Monthly Archives: April 2025

Court Upholds Legality of Poison Pills for Closed-End Funds but Limits Successive Plans

Posted by Eben P. Colby, Kevin T. Hardy, and Elizabeth R. Gonzalez-Sussman, Skadden, Arps, Slate, Meagher & Flom LLP, on
Wednesday, April 16, 2025
, , ,
More from: , , ,

Eben P. Colby, Kevin T. Hardy, and Elizabeth R. Gonzalez-Sussman are Partners at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on a Skadden memorandum by Mr. Colby, Mr. Hardy, Ms. Gonzalez-Sussman, Scott D. Musoff, Marley Ann Brumme, and Cameron Jordan.

On March 28, 2025, the U.S. District Court for the Southern District of New York (SDNY) held that it was legal under the Investment Company Act of 1940 (1940 Act) for a closed-end fund to use a shareholder rights plan (colloquially known as a “poison pill”) to fend off a hedge fund seeking to take control of the fund. However, the court disapproved of the use of successive plans if substantively the same, for the same purpose and adopted while a prior plan was still in effect.

The case, initiated by hedge fund Saba Capital Master Fund, Ltd. (Saba) in January 2024, challenged the adoption of a series of poison pills under Sections 18(d) and 23(b) of the 1940 Act. Skadden represented the target of Saba’s suit, ASA Gold and Precious Metals Ltd. (ASA), in the implementation of the rights plan and briefing its legality under the 1940 Act. [1]

The decision represents a significant development in the ongoing legal battle between closed-end funds and hedge funds, and validates the use of an important defense that can be employed by closed-end funds targeted by activists.

The court was clear that a shareholder rights plan, in and of itself, does not violate the 1940 Act, and endorsed the long-accepted principle that shareholder rights plans serve a “legitimate role” of providing a board with “an opportunity to consider alternatives” when faced with a hostile tender offer, creeping control or similar threat.

READ MORE »

From Opposition to Action: S&P 500 Company Responses to Unfavorable ISS Say on Pay Recommendations

Posted by Linda Pappas, Perla Cuevas, and Olivia Wright, Pay Governance LLC, on
Tuesday, April 15, 2025
, , ,
More from: , , ,

Linda Pappas is a Principal and Perla Cuevas and Olivia Wright are Consultants at Pay Governance LLC. This post is based on their Pay Governance memorandum.

In our previous Viewpoint, “Recap of the 2024 Say on Pay Season,” [1] we discussed the historically low rate of Institutional Shareholder Services (ISS) opposition to Say on Pay (SOP) proposals at S&P 500 companies in 2024. In our follow-up Viewpoint, “Record Low ISS S&P 500 Say on Pay Opposition: The Trends Behind the Decline,” [2] we reported that the general reduction of outlier CEO pay and improvement in compensation committee responsiveness to shareholder concerns likely contributed to reduced ISS SOP opposition. In continuation of our 2024 SOP Viewpoint series, we explore actions S&P 500 companies took in response to ISS SOP opposition and how these actions were received by ISS and shareholders. We also summarize key themes on which we anticipate proxy advisors and investors will focus in the 2025 SOP season.

READ MORE »

Staggered Board Shenanigans at Phillips 66

Posted by Jonathan Macey (Yale Law School), on
Tuesday, April 15, 2025
, , ,
More from:

Jonathan Macey is Sam Harris Professor of Corporate Law, Corporate Finance and Securities Law at Yale Law School and Professor in the Yale School of Management. This post is part of the Delaware law series; links to other posts in the series are available here.

Staggered terms for corporate directors, long a source of debate in corporate governance circles, have again moved from the wings to center stage thanks to a heated proxy contest launched by activist investor Elliott Investment Management L.P. for seats on the board of directors of oil giant Phillips 66. Funds managed by Elliott have a $2.5 billion stake in Phillips, giving it an ownership stake of about 5.7 percent of the company, and making it one of the company’s five biggest shareholders.

Phillips has gone to extraordinary lengths to use its staggered board to thwart shareholder democracy. Not content with a classified board of directors, with three director classes serving staggered three-year terms, it also is among the 9 percent of S&P 500 companies that require a supermajority shareholder vote to amend their charter so that they can join the mainstream of public companies and rid themselves of their classified board governance structure. This toxic combination of a staggered board and a supermajority-voting requirement to get rid of the staggered board has created a truly Orwellian problem for shareholders. Repeatedly in the recent past, in 2015, 2016, 2018, 2021, and 2023, shareholders have voted to amend the company’s charter to de-stagger the board. Most recently, in 2023, the proposal to jettison the staggered board received astonishing support, garnering 99 percent approval of the shares voting in that election. However, amending the corporate charter requires not merely the approval of the shares voting in a particular election, but approval of 80 percent of the outstanding shares. Unfortunately, even with 99 percent of shareholders approving, not enough shares voted to get the proposal past the required 80 percent threshold.

READ MORE »

Controller’s Breach of Fiduciary Duties Leads To Novel Remedy

Posted by Connor P. Wise and Alex J. Kaplan, Sidley Austin LLP, on
Tuesday, April 15, 2025
, , ,
More from: , ,

Connor P. Wise is a Law Clerk and Alex J. Kaplan is a Partner at Sidley Austin LLP. This post is based on their Sidley memorandum, and is part of the Delaware law series; links to other posts in the series are available here.

Vice Chancellor Laster’s opinion in In re Dura Medic Holdings, Inc. is a helpful reminder of potentially bespoke equitable remedies available for breaches of fiduciary duties. The case involved claims brought by a co-founder of Dura Medic, Inc. (“Dura Medic” or “Company”) against affiliates of Comvest, a private equity backer that acquired Dura Medic in 2018 through subsidiary affiliates. The claims focused in particular on Comvest’s subsequent extension of debt and equity financing to the Company without approval by disinterested and independent decisionmakers. Ultimately, the Delaware Court of Chancery held that these controller-interested transactions implicated the entire fairness standard, that Comvest failed to satisfy it (and therefore breached fiduciary duties as a controlling stockholder). This led the Court to hold that Comvest’s financings were equitably subordinated to the Seller Note.

READ MORE »

The Democratization of Investing: Expanding Prosperity in More Places, for More People

Posted by Larry Fink, BlackRock Inc., on
Monday, April 14, 2025
, , ,
More from: ,

Larry Fink is Founder, Chairman and CEO of BlackRock Inc. This post is based on Mr. Fink’s annual letter to investors.

I hear it from nearly every client, nearly every leader—nearly every person—I talk to: They’re more anxious about the economy than any time in recent memory. I understand why. But we have lived through moments like this before. And somehow, in the long run, we figure things out.

Humans are smart, resilient creatures, and we build systems that reflect our own image— systems that take the confusion around us, make sense of it, and produce surprisingly good outcomes. Computers handle complex data (and now language) on our behalf. Cities enable millions of people to live side by side, usually peacefully, mostly productively.

But of all the systems we’ve created, among the most powerful—and uniquely suited to moments like ours—began over 400 years ago. It’s the system we invented specifically to overcome contradictions like scarcity amid abundance, and anxiety amid prosperity.

We call this system the capital markets.

READ MORE »

Private Equity and Stockholder Agreements: Empirical Insights for the Moelis Debate

Posted by Gladriel Shobe (BYU Law School), Jarrod Shobe (BYU Law School), and William W. Clayton (BYU Law School), on
Monday, April 14, 2025
, , ,
More from: , ,

Gladriel Shobe, Jarrod Shobe, and William W. Clayton are Professors of Law at Brigham Young University Law School. This post is based on their recent article forthcoming in the Yale Journal on Regulation, and is part of the Delaware law series; links to other posts in the series are available here.

In 2024, the landmark Moelis opinion from the Delaware Court of Chancery invalidated certain contractual control provisions that allowed insider stockholders to override a board’s statutory role. This decision sparked intense debate over the ways in which insider stockholders should be allowed to control corporations and their boards of directors. The Delaware legislature quickly enacted Delaware Senate Bill 313 (S.B. 313) that created new section 122(18) of the DGCL, effectively overturning Moelis and fundamentally altering Delaware’s traditional board-centric governance model. Proponents claimed the legislation merely codified established market practice, while critics argued it overreacted to a single trial-level decision in ways that could harm public markets.

Both sides, however, lacked empirical data on how common such contractual control rights are, who holds them, and what actual “market practice” entails. Our recent empirical study of 1,362 IPOs from 2010-2021 provides essential context to this debate and a view on what 122(18) is likely to mean going forward. Although the drafters of S.B. 313 claimed they were aiming to validate only those contracts “common” in the market, our data reveal a mismatch between those claims, actual market practice, and the broad scope of the new statutory language.

READ MORE »

Chancery Finds Two 2-Year Non-Competes Unenforceable in Business Sale and Investment

Posted by Gail Weinstein, Philip Richter, and Steven Epstein, Fried, Frank, Harris, Shriver & Jacobson LLP, on
Monday, April 14, 2025
, , ,
More from: , , ,

Gail Weinstein is a Senior Counsel, Philip Richter is a Partner, and Steven Epstein is the Managing Partner, at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank memorandum by Ms. Weinstein, Mr. Richter, Mr. Epstein, Steven J. Steinman, Randi Lally, and Adam B. Cohen, and is part of the Delaware law series; links to other posts in the series are available here.

In Cleveland Integrity Services v. Byers (Feb. 28, 2025), the Court of Chancery held that a non-compete provision entered into in connection with the sale of an oil and gas pipeline inspection company was unenforceable as it was overbroad. The non-compete restricted the executive from competing with the company, anywhere in North America, for two years following termination of his employment with the company. The non-compete’s duration combined with its geographic scope was unreasonable, the court found, as it was “facially broader than necessary to protect [the company]’s U.S. business interests.” The court emphasized that, although the company may have had customers with operations or assets in Canada or Mexico, it “only service[d] such customers within the U.S.” The court stressed that: (i) the company’s business was “geographically rooted: its employees must physically see a pipeline to inspect it…” ; and (ii) while at the time of the sale of the company in 2013, the non-compete “may have been reasonable as a means to protect [the company’s] interest in expanding its services beyond the U.S. free from Defendants’ interference,” the company had not in fact expanded beyond the U.S. and had offered no evidence that it now planned to do so (thus, in 2025, at the time of enforcement of the provision, there was no evidence that the company had “a legitimate economic interest that was advanced by the geographic scope of the covenant”).

READ MORE »

How Boards Can Effectively Oversee AI to Drive Value and Responsible Use

Posted by Ray Garcia, Barbara Berlin, and Jennifer Kosar, PricewaterhouseCoopers, on
Sunday, April 13, 2025
, , ,
More from: , , ,

Ray Garcia is a Leader, Barbara Berlin is a Managing Director, and Jennifer Kosar is an AI Assurance Leader at PricewaterhouseCoopers LLP. This post is based on a PwC memorandum by Mr. Garcia, Ms. Berlin, Ms. Kosar, Rohan Sen, Calen Byers, and Steve Brown.

The state of AI has advanced at a faster pace than almost anyone had expected. The disruptive power of AI is now clear, and companies are actively looking to identify how they can use this technology to transform products, services, operations and workflows.

For boards, engaging with AI means providing oversight and feedback to management while fostering a spirit of experimentation and exploration. This includes making sure the AI strategy drives value creation and is aligned with business objectives, while also considering risks and taking steps to implement AI responsibly.

READ MORE »

Regulatory Shifts in ESG: What Comes Next for Companies?

Posted by Matteo Tonello, The Conference Board, Inc., on
Saturday, April 12, 2025
, , ,
More from: ,

Matteo Tonello is Head of Benchmarking and Analytics at The Conference Board, Inc. This post is based on a Conference Board memorandum by Christine Guinessey, Program Manager, ESG Center, and Andrew Jones, Senior Researcher, ESG Center at The Conference Board, Inc.

The environmental, social & governance (ESG) regulatory landscape is increasingly fragmented, with federal climate disclosure rules stalled in the US, while state-level mandates gain momentum and EU regulations face uncertainty. This report analyzes the major US and international ESG disclosure regulations on corporate radars in 2025 and shares practical recommendations for governance and compliance.

Key Insights

  • At the federal level, the proposed climate disclosure rule from the US Securities and Exchange Commission (SEC) has been stayed indefinitely and new SEC leadership has signaled a shift away from federal ESG mandates.
  • California’s emerging climate-related disclosure laws will have far-reaching effects, applying to large public and private companies with operations in the state and effectively becoming the standard for climate disclosure in the US.
  • ESG disclosure regulations in the European Union will impact EU-based companies as well as large US multinationals and subsidiaries, although efforts are ongoing to adjust and streamline the scope, timeline, and requirements, as outlined in the proposed “Omnibus” package released by the EU Commission in February.
  • As new ESG regulations impose compliance burdens and costs, companies should prepare well in advance, integrate regulatory requirements into broader sustainability strategies, and strengthen governance and data management for effective compliance.

READ MORE »

Redefining the CEO’s Role for the Next Generation

Posted by Bob Romanchek and Frank Carris, Meridian Compensation Partners, on
Friday, April 11, 2025
, , ,
More from: , ,

Bob Romanchek is a Partner and Frank Carris is Consultant at Meridian Compensation Partners. This post is based on their Meridian Compensation Partners memorandum.

More than 1,800 US CEOs departed their roles in 2024, according to Challenger, Gray & Christmas, which was the highest annual amount since the firm started keeping such records. Although the average tenure of the CEOs who departed in 2024 was approximately12 years, the average tenure of active CEOs is slightly more than 5 years, signaling that a generational change is occurring at the top.

Generational shifts in the modern business world pose opportunities and risks for companies as a new generation of executives take the reins. The experiential and societal gap between older and younger leaders may materially change the way companies are run. These differences may influence decision-making and redefine the path to executive positions. The question now is how to bridge this experiential and social divide and enable up-and-coming executives to successfully lead major corporations into the future.

Historically, executives in the United States had their leadership styles molded by a dynamic world. An economic depression, world wars, and an ever-volatile financial market instilled a sense of resilience and discipline into older generations, and they remained laser-focused to provide value to their companies. Their leadership style was born from a world in which technology was limited and decision-making was often done face-to-face. As a result, these executives remained loyal to their organizations as it was seen as a way to succeed, and most promotions came from within the organization. Ultimately, this group capitalized on hard work and long-tenured loyalty to reach high-level leadership positions.

READ MORE »

Page 4 of 7
1 2 3 4 5 6 7