2024 Benchmark Policy Guidelines – US

Courteney Keatinge is Senior Director of Environmental, Social & Governance Research at Glass, Lewis & Co. This post is based on her Glass Lewis memorandum.

Guidelines Introduction

Summary of Changes for 2024

Glass Lewis evaluates these guidelines on an ongoing basis and formally updates them on an annual basis. This year we’ve made noteworthy revisions in the following areas, which are summarized below but discussed in greater detail in the relevant section of this document:


Taking Personhood Seriously in Corporate Law

Asaf Raz is a Research Fellow at the University of Pennsylvania Carey Law School. This post is based on his article, forthcoming in the Columbia Business Law Review, and is part of the Delaware law series.

The evolution of corporate law is tied to developments, or often shocks, in the broader social and legal landscape. A well-recognized example is the 1980s hostile takeover era, as summarized by Delaware Chancellor William Allen: “the secure ground upon which the accepted suppositions of corporation law had been premised[, up to the late 1970s, had broken] apart.” Similar “constitutional moments” for corporate law took place with the Citizens United and Hobby Lobby Supreme Court decisions of the previous decade, and with the corporate purpose discussion that re-emerged in mid-2019, and today remains at the forefront of corporate law scholarship and public debate.


SEC Risk Factors Disclosure Analysis

Dean Kingsley is a Principal and Matt Solomon is a Senior Manager at Deloitte & Touche LLP. Kristen Jaconi is an Associate Professor of the Practice in Accounting and Executive Director at Peter Arkley Institute for Risk Management at the USC Marshall School of Business. This post is based on their recent Deloitte report.

Many S&P 500 companies disclosed they have not experienced past material cybersecurity incidents; however, geopolitics and remote work have heightened cybersecurity risk.

The past 12 months have continued to demonstrate significant volatility and uncertainty in the business environment and broader society, including tectonic shifts in disruptive technologies like Generative artificial intelligence (AI), continued economic upheaval, systemic banking risks, complex domestic and global politics, rising workforce activism, ongoing regulatory reform, devastating natural disasters, and the long-term effects of the pandemic. Public companies continue to be challenged to create and protect enterprise value and stakeholder trust in the face of these and other significant risks.

In this context, Deloitte and the USC Marshall School of Business Peter Arkley Institute for Risk Management (USC Marshall Arkley Institute for Risk Management) have conducted their third annual review of risk factor disclosures of Standard & Poor’s (S&P) 500 companies, identifying key trends in the nature and form of these disclosures. This analysis has shown that companies are continuing to report an average of almost 32 risk factors, covering a wide range of risk domains, including strategic transactions, financial, economic, operational, technology, cybersecurity, informational technology, data security, and privacy, legal, regulatory, and compliance, intellectual property, human capital, and market risks. Opportunities remain to better align external risk reporting with internal risk management and reporting processes, improve the readability and categorization of risks, and make disclosures less generic.


SEC Outlines 2024 Examination Priorities

Aaron Gilbride and Marlon Q. Paz are Partners and Naim Culhaci is a Counsel at Latham & Watkins LLP. This post is based on a Latham memorandum by Mr. Gilbride, Mr. Paz, Mr. Culhaci, Laura Ferrell, Jamie Lynn Walter and Stephen P. Wink.

On October 16, 2023, the Securities and Exchange Commission’s (SEC) Division of Examinations (the Division) published its annual examination priorities for 2024 (2024 Priorities), which focus on “certain practices, products, and services that [the Division] believes present potentially heightened risks to investors or the integrity of the U.S. capital markets.” The Division will prioritize areas that pose emerging risks to investors or the markets, as well as examinations of core and perennial risk areas. The 2024 Priorities include certain of these focus areas, but are not an exhaustive list.


Why Have Uninsured Depositors Become De Facto Insured?

Michael Ohlrogge is Associate Professor at NYU School of Law. This post is based on his recent paper.

I. Introduction

The recent failures of Silicon Valley Bank and First Republic have drawn attention to how rare it is for uninsured depositors at a failed bank to bear losses. Over the past 15 years, uninsured depositors have experienced losses in only 6% of US bank failures. In a newly released paper, I show that ubiquitous rescues of uninsured depositors represent a recent phenomenon dating only to 2008: for many years prior to that, uninsured depositor losses were the norm. I also show that the rise of uninsured depositor rescues has coincided with a dramatic increase in FDIC costs of resolving failed banks, which I estimate resulted in at least $45 billion in additional resolution expenses over the past 15 years.


Weekly Roundup: November 24-30, 2023

More from:

This roundup contains a collection of the posts published on the Forum during the week of November 24-30, 2023

California’s Comprehensive Climate Accountability Regime: Setting an Aggressive New National Standard

SEC Adopts Final Rules to Amend Beneficial Ownership Reporting Rules

2023 Annual ESG Preparedness Report

The Delaware-Inspired Next Step Toward Brazil Becoming the South American Leader in Corporate Law: Making Public Company Arbitrations a Matter of Public Record

Law and Political Economy in China: The Role of Law in Corporate Governance and Market Growth

Strengthening pay practices


Earnouts Update 2023

When Bill Rolls Off: Continuity and Change on Corporate Boards

Which ESG proposals won the favor of investors?

Which ESG proposals won the favor of investors?

Miles Rogerson is a Financial Journalist at Diligent Market Intelligence. This post is based on his Diligent memorandum. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here); Does Enlightened Shareholder Value Add Value? (discussed on the Forum here) both by Lucian A. Bebchuk and Roberto Tallarita; How Much Do Investors Care about Social Responsibility? (discussed on the Forum here) by Scott Hirst, Kobi Kastiel, and Tamar Kricheli-Katz; and  Big Three Power, and Why it Matters (discussed on the Forum here) by Lucian A. Bebchuk and Scott Hirst.

A select group of ESG proposals have led the way in terms of shareholder support during the 2023 proxy season. Freedom of association, alongside broader human rights reporting proposals, won occasional majority support from investors in the 2023 proxy season, as shareholders identified employee retention and recruitment as a potential risk resulting from current market volatility.

In a market plagued by rising inflation and cost-of-living concerns, a number of shareholder proposals on pay equity and severance package approval were also forthcoming.


When Bill Rolls Off: Continuity and Change on Corporate Boards

Peter Cziraki is the Assistant Professor of Finance at Texas A&M University and Adriana Robertson is the Donald N. Pritzker Professor of Business Law at the University of Chicago Law School. This post is based on their recent paper. Related research from the Program on Corporate Governance includes Politics and Gender in the Executive Suite (discussed on the Forum here) by lma Cohen, Moshe Hazan and David Weiss; Will Nasdaq’s Diversity Rules Harm Investors? (discussed on the Forum here) by Jesse M. Fried; and Duty and Diversity (discussed on the Forum here) by Chris Brummer and Leo E. Strine Jr.

Over the last decade, there has been a major push to diversify corporate boards. For example, the proportion of women directors of firms in the S&P 500 index rose from around 10% in 2000 to over 30% in 2023. It is also well-established that larger firms have more women directors than smaller ones.We study where these women directors came from and how they’ve been absorbed in our paper, When Bill Rolls Off: Continuity and Change on Corporate Boards.


Earnouts Update 2023

Gail Weinstein is Senior Counsel and Warren S. de Wied and Steven Epstein are Partners at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. de Wied, Mr. Epstein, Philip Richter, Randi Lally, and Erica Jaffe, and is part of the Delaware law series; links to other posts in the series are available here. Related research from the Program on Corporate Governance includes Allocating Risk Through Contract: Evidence from M&A and Policy Implications (discussed on the Forum here); Are M&A Contract Clauses Value Relevant to Bidder and Target Shareholders? (discussed on the Forum here) both by John C. Coates, Darius Palia and Ge Wu; and The New Look of Deal Protection (discussed on the Forum here) by Fernan Restrepo and Guhan Subramanian.

Since the COVID-19 pandemic began in 2020, there has been a higher proportion of M&A deals including earnouts—used, as usual, to bridge gaps in buyers’ and sellers’ views of valuation in light of economic and financial uncertainties in the marketplace generally and with respect to specific businesses. Also, earnouts have been used in some deals this year to address difficulties in upfront financing as the M&A financing environment has remained challenging. In this Briefing, we discuss (i) the prevalence of earnouts in M&A deals; (ii) the trend in litigation over earnout disputes; (iii) a change in the frequency of certain earnout-related buyer covenants; (iv) basic Delaware legal principles relating to earnouts; and (v) the recent major Delaware earnout decisions, which reflect a new judicial trend of more frequent holdings against buyers. We also offer earnout-related practice points.


Yifat Aran is Assistant Professor of Law at the University of Haifa School of Law and Elizabeth Pollman is Professor of Law and Co-Director of the Institute for Law and Economics at the University of Pennsylvania Carey Law School. This post is based on their symposium article, Ousted, forthcoming in Theoretical Inquiries in Law. Related research from the Program on Corporate Governance includes The Untenable Case for Perpetual Dual-Class Stock (discussed on the Forum here) by Lucian A. Bebchuk and Kobi Kastiel; and Lucky CEOs and Lucky Directors (discussed on the Forum here) by Lucian A. Bebchuk, Yaniv Grinstein, and Urs Peyer.

In an era of “founder-friendly” startup governance, dual-class stock, and technology companies dominating public markets, founder-CEOs are both admired as visionaries and feared as potential governance problems. The entrenchment of founder-CEOs’ control via dual and multi-class stock sparks concern over possible agency costs and insufficient accountability for poor performance, which leads to suspicion that these founders might retain lifetime control. This concern has spurred advocacy for the implementation of sunset provisions and equal treatment agreements, designed to mitigate the risks of enduring control and to promote equal treatment for all shareholders. Amid the twists and turns of this debate, we observe that a small but important point is missing: a substantial number of founder-CEOs have been ousted—forced or pressured to step down from the CEO role despite maintaining important indicia of control.


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