Yearly Archives: 2025

Navigating DEI Disclosure amid Regulatory Shifts

Posted by Neil McCarthy, Markus Hartmann and James Palmiter, DragonGC, on
Monday, March 24, 2025
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Neil McCarthy is Co-Founder and Chief Product Officer, Markus Hartmann is Chief Legal Development Officer, and James Palmiter is CEO and Co-Founder at DragonGC. This post is based on a DragonGC memorandum by Mr. McCarthy, Mr. Hartmann, Mr. Palmiter, Michael Weiksner, Jennifer Carberry, and Nicholas Sasso.

Executive Summary: Strategic Navigation of DEI Disclosure Shifts (2022–2025)

Overview

Diversity, Equity, and Inclusion (DEI) disclosures in SEC filings evolved dynamically from 2022 to early 2025, driven by a variety of factors, including legal scrutiny, shareholder demands and numerous regulatory shifts. DEI disclosures have reached a pivotal moment. Once expanding as part of corporate governance and ESG strategies, DEI statements are increasingly scrutinized and, in some cases, strategically reduced. This summary provides an overview of key trends shaping DEI narratives in SEC filings among a selected group of ten S&P 100 companies, equipping legal, compliance, and investor relations teams with data-driven insights to navigate this evolving landscape.

This report combines DragonGC’s disclosure analytics to examine the selected disclosures, identify trends, and provide practical examples to guide DEI disclosure strategies in 2025. The report also examines the regulatory and legal context of the shifting DEI landscape and summarizes the key drivers influencing corporate DEI disclosures.

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Does Mandatory Risk Disclosure Harm Corporate Innovation?

Posted by Shiu-Yik Au (University of Manitoba) and Hongping Tan (McGill University), on
Monday, March 24, 2025
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Shiu-Yik Au is an Associate Professor of Finance at University of Manitoba, and Hongping Tan is a Professor of Accounting at McGill University. This post is based on their recent article forthcoming in the Journal of Accounting and Public Policy.

There is a debate over whether mandating more risk disclosure will positively or negatively affect corporate innovation. On one hand, information is the lifeblood of capital markets and disclosing more should reduce information asymmetry, which in turn reduces firms’ cost of capital. A lower cost of capital will allow firms to raise more capital for investment in innovation activities.

On the other hand, mandating more risk disclosure may harm investment in R&D as firms are forced to disclose the risks of innovation, but have difficulty disclosing the benefits of innovation. For example, in the current race for Artificial Intelligence (AI), the risks are already largely known (e.g. if the system fails the money invested in AI would be wasted) while the benefits are hard to quantify (e.g. the extent of potential improvement in productivity of office workers). An additional issue is that more disclosure may make less risky projects, such as exploratory patents or capital expenditures, more attractive. For example, why should we invest in firm A’s early-stage cure for cancer when firm B’s weight loss drug has a proven market for billions?

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Key Legal Considerations in Nonprofit Spinout Transactions

Posted by Michael Santos, Daniel Irvin, and Stefan Rajiyah, Morrison & Foerster LLP, on
Monday, March 24, 2025
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Michael Santos is a Partner, and Daniel Irvin and Stefan Rajiyah are Associates, at Morrison & Foerster LLP. This post is based on their Morrison & Foerster memorandum.

I. What is a Nonprofit “Spinout”?

A nonprofit “spinout” refers to a transaction where a nonprofit organization sells all or a substantial portion of its assets to a for-profit organization. These transactions typically involve a nonprofit forming a for-profit subsidiary, contributing assets to such subsidiary, and then selling all or a majority stake in the subsidiary.[1]

This article focuses on key legal issues and considerations for transactions where a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code (the “IRC”) sells a material portion of its assets.

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The Future of Board Diversity Disclosures

Posted by Ali Perry, Jennifer Zepralka and Gabrielle Levin, Mayer Brown LLP, on
Sunday, March 23, 2025
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Ali Perry is a Counsel, and Jennifer Zepralka and Gabrielle Levin are Partners, at Mayer Brown LLP. This post is based on their Mayer Brown memorandum.

The current proxy season presents new challenges and opportunities for U.S. companies as they face shifting expectations regarding board diversity. There are a number of notable developments. The Fifth Circuit Court of Appeals decision to vacate the Nasdaq diversity rules, which required Nasdaq-listed companies to disclose board diversity statistics and have a minimum number of diverse directors, was the first. This ruling, along with recent updates to the proxy voting guidelines of proxy advisory firms and institutional investors, has created uncertainty and variability in the board diversity landscape. Moreover, recent presidential executive orders have put increased scrutiny on such initiatives. In this Legal Update, we discuss these developments and highlight some practical considerations for U.S. companies preparing for this proxy season.

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How DEI Shareholder Proposals Are Faring in 2025

Posted by David A. Bell and Wendy Grasso, Fenwick & West LLP, on
Saturday, March 22, 2025
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David A. Bell is a Partner and Co-Chair of Corporate Governance, and Wendy Grasso is a Corporate Governance Counsel, at Fenwick & West LLP. This post is based on their Fenwick memorandum.

What You Need To Know

  • Total anti-DEI proposals submitted for the 2025 proxy season have surpassed pro-DEI proposals.
  • Total pro-DEI proposals for 2025 appear to be on pace to finish below the 2024 proxy season totals, based on early data.
  • Total anti-DEI proposals for 2025 have already surpassed the 2024 proxy season totals.
  • Pro-DEI proposals continue to fare better than anti-DEI proposals in terms of shareholder approval.

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Shareholder Engagement on Compensation Matters: Special Time-Sensitive Complications for the 2025 Proxy Season

Posted by Alessandra Murata, Michael Bergmann, and Brad Goldberg, Cooley LLP, on
Friday, March 21, 2025
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Alessandra Murata, Michael Bergmann, and Brad Goldberg are Partners at Cooley LLP. This post is based on their Cooley memorandum.

As most public companies know, shareholder outreach is often an important part of the playbook when a company is seeking approval of compensation-related proposals at an annual meeting. A company may engage with shareholders proactively ahead of a compensation-related proposal or in response to a negative recommendation from proxy advisory firms. In addition to engagement relating to current-year proposals, where a company in a prior year received less than a specified favorable vote on its “say-on-pay” proposal – more than 70% for Institutional Shareholder Services (ISS) or 80% for Glass Lewis – proxy advisors expect the company and its independent directors to engage with shareholders following the annual meeting regarding its executive compensation practices, and detail such engagement in the proxy for the next year’s annual meeting, including information about the extent of the outreach (i.e., which shareholders were engaged), what the company and its independent directors heard, and what, if anything, the company did in response to shareholder concerns.

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Weekly Roundup: March 14-20, 2025

Posted by the Harvard Law School Forum on Corporate Governance, on
Friday, March 21, 2025

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This roundup contains a collection of the posts published on the Forum during the week of March 14-20, 2025

Activism in the 2024 Proxy Season and Implications for 2025

Posted by Neil Whoriskey, Dean Sattler, and Scott Golenbock, Milbank LLP, on Friday, March 14, 2025
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2025 Proxy Season Trends: The Pendulum Swings Toward Management

Posted by Arthur B. Crozier, Gabrielle E. Wolf, and Jonathan L. Kovacs, Innisfree M&A Inc., on Friday, March 14, 2025
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Shareholder Activism – 2024 Review and 2025 Outlook

Posted by Elina Tetelbaum, Wachtell Lipton Rosen & Katz, on Friday, March 14, 2025
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Which Officers and Employees Have Advancement Rights?

Posted by Stephanie M. Hurst and Andrew J. Stanger, Mayer Brown LLP, on Saturday, March 15, 2025
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Three Areas Where Boards Spend Their Time But Don’t See Results

Posted by Rusty O’Kelley and Rich Fields, Russell Reynolds Associates, on Sunday, March 16, 2025
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Preparing for the 2025 Reporting Season: Proxy Season Reminders

Posted by Tamara Brightwell, Wilson Sonsini Goodrich & Rosati, on Monday, March 17, 2025
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A Theory of Calibrated Fiduciary Duties in Firms

Posted by Robert J. Rhee (University of Florida), on Monday, March 17, 2025
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Global Institutional Investor Survey 2024 Report

Posted by Kilian Moote and Kiran Vasantham, Georgeson LLC., on Monday, March 17, 2025
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Securities and Derivative Litigation: Quarterly Update

Posted by Joni Jacobsen and Angela M. Liu, Dechert LLP, on Tuesday, March 18, 2025
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Caremark Liability for Materially Misleading Cybersecurity Disclosures: Solar Winds Reconsidered

Posted by Jennifer Arlen (NYU Law), on Tuesday, March 18, 2025
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Remarks by Acting Chair Uyeda to the Investment Company Institute’s 2025 Investment Management Conference

Posted by Mark T. Uyeda, U.S. Securities and Exchange Commission, on Tuesday, March 18, 2025
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Implications of the SEC’s Stance that Meme Coins are not Securities

Posted by F. Dario de Martino and Susan I. Gault-Brown, A&O Shearman, on Wednesday, March 19, 2025
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Opening Delaware’s Black Box of Attorneys’ Fees

Posted by Adam C. Pritchard (Michigan Law School) and Jessica M. Erickson (University of Richmond School of Law), on Wednesday, March 19, 2025
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2025 U.S. Proxy Season Review: Navigating Complexity in a Changed World

Posted by Subodh Mishra, ISS STOXX, on Wednesday, March 19, 2025
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Audit Committees Face Significant New Compliance Oversight Pressures

Posted by Michael W. Peregrine and Ashley Hoff, McDermott Will & Emery LLP, on Thursday, March 20, 2025
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ESG: A Panacea for Market Power?

Posted by Philip Bond (University of Washington) and Doron Levit (University of Washington), on Thursday, March 20, 2025
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Proxy Landscape – “The Times They are A-Changin”

Posted by Allison Wyderka and Wickham Egan, Egan-Jones Ratings Company, on Thursday, March 20, 2025
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Proxy Landscape – “The Times They are A-Changin”

Posted by Allison Wyderka and Wickham Egan, Egan-Jones Ratings Company, on
Thursday, March 20, 2025
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Allison Wyderka is the Head of Product and Research for Proxy Services and Wickham Egan is the Director of Business Development and Operations, at Egan-Jones Ratings Company. This post is based on their Egan-Jones memorandum.

I. Overview

As suggested by the musician Bob Dylan, in the Proxy field, the times are changing. This installment aims to address some of those changes and, perhaps more importantly, implications for those connected to the corporate proxy space and the implications for this proxy season.

Our view is simple, and that is that most investors seek to protect and enhance wealth. Hence, endorsing proposals in shareholder meetings that align with this focus makes sense. Additionally, as fewer asset managers gain market share from smaller ones, they can blunt criticism that they wield too much power by allowing investors to select votes themselves or, more realistically, rely on a third-party like Egan-Jones to do so.

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ESG: A Panacea for Market Power?

Posted by Philip Bond (University of Washington) and Doron Levit (University of Washington), on
Thursday, March 20, 2025
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Philip Bond is a Professor of Finance and Business Economics at the University of Washington, and Doron Levit is the Marion B. Ingersoll Endowed Professor of Finance and Business Economics at the University of Washington Foster School of Business. This post is based on their recent article forthcoming in the Journal of Financial Economics.

In our paper “ESG: A panacea for market power?,” now published in the Journal of Financial Economics, we investigate a fundamental question: What happens when firms credibly pledge to treating stakeholders better than market conditions would dictate?

Consider these common examples:

  • Firms pledge generous compensation and favorable working conditions for employees.
  • Companies pledge environmental stewardship to their customers.
  • Businesses commit to pay “fair” prices to suppliers for inputs like coffee or cacao beans.

These types of corporate commitments have grown significantly in recent decades as market-primacy doctrine has receded. Understanding the consequences of these pledges has become increasingly important in today’s business landscape.

Historically, these pledges have appeared under various labels, most notably “corporate social responsibility.” Today, they are most closely associated with the “social” pillar of ESG policies—the terminology we adopt throughout our analysis.

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Audit Committees Face Significant New Compliance Oversight Pressures

Posted by Michael W. Peregrine and Ashley Hoff, McDermott Will & Emery LLP, on
Thursday, March 20, 2025
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Michael W. Peregrine is a Partner and Ashley Hoff is a Counsel at McDermott Will & Emery LLP.

New policy initiatives from the Trump administration, and the turbulence with which they have been introduced, combine to present board audit committees with unexpected new compliance oversight pressures.

Every new administration has the right to institute its own policies with respect to legal and regulatory enforcement, and the Trump administration is no different in that regard.  Furthermore, there was a clear sense following the election that the new administration would pursue substantive policy changes in many compliance-oriented areas, including the Department of Justice’s civil and criminal enforcement priorities.

But the scope of this change, and the tempo in which it has been introduced, have been extraordinary.  This in turn has created a variety of new challenges for the audit committee, including but not limited to the following:

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