A couple of recent posts on the Business Law Prof Blog combine to make the point that in the race to dethrone Delaware, Nevada just seems to be a lot more serious and thoughtful than Texas. Here’s an excerpt from Prof. Ben Edwards’ post discussing a new Nevada Comission created to study the state’s business courts:
Yesterday, the Nevada Supreme Court officially created a Commission to Study the Adjudication of Business Law Cases. I previously covered the Supreme Court’s proposal here and submitted a letter in support of the proposal. The order creating the Commission contemplates a continuing public process. It provides that the Commission “shall conduct all hearings in public and post all meeting minutes and documents considered by the Commission on the Supreme Court’s website.”
In a related LinkedIn post, Prof. Edwards points out that five of the attorneys on the 24-member Commission have collectively appeared in 242 Nevada Business Court Cases in the past decade.
Meanwhile, Prof. Ann Lipton provided her take on recent developments in The Lone Star State. She’s not impressed:
I keep explaining in various spaces so I may as well articulate it here too: It’s tough to make predictions, especially about the future, but I would be surprised if Texas wins the current chartering race, or at least, wins the race it’s currently running. The issue for Texas is that it keeps demonstrating that it is not interested in crafting a well-designed – even manager-friendly – corporate law; instead, it is interested in using corporate governance as another cudgel in the culture war.
Let’s look, for example, at two recent amendments to its corporate code: allowing corporations to limit shareholder proposals by those who hold either less than $1 million worth of stock or 3% of voting shares; and the proxy advisor law that puts a variety of restrictions on proxy advisor advice.
These laws explicitly take aim at liberal-coded measures; shareholder proposals, for example, have historically been oriented toward liberal causes (despite a recent upsurge in anti-ESG proposals), and the proxy advisor law is targeted at “ESG” advice.
The laws are also a model of poor drafting. The shareholder proposal law, for example, does not apply to corporations chartered in Texas, but does apply to corporations headquartered in Texas or listed on the (currently nonexistent) Texas Stock Exchange. The proxy advisor law, by contrast, applies to corporations chartered in Texas or headquartered in Texas, but not companies listed on the TSE. I don’t know why the inconsistency, and I’m guessing neither does the Texas legislature.
She also points out that while the Texas legislature scrambled to enact anti-woke corporate legislation, it still hasn’t given its corporations the ability to enter into the kind of shareholder agreements that Delaware amended its statute to permit following the Chancery Court’s Moelis decision. Despite corporations’ obvious desire for the flexibility to enter agreements of that kind, the legislature hasn’t tweaked its statute, and those agreements remain “somewhere between very difficult and impossible to adopt in Texas.”
Texas’ AG Ken Paxton’s announcement that he’s investigating ISS & Glass Lewis for “issuing voting recommendations that advance radical political agendas rather than sound financial principles” seems to be additional confirmation that the state’s banking on the culture war to turn it into a mecca for Delaware’s corporate diaspora.
Check out our latest “Timely Takes” Podcast featuring Cleary’s J.T. Ho & his monthly update on securities & governance developments. In this installment, J.T. reviews:
– SEC’s Spring 2025 Reg Flex Agenda/New Corp Fin Director
– Nasdaq Listing Standard Proposals
– SEC Comments on Segment Reporting
– Spencer Stuart Survey of Nominating & Governance Committee Chairs
– BlackRock’s Global Voting Report
Bonus topics this month include the first tariff-related securities lawsuit, retail investor activism and a House Financial Services Committee hearing on shareholder proposals.
As always, if you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share in a podcast, we’d love to hear from you. You can email me and/or Meredith at john@thecorporatecounsel.net or mervine@ccrcorp.com.
Over on LinkedIn, ExxonMobil’s announcement of its retail voting program has prompted a sharp response from Prof. Sarah Haan, who describes it as providing for “perpetual blind proxies.” Here’s an excerpt from her critique:
The proxies are “blind” because shareholders sign up without knowing anything about how management will cast their votes. In fact, the votes are “cast” before the proxy statement is distributed to shareholders—meaning that shareholders have not yet been able to learn who’s running for election, what matters will be voted on, or the company’s position on any of these things. (As a point of fact, a shareholder could invalidate the blind proxy for that one election by executing a follow-on, fully-instructed proxy, but telling shareholders that their vote has already been “cast” is confusing and will discourage this.)
Obviously, the point of perpetual blind proxies is to shift voting power from retail voters to corporate managers, by making it exceedingly difficult for shareholders to navigate the complexities of voting their personal preferences. Perpetual blind proxies are presented as a pro-democracy innovation, but actually they demonstrate the vulnerability of proxy voting as a legal device. Incumbent boards have strong motives to use proxy voting to discourage shareholders from exercising independent choice. This is exactly what perpetual blind proxies do.
Prof. Haan’s post has received many likes and favorable comments from shareholder democracy advocates. I think a big part of what these folks are concerned about is that Exxon’s program is likely to be very popular with retail investors, who are inclined to side with management if they vote at all. This program is designed to make it easier for them to vote, and so I’m 100% certain that Exxon management believes that it will enhance the level of support it receives for its agenda.
I’m also sure that many retail investors won’t think that’s a bad thing. Take me, for example. I dutifully fill out my proxies and return them every year- and I’ll let you in on a little secret, I follow management’s recommendations almost all of the time. Since that’s the case, I’d like to have an option to do that on a “set it and forget it” basis.
Do I understand what that means in terms of shifting power to management? You bet I do, and I think it’s condescending to assume that other retail investors won’t and paternalistic to suggest that they shouldn’t have the option to sign up for something like this. I’m not going to opt in to a program like Exxon’s if I have concerns about management, but in that case, I’m probably just going to sell my investment anyway. Shareholder democracy proponents will say that’s a cynical and apathetic choice. Perhaps it is, but I also think it’s not an irrational one for a retail investor.
So, where others see Exxon as creating a mechanism for “perpetual blind proxies,” I see it as facilitating “rational apathy” on the part of retail investors like me – and there are a lot of retail investors like me. Shareholder democracy advocates know that too, and I think that it shows in their response to Exxon’s program.
On Friday, SEC Chairman Paul Atkins reversed the agency’s existing policy of refusing to consider proposed settlements of enforcement proceedings and “bad actor” waiver requests simultaneously. The existing policy was adopted (see second blog) during the early stages of the Biden administration and reversed a policy adopted by former SEC Chairman Jay Clayton. Here’s an excerpt from Chairman Atkins’ statement:
In consultation with the Divisions of Enforcement, Corporation Finance, and Investment Management, I believe that it is appropriate to restore the Commission’s prior practice of permitting a settling entity to request that the Commission simultaneously consider an offer of settlement that addresses both an underlying Commission enforcement action and any related waiver request. This salutary practice promotes fairness and economy of Commission resources but unfortunately was changed by the prior Administration.
An offer of settlement in a Commission enforcement action that includes a contemporaneous waiver request will be presented to the Commission by the staff for simultaneous consideration. This approach will enable the Commission to consider both the proposed settlement and waiver request together, within the context of the relevant facts, conduct, and consequences, and with the benefit of the analysis and advice of the relevant Commission Divisions, to assess whether the proposed resolution of the matter in its entirety achieves the Commission’s three-part mission more generally. This approach will enhance efficiency and certainty in the settlement process and avoid a siloed internal consideration of the matter, which are critical factors in reaching comprehensive settlements that are in the best interests of investors.
This change in policy is good news for targets in enforcement proceedings. Under the policy adopted during Biden administration, targets settling with the SEC faced uncertainty because their settlement proposal and request for a waiver were not considered simultaneously. That left them in a position where they might find themselves bound by a settlement that they would not have entered into absent the belief that a waiver would be granted.
Earlier this month, Labrador announced the winners of its 2025 U.S. Transparency Awards. This excerpt from its press release discusses the winner of the award for best overall transparency:
Best Overall Transparency: Lowe’s Companies
This year, Lowe’s stands out as the champion of transparency. Lowe’s prioritized readers by implementing best practices across all documents. This includes using graphics and visuals to effectively illustrate company goals and performance. Notably, Lowe’s produced engaging executive summaries, especially in the proxy statement. The company is also proactively anticipating the requirements of CSRD by disclosing its value chain and aligning the sustainability report with the European Union’s European Sustainability Reporting Standards (ESRS).
Be sure to check out the Transparency Awards website for more details about the awards and the companies that received them. Here’s Broc’s 8-minute video with information about the selection process and this year’s winners.
The SEC’s Spring 2025 Reg Flex Agenda was released yesterday, just in time to coincide with the arrival of meteorological fall, and crypto regulation and efforts to ease capital raising rank high on the agency’s agenda. Here’s where things stand on some of the potential SEC rules that we’ve been following:
I’ve got to say, this is probably the most issuer-friendly Reg Flex Agenda I’ve ever seen – and this excerpt from SEC Chairman Paul Atkins’ statement on the Agenda indicates that this is not an accident:
This regulatory agenda reflects that it is a new day at the Securities and Exchange Commission. The items on the agenda represent the Commission’s renewed focus on supporting innovation, capital formation, market efficiency, and investor protection.
Some of you may have noticed that despite all the recent activity at the SEC over executive comp disclosure, it’s not specifically called out in the Reg Flex Agenda. I don’t know for sure, but my guess is that proposed changes to those rules may be part of the “Rationalization of Disclosure Practices” agenda item – and that agenda item’s title suggests that there may be more areas of the public company disclosure regime that the SEC is thinking about revamping.
This Reg Flex Agenda is also one of the most ambitious I’ve seen, and in light of media reports indicating that the SEC is heading into another round of staff cuts, it will be interesting to see if the agency has the bandwidth to move forward on these initiatives in a timely manner.
Segment reporting is a perennial topic when it comes to Corp Fin’s review of SEC filings. So far in 2025, the Staff’s comments in this area have focused on ASU 2023-07, FASB’s revised segment disclosure reporting requirements which went into effect this year. This Maynard Nexsen memo reviews some of the significant recurring Staff comments on compliance with the new requirements. This excerpt discusses Staff comments challenging whether a registrant that reports a single segment actually has multiple reportable segments:
Single segment registrants: are you sure you don’t really have multiple segments?
Compliance with the Segment Reporting Standard requires an analysis of the registrant’s operating segments and reporting segments. Operating segments reflect how an entity manages its business (e.g., by products and services or geographically). Important aspects of an operating segment include that it has available financial information and its operating results are regularly reviewed by the CODM.
Each operating segment may become a reportable segment if it meets certain size thresholds included in the Segment Reporting Standard (e.g., 10% of combined segment revenues). Two or more operating segments also may be combined for this purpose if they are sufficiently similar in certain characteristics listed in the Segment Reporting Standard (e.g., nature of products and services, production processes or customers). Many registrants have determined that they operate only one reportable segment.
Registrants that have determined that they have a single reportable segment sometimes receive a comment from the staff challenging that determination. Historically, this has been one of the most frequent topics for comments on segment reporting. Occasionally the Staff will request to see the reports that the registrant provides to the CODM to understand how management evaluates segment performance. Responding to such comments requires a detailed analysis of the application of the Segment Reporting Standard, which analysis is fact-specific for each registrant.
The memo says that other areas that the Staff frequently comments upon include disclosures relating to reconciliation requirements, significant segment expenses and other segment items, and how the Chief Operating Decision Maker uses the segment performance measure. Staff comments have also focused on whether a segment performance measure is also a non-GAAP financial measure.
With the September 15th compliance date for EDGAR Next enrollment less than two weeks away, the EDGAR Business Office recently held the latest in its series of webinars offering guidance on the EDGAR Next enrollment process & addressing FAQs. The SEC recently announced that a recording of that webcast has been made available and provided links to a bunch of other EDGAR Next related resources available on the SEC’s website. Here’s the announcement in its entirety:
Compliance with EDGAR Next is required on Monday, September 15, 2025 in order to file on EDGAR. Enrollment will remain open through December 19, 2025, however, as of September 15, 2025, filers who have not enrolled or been granted access on Form ID on or after March 24, 2025 will be unable to file until they enroll.
For more information, visit the EDGAR Next page on SEC.gov. Assistance is also available at EDGARNext@sec.gov and by contacting Filer Support at 202-551-8900, option #2.
If you’re one of those folks who invariably pulled all-nighters during exam week (guilty) and are now in need of some additional pre-deadline guidance on how to get your EDGAR Next act together, check out this Husch Blackwell memo.
Kevin LaCroix recently blogged about the filing of what may be the first securities fraud lawsuit based on allegedly misleading disclosure about the business impact of the Trump administration’s tariff regime. This excerpt summarizes the complaint’s allegations:
On August 29, 2025, a plaintiff shareholder filed a securities class action lawsuit in the Eastern District of Michigan against Dow and certain of its executives. The complaint purports to be filed on behalf of a class of investors who purchased the company’s securities between January 30, 2025, and July 23, 2025.
The complaint alleges that during the class period the defendants failed to disclose that “(i) Dow’s ability to mitigate macroeconomic and tariff-related headwinds, as well as to maintain the financial flexibility needed to support its lucrative dividend, was overstated; (ii) the true scope and severity of the foregoing headwinds’ negative impacts on Dow’s business and financial condition was understated, particularly with respect to competitive and pricing pressures, softening global sales and demand for the Company’s products, and an oversupply of products in the Company’s global markets; and (iii) as a result, Defendants’ public statements were materially false and misleading at all relevant times.”
The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The plaintiffs seek to recover damages on behalf of the plaintiff class.
I’m sure it won’t come as a shock to readers that Kevin thinks this may be the first of many tariff-related securities lawsuits. President Trump’s unpredictable and ever-evolving approach toward tariffs creates a situation where companies may find themselves facing some unpleasant surprises during any given quarter. Kevin points out that companies should expect plaintiffs to scour prior company statements for optimistic tariff-related comments that they can fashion into allegations of securities fraud.
Our SEC All-Stars panel will have critical insights about tariff-related disclosures during our upcoming Proxy Disclosure & Executive Compensation Conferences to be held in Las Vegas and virtually on October 21-22. Don’t miss out! You can sign up online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271.
Over on the Cooley’s “Governance Beat,” Broc recently blogged about how analysts and investors use AI to review corporate earnings releases. Here’s a selection of some of the uses he identified:
Sentiment analysis: AI analyzes the tone of management’s language in earnings calls, MD&A sections and press releases. AI measures optimism, uncertainty, hedging, confidence or risk language. It can help predict stock movements based on management sentiment shifts.
Keyword and phrase tracking: Investors use AI to flag specific words or disclosures that signal risk or opportunity. For example, the terms “supply chain disruption,” “macroeconomic uncertainty” or “beat guidance” might be flagged.
Trend and anomaly detection: AI compares current earnings disclosures against past filings or peer disclosures. AI helps to identify outliers in margins, CapEx trends or unexpected shifts in accounting policies.
Financial metric extraction: AI automates the pulling of KPIs (e.g., EPS, EBITDA and revenue growth) from text, tables and footnotes. One benefit is quicker ingestion into models and dashboards without manual review.
In June, Dave blogged about how companies are responding to AI-induced pressure when it comes to the language they use in their MD&A discussions. Based on Broc’s blog, it looks like that the same dynamic is likely at work when it comes to drafting earnings releases.
