This recent article from Gallagher’s Lenin Lopez addresses the need for companies to update their social media policies in order to ensure that they appropriately cover the issues associated with artificial intelligence. This excerpt discusses how companies should think about AI when crafting social media policies:
AI-enabled tools are increasingly part of how content is created, edited, summarized and shared. Employees may view these tools as convenient when preparing posts, responding to industry developments, drafting captions, summarizing company announcements, translating content or making something technical more accessible. Even when an employee is well-intentioned, the output could be inaccurate, incomplete, off-brand or based on confidential or proprietary information that shouldn’t have been entered into the tool in the first place.
AI isn’t the primary focus of most legacy social media policies and companies don’t necessarily need a separate policy to address these risks. However, they should consider targeted updates within the existing universe of their policies, like those covering social media, confidentiality, communications and information security.
For example, companies may want to consider clarifying that:
– Employees remain responsible for content they post, regardless of whether it’s generated or assisted by AI.
– Confidential or proprietary information shouldn’t be entered into unauthorized tools.
– AI-assisted communications are subject to the same approval, accuracy and recordkeeping expectations as any other content.
These additions can help reinforce existing obligations rather than creating entirely new ones. That is, the underlying regulatory themes — like accuracy, supervision and accountability — remain unchanged, even as the tools evolve.
Other topics covered by the article include social media policy basics, the people who should be involved in drafting the policy, the need for review by outside counsel, what to think about when creating a policy, and how often the policy should be refreshed.
If you’re interested in the use of AI for proxy voting recommendations in contested elections, check out Meredith’s recent podcast with Kekst CNC’s Co-CEO Lyndsey Estin and the co-leader of the firm’s Investor Relations and Contested Situations Practice, Nick Capuano. Lyndsey and Nick joined Meredith to discuss Kekst’s recent analysis of how voting recommendations from LLMs compare to those from the major proxy advisory firms across nearly 50 proxy contests. Topics covered in this 24-minute podcast include:
– How Kekst Conducted their Study
– The Headline: LLM Recommendations Lean toward Activists
– Beyond the Headline: Digging into the Data
– How LLM Recommendations Differed from Each Other
– The Sources and Rationales that Most Persuaded the LLMs
– The Sources and Rationales that Held Less Sway with the LLMs
– What this Means for Company Communications in Proxy Contests
We’ve been cranking out podcasts lately and we have several more in the hopper that we expect to post during the next month. If you’re interested in sharing your insights on a topic that you think would likely be of interest to members of TheCorporateCounsel.net or our other sites, we’d love to hear from you. You can contact me at john@thecorporatecounsel.net or Meredith at mervine@ccrcorp.com.
Last Thursday, the SCOTUS issued its long-awaited decision in Sripetch v. SEC, in which the Court unanimously held that the SEC may obtain a disgorgement award from a defendant in an enforcement proceeding without a showing of pecuniary loss to investors. In his opinion for the Court, Justice Gorsuch reviewed the history of the SEC’s use of the disgorgement remedy, the Court’s 2020 decision in Liu v. SEC limiting the agency’s use of disgorgement, and federal legislative responses to that decision.
Citing a variety of judicial precedent, Justice Gorsuch ultimately concluded that neither the Court’s decision in Liu nor traditional equitable principles required the SEC to establish pecuniary harm in order to use disgorgement as a remedy:
What all these and a great many other cases have in common is this: Applying traditional equitable principles, a court ordered the defendant to disgorge the value of the gain attributable to his invasion of the plaintiff ’s legally protected interests without requiring a showing of pecuniary loss. And to know that much is enough to know the answer to this case. Whatever else traditional equitable principles demand, they do not require a showing of pecuniary loss before a court may issue an award of unjust profits.
This excerpt from Gibson Dunn’s memo on the case summarizes its implications:
– The decision preserves one of the SEC’s most powerful monetary remedies. The SEC may continue to seek disgorgement tied to a defendant’s net profits even where identifying individual investors or quantifying their losses would be difficult.
– The Court’s ruling limits defendants’ ability to resist disgorgement by arguing that the SEC must prove the same type of economic loss required in private securities-fraud suits. The focus remains on whether the defendant received unjust enrichment as a result of the securities-law violation and whether the disgorgement award is properly limited to that enrichment.
– Because the Court only assumed without deciding that disgorgement under Section 78u(d)(7) is an equitable remedy, defendants can still challenge SEC disgorgement requests seeking to provide the funds to the U.S. Treasury, instead of to investors, on the grounds that they constitute a penalty that implicates Seventh Amendment jury-trial concerns—a concern highlighted in Justice Thomas’s concurrence.
FTI Consulting’s Garrett Muzikowski recently passed along his firm’s thoughts the implications for firms pondering leaving Delaware of Exxon’s successful “JExit” from New Jersey to the Lone Star State. Here’s what FTI had to say:
– Some Support From Big 3 Likely: For Exxon’s proposal to receive 71% support from shareholders despite both ISS and Glass Lewis recommending against means that at least some large institutional investors voted in favor of the proposal. With each of the Big 3 splitting their stewardship teams into two separate groups with different teams and voting priorities, it’s likely these weren’t unanimous “FOR” votes. It’s even possible 1-2 institutions were more against than for. But 71% implies there was at least some large institutional support for this proposal. At the same time, we do know that at least one very large active manager voted against the proposal without much internal debate. We won’t know specifics for all investors until votes are disclosed later in 2026.
– Proxy Advisors Have Drawn a Line in the Sand: For the time being, companies proposing to redomicile to Texas can expect against recommendations from ISS and Glass Lewis. ISS has gone against 13 of 15 Texas proposals, while GL has gone against 12 of 13. Note that ISS has deemed ArcBest’s approach to the optional provisions in Texas as best in class (adopting charter provisions that opt out of higher thresholds for shareholder proposals or litigation). Even despite having identified this approach as “best in class” – ISS STILL recommended against the ArcBest proposal.
We fully expect ISS and Glass Lewis to include redomiciling in their policy surveys this upcoming fall, as they often do with “new” governance topics. We are less confident they will actually change their stance – but that remains to be seen. At a minimum, the survey will provide incremental clarity for issuers going forward.
– Exxon is a Bellwether for Redomiciling: Prior to Exxon, most companies who made such a move had a near-controlling shareholder and/or were small, unknown companies. Exxon is a massive, well-known, public company with a normal shareholder base. Exxon simply filing its preliminary proxy drove a lot of boardroom discussions on the topic. Now that the proposal has comfortably passed, we expect the conversations to pick up in volume and Boards to analyze this much, much closer.
– Key Factors for Investors: Unlike ISS and Glass Lewis, investors seem to be taking a case-by-case approach to redomiciling. For most investors, it’s an assessment of the tradeoff between economic benefit and a potential decrease in shareholder rights. While NPX vote data won’t be available until late September, our back of the napkin analysis of support levels to date (factoring in controlling shareholders) seems to suggest shareholders are assessing companies operational presence in Texas, the way they’ve approached Texas’ optional provisions, and the company’s governance history/profile.
– Hometown Heros are Likely Next: A key reason Exxon chose to reincorporate to Texas was that its headquarters and a significant amount of its people and operations are based in Texas. Texas is Exxon’s home. Companies who can confidently say they are Texas companies will be the next ones to move (and some already are). There’s a lot of variables at play beyond location of the business that go into investor support, but we think the next litmus test is if a company with little to no presence in Texas can also get shareholder support to redomicile. That’ll truly open the floodgates.
For those of you following the DExit trend, its official scorekeeper, UNLV Law School’s Ben Edwards, has recently updated his tally of the migratory activity of Delaware corporations. Spoiler Alert: Texas has been the favorite destination for Delaware emigres in recent months, but Nevada is coming on strong.
As we head into the height of annual meeting season, be sure to check out our informative 25-minute podcast with Cooley’s Reid Hooper & Michael Mencher on some of the key developments during this year’s proxy season. Topics include:
1. Impact of the Staff’s decision to no longer serve as Rule 14a-8 referee
2. Shareholder proposal trends and success rates
3. AI disclosures in proxy statements
4. How boards are dealing with new oversight demands
5. Changes in how companies are addressing DEI-related disclosures
6. Evolution of proxy advisor policies and strategies for responding to adverse recommendations
7. Outlook for the 2027 proxy season
If you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share with our members in a podcast, please email me at john@thecorporatecounsel.net or Meredith at mervine@ccrcorp.com. We’re always looking for new topics and we’d love to hear from you!
The last time we blogged about the folks from the r/wallstreetbets subreddit was during the height of the pandemic’s meme stock craze. I was pretty dismissive of them back then, but I’ve gotta tip my hat to them for the comments they recently submitted on the SEC’s semiannual reporting proposal. Not only do they raise some pretty good points, but they do so through an endearing and amusing mix of self-deprecation and sarcasm. For example, there’s this:
We understand the Commission is more accustomed to receiving comment letters from people who use words like “stakeholder ecosystem,” and we will try to keep up. A word on who we are, we are self-directed retail investors. Some of us are very good at this and some of us are, in the technical securities law sense, terrible at it. Many of us learned what a 10-Q was the hard way, which is to say we bought a stock, watched it fall 40% on an earnings release, and then read the filing to find out why. That is a stupid order of operations and we acknowledge it. But it is also the entire mechanism by which a generation of retail investors taught itself to read financial statements, and the Commission is now proposing to cut that mechanism in half.
And then there’s this:
We also want to register, respectfully, our objection to the suggestion that quarterly reporting is a burden the Commission can lift to help companies focus on the long term. The companies we trade are not being held back from greatness by the obligation to file four reports a year. Apple files a 10-Q every quarter and has nine hundred billion dollars in cash equivalents. Nvidia files a 10-Q every quarter and is worth more than the GDP of most G20 countries. The entire S&P 500 files a 10-Q every quarter, and the S&P 500 is at an all-time high. If quarterly reporting is crushing American capitalism, American capitalism is hiding it well. We have looked.
To paraphrase Jerry Maguire, you had me at “that is a stupid order of operations. . .” The only negative is one that undoubtedly would have been pointed out to the authors by their fellow Redditors if this was posted on that website – it’s a 750 word wall of text without any paragraph breaks. The folks at Securities Docket flagged this problem as well, and commented “C’mon man! Just hit “Return” on the keyboard a couple times!”
Still, I wonder if Securities Docket may be pointing the finger at the wrong culprit. This seems to be a problem with a lot of comments on the SEC’s website that don’t attach a .pdf, so maybe the problem is with the SEC’s interface? In any event, whoever is to blame obviously hasn’t gotten the message that every Reddit user has heard repeatedly – “paragraphs are your friend.”
UCLA Law Professor Stephen Bainbridge recently submitted a comment letter supporting the SEC’s proposal to permit semiannual reporting. Among other things, the letter acknowledges that a “status quo bias” will deter many companies from initially making the switch, and then goes on to speculate about what types of companies are likely to eventually opt-in. These excerpts provide some details:
Smaller Companies with Higher Reporting Costs. The most natural candidates for electing semi-annual reporting are smaller reporting companies for whom the compliance burden of quarterly reporting is highest relative to the informational benefit investors derive from it. As noted above, the quarterly preparation of Form 10-Q—including financial statement preparation, auditor review, MD&A drafting, and officer certification—imposes fixed costs that fall disproportionately on companies with smaller finance and legal functions.
Companies with Longer-Horizon Investor Bases. Companies whose investor bases have longer investment horizons are also more likely to elect semi-annual reporting successfully. Companies with significant founder or family ownership, companies backed by patient institutional capital, and companies in industries where current-period earnings are poor proxies for long-run value are natural candidates.
Industry Considerations. Certain industries present a natural fit for semi-annual reporting. Companies engaged in long gestation projects—biotech and pharmaceutical firms awaiting regulatory approvals, capital-intensive infrastructure and energy companies, and early-stage technology firms where current losses are priced against multi-year growth expectations—may find that quarterly disclosures add little decision-relevant information for investors already pricing future cash flows over extended horizons. The IPO evidence discussed above supports this intuition: investors in such companies are demonstrably capable of thinking far beyond the current quarter.
Prof. Bainbridge suggests that the companies least likely to depart from quarterly reporting are those with large & active institutional ownership and those in industries, like financial services, retailers with seasonal patterns, and cyclical business, where quarterly results are highly material to market valuations.
The consulting firm Alix Partners recently issued its 2026 U.S. Risk Survey, which analyzes the top risks facing U.S. corporations based on responses from 500 senior executives in legal, compliance, and regulatory roles. The survey found that cybersecurity incidents are of greatest concern to respondents (65%), but that only 48% say that their organizations are “very prepared” to address cyber threats. Here are some other highlights from the survey:
– Financial crime. Fewer than half (48%) of respondents feel “very prepared” to address financial crime and fraud in 2026. Technology investment remains the top resource to combat it—yet confidence in risk-detection technologies dropped 20% year-over-year.
– AI-related risk. Accelerating AI adoption poses internal and external risks, with about half of organizations still lacking key elements of AI governance, such as an AI governing body/committee. The share who see AI-powered attacks as a top cybersecurity concern doubled from 2025—to 34% from 17% last year—but nearly three quarters (74%) have not completed system upgrades to address such threats.
– Data privacy. Nearly six in 10 (58%) cite data privacy as among the most concerning risk events their organizations face, but action lags awareness. Only 50% say their organizations are enhancing or plan to enhance data encryption, for instance, even though 73% say that measure is among the most important to address data privacy challenges for companies in their industry.
– Cryptocurrency. A majority (59%) is either already using crypto for payments and transactions or testing use cases. Yet the lack of more involved safeguards heightens risk: fewer than half (45%) have escalation and off-ramp procedures in place, while just 44% conduct third-party risk assessments for BaaS/fintech partners.
– Sanctions. Amid mounting geopolitical tensions, only about a third (35%) of organizations are “very prepared” for potential changes in sanctions, compared to 44% who said the same in 2025.
The survey also found that 63% of respondents expect corporate disputes to rise due to increased litigation exposure associated with economic uncertainty and AI-driven upheaval, while 80% said that developing federal AI policy poses strategic risk to compliance efforts in an increasingly fragmented regulatory landscape.
The latest issue of Deloitte’s Board Practices Quarterly reports the results of a recent Society for Corporate Governance survey of corporate secretaries, in-house counsel, and other governance professionals from 76 public companies and 17 private companies of varying sizes and industries.
The survey was conducted during Q4 of 2025 and looked into organizational crisis preparedness and governance. Covered topics included crisis plan formalization, types of crises addressed in the plan, management functions that participate in crisis teams, and the role of the board of directors. This excerpt addresses some of the highlights:
– Cybersecurity incidents/data breaches are commonly reported crises: Public companies most often report facing reputational, cybersecurity incident/data breach, and supply chain/geopolitical crises, while private companies most often report facing regulatory investigations, cybersecurity incident/data breach, and major litigation.
– Many have plans, but associated practices vary: Most respondents report having a formal, documented crisis management plan, but whether and how often the plan is reviewed or tested varies across organizations.
– Coverage gaps exist between “experienced” and “planned for” crises: Survey results indicate gaps between crises organizations have experienced and those anticipated and included in crisis plans. Some crises (like major litigation and regulatory investigations) are experienced more often than they are included in plans.
– Readiness practices differ: Most companies define when their board should be involved in a crisis, but whether companies delineate board vs. management responsibilities in a crisis yielded disparate results (25%–73%).
I found a few of the survey’s results a little surprising. For example, nearly one-third (31%) of public companies surveyed did not have a specifically and/or formally defined role for the board in crisis management preparation, and only 15% of public company boards participated in scenario planning or tabletop exercises.
Unlike the past couple of years, nobody’s been running around with their hair on fire about proposed changes to the DGCL, so you may have missed the news that the Delaware General Assembly passed this year’s amendments. Here’s the official synopsis:
Section 1. Section 1 of this Act confirms that if a certificate of incorporation includes a provision that “opts out” of the class vote specified in § 242(b)(2) of Title 8 to increase or decrease the number of shares of a class of stock authorized for issuance, including a provision that requires the affirmative vote of the holders of a majority of the stock (or a majority of the votes of such stock) entitled to vote, that “opt out” will not be deemed an express provision that has the effect of “opting out” of the default provisions of § 242(d). Instead, § 242(d) will apply unless the § 242(b)(2) “opt out” expressly states that the corporation is not governed by § 242(d)(1) or (2), or the § 242(b)(2) “opt out” provision specifies a greater or additional vote to increase or decrease the authorized number of shares of 1 or more classes of stock.
Section 2. Section 2 of this Act amends § 275 of Title 8, which addresses the dissolution of a corporation. New § 275(h) provides that the authority and responsibilities of the registered agent of the corporation terminate at the time the dissolution of the corporation becomes effective, except with respect to service of process that the registered agent has received before that time. New § 275(i) establishes procedures for the Secretary of State to accept service of process for a dissolved corporation after the dissolution has become effective. The amendments to § 275(d) and (f) require a corporation to include in its certificate of dissolution an agreement that the dissolved corporation may be served with process in the State by service to the Secretary of State in accordance with the Secretary of State’s rules and regulations.
Section 3. Section 3 of this Act amends § 312(j) of Title 8, which addresses the revival of the certificate of incorporation of a nonstock corporation if the certificate has become forfeited or void. The amendments delete reference to actions taken by members of a nonstock corporation who are entitled to vote on a dissolution of the corporation. The provisions of § 312(j), when read together with § 312(h), contemplates member action only to elect persons to the governing body of the corporation if there are no such persons then in office to revive the corporation. Because no action by members entitled to vote on a dissolution is required for revival, the reference to these members is being deleted. In addition, because no member action is required to revive a corporation if there are persons then serving on the governing body of the corporation, amended § 312(h) also clarifies that member action will be taken for a revival only “if any” member action is necessary.
Section 4. Section 4 of this Act provides that this Act takes effect on August 1, 2026. This Act requires a greater than majority vote for passage because § 1 of Article IX of the Delaware Constitution requires the affirmative vote of two-thirds of the members elected to each house of the General Assembly to amend the general corporation law.
The legislation will now be sent to Governor Matt Meyer for signature, and as noted above, the amendments will go into effect on August 1st.
