2026 Q3 Audit Committee Update

Posted by Pat Niemann and Jennifer Lee, EY, on
Thursday, October 22, 2026
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Pat Niemann is the Audit Committee Forum Leader and Jennifer Lee is a Managing Director at EY. This post is based on their EY memorandum.

Executive summary

Five areas audit committees should watch next

As audit committees prepare for the quarter ahead, they should consider the following themes as they set agendas. Additional context is provided below.

  • Risk oversight must be more connected and forward looking. Geopolitical disruption, tariff uncertainty, AI, cyber risk, market volatility and regulatory change are converging across operations, supply chains, technology environments and capital allocation decisions. Audit committees should challenge whether management is assessing these risks collectively (and their interdependencies) and with sufficient visibility into second and third order impacts.
  • Resilience should be tested, not assumed. Companies may be accustomed to disruption, but the current environment requires more rigorous scenario planning, stress testing, liquidity discipline and third party dependency mapping. Audit committees should understand the triggers, thresholds and contingency actions management would use if conditions deteriorated.
  • AI governance is entering a more disciplined phase. As AI moves from experimentation to scaled deployment, boards are focusing on cost, return, accountability and control. Audit committees should ask whether management has clear decision rights, reliable cost and value measures, appropriate data and model controls, and cyber defenses that can keep pace with AI enabled threats.
  • Financial reporting implications need early attention. Tariffs, supply chain changes, inflation, interest rates, impairment indicators, liquidity pressures, tax developments, cyber incidents and AI enabled processes may affect judgments, estimates, disclosures and internal controls. Audit committees should confirm that disclosure controls and ICFR remain responsive to the current risk environment.
  • Regulatory change may create both relief and new oversight demands. FASB, SEC and PCAOB developments could affect disclosure requirements, enforcement expectations and audit quality discussions. Audit committees should monitor rulemaking progress and outcomes, being mindful to consider potential implications for investor communications, audit planning and governance practices.

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Anticompetitive Corporate Governance

Posted by Danielle A. Chaim (Bar-Ilan University), on
Thursday, October 22, 2026
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Danielle Chaim is an Assistant Professor at Bar-Ilan University. This post is based on her recent article, forthcoming in the Cornell Law Review.

Corporate law and antitrust law are generally understood to occupy distinct domains within the legal landscape. Corporate law primarily looks inward, governing how authority is allocated within the firm. Antitrust primarily looks outward, policing rivalry among firms in the marketplace. That division rests on a plausible premise: Governance arrangements may shape how a corporation is run, but they do not ordinarily affect competition in the marketplace itself.

That premise is becoming increasingly difficult to sustain. A small number of institutional investors now hold substantial positions across the public equity market, including in competing companies, and wield significant influence through voting, engagement, and market-wide stewardship policies. Their views of governance best practices often converge—a convergence reinforced by investor coalitions, trade associations, and proxy advisers.

In a new paper, I argue that these developments have transformed corporate governance into a potential instrument of competitive harm. What appears to be an internal governance choice at a single company can have market-wide effects when the same powerful investors promote similar arrangements across thousands of firms. The paper develops a two-level account of anticompetitive corporate governance. The first concerns competition among portfolio companies in product and labor markets. The second concerns competition among institutional investors themselves in capital markets.

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SEC Proposes Amendments Addressing Retailization; Modernizing Regulated Funds and Performance-Based Compensation

Posted by Brian Hirshberg, Adam Kanter, and Leslie Cruz, Mayer Brown LLP, on
Thursday, October 22, 2026
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Brian D. Hirshberg and Adam D. Kanter are Partners and Leslie Cruz is a Counsel at Mayer Brown LLP. This post is based on a Mayer Brown memorandum by Mr. Hirshberg, Mr. Kanter, Ms. Cruz, and Anna T. Pinedo.

On September 30, 2026, the Securities and Exchange Commission (the “SEC”) issued two proposing releases containing amendments that would materially affect how business development companies that have elected to be regulated under the Investment Company Act of 1940 (the “1940 Act,” and “BDCs,” respectively), interval funds and other registered funds are structured, as well as their compensation and distribution models.

The proposals would modernize the interval fund framework, permit certain registered closed-end funds (“CEFs”) and BDCs (collectively referred to herein as “regulated CEFs”) to offer multiple share classes without individual exemptive relief and amend Rule 205-3 under the Investment Advisers Act of 1940 (the “Advisers Act”) to expand the circumstances in which SEC-registered investment advisers may receive performance-based compensation, both from regulated funds (through a new “fund board channel”) and from accredited investors and funds whose investors are all accredited investors (through a new “accredited investor channel”).[1]

Taken together, the proposals would facilitate retail access to private markets by providing greater flexibility for funds and their investment advisers.  For sponsors of BDCs and other private asset CEFs, the proposals will have significant practical implications for portfolio construction, liquidity management and adviser compensation.  The proposals also would narrow the commercial gap between interval funds and tender offer funds, and may be of interest to lenders and other counterparties to regulated funds.

We discuss the most significant proposed changes in this Legal Update.

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2026 M&A Integration Survey

Posted by Michael Pokorski, Rupinder Gill, and Kevin Desai, PricewaterhouseCoopers LLP, on
Wednesday, October 21, 2026
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Michael Pokorski is a Deals Principal, Rupinder Gill is a Deals Partner, and Kevin Desai is a Deals Leader at PricewaterhouseCoopers LLP. This post is based on a PwC memorandum by Mr. Pokorski, Mr. Gill, Mr. Desai, and Derek Townsend.

Key takeaways:

  • Only about one in three acquirers fully achieve their deal thesis objectives. The value gap is a decision gap: the gap opens when the acquirer fails to translate the thesis into the specific choices that determine how the combined company operates.
  • Successful acquirers were more likely to define thesis-relevant operating-model elements before close across every deal theme. The sharpest gap appears in revenue-acceleration transactions, where 71% of successful acquirers defined the relevant elements pre-close, compared with 44% of limited-success acquirers.
  • Assign an owner, timeline, and funding to every value initiative before integration begins—successful acquirers do this at nearly twice the rate of limited-success acquirers (59% vs. 28%).
  • Build a finance-validated system to separate realized value from forecasts—only 27% of limited-success acquirers are very confident their reported synergies are real and auditable, compared with 62% of successful acquirers.
  • Conduct leadership and talent diligence before signing, not after close—despite seven in ten acquirers historically naming talent a top deal objective, only 16% actually assess leadership and talent pre-sign.

THE THESIS. The value gap in M&A opens when leaders leave the operating implications of the deal thesis unresolved. Successful acquirers identify the few decisions that matter most, make them early, and connect them to accountable value initiatives and proof.

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NYSE Arca and Nasdaq to Launch Extended Trading: What Companies Should Consider

Posted by Marc S. Gerber and Caroline S. Kim, Skadden, Arps, Slate, Meagher & Flom LLP, on
Wednesday, October 21, 2026
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Marc S. Gerber is a Partner and Caroline S. Kim is a Counsel at Skadden, Arps, Slate, Meagher & Flom LLP.  This post is based on a Skadden memorandum by Mr. Gerber, Ms. Kim, Brian V. Breheny, Raquel Fox, Andrew J. Brady and Nicholas D. Lamparski, all at Skadden.

Executive Summary

  • What’s new: Beginning December 6, 2026, both the Nasdaq Stock Market and NYSE Arca are expected to extend trading hours to 23 hours per day, five days per week (23×5 trading).
  • Why it matters: The 23×5 trading expansion would add an overnight session from Sunday through Thursday from 9 p.m. to 4 a.m. ET, with a mandatory one-hour trading pause Monday through Thursday evening between 8 p.m. and 9 p.m. ET.
  • What to do next: Companies should consider the potential impacts on corporate policies and transaction documents that reference exchange-defined trading sessions and monitor disclosure practices in light of 23×5 trading.

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Laying the Groundwork for Bank M&A

Posted by Edward D. Herlihy, Richard K. Kim, and Brandon C. Price, Wachtell, Lipton, Rosen & Katz, on
Tuesday, October 20, 2026
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Edward D. Herlihy, Richard K. Kim, and Brandon C. Price are Partners at Wachtell, Lipton, Rosen & Katz. This post is based on their Wachtell memorandum

As we enter the final months of 2026, we consider recent developments in bank M&A and offer a framework for preparing for future opportunities. Several significant regional bank deals have closed this year, including Santander/Webster ($12.3 billion), Fifth Third/Comerica ($10.9 billion), Pinnacle/Synovus ($8.6 billion), Huntington/Cadence ($7.4 billion) and PNC/FirstBank ($4.1 billion). Collectively, these transactions reflect a more favorable regulatory environment and demonstrate that even large bank mergers can obtain approval on substantially shorter timelines than in recent years. These transactions had a median sign to close period of just under 4 months, a significant improvement from the approximately 10 month average timeline for transactions valued over $500 million that closed from 2021 through 2024. More timely and predictable regulatory review can enhance deal certainty, accelerate synergies and reduce transaction related risks. The FDIC’s recent proposal to modernize and reform the deal approval process has the potential to further cement accelerated timelines and transparency in the review of bank mergers.

The largest bank deal announced this year was Santander’s $12.3 billion acquisition of Webster, which reversed a trend of large foreign banks exiting the U.S. and signified the attractiveness of high quality U.S. regional bank franchises. In early September, EverBank and WaFd announced a $3.9 billion reverse merger transaction aimed at creating increased operational scale and providing private equity investors in EverBank an opportunity to gain liquidity through access to the public markets. Perhaps most notable is the recent convergence in banking and fintech evidenced by Capital One’s $5.15 billion acquisition of Brex, Valley National’s acquisition of Bluevine, Chime’s acquisition of Stride Bank to become a bank holding company and a surge in new bank charters.

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Court of Chancery Reinforces Section 144’s Protections–and the Need for Faithful Implementation

Posted by Kevin Schwartz, Steven Winter, and Theo. Mirvis, Wachtell Lipton Rosen & Katz, on
Tuesday, October 20, 2026
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Kevin S. Schwartz and Steven P. Winter are Partners and Theo. Mirvis is Of Counsel at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum by Mr. Schwartz, Mr. Winter, Mr. Mirvis, Zachary M. David, and John-Francis S. Flynn, and is part of the Delaware Law Series; links to other posts in the series are available here.

In an important decision interpreting the new Section 144 of the Delaware General Corporation Law, added by the adoption of SB 21 in 2025, the Court of Chancery last week preliminarily enjoined a proposed recapitalization of Cloudflare, Inc. designed to preserve founder control. In re Cloudflare, Inc. Stockholder Litigation, C.A. No. 2026-0772-JTL (Del. Ch. Oct. 16, 2026). The recapitalization sought to create a new class of voting preferred and nonvoting common stock to secure the founders’ continued control notwithstanding the dilution caused by equity compensation and other corporate uses of its stock. The board formed a special committee to determine whether the recapitalization was in the best interests of Cloudflare and its public minority stockholders. The injunction grant turned on an unusual record that enabled the stockholder plaintiffs to assert that coercive and aggressive behavior of the controlling founders, together with evidence of process issues that included unauthorized backchannel communications and deleted Signal messages, impacted the special committee’s fulfillment of its fiduciary duties.

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How Chairs Drive Board Performance

Posted by Rusty O'Kelley and Laura Mantoura, Russell Reynolds Associates, on
Monday, October 19, 2026
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Rusty O’Kelley co-leads the Global Board & CEO Advisory Practice and Laura Mantoura is Board Member and CEO Advisory Practice at Russell Reynolds Associates. This post is based on a Russell Reynolds Associates article originally published online in the NACD (National Association of Corporate Directors) Directorship Magazine.

Boards spend significant time ensuring they have the right mix of skills and experience around the table. However, composition is only part of the performance equation. Board performance depends on how those capabilities are collectively brought to bear. The chair plays a central role in making the board a strategic asset for the organization.

How can chairs translate the strengths of individual directors into stronger board performance? There are four actions the chair can take.

 

Set the board and management up for collaboration

The chair serves as the board’s orchestrator and leader among peers. He or she helps decide what merits the board’s attention, maintains strong working relationships among directors and with management, builds a special rapport with the CEO, and ensures important issues surface in the right forum. Chairs serve as the bridge between the board and leadership when hard decisions must be made.

Yet in Russell Reynolds Associates’ (RRA) 2025 Global Board Culture and Director Behaviors Study, only 67 percent of respondents said directors on their boards often or always cultivate relationships with the CEO, and 52 percent said the same of executives beyond the CEO. The study also found that spending more time on board priorities does not necessarily translate into results.

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SEC Staff Expands No-Action Relief for Retail Voting Programs

Posted by Thomas Fraser, Michael Littenberg and Craig Marcus, Ropes & Gray LLP, on
Monday, October 19, 2026
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Thomas Fraser, Michael Littenberg, Craig Marcus are Partners at Ropes & Gray LLP. This post is based on a Ropes & Gray memorandum by Mr. Fraser, Mr. Littenberg, Mr. Marcus, Christopher Capuzzi, Tom Danielski, and Tara Fisher, all at Ropes & Gray.

On September 29, 2026, the staff of the Division of Corporation Finance (the “Staff”) of the U.S. Securities and Exchange Commission (SEC) granted no-action relief to Tesla, Inc. (“Tesla”) for its proposed framework for issuer voluntary retail shareholder voting programs (each, an “IVRVP”) by public companies. Under an IVRVP, a participating retail shareholder may give a standing instruction to have its shares voted at each shareholder meeting in line with the recommendations of the issuer’s board of directors (a “standing instruction”).

The Staff stated that it will not recommend enforcement action in respect of Rules 14a-3(a), 14a-4(d)(2), 14a-4(d)(3), 14a-4(f), 14a-6(o), 14a-10, or 14a-12(a) under the Securities Exchange Act of 1934 (the “Exchange Act”) if Tesla implements the IVRVP as described in its no-action request letter. Significantly, the Staff added that its position applies to any issuer operating an IVRVP in the same manner described in Tesla’s letter.

The Tesla relief builds on, and is meaningfully broader than, the no-action relief the Staff granted to Exxon Mobil Corporation (“Exxon”) on September 15, 2025, for its retail voting program (the “Exxon RVP”). That no-action relief addressed only Rules 14a-4(d)(2) and 14a-4(d)(3), which generally prohibit a proxy from conferring authority to vote at more than one meeting. Tesla’s relief covers those two rules and also Rules 14a-3(a), 14a-4(f), 14a-6(o), 14a-10, and 14a-12(a). The framework proposed by Tesla also widens the program features available to issuers, including centralized “Hubs” for managing standing instructions, a “householding” opt-in across all of a shareholder’s accounts, and a persistent, account-specific opt-in.

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2026 Proxy Season Review: Compensation-Related Matters

Posted by Heather L. Coleman, Jeannette E. Bander and Amanda K. Toy, Sullivan & Cromwell LLP, on
Sunday, October 18, 2026
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Heather Coleman, Jeannette Bander, and Amanda K. Toy are Partners at Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell memorandum by Ms. Coleman, Ms. Bander, Ms. Toy, Rebecca M. Rabinowitz, Brittney G. Kidwell, and Julia Khomenko, all at Sullivan & Cromwell.

2026 Proxy Season Review, Part 2 (Compensation Related Matters)

September 29, 2026

Summary of Key Trends[1]

A. Strong Say on Pay Results

  1. The number of failed say on pay votes remained low, with overall shareholder support averaging ▲91% among the S&P 500 and ▲92% among the Russell 3000 in H1 2026 (v. 90% and 91% in H1 2025).
  2. Turnover in failed votes declined by ▼50%, indicating a return of “stickier” negative votes.

B. Overall ISS Approach on Say on Pay Evaluation

  1. Compared to proposals ISS supported, proposals with negative recommendations received ▼28% and ▼21% lower support on average, respectively, at S&P 500 and Russell 3000 companies.

C. Details on ISS’s Application of its Pay for Performance Policies in H1 2026

  1. ISS’s approach to say on pay recommendations remained generally unchanged from the prior proxy season.
  2. Alignment of CEO pay with relative total shareholder return remained the most important quantitative factor underlying ISS negative recommendations.
  3. ISS placed slightly greater emphasis on quantitative pay for performance factors in H1 2026, while continuing to focus heavily on qualitative concerns regarding performance goals and incentive compensation design.
  4. Limited, opaque or undisclosed performance goals remained the most often cited qualitative factor underlying ISS negative recommendations, and one off awards resulting in high executive compensation was the second most cited factor.

D. SEC Proposal to Scale Executive Compensation Disclosure Requirements

  1. The SEC proposed significantly scaling back executive compensation disclosure and related shareholder voting requirements for non accelerated filers, which the SEC estimates would comprise approximately 81% of reporting companies.

E. Equity Compensation Plan Voting

  1. Average support was 92% among the S&P 500 and 87% among the Russell 3000 in H1 2026, generally consistent with H1 2025.
  2. Despite an increase in negative ISS recommendations, no plans failed to pass among the S&P 500 (same as H1 2025) and ▲five plans failed among the Russell 3000 (v. two plans in H1 2025).

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