ExxonMobil’s recently announced retail voting program has prompted a negative reaction from certain segments of the corporate governance industrial complex, so I guess it was inevitable that somebody would eventually cobble together a lawsuit challenging the program. According to this Investment Executive article, “eventually” is now:
The City of Hollywood Police Officers’ Retirement System has filed a proposed class action in U.S. district court on behalf of Exxon shareholders, against the company and its board of directors, alleging that they are breaching their fiduciary duties in connection with the company’s adoption of its “retail voting program.”
The program, which was approved by the U.S. Securities and Exchange Commission (SEC) last month, enables the company to automate retail investors’ votes in favour of management.
The proposed lawsuit is seeking an injunction to prevent the company from introducing the program, which it alleges infringes on shareholders’ voting rights and is designed to stifle shareholder dissent and entrench management.
It argues that the program impairs the voting rights of shareholders that opt into the program, “based on inadequate disclosures.” It also argues that the votes of shareholders that can’t or don’t opt in will be diluted.
By adopting the program, the lawsuit alleges that the company’s directors breached their fiduciary duties.
“By attempting to weaponize a largely disengaged body of retail shareholders … the [program] affirmatively violates federal law, and constitutes both an unlawful entrenchment device and a breach of fiduciary duty under New Jersey law,” the plaintiffs’ filing alleged.
As I mentioned in my earlier blog, I was already planning to enroll in any similar program that the companies I invest in offer, but now that I know I’m allegedly being “weaponized,” I’m even more eager to sign up. I’ve never been weaponized before, and frankly, it sounds kind of sexy. (I don’t get out much.)
It didn’t take long for Prof. Ann Lipton to flag one of the potential problems with this lawsuit – the uncertainties concerning whether shareholders have a right of action to bring claims alleging violations of the proxy rules. I don’t know all of the intricacies about implied private rights of action, but my guess is that this is very much a live issue in the case. The federal courts haven’t been kind to claims asserting private rights of action under Rule14a-9 in recent years, and to the extent that other provisions of the proxy rules are claimed to provide such a right, my guess is that they’ll be equally skeptical.
By the way, check out this blog from Broc Romanek highlighting a Cooley Alert that contends some of the arguments asserted against Exxon’s program are misleading.
As far as public sector and public sector adjacent jobs go, being a PCAOB director is a pretty lucrative gig. Currently, the PCAOB’s Chair makes $673,000 and the other board members make $574,000. If you think that’s a lot of money, you’re not the only one – SEC Chairman Paul Atkins thinks so too. In fact, he thinks it’s too much money. In a July 2025 statement soliciting PCAOB board candidates, he criticized the growth in the PCAOB’s budget in recent years and set his sights squarely on board member compensation, noting that “an evaluation of Board member compensation will be among the items the Commission considers in connection with its review of the Board’s 2026 budget.”
According to an article in Friday’s WSJ, the PCAOB appears to have gotten the message in preparing its fiscal 2026 budget:
The Public Company Accounting Oversight Board has proposed a 20% cut to the salaries of its board members as it faces scrutiny from the Securities and Exchange Commission over compensation levels.
The cut was part of a preliminary 2026 budget the U.S. audit regulator submitted to the SEC in recent weeks, people familiar with the matter said. The plan suggests shrinking the overall budget by roughly 10% from the anticipated 2025 amount. This year’s spending is expected to come in below the $399.7 million the SEC approved last year.
The SEC, which oversees the PCAOB, has until Oct. 31 to propose revisions to the preliminary budget, followed by an audit-board vote in November and SEC vote in December, according to SEC rules. The process could be delayed by the government shutdown.
Is this cut big enough to satisfy Chairman Atkins & his colleagues? I don’t know, but it is worth noting that even with the proposed cuts, the WSJ article says that PCAOB board members would still be much more highly compensated than their counterparts at the SEC. It cites 2022 figures showing that Atkins’ predecessor, Gary Gensler, earned about $168,000, while commissioners Caroline Crenshaw and Hester Peirce earned roughly $158,000.
All things considered, I think I’d prefer to be the head of the other SEC – the Southeastern Conference. According to media reports, that SEC Chairman, Gary Sankey, earns $4 million a year.
If you’re traveling to Las Vegas today for our “Proxy Disclosure and 22nd Annual Executive Compensation Conferences,” be sure to join us at 4 pm in the Primrose Hallway at The Virgin Hotels for a casual evening reception celebrating CCRcorp’s 50th anniversary. You’ll be able to collect your credentials for the PDEC Conferences, network with other 2025 PDEC attendees and sponsors, and enjoy complimentary drinks, appetizers and entertainment – plus a celebratory toast to 50 years of our corporate counsel resources!
There’s still time to register to attend our PDEC Conferences in person or virtually. Just email us at info@ccrcorp.com, call us at 800-737-1271, or visit our online store. We look forward to seeing you there!
Still not sure if you want to attend? Well, we’ve given you plenty of our own sales pitches over the past several months. Now, we ask that you consider some advice from an independent third party:
“Buy the ticket, take the ride…and if it occasionally gets a little heavier than what you had in mind, well…maybe chalk it up to forced consciousness expansion. . .” – Hunter S. Thompson, Fear and Loathing in Las Vegas
While the SEC’s climate disclosure rules remain bogged down in a litigation quagmire, the California Air Resources Board (CARB) continues its efforts to implement California’s own climate disclosure regime (even though those requirements are also the subject of ongoing litigation). Last month, CARB released a preliminary list of over 3,100 companies that could be subject to upcoming reporting requirements under either SB 253 or SB 261.
Last Friday, CARB released a draft reporting template for those companies that will be required to report their Scope 1 and Scope 2 emissions under SB 253 beginning next year. The draft template states:
The template is intended to streamline reporting, especially for entities disclosing GHG emissions for the very first time. Reporting entities are not currently required to use the template; its use is voluntary for the 2026 reporting cycle. CARB will provide guidance on later reporting cycles as part of its regulatory process. CARB is seeking input on this draft template to help CARB further refine the template.
CARB invites reporting entities and other stakeholders to review the draft template and provide feedback on its structure, substance, and alignment with SB 253’s overarching objectives.
The template is organized into the following sections:
– Organization Information
– Third-Party Verification
– Inventory Boundary
– Scope 1 and Scope 2 Disclosure
– Methodology
– De Minimis / Minor Sources
– California MRR Fields (if applicable)
– Emission Reductions (if applicable)
The template also includes optional fields for future reporting years as CARB further develops the program. These optional fields include base year emissions to support intraorganizational comparison, providing more transparency to investors and stakeholders.
CARB is seeking comments on the draft reporting template, either through the public docket that will remain open through October 27, 2025, or by email to climatedisclosure@arb.ca.gov.
In a notice posted on its website this week, the California Air Resources Board (CARB) indicates that final regulations that were expected to be issued this week will now be delayed until the first quarter of 2026. The notice states:
Following the California Air Resources Board’s (CARB) August 2025 workshop, CARB staff have made available public resources to solicit feedback from stakeholders, including a Climate-Related Financial Risk Report Checklist (09/02/25), a preliminary list of regulated entities and voluntary stakeholder survey tool (09/24/25), and a draft reporting template for Scope 1 and Scope 2 GHG Emissions (10/10/25). Given the large volume of public comments staff have received, and given ongoing input related to identifying the range of covered entities, CARB is proposing an updated timeline for bringing the initial rulemaking (including the fee-related provisions) to the board in Q1 2026. CARB is continuing to take feedback on the draft reporting template for Scope 1 and Scope 2 GHG emissions at CARB’s public docket through 10/27/25. Feedback related to the preliminary list of covered entities can be submitted through an online survey. Other comments or inquiries can be submitted to Climatedisclosure@arb.ca.gov.
The CARB notice does not indicate that the compliance dates for companies will change, even though the work on the regulations remains ongoing. Those companies who are required to make climate disclosures under SB 261 are still expected to submit their reports by January 1, 2026, while those companies that are covered by SB 253 are expected to report their Scope 1 and Scope 2 emissions by June 30, 2026.
One of the sessions at the 2025 Proxy Disclosure Conference that I was really looking forward to was my interview with Sebastian Gomez Abero, who serves as Acting Deputy Director for Legal and Regulatory Policy and Associate Director in the Disclosure Review Program in the SEC’s Division of Corporation Finance. Unfortunately, the government shutdown has made it impossible for Sebastian to join us at the conference.
But the show must go on! We will now open the Proxy Disclosure Conference with a new session, “Dave Lynn & Brian Breheny: Former Corp Fin Staff on Corp Fin’s Agenda,” during which Brian Breheny from Skadden and I will discuss the priorities of the Division of Corporation Finance at the SEC and what those priorities mean for you. This promises to be an interesting and lively conversation about all that is going on in Corp Fin that you do not want to miss!
Yesterday, Glass Lewis issued a major announcement about what it calls “substantial enhancements to its business model.” Glass Lewis points out that these enhancements are made possible by technological advancements, in particular AI and smart technology that enables customization of its proxy voting advice. The announcement notes:
Over the next two years, Glass Lewis plans to make two significant changes to the way it applies proxy voting policies and delivers its highly-regarded proxy research and voting recommendations.
First, Glass Lewis will help all clients move beyond standard policies, guiding them in creating voting frameworks that reflect their individual investment philosophies and stewardship priorities. A majority of the firm’s clients already use their own custom policy guidelines or a specific thematic policy. The goal is to enable all clients to vote according to their own policies.
Second, Glass Lewis will move away from singularly-focused research and vote recommendations based on its house policy and shift to providing multiple perspectives that reflect the varied viewpoints of clients. While still under development, the spectrum of perspectives could range from one that leans toward management and others that reflect more governance fundamentals. Beginning in 2027, clients will be able to access any or all of these perspectives to inform their proxy voting decisions.
“Technology has advanced enough now to allow us to apply smart technologies and AI in particular to complex proxy voting processes,” said Mann. “With these tools, Glass Lewis is modernizing proxy voting practices, removing the perception of influence, and transforming proxy voting into a more strategic and client-driven experience.”
The abandonment of benchmark voting policies in favor of more bespoke voting advice could potentially complicate the proxy voting and engagement environment, as companies try to determine how investors will vote on specific proposals and director elections. At the same time, the technology-enabled move to more tailored voting advice could ultimately result in more moderate (and less extreme) voting policy outcomes. In any event, the move by Glass Lewis is big news for the proxy advisory business, as well as for companies and investors.
A big topic for discussion this week has been whether companies will elect to proceed with IPOs while the SEC Staff is furloughed during the government shutdown, following the updated Rule 430A guidance that Meredith discussed last Friday. While the SEC guidance is potentially helpful to companies considering IPOs in the near term, it is also important to consider the approach that the stock exchanges will take with respect to listing companies that may have not completed (or even started) the Corp Fin review process.
In updated FAQs posted by Nasdaq when the current government shutdown began, the exchange provided the following relevant guidance:
Q: Would Nasdaq list a company that had cleared all SEC comments before the shutdown?
Nasdaq generally would list a company that satisfies the listing requirements if the company cleared all SEC comments before the shutdown, regardless of whether the registration statement was already effective before the shutdown or becomes effective during the shutdown pursuant to the provisions of section 8(a) of the 1933 Act.
Q: Would Nasdaq list a company with outstanding SEC comments?
In limited situations, where the company has substantially completed the comment process before the shutdown and acquiesces to any outstanding SEC comments in a manner that clearly addresses the SEC comment, Nasdaq would consider listing the company upon its registration statement becoming effective. In making a determination, among other factors, Nasdaq will consider the nature and materiality of the outstanding comments, the history of the company and any prior review of its filings by the SEC, and whether the company’s counsel and auditor are willing to represent that they believe all disclosure and accounting comments, respectively, have been fully addressed. In addition, Nasdaq would consider any supplemental disclosure related to the shutdown, such as additional risk factors. Any company that believes it is in this situation and considering whether to proceed should contact Nasdaq’s Listing Qualifications Staff at + 1 301 978 8008 or DL -lnitialListingTeam@nasdag.com.
Q: Would Nasdaq list a company that had not yet received SEC comments or that first filed a registration statement during the shutdown?
Notwithstanding the ability for a registration statement to become effective during the shutdown, the U.S. capital markets depend upon the accuracy and completeness of registration statements and SEC review has been a longstanding part of this process. At this time, Nasdaq would not generally list a company in connection with an IPO unless the company has substantially completed the comment process with the SEC on its 1933 Act registration statement prior to the shutdown. However, Nasdaq recognizes the uncertain duration of the shutdown and its effects on companies. We are open to discussions with the government and legal, audit and banking advisors on controls, standards and processes that could adequately protect investors while allowing capital raising activity to continue. Nasdaq may revisit its position in light of any such discussions.
Q: Can a company currently trading in the over-the-counter market list on Nasdaq during the shutdown?
A company currently trading in the over-the-counter market that satisfies Nasdaq’s listing requirements can file a 1934 Act registration statement to list on Nasdaq, and Nasdaq will certify that registration statement. However, if a company trading on the over-the-counter market must file a 1933 Act registration statement to raise capital to satisfy Nasdaq’s listing requirements, Nasdaq will treat it similarly to the way we treat an IPO (as discussed above) – we will not approve the application unless the company has received and addressed all SEC comments on that registration statement.
As a self-avowed Swiftie, you can imagine how excited I was when Taylor Swift’s new album The Life of a Showgirl happened to drop on my birthday a couple weeks ago. I did receive my very own special edition vinyl that day, but I never actually got a chance to sit down and listen to the album because October is a very busy travel month for me! I have been on the road this week for the Society for Corporate Governance Western Regional Conference, and of course next week I will be arriving in Las Vegas to be a part of the 2025 Proxy Disclosure Conference and the 22nd Annual Executive Compensation Conference. Like Taylor, I will be drawing on my inner Showboy for inspiration as I “perform” with our great ensemble of speakers and our action-packed (and always entertaining) agenda.
To be a part of our October Conferences (either in-person or online), you can register online or reach out to our team by emailing info@ccrcorp.com or calling 1.800.737.1271. I look forward to seeing you there!
It is not every day that the SEC approves a Form 1, which is the form used to apply to the SEC to operate as a national securities exchange. Just before the government shutdown, TXSE Group Inc. announced that the SEC approved the Texas Stock Exchange’s Form 1 registration to operate as a national securities exchange. The announcement notes:
TXSE is the first fully integrated national securities exchange to receive SEC approval in decades. TXSE has already completed its proprietary order matching engine and exchange platform, incorporating the latest hardware and software to deliver low-latency performance, flexibility, and scalability in an evolving trading and regulatory environment.
Importantly, TXSE will provide comprehensive listing solutions for corporate issuers and ETP sponsors that are aligned with their priorities and fully transparent. TXSE worked closely with the SEC staff throughout the approval and public comment process.
“Today’s approval marks a pivotal moment in our effort to build a world-class exchange rooted in alignment, transparency, and partnership with issuers and investors,” said James H Lee, founder and CEO of TXSE and its parent company, TXSE Group Inc. “Real competition for corporate listings in the United States has finally arrived.”
TXSE will launch trading as well as ETP and corporate listings in 2026. Over the long run, TXSE’s mission is to reverse the decades-long decline in the number of U.S. public companies by reducing the burden of going and staying public while maintaining some of the highest quantitative standards in the industry.
TXSE has already led the push for key legislative and legal reforms to strengthen Texas’ pro-business environment and establish the state as the premier jurisdiction for corporate headquarters, listings, and exchange operators. TXSE will continue working alongside Texas leadership to advocate on behalf of issuers and investors to reform policy at the state, federal, and regulatory levels.
Texas Governor Greg Abbott offered his congratulations to the TXSE on the SEC’s approval, stating:
“Texas is swiftly becoming America’s financial hub,” said Governor Abbott. “I congratulate the Texas Stock Exchange for the launch of Texas’ own trading platform that will spur economic development and expand the financial might of our great state around the world. Working together, we will make Texas stronger and more prosperous than ever before.”
The TXSE has developed a proprietary order-matching engine and exchange platform that employs hardware and software to deliver low-latency performance designed to meet industry standards. This infrastructure is designed to operate within today’s complex trading landscape and stringent regulatory environment. The platform supports listing solutions for both corporate issuers and ETP sponsors, and seeks to address evolving market demands for transparency, efficiency, and reliability.
The SEC acknowledged in its approval that many attributes of the TXSE’s listing rules, including listing standards and governance guidelines, are substantially similar to the pre-existing national security exchange frameworks. According to the SEC, the TXSE’s corporate governance standards are “designed to promote independent and objective review and oversight of the accounting and auditing practices of listed issuers and to enhance audit committee independence, authority, and responsibility.”
It will be interesting to observe the launch of a startup national securities exchange – we do not get an opportunity to see that happen too often!
