ESG, DEI AND HUMAN CAPITAL DISCLOSURES

The prevalence of public company human capital practices and disclosures ebbs and flows. Over the last two years, DEI-related metrics in incentive plans and references in annual reports and proxy statements receded amid legal headwinds, shifting policies and recalibrated investor voting guidelines.

As the next reporting season approaches, companies should ensure that disclosures reflect any updates to DEI policies and align with current practices, reconcile policies with evolving regulatory and legal guidance, and calibrate to increasingly divergent stakeholder expectations. Nasdaq-listed issuers should consider removing the prescriptive board-diversity table, which is no longer required after the Fifth Circuit’s December 2024 ruling. Risk factors in the 2026 annual report should be updated to match current commitments and oversight practices, and companies that revised or omitted DEI metrics in 2025 annual compensation plans should ensure disclosures in their annual report and proxy statement reflect those amendments. Companies should also monitor further developments in proxy advisory firm and institutional investor voting guidelines on DEI matters.

Bottom line: ensure practices, governance documents, and public disclosures are consistent and responsive to investor regulatory and other stakeholder expectations which may not be straightforward to do because of conflicting perspectives. For more information about 2025 trends in the use of DEI metrics in incentive plans and DEI references in human capital and proxy disclosures, see our article, Evolving Trends in Human Capital Practices and Disclosures, published in A&O Shearman’s 23rd Annual Corporate Governance & Executive Compensation Survey.

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