Shapeshifting DEI Whistleblowers: What to Know and Expect in 2025

Elizabeth Bieber, Austin Evers, and Jennifer Loeb are Partners at Freshfields Bruckhaus Deringer LLP. This post is based on a Freshfields memorandum by Ms. Bieber, Mr. Evers, Ms. Loeb, Young Park, and Ginger Hervey.

The landscape for Diversity, Equity, and Inclusion (DEI) in the United States has shifted dramatically in 2025. What was once viewed as a cornerstone of corporate social responsibility is now a flashpoint for legal scrutiny, political backlash, and reputational risk. At the center of this transformation is an increasingly empowered and incentivized figure: the whistleblower.

A New Enforcement Era

Countering DEI has become a top priority for the current administration in Washington. Executive orders issued in January 2025 explicitly target what the administration calls “illegal DEI,” though the term remains legally undefined. These orders direct federal agencies to investigate and dismantle DEI programs across sectors, with the Department of Justice (DOJ) leading the charge.

In a memo, Deputy Attorney General Todd Blanche announced the launch of a “Civil Rights Fraud Initiative,” signaling DOJ’s intent to use the False Claims Act (FCA) to pursue federal contractors who “knowingly violate civil rights laws” through DEI programs. The FCA is a potent tool: it allows whistleblowers to file qui tam lawsuits on behalf of the government and receive a share of any recovery, which can be triple the amount of the alleged fraudulent claims.

This memo was a call to action. Federal agencies are not equipped to root out “illegal DEI” or “egregious practitioners” alone. Efforts to have agencies send certifications to companies were uncoordinated and non-standardized, and ultimately unlikely to root out the kinds of specific practices at companies that had sophisticated counsel. Federal agency budgets have been slashed and the brain drain in the federal government is real. Starting a new initiative takes resources: time, attention, and money to deploy a large-scale fishing campaign.

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Weekly Roundup: July 11-17, 2025


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This roundup contains a collection of the posts published on the Forum during the week of July 11-17, 2025

The Art and Science of Earn-Outs in M&A


Oversight in the AI Era: Understanding the Audit Committee’s Role


Texas Enacts New Law to Regulate Proxy Advisory Firms



What It Takes to Lead in the Boardroom: Insights for Prospective Directors


The One Big Beautiful Bill Act & M&A



How to Control Controller Conflicts


Board Leadership in Navigating Volatility


Fortune 1000 Say-on-Pay: An Analysis of Shareholder Engagement in Response to Adverse Votes


The 2025 Proxy Season in 7 Charts


Prepared Remarks for the SEC Roundtable on Executive Compensation Disclosure Requirements


Prepared Remarks for the SEC Roundtable on Executive Compensation Disclosure Requirements

Ola Peter Gjessing is a Lead Investment Stewardship Manager at Norges Bank Investment Management (NBIM). This post is based on his remarks for the SEC Roundtable on Executive Compensation Disclosure Requirements.

A big thanks to the SEC. Thanks to everyone participating, either here or on the stream.

Thanks for inviting me and my institution, the Norwegian Fund [1], which reaps the benefits of investing in America. The majority of our global portfolio we invest here in America.

As a shareholder and investor, we are increasingly getting involved in discussions on executive compensation. Here are five points I would like to make.

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The 2025 Proxy Season in 7 Charts

Lindsey Stewart is Director of Investment Stewardship Research at Morningstar, Inc. This post is based on his Morningstar memorandum.

The end of June marks the end of another proxy year, and the past year certainly looks very different from previous ones, particularly when it comes to sustainability.

Overall, the number of ESG shareholder resolutions has fallen by around a third in 2025, but support levels have stabilized at just above 20%. Yet, once again, there’s a big difference in shareholder support for “G” resolutions on corporate governance compared with “E&S” resolutions on environmental and social themes.

Stabilizing Support for Far Fewer Shareholder Resolutions

The charts below illustrate the 2025 proxy year in the context of the last 10 years. They show a cut of Morningstar’s proxy-voting data as of mid-June, which is not the full proxy year, but it covers more than enough of the year to be able to draw out the key trends on the volume and shareholder support for ESG resolutions these past 12 months.

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Fortune 1000 Say-on-Pay: An Analysis of Shareholder Engagement in Response to Adverse Votes

Neil McCarthy is Co-Founder and Chief Product Officer, G. Michael Weiksner is Co-Founder and Chief Technology Officer, and James Palmiter is CEO and Co-Founder at DragonGC. This post is based on a DragonGC memorandum by Mr. McCarthy, Mr. Weiksner, Mr. Palmiter, Markus Hartmann, Jennifer Carberry, and Nicholas Sasso.

Background

SEC rules require that public companies hold a separate shareholder advisory vote to approve the compensation of executives. This covers compensation disclosed per S-K Item 402 including CD6A, the compensation tables, and other narrative executive compensation disclosures.

Most years for most companies this vote passes with greater than 80% support from those shareholders who vote on the matter. But sometimes for some companies the approval rate is less than 80%. Sometimes the resolution receives less than a majority and fails to pass at all.

These adverse outcomes are typically driven by an adverse voting recommendation from one or more of ISS, Glass Lewis and large institutional investors for violating their voting policies for executive compensation. While SEC rules only require a non-binding advisory vote, in practice these entities provide an enforcement mechanism.

Companies that have received an adverse say-on-pay vote nearly always respond with a shareholder engagement program during the following season.

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Board Leadership in Navigating Volatility

Randi Lesnick and Andy Levine are Co-Chairs of Corporate Practice, and Joel May is a Partner at Jones Day. This post is based on a Jones Day memorandum by Ms. Lesnick, Mr. Levine, Mr. May, and Jennifer Lewis.

In Short

The Situation: Public company boards are facing an unprecedented convergence of destabilizing forces, including geopolitical shocks, inflation, supply-chain disruptions, social unrest, and rapid technological change. At the same time, stakeholders continue to have high expectations for effective board oversight and value creation.

The Result: Boards can seek to direct the management of this rapid pace of change by adopting structures and processes that promote swift, disciplined decision-making, continuous learning, and candid communication. With these elements in place, directors empower management to pivot decisively, safeguard the enterprise, and capitalize on emerging opportunities, thereby preserving and enhancing long-term value.

Looking Ahead: Forward-thinking boards treat volatility as a strategic catalyst rather than a threat. By anticipating issues, developing flexible response frameworks, and thoughtful stakeholder engagement, boards can create a governance framework that anticipates disruption rather than merely reacts to it. Directors who master this proactive approach fulfill their fiduciary duties to the corporation and its shareholders while positioning the company for success during volatile times.


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How to Control Controller Conflicts

Lucian Bebchuk is the James Barr Ames Professor of Law, Economics, and Finance and Director of the Program on Corporate Governance at Harvard Law School, and Kobi Kastiel is Professor of Law at Tel Aviv University. This post is part of the Delaware law series; links to other posts in the series are available here.

We recently posted on SSRN our article How to Control Controller Conflicts, which will be published later this year in the Journal of Corporation Law’s fiftieth anniversary issue.

Our article provides a unified approach to protecting public investors in controlled companies in an effective and internally consistent manner. The article also provides a strong critique of Delaware’s recent legislation on the subject.

We focus on a question that Delaware law has grappled with for several decades: How should corporate law address agency problems in companies with a controlling shareholder (“controlled companies”)? Specifically, when—and to what extent—should approval by independent directors, without a supplemental majority-of-the-minority (MOM) approval, be sufficient to “cleanse” corporate actions involving a controller conflict? Viewing such actions as “cleansed” means that, despite the presence of a conflict, courts would apply the deferential business judgment standard, which generally governs unconflicted director decisions, and thereby preclude judicial scrutiny of the actions’ merits.

After decades-long swings of the judicial pendulum, a recent legislative amendment to the Delaware General Corporation Law, commonly referred to as SB21, adopted an approach that requires a different treatment for freezeout settings and non-freezeout settings. While a MOM vote alongside an independent director approval is necessary for cleansing freezeout decisions, an independent director approval alone is sufficient for cleansing decisions in non-freezeout settings.

Our analysis explains why SB21’s critical distinction between freezeouts and non-freezeout settings is untenable. Allowing cleansing by independent director approval alone in all non-freezeout transactions, we show, is conceptually inconsistent with SB21’s prescription that such approval can never suffice to cleanse freezeout decisions. READ MORE »

California Climate Accountability: Getting Started on SB 253 and SB 261 Reporting

Subodh Mishra is Global Head of Communications at ISS STOXX. This post is based on an ISS-Corporate memorandum by Fredrik Lundin, Senior Sustainability Solutions Product Manager, and Ravi Mahapatra, Sustainability Product Associate, at ISS-Corporate.

Key Takeaways:

  • Emissions Disclosure: SB 253 requires companies in scope to annually disclose scope 1 and 2 GHG Emissions (Scope 3 starting 2027)
  • Financial Risks: SB 261 requires companies to report biannually on climate-related financial risks
  • Future Guidance: CARB will develop guidance around the climate acts, but these will likely not be finalized until late 2025.
  • Getting Ready for Emissions Reporting: Companies can begin developing disclosures aligned with SB 253 requirements using available guidance and standards.
  • Framework Clarity: SB 261 is informed by the TCFD and IFRS S2 frameworks. Companies can proactively address the regulation by aligning their reporting with these standards, as CARB continues to finalize specific requirements.

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The One Big Beautiful Bill Act & M&A

Deborah Paul and Rachel Reisberg are Partners at Wachtell, Lipton, Rosen & Katz. This post is based on their Wachtell memorandum.

The One Big Beautiful Bill Act (the “OBBBA”) was signed into law on Friday, and, while not the paradigm shift of 2017’s Tax Cuts and Jobs Act (the “TCJA”), it introduces important changes affecting both domestic and cross-border transactions, many of which are effective for tax years beginning after December 31, 2025.  The overall impact of the OBBBA in specific situations, especially for U.S. multinationals, will require careful analysis.  However, in many respects, the new law preserves or enhances the status quo, avoiding the disruption of otherwise sunsetting TCJA provisions and, in the domestic context, favoring acquirors of depreciable tangible assets and certain leveraged transactions.

Notably, the OBBBA omits the so-called “revenge tax” included in earlier versions of the bill that raised particular concern among debt issuers and lenders and threatened to decrease foreign investment into the United States.  The “revenge tax” would have increased federal income tax rates on certain income of residents of, and multinationals parented in, countries imposing extraterritorial or deemed discriminatory taxes (such as digital services taxes).  The provision was dropped as a result of negotiations with the G7, which agreed in principle to seek to exempt U.S.-parented groups from certain aspects of the OECD’s global minimum tax framework.  The longer-term impact of the G7 resolution, including whether and to what extent the OECD and member countries ultimately adopt exemptions for U.S. companies, remains to be seen.

On the domestic front, the OBBBA makes permanent several taxpayer-favorable TCJA provisions.  Taxpayers will again be entitled to deduct immediately 100% of the cost of depreciable tangible assets, likely increasing the appeal of acquiring assets as compared to stock.  The deduction for up to 20% of the business income of certain noncorporate investors in certain pass-through entities is made permanent, preserving the tax efficiency of partnership, rather than corporate, joint venture structures for those investors.  The OBBBA permanently restores the pre-2022 TCJA limitation on interest expense deductions by applying the 30% limit to an amount that approximates EBITDA, rather than EBIT.  But it imposes new limits by excluding from the EBITDA calculation certain foreign-source items of income.  The net impact of these changes on particular leveraged transactions will need to be assessed.

For U.S. multinationals, the OBBBA is a mixed blessing.  It widens the scope of income of U.S.-parented “controlled foreign corporations” (“CFCs”) that is subject to current federal income taxation, but generally improves the U.S. parent company’s ability to credit foreign income taxes.  Specifically, GILTI (the TCJA’s tax on CFC earnings in excess of a deemed 10% return on tangible assets) is replaced with a more costly tax on “net CFC tested income,” a concept that does not reflect a deduction for the return on tangible assets.  However, the OBBBA liberalizes the foreign tax credit regime by increasing the amount of foreign taxes that may be credited against net CFC tested income and by no longer requiring interest expense and research and experimental expenditures to be allocated against such income.  The OBBBA also revises the treatment of mid-year sales of CFCs, requiring a pro rata income allocation based on the period of stock ownership.

M&A participants in both the domestic and cross-border contexts should be mindful of the new law, and its provisions should be factored into the negotiation of deal pricing, structure and other terms.

What It Takes to Lead in the Boardroom: Insights for Prospective Directors

Evan Epstein is an Executive Director at the UC Center for Business Law at UC Law San Francisco, Jane Sadowsky is a Senior Advisor at Moelis & Company, and Kaley Karaffa is the Head of Board Advisory in the Americas at Nasdaq. This post is based on their Nasdaq Center for Board Excellence insights.

In today’s new era of governance, board members who can shape and sustain a strong board culture are emerging as enablers of organizational success. The Wharton Alumni for Boards community and Nasdaq Center for Board Excellence convened a panel of seasoned directors to share insights and practical strategies for enhancing board engagement. The panel included Evan Epstein, Executive Director at the UC Center for Business Law in San Francisco, and host and author of the Boardroom Governance podcast and newsletter, Jane Sadowsky, who currently serves on two public and one private equity-backed corporate boards and is a senior advisor at Moelis & Company and a founding member of Extraordinary Women on Boards, and Kaley Karaffa, Head of Board Advisory, Americas and APAC at Nasdaq.

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