Monthly Archives: August 2025

Delaware Rulings on M&A Indemnification Provisions Stress the Need for Careful Drafting

Posted by Edward B. Micheletti, Nick G. Borelli, and Jonathan F. Garcia, Skadden, Arps, Slate, Meagher & Flom LLP, on
Wednesday, August 20, 2025
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Edward B. Micheletti is a Partner, and Nick G. Borelli and Jonathan F. Garcia are Associates 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.

Delaware courts are frequently called upon to interpret indemnification provisions linked to representations and warranties, which serve as potential remedies for losses, dictating when and how one party must make whole the other. Transaction parties often heavily negotiate indemnification provisions because they are valuable mechanisms for allocating risks and transaction costs.

Three recent Delaware opinions underscore the importance of (i) defining the scope of indemnification to avoid ambiguity, (ii) signaling when compliance with a provision is material and (iii) determining how to calculate damages.

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Activists Find Winning Strategy in Surprise First Half

Posted by Jason Booth, Diligent Market Intelligence, on
Tuesday, August 19, 2025
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Jason Booth is an Editorial Manager at Diligent Market Intelligence. This post is based on a Diligent memorandum by Mr. Booth, Josh Black, and Antoinette Giblin.

U.S.-based activists in particular achieved an uptick in success rates amid the turbulence sparked by U.S. President Donald Trump’s trade war and policy shift, with many adopting new tactics and advancing stronger director candidates to achieve their desired objectives.

While the volume of seats gained by activists globally saw an 11% decline in the first half of 2025, activists operating in the U.S. won 112 board seats, up from 101 in the same period in 2024, making it the most successful start to a year for board gains since 2022. Out of the 91-board representation demands advanced at U.S.-based targets in the first half of the year, activists secured at least one seat in 64 cases, or roughly 70% of the time. That compares with a 53% success rate at securing at least one seat over the same period in 2024 when there were 118 board representation demands. Globally, the success rate for activists winning at least one board seat was 55% in the first half of 2025.

Although the volume of U.S.-focused board representation demands fell by almost 23% in the first half when compared to the same period last year, many industry experts told DMI that those that did advance were of high quality and delivered with conviction.

“The activists are getting better,” said Jim Rossman, global head of shareholder advisory at Barclays. “The quality of who they’re nominating and the strategy with which they nominate has become better and more sophisticated.”

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Women in Charge: Evidence from Hospitals

Posted by Katharina Lewellen (Tuck School of Business at Dartmouth), on
Tuesday, August 19, 2025
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Katharina Lewellen is a Professor of Finance at the Tuck School of Business at Dartmouth. This post is based on her recently published article in the Journal of Finance.

While women continue to be underrepresented in executive leadership, the U.S. hospital sector offers a rare opportunity to study a sizable number of female CEOs in a relatively homogeneous, data-rich setting. In this paper, I examine the decision-making, compensation, and turnover of nearly 4,400 hospital CEOs (819 of them women) over a 19-year period, using financial, operational, and governance data from nonprofit hospitals.

Contrary to prior research suggesting that women exhibit more risk aversion or altruistic preferences, I find no systematic differences in the corporate policies or decision-making of male and female hospital CEOs. There is no evidence that female CEOs match with hospitals that pursue more conservative investment or financing strategies, serve poorer communities, or devote more resources to charity care. Furthermore, female and male CEOs responded similarly to the 2008 financial crisis across multiple dimensions, including investment and employment—suggesting that gender does not influence strategic responses to financial shocks.

In contrast to the similarity in decision-making, compensation and turnover outcomes differ starkly by gender. Female hospital CEOs earn 32% less than their male counterparts on an unconditional basis. Controlling for hospital size, fixed effects, and CEO characteristics, the gap narrows but remains statistically significant at 7.8%. More strikingly, pay-for-performance sensitivity is flatter for women—CEO pay increases by 15% for male CEOs in the top quintile of financial performance, compared to 5.3% for female CEOs. Meanwhile, turnover-performance sensitivity is higher for women: female CEOs are substantially more likely to be replaced following periods of poor performance.

These asymmetric outcomes are consistent with theories of CEO labor markets in which boards—or the constituencies they represent—perceive women as less skilled or productive. Consequently, boards pay female CEOs less, give them weaker incentives, and dismiss them more readily. Yet, hospital performance metrics—financial and nonfinancial—are not significantly different under male and female leadership. READ MORE »

2025 Proxy Season Review: Rule 14a-8 Shareholder Proposals

Posted by H. Rodgin Cohen and June Hu, Sullivan & Cromwell LLP, on
Tuesday, August 19, 2025
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H. Rodgin Cohen is a Senior Chair, and June Hu is a Special Counsel at Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell memorandum by Mr. Cohen, Ms. Hu, Melissa Sawyer, Marc Treviño, and Arman Smigielski.

OVERVIEW

The 2025 proxy season unfurled against a rapidly shifting political and regulatory backdrop. The dizzying pace of developments from courts, as well as lawmakers, regulators, and other political actors, resulted in an unpredictable and volatile proxy season for companies, investors, proxy advisors and other stakeholders. Broadly speaking, for H1 2025 annual meetings, companies (1) received shareholder proposals during the period between the presidential election and inauguration, (2) explored no-action relief as the SEC was revising its Rule 14a-8 guidance to increase the availability of exclusionary relief (see Section D) and (3) received proxy advisor recommendations and shareholder votes after the Trump administration issued Executive Orders and took other measures on prevalent Rule 14a-8 topics, such as diversity, equity and inclusion (“DEI”).

Submitted Proposals. The number of submitted proposals declined for the first time since 2020, decreasing by 13% compared to H1 2024. Although environmental, social and political (“ESP”) proposals continued to represent the majority of submissions (57% vs. 62% in H1 2024), proposals on ESP topics decreased in H1 2025 while governance proposals increased, narrowing the gap between the categories.

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Shareholder Engagement Considerations in Light of Texas v. Blackrock

Posted by Helena Grannis, Joseph Kay, and Shuangjun Wang, Cleary Gottlieb Steen & Hamilton LLP, on
Monday, August 18, 2025
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Helena Grannis, Joseph Kay, and Shuangjun Wang are Partners at Cleary Gottlieb Steen & Hamilton LLP. This post is based on their Cleary memorandum.

On Friday, the Court in Texas v. Blackrock issued an opinion largely denying defendants’ motion to dismiss, which allows a coalition of States to proceed with claims that BlackRock, State Street, and Vanguard conspired to violate the antitrust laws by pressuring publicly traded coal companies to reduce output in connection with the investment firms’ ESG commitments. The Court found that the States plausibly alleged that defendants coordinated with one another, relying on allegations that they joined climate initiatives, made parallel public commitments, engaged with management of the public coal companies, and aligned proxy voting on disclosure issues. It is worth noting that, while the court viewed BlackRock’s, State Street’s, and Vanguard’s participation in Climate Action 100+ and NZAM as increasing the plausibility of the claim in favor of denying the motion to dismiss, the Court clarified that it was not opining that the parties conspired at Climate Action 100+ or NZAM.

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Common Ownership Around the World

Posted by Miguel Anton (IESE Business School), on
Monday, August 18, 2025
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Miguel Antón is a Professor in the Financial Management Department at IESE Business School. This post is based on a recent paper by Professor Antón, Florian Ederer, the Allen and Kelli Questrom Professor in Markets, Public Policy & Law at Boston University, Mireia Giné, Professor and Head of the Financial Management Department at IESE Business School, and Guillermo Ramirez-Chiang, a PhD candidate in the Finance Department at IESE Business School. 

Common ownership describes a situation whereby the same investors hold significant stakes in multiple competing firms. Over the last few decades it has become a defining feature of modern capital markets. Its growth has sparked an important debate among academics, regulators, and policymakers about its potential implications for competition and corporate governance.

In our new working paper “Common Ownership Around the World,” we provide the first systematic, global analysis of this trend. Using a novel dataset covering 49 countries and more than 60,000 publicly listed firms from 2005 to 2019, we document the global rise in common ownership and explore its key drivers. While common ownership is increasing across the globe, the United States remains a clear outlier in both the level and concentration of such ownership.

A Global Trend with U.S. Leadership

Our study shows that common ownership is now a global phenomenon. In the median country, the average measure of overlapping ownership (κ) more than doubled between 2005 and 2019. However, the U.S. stands far above all others: its average common ownership intensity is nearly twice as high as the next highest country. This U.S. dominance is not only due to higher institutional investment but also to greater concentration among asset managers. Notably, this pattern persists even when adjusting for firm size and industry, indicating that the U.S. is structurally distinct in its ownership architecture.

The increase in common ownership is especially pronounced among the largest firms in every country. Across regions, firms in the top tercile of the market capitalization distribution have approximately three times the level of common ownership of the median firm. This concentration means that common ownership is most intense precisely where market power and competitive dynamics are likely most consequential. In fact, in the U.S., common ownership levels among top-tercile firms are on par with those observed among S&P 500 constituents, suggesting that the trend is particularly pronounced at the upper end of the firm size distribution.

The Role of the Big Three

One of the most striking findings is the central role played by the “Big Three” asset managers—BlackRock, Vanguard, and State Street. In the U.S., these firms have become the largest shareholders in nearly 40% of all public companies, up from just 3% in 2005. Their rise accounts for a significant share of the growth in common ownership, both domestically and globally. This rise reflects both their growing assets under management and the increased popularity of passive index investing. READ MORE »

California Supreme Court Saves Delaware Forum Selection Clauses in Corporate Certificates of Incorporation

Posted by Shannon Eagan and Craig TenBroeck, Cooley LLP, on
Monday, August 18, 2025
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Shannon Eagan and Craig TenBroeck are Partners at Cooley LLP. This post is based on a Cooley memorandum by Ms. Eagan, Mr. TenBroeck, Tiffany Le, and Samantha Kirby.

On July 21, 2025, the California Supreme Court issued a significant decision clarifying that a forum selection clause in a company’s certificate of incorporation is not unenforceable simply because the selected forum (here, the Delaware Court of Chancery) does not provide the right to a jury trial.

In EpicentRx, Inc. v. Superior Court, the California Supreme Court reversed the Court of Appeal, holding that the mere unavailability of a jury trial in the chosen forum does not, by itself, render forum selection clauses unenforceable under California public policy. The Supreme Court explained that while “courts may properly consider whether enforcement of a forum selection clause would violate public policy,” “California’s strong public policy protects the jury trial right in California courts, not elsewhere.” Having so held, the Supreme Court remanded the matter for the court below to consider, in the first instance, “plaintiff’s other arguments against enforcement of the forum selection clause, such as the manner of its adoption as part of the corporation’s certificate of incorporation and bylaws.”

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Corporate Support for DEI Continues Among Investors and Companies

Posted by Timothy Smith (ICCR) , on
Sunday, August 17, 2025
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Timothy Smith is the Senior Policy Advisor at the Interfaith Center on Corporate Responsibility (ICCR). This post is based on an ICCR memorandum by Mr. Smith and Max Homans.

During this proxy season, companies faced a wave of shareholder resolutions attacking diversity, equity, and inclusion (DEI) programs and calling for their eradication. This campaign expanded last year’s anti-DEI attacks, tracked in our 2024 paper, Championing Diversity in Corporations, [1] which also provided quotes from numerous companies strongly defending their diversity programs. This year’s anti-DEI resolutions built upon growing attacks on DEI by various government agencies and right-wing critics, who argued that company diversity programs were on the way out. Interestingly, these anti-DEI resolutions conveyed the exact opposite message, demonstrating that investors and companies alike believe that diversity has a positive impact on employees and long-term shareholder value.

In fact, in this proxy season approximately 98% of the shares voted to maintain current corporate diversity, equity, and inclusion programs. 32 companies (listed in the appendix) including Disney, Costco, Visa, Apple, Deere, Boeing, Goldman Sachs, Levi’s, AMEX, Coca-Cola, Berkshire Hathaway, Bristol Myers, and Gilead Science saw near-unanimous votes, averaging a mere 2% shareholder vote supporting these resolutions, sending a clear message to the boards that shareholders support the business case for non-discrimination in employment and a diverse workforce. [2]

Many of these companies under attack remained publicly committed to their longstanding DEI programs. Corporations like Costco, JPMorganChase, Delta Air Lines, American Airlines, Southwest Airlines, and Apple continue to view diversity as a cornerstone of their workforce strategies, refusing to back down despite mounting pressure from conservatives and the White House. [3]

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Ahead of the Curve: Factoring the Cost of Carbon into Long-Term Decision-Making

Posted by Allen He, Joel Paula, and Jessica Pollock, FCLTGlobal, on
Saturday, August 16, 2025
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Allen He is a Director, Joel Paula is a Managing Director, and Jessica Pollock is a Senior Research Associate at FCLTGlobal. This post is based on their FCLTGlobal memorandum.

INTRODUCTION

Decarbonization is a major investment theme for long-term investors, given the worldwide shift already under way in energy infrastructure, transportation, agriculture, business models, and the built environment. Annual climate finance surpassed $1 trillion in 2021 and has been climbing since.[1] Renewable energy generation will meet 35 percent of global demand by 2025; that mix was just 19.5 percent in 2010.[2] Investment flows contrast with the global cost of climate change damages, which could range between $1.7 trillion and $3.1 trillion per year by 2050.[3]

Climate-related risks will have far reaching implications for the long-term investment portfolios of sovereign wealth funds, pension funds, insurance companies, and endowments. A recent survey of 200 asset owners found that 56 percent plan to increase climate investment over the next 1-3 years, and 46 percent said that navigating the transition is their most important investment priority over the same period.[4]

Despite momentum, progress feels incremental. Today’s volatile political and geopolitical context has upended climate and industrial policy, creating significant uncertainty for long-term investors. A reshuffling of global trade and supply chains also means a reshuffling of where emissions occur. To be clear, the climate transition was never assumed to progress in a linear fashion. At times, decarbonization pathways may appear to stagnate or even move in the wrong direction. While various regions are at different points in implementing climate policies, greater policy uncertainty has the effect of widening potential outcomes.

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Retail Access to Private Markets

Posted by Ben Bates (Harvard Law School), on
Friday, August 15, 2025
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Ben Bates is a Research Fellow at the Harvard Law School Program on Corporate Governance. This post is based on his recent paper.

The U.S. securities laws divide investment opportunities between public markets, in which anyone can invest, and private markets, which are open only to the wealthy. Today, many of the buzziest investment opportunities—including everything from private equity and private credit funds to direct investments in hot tech startups like OpenAI and SpaceX—are available only in the private markets.

As the private markets have grown, retail investors have become increasingly interested in gaining access. At the same time, politicians, policymakers, and investment managers have become more and more willing to find ways to give them access. Just last Thursday, President Trump issued an executive order aimed at making it easier for individuals to invest in “alternative assets,” in their 401(k)s. The SEC has also been evaluating ways to expand private market access.

In a new paper, I study investment funds that offer retail investors access to private investments. These “retail private funds” have multiplied over the past 5-10 years, and they are poised to become an increasingly important part of the investing landscape. Retail private funds are typically structured as registered closed-end funds or business development companies (BDCs). Their shares often do not trade on a stock exchange, and they provide liquidity to investors through periodic share repurchases. Most retail private funds today offer access to private credit investments, though a smaller number offer access to private equity, infrastructure, and other investment types. Retail private funds also generally have much higher fees than traditional mutual funds and ETFs.

Using data from the SEC filings of funds structured as BDCs, I study the funds’ performance and highlight two potential issues for unwary retail investors. First, I show that BDCs’ reported returns—which are based on their estimated net assets values (NAVs)—exhibit exceptionally low volatility, especially given the nature of the funds’ underlying investments and the funds’ use of leverage. These reported returns may lead retail investors to underestimate the funds’ risks. Second, I show that non-traded BDCs sold to less wealthy individuals have lower returns on average than private BDCs sold only to wealthier individuals. This finding raises the concern that individuals with modest means who participate in private markets may predominantly be sold products with below-average performance.

Concern #1: Retail Private Funds Are Riskier Than They Appear

In the paper, I show that, from 2015 to 2024, BDCs reported higher returns than (or at least similar returns to) a portfolio of publicly traded high yield bonds, but with lower volatility. This result is striking because BDCs predominantly invest in high-yield loans to small and medium-sized private companies and use substantial leverage. Interestingly, among BDCs that have publicly traded shares, the funds’ actual, trading returns are more than 4x more volatile than their reported returns. READ MORE »

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