Yearly Archives: 2025

Letter on Delaware Senate Bill 21

Posted by Jeff Mahoney, Council of Institutional Investors, on
Wednesday, March 12, 2025
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Jeffrey P. Mahoney is General Counsel at the Council of Institutional Investors. This post is based on a recent CII letter.

The Council of Institutional Investors (CII or Council) writes to respectfully express our opposition to the enactment of Delaware Senate Bill 21 in its current form (SB 21). [1]

CII is a nonprofit, nonpartisan association of U.S. public, corporate and union employee benefit funds, other employee benefit plans, state and local entities charged with investing public assets, and foundations and endowments with combined assets under management of approximately $5 trillion. CII members are major long-term shareowners with a duty to protect the retirement savings of millions of workers and their families, including public pension funds with more than fifteen million participants – true “Main Street” investors through their pension funds. Our associate members include non-U.S. asset owners with about $4 trillion in assets, and a range of asset managers with approximately $58 trillion in assets under management.

CII is a leading voice for effective corporate governance, strong shareowner rights and sensible financial regulations that foster fair, vibrant capital markets. CII promotes policies that enhance long-term value for U.S. institutional asset owners and their beneficiaries. [2]

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Another “Super Year” for Activism

Posted by Kai H. E. Liekefett and Derek Zaba, Diligent Market Intelligence, on
Tuesday, March 11, 2025
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Kai H. E. Liekefett and Derek Zaba are Co-Chairs of the Shareholder Activism & Corporate Defense Practice at Sidley Austin LLP. This post is based on a Diligent memorandum by Mr. Liekefett, Mr. Zaba, Josh Black, and Antoinette Giblin.

2024 was called a “super year” for political elections, with 72 countries and half the world’s population going to the polls. Incumbent political parties across the globe lost these elections at a dizzying rate as voters punished those seen as responsible for inflation and other economic woes. It was also a booming year for shareholder activism, but incumbent directors fared much better than their political counterparts at the ballot box as activists failed to persuade investors of their case for change in proxy contests that went to a vote. With many expecting 2025 to be another “super year” for activism, here is a look at what we observed in 2024.

The post-pandemic surge in activism continued with 255 campaigns launched by primary and partial-focus activists in 2024, up from 251 the year prior and a 7% increase when compared to 2022, according to DMI data. These figures reflect a continued surge in activism in the U.S. and Asia, including Japan and South Korea. Meanwhile, activism activity in Europe softened due to the ongoing conflict in Ukraine and general economic uncertainty.

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Proxy Advisors and Institutional Shareholders Revise Voting Guidelines on Board Diversity

Posted by Eric Juergens, William D. Regner, and Amy Pereira, Debevoise & Plimpton LLP, on
Tuesday, March 11, 2025
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Eric T. Juergens and William Regner are Partners, and Amy Pereira is an Associate, at Debevoise & Plimpton LLP. This post is based on a Debevoise memorandum by Mr. Juergens, Mr. Regner, Ms. Pereira, Gordon Moodie, and Steven J. Slutzky.

Several proxy advisors and institutional shareholders have revised their voting guidelines for the 2025 proxy season to scale back their expectations regarding board diversity. The renewed scrutiny on board diversity unfolds against a backdrop of intensifying “anti-DEI” sentiment in the United States, causing many public companies to reconsider their DEI commitments and related disclosures.

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Prepare for Changes to the Shareholder Engagement Process

Posted by Brian V. Breheny, Raquel Fox, and Marc S. Gerber, Skadden, Arps, Slate, Meagher & Flom LLP, on
Tuesday, March 11, 2025
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Brian V. Breheny, Raquel Fox, and Marc S. Gerber are Partners at Skadden, Arps, Slate, Meagher & Flom LLP. This post is based on a Skadden memorandum by Mr. Breheny, Ms. Fox, Mr. Gerber, Joshua Shainess, and Kyle Wiley.

As companies prepare for engagement with their shareholders in connection with the 2025 annual meeting season, they should be prepared for a change in the approach followed by institutional investors. These changes are being driven by recent Securities and Exchange Commission (SEC) staff guidance related to the ability of institutional investors to report their beneficial ownership of more than 5% of a company’s voting, equity securities with the SEC on Schedule 13G.

On February 11, 2025, the staff of the SEC’s Division of Corporation Finance issued updated and new guidance regarding the eligibility of shareholders to file Schedule 13G instead of Schedule 13D beneficial ownership reports. The guidance notes that a shareholder’s ability to report on Schedule 13G depends on whether it holds the securities with a purpose or effect of “changing or influencing” control of the issuer. The staff withdrew previous guidance that stated that engagement with management on executive compensation, environmental, social or other public interest issues, or corporate governance topics unrelated to a change of control typically would not prevent the company from using Schedule 13G.

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2025 Proxy Season Preview

Posted by Matteo Tonello, The Conference Board, Inc., on
Monday, March 10, 2025
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Matteo Tonello is Head of Benchmarking and Analytics at The Conference Board, Inc. This post is based on a Conference Board memorandum by Ariane Marchis-Mouren, Senior Researcher, Corporate Governance at The Conference Board.

Shareholder proposals reached record levels in 2024, signaling continued shareholder engagement pressures for 2025. Companies should continue proactively engaging with shareholders, monitor policy updates, and ensure compliance with regulatory requirements to navigate this dynamic landscape effectively.

Key Insights 

  • The 2025 proxy season is expected to see sustained shareholder activism, evolving priorities in environmental and social (E&S) proposals, and a renewed focus on corporate governance.
  • Companies continue to face competing pressures from shareholder proposals both for and against environmental, social & governance (ESG) topics, with anti-ESG filings increasing in prominence.
  • As some investors deprioritize E&S issues amid political shifts, core governance topics such as executive compensation are expected to face heightened scrutiny this proxy season.
  • Average support for shareholder proposals peaked in 2021 and steadily declined through 2024; an exception is governance proposals, which are back to 2021 levels.
  • With “proposal fatigue” growing among institutional investors, companies can strengthen investor support by providing detailed cost-benefit analyses of shareholder proposals.

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ESG Misrepresentations and Bond Investors

Posted by James Park (UCLA), on
Monday, March 10, 2025
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James Park is Professor of Law at UCLA School of Law. This post is based on his recent paper.

When the Securities and Exchange Commission (SEC) describes its mission as protecting investors, it mainly has stock investors in mind. The stock market crash of 1929 prompted Congress to pass the federal securities laws. It believed that ordinary investors needed protection from Wall Street insiders who exploited the speculative fervor in stock prices that preceded the crash to enrich themselves. In contrast, investors in corporate bond markets were viewed as needing less protection. The private placement exemption was meant in part to relieve issuers from the disclosure requirements of the Securities Act of 1933 when selling bonds to sophisticated investors such as insurance companies.

In the modern era, the SEC’s enforcement cases against public companies for misleading investors have most often emphasized stock investor losses. The agency’s accounting fraud cases routinely argue that a company issued materially misleading information to boost its stock price. The losses from the wave of securities fraud in the late 1990s and early 2000s prompted Congress to give the SEC the power to create funds to compensate investors for their losses. The SEC generally distributes fund recoveries to stock investors.

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Impacts for US Companies of the Proposed EU Omnibus Package

Posted by Beth Sasfai, Emma Bichet, and Jack Eastwood, Cooley LLP, on
Monday, March 10, 2025
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Beth Sasfai is a Partner, Emma Bichet is a Special Counsel, and Jack Eastwood is an Associate at Cooley LLP. This post is based on their Cooley memorandum.

On February 26, 2025, the European Commission (Commission) published a proposed ‘Omnibus package’ to streamline some of the recently adopted European Union (EU) sustainability laws. The laws in scope of the proposed Omnibus package are the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy Regulation, the Corporate Sustainability Due Diligence Directive (CSDDD) and the Carbon Border Adjustment Mechanism (CBAM).

The Omnibus package is a legislative proposal and could still change before being adopted. It will now pass to the European Parliament and member states in the European Council for negotiation. Both the Parliament and the Council have the power to amend any of the provisions in the proposal. This is worth tracking closely for US companies that are in scope of these laws since it could have a significant impact on their EU legal compliance obligations.

Below are some key takeaways from the Commission’s proposed Omnibus package and its potential impacts for US companies preparing for compliance with key EU sustainability laws.

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Remarks by Commissioner Peirce Before the Investor Advisory Committee

Posted by Hester M. Peirce, U.S. Securities and Exchange Commission, on
Sunday, March 9, 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, Brian [Schorr], and good morning to you all at this first Investor Advisory Committee meeting of 2025. Thank you to all the panelists joining us today. Although the Commission’s make-up has changed and we are seeing Commission priorities shift, our shared desire to ensure vibrant capital markets and informed investors will continue to unite and guide us.

Today’s first panel is set to discuss how public companies disclose the risks and opportunities associated with artificial intelligence. I hope that one theme in the conversation will be the value of principles-based disclosure and the value of affording companies the discretion to make disclosures based on what is material to their particular circumstances. Principles-based disclosure rules do not prescribe corporate disclosure, but instead provide the framework within which companies make material disclosures to investors. Attempts to fill disclosure rulebooks with requirements specific to climate, artificial intelligence, or any other hot topic disserve investors in several ways. First, companies that do not have material things to say about these topics can be forced to spend company resources saying them. Second, even mere disclosure requirements can end up being an indirect way for a securities regulator to micromanage substantive company operations. Third, these disclosure requirements can distract corporate boards and managers from doing more important things. Fourth, corporate disclosures filled with answers to prescriptive disclosure frameworks drown out material information. Clear and comprehensive disclosure should be our goal, not homogenization for its own sake. I anticipate that the panel of experts Alvin has gathered will provide us with much to think about.

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Statement by Acting Chair Uyeda on Climate-Related Disclosure Rules

Posted by Mark T. Uyeda, U.S. Securities and Exchange Commission, on
Saturday, March 8, 2025
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Mark T. Uyeda is the Acting Chairman of the U.S. Securities and Exchange Commission. This post is based on his recent statement. 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.

Today, I am taking action on The Enhancement and Standardization of Climate-Related Disclosures for Investors rule that was adopted by the Commission on March 6, 2024 (the “Rule”). [1] The Rule is currently being challenged in litigation consolidated in the Eighth Circuit [2] and the Commission previously stayed effectiveness of the Rule pending completion of that litigation. [3] The Rule is deeply flawed and could inflict significant harm on the capital markets and our economy.

Both Commissioner Peirce and I voted against the Rule’s adoption. [4] Commissioner Peirce said that then-existing disclosure rules were sufficient and that the “[R]ule’s anticipated benefits do not outweigh the costs.” [5] She argued that “only a mandate from Congress should put us in the business of facilitating the disclosure of information not clearly related to financial returns.” [6] I stated that the Commission was “without statutory authority or expertise” to address climate change issues and that “this [R]ule is climate regulation promulgated under the Commission’s seal.” [7]

During the comment period, many submissions likewise urged that the Rule not be adopted. Among the reasons were that the Rule would require a large volume of financially immaterial information, financially material climate-related risks were already subject to disclosure under existing rules, and the proposed rules overstepped the SEC’s regulatory authority. [8]

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Texas is Disrupting Delaware’s Dominance through Innovation

Posted by Jonathan Macey (Yale Law School) and Roberta Romano (Yale Law School), on
Friday, March 7, 2025
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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, and Roberta Romano is Sterling Professor of Law at Yale Law School and Co-Director of the Yale Law School Center for the Study of Corporate Law. This post is part of the Delaware law series; links to other posts in the series are available here.

Disruptive innovation has come to the jurisdictional competition for corporate charters.

For decades, the biggest obstacle facing states seeking to challenge Delaware’s dominance in the jurisdictional competition for corporate charters was their inability to replace Delaware’s massive inventory of highly developed case law precedent. This body of law, coupled with the promise that an elite cadre of sophisticated judges would interpret new legal disputes against the background of these precedents, allowed Delaware to offer what its competitor-states could not: certainty and predictability. Until now that is.

Delaware’s position seemed insurmountable because competing with Delaware required other states to match Delaware’s certainty and predictability. This certainty and predictability was possible because of Delaware’s large body of precedential case law and its specialized and exclusive trial court. While a state could alleviate an absence of controlling precedents by incorporating Delaware decisions into its case law, as Delaware did when it superseded New Jersey as the leading domicile state in the early Twentieth Century, that does not resolve the problem going forward of having judges with expertise deciding new issues as the business environment changes. Companies that wanted to do complex deals like public offerings of debt or equity, the pursuit of an active mergers and acquisitions program, the implementation of antitakeover devices and major restructurings relocated to Delaware because their advisors told them that the law in rival jurisdictions was too undeveloped and uncertain. Companies, and their officers and directors have a high demand for legal certainty when facing litigation risk and are willing to pay for it. And pay for it they did, by opting in to the high-fee, litigation world of Delaware corporate law.

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