Monthly Archives: May 2021

Proxy Preview 2021

Heidi Welsh is founding executive director of the Sustainable Investments Institute; and Michael Passoff is the founder and CEO of Proxy Impact. This post is based on a memorandum co-published by As You Sow, Proxy Impact, and the Sustainable Investment Institute. Related research from the Program on Corporate Governance includes Social Responsibility Resolutions by Scott Hirst (discussed on the Forum here).

Proponents have filed at least 435 shareholder resolutions on environmental, social and sustainability issues for the 2021 proxy season, with 313 pending as of February 19. Securities and Exchange Commission (SEC) staff have allowed the omission of 24 proposals so far in the face of company challenges; companies have lodged objections to at least 74 more that have yet to be decided—12 more than at this time last year. Proponents have already withdrawn about 90 proposals, however, up from 78 at this time last year and 71 in mid-February 2019.

Annual totals are down from a bit from the all-time high of just under 500 in 2017. About 40 percent of filed resolutions have gone to votes each year since 2018, around 45 percent have been withdrawn and between 13 and 16 percent omitted.

The tumultuous events of 2020 prompted a slew of new shareholder proposals investors will consider in 2021. New angles are most apparent in the big increase in resolutions about racial justice and equal opportunity, but proponents also are raising fresh ideas about worker safety, climate transition planning and lobbying.


Corporate Governance Update: “Materiality” in America and Abroad

David A. Katz is partner and Laura A. McIntosh is consulting attorney at Wachtell, Lipton, Rosen & Katz. This post is based on an article first published in the New York Law Journal.

The concept of materiality is a bedrock feature of American securities law and regulation. It informs the way investors think, talk, and transact, the way lawyers advise their clients, and the way legislators and regulators draft and enforce federal mandates. The working definition of materiality in the United States, which has served corporate America well for nearly nine decades, now finds itself facing significant pressures from a variety of sources. The European Union, the World Economic Forum, and other stakeholder- and EESG-oriented organizations are advocating for a broader definition and developing concepts of expanded materiality that go far beyond the traditional American approach in ways that threaten to undermine the usefulness of materiality as a guiding principle for disclosure.

In the current debate over materiality, two issues should remain distinct: the importance of stakeholder governance and EESG on the one hand, and the question of redefining the standard of materiality from a securities law and market perspective on the other. Institutional investors in the United States are increasingly focused on stakeholder governance and EESG issues, and corporate disclosure on these topics can and should be addressed within the American framework of materiality. If disclosure of immaterial information is required for non-financial reasons, it should be acknowledged as such and not swept into the concept of materiality. There are examples of such requirements under U.S. law, but though these disclosures are mandated, the information provided is not considered “material.” In an article forthcoming in May, we will address the issues that would arise in connection with SEC-mandated EESG disclosures.


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