Today at 10 a.m. Eastern, the Delaware Supreme Court will hear arguments in Rutledge v. Clearway Energy – which will discuss the constitutionality of the controversial off-cycle amendments to the Delaware General Corporation Law that the state legislature adopted back in March.

The changes were part of “SB 21” – which amended DGCL Section 144 to provide a safe harbor for transactions in which directors, officers, and/or controlling stockholders might have an interest. SB 21 was the Delaware legislature’s response to the court decision that fueled “DExit” grumbles.

The question of constitutionality is a big deal not just for the part of the amendments dealing with conflicted transactions, but also the changes to the scope of books & records demands. Everyone has been in “wait & see mode” to know for sure that companies can actually rely on these amendments. This Bloomberg article has more detail:

A Clearway Energy Inc. shareholder argues S.B. 21 violates Delaware’s constitution by limiting the Chancery Court’s ability to provide remedies for breaches of fiduciary duty. It also violates protections against retroactive laws affecting vested rights with provisions that apply to transactions that occurred before the law took effect, he said.

The company and Meyer say the legislation maintains authority lawmakers hold to define corporate duties and standards of review—and if necessary apply changes retroactively. S.B. 21 establishes a framework for reviewing fiduciary duty claims involving interested transactions without stripping the Chancery Court’s jurisdiction, they said.

The article includes a prediction that the law will be upheld and that Delaware will continue to be the “First State” when it comes to incorporations. We will stay tuned!

You can watch a live stream of the oral arguments on the Delaware Supreme Court’s website – and briefs from the parties and others are available on this page. If you’re a member of this site, you can find more resources in our “Delaware” Practice Area – where we continue to post updates on the DGCL amendments and related matters.

– Liz Dunshee

There is clearly a lot happening in corporate governance these days! In this 27-minute episode of Women Governance Trailblazers, Courtney and I caught up with Maeve O’Connor, who is Co-Chair of the Debevoise’s Securities Litigation Practice and Chair of the firm’s Insurance Litigation Practice. We discussed:

1. Highlights of being a securities litigator.

2. Enforcement trends and recommendations for boards and companies in a deregulatory environment.

3. Securities litigation trends that boards may need to consider.

4. Things boards and advisors can do to improve disclosures and minutes from a litigation perspective.

5. Changes and trends resulting from recent amendments to the Delaware General Corporation Law and the “DExit” movement.

6. Maeve’s advice to early-career lawyers who aspire to be part of the next generation of corporate governance trailblazers.

To listen to any of our prior episodes of Women Governance Trailblazers, visit the podcast page on TheCorporateCounsel.net or use your favorite podcast app. If there are governance trailblazers whose career paths and perspectives you’d like to hear more about, Courtney and I always appreciate recommendations! Drop me an email at liz@thecorporatecounsel.net.

– Liz Dunshee

I’m still coming down from the magical experience of our “Proxy Disclosure & 22nd Annual Executive Compensation Conferences” – which happened a couple of weeks ago in Las Vegas. When I say “magical,” I mean that literally – we had a pretty impressive magician, as well as caricature artists, at our welcome reception.

Of course, all the learnings and connections were magical too. Here are 8 takeaways from the Proxy Disclosure Conference, to help everyone gear up for what’s going to be a wild proxy season:

1. The SEC is “open for business”

– Even though the Commission is facing staffing reductions and operational challenges due to the government shutdown, leadership wants to show that they are really open for business.

– Actions so far show an effort to be flexible while also continuing to provide investor protection. Corp Fin continues to have strong leadership and is actively engaging with issuers.

– The disclosure review program still exists – anecdotally, companies are receiving typical comments on MD&A and non-GAAP disclosures – there’s less emphasis on specialized comment initiatives that we’ve seen in the past.

2. Government shutdown impact

– Most Corp Fin activities are limited during the shutdown.

– EDGAR remains open.

– Companies should consider disclosures about shutdown impacts in risk factors, MD&A, and forward-looking statements, especially if they’re dependent on government activities.

3. Artificial intelligence oversight and use

– Not surprisingly, we talked about AI becoming a key focus for boards.

– Companies are enhancing disclosure about AI oversight, risk assessment and governance.

– Companies are using AI in business and reporting functions, such as MD&A analysis of business trends – with controls over AI-generated outputs.

– Institutional investors are using AI tools to analyze governance and compensation data.

4. Geopolitical disclosures

– Think about risks and business impacts of changing regulations, trade matters, etc. – for risk factors as well as your MD&A.

– After pulling back on earnings guidance earlier this year, some companies are now providing guidance again, but it may not be as specific as it was in the past – it’s more “directional” in nature.

5. Delaware updates to watch

– A lot of investors and companies still like Delaware, but Nevada may be worth discussing for companies that have concentrated ownership.

– Stay tuned for the impact of recent statutory amendments.

6. Activism looks different these days

– More settlements, higher-caliber director slates, increasingly targeting large-cap companies, and more “vote no” campaigns.

– Activists are increasingly using social media, AI, and data analytics to mobilize shareholder votes and shape narratives.

– Companies may have to deal with multiple activists with conflicting agendas – and while proxy fights are costly and exhausting, companies should also keep in mind that settling too early may cause additional activists to emerge.

– Year-round activism requires constant preparedness and monitoring.

7. The “shareholder proposal” landscape is facing major changes

– We may see bylaw amendments to curb precatory shareholder proposals, or statutory fixes as Texas is trying to do.

– We don’t know yet whether these bylaws will be challenged in court or the extent to which having this bylaw will negatively impact director support at annual meetings. Now is the time to talk about this with your institutional investors to figure that out!

– We may see companies seek no-action relief under the theory that precatory proposals are not a right under state law – with the SEC framing up a question for Delaware (or other states’) courts to decide.

– The biggest question is whether the Rule 14a-8(i)(1) basis for exclusion will apply only to E&S proposals, or also governance proposals.

– The jury is out on which companies will serve as a “test case” for excluding precatory proposals on the basis of state law, and how comfortable other companies will be in relying on that situation-specific relief.

8. Improve your proxy process

– Changes to voting mechanics with retail shareholders and asset managers make it even more important to understand your shareholder composition and tailor outreach strategies.

– Detailed time and responsibility matrices are key to an effective proxy process – the new thing here is that you can increasingly leverage technology to keep track of tasks. Tech is also in play with using social media for outreach and streamlining virtual meetings.

If you registered for the Conferences, the video archives are now available – and transcripts are coming soon! If you’re a member of our sites who registered for the Conferences, you can access the archives with your regular login credentials. If you registered and aren’t a member, reach out to info@ccrcorp.com to get access.

I want to give a huge shoutout to everyone who attended the Conferences – as well as our excellent speakers and our hardworking CCRcorp team, who all put so much effort into making it a success! I can’t wait to see everyone next year in Orlando!

– Liz Dunshee

According to this Reuters article, when it comes to the “Department of Government Efficiency” initiative at the SEC, “Elvis has left the building.” DOGE arrived at the agency in late March, and since then we’ve seen a big reduction in the number of staff at the Commission.

As we discussed at our Proxy Disclosure Conference, it’s too early to tell whether the staffing cuts will affect regulatory initiatives, enforcement, disclosure review, or responses to registration statements. The Reuters article echoes that sentiment – here’s an excerpt:

Critics said DOGE’s work at the SEC marked a new level of White House involvement at an agency conceived by Congress to operate independently of the executive.

It was unclear how much of DOGE’s efforts would have a lasting imprint on the SEC. As part of the DOGE initiative, the agency offered several rounds of buyouts, resulting in deep cuts to the workforce at a time of market turbulence and dealmaking by the president.

DOGE also planned a restructuring of the agency’s IT functions and sought to influence regulations on blank-check companies and confidential reporting by private investment funds.

– Liz Dunshee

I blogged earlier this year that the SEC is getting stricter about whistleblower awards. The folks at “Whistleblower Network News” have now tallied the dollar amounts from the orders posted by the SEC – this article discusses what they found:

Aside from 122 denials and six orders omitting award amounts, award orders for fiscal year (FY) 2025 total $59.7 million. This figure averages to around $2 million per award.

The 2025 report stands in stark contrast to (FY) 2024 and (FY) 2023, which had totals of $255 million and $600 million, respectively. The SEC’s whistleblower program has not seen such a low level of awards since 2017 under the Obama administration.

Of course, the SEC hasn’t been able to post orders recently in light of the government shutdown. But the Operations Plan says they’re still accepting tips:

The Division of Enforcement will have only a limited number of staff on duty to perform excepted functions. However, staff will attempt to respond to certain critical matters, including allegations of ongoing fraud and misconduct. The Tips, Complaints, and Referrals website will continue to be operational, and submissions will be reviewed for appropriate action.

So, even though the focus and magnitude of awards might be changing right now, the program is still in effect.

– Liz Dunshee

In late October, Glass Lewis announced the results from its annual policy survey. You might be wondering, “does this still matter, since Glass Lewis is moving away from its house policy?” The answer is “yes,” for a few reasons:

1. That move isn’t happening until 2027.

2. Even after the “house policy” disappears, Glass Lewis is still going to provide research and perspectives to clients – it’s just that everything will be more customized, which is already happening at a certain level. Glass Lewis says results from the policy survey inform its case-by-case analysis of company circumstances in the research and filters that it provides to its global client base.

3. The policy gives insight into investors’ current views on several hot topics – including reincorporation, board and workforce diversity, bylaws restricting shareholder proposals and derivative suits, disclosure of executives’ personal security costs and other executive compensation info, response to “anti-ESG” sentiment, and more.

Here are a few key takeaways:

– 85 percent of investors and 76 percent of non-investors say they do not base governance votes solely on financial performance.

– With Texas and Nevada amending their laws to attract more companies, 50 percent of investors are focusing more on shareholder rights when assessing reincorporation.

– 44 percent of U.S. investors view the CEO-to-median-employee pay ratio as “not important”, compared to just 8 percent of non-U.S. investors.

– U.S. based investors are far more likely to ignore diversity factors in their evaluation of boards (42%) compared to investors from other regions (6%).

When it comes to providing research & recommendations that take into account non-financial factors, that’s a pretty important question (and response) for the proxy advisors. John blogged recently that Texas AG Ken Paxton announced an investigation of ISS & Glass Lewis – another shot across the bow after a court temporarily blocked SB 2337 while challenges to that bill proceed to trial early next year.

On that note, here’s more color on how investors and non-investors are evaluating reincorporation, based on survey responses:

Over the past year, many U.S. states have amended their corporate laws to attract or retain companies. Changes include establishing specialized business courts, providing increased protection for directors, officers, and controlling shareholders, reducing litigation risk, and providing greater clarity on the standards for director independence and/or disinterestedness.

In response to this shifting landscape, half of investors reported that they are putting more emphasis on shareholder rights and protections (compared to just one-third of non-investors. Conversely, compared to investors, non-investors were over twice as likely to have become more favorable to company-friendly laws and statutes, litigation risk, and protecting directors, officers and controlling shareholders.

Glass Lewis typically publishes its policy updates in November or December. Stay tuned!

– Liz Dunshee

Delistings have been top of mind for some folks lately, especially in light of steps that Nasdaq has been taking to accelerate the process for some types of non-compliance. Specifically:

– Meredith recently flagged a couple of Nasdaq proposals that – if approved – will accelerate delistings for stocks trading at low prices and for companies with low public float.

– Nasdaq amended its rules earlier this year to accelerate delistings for companies failing to meet the minimum bid price requirement.

So, a recent Deep Quarry newsletter caught my eye, where Olga Usvyatsky summarizes the most common reasons for delisting notices that are being reported on Form 8-K. Here’s what she found:

1. Listing Standards – Price, Market Value & Financial Condition. Non-compliance with quantitative listing standards, such as minimum bid price, market value, equity, or net income, comprises about 56% of the cases.

2. Late SEC Reports/Filing Deficiencies. Non-compliance with timely disclosure requirements, including a failure to file annual or quarterly reports, comprises about 21% of the cases.

3. Other – mostly M&A related withdrawals. Voluntary withdrawal requests, typically amid an M&A transaction, comprise about 16% of the cases. Note that this category refers to a voluntary withdrawal request amid a strategic decision and is not an acknowledgement of a deficiency.

4. Public-interest or SPAC-related concerns comprise about 5.1% of the cases, with common reasons including concerns about a company being a “public shell”, concerns about issuance of securities that cause a substantial dilution, Chapter 11 petitions, and SPAC-specific issues related to inability to complete an acquisition within a prescribed timeframe.

5. Governance and shareholder rights lapses category comprises about 4.5% of the cases, comprised primarily of failures to hold annual meetings (1.8% of the cases), deficient board compositions (1.4% of the cases), and failures to adopt compensation clawback policies (0.6% of the cases).

If you’re working with a company that’s received a delisting notice or is heading in that direction, I shared a template compliance plan last year that may help you chart a path out of the wilderness.

– Liz Dunshee

Courtney Kamlet and I are back with new season of our podcast – “Women Governance Trailblazers” – where we interview women in the corporate governance field about their career journeys, leadership in the boardroom & C-suite, and current corp gov issues. In this 21-minute episode, we caught up with Dr. Julie Williamson, who is CEO of Karrikins Group, host of “The Failure Gap” podcast, and author of Make HOW Matter: Key Conversations for Leaders to Build Alignment and Accelerate Growth. We discussed:

1. Julie’s journey to becoming the CEO of Karrikins Group, and why she decided to get her PhD in Organizational Communication.

2. Why the “how” of leadership matters.

3. Key conversations that help boards and executives navigate decisions, including the importance of naming short-term and long-term tradeoffs.

4. How building alignment at the board level impacts corporate culture and success.

5. How Julie’s experience as an Ironman triathlete affects her perspective.

6. Julie’s advice for the next generation of women governance trailblazers.

To listen to any of our prior episodes of Women Governance Trailblazers, visit the podcast page on TheCorporateCounsel.net or use your favorite podcast app. If there are governance trailblazers whose career paths and perspectives you’d like to hear more about, Courtney and I always appreciate recommendations! Drop me an email at liz@thecorporatecounsel.net.

– Liz Dunshee

When the SEC’s Reg Flex Agenda was published a few weeks ago, John pointed out the somewhat cryptic item of “Rationalization of Disclosure Practices.” Yesterday afternoon, in remarks at the “Financial Markets Quality Conference” at Georgetown, SEC Chair Paul Atkins gave a clearer glimpse into which disclosures could be on the chopping block. This Bloomberg Law article recaps:

Companies sometimes spend several pages discussing risk factors in their annual 10-K reports to meet Securities and Exchange Commission requirements, confusing investors about what’s important, Atkins told reporters at a Georgetown University conference. Firms have risk-averse lawyers who “dump the kitchen sink in,” the Republican said.

“It’s become a repository for too much,” Atkins said. “It’s not serving investors well.”

• The SEC during the first Trump administration required companies to have a risk factor summary of no more than two pages in their 10-Ks, if their reports discussed risks for more than 15 pages.

• Atkins said Thursday the agency also is looking to change rules for companies’ executive compensation reporting to ensure they provide “material” information to investors.

• The SEC’s work to update disclosure rules will happen during the “coming months and years,” the chairman said, without offering more specifics.

Like I said yesterday, the disclosure regime is only piece of the puzzle for public companies – but there is room for improvement!

Keep in mind that a government shutdown could slow down these ambitious rulemaking initiatives. That’s looking like a strong possibility right now – 77% of Polymarket bettors have their money on it as of the time of writing! – but there’s still some time to reach a deal. If there’s no continuing resolution or actual agreement soon, I’m sure John will share reminders next week from our previous editions of “The Government Shutdown Blues” – and color on how things could be different this time around.

– Liz Dunshee

Last week, Dave blogged about Corp Fin’s new CDI on filer status. This interpretation has been flying under the radar – but it’s actually a pretty big deal for companies that lose their eligibility as smaller reporting companies under the SRC revenue test – (paragraph (2) or 3(iii)(B) of the SRC definition in Exchange Act Rule 12b-2) – and need to transition to being accelerated filers.

Moving into the accelerated filer category means that a Section 404(b) auditor attestation is required – which adds time & expense to the filing process. According to the CDI – which is No. 130.05 in the “Exchange Act Rules” category – companies have a year after the loss of SRC status to continue as non-accelerated filers (without the expensive auditor attestation). This clarifies Rule 12b-2 in a way that’s different from how some people had been interpreting it – which will be welcome news to SRCs, but keep in mind that the accommodation applies only if the SRC loses eligibility due to the revenue test, not the public float test.

If that’s all clear as mud, take a look at this Filer Status Guide from Cooley. It has flowcharts that show when to evaluate filer status and the questions to ask.

– Liz Dunshee