Deal Diary

On May 15, 2023, the Eastern District of California ruled that California Assembly Bill No. 979 (“AB 979”) violates the Equal Protection Clause of the U.S. Constitution’s Fourteenth Amendment and 42 U.S.C. § 1981. As enacted, California’s Board Diversity Statute, required public companies with headquarters in the state to include a minimum number of directors from “underrepresented communities” or be subject to fines for violating the statute. AB 979 defines a “director from an underrepresented community” as “an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender.”

In April 2022, the Financial Conduct Authority (the FCA) issued its final policy statement on diversity and inclusion (D&I) requirements for premium and standard listed issuers with the object of increasing transparency for investors on the diversity of boards and executive management. 

As companies begin preparing for the 2023 proxy season, we note that Institutional Shareholder Services Inc. (ISS) and Glass Lewis, the leading providers of corporate governance solutions and proxy advisory services, issued updated benchmark policies (proxy voting guidelines), which can be found here and here, respectively. The updated proxy voting guidelines generally focus on board accountability and oversight considerations and address topics such as climate accountability, board diversity, shareholder rights, corporate governance standards, executive compensation and social issues. What follows is a summary of the proxy voting guidelines published by ISS and Glass Lewis for the 2023 proxy season.

Editor’s Note: Akin Gump is pleased to publish the first in a series of blog posts covering significant issues U.S. boards of directors may expect to face in 2022. In addition to ongoing pressures on the part of boards of directors of private and public companies to continue embracing environmental, social and governance (ESG) principles in connection with developing both short- and long-term growth strategies, directors in the U.S. (and, by extension, overseas) are facing any number of challenges that will need to be navigated in a thoughtful and transparent manner. We expect to publish this series of posts over the next few weeks, as well as updated materials and content as and when events warrant.  

On Friday, August 6, 2021, the U.S. Securities and Exchange Commission approved a new set of disclosure requirements for companies listed on Nasdaq trading platforms. These new rules regarding board diversity and related disclosures will require Nasdaq-listed companies, subject to certain exceptions, to increase diversity in their boardrooms or disclose why they have not done so. This client alert, which follows-up on our previous description of Nasdaq’s proposal, tells you what you need to know.

On November 17, 2021, the Securities and Exchange Commission (SEC) proposed amendments to its rules governing proxy solicitations. The proposals seek to address concerns by investors and others that the current rules may impede and impair the timeliness and independence of proxy voting advice and subject proxy voting advice businesses (PVABs) to undue litigation risks and compliance costs.

On Thursday, November 4, 2021, proxy advisory firm Institutional Shareholder Services (ISS) launched an open comment period on 16 proposed policy changes. The request for comment categorized the proposed changes within five general topics: (i) Board Diversity; (ii) Board Accountability – Unequal Voting Rights; (iii) Board and Other Governance Structure Elections; (iv) Climate; and (v) Compensation. Chiefly focused on the impact to the U.S. benchmarks, each of these general topics are summarized below; however, this blog post focuses on ISS’s updates on climate issues.

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On September 19, 2022, amendments to the Securities and Exchange Commission (SEC) rules governing proxy solicitations became effective. The amendments, proposed on November 17, 2021, seek to address concerns by investors and others that the current rules may impede and impair the timeliness and independence of proxy voting advice and subject proxy voting advice businesses (PVABs) to undue litigation risks and compliance costs.