Monthly Archives: February 2022

Survey on Corporate Political Activity for 2022

Posted by Cydney Posner, Cooley LLP, on
Wednesday, February 2, 2022
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Cydney S. Posner is special counsel at Cooley LLP. This post is based on her Cooley memorandum. Related research from the Program on Corporate Governance includes Corporate Political Speech: Who Decides? by Lucian Bebchuk and Robert J. Jackson Jr. (discussed on the Forum here); The Untenable Case for Keeping Investors in the Dark by Lucian Bebchuk, Robert J. Jackson Jr., James David Nelson, and Roberto Tallarita (discussed on the Forum here); and The Politics of CEOs by Alma Cohen, Moshe Hazan, Roberto Tallarita, and David Weiss (discussed on the Forum here).

If you think 2021 was a tough year for corporate political activity, 2022 may be even more challenging. That’s according to a recent survey from The Conference Board of government relations executives and managers of political action committees. In the survey, 87% of respondents said they expect 2022 to be at least as challenging as 2021, and 42% anticipate that it may actually be worse. In the aftermath of the January 6, 2021 attack on the Capitol, many companies and CEOs spoke out, signed public statements and determined to pause or discontinue some or all political donations. The heated political climate also heightened sensitivity to any dissonance or conflict between those public statements or other publicly announced core company values and the company’s political contributions, further complicating the political environment for companies and executives. In the survey, respondents cited a number of factors that contributed to the difficult environment for corporate political activity in 2021: in particular, 77% cited the frequent emergence of new social and political issues on which companies faced pressure to take a stance. According to the Executive Director of The Conference Board ESG Center, “With the 2022 mid-term election year bringing sustained scrutiny, companies that engage in political activity need to make the affirmative case for why they do so….They should focus on engaging and educating both internal and external stakeholders on how their activities serve both corporate and societal purposes.”

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The Corporate Governance Gap

Posted by Kobi Kastiel (Tel Aviv University) and Yaron Nili (University of Wisconsin), on
Tuesday, February 1, 2022
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Kobi Kastiel is Associate Professor of Law at Tel Aviv University, and Lecturer on Law at Harvard Law School; and Yaron Nili is Associate Professor of Law and the Smith-Rowe Faculty Fellow in Business Law at the University of Wisconsin Law School. This post is based on their recent paper, forthcoming in the Yale Law Journal. Related research from the Program on Corporate Governance includes Learning and the Disappearing Association between Governance and Returns, by Lucian Bebchuk, Alma Cohen, and Charles C.Y. Wang (discussed on the Forum here); and What Matters in Corporate Governance? by Lucian Bebchuk, Alma Cohen, and Allen Ferrell.

A reliable system of corporate governance is an important requirement for the long-term success of public companies. After decades of research and policy advocacy, there is a growing sense that many public corporations are finally nearing the promised land: their boards seem more diverse, large investors seem more engaged, and directors seem more accountable than ever. But is this perception accurate?

In a new paper, forthcoming in the Yale Law Journal, we explore this question by providing a comprehensive empirical account of the differences in the governance arrangements and shareholder engagements between large- and small-cap corporations. We compiled a rich and detailed historical dataset from a diverse array of sources, some of it hand-collected and coded, for both S&P 1500 and the bottom 200 companies of the Russell 3000 companies, which sheds new light on the corporate governance of mid- and small-cap companies.

As the paper reveals, while many large, high-profile companies are more attentive to shareholder demands and tend to serve as models of desirable governance practices, the picture is considerably different in the far corners of corporate America, away from the limelight of the S&P 500. In these smaller, less-scrutinized corporations, the adoption of governance arrangements is less organized or systematic and often significantly departs from the norms set by larger companies. This results in what this paper calls the “Corporate Governance Gap.”

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The 2022 Boardroom Agenda

Posted by Robert Lamm and Carey Oven, Deloitte LLP, on
Tuesday, February 1, 2022
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Robert Lamm is an independent senior advisor at the Center for Board Effectiveness and Carey Oven is national managing partner at the Center for Board Effectiveness and chief talent officer of Deloitte Risk & Financial Advisory and Deloitte & Touche LLP. This post is based on a Deloitte memorandum by Mr. Lamm, Mr. Oven, Maureen Bujno, Krista Parsons, Caroline Schoenecker, and Audrey Hitchings. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) and Will Corporations Deliver Value to All Stakeholders?, both by Lucian A. Bebchuk and Roberto Tallarita; For Whom Corporate Leaders Bargain by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here); and Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock by Leo E. Strine, Jr. (discussed on the Forum here).

The role of the corporation and the board in an ever-changing world

The saying “the more things change, the more they stay the same” has been around for a long time, but events of the past few years suggest that it may no longer be true. Those events have stress tested the status quo to a remarkable degree: We have experienced and continue to experience wave after wave of a global pandemic, domestic and global political and geopolitical uncertainty, the increasingly menacing existential threat of climate change, and demands for racial and political justice—to name just a few.

From the perspective of business, these developments have been accompanied by another challenge to the status quo—the increasingly widespread belief that corporations cannot and should not ignore the world around them, but rather should be engaged members of society and act to address the challenges we face.

For example, the 2021 Edelman Trust Barometer reported that “sixty-one percent of respondents expect CEOs to fill the void left by government in fixing societal problems, while 65 percent feel CEOs should be as accountable to the public as they are to their shareholders.” [1]

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M&A Outlook for 2022

Posted by Jim Langston, Kyle Harris, and Nickolas Bogdanovich, Cleary Gottlieb Steen & Hamilton LLP, on
Tuesday, February 1, 2022
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Jim Langston and Kyle Harris are partners and Nickolas Bogdanovich is an associate at Cleary Gottlieb Steen & Hamilton LLP. This post is based on their Cleary memorandum.

2021 was a historic year for mergers and acquisitions activity. While some reversion to the mean may be in store, we expect robust dealmaking to continue in 2022. As boards of directors and management teams seek opportunities in this competitive market, they will need to navigate a dynamic regulatory landscape and should expect investors and other stakeholders to focus on ESG metrics in the evaluation of M&A transactions to a greater extent than before.

Market Overview: Will the Boom Continue?

Attitudes among corporate executives, investment professionals and their advisors reveal a general optimism about the prospects for M&A in 2022. And who could blame them? 2021 was a historic year for M&A, with a record $5.8 trillion in global announced transactions.

There are headwinds brewing, some of which are not new but have yet to fully play out: projected interest rate increases, enhanced scrutiny of transactions from antitrust and foreign investment authorities, potential tax law changes, the recurrence of new COVID-19 variants and various macroeconomic uncertainties. In addition, some tailwinds (particularly government stimulus) are weakening.

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