative and quantitative climate-related information in their registration statements and periodic reports in general alignment with internationally accepted disclosure frameworks, including the Task Force on Climate-Related Financial Disclosures (TCFD) and the Greenhouse Gas (GHG) Protocol.


Proxy Preview 2024

Matt DiGuiseppe is Managing Director, Maria Castañón Moats is Leader, and Paul DeNicola is Principal at the Governance Insights Center, PricewaterhouseCoopers LLP. This post is based on their PwC memorandum.

As we gear up for the 2024 proxy season, it’s important to temper our expectations for any major surprises. The trends we’ve seen in recent years are likely to continue, effectively establishing the past couple of years as the new normal. Shareholder proposal support is likely to remain subdued. Activist campaigns for board seats will likely end in settlements. Voting outcomes will remain predictable because guidelines have not changed significantly. On the handful of new mandated disclosures, shareholders will likely be observing and digesting them to figure out what strategic insights they can gain. And, after years of tumult, the market is settling on the new baseline for environmental, social and corporate governance expectations against which boards and management teams can measure themselves.


Key Considerations for the 2024 Annual Reporting and Proxy Season: Proxy Statements

Maia Gez and Scott Levi are Partners, and Danielle Herrick is Professional Support Counsel at White & Case LLP. This post is based on a White & Case memorandum by Ms. Gez, Mr. Levi, Ms. Herrick, and Sarah Hernandez.

Each year in our Annual Memo series, White & Case’s Public Company Advisory Group provides practical insights on preparing Annual Reports on Form 10-Ks, Annual Meeting Proxy Statements and, for FPIs, the Annual Report on Form 20-F. This installment of our Annual Memo will focus on key considerations for 2024 Annual Meeting Proxy Statements in three subsections:

  • Compensation Related Disclosure Matters
  • Boards of Directors and Related Governance Disclosures
  • Proxy Housekeeping Items


Creditor rights, collateral reuse, and credit supply

Brittany Lewis is an Assistant Professor of Finance at Olin Business School, Washington University in St. Louis. This post is based on her recent article forthcoming in the Journal of Financial Economics.

According to Griffin, Kruger, and Maturana (JFE, 2021), “ten years after the financial crisis, the central question of what explains the rise and fall in house prices remains unresolved.” In “Creditor Rights, Collateral Reuse, and Credit Supply” (JFE, 2024), I seek to address this central question by critically analyzing the contribution of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) 2005 in the build up to and unfolding of the Global Financial Crisis (GFC) of 2008.

In addressing this question, the paper combines micro hand-collected data, an innovative research design, and a quasi-random experiment. The research design causally links BAPCPA to an expansion of credit supply that directly funded the mortgages most exposed to default in the GFC.  BAPCPA expanded the sale and repurchase, or “repo,” market’s “safe harbors” in the Bankruptcy Code to include mortgages loans, mortgage related securities and interest on mortgage loans and mortgage related securities. This change granted mortgage collateral preferred bankruptcy treatment and only affected private-label or risky mortgage collateral, since agency mortgage collateral had been granted this status in 1984.


Weekly Roundup: April 5-11, 2024

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This roundup contains a collection of the posts published on the Forum during the week of April 5-11, 2024

Proposed Amendments to DGCL on Stockholder Contracting Would Create More Problems Than They Purportedly Solve

A Deeper Dive into the SEC’s Landmark Climate Disclosure Rules for Public Companies

Practice Points in Response to Activision

2024 Annual Meeting Filing and Disclosure Requirements

Not at Any Price – Contested M&A, The New Normal

The Neoclassical View of Corporate Fiduciary Duty Law

Delaware Supreme Court Holds Entire Fairness Applicable to All Conflicted Controller Transactions

SEC Fines Two Investment Advisers for “AI Washing”

HLS Forum on Corporate Governance Continues Growing

The New Framework provided by Moelis

The Global South in Comparative Corporate Governance

The Shareholder Activism of Anti-Discrimination Proponents

Low Carbon Mutual Funds

AI Governance Appears on Corporate Radar

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