While big institutional investors push the SEC for climate disclosure rules that would make it easier to compare corporate info, the grassroots effort among smaller shareholder proponents also shows no signs of stopping. Climate proposals are proliferating in both number & type, according to the 112-page “Proxy Preview” issued last week by As You Sow, Si2 and Proxy Impact. Here’s an excerpt (also see the resources in our “Proxy Season” and “Shareholder Proposals” Practice Areas):
Climate change has jumped to the top of the proxy season agenda this year and is the biggest single topic. Climate-related concerns undergird a growing number of proposals that seek consistency between corporate policy and political influence, too. Resolutions about environmental management also implicitly address the climate, but so do new human rights resolutions about environmental justice. In all, there are 145 proposals about the environment, up substantially from 91 last year.
The report also shares these stats:
– The number of proposals specifically on climate change has nearly doubled to 110, up from 79 last year.
– A striking change is the near-total focus on greenhouse gas (GHG) emissions targets, with most proposals asking for a transition to net-zero status by 2050. Only eight ask about deforestation and water. Sixty-eight of the 101 resolutions about carbon asset risk address emissions (up from 29 at
this point last year).
– Proponents are starting from a position of strength established last year when average support for climate proposals topped 50 percent for the first time.
– New proposals are targeting use of carbon offsets, accounting & reporting controls for emissions, cryptocurrency carbon footprint, financing of fossil fuels, and social inequities relating to a “just transition”
– After gradually diminishing from a high of nearly 50 proposals 10 years ago, the number of environmental management proposals has risen again, to 35, with more likely. These include proposals about plastics, repairing products to reduce waste, chemical footprints, agricultural practices, and mining.
These trends don’t just create headaches for management and securities lawyers – they’re affecting director support. That’s one reason why creating, maintaining & disclosing a viable net-zero transition plan is becoming so important.
Join us tomorrow at 2pm ET for the webcast – “Shareholder Insights: 2022 Priorities” – to hear from Council of Institutional Investors’ Glenn Davis, Dimensional Fund Advisors’ Kristin Drake, Sustainable Governance Partners’ Rob Main, and Federated Hermes – International’s Tim Youmans. We’ll be discussing key priorities, voting policy adjustments and how to maximize engagement opportunities during the heart of the proxy season.
If you attend the live version of this 60-minute program, CLE credit will be available. You just need to fill out this form to submit your state and license number and complete the prompts during the program.
Members of TheCorporateCounsel.net are able to attend this critical webcast at no charge. The webcast cost for non-members is $595. If you’re not yet a member, subscribe now by emailing sales@ccrcorp.com – or call us at 800.737.1271.
This morning, the Commission will consider a climate disclosure proposal that could significantly change controls & reporting practices. The flurry of recent proposals – including on Rule 10b5-1 plans, buybacks and cyber disclosure – suggests that the floodgates are opening for Chair Gary Gensler’s regulatory agenda. And it comes on the heels of a very active conclusion to the term of prior SEC Chair Jay Clayton. The Commission has now bestowed us with 20+ rule changes and proposals over the past two years! Are you keeping up?
Maybe it’s middle-age or lack of sleep (thanks, kids), but I for one am having a hard time remembering what has recently changed – and what might be changing in the near future. In response to member requests, we’ve created this “cheat sheet” to track selected rulemaking and show where on our site you can find practical guidance on each topic. You can find the cheat sheet via the blue nav bar at the top of the home page.
We are always open to suggestions on new ways to help our members look good. Email us any time to share what would make your work life easier.
To someone who doesn’t spend their days advising on securities law compliance, the procedural ins & outs of the Commission’s rulemaking might seem about as interesting as watching paint dry. But around here, we get pretty jazzed about the nuances, and it’s not just because Schoolhouse Rock was one of the most impactful shows of my childhood.
Dave, Alan, and many of our speakers and members have spent big parts of their career on the Staff, where they have had a hand in creating and interpreting rules and regulations. Many of our members also actively participate in the rulemaking process through comments and meetings. We share details that a lot of folks gloss over because our community is so involved and because the backstory can be important to understanding why a rule turned out the way it did and how the SEC wants it to be applied. We’ve written about:
A lot goes in to the rulemaking process, with the goal of creating disclosure rules that are both workable for companies and informative to investors, to support the SEC’s 3-part mission. For a great “101” of how the SEC rulemaking process works, check out this 2-minute video from Persefoni’s Kristina Wyatt.
As we head into proxy season, make sure to stay in-the-know on the latest developments by subscribing to our “Proxy Season Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply entering their email address on the left side of that blog. Here are some of the latest entries:
– Vote No Campaigns: Getting More Sophisticated?
– T. Rowe Completes Spin-Off That Could Affect Smaller Co Voting & Engagements
– Big Decline in 14a-8 No-Action Requests: New Normal?
– Sustainable Packaging Proposal Achieves Record-Breaking 94.2% Support
– What to Do Now to Get Your Retail Vote
– 2022 Proxy Season: Be On Alert for Eroding Director Election Support
If you’re not already a member and able to access our daily updates, sign up today by emailing sales@ccrcorp.com – or call 1-800-737-1271. This blog and our many other proxy season resources will equip you with practical guidance on disclosure, shareholder resolutions & voting trends, so that you’re not caught off-guard during the busiest time of year.
While much attention was focused on the SEC’s proposed cybersecurity disclosure rules that were approved last week, Congress has also weighed in with legislation establishing new cybersecurity reporting requirements for private sector companies that was signed into law this week.
The latest $1.5 trillion government spending bill included new requirements for critical infrastructure entities to report cyber incidents. The legislation: (i) requires critical infrastructure entities to report cyber incidents to the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) within 72 hours; and (ii) requires critical infrastructure entities to report ransom payments in response to ransomware attacks within 24 hours, also to CISA. These changes represent a significant expansion in the federal requirements for private sector reporting of cyber incidents. What constitutes “critical infrastructure” will be defined in CISA regulations, but will include areas such as energy, financial services, food and agriculture, healthcare, information technology, defense industrial base, among others.
CT Corporation recently sent an alert to customers noting that the State of California is planning to launch an enhanced business entity system on Tuesday, March 29, 2022. In preparation for this update, most of California’s systems will be offline Wednesday, March 23 through Monday, March 28. During this time, filings submitted to the Business Entities office of the Secretary of State will receive the file date of submission (provided that they are in fileable order), but there will be little to no evidence returned during this time frame. On top of all that, the California Secretary of State’s office will be closed on Thursday, March 31, 2022, in observance of César Chávez Day. Needless to say, if you have transactions involving California business entities during this timeframe, you should check in with your filing agent.
Over the course of this year, I have been taking a walk down memory lane and looking back on 15 years of contributing to CCRcorp publications. One of my favorite features of the sites in the CCRcorp universe is the Q&A Forum, which just hit a new milestone of over 24,000 questions answered!
When I first joined the organization in 2007, I manned the Q&A Forums on TheCorporateCounsel.net and CompensationStandards.com, because I believed that I was uniquely qualified to answer the questions from our members, having just finished serving as the Chief Counsel of the SEC’s Division of Corporation Finance. I soon discovered it was a daunting task, and doing it gave me a new appreciation for how Broc Romanek and Alan Dye had been responding to all of those questions in the years before I started. Alan is of course always the inspiration, because he has been providing so much timely, useful advice on the Section16.net Q&A Forum for many years.
One of the most valuable things that I learned in my time serving at the SEC was how important it is to answer the question asked, and that is what attracted me to the Q&A Forums on the CCRcorp sites. I have sometimes been dubbed the “Shell Answer Man” because I developed a knack for answering questions over the course of my career. But the thing that I like the most about the Q&A Forums is the ability to interact directly with our members while getting a sense of the issues that they are struggling with in practice, because that helps me in my own practice and is useful for developing practical content for the CCRcorp publications.
We recently passed a significant milestone, the two-year anniversary of when the World Health Organization first characterized COVID-19 as a pandemic. We all no doubt recall those early March 2020 days when we optimistically thought that things would be back to normal in a couple of weeks once we could successfully “bend the curve,” but shortly after that things were anything but normal for the next two years. Today, we are now stuck in the “new normal,” whatever that is. For public companies, there have been a few lessons from the pandemic worth reflecting on:
The benefits of current disclosure. I am always a staunch defender of our current and periodic reporting system in the United States, often noting that public companies do not have to disclose all material information all of the time – companies need only make disclosures when they have an affirmative disclosure obligation. However, in a crisis situation like the onset of the COVID-19 pandemic, there are benefits to utilizing current disclosure to keep the market informed about developments, even when the future outcome may be uncertain. Former SEC Chair Jay Clayton and former Director of Corp Fin Bill Hinman issued a statement in April 2020 calling for companies to provide detailed real-time disclosure about the impact of the pandemic, even when the future was very hard to predict.
A little help from the SEC. Over the years, the SEC has been pretty good about putting out guidance and making accommodations when a crisis hits. I can recall sitting in Marty Dunn’s office many years ago coming up with relief for public companies affected by Hurricane Katrina, which came to serve as a model for future crisis situations. In the case of COVID-19, the SEC was quick to act, putting out a series of statements and orders which recognized the challenges of dealing with a shift to a work-from-home environment, the ability to meet filing deadlines, the need to quickly pivot to virtual annual meetings, the need for more disclosure about the impact of the pandemic, etc. The SEC and the Staff were proactive, and that is always a positive thing for public companies and the markets.
The triumph of risk factors. It is hard to fathom that we still have COVID-19 risk factors in most public company filings. References to the impact of a global pandemic in risk factor disclosure prior to 2020 were often in the context of a vague laundry list of the “parade of horribles,” e.g., war, natural disasters, earthquakes. But very quickly in 2020, the COVID-19 risk factor became something of an art form, laying out what was generally known and unknown about the pandemic and providing some very important context to the COVID-19 disclosures included elsewhere in the filing. I think that the COVID-19 pandemic resulted in a greater appreciation for the value of risk factor disclosure as a means of dealing with significant uncertainty.
The triumph of technology. If you had told me in 2019 that my kids would soon be attending school virtually and that I would be working from home 100% of the time, I would have thought you were engaged in some sort of Jetsons-style futuristic fantasy. As it turned out, those things were entirely possible with the technology that we had readily at hand. Of course none of it was perfect and we all have our gripes about the setup to this day, but we should be grateful that we had the ability to “move on” quickly after the onset of the pandemic and continue the important functions of education and commerce. This certainly applies to public company annual meetings – thanks to the efforts of the industry and with a little help from the SEC, companies were able to pivot quickly to virtual annual meetings en masse, allowing directors to be elected and business to be conducted at a time when it would have been impossible to have traditional in-person annual meetings.
Above all else, today I am eternally grateful to all of the “front line” workers who have been out there during the pandemic keeping us alive and keeping the wheels of commerce moving. At the same time, I grieve for all of the lives lost from this disease. I sincerely hope that brighter days are ahead for all of us.
The SEC has announced the details for the 41st Annual Government-Business Forum on Small Business Capital Formation, which is hosted by the Office of the Advocate for Small Business Capital Formation. The event will take place virtually again this year, in four sessions taking place on April 4-7 from 1:00-2:30 pm ET.
Sessions will focus on the following topics:
• Mon., April 4 – Empowering Entrepreneurs: Tools to Navigate Capital Raising
• Tue., April 5 – Hometown Entrepreneurship: How Entrepreneurs Can Thrive Outside of Traditional Capital Raising Hubs
• Wed., April 6 – New Investor Voices: How Emerging Fund Managers Are Diversifying Capital
• Thur., April 7 – Small Cap World: What to Know and How to Think Ahead
The SEC notes that the website for the Annual Government-Business Forum will continue to be updated with details on the agenda, speakers, registration, and FAQs in the coming weeks.
