Yearly Archives: 2024

SEC Climate Disclosure Rules Spark Flurry of Litigation

Sarah Levine is a Partner, Howard Sidman is the Deputy Chair of ESG, and Rose Mooney is an Associate at Jones Day. This post is based on a Jones Day memorandum by Ms. Levine, Mr. Sidman, Ms. Mooney, and Brett Shumate.

On March 6, 2024, the United States Securities and Exchange Commission (“SEC”) adopted the much anticipated climate-related disclosure rules, two years after publishing the proposed rules. Immediately following the adoption of the rules, multiple parties filed petitions for review in six different appellate courts: the Second, Fifth, Sixth, Eighth, Eleventh, and D.C. Circuits. A total of 25 states filed petitions across four of those circuits (the Fifth, Sixth, Eighth, and Eleventh Circuits). The American Free Exercise Chamber of Commerce joined the state-led suit in the Eighth Circuit. In addition, the U.S. Chamber of Commerce and two affiliated Texas business groups, two energy companies, and two energy producer trade associations filed three additional petitions in the Fifth Circuit.

Environmental groups also filed suit: the Sierra Club filed in the D.C. Circuit; and the Natural Resources Defense Council filed in the Second Circuit. The latter two petitioners largely support the SEC’s authority to issue the rules but will likely argue the SEC should have gone further. These groups appear to have filed their petitions in courts that may be more deferential to the SEC than the circuits chosen by the other petitioners.

READ MORE »

Recent Updates in Delaware Disclosure Law

Arthur R. Bookout and Edward B. Micheletti are Partners at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on their Skadden memorandum and is part of the Delaware law series; links to other posts in the series are available here.

The Delaware Supreme Court recently issued two opinions weighing in on the scope of disclosures involving board advisors in connection with M&A transactions that warrant close attention. In both rulings — each written en banc — the Delaware Supreme Court reversed the lower courts’ dismissals of all claims because (among other reasons) certain material information about the target companies’ advisors was not disclosed. The Delaware Court of Chancery recently cited both rulings in denying motions to dismiss disclosure claims against directors and aiding and abetting claims against financial advisors. Companies and financial advisors alike should be aware of the court’s rulings and changes to Delaware law, as they will undoubtably have an impact on disclosures with regard to advisors’ prior and current engagements, as well as any proprietary equity holdings of merger parties.

READ MORE »

SEC Expands Scope of Internal Accounting Controls to Encompass Companies’ Cybersecurity Practices

Sophie Rohnke is Of Counsel, Sarah Pongrace is an Associate Attorney, and Mark Schonfeld is a Partner at Gibson, Dunn & Crutcher LLP. This post is based on their Gibson Dunn memorandum.

In another extension of the internal accounting controls provisions of the securities laws, this week the Securities and Exchange Commission (the “Commission” or “SEC”) announced a settled enforcement action with a public company victimized by a ransomware attack (the “Company”) for violations of Section 13(b)(2)(B) of the Exchange Act and Exchange Rule 13a-15(a). According to the Commission’s order, the Company’s response to the late-2021 cyber incident showed that it had failed to (1) devise and maintain a sufficient “system of cybersecurity-related internal accounting controls” sufficient to provide reasonable assurances that access to its IT systems was only permitted with management’s authorization, in violation of Section 13(b)(2)(B); and (2) design effective disclosure controls and procedures for cybersecurity risks and incidents, in violation of Rule 13a-15(a). As part of the settlement, the Company agreed to pay a $2.125 million civil penalty, an amount which, according to the SEC’s announcement, took into account the Company’s “meaningful cooperation that helped expedite the staff’s investigation” and their voluntary adoption of “new cybersecurity technology and controls.”

READ MORE »

Minimum Viable Signal: Venture Funding, Social Movements, and Race

Matt Marx is the Bruce F. Failing, Sr. Chair in Entrepreneurship and Professor of Management & Organizations in the Charles H. Dyson School of Applied Economics and Management at Cornell SC Johnson College of Business, Qian Wang is a PhD Student at Cornell SC Johnson College of Business, and Emmanuel Yimfor is an Assistant Professor of Business at Columbia Business School. This post is based on their working paper.

On 25 May 2020, Minneapolis police officer Derek Chauvin placed his knee on the neck of George Floyd for 9.5 minutes. The ensuing Black Lives Matter (BLM) social movement spurred reflection not only regarding police brutality but also drew attention to the underrepresentation of Black entrepreneurs. Many investors tweeted their intention to fund Black-owned startups, though these public professions of support were met with skepticism. As Arlan Hamilton of Backstage Capital said, “You can’t jump out of the taxi at the end of the inclusion marathon and act like you’ve been running in it the whole time.”

Beyond rhetoric, did venture capitalists actually respond by investing in Black entrepreneurs? This question is challenging to answer, given the lack of data on the race of founders. We create a new database of founder race for all U.S.-based startups tracked by PitchBook from 2000-2023, fusing image-classification algorithms with manual review of over 150,000 founder photos and profiles. We perform the same classification for more than 30,000 investor profiles.

READ MORE »

Weekly Roundup: June 21-27, 2024


More from:

This roundup contains a collection of the posts published on the Forum during the week of June 21-27, 2024

Vice Capital


Court calls a halt to Exxon case against Arjuna


Delaware Court Denies Dismissal of Claims Based on Controller and Financial Advisor Conflicts




Climate Disclosure Update


The Chamber and NCPPR file brief challenging SEC climate disclosure rule


The Social Benefits of Control


ESG Engagements in 2024


SEC Targets AI Washing in Private Capital Markets


Publicly Traded Public Benefit Corporations: An Empirical Investigation


DEI Metrics in Executive Compensation


A Survey of Non-Independent Directors at S&P 500 Companies


Validating Valuation: How Statistical Learning Can Cabin Expert Discretion in Valuation Disputes


Measure of Leadership: CEOs and Directors on Navigating Change


Measure of Leadership: CEOs and Directors on Navigating Change

Jason Baumgarten is Global Board & CEO Practice Leader, Julie Daum is Board & CEO Practice Co-leader, North America, and George Anderson is Leader, Board Effectiveness Services, North America at Spencer Stuart. This post is based on a Spencer Stuart memorandum by Mr. Baumgarten, Ms. Daum, Mr. Anderson, Alice Au, Rowen Bainbridge, and Giovanna Galli.

At a glance

  • More than three-quarters of CEOs and board directors feel high levels of business uncertainty, and most see the risks accelerating. Notably, directors are far more likely to be very confident in their CEOs’ readiness than CEOs are in their board members to deal with the changing environment.
  • Business leaders are focusing on internal priorities – led by company culture and talent attraction and retention – while keeping a watchful eye on external disruptions.
  • Senior leaders want and need to hear from one another as they navigate this period but should also listen closely to their employees as there are disconnects on some key issues.

Geopolitical upheaval. Artificial intelligence (AI). Election uncertainty. These external forces are only adding to the challenges CEOs and boards face. We know from our work with these leaders how running an organization is only becoming more relentless and complex. But what if leaders could better understand what their peers are dealing with — and learn from their experience?

We speak every day with leaders around the world about their top concerns and how they are responding — whether that’s evolving how the top team works together, better leveraging board directors’ expertise or addressing cultural impediments to change. With our Measure of Leadership series, we’re expanding that ongoing dialogue so CEOs and board directors can hear from one another, at scale. We asked more than 2,000 CEOs and directors about a range of topics, including what keeps them up at night and how they are coping. We also surveyed more than 1,200 employees in the U.S. and U.K., comparing their responses and leaders’ views.

What did we find? Through both quantitative data and thousands of unfiltered responses, we learned that while the existential issues expected to consume them just a few months ago are on their minds, the world’s business leaders are most focused on issues they can more directly control: company culture, changing workforce dynamics and access to talent. Fewer than half of all leaders surveyed are prioritizing and addressing the disruptive emergence of generative AI, for example, while barely a quarter feel compelled to address geopolitical dynamics right now.

READ MORE »

Validating Valuation: How Statistical Learning Can Cabin Expert Discretion in Valuation Disputes

Andrew Baker is an Assistant Professor of Law at UC Berkeley School of Law, Jonah B. Gelbach is a Professor of Law at UC Berkeley School of Law, and Eric L. Talley is Isidor and Seville Sulzbacher Professor of Law at Columbia Law School. This post is based on their working paper.

Introduction

Financial valuation is a cornerstone of modern commercial litigation, influencing outcomes across substantive areas of legal dispute, from bankruptcy to tax and corporate law. However, its ubiquity comes with substantial challenges for the judiciary. Conventional approaches to valuation, including discounted cash flow, comparable company, and comparable transactions analyses, leave open substantial areas of discretion to be exploited by economic experts. In our article, we argue that these “expert degrees of freedom” generate inconsistent and overly subjective valuations, with expert reports regularly diverging by orders of magnitude, to the frequent frustration of generalist judges. Using Monte Carlo simulations and a case example, our paper demonstrates the benefits of using contemporary statistical learning techniques to increase the precision of financial valuation while reducing this variability and expert bias.

READ MORE »

A Survey of Non-Independent Directors at S&P 500 Companies

Alexander May is a Partner and Bill Erlain is an Associate at Jenner & Block LLP. This post is based on their Jenner & Block memorandum.

Board composition remains a critical issue for public companies as investors and other stakeholders evaluate the skills, qualifications, and background of directors. It is well-known that stock exchange rules generally only require that a company’s board contains a majority of independent directors, with the exception of controlled companies. However, after these bare requirements, a board has substantial latitude to select its nominees, including non-independent directors.

As companies consider director succession planning and meeting the expectations of investors and other stakeholders, a possible governance option is the use of non-independent directors, including “management” directors who are employed by the applicable company.  Management directors usually have oversight responsibilities via their employee roles and have key risk management functions and specific knowledge to help boards in carrying out their oversight duties.  With succession planning being a key governance concern, providing executive chairs and other management members access to the boardroom may allow for smoother transitions, and/or “level up” certain directors for further board service. However, management directors suffer from lack of stock exchange and proxy advisor independence, the inability to serve on key committees and the views of certain market participants that ownership/oversight should be separated from day-to-day management of a company.

READ MORE »

DEI Metrics in Executive Compensation

Paul Hodgson is a Senior Advisor at ESG data analytics firm ESGAUGE. This post relates to a report authored by Mr. Hodgson based on data published by The Conference Board and ESGAUGE.

The Supreme Court’s decision to side with Students for Fair Admission in Students for Fair Admissions v. Harvard, [1] which struck down the use of “affirmative action” in college admissions, caused concern among compensation committee members, compensation consultants and the executives and managers incentivized to enhance diversity, equity, and inclusion (DE&I) at their employers about the risk of litigation and activism associated with corporate DE&I programs and metrics.

While the decision only relates to the educational sector, corporate DE&I programs could be affected in several ways, including:

  •  Increased challenges to workplace DE&I programs.
  • Increased legislation against DE&I programs, especially from the Republican-led House and red states.
  • Increased litigation challenging corporate DE&I programs.
  • Increased challenges to diversity recruitment.

READ MORE »

Publicly Traded Public Benefit Corporations: An Empirical Investigation

Jens Dammann is the Ben H. and Kitty King Powell Chair in Business and Commercial Law at the University of Texas School of Law. This post is based on his recent article, forthcoming in the Stanford Journal of Law, Business & Finance.

Many corporations seek to persuade their investors, customers, and employees that they care not only about profits but also about corporate constituencies such as workers, communities, and the environment.

So-called public benefit corporations (“PBCs”) are at the forefront of this movement. A PBC’s charter must name a specific public benefit, such as protecting the environment or reducing poverty. Moreover, when making business decisions, a PBC’s directors must balance the goal of maximizing shareholder wealth with the specified public benefit and the interests of those affected by the PBC’s operations. In other words, the law explicitly dispenses with the principle of shareholder primacy and instead binds the PBC’s directors to a more complex set of goals.

READ MORE »

Page 38 of 78
1 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 78