September 25, 2020

BRT Says It Wants to Put a Price on Carbon…Over the Next 3 Decades

Last week, the Business Roundtable released these “Principles & Policies Addressing Climate Change” – a 16-page statement that declares the US should adopt a “market-based approach” to reduce emissions in line with the Paris Agreement. The BRT is careful to note that carbon should be priced only where it is environmentally and economically effective and administratively feasible, and in a way that continues to foster innovation & competitiveness. This Politico article summarizes the BRT’s positions. Here’s an excerpt:

A “market-based mechanism” is a broad term, and the Business Roundtable did not recommend any one particular design. It called for putting a price on carbon as a means to reduce emissions since “a clear price signal is the most important consideration for encouraging innovation, driving efficiency, and ensuring sustained environmental and economic effectiveness.”

Examples include direct taxation of carbon dioxide emissions as well as cap-and-trade schemes, such as legislation that passed the House in 2009 but fizzled in the Senate.

Any revenues that come from any market-based system should be used to support economic growth, reduce societal impact, and aid people and companies that are the most negatively affected, the goups said. And it should be linked with “at least a doubling of federal funding for research, development and demonstration of (greenhouse gas) reduction technologies.”

As this WaPo article notes, it’s looking like corporate interests may be more likely to claim a seat at the table the next time climate change legislation is considered, versus trying to kill those efforts outright, and that might help us all. However, the BRT’s principles envision reducing emissions by at least 80% from 2005 levels by 2050 and come at a time when the BRT is still drawing scrutiny of last year’s “stakeholder capitalism” pledge – the latest shot being this letter last week from Senator Elizabeth Warran (D-Mass.).

I suspect that a 30-year goal for reducing emissions is not what investors have in mind when they refer to “long-termism” – so if companies are hanging their hats on the BRT timeline, they probably also need to have some convincing talking points for engagements. As illustrated by this “open letter” issued last week by PRI, investors also continue to want companies to reflect climate-related risks in financial reporting.

Director Information Rights: The Latest “WeWork” Gift

We don’t get to blog much about The We Company since its IPO imploded, but their ongoing litigation recently brought us a nugget of corporate governance case law out of the Delaware Court of Chancery. In this opinion, Chancellor Bouchard decided as a matter of first impression that management cannot unilaterally preclude a director from obtaining the company’s privileged information.

The directors who were being kept in the dark here were members of a special committee formed last fall who were opposing the company’s motion to dismiss a complaint that the company filed in April against SoftBank, and they wanted privileged info that had been shared among company management, in-house counsel and outside counsel. The motion to dismiss was brought by a new committee consisting of two temporary directors, which was formed in May.

The info at issue isn’t the info that was shared between the new committee and its counsel, but between the company and its counsel – info about how the new committee was established, etc. Here’s the holding:

This decision holds, under basic principles of Delaware law, that directors of a Delaware corporation are presumptively entitled to obtain the corporation’s privileged information as a joint client of the corporation and any curtailment of that right cannot be imposed unilaterally by corporate management untethered from the oversight and ultimate authority of the corporation’s board of directors. Accordingly,the Special Committee is entitled to receive the privileged information of the Company it is has requested, which, to repeat, does not concern privileged communications between the New Committee and its own counsel.

This opinion is of interest because isolating director factions or underperforming directors through the use of special committees is one avenue that companies use to minimize those directors’ activities when they can’t otherwise be removed and won’t resign – but as this case emphasizes, director information rights must be honored. This blog from Frank Reynolds explains that there is a situation in which a board or committee can withhold privileged information – which exists when there’s sufficient adversity that the director could no longer have an expectation that they were a client of the board’s counsel. Here, the court found that management acted unilaterally – so the exception didn’t apply.

Venture Capital: New NVCA Forms Include Market Term Analysis

Here’s the intro from this Troutman Pepper memo (visit our “Venture Capital” Practice Area for more resources):

The National Venture Capital Association (NVCA) published on July 28, 2020 an updated suite of model venture capital financing documents that reflect the current events shaping the investment climate, and for the first time, embedded analysis of market terms directly in the NVCA’s model term sheet. Venture capital funds, professional investors, emerging companies and their respective advisors will benefit from the summary analysis contained in this article which highlights the most significant changes to the primary model financing documents.

The NVCA’s updates are timely because venture capital investing remains strong despite the challenges of 2020. Pitchbook reports 2,893 U.S. venture capital deals with an aggregate of $45.20B of capital raised as of the second quarter of 2020, representing approximately a 17% reduction in deal count and a 2% increase in aggregate dollars raised over the same period in 2019. Economic uncertainty looms in the market, as does the specter of increased governmental interest in foreign investments in certain emerging businesses.

Liz Dunshee