Cydney S. Posner is special counsel at Cooley LLP. This post is based on a Cooley memorandum by Ms. Posner. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance by Lucian A. Bebchuk and Roberto Tallarita (discussed on the Forum here) and Toward Fair and Sustainable Capitalism by Leo E. Strine, Jr (discussed on the Forum here).
I can think of only one public company that is currently a Delaware Public Benefit Corporation. That’s Laureate Education, which initially filed with the SEC in 2015 and went effective in 2017. (See this PubCo post.) Now, finally, we have a second company that has filed for its IPO as a PBC—Lemonade, Inc., which declares on the cover page of its prospectus that it is incorporated in Delaware as a PBC as a demonstration of its “long-term commitment to make insurance a public good.” It’s been quite a long dry spell since the PBC legislation was signed into law in 2013. In the last few years, however, we have witnessed intensifying investor focus on sustainability as a strategy (see, for example, this PubCo post), as well as swelling numbers of companies declaring their commitments to all stakeholders, as reflected, for example, in the Business Roundtable’s adoption of a new Statement on the Purpose of a Corporation (see this PubCo post) and the World Economic Forum’s Stakeholder Principles in the COVID Era (see this PubCo post). What’s more, new legislation just passed by the House in Delaware will, if ultimately signed into law, make it easier to slip in and out of PBC status. [Update: This bill was signed into law on July 16.] Will these trends toward sustainability and stakeholder capitalism, together with the Delaware legislation, fuel a renewed interest in the PBC for public companies and expecting-to-become public companies? Will Lemonade open the floodgates?
Letter to Clayton and Hinman on Virtual and Hybrid Meetings
More from: Amy Borrus, Josh Zinner, Lisa Woll, Mindy Lubber, Sanford Lewis, Ceres, Council of Institutional Investors, Interfaith Center on Corporate Responsibility, Shareholder Rights Group, US SIF
Amy Borrus is Executive Director at the Council of Institutional Investors; Sanford Lewis is Director of the Shareholder Rights Group; Mindy Lubber is President and CEO of Ceres; Lisa Woll is CEO of US SIF; and Josh Zinner is CEO of the Interfaith Center on Corporate Responsibility. This post is based on their letter to SEC Chairman Jay Clayton and division of corporation finance director William Hinman.
We are writing on behalf of the investors, asset managers and asset owners represented by our members, who collectively represent hundreds of institutional investors with at least $45 trillion in assets under management. Our organizations recognize the exceptional circumstance of this year’s AGM season in the midst of the Covid-19 crisis. Due to this pandemic, shareholder meetings at most companies quickly went from being in-person to virtual. This led to considerable confusion and technical difficulties, in many cases inhibiting shareholder participation in meetings. We are concerned about the potential for poor precedents for conduct of shareholder meetings, and in some circumstances, deliberate actions that limited shareholder participation at various companies. Although we recognize that state law, individual companies and intermediaries must step up, we believe that there are appropriate steps that the SEC can take to help improve the situation.
Certainly there was substantial strain on many corporate secretaries this year given the late hour of the change from in person to virtual meetings for most companies, as well as the need to conduct meetings with management and board members in multiple locations due to travel and public health restrictions, relying on sometimes iffy technology and broadband connections. We understand that Broadridge, which had provided the platform for nearly all virtual meetings before the pandemic, did not have bandwidth to accommodate all companies to hold meetings when they had planned. And we appreciate the April 7th guidance provided by the SEC, and that other providers became more active in offering virtual meeting platforms. [1]
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