It’s not news that a number of companies are taking a careful look at their diversity-related disclosures and practices this year. One of the many complexities with this process is that – similar to when the programs and disclosures were created – it’s a cross-functional effort. It can be challenging to keep track of all the separate categories of risks that companies are facing, but if you’re called on to summarize the litigation risks relating to securities and corporate law, this Winston & Strawn article does a nice job – and it also gives recommendations for mitigating these risks. Here are the takeaways:
1. Disclosures must reflect corporate practices. Companies have responded to the changing DEI landscape in different ways when it comes to their public disclosures. Many are carrying out audits, reviews, and revisions of their DEI-related programming and policies. In that process, some companies have stripped mention of DEI-related terminology or perceived buzzwords from their disclosures. Others have added more specific risk disclosures addressing risks of reputational harm, litigation, or regulatory scrutiny concerning the company’s actual or perceived DEI practices or compliance with evolving DEI-related requirements. The most important thing is for the company’s disclosures to match its practices. A significant change in how a company publicly discusses DEI will invite risk if its internal practices have not similarly changed.
2. Disclosures should specify particular risks. As a general matter, more robust and more specific risk disclosures are likely to serve a company well in defending against investor claims. Target demonstrates that DEI-related risk disclosures will not guarantee success at the motion to dismiss stage; however, if a company is aware of specific, DEI-related risks, a matching risk disclosure is likely to serve as a powerful defense—certainly more so than nondisclosure. To be sure, simply insofar as companies continue to pursue DEI-related policies, that in itself may constitute a risk for the companies to consider disclosing, depending on the circumstances.
3. Where possible, identify DEI-related statements as forward-looking. Companies should endeavor to properly identify DEI-related statements as forward-looking or opinions to the extent they are subjective, aspirational, and/or aimed toward the future. All such statements should be clearly identified as such.
4. Ensure proper oversight relating to DEI risks. Company management and directors need to ensure they are appropriately supervising DEI-related risks and that their oversight is described accurately in the company’s proxy statement and other disclosures.
Yesterday, I blogged that Glass Lewis might be considering an eventual pivot away from providing voting recommendations and toward helping investor clients develop their own custom policies – but to take it with a grain of salt, because the business folks at the proxy advisor might change their minds.
Apparently, at this point, the pivot plan has already been shelved (if it ever got off the shelf in the first place). Mike Levin of The Activist Investor shared a report from The Deal in which a senior executive said it would continue to produce proxy analysis and vote recommendations that follow those guidelines. (I’ll note that even the original report from Semafor noted none of this would happen anytime soon, if at all.)
Mike points out that proxy advisors get an outsized amount of attention. I agree that those of us “in the weeds” are pretty invested in all of the ups, downs, and proclamations – since on the corporate side, we’re likely to get blamed if something goes sideways! Unfortunately, in some cases, executives don’t pay attention until there’s a low vote for say-on-pay or director elections. And then – yes – resentment and outsized attention ensues. Mike gives this helpful context of the parts of Glass Lewis’s business – analysis, advice, and processing:
GL appears to have considered abandoning the “advice” element of its service lineup.
It will continue to analyze the subjects on which its clients vote. This means assembling the voluminous data and documents needed to understand those subjects, running that information through its sophisticated models, and describing how the results line up against voting policies.
It will also continue to process votes. This means handling all the arcane procedures for a client to complete proxy cards, submit votes, track results, write reports, etc. etc.
The advice segment of these services brings trouble. Here it takes a stand on which directors and proposals to support or oppose, and whether to approve exec comp. They can’t possibly please enough people to mitigate the controversies that inevitably occur. Notably, the GL website doesn’t mention its voting advice, or at least we couldn’t find it among all the other “Investor Solutions” it provides.
Mike also shares his hunch that some of Glass Lewis’s pension fund clients may prefer continued recommendations rather than their own custom policies. Glass Lewis’s specific business decisions aside, the proxy voting landscape continues to evolve – and we’ll keep paying attention to changes!
As we head into the height of annual meeting season, don’t miss this informative 29-minute podcast with Cooley’s Reid Hooper & Michael Mencher – addressing how folks are dealing with this year’s twists & turns. Topics include:
1. Influence of SLB 14M on current and future proxy seasons
2. Shareholder proposal hot topics
3. Impact of 13D/G CDIs on proxy season engagement
4. Overview of 14a-8 “no-action” letter results
5. Trends in no-action submissions and arguments
6. Outlook for 2026 proxy season after a full year of SLB 14M
We’re getting a lot of positive feedback on the podcast format and the topics we’ve been covering, so there will be more episodes to come! 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.
Semafor reported last week that proxy advisor Glass Lewis – whose recommendations carry weight with many pensions and other institutions – may be considering an eventual pivot away from “house policies” and toward helping investors develop their own custom policies. Here’s an excerpt:
Glass Lewis, the scrappier and smaller rival of Institutional Shareholder Services (ISS), is discussing a dramatic shift to essentially scrap its “house view” on ballot measures ranging from takeover battles to complaints about gender balance, political donations, and carbon emissions, according to people familiar with the matter and an internal memo seen by Semafor. The move is partly in response to heightened conservative backlash, they said.
Glass Lewis would help investors develop their own custom voting policies, handle the paperwork and regulatory reporting, and provide data and research. The changes would be phased in over a few years, and the firm would likely continue to make explicit recommendations in the meantime.
It’s important to note that this appears to be in the early stages of consideration – and Glass Lewis hasn’t made a public announcement – so things could change. That said, it’s consistent with undercurrents of disruption that are happening with shareholder voting. Ongoing criticism of proxy advisors (which Meredith blogged about today on The Proxy Season Blog), new technologies that could make it easier to develop custom policies, and the growing push for “investor choice” suggest that some sort of change is coming. All of these percolating changes could add up to suspenseful proxy seasons for companies. Stay tuned!
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…
A few weeks ago, I had the honor of participating as a panelist at the SEC’s 44th Annual Small Business Forum, which took place at the SEC’s Washington, DC headquarters. The SEC has posted recordings of the first half and the second half of the program, and my panel took place during the second half. The panel was moderated by Sebastian Gomez Abero, who is Acting Deputy Director, Legal and Regulatory Policy in Corp Fin, and I was joined on the panel by Dr. Yunhao Chen, who serves as CFO of Massimo Group.
We focused our panel discussion on going public and operating as a public company, addressing some of the key challenges that smaller companies face when seeking to access the public capital markets, as well as once they are operating as public company. During the course of our conversation, I shared the following observations:
– While we observed increased IPO volume in 2024 and the first quarter of 2025, the IPO market largely shut down amidst the market turmoil that followed the U.S. government’s shift in trade policy, which demonstrates how quickly the market dynamic can change, and how companies that are seeking to go public have very little control over their IPO timeline given how the IPO window can so rapidly close.
– One of the biggest challenges for smaller companies seeking to go public is a problem that cannot be readily addressed through regulatory policy or legislative action, and that is the lack of infrastructure for completing small IPOs, as we have lost the regional investment banks and regional stock exchanges that existed 30 years ago.
– I noted that this challenge leads us to the need to rethink what is an IPO, because the traditional underwritten, fully-marketed IPO that is trading on a stock exchange is very much reserved for companies that have valuations that can support raising a hundred and fifty million, two hundred million dollars in proceeds, and that is why there was excitement with things like Tier 2 of Regulation A and the JOBS Act IPO on-ramp.
– For smaller companies that have gone public, one of their biggest challenges as a public company is the complexity of the disclosure requirements on top of the general compliance costs and the need for controls and all those things that come with operating as a public company. In this regard, I pointed out the complexity of navigating the SEC’s filer status rules.
– I also noted the volume of the disclosure required of smaller companies, and how the gap has narrowed between what a smaller company must disclose and what a larger company must disclose. I offered up that perhaps we should go back to having a completely separate disclosure regime for smaller companies, as we did in the times before Regulation SB was integrated into Regulation S-K.
– For any companies still thinking about going public when facing all of these challenges, I offered that you should act like a public company before you become a public company, because for the executive team, the financial reporting team, the lawyers and everyone else that might be involved, you really have to build that muscle of being a public company over time. This involves focusing on your compliance program, focusing on your internal controls and disclosure controls, a really thinking about how you will interact with investors and how you will communicate the company’s story.
– In terms of suggestions for regulatory changes, I offered that we should really step back and figure out what do we really mean when we are trying to categorize smaller companies, particularly for the purpose of effectively right-sizing their disclosure obligations to align with their size and sophistication. I also noted that we should enhance and expand the improvements that came about with the JOBS Act, while revisiting shelf eligibility for companies that are already public.
The SEC’s Small Business Forum was a very thought-provoking program at a time when we are experiencing some legislative and regulatory focus on capital formation for smaller companies. I encourage you to go back and listen to the archive or review the transcript if you were not able to watch it live.