Corporate Governance

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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

Increased stakeholder expectations have made corporate governance more important than ever, with important implications for companies and their executives. The following guest post examines the ways that sound corporate governance structures and practices can help position companies to be able to defend themselves in the event of litigation. This paper was written by Suzanne H. Gilbert is a member of the Board of Advisors of Grace & Co. Consultancy, Inc.; H. Stephen Grace Jr., Ph.D. President of H.S. Grace & Company, Inc.; Joseph P. Monteleone, a partner with Weber Gallagher Simpson Stapleton Fires and Newby LLP law firm; and S. Lawrence Prendergast is a member of the Board of Advisors of Grace & Co. Consultancy, Inc. and is Chairman of the Turrell Fund. A version of this article previously was published in the American Bar Association’s Business Law Today. 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. The authors’ article follows.
Continue Reading Guest Post: Stress Testing Your Corporate Governance Structure

As I noted a prior post, on August 6, 2021, the SEC, in a split vote along party lines, approved Nasdaq’s proposed listing guidelines requiring companies listed on the exchange to comply with board diversity requirements or explain their failure to do so. On August 9, 2021 a nonprofit directors’ organization called the Alliance for Fair Board Recruitment filed a petition with the Fifth Circuit Court of Appeals seeking to have the appellate court review the SEC’s order. The organization explained its move in an August 18, 2021 press release, stating that it sought to challenge the order because it “will compel many of our nation’s largest publicly traded corporations to illegally discriminate on the basis of gender, race, and sexual orientation” in selecting directors. The appellate petition can be found here. The August 18 press release can be found here.
Continue Reading Court Challenge to Nasdaq Board Diversity Rules Filed

The topic of diversity on corporate boards has been the focus of a great deal of recent attention, discussion, and action. California has enacted legislation aimed toward more diverse boards; certain institutional investors have begun pushing for greater diversity in the boardroom; and there has even been litigation targeting companies whose boards are not diverse. In addition, last December, the Nasdaq securities exchange filed with the SEC a proposal requiring companies listed on its exchange to disclose whether the company is in compliance with the exchange’s diversity standards or to explain why it is not in compliance. On August 6, 2021, the SEC, in a vote split along party lines, approved the proposed Nasdaq guidelines, making the guidelines applicable to most of the nearly 3,000 Nasdaq listed company. The SEC’s August 6, 2021 order approving the guidelines can be found here.
Continue Reading SEC Approves Nasdaq’s Board Diversity Disclosure Requirements

As this blog’s readers know, one of the important corporate governance developments in recent months has been the heighted focus on board diversity. As part of this focus, several states have enacted statutory requirements addressing board diversity. The following guest post from Jessie K Liu, Susan Saltzstein, Lauren Aguiar and Tansy Woan of the Skadden, Arps, Slate, Meagher & Flom LLP law firm take a look at the various state and regulatory initiatives, and provide a survey overview of the relevant state legislation. This article updates a prior Skadden client alert. 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: Diversity in the Corporate Boardroom:  A Current Scorecard

Last summer, when California adopted a new law requiring corporations based in the state to add board members from “underrepresented communities,” it modeled the statute on the board gender diversity statute the state had enacted two years before. The constitutionality of the board gender diversity law itself had been challenged in a federal court lawsuit, but the court hearing the suit had dismissed it based on the named plaintiff’s lack of standing. However, in a June 21, 2021 opinion (here), the Ninth Circuit reversed the district court, finding that the claimant had sufficient standing to pursue the claim. The appellate court’s action has implications both for the board gender diversity statute and the more recently adopted board racial diversity statute, which has also been challenged in court.
Continue Reading 9th Circ. Revives Legal Challenge to California Board Gender Diversity Statute

The importance of ESG issues for companies and their executives is nothing new, but in recent days ESG issues seem to have taken center stage. The surprising success of activist investor Engine No. 1 in electing climate change-focused candidates to the board of ExxonMobil and the order by the Dutch court requiring Royal Dutch Shell to reduce carbon dioxide emissions by 50% of 2019 levels by 2030 are just two of the recent examples of the ways in which ESG issues increasingly have come to predominate corporate agendas. As discussed below, challenges related to ESG issues seem likely to continue. Among other things, these developments present new risks for potential D&O liability exposures as well.
Continue Reading The Predominance of ESG-Related Issues and the Implications for Corporate Boards