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Today, catch the complimentary full-day online audio conference on TacklingGlobalWarming.com: “Tackling Global Warming: Challenges for Boards and their Advisors.” There is no need to register or pay; just click and learn.

We are providing this webconference as a “thank you” to our community – and due to the seriousness of the issues related to climate change. All of the panels will be archived if you can’t catch it today. Below is the agenda:

1. What the Studies Show: A Tutorial: Margaret Leinen, Chief Scientific Officer, Climos

2. The Business Case for Tackling Global Warming :
– John Stowell, Vice President, Environmental Health & Safety Policy, Duke Energy
– Bill Ellis, Visiting Fellow, Yale School of Forestry and Environmental Studies

3. The Board’s Perspective: Strategic Opportunities and Fiduciary Duties:
– Michael Gerrard, Partner, Arnold & Porter
– Stephen Jones, Shareholder, Greenberg Traurig

4. The Investor’s Perspective: What They Seek and Their Own Duties:
– Janice Hester Amey, Director of Corporate Governance, CalSTRS
– Doug Cogan, Deputy Director of Social Issues Services, Institutional Shareholder Services
– David Gardiner, Founder, David Gardiner & Associates
– Mindy Lubber, President, Ceres

5. Why You Need to Re-Examine Your D&O Insurance Policy:
– Wylie Donald, Partner, McCarter & English
– Peter Gillon, Shareholder, Greenberg Traurig

6. Disclosure Obligations under SEC and Other Regulatory Frameworks:
– Miranda Anderson, VP, Investor Analysis, David Gardiner & Associates, LLC
– Maureen Crough, Partner, Sidley & Austin
– Jeff Smith, Partner, Cravath Swaine & Moore

7. How (and Why) to Modify Your Contracts: Force Majeure and Much More:
– Wylie Donald, Partner, McCarter & English
– Michael Gerrard, Partner, Arnold & Porter

8. Due Diligence Considerations When Doing Deals:
– Maureen Crough, Partner, Sidley & Austin
– Jeff Smith, Partner, Cravath Swaine & Moore

In addition to the webconference, there are plenty of other complimentary resources related to boards and climate change.

ESG = Environmental, Social and Governance

If you aren’t familiar with the acronym “ESG,” you will be soon as investors have reached a broad consensus that non-financial factors have a significant impact on investment performance. Just listening to Mindy Lubber, President of Ceres, during today’s webconference – “Tackling Global Warming: Challenges for Boards and their Advisors” – brings this point home. Ceres leads the Investor Network on Climate Risk, a group of leading institutional investors with collective assets of over $4 trillion.

To learn how some of the largest pension funds deal with ESG, see this new report (which gives a comprehensive overview of the different approaches taken by funds in various parts of the world). Also, ISS recently blogged about how ESG is playing a role in the investment process.

Bellwether Analysis: Delaware Chancery Court Dismisses Backdated Options Derivative Case

From Travis Laster: On June 7th, Vice Chancellor Strine of the Delaware Court of Chancery issued his opinion in Desimone v. Barrows, thereby providing a third major Delaware decision on stock option practices. There is much to digest in this 75-page opinion (which is posted in the CompensationStandards.com “Backdated Options” Practice Area). Here are some highlights:

1. On pages 38-43, VC Strine charts two scenarios involving backdating, one which he states would not give rise to any claim against directors and another which would. The core difference in the scenarios is whether the directors had reason to know that their actions were contrary to law. VC Strine’s paradigms will provide significant guidance to practitioners addressing option situations.

2. VC Strine rejects the idea that a “continuing wrong” exists when there have been a series of backdated options. Consistent with Ryan v. Gifford, VC Strine views each grant as a separate event. In Desimone, that meant that the plaintiff could not challenge grants pre-dating his stock ownership under Delaware’s continuous ownership rule.

3. As many commentators predicted, VC Strine holds that a board comprised of a majority of disinterested and independent directors can obtain a Rule 23.1 dismissal of stock option backdating claims. The Vice Chancellor distinguishes Ryan as a case in which half the board was conflicted and Tyson as a case in which there were detailed allegations of domination and control. VC Strine reaches this conclusion despite the fact that “Sycamore has essentially admitted in public filings that many [grants] were backdated.” The key issue under Rule 23.1, however, is not whether misconduct occurred, but rather “whether the … Board should be divested of its authority to address that misconduct.”

4. VC Strine notes at several points that he doubts whether any recognizable claim, other than a theoretical claim of waste based on overcompensation, could be asserted based on “bullet-dodging.” At that point, negative information has been disclosed to the markets and a grant at fair market value should not be problematic. Indeed, he observes that a contrary rule would incentivize option grants before the release of negative information, creating a counter-intuitive compensation strategy.

5. Desimone challenged various officer grants made under a plan that did not require fair-market-value grants, expressly permitted below-market-value grants, and under which virtually all employee grants were handled by a single executive officer without direct board oversight or involvement. VC Strine concludes that a challenge to these grants at most implicates a Caremark theory. He finds that Desimone failed to plead sufficient red flags to support any type of Caremark claim.

6. VC Strine holds that large grants of options to executive officers permit a pleading-stage inference of director knowledge of the terms of the grants. At the same time, however, VC Strine explicitly rejects the argument that the knowledge of any one director can be imputed to the others for purposes of demand excusal. Prior to this decision, Delaware courts had not meaningfully addressed imputation of knowledge among directors. VC Strine concludes that the complaint at most called into question the two members of the Compensation Committee and did not impugn the independence or disinterestedness of a majority of the board.

7. With respect to grants made to the outside directors, VC Strine considered the board to be interested without conducting any type of materiality analysis. He then held that the complaint did not state a claim as to these grants because the stockholder-approved plan provided for an automatic grant of 30,000 market priced options each year, as of the date of the annual meeting. Because the directors “took the good with the bad” in accordance to what the stockholders approved, no breach of fiduciary duty claim was stated.

Because of its overarching treatment of a variety of stock option scenarios, Desimone is likely to become the bellwether case for backdating analysis. The holding on director imputation of knowledge is also quite significant and potentially has far reaching implications, particularly because the questions of directors knew and when they knew it frequently create the dividing line between a care and loyalty claim.

– Broc Romanek