On Friday, Liz announced her plans to go back to private practice, while continuing to be a contributor to our resources going forward. Believe it or not, I can completely understand her decision to go back to private practice.
When I left the SEC back in 2007 and joined what was then Executive Press on a full-time basis, I realized after about eighteen months that I actually missed the practice of law (as opposed to just writing about the practice of law), so I felt the need to get back to helping clients with their legal issues. I am glad that I did, because it gave me a chance to build an amazing practice, while at the same time my practical experience helped me improve the content that I could provide to you through our resources. My hope is that Liz will have a similar experience, while at the same time improving that all-too-elusive work-life balance.
I would like to take this opportunity to thank Liz for all of the extraordinary efforts that she has undertaken over the past 6 years. Liz is a great colleague to work with, and she has inspired me to continue to generate content across our resources. Liz has ably steered us through a lot of change over the past few years and has worked very hard to bring you some incredible resources, such as PracticalESG.com and all of the up-to-date treatises, handbooks and Practice Areas across our sites. I also want to thank Liz for supporting my efforts, listening to my crazy ideas and providing me with the motivation to bring you the practical guidance that you need. Thank you Liz, best wishes on your new endeavors and I look forward to continuing to collaborate with you in the future.
As Liz noted on the Proxy Season Blog, last week ISS announced updates to its benchmark voting polices that will be effective for the 2023 proxy season. Here are the highlights:
– Climate Disclosure & Targets – Globally, there’s a new “climate board accountability” policy for companies in the Climate Action 100+ Focus Group. If the company isn’t adequately disclosing climate risk and doesn’t have either medium-term GHG emission reduction targets or Net Zero-by-2050 for at least Scope 1 & Scope 2, ISS will generally recommend voting against the appropriate directors and/or other voting items available. There will also be additional info in research reports on this, for all Climate Action 100+ companies.
– Board Gender Diversity – Now in effect for all Russell 3000 and S&P 1500 companies, generally vote against or withhold from the nominating committee chair where there are no women on the board (exception if there was a woman at the preceding annual meeting and there’s a “firm commitment” to return to gender-diverse status within one year)
– Officer Exculpation – In light of DGCL changes, ISS is adopting a policy to recommend case-by-case on proposals providing for exculpation provisions in a company’s charter.
– Unequal Voting Rights – The previous grandfathering of older companies with unequal voting rights will be removed in 2023. As part of this update, a de minimis exception has been defined as no more than 5 percent of total voting power.
– Problematic Governance Structures – For the U.S. policy on companies that go public with other problematic governance structures (including classified boards and supermajority vote requirements), a “reasonable sunset period” to fully eliminate the provision is being defined as no more than 7 years from the date of going public.
– Political Expenditures Alignment Transparency Shareholder Proposals – A new specific policy is being introduced for shareholder proposals requesting company transparency on the congruency of its political contributions and lobbying with its public commitments and policies, including climate lobbying congruency to its climate goals. The new policy will provide more transparency to the market about how such shareholder proposals are assessed and codify the case-by-case approach used in the 2022 proxy season. (Emily blogged about these proposals emerging last year, and it sounds like they are going to continue to proliferate.)
– Share Issue Mandates – For U.S. domestic issuers incorporated outside the U.S. and listed solely on a U.S. exchange, a policy is being introduced to generally vote for resolutions to authorize the issuance of common shares up to 20 percent of currently issued common share capital, where not tied to a specific transaction or financing proposal.
Mark your calendars now for our upcoming webcast scheduled for Tuesday, January 10th at 2pm Eastern, “ISS Forecast for 2023 Proxy Season.” We’ll have ISS’s Head of US Research, Marc Goldstein, to offer tips on how to prepare for 2023 issues. Marc will be joined by Davis Polk’s Ning Chiu and Gunster’s Bob Lamm.
The SEC Small Business Advocacy team continues to expand its capital raising Building Blocks, which are user user-friendly educational resources that explain securities law fundamentals in plain language. The new topics are:
– How do I know when I am ready to take my company public?
– What does it mean to be a public company?
– What does the SEC have to do with my private company?
The Staff is always looking for ideas on how to improve its resources, so feel free to reach out to them at smallbusiness@sec.gov.
Not to brag, but I currently hold the honor of “most favorite person in the world” with my almost-three-year-old. I’m soaking it up because I know this glory will be fleeting. With our two older kids, I’ve already been edged out by the iPad, other hobbies, and school buddies. As every parent knows, it’s fun to see our kids start to spread their wings, but also a little sad to let them go.
After a lot of soul-searching, I have come to realize that I only get one chance at this life, and I don’t want to spend all of it behind a computer screen – as fun as that’s been! The moment has come for me to put more energy toward my family, friends and in-person happenings. For those reasons, I am doing something I have never done before: stepping back – or at least, sideways – from a career opportunity. I am certainly not the first to make this decision, but boy has it been a tough one!
Our intrepid Senior Editor, John Jenkins, who you all know and love, is going to be taking over the Managing Editor role here – effective at year-end. His 35 years of practice on high-profile activist battles, deals, and day-to-day corporate governance and securities work give him a deep understanding of what practitioners need to be successful. He’s already been doing most of the heavy lifting on the “providing practical guidance” front – which he is somehow able to do in a straightforward and entertaining way, despite the complex material. I will never tire from reading John’s analysis, whether it’s a 10-page article in The Corporate Counsel or a 3-sentence response on the Q&A forum. What’s different is that now, he’ll also be the person you go to if you need to “speak to the manager.”
Eventually, you’ll need to make an update to your address book to make sure you still receive all of our blogs – stay tuned for more info. But other than that, not much will change for you – and please don’t delete my contact info! I’ll still be here in a part-time role – which will include blogging, lining up webcasts and events, and helping with whatever John calls on me to do.
In a couple of months, I’ll also be returning to private practice at a firm, which will keep me closer to the issues that everyone is dealing with and make the guidance that I share here more useful. One thing that’s surprised me about this job is how much I’ve missed working directly with clients. I’m looking forward to climbing back in the trenches – with the added benefit of the past 6 years’ of experience. In addition to that and being part of a firm that is very involved in the local community, I have to admit that I’ve also missed hearing crazy stories from colleagues in other practice areas. Is there anything more entertaining than story time from the litigators about “what not to do”?
I hope to land at something closer to a 40-hour workweek – which would leave more breathing room for family, friends and local involvement. If anyone has tips for sticking to this – a “reduced schedule” in the law firm world – I’m all ears. Drop me a note at liz@thecorporatecounsel.net. I’ll collect these nuggets of wisdom and share them in a follow-up blog!
“You get out of it what you put into it,” is what my track coach always said when we asked if we were in for an easy practice. What a guilt trip! But it worked – we almost always won – and it’s stuck with me.
I care – maybe too much? – about these sites, everyone who uses them and the results that we deliver to our shareholders, which means it’s very difficult for me to set aside work on nights and weekends. It feels like there is always more to be done! Building on the incredible foundation provided by Jesse Brill and Broc Romanek, these efforts have resulted in a lot of “wins” that have been very rewarding. During the past year, the team here has:
– Increased our event attendance, memberships, and blog followers
– Launched PracticalESG.com and the 1st Annual Practical ESG Conference
– Delivered practical guidance on cutting-edge issues via numerous webcasts & special events – e.g., our DEI workshop series, our climate disclosure event, and our special session on the SEC’s new pay vs. performance rules – each of which exceeded our attendance expectations and received rave reviews
– Continued to share high-quality & timely guidance on the vast array of issues that our members are grappling with, by answering hundreds of Q&A posts (thanks John, and everyone who submits questions & answers!), providing in-depth and practical analysis through our newsletters, and staying on top of updates with our handbooks, checklists, blogs and practice areas
We have done all of this (and more) while also making significant internal corporate changes over the past 3-4 years in our operations, sales, marketing, member services and tech infrastructures. Although this operation has been running for 45+ years, it has in many ways felt like working at a start-up, because of all of the new processes and ideas that are flowing. I spend much of each day on “executive stuff,” which has been an eye-opening experience and one that I am very grateful for.
Thank you to our Board Chair Nathan Brill, our CEO Mel Yarbrough, and my fellow executive leadership team members, our VP of HR & Operations Dawn Chyten and our VP of Sales Jim Currie. Dawn, Jim and I have spent an incalculable number of hours together in Zoom meetings! Thank you as well to the entire management team here for their leadership and dedication. I appreciate everyone’s patience with me, the opportunities for growth, and the many things I’ve learned from each and every one of these colleagues along the way.
Thank you as well to the entire CCRcorp team of employees – I can’t name everyone here, but I’d be remiss if I didn’t call out my “right-hand woman” for all of our events, our Operations & Event Manager, Victoria Newton. I have been blown away by the dedication and creativity of each person on the CCRcorp staff. It has been an honor – and fun! – to be part of this team.
I am very pleased with our business results, but the most rewarding part of this job, by far, has been the relationships that have come with it. I can’t really put into words how much I’ve learned from all of you, and how much I’ve appreciated your willingness to contribute to this community. Whether it’s by speaking on webcasts and at events, recording podcasts, writing articles, participating in our Q&A forums, sending tips and notes in response to the blogs, making suggestions for the sites – every interaction has been valuable.
I had very big shoes to fill when I took over the lead editorial position from Broc three years ago, and you all stepped up to continue to make these sites and events exceptional. The caliber of our speakers and contributors provides a one-of-a-kind learning experience on corporate & securities law issues, yes. But it also reinforces the value of “giving back,” and has often left me star-struck! Thank you to every single person who has contributed, in whatever unique way has suited you.
Special thanks, of course, also goes to our Editorial team: past & present. I’ll be forever grateful to Broc for giving me the opportunity to join this company; to John Jenkins and Dave Lynn for their wisdom and guidance throughout my full-time role here, and their humor; to Lynn Jokela, Emily Sacks-Wilner, Julie Gonzales, Ngozi Okeh, Lawrence Heim, and Zach Barlow for their enthusiasm and high-quality work; and to Alan Dye, Mark Borges, Mike Gettelman, Mike Melbinger, and all of our other regular contributors, for their kindness to me and their dedication to sharing invaluable guidance with fellow practitioners.
I’m incredibly proud of the team that we’ve built, the diverse perspectives we’ve sought out, and all of the practical guidance that we’ve provided, all while being careful not to take ourselves too seriously. It really has been an honor to support this group and to bring together other experts in our community. I’ll continue to be reachable at my email here – liz@thecorporatecounsel.net – and on LinkedIn and Twitter. I’m looking forward to my ongoing involvement, and continuing to see you all at conferences!
John blogged a few weeks ago that private debt issuers would soon be finding themselves between a rock (significantly expanded disclosure requirements) & a hard place (reduced liquidity), due to expiring relief for broker-dealer quotation obligations under amended Rule 15c2-11. According to this Simpson Thacher memo, the SEC swooped in with a no-action letter yesterday to postpone doomsday to 2025. Here’s an excerpt:
The original compliance date for amended Rule 15c2-11 was September 28, 2021, which, pursuant to a series of no-action letters issued by the staff of the SEC’s Division of Trading and Markets, was extended to January 4, 2023 for issuers of fixed income securities. Following requests from market participants for additional relief, on November 30, 2022, the SEC issued a no-action letter temporarily extending the compliance date for issuers of fixed income securities to January 4, 2025.
In this memorandum, we briefly describe the scope of information typically provided by private issuers of fixed income securities under current practice and how amended Rule 15c2-11 will result in changes to that approach if permanent relief is not provided.
This blog from Bass Berry’s Jay Knight summarizes the comment letter submitted earlier this week by the ABA’s Fed Reg Committee – which requested an extension of the no-action relief that had been slated to expire this January, until the SEC can determine whether further exemptive relief and additional rulemaking would be useful.
Last week, the National Association of Manufacturers & the Kentucky Association of Manufacturers submitted a comment letter to request that Rule 15c2-11 be amended to permanently exempt Rule 144a fixed-income securities from the new requirements.
Yesterday, the Center for Audit Quality released a new 34-page report in connection with researchers at the University of Tennessee Knoxville’s Neel Corporate Governance Center and the Pamplin College of Business at Virginia Tech. The title captures the audit committee’s eternal plight of being the dumping ground for new responsibilities: “Audit Committee: The Kitchen Sink of the Board.”
The report first notes the perils of the “kitchen sink” approach:
– Perpetually assigning emerging risks to the AC (i.e., the “kitchen sink” approach) can lead to suboptimal oversight due to overworked ACs and a “check the box” mentality.
– Traditional AC skill sets relate to financial reporting and internal controls. As AC responsibilities evolve, it is important that AC skill
sets evolve as well.
– Some AC members individually advocate for the AC to oversee these emerging risks because of their personal skills and interests. In these cases, AC members should be careful not to succumb to overconfidence bias and ensure that a clear succession plan is in place without them.
– To effectively allocate oversight responsibilities, ACs may need to consider situations when it makes sense to push back on their boards.
And it offers these tips to help audit committees balance the heavy workload:
– Develop skill sets that match oversight responsibilities
⸰ Actively assess the committee’s key risks when planning for continuing education opportunities and use specialists where needed.
⸰ Regularly evaluate whether AC refreshment is needed to keep up with the necessary skill sets to properly oversee evolving risks.
⸰ Carefully manage the AC agenda by mapping out risks to allow for deep dives on a rotation of topics throughout the year.
– Free up time for additional responsibilities by managing the agenda & relationships
⸰ Work with management to fine-tune the types of materials delivered in advance and hold AC members accountable for reading them.
⸰ Reflect on whether meetings allowed for sufficient time to evaluate management’s response to key risks, and schedule meetings so that they can go long or continue at an additional time when needed.
⸰ Maintain a collaborative relationship with management to foster transparency.
⸰ Adopt leading practices to manage shared governance across board committees.
This is all pretty common-sense stuff, but it’s helpful to see it gathered in one place. The recommendations are based on interviews with audit committee chairs, investors, and people involved with proxy disclosures – 2200 minutes of conversation!
A couple of weeks ago, the “Russell 3000 Board Diversity Disclosure Initiative” – an investor coalition that is co-led by the State Treasurers of Illinois and Connecticut – announced that it had sent its annual letter to Russell 3000 companies, requesting more detail on the racial, ethnic & gender composition of the board.
We blogged about this coalition a couple of years ago when it launched. This year, there are three versions of the letter, customized for:
– Top performers: 386 companies provide “exemplary disclosure” of the demographics of individual directors, often via a matrix
– Middle performers: 1,847 companies provide disclosure on an aggregate basis or only for certain directors
– Bottom performers: 702 companies do not provide board race, ethnicity and gender in public filings
The letters highlight the benefits of disclosure on an individual director basis and call on the “middle” & “bottom” performers to up their game – based on self-identification from directors. This blog from Perkins Coie’s Allison Handy provides three considerations for companies that received the letter:
1. The letters are framed as a request for disclosure, not as a proposal, demand, or new voting policy. The letters refer to voting policies of organizations included in the initiative, such as versions of “vote against” policies for companies with no board diversity and/or no board diversity disclosures.
They note that some member organizations are considering strengthening board diversity voting policies and expanding engagement on this topic. We are not aware of any announced voting policies that would penalize a company that reports board diversity information on an aggregate, rather than individual, basis. In light of this framing, many companies may decide that no direct response is needed at this time.
2. The gap between the requested disclosure and the Nasdaq board diversity matrix is not clearly articulated. It is worth noting that the Nasdaq matrix is intended to provide decision-useful diversity disclosures that are comparable across companies. The Nasdaq matrix requires disclosure of specified racial and ethnic characteristics, disaggregated by gender. The press release and letters from the initiative call for individualized disclosure, but do not explain why investors need individual, rather than aggregate, diversity data.
Currently, large institutional investor and proxy advisor policies addressing board diversity disclosures generally accept either individual or aggregated diversity information. If a company does decide to engage with investors involved in this initiative, it might consider seeking clarity on why individualized disclosures are important.
3. Some directors may have privacy concerns about individualized disclosures. As acknowledged in Corp Fin’s Regulation S-K CDIs 116.11 and 133.13, as well as Nasdaq’s board diversity rules, companies need the consent of directors to disclose personal, self-identified diversity characteristics.
Not all directors are willing to have their diversity characteristics disclosed on an individualized basis, and companies may face more pushback on disclosure when disclosure is made on an individual, rather than aggregate, basis. Before committing to a new disclosure regime requested by investors, companies should consider these potential privacy concerns.
Big banks have been leading the way in board gender diversity – but this Bloomberg article says that the percentage of women on boards at these institutions has recently dropped. Here’s an excerpt:
Gains have stalled as women reached a third of seats, which researchers have said is a key level for gaining influence in the boardroom. Groups such as 50/50 Women on Boards are now trying to nudge representation higher, to reflect women’s near parity in the workplace overall.
The average number of women directors was unchanged at 4.7, out of an average board size of 13.7. The percentage of female directorships fell to 34.6% from 35%. That compares with 32% for the S&P 500 Index.
The drop was caused by 3 banks each appointing a new male director last month – which shows just how precarious diverse representation can be. Of the 18 banks in the index, Citigroup has the highest percentage of women on its board – 58%!
It is disappointing that Citibank’s composition is still so exceptional, not to mention that it’s problematic to be stuck in the mud on the basics as we look ahead to more leaders & stakeholders identifying as non-binary. Imagine if there were headlines whenever male representation surpassed 50%…which is the case for every bank in the index besides Citi.
