Monthly Archives: April 2024

Action Items for Boards: Where Directors and C-Suite Leaders Align and Diverge

Frank Kurre is a Managing Director at Protiviti, Mark Rogers is Founder and CEO at BoardProspects, and Michael Tae is Co-President at Broadridge Investor Communication Solutions. This post is based on their Protiviti memorandum.

The relationship between the board and the management team is vital to the success of any company or organization, and like every relationship, there are areas of strong alignment, as well as points of divergence.

This is a principle well understood in the corporate governance community, but as longtime advisers to boards and management teams, our organizations (Protiviti, Broadridge and BoardProspects) sought to quantify these alignments and disagreements.

Based on our survey of more than 1,000 directors and C-level executives, respondents reported a meaningful perception gap between how the Board views its performance and risk preparedness and how management teams view these same critical areas. Taken together, the areas of agreement and the points of difference provide reminders and insights on how boards and the C-suite can accomplish more together.


Against Contractual Formalism in Shareholder Oppression Law

Benjamin Means is a Professor of Law and the John T. Campbell Chair in Business and Professional Ethics at the University of South Carolina School of Law, and Douglas K. Moll is the Beirne, Maynard & Parsons, L.L.P. Professor of Law at the University of Houston Law Center. This post is based on their article forthcoming in the UC Davis Law Review.

In a closely held corporation, there are few shareholders, the stock is not publicly traded, and, typically, the principal shareholders take an active role in management. Without control rights or exit rights, however, minority shareholders are inherently vulnerable to mistreatment. The majority elects the board of directors, and the board calls the shots. Taken together, the minority’s lack of control and lack of liquidity empower majority shareholders to freeze out the minority owners from any return on their investment. Compounding this unfair treatment, the majority may then offer to repurchase the minority’s stock at pennies on the dollar, knowing that the minority has no choice but to capitulate.


Data in the Driver’s Seat: What Boards Need to Know about Data Governance

Beth George is a Partner, Christine Lyon is a Partner and Global Co-Head of Data Privacy and Security, and Pam Marcogliese is Head of US Transactions at Freshfields Bruckhaus Deringer LLP. This post is based on a Freshfields memorandum by Ms. George, Ms. Lyon, Ms. Marcogliese, Elizabeth Bieber, Nomi Conway, and Rachel Johnson.

Artificial intelligence (AI) – and particularly generative AI – has accelerated the race toward ever more innovative data-driven products and services, and sharpened focus on the ever-growing importance of data. As the value of data increases, legislators, regulators, and enforcement bodies are jockeying for position as referees of AI and data protection. The result is an expanding body of laws, regulation, guidance, and enforcement that create new obligations for companies about how they collect and use data, protect consumer rights, secure their systems, and develop and deploy data-driven technologies. Companies also may find themselves facing pointed and wide-ranging questions from regulators, the media, customers, employees, suppliers, and shareholders about their data-related practices.


UK Takeover Panel Proposes Narrowing the Scope of Companies Subject to the Takeover Code

Bruce Embley and Simon Toms are Partners and Craig Kelly is a Counsel at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on a Skadden memorandum by Mr. Embley, Mr. Toms, Mr. Kelly and George Knighton.

On 24 April 2024, the UK Takeover Panel (the Panel) published Public Consultation Paper 2024/1 (the PCP), which proposes a significant change to the applicability of the UK Takeover Code (the Code), by narrowing the scope of companies to which the Code applies.

The amendments proposed by the PCP would, if adopted, result in a significantly reduced number of companies subject to the Code and impact those that are incorporated in the UK but listed on the NYSE or NASDAQ.

For or against? The year in shareholder resolutions—2023

Donna F. Anderson is Global Head of Corporate Governance and Jocelyn S. Brown is Head of Governance for EMEA and Asia-Pacific at T. Rowe Price. This post is based on their T. Rowe Price memorandum.

This is the fourth year that we have published analysis of our voting results on shareholder resolutions on environmental, social, and political topics.[1] Since the 2021 proxy voting season, when these resolutions earned unusually high support, we have observed a bifurcation among proponents of these resolutions, particularly in the U.S. and Canada. Many resolutions are still put forward under a traditional framework of advocating for actions that could increase the value of the corporation or reduce the risks it faces. However, a new approach has taken hold in these markets that we believe is not tethered to value creation for shareholders. We explore the effects of this bifurcation in this year’s report.


Introduction to SEC v. Panuwat: Understanding “Shadow” Insider Trading

J.W. Verret is an Associate Professor of Law at George Mason University and a Counsel at Lawrence Law, and Greg Lawrence is a Partner at Lawrence Law. This post is based on their recent paper.

In the groundbreaking case SEC v. Panuwat, the Securities and Exchange Commission (SEC) successfully pioneered a legal theory referred to as “shadow” insider trading. This concept extends traditional insider trading paradigms to situations where an individual, privy to material non-public information (MNPI) regarding one company (Company A), capitalizes on that knowledge to trade securities in another company (Company B). The facts of the case against Matthew Panuwat, a former executive at Medivation, illuminate this novel application of the law.

According to the SEC’s complaint, Panuwat, an employee of the pharmaceutical company Medivation, became aware that Medivation would soon be bought out. Just a few minutes after learning that information, Panuwat commenced purchasing out-of-the-money, short-term call options in another company, Incyte Corp. The SEC argued that Incyte was a closely comparable company to Medivation, and therefore, these trades in Incyte constitute illegal insider trading.


Climate Action 100+ Departures Put Proxy Voting in the Spotlight

Lindsey Stewart is Director of Investment Stewardship Research at Morningstar, Inc. This post is based on a Morningstar memorandum by Mr. Stewart and River Meng.

Key Takeaways

Manager Exits Grab Headlines Ahead of Proxy Season 

  • Five US asset managers recently decided to exit or amend their participation in the Climate Action 100+ engagement initiative. The initiative has faced accusations of collusive behavior, which it denies.
  • Invesco, JPMorgan, Pimco, and State Street have left the initiative. BlackRock has restricted its participation to its non-US business.
  • The five exited or amended signatories’ support for 20 climate-related resolutions flagged by CA100+ averaged 45%, with a range of 10% to 95%.

Proxy-Voting Records Show No Evidence of Collusion

  • Proxy-voting records for the 20 flagged resolutions in 2023 suggest a wide range of voting approaches among CA100+ signatories, not collusion.
  • The 50 CA100+ signatories we reviewed supported an average 76% of the resolutions. Support by 10 nonsignatories averaged 27%.
  • The 35 asset manager signatories supported an average 74% of the resolutions, ranging from 10% to 100%. Average support by five nonsignatory asset managers in the US stood much lower, at 11%.

Further Evidence of Managers’ US-Europe Divide 

  • The average voting profile of the five exited or amended signatories is very similar to that of other US managers. The 20 US managers we reviewed supported an average 48% of the 20 resolutions.
  • In contrast, 20 European managers we reviewed supported an average 85% of the 20 resolutions.
  • Twenty public pension asset owners in the US and Canada averaged 71% support for the proposals. Even among five nonsignatory asset owners, only two supported less than 60% of the 20 resolutions.


That Starbucks DEI Case Doesn’t Stand for What You Think It Does

Scott Shepard is General Counsel and Director, Stefan Padfield is Deputy Director, and Ethan Peck is an Associate of the Free Enterprise Project (FEP) at The National Center of Public Policy Research (NCPPR). This post was prepared for the Forum by Mr. Shepard, Mr. Padfield, and Mr. Peck.

Shareholders have many reasons to be concerned about the embrace of DEI by the corporations they are invested in. One can draw a direct line from corporate DEI commitments to the staggering losses of Disney, Target, and Bud Light this past summer, as well as the $26 million reverse discrimination” judgment levied against Starbucks this past year. And there is reason to believe the financial losses attributable to corporate commitments to DEI will only get worse before they get better, because many of the relevant corporate decision-makers appear zealously committed to discriminating on the basis of race and pushing radical gender ideology regardless of the legal and financial risk, while the growing backlash against this radicalism will ensure more cases are filed and more boycotts are implemented. Simply put, the true believers” will continue to push their radical neo-racism and biology-defying and family-destroying transgenderism until they are forced to stop.


The CSDDD: How the Phoenix Can Rise from the Ashes

Robert G. Eccles is a Visiting Professor of Management Practice at Saïd Business School; Richard Gardiner is EU Public Policy Lead, and Andrea Webster is Financial System Transformation Lead at World Benchmarking Alliance. This post was prepared for the Forum by Professor Eccles, Mr. Gardiner, and Ms. Webster.

There was no shortage of disappointment and discourse from all sides during the recent negotiations on the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). Opinions were plentiful, diverse, passionate, and the gloves certainly came off in the final round.

The debate played out amongst ourselves, where on February 5, 2024  one of us (Eccles, a Democrat) waded into the debate with a piece with Dan Crowley (his Republican friend) taking a critical view of CSDDD. It received a number or comments when it was posted on LinkedIn; far more negative ones than positive. Another one of us (Webster, a good friend of Bob’s) bitingly wrote that ‘I think you can do better than this” and “your comment about extraterritorial reach into the US made me snort my cup of tea…the irony.”


Weekly Roundup: April 19-25, 2024

More from:

This roundup contains a collection of the posts published on the Forum during the week of April 19-25, 2024

The Hidden Logic of Shareholder Democracy

The Case Against the SEC’s Final Climate Rules Begins in Earnest (and What It Means)

Governance Matters: The Proof Is in the Proxy

Taxation and Corporate Governance

Q1 2024 Review of Shareholder Activism

Alternative Data – A COSO perspective

The Gist of Tornetta

U.S. Supreme Court Rules on Liability for Item 303 Omissions in Shareholder Suits

Environmental & Social Policy Issues in the 2024 U.S. Proxy Season

Issuers see former directors take on activist role

Unicorn Shareholder Suits

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