The corporate governance field has lost one of its pioneers, with Bob Monks passing away last week at the age of 91. Bob devoted over four decades to promoting shareholder democracy and harnessing the voice of the shareholder – and truly changed the landscape for all of us.
In 1985, Bob founded Institutional Shareholder Services – which has grown into an influential proxy advisor and is one of the best-known corporate governance consulting firms that has ever existed. He went on to work with other prominent corporate governance leaders to launch and run other ventures, including The Corporate Library (now part of MSCI) and ValueEdge Advisors. Here’s an excerpt from the tribute shared by the ValueEdge team:
Bob always said that his understanding of the critical importance and opportunity for institutional shareholders came from a polluted river he saw when he was running for office in Maine. “I couldn’t think of anyone connected with the company emitting the effluent who wanted the result I saw.” Because he had been a law firm partner, a corporate CEO, a board member, and, as head of an investment company, the person who routinely voted proxies as management recommended, he understood every part of the process. And he devoted the rest of his professional life to “waking the sleeping giant,” and creating a better way for institutional shareholders to play the role that makes markets efficient.
Here’s the WaPo obituary and the ISS tribute. We send our sincere condolences to Bob’s family and his many friends.
For our “Mentorship Matters” podcast series, Dave and I recently interviewed Jane Magnuson. Jane is a Certified Executive Coach with her own practice – and she previously worked in Biglaw and as an in-house corporate lawyer, so she has been in our shoes. In this 18-minute episode, we discussed:
1. What inspired Jane’s shift from practicing law to executive coaching, and the influence her legal background has had on her approach to coaching
2. The similarities and differences between mentorship and coaching
3. The benefits of mentorship and coaching
4. Recommendations on what to look for in a mentor or coach
5. Strategies lawyers can use throughout their careers to identify opportunities and advance in their career paths
6. Jane’s observations about the attributes and practices that allow a person to flourish in their career and life, and advice on how to cultivate those qualities
Thank you to everyone who has been listening to the podcast and sending feedback! If you have a topic that your think we should cover or guest who you think would be great for the podcast, feel free to contact Dave or me by LinkedIn or email.
On Saturday, at the end of the 5-hour Q&A preceding Berkshire Hathaway’s formal annual meeting of shareholders, Warren Buffett announced that he would recommend that the company’s board of directors consider appointing his replacement, Vice Chair Greg Abel, effective as of year-end. The announcement came as a surprise to shareholders, most of the board, and even Greg Abel. From the transcript:
Tomorrow we’re having a board meeting of Berkshire and we have 11 directors. Two of the directors who are my children, Howie and Susie, know of what I’m going to talk about. The rest of them – this will come as news to them.
I think the time has arrived where Greg should become the chief executive officer of the company at year-end. I want to spring that on the directors effectively and then give that as my recommendation. Let them have the time to think about what questions or what structures or anything that they want, and then the meeting following that, which will come in a few months, we’ll take action on whatever the view is of the 11 directors. I think they’ll be unanimously in favor of it.
That would mean that at year-end Greg would be the chief executive officer of Berkshire. I would still hang around and could conceivably be useful in a few cases. But the final word would be what Greg said, in operations, in capital deployment, whatever it might be.
I could be helpful, I believe, in certain respects if we ran into periods of great opportunity or anything. I think that Berkshire has a special reputation that when there are times of trouble for the government, we are an asset and not a liability, which is very hard to have because usually the public and government get very negative on business if there’s a time like that.
But Greg would have the tickets. Whether it’s acquisitions – I think the board would be more welcome to giving him more authority on large acquisitions probably if they knew I was around. But Greg would be the chief executive, period.
The plan is – and Greg doesn’t know anything about this until what he’s hearing right now – that the board will be able to ask me questions tomorrow about more of the specifics of what they should be thinking about. They’ll digest it, and then at the next board meeting after that, if they act, then obviously we have something to announce to the world as a material change and we’ll go forward with that operation.
Although Berkshire’s meeting was only available to in-person attendees in years’ past, these days it’s broadcast on CNBC. Moreover, news outlets immediately publish writeups that cover everything about the meeting – ranging from the swag, to Buffett’s witty nuggets, to – in this case – business-related announcements. So, there’s probably no need to worry about Regulation FD issues. But what if a CEO makes a surprise announcement of potentially “material” news at an annual meeting that isn’t widely followed enough to be known as the “Woodstock of Capitalism”? I know I’m always sweating it out during Q&As for even the most perfunctory of AGMs. Our Reg FD Handbook gives thoughts on how to handle unplanned MNPI disclosures:
Question: If an executive responding to shareholder questions at a virtual shareholder meeting discloses material non-public information, is the company required to make a replay of that meeting publicly available for a certain period of time? I see that in the footnote to Reg FD adopting release, the SEC encouraged companies to make such replay available (and to indicate how long it will be available), but is it required?
Answer: The first question to consider is whether your virtual annual meeting is compliant with Regulation FD’s requirements. If the virtual meeting isn’t made available to the public and advance notice of how the public may access the meeting is not provided, then it won’t satisfy Regulation FD’s requirements (just as most traditional annual meetings don’t). See Reg FD CDI 102.05. So, if your meeting isn’t Regulation FD compliant and an executive inadvertently spills the beans on MNPI during the meeting, you will have to promptly disclose the information in a Regulation FD compliant manner (press release, Form 8-K, etc.)
Assuming that the virtual annual meeting is Regulation FD compliant, there’s no specific requirement for a transcript to be posted, but it is clearly a best practice when it comes to earnings calls and other management presentations. Most annual meetings have not been structured to comply with Regulation FD in the past, and the universe of virtual annual meetings isn’t very extensive. That means there isn’t a lot of precedent when it comes to posting transcripts. Since that’s the case, we recommend companies post a transcript and keep it up for as long as they customarily keep earnings releases posted.
What about Item 5.02 of Form 8-K, which requires disclosure within 4 business days of certain executives’ decision to retire or resign? Well, according to CDI 117.01, no disclosure is required solely by reason of discussions or consideration of retirement – and whether communications represent discussion or consideration vs. notice of a decision to retire is a facts & circumstances determination. Buffett seemed careful to frame this as something that is being considered and possibly determined at a later date, but that’s not legal advice! The people with all the facts will have to make the call. Our Form 8-K Handbook can help with these types of questions if you ever find yourself in a similar situation…
Speaking of CEO turnover, formal succession planning is becoming more common, according to a recent report from Russell Reynolds. Although this can be a sensitive topic to raise with CEOs, the report points out that normalizing the process not only benefits the company – it also helps the CEOs leave on better terms. Here’s an excerpt:
Last year told a hugely positive story around succession planning, with 22% of all CEO departures occurring because of a planned succession process—a 13% increase year-on-year, and the highest level ever recorded. This growing emphasis on succession planning contributed to fewer CEO removals, with the figure dropping to 14%, a significant decrease from 27% in 2023 and the lowest level since records began in 2018.
The focus on succession planning also led to a record number of internal promotions in 2024 – with 73% of incoming CEOs being promoted from within the organization. This reflects well on the Board because it shows that directors are mindful of developing an internal talent pipeline.
Meaghan also shared Recently on the Mentor Blog that more GC roles are being filled by internal candidates – so succession planning improvements may be going beyond the CEO.
For more real-time data on CEO turnover, check out Russell Reynolds’ “Global CEO Turnover Index” – which shows that the number of CEO departures in 2024 was well above average. Visit our “CEO Succession” Practice Area for checklists and resources for managing the process.
Like many people, I love a good Warren Buffett quote. Maybe because they remind me of my grandfather, who would’ve turned 105 last week – he had a never-ending stockpile of witticisms and also spent a lot of time in Nebraska. This list of 90 sayings from the “Oracle of Omaha” has a few of my favorites:
1. “The most important thing to do if you find yourself in a hole is to stop digging.”
2. “Don’t pass up something that’s attractive today because you think you will find something better tomorrow.”
3. “There’s never just one cockroach in the kitchen.”
4. “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”
5. “You should never test the depth of the water with both feet.”
6. “Games are won by players who focus on the playing field –- not by those whose eyes are glued to the scoreboard.”
7. “I try to invest in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
8. “If you’re in the luckiest one per cent of humanity, you owe it to the rest of humanity to think about the other 99 per cent.”
9. “It’s only when the tide goes out that you learn who’s been swimming naked.”
10. “Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy.”
I have a feeling we’re still in for a few more good ones…
We must have entered the “crypto phase” of Corp Fin’s to-do list, because yesterday, the Staff of the SEC’s Division of Corporation Finance published a statement on the application of federal securities laws to crypto assets. This is a topic that folks in the crypto industry have been wanting for years.
The move to share guidance is consistent with the agency’s about-face on regulating crypto. I’m sure it’s no coincidence that it’s arrived on the heels of last week’s statement on stablecoins. This one doesn’t address whether an asset is a “security.” Rather, it explains how the disclosure rules apply to equity or debt crypto assets that are securities. For purposes of the statement, a “crypto asset” is an asset that is generated, issued, and/or transferred using a blockchain or similar distributed ledger technology network (“crypto network”), including, but not limited to, assets known as “tokens,” “digital assets,” “virtual currencies,” and “coins,” and that relies on cryptographic protocols.
It’s going to take some time for the SEC’s Crypto Task Force to deliberate and issue a comprehensive regulatory framework for these assets (we’ve blogged about some recommendations). So, in the meantime, the statement sheds light on how issuers whose operations relate to networks, applications and/or crypto assets can comply with existing Reg S-K disclosure requirements. Specifically, Corp Fin gives examples of what issuers could discuss in response to:
1. Description of Business
2. Risk Factors
3. Description of Securities
– Rights, Obligations, and Preferences
– Technical Specifications
4. Supply
5. Directors, Executive Officers, and Significant Employees
6. Financial Statements
7. Exhibits
The Staff also noted that nothing in the statement is intended to suggest that registration or qualification is required in connection with an offering of a crypto asset if the crypto asset is not a security and not part of or subject to an investment contract. In a statement, Commissioner Hester Peirce – who was anointed as “Crypto Mom” many years ago – gave more color:
Offerings and registrations for which this statement may be relevant involve equity or debt securities of issuers whose operations relate to networks, applications, or crypto assets. Other offerings and registrations for which this statement may be relevant involve crypto assets offered as part of or subject to an investment contract. Registration or qualification is not required in connection with an offering of a crypto asset if the crypto asset is not a security and not part of or subject to an investment contract. The statement reflects the Division’s observations regarding disclosures provided in response to existing requirements and takes into account crypto-related disclosure questions the Division has received.
This guidance might be helpful for a company that is:
– developing a blockchain and issuing debt or equity;
– registering the offering of an investment contract in connection with an initial coin offering;
– issuing a crypto asset that itself is a security because, for example, it provides a revenue stream based on the issuer’s performance; or
– integrates non-fungible tokens into video games and is issuing debt or equity.
This for sure won’t be the last update we see on crypto and the securities laws. A Crypto Task Force Roundtable is happening today at the SEC. Last week, (then Acting) Commissioner Uyeda directed the Staff to review statements the Staff had previously issued on crypto topics – with an eye toward deregulation.
I couldn’t find this statement on SEC.gov. Maybe I missed it. But at any rate, it was on “X” and reported by all the crypto outlets, and I guess that’s where we get news now.
On Wednesday, the President issued a memo that gives more color to the “review & repeal” directive contemplated by Executive Order 14219 that was issued a few months ago. The memo says that all agency heads should prioritize regulations that could be struck down as overreach or otherwise unlawful under recent Supreme Court cases. Here’s the real kicker:
In effectuating repeals of facially unlawful regulations, agency heads shall finalize rules without notice and comment, where doing so is consistent with the “good cause” exception in the Administrative Procedure Act. That exception allows agencies to dispense with notice-and-comment rulemaking when that process would be “impracticable, unnecessary, or contrary to the public interest.”
SEC Commissioner Caroline Crenshaw already dissented from the Commission’s decision to drop its defense of climate disclosure with no attempt at “notice & comment” repeal. Now, other rules could be on the chopping block. The memo refers specifically to these SCOTUS cases:
1. Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024);
2. West Virginia v. EPA, 597 U.S. 697 (2022);
3. SEC v. Jarkesy, 603 U.S. 109 (2024);
4. Michigan v. EPA, 576 U.S. 743 (2015);
5. Sackett v. EPA, 598 U.S. 651 (2023);
6. Ohio v. EPA, 603 U.S. 279 (2024);
7. Cedar Point Nursery v. Hassid, 594 U.S. 139 (2021);
8. Students for Fair Admissions v. Harvard, 600 U.S. 181 (2023);
9. Carson v. Makin, 596 U.S. 767 (2022); and
10. Roman Cath. Diocese of Brooklyn v. Cuomo, 592 U.S. 14 (2020).
This Fact Sheet gives a paragraph on how the executive branch is interpreting each of those cases. From Politico:
The White House directive appears to claim that the high court’s 2024 ruling known as Loper Bright applies retroactively, although the court’s conservative justices held explicitly that the decision is forward-looking.
The SEC has been somewhat insulated from the fallout of the Loper Bright decision because courts haven’t given much deference to SEC rules in recent years anyway. But under this memo, things could get interesting – especially given some of Chair Atkins’ views on the PCAOB, Sarbanes-Oxley rules, shareholder proposals, and more. As John blogged when Loper Bright was issued, while the rollback of certain disclosure requirements could be happy news for companies in some ways, companies also should consider the business impact of the broader, government-wide deregulation effort. The Politico article predicts the memo will face legal challenges.
We’ve posted an informative 27-minute episode of the “Timely Takes” podcast – John met up with Brian Breheny of Skadden, Rick Hansen of HP, and Allie Ritherford of PJT Camberview to discuss the Staff’s recent CDIs on Schedule 13G eligibility and their impact on shareholder engagement practices. With multiple guests and a technical subject, this one ended up being akin to a “mini webcast” – so we’ve also posted a transcript that you can refer back to. Topics include:
1. Overview of the Staff’s recently updated CDIs on Schedule 13D/13G and additional informal Staff guidance.
2. How investor approaches to engagements with management have changed in response to the CDIs.
3. How companies should respond to the new environment and maximize the value of investor engagements.
4. How investors’ response to the CDIs may influence the role of proxy advisors in contested elections.
5. Implications for companies facing activist campaigns.
6. Recommendations for investors on how to navigate the new environment.
If you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share, email John at john@thecorporatecounsel.net or Meredith at mervine@ccrcorp.com.
Yesterday, the Senate voted 52-44 to confirm the nomination of Paul Atkins as Chair of the SEC. Chair Atkins was approved to serve for the remainder of Gary Gensler’s term, which expires June 5th, 2026. SEC Commissioners can serve for up to 18 months past the expiration of their term, and then the Senate has to vote again on reappointment for a subsequent 5-year term.
Chair Atkins will be overseeing a Staff that has hit the ground running on capital formation priorities – despite thinner ranks. The three other current Commissioners issued this statement to welcome Chair Atkins back to the SEC.
Here’s a big development that was revealed in a blog last month from Nasdaq president Tal Cohen:
We are excited to share that Nasdaq has begun engaging with regulators, market participants and other key stakeholders, with a view of enabling 24-hour trading five days a week on the Nasdaq Stock Market.
Our timeline is pending regulatory approval and alignment with critical industry infrastructure providers, which we anticipate being in the second half of 2026.
Honestly, my first thought in reading this was. . . not excitement. With “fake news” causing a multi-trillion-dollar market swing earlier this week, it seems like we already have our hands full during regular trading hours.
I’m just a lowly securities lawyer, so I wouldn’t expect my opinion to matter to anyone. But apparently Investor Relations folks also have some concerns, as discussed in detail in this LinkedIn newsletter. This Fast Company article explains in layman’s terms:
Companies, especially the ones found on the tech-heavy Nasdaq, like Apple, Amazon, Alphabet, Nvidia, and more, like to control when investors receive news about them, as much as they can, anyway. The reason for this is that news, especially when it’s first disseminated, can make a stock’s price swing wildly in one direction or another.
This is why many companies report their earnings before or after regular market hours. Retail investors typically don’t trade in those hours, which helps mitigate any large-scale fear- or greed-based selling or buying when news hits.
If stocks are traded 24/5, companies lose this buffer—which could lead to increased trading volatility. If this change happens, every CEO or CFO will have to be extra careful what they say during earnings calls, as any statement—correctly interpreted or not—could lead to instant trading volatility.
And for the media covering Nasdaq companies—and the markets in general—well, they will no longer be able to call it a night after 4 p.m. If the Nasdaq is trading 24/5, that means U.S. financial news is now happening 24/5, and investors are going to want real-time analysis and updates.
I understand the change would bring benefits, but I’m exhausted just thinking about it.
Nasdaq is actually not the first exchange to pursue 24-hour trading. The SEC approved the “24X exchange” last fall – which offers trading 23 hours a day, five days a week. That approval drew criticism – but Commissioners Peirce and Crenshaw responded with this statement defending their decision. So, unfortunately for me, it seems like they’re on board with the concept.
