Yearly Archives: 2025

2025 U.S. Proxy Season Preview: Navigating Complexity in a Changed World

Posted by Subodh Mishra, ISS STOXX, on
Wednesday, March 19, 2025
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Subodh Mishra is Global Head of Communications at ISS STOXX. This post is based on an ISS-Corporate memorandum by Jun Frank, Managing Director, Global Head of Compensation & Governance Advisory at ISS-Corporate.

Corporate Boards find themselves in a changed world this proxy season. The tide of shareholder and regulatory pressure on corporations to disclose and take action on environmental and social causes has subsided, while a wave of new risks ranging from new technology to geopolitical tension and potential trade wars disrupts the market. Every week seems to bring a new development, from changes in how investors view certain topics to SEC rules and guidance. Boards are being pulled in many, sometimes contradicting, directions, and must carefully navigate a myriad of legal, compliance, climate, social, political, and technological risks. As the 2025 Proxy Season approaches, ISS-Corporate examines key trends and themes that are likely to have significant impact.

KEY TAKEAWAYS

  • The SEC’s updated its compliance and disclosure interpretations, prompting some investors to pause or change their engagement strategy. That means issuers may face difficulties engaging with investors ahead of their shareholder meetings.
  • Pushback against ESG and DEI initiatives is intensifying, and the surge of shareholder proposals criticizing certain environmental or social initiatives continues, representing 14.7% of all proposals submitted thus far for 2025.
  • Though these counter-ESG proposals rarely receive broad shareholder support, some companies are likely to concede or make compromise to reach an agreement before the matter comes to a vote. Trend to watch: withdrawals.
  • Disclosure of diversity information and use of diversity metrics in executive pay is expected to diminish, and board diversity considerations are likely to play a much smaller role this proxy season.
  • Amid rising complexity and diversity of viewpoints the investor community, boards can look to the fundamental principles of corporate governance to help guide their decisions: economic relevance of extra-financial factors, competent and independent boards, and alignment between pay and performance.

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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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Adam C. Pritchard is the Frances & George Skestos Professor of Law at the University of Michigan Law School, and Jessica M. Erickson is the Nancy Litchfield Hicks Professor of Law at the University of Richmond School of Law. This post was prepared for the Forum, and is part of the Delaware law series; links to other posts in the series are available here.

Anyone following the recent legislative battles in Delaware would be justified in thinking that there is only a single set of proposed reforms to Delaware stockholder litigation pending in the General Assembly. Senate Bill 21, which addresses transactions in which directors, officers, or controlling stockholders have a financial interest, has dominated recent news headlines coming out of Delaware.

There is a second set of pending reforms, however. A bipartisan group of Delaware legislators has proposed asking the Council of the Corporation Law Section of the Delaware State Bar Association to prepare recommendations for legislative action regarding fee awards in common fund stockholder litigation.

That request was motivated by the Court of Chancery’s recent eye-popping $345 million award of attorneys’ fees to the plaintiffs’ lawyers who successfully challenged Elon Musk’s stock option award in a derivative lawsuit filed on Tesla’s behalf. That record-setting fee award—25.3 times the lodestar—valued the lawyers’ time at almost $18,000 an hour.

We have spent much of our careers studying stockholder lawsuits and attorneys’ fees, and we have some thoughts on how the Council should tackle this study. We start with a simple premise: fee awards come directly out of settlements or judgments, so every dollar for the lawyers means one less dollar for stockholders. Basic economic theory therefore suggests that judges making fee awards on behalf of stockholders should be aiming for awards that are not a dollar more than it takes to incentivize plaintiffs’ attorneys to bring meritorious cases.

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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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F. Dario de Martino and Susan I. Gault-Brown are Partners at A&O Shearman. This post is based on their A&O Shearman memorandum.

In this statement, the SEC staff took the position that typical meme coins — a category of crypto assets inspired by internet memes, pop culture, or trending jokes — do not constitute “securities” under federal law.

In the view of the Division, transactions in these meme coins need not be registered under the Securities Act of 1933, nor exempt from registration because they do not involve an “offer and sale” of securities.

This effectively signals a hands-off regulatory approach for genuine meme coins, while cautioning that investors in such tokens will not be protected by federal securities laws if the tokens fail or lose value.

The staff’s stance aligns with recent remarks by Commissioner Hester Peirce — who noted that many meme coins are likely not securities — and reflects the SEC’s effort to clarify how traditional securities law definitions apply in the rapidly evolving crypto market.

The Staff Statement defines a “meme coin” as a type of crypto asset driven largely by social media buzz and community speculation rather than any inherent utility or investment promise. These tokens are typically marketed for entertainment or cultural purposes, often explicitly disclaiming any expectation of profit or practical use beyond novelty or community engagement. Their market value tends to be highly volatile and based purely on demand and viral sentiment — characteristics the SEC staff likened to collectibles (e.g., digital art or trading cards) rather than investment instruments.

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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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Mark T. Uyeda is the Acting Chair Throughout of the U.S. Securities and Exchange Commission. This post is based on his recent remarks. The views expressed in the post are those of Commissioner Uyeda, and do not necessarily reflect those of the Securities and Exchange Commission or the Staff.

I. Introduction

Thank you, Paul [Cellupica], for the thoughtful introduction and I appreciate the invitation to address the ICI’s 2025 Investment Management Conference. First, I’d like to congratulate Dorothy Donohue on her well-earned retirement. Dorothy has had an impressive career spanning both public and private service, with a deep knowledge of the fund industry and its legal framework. I have worked with her on many issues over the years. She will be missed, and I wish her well on her next chapter.

This year – 2025 – marks the start of a new presidential administration, which holds tremendous potential. It has been a privilege to serve these past couple of months as the Acting Chairman of the Securities and Exchange Commission. [1]

This year also marks a personal milestone – my thirtieth year of legal practice, which started out as a first-year associate in the ’40 Act practice of a major law firm. The practice was led by Richard “Dick” Phillips, one of the legends of the securities bar and, equally important, a former member of the SEC staff. Dick served the Commission during the 1960s in several capacities, including assistant to the chairman, assistant general counsel, and staff director of the SEC Corporate Disclosure and Investment Company Studies.

During that time, I learned a few things. First, I could distinguish between an open-end and a closed-end fund. And second, I learned to have a lot of respect for the SEC staff. READ MORE »

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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Jennifer Arlen is a Professor of Law at New York University School of Law. This post is based on her recent paper, and is part of the Delaware law series; links to other posts in the series are available here.

Delaware’s Caremark doctrine requires directors to exert oversight over legal risks and imposes personal liability for corporate traumas caused by legal violations on directors who knowingly or utterly breach those duties.  Duties and the threat of liability are heightened in the case of a Mission Critical Legal Risk (MCLR). Yet to date Delaware judges consistently dismiss Caremark against directors for poor oversight of a mission critical risk: cybersecurity. The reason is simple. Caremark oversight duties and liability applies to legal risk. Poor corporate cybersecurity often is a mission critical risk, but generally does not violate the law.

In a forthcoming article, I show that directors nevertheless can be held liable under Caremark for corporate trauma triggered by inadequate cybersecurity in an important class of cases. Specifically, directors should face potential liability under Caremark when the company had inadequate cybersecurity that risked (and later caused) substantial harm to business and government agency customers, and violated the law prior to the malicious cyber-event by knowingly making materially misleading statements to its business or government customers designed to defraud them into believing that the company’s cybersecurity systems and practices were materially better than they were, provided that these lies constituted a MCLR for the company. Directors in such circumstances should be liable for all corporate trauma caused by directors’ breach of their oversight duties, including losses from customer flight and litigation and sanctions arising from securities fraud cases predicated on the materially misleading statements to consumers.  I show that the derivate plaintiffs in the SolarWinds case likely would have avoided dismissal had they predicated their claims on the corporate trauma to SolarWinds from the confluence of its materially misleading statements about its cybersecurity, its apparent cybersecurity deficiencies, and the cyber-hack it suffered.

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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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Joni Jacobsen and Angela M. Liu are Partners at Dechert LLP. This post is based on a Dechert memorandum by Ms. Jacobsen, Ms. Liu, Julia Markham-Cameron, Christopher J. Merken, and Harnelle C. St Cloud.

Key Takeaways

In this edition of Dechert’s Securities & Derivative Litigation Quarterly Update, we:

  • Examine trends in federal securities class-action filings, which saw a slight uptick in 2024, with an increase in AI-related cases and notable declines in SPAC and cryptocurrency-related filings;
  • Discuss recent decisions applying the U.S. Supreme Court’s 2021 decision in Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System in which courts have denied class certification motions; and
  • Analyze the Supreme Court’s decisions to dismiss as improvidently granted two certiorari petitions in securities actions after oral argument in those cases.

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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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Kilian Moote is the US Head of ESG Advisory and Kiran Vasantham is the Head of Investor Engagement at Georgeson LLC. This post is based on their Georgeson memorandum.

Georgeson’s Global Institutional Investor Survey highlights some of the top priorities and strategies of institutional investors around the world.

Priorities for 2025 include executive pay, shareholder rights, climate transition and human capital management.

Such priorities can provide indicators for companies seeking to address potential risks and opportunities in a dynamic market environment increasingly shaped by active ownership.

Regulatory and policy changes in the US, as well as evolving political and cultural shifts, have injected new complexities into many areas of environmental, social and governance (ESG) discussions.

New public policy developments, such as the SEC’s staff legal bulletin (SLB) on 14M and the recent change to 13D-G reporting, are some of the structural changes affecting how issuers and investors engage.

One notable impact of the SEC’s SBL 14M is that it reverses the significant social policy inclusions found in SLB 14L, which had emphasized consideration of broader societal effects of shareholder proposals. As a result of this change, more issuers will likely seek and receive ‘no action’ relief on some ESG-focused shareholder proposals. As of February 19, 2025, there were already more ‘no action’ requests than during the entire 2024 proxy season.

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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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Robert J. Rhee is the John H. and Marylou Dasburg Professor of Law at the University of Florida Levin College of Law. This post is based on his recent article, forthcoming in the Journal of Corporation Law.

At the heart of the laws of firms lies an unsolved enigma: Although all owners presumably desire maximal profit irrespective of the form of firm, the rules of fiduciary duty diverge, as if the law seeks discretely disparate managerial behavior and thus qualitatively different business outcomes for each form of firm. The differences are not subtle shades of refinement, but quantum contrasts of discrete legal states. The law shuffles, reclassifies, and relocates core elements of the duty of care and the concept of good faith uniquely in each form of firm. Why? Despite apparent differences in legal expressions, a single fiduciary rule governs all forms of firms. My article, A Theory of Calibrated Fiduciary Duties in Firms, 51 Journal of Corporate Law (forthcoming 2026), theorizes the idea of calibrated fiduciary duties, which explains why the law does and should vary the fiduciary standards of conduct in agency, noncorporate firms, and corporations.

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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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Tamara Brightwell is a Partner at Wilson Sonsini Goodrich & Rosati. This post is based on a Wilson Sonsini memorandum by Ms. Brightwell, Brandon Gantus, Michael Klippert, Allison Spinner, Lisa Stimmell, and Courtney Mathes.

With the 2025 proxy season upon us, this Alert highlights governance, disclosure, and engagement considerations for companies preparing for their 2025 annual meetings. [1] Many of the governance and disclosure matters discussed below remain consistent with prior rulemakings and disclosure requirements adopted by the U.S. Securities and Exchange Commission (SEC). However, in recent weeks, we have seen a significant shift in the discourse and approach regarding environmental, social, and governance matters, particularly related to diversity, equity, and inclusion (DEI) disclosures. These disclosures had become common in proxy statements and were seen as responsive to the expectations of proxy advisory firms and large institutional investors; however, as our 2025 Environmental and Social Developments alert discusses in greater detail, recent developments have changed how some of these stakeholders are approaching these matters. We highlight below several considerations relating to these developments but note that the approach on these issues by many other stakeholders remains in flux.

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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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Rusty O’Kelley is a Managing Director, and Rich Fields is the Head of Board Effectiveness Practice at Russell Reynolds Associates. This post is based on a Russell Reynolds memorandum by Mr. O’Kelley, Mr. Fields, Laura Sanderson, Gretchen Anderson, Joy Tan, and PJ Neal.

In today’s rapidly shifting business landscape, boards are simultaneously learning to navigate through unprecedented complexities while facing expectations to deliver sound advice for sustainable growth. Boards are under a range of intense pressures (Figure 1), including understanding cybersecurity and data privacy implications (66% of board directors identify this as a top three operational risk concern), steering through political and regulatory risk (44%), and overseeing organizational change (38%). As their behaviors, decisions, and actions impact key aspects of the organization, the need for boards to deliver meaningful results is more urgent than ever.

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