Deal Diary

We have released our 2023 ESG Survey which includes a collection of reports reflecting on significant ESG themes and trends from 2022, as well as what we believe to be key developments for 2023.

Recent rulings underscore the attention boards of directors and management must continue to pay to the risks faced by companies across all sectors of the economy and their potential impact on business operations. Last year’s decision in In re Boeing Co. Derivative Litigation¹ only serves as the most recent reminder of the potential exposures (including personal liability) companies, boards of directors and management may face.

On June 21, 2021, the U.S. Supreme Court issued its opinion in Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System,¹ vacating the 2nd Circuit’s previous decision and remanding for further consideration as to whether Goldman Sachs rebutted the fraud-on-the-market presumption of reliance by a preponderance of the evidence. Relying on the presumption of reliance established in Basic,² respondent shareholders (“Plaintiffs”) had alleged that Goldman Sachs made material misrepresentations that allowed it to maintain an artificially inflated stock price. Plaintiffs’ claims arose from generic statements that Goldman Sachs released in which it claimed that it had a system in place to resolve conflicts of interest. After Goldman Sachs issued the generic statements, it became public knowledge that Goldman Sachs did not, in fact, adequately resolve a conflict of interest. Shortly thereafter, Goldman Sachs’s stock price dropped.

On March 29, 2021, the U.S. Supreme Court heard oral argument in Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System.¹ In this closely watched case, the Court is expected to clarify the evidentiary burden for rebutting the “fraud on the market” presumption of reliance at the class certification stage in securities fraud class actions.

In mid-March 2020, concerned about opportunistic activist stockholders, a precipitous decline in oil prices and corresponding stock volatility, as well as uncertainty created by the unprecedented COVID-19 pandemic, the board of directors of the Williams Companies, Inc. (“Williams” or the “Company”) adopted a one-year stockholder rights plan with a five percent trigger (the “Williams Plan”). Less than a year later, the Delaware Court of Chancery, after reviewing the Williams Plan under the Unocal standard, permanently enjoined it, and found that the directors had breached their fiduciary duties, thereby rendering it unenforceable.

The world has changed a lot since our 2020 report. A global pandemic; a reckoning on race, inequality and social justice; a climate crisis; an economic shock; and increased political polarization have created challenging dynamics for companies and boards globally. The role of the board in managing risk and charting the course ahead is more critical today than ever before. This report delves into these wide-ranging and interlocking issues and offers insight on how directors and management must proactively embrace their stewardship roles in this brave new world.

Akin Gump discusses the challenging decisions that equity investors and sponsors will need to make in reviewing the financial needs and business operations of their portfolio companies as a result of the economic upheaval and government-mandated social restrictions imposed by the spread of COVID-19. Accordingly, it is important to consider the responsibilities and duties that attach to equity investors and sponsors who are deemed “controlling equityholders” under applicable law.

In High River Ltd. P’ship v. Occidental Petroleum Corp., No. CV 2019-0403-JRS, 2019 WL 6040285 (Del. Ch. Nov. 14, 2019), the Court of Chancery of the state of Delaware recently refused to hold that Section 220 books and records demands could be used solely for furthering a proxy contest without otherwise stating and demonstrating a proper purpose, such as exploring a credible basis of corporate mismanagement. In this article we explore potential takeaways from the High River opinion and considerations for stockholders in making Section 220 demands and supplemental approaches aimed at enhancing the efficacy of such pleadings and demands based on Delaware case law.