December 2, 2022

It’s Not Goodbye

Not to brag, but I currently hold the honor of “most favorite person in the world” with my almost-three-year-old. I’m soaking it up because I know this glory will be fleeting. With our two older kids, I’ve already been edged out by the iPad, other hobbies, and school buddies. As every parent knows, it’s fun to see our kids start to spread their wings, but also a little sad to let them go.

After a lot of soul-searching, I have come to realize that I only get one chance at this life, and I don’t want to spend all of it behind a computer screen – as fun as that’s been! The moment has come for me to put more energy toward my family, friends and in-person happenings. For those reasons, I am doing something I have never done before: stepping back – or at least, sideways – from a career opportunity. I am certainly not the first to make this decision, but boy has it been a tough one!

Our intrepid Senior Editor, John Jenkins, who you all know and love, is going to be taking over the Managing Editor role here – effective at year-end. His 35 years of practice on high-profile activist battles, deals, and day-to-day corporate governance and securities work give him a deep understanding of what practitioners need to be successful. He’s already been doing most of the heavy lifting on the “providing practical guidance” front – which he is somehow able to do in a straightforward and entertaining way, despite the complex material. I will never tire from reading John’s analysis, whether it’s a 10-page article in The Corporate Counsel or a 3-sentence response on the Q&A forum. What’s different is that now, he’ll also be the person you go to if you need to “speak to the manager.”

Eventually, you’ll need to make an update to your address book to make sure you still receive all of our blogs – stay tuned for more info. But other than that, not much will change for you – and please don’t delete my contact info! I’ll still be here in a part-time role – which will include blogging, lining up webcasts and events, and helping with whatever John calls on me to do.

In a couple of months, I’ll also be returning to private practice at a firm, which will keep me closer to the issues that everyone is dealing with and make the guidance that I share here more useful. One thing that’s surprised me about this job is how much I’ve missed working directly with clients. I’m looking forward to climbing back in the trenches – with the added benefit of the past 6 years’ of experience. In addition to that and being part of a firm that is very involved in the local community, I have to admit that I’ve also missed hearing crazy stories from colleagues in other practice areas. Is there anything more entertaining than story time from the litigators about “what not to do”?

I hope to land at something closer to a 40-hour workweek – which would leave more breathing room for family, friends and local involvement. If anyone has tips for sticking to this – a “reduced schedule” in the law firm world – I’m all ears. Drop me a note at I’ll collect these nuggets of wisdom and share them in a follow-up blog!

Liz Dunshee

December 2, 2022

A Look Back: What We’ve Accomplished

“You get out of it what you put into it,” is what my track coach always said when we asked if we were in for an easy practice. What a guilt trip! But it worked – we almost always won – and it’s stuck with me.

I care – maybe too much? – about these sites, everyone who uses them and the results that we deliver to our shareholders, which means it’s very difficult for me to set aside work on nights and weekends. It feels like there is always more to be done! Building on the incredible foundation provided by Jesse Brill and Broc Romanek, these efforts have resulted in a lot of “wins” that have been very rewarding. During the past year, the team here has:

– Increased our event attendance, memberships, and blog followers

– Launched and the 1st Annual Practical ESG Conference

– Delivered practical guidance on cutting-edge issues via numerous webcasts & special events – e.g., our DEI workshop series, our climate disclosure event, and our special session on the SEC’s new pay vs. performance rules – each of which exceeded our attendance expectations and received rave reviews

– Continued to share high-quality & timely guidance on the vast array of issues that our members are grappling with, by answering hundreds of Q&A posts (thanks John, and everyone who submits questions & answers!), providing in-depth and practical analysis through our newsletters, and staying on top of updates with our handbooks, checklists, blogs and practice areas

We have done all of this (and more) while also making significant internal corporate changes over the past 3-4 years in our operations, sales, marketing, member services and tech infrastructures. Although this operation has been running for 45+ years, it has in many ways felt like working at a start-up, because of all of the new processes and ideas that are flowing. I spend much of each day on “executive stuff,” which has been an eye-opening experience and one that I am very grateful for.

Thank you to our Board Chair Nathan Brill, our CEO Mel Yarbrough, and my fellow executive leadership team members, our VP of HR & Operations Dawn Chyten and our VP of Sales Jim Currie. Dawn, Jim and I have spent an incalculable number of hours together in Zoom meetings! Thank you as well to the entire management team here for their leadership and dedication. I appreciate everyone’s patience with me, the opportunities for growth, and the many things I’ve learned from each and every one of these colleagues along the way.

Thank you as well to the entire CCRcorp team of employees – I can’t name everyone here, but I’d be remiss if I didn’t call out my “right-hand woman” for all of our events, our Operations & Event Manager, Victoria Newton. I have been blown away by the dedication and creativity of each person on the CCRcorp staff. It has been an honor – and fun! – to be part of this team.

Liz Dunshee

December 2, 2022

The Most Rewarding Thing

I am very pleased with our business results, but the most rewarding part of this job, by far, has been the relationships that have come with it. I can’t really put into words how much I’ve learned from all of you, and how much I’ve appreciated your willingness to contribute to this community. Whether it’s by speaking on webcasts and at events, recording podcasts, writing articles, participating in our Q&A forums, sending tips and notes in response to the blogs, making suggestions for the sites – every interaction has been valuable.

I had very big shoes to fill when I took over the lead editorial position from Broc three years ago, and you all stepped up to continue to make these sites and events exceptional. The caliber of our speakers and contributors provides a one-of-a-kind learning experience on corporate & securities law issues, yes. But it also reinforces the value of “giving back,” and has often left me star-struck! Thank you to every single person who has contributed, in whatever unique way has suited you.

Special thanks, of course, also goes to our Editorial team: past & present. I’ll be forever grateful to Broc for giving me the opportunity to join this company; to John Jenkins and Dave Lynn for their wisdom and guidance throughout my full-time role here, and their humor; to Lynn Jokela, Emily Sacks-Wilner, Julie Gonzales, Ngozi Okeh, Lawrence Heim, and Zach Barlow for their enthusiasm and high-quality work; and to Alan Dye, Mark Borges, Mike Gettelman, Mike Melbinger, and all of our other regular contributors, for their kindness to me and their dedication to sharing invaluable guidance with fellow practitioners.

I’m incredibly proud of the team that we’ve built, the diverse perspectives we’ve sought out, and all of the practical guidance that we’ve provided, all while being careful not to take ourselves too seriously. It really has been an honor to support this group and to bring together other experts in our community. I’ll continue to be reachable at my email here – – and on LinkedIn and Twitter. I’m looking forward to my ongoing involvement, and continuing to see you all at conferences!

Liz Dunshee

December 1, 2022

Rule 15c2-11: SEC Extends Relief for Private Debt Issuers to 2025

John blogged a few weeks ago that private debt issuers would soon be finding themselves between a rock (significantly expanded disclosure requirements) & a hard place (reduced liquidity), due to expiring relief for broker-dealer quotation obligations under amended Rule 15c2-11. According to this Simpson Thacher memo, the SEC swooped in with a no-action letter yesterday to postpone doomsday to 2025. Here’s an excerpt:

The original compliance date for amended Rule 15c2-11 was September 28, 2021, which, pursuant to a series of no-action letters issued by the staff of the SEC’s Division of Trading and Markets, was extended to January 4, 2023 for issuers of fixed income securities. Following requests from market participants for additional relief, on November 30, 2022, the SEC issued a no-action letter temporarily extending the compliance date for issuers of fixed income securities to January 4, 2025.

In this memorandum, we briefly describe the scope of information typically provided by private issuers of fixed income securities under current practice and how amended Rule 15c2-11 will result in changes to that approach if permanent relief is not provided.

This blog from Bass Berry’s Jay Knight summarizes the comment letter submitted earlier this week by the ABA’s Fed Reg Committee – which requested an extension of the no-action relief that had been slated to expire this January, until the SEC can determine whether further exemptive relief and additional rulemaking would be useful.

Last week, the National Association of Manufacturers & the Kentucky Association of Manufacturers submitted a comment letter to request that Rule 15c2-11 be amended to permanently exempt Rule 144a fixed-income securities from the new requirements.

Liz Dunshee

December 1, 2022

Audit Committees: Avoiding the “Kitchen Sink” Phenomenon

Yesterday, the Center for Audit Quality released a new 34-page report in connection with researchers at the University of Tennessee Knoxville’s Neel Corporate Governance Center and the Pamplin College of Business at Virginia Tech. The title captures the audit committee’s eternal plight of being the dumping ground for new responsibilities: “Audit Committee: The Kitchen Sink of the Board.”

The report first notes the perils of the “kitchen sink” approach:

– Perpetually assigning emerging risks to the AC (i.e., the “kitchen sink” approach) can lead to suboptimal oversight due to overworked ACs and a “check the box” mentality.

– Traditional AC skill sets relate to financial reporting and internal controls. As AC responsibilities evolve, it is important that AC skill
sets evolve as well.

– Some AC members individually advocate for the AC to oversee these emerging risks because of their personal skills and interests. In these cases, AC members should be careful not to succumb to overconfidence bias and ensure that a clear succession plan is in place without them.

– To effectively allocate oversight responsibilities, ACs may need to consider situations when it makes sense to push back on their boards.

And it offers these tips to help audit committees balance the heavy workload:

– Develop skill sets that match oversight responsibilities

⸰ Actively assess the committee’s key risks when planning for continuing education opportunities and use specialists where needed.

⸰ Regularly evaluate whether AC refreshment is needed to keep up with the necessary skill sets to properly oversee evolving risks.

⸰ Carefully manage the AC agenda by mapping out risks to allow for deep dives on a rotation of topics throughout the year.

– Free up time for additional responsibilities by managing the agenda & relationships

⸰ Work with management to fine-tune the types of materials delivered in advance and hold AC members accountable for reading them.

⸰ Reflect on whether meetings allowed for sufficient time to evaluate management’s response to key risks, and schedule meetings so that they can go long or continue at an additional time when needed.

⸰ Maintain a collaborative relationship with management to foster transparency.

⸰ Adopt leading practices to manage shared governance across board committees.

This is all pretty common-sense stuff, but it’s helpful to see it gathered in one place. The recommendations are based on interviews with audit committee chairs, investors, and people involved with proxy disclosures – 2200 minutes of conversation!

Liz Dunshee

December 1, 2022

Board Diversity: Investor Coalition Wants Disclosure About Individual Directors

I blogged yesterday about a drop in board gender diversity at big US banks, the impact that big asset managers have had on US board demographics, and impending “comply or explain” board diversity targets for UK-listed companies. But there is even more to say on this topic!

A couple of weeks ago, the “Russell 3000 Board Diversity Disclosure Initiative” – an investor coalition that is co-led by the State Treasurers of Illinois and Connecticut – announced that it had sent its annual letter to Russell 3000 companies, requesting more detail on the racial, ethnic & gender composition of the board.

We blogged about this coalition a couple of years ago when it launched. This year, there are three versions of the letter, customized for:

Top performers: 386 companies provide “exemplary disclosure” of the demographics of individual directors, often via a matrix

Middle performers: 1,847 companies provide disclosure on an aggregate basis or only for certain directors

Bottom performers: 702 companies do not provide board race, ethnicity and gender in public filings

The letters highlight the benefits of disclosure on an individual director basis and call on the “middle” & “bottom” performers to up their game – based on self-identification from directors. This blog from Perkins Coie’s Allison Handy provides three considerations for companies that received the letter:

1. The letters are framed as a request for disclosure, not as a proposal, demand, or new voting policy. The letters refer to voting policies of organizations included in the initiative, such as versions of “vote against” policies for companies with no board diversity and/or no board diversity disclosures.

They note that some member organizations are considering strengthening board diversity voting policies and expanding engagement on this topic. We are not aware of any announced voting policies that would penalize a company that reports board diversity information on an aggregate, rather than individual, basis. In light of this framing, many companies may decide that no direct response is needed at this time.

2. The gap between the requested disclosure and the Nasdaq board diversity matrix is not clearly articulated. It is worth noting that the Nasdaq matrix is intended to provide decision-useful diversity disclosures that are comparable across companies. The Nasdaq matrix requires disclosure of specified racial and ethnic characteristics, disaggregated by gender. The press release and letters from the initiative call for individualized disclosure, but do not explain why investors need individual, rather than aggregate, diversity data.

Currently, large institutional investor and proxy advisor policies addressing board diversity disclosures generally accept either individual or aggregated diversity information. If a company does decide to engage with investors involved in this initiative, it might consider seeking clarity on why individualized disclosures are important.

3. Some directors may have privacy concerns about individualized disclosures. As acknowledged in Corp Fin’s Regulation S-K CDIs 116.11 and 133.13, as well as Nasdaq’s board diversity rules, companies need the consent of directors to disclose personal, self-identified diversity characteristics.

Not all directors are willing to have their diversity characteristics disclosed on an individualized basis, and companies may face more pushback on disclosure when disclosure is made on an individual, rather than aggregate, basis. Before committing to a new disclosure regime requested by investors, companies should consider these potential privacy concerns.

Check out our “D&O Questionnaire Handbook” for guidance on how to ask directors about their demographics, and our “D&O Biographical/Director Qualifications & Skills Disclosure” for more guidance about disclosures.

Liz Dunshee

November 30, 2022

Board Diversity: Women’s Gains Stall at Big Banks

Big banks have been leading the way in board gender diversity – but this Bloomberg article says that the percentage of women on boards at these institutions has recently dropped. Here’s an excerpt:

Gains have stalled as women reached a third of seats, which researchers have said is a key level for gaining influence in the boardroom. Groups such as 50/50 Women on Boards are now trying to nudge representation higher, to reflect women’s near parity in the workplace overall.

The average number of women directors was unchanged at 4.7, out of an average board size of 13.7. The percentage of female directorships fell to 34.6% from 35%. That compares with 32% for the S&P 500 Index.

The drop was caused by 3 banks each appointing a new male director last month – which shows just how precarious diverse representation can be. Of the 18 banks in the index, Citigroup has the highest percentage of women on its board – 58%!

It is disappointing that Citibank’s composition is still so exceptional, not to mention that it’s problematic to be stuck in the mud on the basics as we look ahead to more leaders & stakeholders identifying as non-binary. Imagine if there were headlines whenever male representation surpassed 50%…which is the case for every bank in the index besides Citi.

Liz Dunshee

November 30, 2022

Board Diversity: What’s Moved the Needle?

A recent working paper from the National Bureau of Economic Research poses this question:

There is a growing emphasis on diversity, equity, and inclusion (DEI) in American society. A majority of S&P 500 companies now employ a chief diversity officer (Green, 2021), and since 2017, nearly 2,000 CEOs have pledged to advance DEI within their firms (PwC, 2021). Yet, women continue to be underrepresented in the highest tiers of US leadership, including in business, where women account for only 5% of public company CEOs and 18% of top executives despite accounting for 48% of the labor force and 40% of managers (ILO, 2020).

To increase gender diversity in corporate leadership, governments around the world have enacted quotas requiring companies to appoint women to their board of directors. In the US, where as recently as 2016 only 13% of public companies’ directors were women, California adopted a board gender quota — which courts have since overturned — and similar regulations have been proposed in other states. That lawmakers are turning to controversial mandates begs the question: Why don’t firms appoint more female leaders on their own, and how might they be encouraged to do so without government intervention?

The researchers found that “private ordering” by shareholders has had the greatest impact on increasing board gender diversity – in particular, due to voting policies of the “Big 3” asset managers following State Street’s “Fearless Girl” campaign that was launched in March 2017. Here’s what they concluded, based on board composition data at companies where the Big 3 had an ownership stake:

We estimate that their campaigns led American corporations to add at least 2.5 times as many female directors in 2019 as they had in 2016. Firms increased diversity by identifying candidates beyond managers’ existing networks and by placing less emphasis on candidates’ executive experience. Firms also promoted more female directors to key board positions, indicating firms’ responses went beyond tokenism. Our results highlight index investors’ ability to effectuate broad-based governance changes and the important impact of investor buy-in in increasing corporate-leadership diversity.

The influence of the Big 3 has become much more politically charged since 2017, causing the institutions to look for ways to disseminate voting power and become slightly less vocal, but stating diversity expectations was definitely groundbreaking at the time. The voting policies of BlackRock & SSGA continue to articulate diversity aspirations, and leave the door open to “case-by-case” voting decisions for companies that don’t meet them. Vanguard’s voting policy is more disclosure-based.

Liz Dunshee

November 30, 2022

Board Diversity: More Progress Across the Pond

UK-listed companies are assembling more diverse boards & executive management teams than we are in the US, ahead of new rules from the UK Financial Conduct Authority that will require disclosure in annual reports beginning in April 2023.

In addition to numerical disclosure in a new table about the diversity of the board and executive management, the rules call for “comply or explain” disclosure against diversity targets set by the FCA. Those targets are: that corporate boards be comprised of at least 40% women directors and have at least one director from a non-white minority ethnic background, and that at least one “senior board position” (Chair, CEO, CFO, or Senior Independent Director) be held by a woman.

ISS ESG recently collected data from affected companies about their progress on these requirements. Here’s an excerpt from their blog that summarizes the findings:

ISS ESG Director & Executives Diversity Data collated at the end of April showed that 18 percent of FTSE AllShare constituents (excluding investment trusts) did not yet meet any of these targets and that only 14 percent had met all three.

Six months later and roughly five months ahead of implementation, ISS ESG finds a smaller proportion – 14 percent – of FTSE AllShare constituents were not yet meeting the targets while, conversely, those that met all three had grown by five percentage points to 19 percent.

Moreover, an analysis of data as of November 1 finds that 40 percent of FTSE AllShare constituents had met the target of at least 40 percent of women on the board, 53 percent have at least one senior board position held by a woman and 64 percent have at least one minority director, up eight, five and five percentage points respectively since late April.

Liz Dunshee

November 29, 2022

Caremark Liability: SolarWinds Dismissal Shows It’s Still a High Bar

John blogged a few months ago about lessons for boards from recent Delaware cases. A recent Fried Frank memo layers on the Court of Chancery’s recent dismissal of Caremark claims in a derivative suit against SolarWinds’ directors, relating to the massive cyber attack that occurred at that company two years ago and the 40% tumble in the company’s stock price that followed the incident. Here’s an excerpt with key takeaways:

This is the second Delaware decision in the past year to address a board’s oversight duties under Caremark with respect to cybersecurity risk. In both cases (the other being Sorenson, relating to the hacking of Marriott’s hotel reservation system), Caremark claims were asserted following a cybersecurity attack by third party hackers that exposed customers’ personal information. In both cases, the court dismissed the Caremark claims and reaffirmed that—notwithstanding a recent increase in Caremark claims following corporate traumas—it remains very difficult for a plaintiff to succeed on a Caremark claim. The court emphasized in both cases that a board’s failure to prevent a corporate trauma is not sufficient for liability under Caremark unless the failure was due to “bad faith” by a majority of the directors.

The court found that the board’s inattention to cybersecurity issues and “subpar” system for reporting and monitoring cybersecurity risk did not, without more, indicate “bad faith.” The board allegedly: did not receive relevant information from the committees with responsibility for cybersecurity; did not discuss cybersecurity even once in the two years leading up to the Sunburst attack; and ignored warnings about cybersecurity deficiencies. The court found no implication of bad faith, however, as the board: “did not allow the company itself to violate law”; “did ensure that the company had at least a minimal reporting system about corporate risk, including cybersecurity”; and did not “ignore[] sufficient ‘red flags’ of cyber threats to imply a conscious disregard of a known duty, indicative of scienter.”

Notwithstanding the dismissal of the case, the court’s opinion underscores the need for boards to implement appropriate systems to monitor and address cybersecurity risk. The court acknowledged the growing and consequential risks posed by cybersecurity threats. Indeed, the court characterized cybersecurity as a “mission-critical” risk for online providers, as they rely on customers sharing with them access to their personal information.

The memo takes a look at key facts that were relevant to the court’s decision to dismiss this case, and provides additional practice pointers specific to boards & to management.

Lest anyone get too carried away with celebrating this dismissal, it’s important to remember that derivative suits are only one flavor of liability. SolarWinds reported on a Form 8-K last month that it had settled a securities class action, also arising out of the December 2020 cyber incident, for $26 million. This blog from ISS Securities Class Action Services summarizes that complaint – and notes that the SEC may also be considering an enforcement action against the company.

Cybersecurity oversight continues to be a hot-button issue for the SEC’s disclosure initiatives as well – making an appearance in the Strategic Plan that I blogged about yesterday. All of this adds up to a topic that boards cannot ignore. For an additional resource, check out Dave’s 21-minute podcast about cybersecurity exposure preparedness for directors.

Liz Dunshee