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I’m sure that it isn’t news to any of our readers that this year’s SEC rulemaking, enforcement actions and legislative, judicial, and regulatory developments have created a lot of new requirements and risks for public companies to consider as the new year approaches. This recent Sidley memo offers a dozen recommended action items for public companies to consider for 2024 in light of those developments. Here’s an excerpt with several of those recommendations:

– Proactively prepare for shareholder activism; confirm there are no illegal director interlocks. Particularly given the current universal proxy rules, companies are well advised to review director biographies in proxy statements and on corporate websites to ensure they reflect the strengths, qualifications, and relevant experience of individual directors. Before any activist situation arises, companies should also assess their vulnerabilities and ask experienced proxy contest counsel to review their corporate bylaws to ensure that they reflect current best practices. See the Sidley article here. Companies should also confirm that they have no interlocking directorates in violation of the Clayton Act – enforcement by the Federal Trade Commission and the Department of Justice resulted in more than a dozen director resignations in 2023, as discussed in the Sidley article here.

– Ensure that the board understands the impact of artificial intelligence (AI) on corporate strategy and risk. Corporate boards need to understand and stay apprised of AI-related legislative and regulatory initiatives in the U.S. and abroad and oversee the company’s compliance, as well as the development of relevant policies, information systems, and internal controls, to ensure that AI use is consistent with legal, regulatory, and ethical obligations, with appropriate safeguards to protect against risks. See the Sidley articles here and here and listen to the Sidley webinar on the EU AI Act here.

– Refresh policies on corporate statements about high-profile social and political issues. Companies may face negative consequences to their business or reputation whether they speak or stay silent. Accordingly, companies may wish to consider adopting policies and processes for determining what issues to speak out on and when, who has authority to speak, and which types of statements (if any) require board notification or prior approval. These decisions should align with a company’s core values and take into account the potential benefits and risks associated with taking a position. See the Sidley article here.

Other action items addressed in the memo include amending corporate charters to provide for officer exculpation, implementing systems to ensure compliance with new cyberdisclosure regulations, staying apprised of EU and California climate disclosure rules and pending SEC climate disclosure rulemaking, and preparing for compliance with the new EU subsidies regulation.

– John Jenkins