Yearly Archives: 2024

Weekly Roundup: October 25-31, 2024

Posted by the Harvard Law School Forum on Corporate Governance, on
Friday, November 1, 2024

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This roundup contains a collection of the posts published on the Forum during the week of October 25-31, 2024

Why Boards are Focused on Human Capital Governance and Risk

Posted by John M. Bremen, Kenneth Kuk, and Don Delves, Willis Towers Watson, on Friday, October 25, 2024
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2024 U.S. Board Index

Posted by Julie Daum and Laurel McCarthy, Spencer Stuart, on Saturday, October 26, 2024
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2024 ESG + Incentives Report

Posted by John Borneman, Matt Mazzoni, and Mira Yoo, Semler Brossy Consulting Group LLC, on Sunday, October 27, 2024
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Complying with California Climate Disclosure Legislation

Posted by Michael Littenberg, Marc Rotter, and Peter Witschi, Ropes & Gray LLP, on Monday, October 28, 2024
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Failed Say on Pay: How Do Companies Course Correct after a ‘No’ Vote?

Posted by David F. Larcker (Stanford University), Lucia Song (Equilar, Inc), and Courtney Yu (Equilar, Inc), on Monday, October 28, 2024
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Post-Doctoral Corporate Governance Fellowships For Economics, Finance, and Accounting Researchers

Posted by Harvard Law School Forum on Corporate Governance, on Monday, October 28, 2024
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Key Takeaways from Recent SEC Cybersecurity Enforcement Actions

Posted by Jennifer Lee, Shoba Pillay, and H. Kurt von Moltke, Jenner & Block LLP, on Tuesday, October 29, 2024
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How Can Boards of Directors Improve Their Effectiveness?

Posted by Yuki Sakasai (IESE Business School), Gaizka Ormazabal (IESE Business School), and Jordi Canals (IESE Business School), on Tuesday, October 29, 2024
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Proxy Season 2024: Key Trends & Developments in the United States

Posted by Brianna Castro, Krishna Shah, and Aaron Wendt, Glass, Lewis & Co, on Tuesday, October 29, 2024
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Important Whistleblower Protection and AI Risk Management Updates

Posted by Ben Kingsley, Jen Hitchcock, and Ran Ben-Tzur, Fenwick & West LLP, on Wednesday, October 30, 2024
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The Market Value of Partisan Balance

Posted by Brian D. Feinstein (The Wharton School) and Daniel J. Hemel (NYU School of Law), on Wednesday, October 30, 2024
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CEO and Executive Compensation Practices in the Russell 3000 and S&P 500

Posted by Dana Etra (FW Cook), Paul Hodgson (ESGAUGE), and Matteo Tonello (The Conference Board, Inc.), on Wednesday, October 30, 2024
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Partnering Between Established Companies and Startups

Posted by Joe Pennell, Scott F. Young, and Jon McPherson, Mayer Brown LLP, on Thursday, October 31, 2024
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Barking without Biting: How Corwin did not Change M&A

Posted by Matteo Gatti (Rutgers Law School) and Martin Gelter (Fordham University School of Law), on Thursday, October 31, 2024
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Corporate Board of Directors: Latest Findings from Pulse Survey

Posted by Ray Garcia, Paul DeNicola, and Mohini Singh, PricewaterhouseCoopers LLP, on Thursday, October 31, 2024
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Corporate Board of Directors: Latest Findings from Pulse Survey

Posted by Ray Garcia, Paul DeNicola, and Mohini Singh, PricewaterhouseCoopers LLP, on
Thursday, October 31, 2024
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Ray Garcia is a Leader, Paul DeNicola is a Principal, and Mohini Singh is a Director at PricewaterhouseCoopers LLP. This post is based on their PwC memorandum.

Directors see election and economic headwinds on the horizon

Directors are assessing the November elections and what different results would mean. According to our October 2024 Pulse Survey, 76% of directors say the US regulatory environment poses a moderate or serious risk. And regardless of who wins the election, 81% agree or strongly agree there will be more regulation.

Directors also have concerns about the health of the economy, and two thirds (66%) say there will be a recession in the next six months. Eighty-four percent say changing operational priorities to prepare for such an event is either somewhat of a challenge or a significant challenge. Board members should prioritize agile decision-making to help their companies adapt quickly to potential regulatory changes and economic shifts after the election.

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Barking without Biting: How Corwin did not Change M&A

Posted by Matteo Gatti (Rutgers Law School) and Martin Gelter (Fordham University School of Law), on
Thursday, October 31, 2024
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Matteo Gatti is a Professor of Law at Rutgers Law School, and Martin Gelter is a Professor of Law at Fordham University School of Law. This post is based on their recent paper and is part of the Delaware law series; links to other posts in the series are available here.

Our working paper, Barking without Biting: How Corwin Did Not Change M&A, explores the influence of two Delaware Supreme Court decisions—C & J Energy (2014) and Corwin (2015)—on deal practice. The decisions have faced criticism for potentially curbing directors’ fiduciary duties by reducing the ability of plaintiffs to seek remedies for breach of fiduciary duties in M&A transactions. Our study examines the effect of these decisions on M&A practices, including termination fees, market checks, and go-shop provisions, finding that their actual impact on shareholder protections and investor returns has been limited.

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Partnering Between Established Companies and Startups

Posted by Joe Pennell, Scott F. Young, and Jon McPherson, Mayer Brown LLP, on
Thursday, October 31, 2024
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Joe Pennell and Scott F. Young are Partners and Jon McPherson is an Associate at Mayer Brown LLP. This post is on their Mayer Brown memorandum.

Well-established companies thrive by accumulating capabilities, including by partnering with start-up companies. In those partnering arrangements, the established company often has greater capabilities, market access, technology capital and management skill in all areas but one. But, the startup is among the best in the world at that one area. That one area may, for example, be an emerging technology, an innovative product or a loyal customer base. The deal, then, is for the established company and the startup to share, in some ways, the risks and rewards of attempting to grow a business in the startup’s area using the established company’s capabilities.

In this chapter, we provide suggestions for both established companies and startups to facilitate these deals. These suggestions include, for the established company, understanding the value proposition of the deal, using approval processes to the established company’s advantage, and using contract provisions to mitigate the risk of a startup’s financial failure. For the startup, these suggestions include establishing clear objectives and communication (including around capability gaps), educating the established company about the startup’s characteristics and being efficient in contract negotiation and drafting.

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CEO and Executive Compensation Practices in the Russell 3000 and S&P 500

Posted by Dana Etra (FW Cook), Paul Hodgson (ESGAUGE), and Matteo Tonello (The Conference Board, Inc.), on
Wednesday, October 30, 2024
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Dana Etra is Managing Director and Head of the Boston office at FW Cook, Paul Hodgson is Senior Advisor at ESGAUGE, and Matteo Tonello is Head of Benchmarking and Analytics at The Conference Board, Inc. This post is based on their FW Cook, ESGAUGE, and The Conference Board memorandum.

While boards need to prepare for increases in total executive compensation to ensure their companies remain competitive in the market for top leadership talent, they should also be mindful of stakeholder perception and their companies’ own long-term goals when designing compensation packages. This report documents trends and developments in senior management compensation at companies in the Russell 3000 and S&P 500 indexes.

Key Insights

  • Despite significant market volatility, 2023 and early 2024 saw positive shareholder returns, reflecting a resilience that is likely to extend into 2025 and may lead to further increases in total executive compensation.
  • Increases in stock awards significantly outpace those of non-equity incentive plans, potentially overemphasizing long-term equity growth at the expense of short-term corporate goals.
  • Although stock options now only represent on average 10% of total CEO compensation, compensation committees need to be vigilant that awards do not lead to excessive risktaking or other opportunistic behaviors meant to temporarily boost their value at the time of vesting.
  • Developing a more structured and transparent approach to allocating CEO perquisites can help mitigate potential reputational risks and align executive compensation with long-term shareholder value.

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The Market Value of Partisan Balance

Posted by Brian D. Feinstein (The Wharton School) and Daniel J. Hemel (NYU School of Law), on
Wednesday, October 30, 2024
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Brian D. Feinstein is an Assistant Professor of Legal Studies at The Wharton School of the University of Pennsylvania, and Daniel J. Hemel is a Professor of Law at NYU School of Law. This post is based on their recent article forthcoming in the Northwestern University Law Review, and is part of the Delaware law series; links to other posts in the series are available here.

What accounts for Delaware’s remarkable dominance in the market for corporate charters? For some influential observers, part of the answer lies in the state’s unique commitment to politically balanced courts. Alone among U.S. states, Delaware requires that only a bare majority of judges on nearly all its state courts hail from the same political party (the “bare-majority limitation”). It also requires the remaining seats on several of its most important courts—including its supreme court and court of chancery—to be filled by members of the other major party (the “other-major-party reservation”). Both partisan balance requirements are enshrined in the Delaware Constitution (although since last year, the state has taken the position that the other-major-party reservation is unenforceable). In practice, these requirements ensure that a roughly equal number of Democratic and Republican judges sit on the state’s courts.

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Important Whistleblower Protection and AI Risk Management Updates

Posted by Ben Kingsley, Jen Hitchcock, and Ran Ben-Tzur, Fenwick & West LLP, on
Wednesday, October 30, 2024
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Ben Kingsley, Jen Hitchcock, and Ran Ben-Tzu are Partners at Fenwick & West LLP. This post is based on a Fenwick memorandum by Mr. Kingsley, Ms. Hitchcock, Mr. Ben-Tzur, Mike Dicke, Chris Steskal, and Dave Feder.

What You Need To Know

  • In September 2024, the United States Department of Justice (DOJ) announced its updated Evaluation of Corporate Compliance Programs guidance, which is the roadmap that Criminal Division prosecutors use to evaluate a company’s compliance program.
  • The updated guidance underscores two primary DOJ priorities for corporate compliance: (1) how companies are navigating risks relating to artificial intelligence and other “new and emerging technologies,” and (2) how companies are encouraging and protecting corporate whistleblowers.
  • There are multiple updates across different areas in the guidance that corporate compliance professionals should review.

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Proxy Season 2024: Key Trends & Developments in the United States

Posted by Brianna Castro, Krishna Shah, and Aaron Wendt, Glass, Lewis & Co, on
Tuesday, October 29, 2024
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Brianna Castro is a Senior Director of U.S. Research, Krishna Shah is the Director of North American Executive Compensation Research, and Aaron Wendt is the Director of U.S. Governance Policy at Glass, Lewis & Co. This post is based on a Glass Lewis memorandum by Ms. Castro, Ms. Shah, Mr. Wendt, Courteney Keatinge, Joah Clements, and Sarah Wenger.

Despite some high-profile meetings and controversies, it appears that U.S. shareholders were generally more supportive across the board in the 2024 proxy season, with significant declines in the number of failed directors and say-on-pay proposals, and an increase in the number of majority-supported shareholder proposals. compared to 2023.

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How Can Boards of Directors Improve Their Effectiveness?

Posted by Yuki Sakasai (IESE Business School), Gaizka Ormazabal (IESE Business School), and Jordi Canals (IESE Business School), on
Tuesday, October 29, 2024
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Yuki Sakasai is a Senior Research Associate, Gaizka Ormazabal is a Professor of Accounting and Control, and Jordi Canals is a Professor of Strategic Management and the Fundación IESE Chair in Corporate Governance, all at IESE Business School. This post is based on their recent paper. 

1. Introduction [1]

The business landscape is experiencing large disruptions, including climate change, energy transition, artificial intelligence and geopolitical tensions. Companies need to adapt quickly and effectively to these disruptions to survive. Boards of directors have the duty to help their companies and work with the CEO and senior management to steer the company and contribute to its long-term development and value creation in a sustainable manner.

In this new context, it is important to understand how the mission and functions of the board of directors are changing. In this report, we present the outcome of a recent comprehensive survey [2] of board directors on how they see these four critical areas with a large impact on the future of their firms: corporate purpose and culture; boards in action: board competencies and dynamics; CEO leadership development and succession plans; and the board in corporate strategy and geopolitics. By asking board directors their views on these areas, we can obtain qualitative answers regarding some of the critical functions and tasks of boards of directors in the current disruptive context. Their answers also provide indicators of their boards’ awareness and readiness—as they are perceived by board directors—to help steer the company toward its sustainable long-term development.

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Key Takeaways from Recent SEC Cybersecurity Enforcement Actions

Posted by Jennifer Lee, Shoba Pillay, and H. Kurt von Moltke, Jenner & Block LLP, on
Tuesday, October 29, 2024
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Jennifer Lee, Shoba Pillay, and H. Kurt von Moltke are Partners at Jenner & Block LLP. This post is based on a Jenner & Block memorandum by Ms. Lee, Ms. Pillay, Mr. Moltke, Charles Riely and Zoë Higgins Reinstein.

The SEC recently announced disclosure settlements against four current and formerly public companies impacted by the highly publicized compromise of SolarWinds’ signature network monitoring software, Orion. The settlements generally found that these companies used SolarWinds’ Orion software, learned that the threat actor behind the SolarWinds Orion compromise had accessed their systems, and subsequently minimized the cybersecurity incident in their public disclosures. This client alert analyzes the cases and provides key takeaways for public companies.

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