A&O Shearman today released its annual Corporate Governance & Executive Compensation Survey. Now in its 22nd edition, the survey provides insights on current developments in corporate governance and executive compensation matters and identifies related trends across the Top 100 Companies in the United States listed on the NYSE and Nasdaq, measured by market capitalization and revenue. This edition marks the first since the merger of Shearman & Sterling with Allen & Overy, boasting an expanded global presence and enhanced capabilities and featuring a thorough focus on matters of international significance.
The 22nd Corporate Governance & Executive Compensation Survey dives into the corporate governance issues that are in focus in the current environment, with a goal of providing a perspective on what boards and management teams should be thinking about as they enter the 2025 proxy season. A list of the Top 100 Companies can be found at the end of the publication.
Key major finding and research areas from this year’s report include:
- Cybersecurity: Directors with cybersecurity experience increased significantly in 2024 from 70 in 2023 to 88 in 2024.
- Board diversity: In 2024, the number of Top 100 Companies that presented director-specific diversity information increased to 73 companies from 61 companies in 2023.
- Women in the boardroom: Women constituted an average of 33.7% of the directors of the Top 100 Companies in 2024 as compared to 34% in 2023.
Articles featured in this year’s survey include:
Recapping the 2024 proxy season: will E&S shareholder proposals survive?
The last few years including 2024 have witnessed a steady decline in the number of environmental and social (E&S) shareholder proposals submitted, in the level of shareholder support for these proposals, and in the number of these proposals that ultimately passed. This article explores whether the shareholder proposal as a tool in the E&S shareholder activism kit is fading away.
2024 developments: Delaware Law on controlling stockholder transactions
Under Delaware law, most actions a board of directors, if challenged by stockholders, will be reviewed under the permissive “business judgment rule” standard. Where the business judgment rule applies, most lawsuits will be dismissed on the pleadings before discovery or trial. This article gives background on standards of judicial review of fiduciary actions under Delaware law and update of the 2024 developments including case examples, with a particular focus on the expansive use of the entire fairness standard in decisions involving controlling stockholders.
EU rules on sustainability reporting and due diligence and their impact on U.S. companies
Since the European Union published its “green deal” in 2020, a wave of new ESG legislation has been issued that will profoundly impact how corporations report on ESG matters and carry out their activities. These new rules impact not only companies headquartered in the EU, but also U.S. multinationals with significant EU operations. This article focuses on how two key pieces of EU legislation impact U.S. companies: The sustainability reporting rules under the Corporate Sustainability Reporting Directive or “CSRD”, and the sustainability due diligence requirements under the Corporate Sustainability Due Diligence Directive or “CS3D”.
Innovating in your governance approach to generative AI
This article explores the specific features of generative AI that affect governance and provides a framework that addresses unique risks to allow businesses to innovate quickly, responsibly and efficiently and, at the same time, provide a board with a tangible framework on which to base its oversight of the growing risks and opportunities.
Geopolitical risk mitigation for inbound U.S. investment
In the last decade, CFIUS jurisdiction has expanded to include certain minority investments, and any transaction structured to evade CFIUS review. There is now a mandatory filing regime for investments in the critical technology, critical infrastructure, and sensitive personal data sectors. The article outlines opportunities for foreign investors in the U.S. market and the CFIUS risks.
Regulation of proxy advisors rides the roller coaster
The regulation of proxy advisory firms like ISS and Glass Lewis, actively on the SEC’s agenda since 2010, has continued to see significant legal change and uncertainty, with several court decisions this year pointing in different directions and the SEC itself changing its position. This article reviews the 2020 rule codifying the treatment of certain proxy voting advice as proxy solicitation and imposing requirements on proxy advisory firms, the subsequent 2022 rule reversal and the related recent court decisions, as well as possible next steps.
ESG and incentive compensation plans: is the backlash real?
The impact of ESG backlash is most notable in the decreasing support for pro-environmental and social shareholder proposals, with many U.S. issuers focusing on whether to revisit the inclusion of ESG metrics in their incentive compensation programs. This article concludes that U.S. issuers continue to view ESG metrics as a beneficial component of their incentive-compensation programs, particularly their annual bonus programs.
Listing regime overhaul and investment stewardship debates
On July 29, all existing U.K.-listed companies were migrated from the listing category they were in immediately prior to that date into an appropriate category under the new rules, whether that is the new ESCC category (for premium listed companies) or one of the other new categories or an existing category that has been carried over into the new regime (e.g., for certain investment companies). This article reviews the new listing rules, focused on how they will impact corporate governance and investor relationships with U.K.- listed companies.
Read A&O Shearman’s 22nd Annual Corporate Governance & Executive Compensation Survey here.
