Monthly Archives: September 2022

CEO Succession Practices in the Russell 3000 and S&P 500: 2022 Edition

Matteo Tonello is Managing Director of ESG Research at The Conference Board, Inc., and Jason D. Schloetzer is Associate Professor of Business Administration at the McDonough School of Business at Georgetown University. This post relates to CEO Succession Practices in the Russell 3000 and S&P 500: Live Dashboard, an online dashboard published by The Conference Board, Heidrick & Struggles, and ESGAUGE.

These Key Findings are based on a dataset downloaded on July 6, 2022 from CEO Succession Practices in the Russell 3000 and S&P 500: Live Dashboard. The Live Dashboard is updated weekly with information on succession announcements about chief executive officers (CEOs) made at Russell 3000 and S&P 500 companies; please browse the Live Dashboard for the most current figures. For comparative purposes, the Live Dashboard includes historical data and breakdowns across business sectors (as classified under the Global Industry Classification Standard, or GICS) and company size groups. See Using this Dashboard for more details.

The project is conducted by The Conference Board and ESG data analytics firm ESGAUGE, in collaboration with executive search firm Heidrick & Struggles.

After declining during the pandemic, the rate of CEO turnover at US public companies is picking up rapidly, as boards regain confidence in their succession plans and recessions concerns prompts some longer-tenured leaders to exit their roles.

During the height of the pandemic, many companies chose to avoid compounding the business risks resulting from the crisis with the uncertainties of a leadership turnover. A clear decline in the 2021 rate of CEO succession indicated that, even in situations where a change might have been planned, many CEOs were asked to prolong their tenure and help to steer the ship. However, preliminary annualized data on the 2022 rate show that those earlier numbers may now be reversing and that this is poised to be a record year for CEO departures. Two factors may help to explain this finding.

First, many CEOs are ready to move on. The pressure of managing during an unprecedented crisis—which, due to the current geopolitical and the looming prospect of a recession, has only accelerated rather than abated—has taken a toll on leaders, especially those who had been planned their retirement for years. Second, boards of directors may be more prepared for change too. In the last two years, they have had the time to stress-test and strengthen their company’s succession plan, gaining more confidence in their ability to execute it.


The Global ESG Regulatory Framework Toughens Up

Chris McGarry, Jacquelyn MacLennan, and Clare Connellan are partners at White & Case LLP. This post is based on a White & Case memorandum by Mr. McGarry, Ms. MacLennan, Ms. Connellan, Taylor Pullins, Maia Gez, and Mark Clarke.

Global ESG regulation is set to make a leap with new requirements for private businesses to report on and prevent adverse impacts on climate, the environment and human rights. We summarise three key regulatory developments that should be on the agenda for large companies.

  • CSDDD: The European Commission adopted its proposal for the Corporate Sustainability Due Diligence Directive [1] on 23 February 2022. The CSDDD is an important component of the European Green Deal, [2] as well as a long promised initiative in the EU’s human rights strategy, [3] and will necessitate strategic and operational changes by businesses globally.
  • CSRD: Earlier elements of the European Green Deal focused on disclosure: in particular, under the Sustainable Finance Disclosure Regulation, the Taxonomy Regulation and, most recently, the Corporate Sustainability Reporting Directive which has received provisional political agreement and is expected to complete the final stages of formal approval by the Council and European Parliament shortly. The CSRD will update and reinforce the EU’s Non-Financial Reporting Directive, [4] and operate in tandem with the CSDDD. Member States are required to implement the CSRD, and its obligations will start to apply as of 1 January 2024.
  • SEC: Meanwhile across the Atlantic on March 21, 2022, the U.S. Securities Exchange Commission (SEC) proposed rules to require climate change disclosure in the annual reports and registration statements of public companies registered with the SEC, including any company (domestic or foreign) whose stock is listed on a U.S. stock exchange. The SEC proposal on climate disclosure rules was long awaited, but comes amidst deep disagreement on the role of the SEC in this area. The SEC recently closed the public comment period on the proposal and must review and respond to comments before issuing any final rules. Litigation challenging the SEC’s authority is likely if the proposed rules are adopted, including arguments based on the “major questions doctrine,” as recently seen in West Virginia v. EPA. [5]


ESG, Stakeholder Governance, and the Duty of the Corporation

Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, Adam O. Emmerich, Kevin S. Schwartz, Sabastian V. Niles and Anna M. D’Ginto.

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? (discussed on the Forum here), both by Lucian A. Bebchuk and Roberto Tallarita; 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); and Stakeholder Capitalism in the Time of COVID, by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita (discussed on the Forum here).

Recently, there has been much confusion and misinformation about (1) environmental, social, and governance (ESG) considerations, (2) the ways in which companies, boards, asset managers, investment funds, and other market participants can, do, and should factor such considerations into their decision-making processes, and (3) the need for companies to consider, balance, advance, and appropriately protect stakeholder interests in order to create value, generate sustainable returns, and guard against downside risks to value and corporate health. This cloud of confusion stems, in part, from nascent efforts to politicize ESG. Consider the Trump administration’s proposed rulemaking in the Department of Labor that would have required fiduciaries of retirement plans making investment decisions to focus solely on “pecuniary” factors (and, in turn, would have burdened the ability of fiduciaries to appropriately take ESG factors into account in selecting investments and engaging in risk-return analyses). And consider the letter sent to BlackRock last month by 19 Republican attorneys general, accusing the asset manager of prioritizing its “climate agenda” over the interests of pensioners’ investments. These developments unfortunately fail to appreciate that ESG, properly understood, is merely a collection of quite disparate risks that corporations face, from climate change to human capital to diversity to relations among the board, management, shareholders, and other stakeholders. We write to resituate the role of ESG and stakeholder governance within the well-established legal framework of corporate fiduciary duties.

Dating back to the 1932 law review exchange between Merrick Dodd and Adolf Berle, there has been a long-running debate over whether the purpose of the corporation is to maximize short-term profits for shareholders or, instead, to operate in the interest of all of its various stakeholders to promote the long-term value of the corporation. For several decades, the predominant view among corporate leaders, practitioners, academics, investors, and asset managers was that the role of the corporation was solely to maximize profits for shareholders. This theory, which came to be known as shareholder primacy, is epitomized by Milton Friedman’s seminal 1970 essay, The Social Responsibility Of Business Is to Increase Its Profits, in which he argued that every corporation should seek solely to “increase its profits within the rules of the game.”  Friedman’s shareholder-centric view of corporate purpose posited that a corporation that “takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers” would undermine “the basis of a free society.”


“Pay Versus Performance” Rule Increase Disclosure Obligations for Public Firms

Brandon Gantus, Lori Goodman, and Nicole Foster are partners at Freshfields Bruckhaus Deringer LLP. This post is based on their Freshfields memorandum. Related research from the Program on Corporate Governance includes Stealth Compensation Via Retirement Benefits and Paying for Long-Term Performance (discussed on the Forum here), both by Lucian Bebchuk and Jesse Fried.

On August 25, 2022, the U.S. Securities and Exchange Commission (the SEC) issued final rules on the “pay versus performance” disclosure. These rules, which were in process for over seven years, dramatically expand the information that public companies will be required to disclose regarding the relationship between their executive compensation and the company’s financial and stock price performance.

Under the final rules, most public companies are required to provide in their annual proxy statement or other information statement covering executive compensation:

  • a table featuring their executive compensation (both as reported in the summary compensation table (SCT) and adjusted to represent amounts actually paid), their net income, their total shareholder return (TSR), the TSR of their compensation peer group, and a financial performance measure chosen by the company (the Company-Selected Measure), generally over the last five most recently completed fiscal years;
  • a clear description of the relationship between the compensation actually paid to their executives and the financial metrics disclosed in the table as well as the relationship between the company’s TSR and the compensation peer group TSR; and
  • a table (the Tabular List) of the most important performance measures used by the company to link compensation actually paid to the executives to company performance.

These new disclosures must be included with proxy statements or other information statements that cover executive compensation for fiscal years ending on or after December 16, 2022. For most public companies, including calendar-year public companies whose fiscal year ends on December 31, this disclosure will be required beginning with their next annual proxy statement to be filed with the SEC in 2023.


Risk Management and the Board of Directors

Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy.  This post is based on a Wachtell, Lipton, Rosen & Katz memorandum.



As companies seek to navigate a multi-stakeholder global landscape and the world continues to adjust to the impacts of Covid-19, significant new risks have emerged that are reshaping the near-term business and risk landscape. These new risks—and the intensification of longstanding risks—are pressure-testing the agility and resilience of corporate strategies, risk management systems and practices. The pandemic accelerated technological disruptions and business model changes and exposed sharp differences in the impacts felt by different sectors, with some experiencing enormous dislocation and others doing remarkably well and arguably emerging stronger. Looking ahead, all sectors of the economy are facing macroeconomic headwinds, including persistent inflation, surging interest rates, continued supply-chain bottlenecks and commodity shortages, all occurring amid the backdrop of the war in Ukraine, China’s zero-Covid policy and growing geopolitical tensions. Severe drought, heatwaves and flooding across the globe have highlighted the burgeoning challenge of climate risks, which, along with the tight labor market and declining fertility rates across the developed world, present near- and longer-term risks that will require significant planning. Cybersecurity also continues to be a significant threat with regulators stepping up focus in step with growing geopolitical risks. In the United States, the 2022 midterms and ongoing political polarization continue to create uncertainties and surprises that companies will need to prepare for and address.

More than two-thirds of organizations surveyed by the American Institute of Certified Public Accountants (“AICPA”) noted that perceived risk volumes and complexities remain elevated as companies across all sectors continue to deal with the litany of risks noted above. Surveyed organizations also recognized a “need for real change in how organizations govern business continuity and crisis management” in light of growing pressures from stakeholders for more disclosure about risks and heightened demands on management and boards to enhance effective risk management and preparedness for unexpected risk events. The World Economic Forum’s Global Risks Report 2022 highlighted the economic and societal ramifications of the Covid pandemic, noting that domestic and global fragmentation may worsen the pandemic’s impacts and complicate the coordination needed to tackle the challenges ahead.


A Primer on DAOs

Gail Weinstein is senior counsel, and Steven Lofchie and Jason Schwartz are partners at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Lofchie, Mr. Schwartz, Ashar Qureshi, and Amir R. Ghavi.

In Colonial times, there were “joint stock corporations,” then came our modern-day corporations, then “limited liability companies” (LLCs). Now there are DAOs—“decentralized autonomous organizations.”

DAOs (pronounced “Dows”) are a new kind of entity, regarded by their enthusiasts not as “companies” at all but as collections of individuals organized around the decentralization, autonomous functioning, transparency, and bottom-up principles that characterize the digital universe. DAOs have been created for varied purposes, both charitable and profit-making. Although most have been focused on cyber-related projects, their presence has been expanding beyond the cyber realm. For example, “SPADs”—which are SPACs (special purpose acquisition vehicles) that are DAOs—have emerged to engage in the acquisition of physical target companies. Some investors, dubbing DAOs “the new LLCs,” expect that they will become a significant form of business entity in the very near-term. Indeed, DAOs have experienced explosive growth in the past couple of years.

At the same time, DAOs face significant challenges and present significant risks. While many DAOs have been successful in raising large amounts of money in short periods of time, most (at least those formed for non-crypto-related purposes) have had a notable lack of success in achieving the missions for which the funds were raised. Further, the technological infrastructure is complicated and the legal structures can be cumbersome. Most significant are the risks presented by continued legal uncertainty (with respect to liability issues; regulatory uncertainty (including treatment under the securities, tax, antitrust and insolvency laws); cryptocurrency price fluctuations; cybersecurity breaches; and still-nascent and varied industry customs and practices.)

Thus, it remains unclear whether, how, and to what extent DAOs might displace traditional organizational structures. But they represent an increasingly popular and potentially transformational business idea, rooted in the mindset and methods of modern times—making them worthy of attention as they evolve.


CEO Political Leanings and Store-Level Economic Activity during COVID-19 Crisis: Effects on Shareholder Value and Public Health

John Bizjak is the Robert and Maria Lowdon Chair in Finance and Professor of Finance at Texas Christian University Neeley School of Business. This post is based on a recent paper, forthcoming in the Journal of Finance, by Prof. Bizjak; Swaminathan Kalpathy, Associate Professor of Finance; Vassil Mihov, Associate Professor and Beasley Fellow in Finance; and Jue Ren, Assistant Professor of Finance, all at Texas Christian University Neeley School of Business.

The costs and benefits of national, state, and local policies intended to inhibit the transmission of COVID-19 and protect public health are the subject of an ongoing debate in the U.S. At the heart of this debate is the trade-off between the benefits of opening up an economy and the potential risks to public health. In particular, social distancing and other policies that limit the spread of COVID-19 (e.g., wearing masks, travel restrictions, limiting number of customers in a store) can also reduce economic activity.

Evidence from academic studies and surveys indicates that political and cultural beliefs are associated with individual attitudes towards both COVID-19 and policies intended to limit virus transmission. Individuals identifying themselves as Democrats are more likely to adopt stricter social distancing measures compared to those identifying themselves as Republicans. Such attitudes and beliefs about the pandemic and the economic costs and benefits of social distancing are likely to extend to CEOs and other firm executives. Restrictive policies that aim to protect the health of store employees and customers can impose a burden on a firm and its customers, reducing store visits. Conversely, lenient policies that aim to boost store traffic can provide a channel for virus transmission. We note that differences in ideology do not mean that Republicans solely prioritize the economic benefits of opening the economy over the potential public health risks, or that Democrats are unaware that restricting commerce to provide public health benefits can have detrimental effects on the economy. Political leanings, however, are likely to tip the scale in how political ideology affects prioritizing the potential trade-offs.

In our paper, CEO Political Leanings and Store-Level Economic Activity during the COVID-19 Crisis: Effects on Shareholder Value and Public Health, (Journal of Finance, October 2022), we provide evidence of a trade-off between firm-level economic activity and public health concerns at the onset of the COVID-19 pandemic. We show that CEO political leanings affect this trade-off.


Weekly Roundup: September 9-15, 2022

More from:

This roundup contains a collection of the posts published on the Forum during the week of September 9-15, 2022

Speech by Chair Gensler on Kennedy and Crypto

Proposed Additional Amendments to Form PF

NYSE’s Proposed Relaxed Pricing Limits for Primary Direct Listings

Enhanced ESG Disclosures for Investment Funds and Advisers: A Comment from BlackRock

Deregulation and Board Policies: Evidence from Performance Measures Used in Bank CEO Turnover Decisions

About the SEC’s Climate Proposal

Cybersecurity + ESG for the Global Capital Markets

Cybersecurity + ESG for the Global Capital Markets

Jonathan R. Everhart is Chairman, CEO & Chief Investment Officer of Global ReEnergy Holdings. This post is based on Global ReEnergy Holdings memorandum by Dr. Everhart.

Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) by Lucian A. Bebchuk and Roberto Tallarita; Does Enlightened Shareholder Value Add Value? (discussed on the Forum here) and Stakeholder Capitalism in the Time of COVID (discussed on the Forum here), both by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita; Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock (discussed on the Forum here) by Leo E. Strine, Jr.; and Corporate Purpose and Corporate Competition (discussed on the Forum here) by Mark J. Roe.


This policy brief discusses cybersecurity from the corporate governance standpoint and illustrates how Nasdaq can implement cybersecurity into its ESG Reporting Guide, which is used by many public and private companies globally. The intersection of a company’s cybersecurity and ESG is a new corporate governance model. Cybersecurity has become a prevalent issue, specifically in the context of the digital economy, as corporate stakeholders require cyberattacks and security breaches to be proactively measured and mitigated in governing enterprise-wide risk management. Additionally, cybersecurity has gained wider attention due to increasingly impactful data breaches (i.e., SolarWinds) and the shift to remote working environments. As companies prioritize ESG, the inclusion of cybersecurity into their ESG governance framework is critical to manage the risks posed by cybersecurity to their ESG efforts. Nasdaq’s ESG Reporting Guide is a leading standard within the global capital markets for companies implementing ESG policies and metrics. This policy brief provides a use case demonstrating the implementation of the National Institute of Standards and Technology’s (NIST) Cybersecurity Framework into the Nasdaq ESG Reporting Guide. This can aid in encouraging more enhanced cybersecurity governance and improvements for the global capital markets.



Since the inception of ESG practices, cybersecurity has not been considered a key component of ESG. However, with the increase in high-profile data breaches, the acceleration of the global digital economy, and the shift to remote working environments, cybersecurity has rapidly become integral to ESG. Leading institutions, like JPMorgan, suggest that considering cybersecurity as an ESG metric is a relatively new model, however all evidence points to continued interest of this new model by organizational stakeholders across the board. [1] For instance, a 2019 survey by RBC Asset Management on investing concluded that 67% of investor respondents from the U.S., Europe, Asia, and Canada ranked cybersecurity as a top concern. [2] Core cybersecurity spending reached $68 billion in 2020, consisting of major spending in infrastructure protection, network security equipment, integrated risk management, and application security. [1] A Bloomberg report estimates cybersecurity spending to surpass $200 billion annually by 2024. [3] Given the rising importance of cybersecurity to a company’s operational and financial performance, it has become a key ESG issue and should be implemented within a company’s ESG practices.


Indemnity and Insurance: How Directors and Officers Can Enhance Their Protections

Jacquelyn Burke is special counsel and Rachel Katz is an associate at Cooley LLP. This post is based on their Cooley memorandum.

Whether they are new executive leaders or longtime members of a corporate board, directors and officers should be considering two prongs of protection—a robust insurance program and a tailored indemnification agreement.

Directors and officers can face significant personal exposure whenever their company is involved in a dispute or investigation. For example, for the past 10+ years, stockholder litigation has accompanied 80% to 90% of public M&A deals, in which stockholders assert breach of fiduciary duty claims or disclosure claims. Ongoing market volatility and increased regulatory efforts add to the potential for exposure. Prudent directors and officers—and any funds that place them on boards or in leadership positions—should avail themselves of all available legal protections in charter provisions, D&O insurance and indemnification agreements individualized to their needs.

In fact, looking to the company for indemnification vis-à-vis its charter provisions and indemnification agreements is generally the first line of defense. As an initial point, individualized indemnification agreements offer several advantages over any indemnification provisions in organizational documents, as outlined below.

Easier enforcement

Indemnification agreements may be more easily enforced by directors and officers because they are bilateral contracts reflecting bargained-for consideration in the form of an individual’s agreement to accept or continue service with the company—and cannot be amended without the directors’ and officers’ consent.


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