Yearly Archives: 2025

A Time to Pivot: Four Ways US M&A Leaders Are Adapting to 2025 Conditions

Posted by Adam Reilly and Barry Winer, Deloitte LLP, on
Thursday, June 12, 2025
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Adam Reilly is a National Managing Partner, and Barry Winer is a Head of Research at Deloitte LLP. This post is based on their Deloitte memorandum.

In an era of geopolitical change coupled with potential economic and regulatory policy shifts, the mergers and acquisitions landscape is set to be particularly challenging for the foreseeable future while also providing new opportunities. And according to our research, adaptability and agility in responding to these challenges are no longer just a nice-to-have skills for M&A leaders. They’re becoming core competencies and the “new normal.”

Deloitte surveyed 1,500 US-based corporate and private equity professionals in late 2024 to gauge their expectations for M&A activity in the following 12 months and learn more about their experiences with recent transactions (see methodology). Our research revealed four key pivots that leading M&A teams are using to capture value amid current risks and uncertainties.

The strategic pivot: Looking beyond traditional M&A

While M&A leaders are gearing up for future deals, our survey shows they’re also keeping their options open with strategic alternatives as a hedge, such as joint ventures, alliances, and initial public offerings  as well as divestitures. Surveyed leaders say they’re currently pursuing alternative deals at a rate almost equal to traditional M&A. That marks a 42% increase in alternative M&A transactions between 2022 and 2024, indicating that organizations may be seeking more flexible and collaborative growth options (figure 1).

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Tariffs and Transparency: Navigating Investor Expectations on Executive Pay Changes

Posted by Sydney Carlock and Martha Carter, Teneo, on
Wednesday, June 11, 2025
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Sydney Carlock is a Managing Director, and Martha Carter is the Vice Chairman & Head of Governance and Sustainability at Teneo. This post is based on a Teneo memorandum by Ms. Carlock, Ms. Carter, Matt Filosa, Sean Quinn, and Diana Lee.

The U.S. “Liberation Day” announcement on April 2, 2025, introducing broad global tariffs, followed by pauses, adjustments and international agreements, has sparked significant market volatility. While recent trade agreements have tempered initial concerns, ongoing negotiations and administration positions, including those on regional tariffs and tariff related price hikes, signal continued uncertainty. In this environment, visibility into expected payouts from executive compensation programs will be limited, which may prompt some boards to consider adjustments to targets or awards.

This situation is not unlike other periods of disruption, and valuable lessons can be drawn from historical precedent. While compensation committees need flexibility to respond to shifting, unforeseen conditions, proxy advisors and investors will closely monitor such pay decisions for alignment with shareholder outcomes. Committees must carefully evaluate the potential governance and reputational implications of any adjustments. Below, we outline historical context, proxy advisor perspectives and six emerging factors for boards to consider when evaluating executive pay changes.

Exceptional Pay Actions During Periods of Economic Disruption Have Historically Drawn Scrutiny

Current volatility reflects the uncertainty seen during the early stages of the COVID-19 pandemic, which led to widespread incentive payout adjustments and goal resetting, as well as during the 2008 Great Recession, when many companies issued discretionary retention bonuses. However, these actions drew criticism from investors and stakeholders who objected to insulating executive compensation at a time when investors suffered losses and the broader population experienced economic hardship.

Indeed, pandemic-related compensation adjustments were a key factor behind historically low say-on-pay support in 2022 and the highest rate of say-on-pay failures in over a decade. The pay practices contributing to the Great Recession also led to sweeping disclosure regulations, including Dodd-Frank’s requirement for an advisory say-on pay vote. Likewise, the mid-2000s stock option backdating scandals prompted heightened regulatory scrutiny and greater transparency in disclosures. These crises have shaped both regulation and investor expectations around executive compensation.

Response: The Limits of ESG in Assessing Nonprofit Control

Posted by Ofer Eldar (UC Berkeley School of Law) and Mark Ørberg (Copenhagen Business School), on
Wednesday, June 11, 2025
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Ofer Eldar is a Professor of Law at the UC Berkeley School of Law, and Mark Ørberg is an Assistant Professor at Copenhagen Business School. This post replies to a response posted on the Forum by David Schröder and Steen Thomsen here to their work that was posted on the Forum here.

We appreciate Schröder and Thomsen’s thoughtful response and valuable empirical study exploring ESG performance among foundation-owned firms. This topic is timely, as nonprofit control is under stress both in the U.S., with the ongoing governance debate surrounding OpenAI, and in Europe, with recent turmoil at Novo Nordisk—one of the world’s leading pharmaceutical companies and arguably the crown jewel of the enterprise foundation model (Bansal, 2025). Following recent underperformance by the for-profit pharmaceutical company, the Novo Foundation has intervened reportedly to accelerate the CEO’s succession primarily out of concern that the company has failed to respond to competition and generate sufficient profits.

This unusual governance intervention by the nonprofit—typically passive in its oversight—is not driven by social purpose, but by the risk that the for-profit will fail to produce the kind of cash flows that have sustained the foundation’s substantial philanthropic giving. The governance shift at Novo Nordisk reinforces our definition of the income-generating model of nonprofit control. This view of enterprise foundations as primarily cash-generating entities is even more evident in companies that sell global consumer brands, such as IKEA and Carlsberg. The Carlsberg Foundation’s charter includes numerous charitable goals in support of science and the arts, while its only arguable commitment to responsible business is to developing the art of making beer and keeping the brewing of beer on a high and honorable level (See 2025 Charter).

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Pulse on Pay: 12 Years of CEO Pay Long-term Trends in S&P 500 Executive Compensation

Posted by Margaret Hylas and Leah Sine, Semler Brossy, on
Wednesday, June 11, 2025
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Margaret Hylas is a Principal, and Leah Sine is a Senior Associate at Semler Brossy. This post is based on their Semler Brossy memorandum.

Equity Prevalence and Average Vehicle Mix for CEOs

Key Takeaways: Long-term incentive (LTI) designs have become strongly aligned with institutional investor and proxy advisor preferences through increased performance stock and restricted stock units and reduced stock options. The increase in restricted stock is notable because it is the least intuitively linked to performance of the three vehicles.

We believe the current state reflects the evolution of equity compensation strategies towards a balance of active performance management and risk mitigation.

95% of S&P 500 companies currently use PSUs, up from 76% in 2012 (PSUs represent an average of 60% of CEO LTI mix).

Only 42% of S&P 500 companies currently use options, down from 68% in 2012 (Options represent an average of 13% of CEO LTI mix) 77% of S&P 500 companies currently use RS Us, up from 58% in 2012. READ MORE »

Remarks by Commissioner Peirce at the Third Annual Conference on Emerging Trends in Asset Management

Posted by Hester M. Peirce, U.S. Securities and Exchange Commission, on
Tuesday, June 10, 2025
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Hester M. Peirce is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on her recent remarks. The views expressed in this post are those of Commissioner Peirce and do not necessarily reflect those of the Securities and Exchange Commission or its staff.

Thank you, Natasha [Vij Greiner]. Good morning and welcome to the Third Annual Conference on Emerging Trends in Asset Management. Before I begin, I must remind you that my views are my own as a Commissioner and not necessarily those of the SEC or my fellow Commissioners.

Today’s four panels take us on a tour from the beginning of the ’40 Acts up to the most recent developments in asset management, and on to the developments likely to come in the near future. These panels are in keeping with the asset management industry, which is an iterative one in which new developments are rooted in the old. I am looking forward particularly to hearing from our “Forever Young” panel of former IM Directors who will reminisce on 85 years of the Investment Company and Investment Advisers Acts.

Thinking back to my arrival at the Division of Investment Management as a wide-eyed staff attorney 25 years ago makes me feel anything but young. But happy memories linger from my four years in the Division: Immersing myself in Division history with the well-worn green binder “bibles,” wrestling through current issues in a rulemaking, or imagining the future of asset management through the eyes of the red book. My colleagues, of course, were the highlight of that experience. Paul Roye as Division Director, Hunter Jones as remarkably patient supervisor, Bob Plaze as master rule-drafter, Martha Peterson as consummate mentor, and countless colleagues who only recently left the staff, including: Bill Middlebrooks, Beckie Marquigny, Chris Chow, Penelope Saltzman, Jennifer McHugh, Jennifer Sawin, Janet Grossnickle, and Nadya Roytblat, to name a few. These and other members of the Division staff poured themselves into administering the statutory framework within which the asset management industry has flourished. READ MORE »

Caremark’s Politics

Posted by Itai Fiegenbaum (St. Thomas University College), on
Tuesday, June 10, 2025
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Itai Fiegenbaum is an Assistant Professor of Law at St. Thomas University College of Law. This post is based on his recent article forthcoming in Cardozo Law Review, and is part of the Delaware law series; links to other posts in the series are available here.

How and why do corporate rules evolve? Delaware is the unquestioned jurisdiction of choice for most publicly traded US corporations. And since the decision of where to incorporate belongs to corporate insiders, one might attribute Delaware’s market dominance to a corporate law that caters to their needs. According to this view, Delaware corporate law habitually relaxes the restraints that hamper insider expropriation of gains that would otherwise be distributed to outside investors. Conversely, because insiders anticipate the need to tap the capital markets for future funding, Delaware’s supremacy might be due to the lower cost of capital enjoyed by Delaware-incorporated companies. Subscribers of this view highlight Delaware’s robust legal constraints that deter self-dealing and other harmful actions by powerful insiders.

These two views, commonly known as the “race to the bottom” and the “race to the top,” share a point of commonality regarding Delaware’s apprehension of being displaced by a competing state as the trigger for corporate law evolution. In practice, no other state comes close to Delaware’s market share of publicly traded corporations. If not the fear of competition from other jurisdictions, what external forces influence the trajectory of Delaware corporate law? Professor Mark Roe provided a compelling answer to this question: State corporate law is not the only game in town. If displeased with the level of investor protection provided at the state level, Congress will enact corrective federal legislation. Congressional intervention, however, only occurs for issues that reach national prominence. Delaware’s concern for the value of its corporate brand incentivizes it to nip public debate about those issues in the bud. In practical terms, the Delaware courts – as arbiters of Delaware law – will appear to be sufficiently vigilant in protecting outside investors lest Congress assume that task.

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Evolving DEI Disclosure Practices in SEC Filings

Posted by Hayden Goudy, Tierra Piens, and Meghan Conway, Orrick, on
Tuesday, June 10, 2025
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Hayden Goudy is a Director of Responsible Business Solutions, Tierra Piens is a Senior Associate, and Meghan Conway is a Senior Responsible Business Solutions Research Analyst at Orrick. This post is based on an Orrick memorandum by Mr. Goudy, Ms. Piens, Ms. Conway, and Mike Delikat.

Evolving DEI Disclosure Practices in SEC Filings

In the first four months of the Trump Administration, many companies have modified and, in some cases, ended their diversity, equity, and inclusion (“DEI”) related commitments, policies, programs and practices. The extent of these changes is illustrated by the fact that a large majority of the S&P 500 have significantly revised or removed DEI-related disclosures from their recent filings with the Securities and Exchange Commission (“SEC”).

We analyzed evolving DEI-related disclosure practices in recent SEC filings among major corporations, with a spotlight on the financial sector, [1] and found a marked shift in how companies disclose their approach to what was previously described as DEI. While the majority of large public companies in the US have removed references to “DEI” and related language from their SEC filings, most of these companies still have at least one diversity-related disclosure in their most recent annual report or proxy statement, reflecting a change in corporate disclosure and internal approaches to diversity-related policies, programs and practices that is still evolving.

Executive Action by the Trump Administration

In the first week of his administration, President Trump issued a series of executive orders regarding DEI-related programs in the public and private sectors. This included Executive Order 14173, titled “Ending Illegal Discrimination and Restoring Merit-Based Opportunity”, signed by President Trump on January 21, 2025. Executive Order 14173 READ MORE »

Midyear Observations on the 2025 Board Agenda

Posted by David A. Brown, KPMG LLP, on
Monday, June 9, 2025
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David A. Brown is Executive Director at KPMG LLP. This post is based on a KPMG memorandum by John H Rodi, Anne C Zavarella, and Patrick A. Lee.

Disruption, volatility, and uncertainty aren’t new operating conditions by any means. But the assumptions that have long driven corporate thinking—the role of government, geopolitical norms, and consistency in US policies as administrations change, and the speed of technological advances—are being upended. Few business leaders have experienced the scope, complexity, and combination of issues companies are facing today—and many will earn their stripes in the months ahead. As one director noted during the 2025 KPMG Board Leadership Conference, “It’s prime time for leaders to lead.”

Approaching midyear, post-election exuberance among business leaders has been overshadowed by a significant decline in confidence about the growth prospects for the US economy and the opportunities ahead for their companies. As one CEO noted, “High volatility and low visibility are difficult conditions.” Amid growing concern about tariffs and their inflationary effect, a near majority of CEOs anticipate a recession, price hikes, and potential job losses.[1] At the same time, the macro forces of generative artificial intelligence (GenAI), climate, and geopolitics are calling for deeper boardroom conversations about risk, resilience, strategy, and talent, and what the future will look.

Based on our ongoing work with directors and business leaders and discussions during the 2025 KPMG Board Leadership Conference[2]—we offer observations READ MORE »

Corporate Actions as Moral Issues

Posted by Zwetelina Iliewa (University of Bonn), Elisabeth Kempf (Harvard Business School), and Oliver G. Spalt (University of Mannheim), on
Monday, June 9, 2025
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Zwetelina Iliewa is an Assistant Professor of Finance at the Department of Economics at the University of Bonn, Elisabeth Kempf is an Associate Professor of Business Administration at Harvard Business School, and Oliver G. Spalt is a Professor of Finance at University of Mannheim. This post is based on their recent paper.

 

In recent years, a growing body of research in finance and economics has explored how nonpecuniary preferences—moral, ethical, or social concerns that are not directly tied to financial returns—shape the decisions of investors, consumers, and managers. Much of this work has focused on environmental, social, and governance (ESG) considerations and has reinvigorated the broader debate over the objective function of the firm.

In our new paper, Corporate Actions as Moral Issues, we contribute to this discussion by asking: which corporate actions do people care most about from a moral perspective, and why? Using a representative sample of more than 2,000 Americans, we examine how respondents evaluate a broad set of corporate actions, ranging from CEO pay to fossil fuel usage, while holding constant the financial value created by these decisions.

Our findings provide robust evidence that many corporate actions are viewed through a moral lens, and that these moral views are strongly shaped by individual differences in moral universalism—the tendency to extend concern equally to others, regardless of social or geographic distance. READ MORE »

Recent Developments for Directors

Posted by Julia Thompson, Keith Halverstam, and Jenna Cooper, Latham & Watkins LLP, on
Monday, June 9, 2025
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Julia Thompson, Keith Halverstam, and Jenna Cooper are Partners at Latham & Watkins LLP. This post is based on a Latham memorandum by Ms. Thompson, Mr. Halverstam, Ms. Cooper, Charles Ruck, Ryan Maierson, and Joel Trotter.

Delaware Legislature Acts to Stop Corporate Exodus

In an effort to reverse corporate departures from Delaware, its state legislature amended the Delaware General Corporation Law to overturn multiple Chancery Court decisions. Notably, the amendments:

  • limit controlling stockholder liability by excluding any stockholder or group that owns less than a third of a company’s voting power and by establishing that, other than in going-private or squeeze-out transactions, courts will not review a controlling stockholder transaction approved either by a committee of independent directors or by an informed and uncoerced vote of a majority of other stockholders;
  • limit stockholder rights to inspect corporate books and records to core documents such as governing documents, minutes, board books, financial statements, and D&O questionnaires; and
  • presume the independence of directors who satisfy stock exchange independence standards.

Companies have applauded these updates to Delaware law. Texas and Nevada in turn continue to READ MORE »

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