The “G” in ESG stands for “governance.” ESG is of course of one of the most au courant topics in the corporate and securities world, and the inclusion of governance as one of the three ESG pillars inferentially suggests that governance is a new – or at least newly relevant – topic. The reality is, however, that governance is a perennial topic. Its relevance has never diminished, and it remains as important as ever. However, principles of corporate governance do evolve with changing times. It is this evolution of corporate governance that is at the heart of a new book on the topic.

The book, which is entitled “Corporate Governance: Understanding the Board-Management Relationship,” and was written by H. Stephen Grace, Jr., Ph.D, Founder and President of H.S. Grace & Company, Inc.; Suzanne Gilbert, Member Board of Advisors of Grace & Co. Consultancy, Inc.; Joseph P. Monteleone, Esq, Principal Catamount Services, LLC; and S. Lawrence Prendergast, Chairman of the Board of Trustees, Turrell Fund, explores the values-based origin of governance principles; examines the recent progression of governance concepts and considers several recent circumstances that explain the changing concepts; and reviews some of the practical implications of these changing concepts and principles. The book, more information about which can be found here, is a useful and readable summary of current understandings and best practices in corporate governance.Continue Reading Book Review: Corporate Governance: Understanding the Board-Management Relationship

Governance Issues frequently are the heart of corporate and securities lawsuits. For that reason, the testimony in this type of litigation of corporate governance and management practices experts can be indispensable. In the following guest post, Dr. Stephen Grace, President and Founder of H.S. Grace & Company, Inc., Alvin H. Fenichel, CPA, Senior Advisor at H.S. Grace & Company, Inc., and Joseph P. Monteleone, Esq., the Principal in Catamount Services LLC,  take a look at the ways in which the testimony of these experts can be utilized in these kinds of lawsuits, as well as the related question of who is qualified to serve as a governance expert. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.Continue Reading Guest Post: Is It Ever Too Early To Engage A Corporate Governance Expert?

In a lengthy and detailed opinion, the Fifth Circuit has rejected two petitions challenging the SEC’s approval of Nasdaq’s board diversity rules. The rules require most Nasdaq-listed companies to have women and minority directors on their boards or explain why they don’t. The petitioners had argued that the rules violated constitutional free speech and equal

Every now and then it is worthwhile to go back to the basics. In the following guest post, Greg Markel, Gina Ferrari, and Sarah Fedner, all of the Seyfarth Shaw law firm, review the basic building blocks of corporate governance duties and discuss ways for directors and boards to avoid violating the duties. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.Continue Reading Guest Post: Essential Corporate Governance Duties and How To Avoid Violating Them

As I noted in recent posts (for example, here), an anti-ESG backlash has been forming. The backlash has already taken a variety of forms, including anti-ESG legislation and anti-ESG litigation. Now, in what one media source called a “new front in a campaign against companies” related to ESG activities, a group of five Republican senators has sent letters to 51 large U.S. law firms warning the firms that the Senators plan to use their congressional oversight powers “to scrutinize the institutionalized antitrust violations being committed in the name of ESG.” The Senators’ letter campaign is described in a November 4, 2022 Reuters article (here). The Senators’ November 3, 2022 letters to the law firms can be found here.
Continue Reading Senators Warn Law Firms Concerning ESG-Related Advice

As I have previously noted (most recently here), something of an anti-ESG backlash has started to take shape, at least in certain quarters. Legislatures in several states have passed legislation prohibiting state pension funds from investing in ESG- focused investments or prohibiting the state from doing business with companies that boycott certain industries. The backlash has also taken the form of litigation, as, for example, with respect to the lawsuit recently filed against Starbucks board pertaining to the company’s diversity, equity, and inclusion initiative (DEI).

As Alison Frankel discusses in an October 26, 2022 post on her On the Case blog (here), and in the latest manifestation of this kind of anti-ESG litigation, a nonprofit group has filed an action against the pharmaceutical giant Pfizer based on the company’s sponsorship of a foundation offering fellowships aimed at Black, Latino, Native American and other minority candidates. This latest lawsuit is yet another indication that the companies that get caught up in ESG litigation may the companies taking ESG initiatives, perhaps more so that ESG laggards.
Continue Reading Suits Targeting Firms Seeking to Boost Minorities Highlight ESG Risks

The hot topic in the financial press, the corporate world, and the legal arena these days is “ESG.” This portmanteau expression – ESG — is meant to encompass a plethora of diverse and unrelated concepts, ideas, and concerns. The reality is that it is hard to say simply what “ESG” means; and not just “ESG,” but each of the three pillars, E, S, and G, are subject to the same definitional imprecision. Yet everyone continues to act as if “ESG” is a known, specific, and identifiable thing, that can be measured and assessed. The result is a false sense of precision, and a great deal of very sloppy thinking.

These issues are well-discussed in Cydney Posner’s August 8, 2022 post on the Cooley law firm’s Pubco blog, entitled “What’s Wrong with ESG Measures?” (here). Posner’s article discusses in the detail the recent research paper issued by the Rock Center for Corporate Governance at Stanford University entitled “ESG Ratings – A Compass Without Direction” (here).
Continue Reading Zeroing In On The Problem With “ESG”

Virginia Milstead

In the following guest post, Virginia Milstead, a partner at the Skadden, Arps, Slate, Meagher & Flom LLP law firm, reviews and considers the implications of the May 13, 2022 verdict in Crest v. Padilla, in which the Los Angeles County Superior Court held that California’s statute requiring women on corporate boards violates the state constitution’s equal protection clause. A version of this article previously was published as a Skadden client alert; this version is updated to reflect the fact that the California secretary of state has indicated that she will appeal the court’s verdict. I would like to than the author for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the author’s article.
Continue Reading Guest Post: California Trial Court Strikes Down Women on Boards Law

Over recent months, there has been a series of regulatory, legislative, and litigation measures and actions implemented to try to address perceived concerns about diversity in the corporate boardroom. Prominent among these measures was AB 979, the California board diversity statute for “underrepresented communities.” This California legislative measure was the subject to a legal challenge seeking to prevent the California secretary of state from expending taxpayer funds to enforce the measure, which, the taxpayer plaintiffs claimed, violated the equal protection clause in the California state constitution. In an interesting and detailed April 1, 2022 opinion (here), California Superior Court Judge Terry A. Green, granted the taxpayers’ motion for summary judgment, striking down the legislation on equal protection ground.
Continue Reading Court Strikes Down California Board Diversity Statute

Michael W. Peregrine

Russia’s invasion of Ukraine will have many ramifications, some of which may only become apparent over the course of years . For those of us whose job is to worry about the liability exposures of corporate directors and officers, one question has been whether the developments in Ukraine will have legal implications for companies and their executives. Among other concerns for companies and their executives is the sanction regimes that the governments of the U.S., U.K. and other countries have put in place.  In the following guest post, Michael W. Peregrine, a partner at McDermott Will & Emery LLP, examines at the corporate governance implications for U.S. companies arising from the sanctions. A version of this article previously was published by Forbes. I would like to thank Michael for allowing me to publish his article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Michael’s article.
Continue Reading Guest Post: The Globalization of Corporate Governance