Emerging developments in corporate governance, impact of COVID-19 and outlook for 2022 – Shareholders

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The lingering COVID-19 pandemic continued to impact corporate governance practices and trends in 2021, while other notable developments, including an increase in shareholder proposals, changes to proxy rules and increased climate change accountability requirements have emerged.

Shareholder influence is growing

With the global battle against COVID-19 far from over, many companies continued to hold annual shareholder meetings virtually in 2021. While the pandemic may have hampered in-person meetings, it has not stifled the engagement of investors throughout the shareholder proposal process. In fact, the 2021 proxy season brought a flurry of proposals heavily focused on political lobbying spending, emissions and environmental degradation, workforce diversity, and other social initiatives. These proposals received record support with a total of 71 shareholder proposals adopted, an increase of almost 60% over 2020. As shareholder voices on corporate governance grew louder, developments Regulations have also changed the landscape of shareholder engagement in other ways. .

Universal proxy cards

After years of deliberation, the SEC passed rules in November requiring the use of so-called “universal proxy cards” in contested director elections. The rules require companies and dissidents to include everything named directors on each of their respective proxy cards, effectively providing shareholders with a full menu of nominees and increasing the likelihood of a “split-ticket” vote that tends to favor dissenters and their nominees.

enterprise risk management

In September, the Delaware Chancery Court reiterated the importance of increasing scrutiny over the careful oversight of critical business risks by boards of directors, which allows care mark claims against Boeing’s board of directors to overrule a motion to dismiss for what the plaintiffs claimed were failures to: (i) identify and address the safety risks of certain sensors used in, and (ii) report quickly the safety problems encountered by its 737 MAX aircraft. As a descendant of care mark liability decisions continued to expand this year, courts emphasized that corporate risks take many forms and that the oversight functions of corporate directors should be tailored accordingly to operations, industries and to the commercial activities of their companies. As specific examples of
care mark claims have proliferated in recent years, including food safety, pharmaceutical development and financial reporting, evolving forms of corporate risk, including social issues, are beginning to appear systemic across industries. Supply chain shortages, workforce recruitment and retention, and worker safety, for example, have become major concerns that administrators must continue to monitor and monitor over the course of the year. coming year. But one particular business risk has become more visible than all the others in 2021: climate change.

Climate change

2021 has witnessed a sea change in public discourse regarding corporate responsibility in the face of climate change and its effects. On the heels of BlackRock Chairman Larry Fink’s annual letter to investors highlighting the importance of a sustainable future, companies across all sectors have been challenged to re-examine their role in building and preserving this coming. Wildfires, power outages and the publicity of extreme weather events linked to an unstable climate have made calls for sustainable progress among businesses impossible to ignore. It may not be long before investors turn their calls for progress into urgent demands for fundamental corporate change. In fact, ISS may have heralded a new era of director accountability for climate change with the adoption of a policy recommending voting against the directors of the 167 “significant GHG emitters” companies currently identified as the “Climate Action 100+ Focus Group,” and will recommend incumbent directors of companies that have failed to meet minimum climate-related disclosure standards and have not issued specific emissions reduction targets.

The year to come…

2021 proved once again that ESG is a movement, not a moment. In 2022, directors must demonstrate that they understand that “ESG” is more than an acronym as American companies chart their course for the future. Well understood, and as it has been transformed in recent years, ggovernance in the coming year must integrate Eenvironmental and
Ssocial progress as indispensable priorities – not just accessories.

Read the full 2021 transactional year review and 2022 forecast.

Originally published January 2022

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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