Nouvelles diverses

actualités internationales engagement et activisme actionnarial Gouvernance

The Distribution of Voting Rights to Shareholders

Vyacheslav Fos et Clifford Holderness publient un article sur la distribution des droits de vote des actionnaires sur la bourse NYSE : « The Distribution of Voting Rights to Shareholders » (ECGI Finance Series 733/2021).

Résumé

This is the first comprehensive study of the distribution of voting rights to shareholders. Only those owning stock on the record date may vote. Firms, however, reveal that date after the fact 91% of the time. With controversial votes, firms are more likely to do the opposite, and this is associated with a lower passage rate for shareholder-initiated proposals.

The NYSE sells non-public record-date information to select investors. When stocks go ex vote, prices decline and trading volume often surges, suggesting that investors are buying marginal votes. These trends are most pronounced with controversial votes.

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actualités internationales Divulgation divulgation extra-financière Gouvernance Normes d'encadrement normes de droit normes de marché Responsabilité sociale des entreprises

Approche juridique sur la transparence ESG

Excellente lecture ce matin de ce billet du Harvard Law School Forum on Corporate Governance : « Legal Liability for ESG Disclosures » (de Connor Kuratek, Joseph A. Hall et Betty M. Huber, 3 août 2020). Dans cette publication, vous trouverez non seulement une belle synthèse des référentiels actuels, mais aussi une réflexion sur les conséquences attachées à la mauvaise divulgation d »information.

Extrait :

3. Legal Liability Considerations

Notwithstanding the SEC’s position that it will not—at this time—mandate additional climate or ESG disclosure, companies must still be mindful of the potential legal risks and litigation costs that may be associated with making these disclosures voluntarily. Although the federal securities laws generally do not require the disclosure of ESG data except in limited instances, potential liability may arise from making ESG-related disclosures that are materially misleading or false. In addition, the anti-fraud provisions of the federal securities laws apply not only to SEC filings, but also extend to less formal communications such as citizenship reports, press releases and websites. Lastly, in addition to potential liability stemming from federal securities laws, potential liability could arise from other statutes and regulations, such as federal and state consumer protection laws.

A. Federal Securities Laws

When they arise, claims relating to a company’s ESG disclosure are generally brought under Section 11 of the Securities Act of 1933, which covers material misstatements and omissions in securities offering documents, and under Section 10(b) of the Securities Exchange Act of 1934 and rule 10b-5, the principal anti-fraud provisions. To date, claims brought under these two provisions have been largely unsuccessful. Cases that have survived the motion to dismiss include statements relating to cybersecurity (which many commentators view as falling under the “S” or “G” of ESG), an oil company’s safety measures, mine safety and internal financial integrity controls found in the company’s sustainability report, website, SEC filings and/or investor presentations.

Interestingly, courts have also found in favor of plaintiffs alleging rule 10b-5 violations for statements made in a company’s code of conduct. Complaints, many of which have been brought in the United States District Court for the Southern District of New York, have included allegations that a company’s code of conduct falsely represented company standards or that public comments made by the company about the code misleadingly publicized the quality of ethical controls. In some circumstances, courts found that statements about or within such codes were more than merely aspirational and did not constitute inactionable puffery, including when viewed in context rather than in isolation. In late March 2020, for example, a company settled a securities class action for $240 million alleging that statements in its code of conduct and code of ethics were false or misleading. The facts of this case were unusual, but it is likely that securities plaintiffs will seek to leverage rulings from the court in that class action to pursue other cases involving code of conducts or ethics. It remains to be seen whether any of these code of conduct case holdings may in the future be extended to apply to cases alleging 10b-5 violations for statements made in a company’s ESG reports.

B. State Consumer Protection Laws

Claims under U.S. state consumer protection laws have been of limited success. Nevertheless, many cases have been appealed which has resulted in additional litigation costs in circumstances where these costs were already significant even when not appealed. Recent claims that were appealed, even if ultimately failed, and which survived the motion to dismiss stage, include claims brought under California’s consumer protection laws alleging that human right commitments on a company website imposed on such company a duty to disclose on its labels that it or its supply chain could be employing child and/or forced labor. Cases have also been dismissed for lack of causal connection between alleged violation and economic injury including a claim under California, Florida and Texas consumer protection statutes alleging that the operator of several theme parks failed to disclose material facts about its treatment of orcas. The case was appealed to the U.S. Court of Appeals for the Ninth Circuit, but was dismissed for failure to show a causal connection between the alleged violation and the plaintiffs’ economic injury.

Overall, successful litigation relating to ESG disclosures is still very much a rare occurrence. However, this does not mean that companies are therefore insulated from litigation risk. Although perhaps not ultimately successful, merely having a claim initiated against a company can have serious reputational damage and may cause a company to incur significant litigation and public relations costs. The next section outlines three key takeaways and related best practices aimed to reduce such risks.

C. Practical Recommendations

Although the above makes clear that ESG litigation to date is often unsuccessful, companies should still be wary of the significant impacts of such litigation. The following outlines some key takeaways and best practices for companies seeking to continue ESG disclosure while simultaneously limiting litigation risk.

Key Takeaway 1: Disclaimers are Critical

As more and more companies publish reports on ESG performance, like disclaimers on forward-looking statements in SEC filings, companies are beginning to include disclaimers in their ESG reports, which disclaimers may or may not provide protection against potential litigation risks. In many cases, the language found in ESG reports will mirror language in SEC filings, though some companies have begun to tailor them specifically to the content of their ESG reports.

From our limited survey of companies across four industries that receive significant pressure to publish such reports—Banking, Chemicals, Oil & Gas and Utilities & Power—the following preliminary conclusions were drawn:

  • All companies surveyed across all sectors have some type of “forward-looking statement” disclaimer in their SEC filings; however, these were generic disclaimers that were not tailored to ESG-specific facts and topics or relating to items discussed in their ESG reports.
  • Most companies had some sort of disclaimer in their Sustainability Report, although some were lacking one altogether. Very few companies had disclaimers that were tailored to the specific facts and topics discussed in their ESG reports:
    • In the Oil & Gas industry, one company surveyed had a tailored ESG disclaimer in its ESG Report; all others had either the same disclaimer as in SEC filings or a shortened version that was generally very broad.
    • In the Banking industry, two companies lacked disclaimers altogether, but the rest had either their SEC disclaimer or a shortened version.
    • In the Utilities & Power industry, one company had no disclaimer, but the rest had general disclaimers.
    • In the Chemicals industry, three companies had no disclaimer in their reports, but the rest had shortened general disclaimers.
  • There seems to be a disconnect between the disclaimers being used in SEC filings and those found in ESG In particular, ESG disclaimers are generally shorter and will often reference more detailed disclaimers found in SEC filings.

Best Practices: When drafting ESG disclaimers, companies should:

  • Draft ESG disclaimers carefully. ESG disclaimers should be drafted in a way that explicitly covers ESG data so as to reduce the risk of litigation.
  • State that ESG data is non-GAAP. ESG data is usually non-GAAP and non-audited; this should be made clear in any ESG Disclaimer.
  • Have consistent disclaimers. Although disclaimers in SEC filings appear to be more detailed, disclaimers across all company documents that reference ESG data should specifically address these issues. As more companies start incorporating ESG into their proxies and other SEC filings, it is important that all language follows through.

Key Takeaway 2: ESG Reporting Can Pose Risks to a Company

This article highlighted the clear risks associated with inattentive ESG disclosure: potential litigation; bad publicity; and significant costs, among other things.

Best Practices: Companies should ensure statements in ESG reports are supported by fact or data and should limit overly aspirational statements. Representations made in ESG Reports may become actionable, so companies should disclose only what is accurate and relevant to the company.

Striking the right balance may be difficult; many companies will under-disclose, while others may over-disclose. Companies should therefore only disclose what is accurate and relevant to the company. The US Chamber of Commerce, in their ESG Reporting Best Practices, suggests things in a similar vein: do not include ESG metrics into SEC filings; only disclose what is useful to the intended audience and ensure that ESG reports are subject to a “rigorous internal review process to ensure accuracy and completeness.”

Key Takeaway 3: ESG Reporting Can Also be Beneficial for Companies

The threat of potential litigation should not dissuade companies from disclosing sustainability frameworks and metrics. Not only are companies facing investor pressure to disclose ESG metrics, but such disclosure may also incentivize companies to improve internal risk management policies, internal and external decisional-making capabilities and may increase legal and protection when there is a duty to disclose. Moreover, as ESG investing becomes increasingly popular, it is important for companies to be aware that robust ESG reporting, which in turn may lead to stronger ESG ratings, can be useful in attracting potential investors.

Best Practices: Companies should try to understand key ESG rating and reporting methodologies and how they match their company profile.

The growing interest in ESG metrics has meant that the number of ESG raters has grown exponentially, making it difficult for many companies to understand how each “rater” calculates a company’s ESG score. Resources such as the Better Alignment Project run by the Corporate Reporting Dialogue, strive to better align corporate reporting requirements and can give companies an idea of how frameworks such as CDP, CDSB, GRI and SASB overlap. By understanding the current ESG market raters and methodologies, companies will be able to better align their ESG disclosures with them. The U.S. Chamber of Commerce report noted above also suggests that companies should “engage with their peers and investors to shape ESG disclosure frameworks and standards that are fit for their purpose.”

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actualités internationales Gouvernance rémunération

COVID-19 : quel impact sur la rémunération des dirigeants américains ?

L’Harvard Law School Forum on Corporate Governance publie un bel article sur les conséquences de la COVID-19 sur la rémunération des hauts dirigeants des entreprises américaines : « COVID-19 and Executive Pay: Initial Reactions and Responses«  (de Stephen Charlebois, Phillip Pennell, and Rachel Ki).

Extrait :

Though businesses have managed executive pay programs through tough economic conditions before, they now must do so under an unprecedented confluence of external expectations and scrutiny, from the advent of Say on Pay to increased shareholder engagement to the beginning of an era of stakeholder primacy.

While results vary across industries, findings indicate that a majority of U.S. corporations have not yet formulated a response to COVID-19 on executive pay but anticipate taking some form of action later in 2020.

What should you take away from the results of this survey?

  • There is no universal response. Findings indicate a variety of approaches influenced by company outlook, industry dynamics and broader context
  • That said, most companies are delaying action until there is greater clarity. Companies that already made pay decisions are generally waiting until payout determinations to see if adjustments are necessary, and those that have not yet made decisions in 2020 are delaying until the impact of COVID-19 is better understood
  • Companies acting now are doing so out of necessity and are primarily in the hardest-hit industries where immediate cash preservation is a key priority

What are key considerations going forward?

  • Timely, effective communication is key. Shareholders, employees and customers are all closely monitoring the actions companies are taking in response to the crisis; if decisions are made, transparent and honest communication can build positive alignment and strengthen relationships with key stakeholders
  • Align executive pay with the stakeholder experience. Company actions are being closely monitored and the expectation is that shareholder experience should be reflected in compensation decisions (i.e., significant shareholder value losses or headcount reductions are accompanied by lower pay outcomes for executives)
  • Establish objective principles for using discretion. While quantitative metrics may be difficult to rely on at this time, establishing a list of factors for Committees to consider if they decide to apply discretion at the end of the year will allow companies to demonstrate that decisions were made in ways that demonstrably tie back to business context.

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actualités internationales devoirs des administrateurs Gouvernance Normes d'encadrement parties prenantes Responsabilité sociale des entreprises

Capital humain et gouvernance d’entreprise : un intéressant rapport

UCLA School of Law vient de publier un rapport d’une dizainede pages sur la gestion du capital humain et son intégration dans la gouvernance des entreprises : « Corporate Governance : The growing Importance of Human Capital Management » (avril 2020).

Extrait :

1. Over the last several years, investors and proxy advisory firms have increasingly focused their attention on environmental, sustainability and governance (ESG) and human capital management (HCM) issues. While there is no one definition of HCM, the term is widely used to cover a very broad range of workforce matters that are of concern to investors and the public as they focus on building long-term value and reducing business and reputational risks. These concerns have resulted in calls for enhanced company disclosures about their HCM practices and processes.

2. Under Delaware and federal law, directors have no duties that are specifically focused on HCM. However, under Delaware law and that of many other states, directors have duties of care, loyalty and oversight that can under certain circumstances apply to HCM matters and can result in director liability.

3. While federal securities laws and rules contain several corporate disclosure requirements that apply to employees and touch on HCM issues, current laws and rules are not as robust or focused as many investors would like and have proposed. In response to rulemaking and other investor requests, the U.S. Securities and Exchange Commission has proposed amendments to its disclosure rules that would expressly require companies to describe their human capital resources to the extent that they are material to an understanding of a company’s business as a whole.

4. Some public companies have already articulated board responsibilities for oversight of HCM matters; some have renamed and expanded the responsibilities of their compensation committees to reflect their expanded focus; and some have disclosed their HCM polices and efforts in their securities law filings and other publications.

5. Separate and apart from the legal requirements that apply to corporate board duties and corporate disclosure requirements, there are important business, governance and reputational reasons for boards and companies to care about and address HCM matters. 6. While there is no one-size-fits-all approach to board oversight of HCM matters, areas for possible board attention are (i) diversity and inclusion, (ii) employee satisfaction and engagement, (iii) succession and talent management, (iv) attrition and retention, and (v) ethics, workforce culture and risk.

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actualités internationales Base documentaire Gouvernance jurisprudence mission et composition du conseil d'administration normes de droit Nouvelles diverses

Delaware Supreme Court Reinforces Director Oversight Obligation

Nouvelle intéressante en droit des sociétés par actions américain : la Cour suprême du Delaware a rendu une décision récemment (Marchand v. Barnhill) qui porte sur les devoirs des administrateurs en matière de surveillance institutionnelle et de mise en place d’un système de contrôle des risques (voir l’actualité sur Skadden).

Résumé :

On June 18, 2019, in Marchand v. Barnhill, 212 A.3d 805 (Del. 2019), the Delaware Supreme Court issued an important decision reaffirming the obligation that directors of Delaware corporations make good faith efforts to implement and monitor a risk oversight system. In Marchand, the Supreme Court reversed the Court of Chancery’s dismissal of a stockholder derivative suit seeking damages pursuant to alleged Caremark claims, which are difficult to plead and prove.1 Specifically, the Supreme Court held that, at the pleading stage, the plaintiffs had alleged facts sufficient to satisfy the high Caremark standard for establishing that a board breached its duty of loyalty by failing to make a good faith effort to oversee a material risk area, thus demonstrating bad faith.

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actualités internationales Gouvernance Nouvelles diverses Responsabilité sociale des entreprises Valeur actionnariale vs. sociétale

Business Roundtable : la révolution en marche

Le Business Roundtable (association regroupant les plus grands chef d’entreprise américains) a pris une position audacieuse le 19 août 2019 : celle de redéfinir l’objectif des grandes entreprises (« Statement on the Purpose of a Corporation »).

While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to:

  • Delivering value to our customers. We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.
  • Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect.
  • Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions.
  • Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses.
  • Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.

Each of our stakeholders is essential.

Voir le communiqué de presse ici

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actualités internationales engagement et activisme actionnarial Gouvernance Normes d'encadrement Nouvelles diverses

SEC et agences de conseil en vote : ça bouge !

Intéressante information de The Advisor-s Edge concernant les agences de conseil en vote : « Updated: SEC addresses proxy voting concerns » (21 août 2019).

Extrait :

The U.S. Securities and Exchange Commission (SEC) set out its views on investment advisors fulfilling their proxy voting responsibilities. The guidance states that proxy voting advice constitutes a “solicitation” under federal rules and provides instructions on applying anti-fraud rules to proxy voting advice.

“Advisers who vote proxies must do so in a manner consistent with their fiduciary obligations and, to the extent they rely on voting advice from proxy advisory firms they must take reasonable steps to ensure the use of that advice is consistent with their fiduciary duties,” said SEC commissioner Elad Roisman, who led development of the new guidance.

“In addition, proxy advisory firms, to the extent they engage in solicitations, must comply with applicable law,” he noted.

Pour accéder au texte de la SEC : « Commission Guidance Regarding Proxy Voting Responsibilities of Investment Advisers » (17 CFR Parts 271 and 276)

Résumé :

The Securities and Exchange Commission (the “SEC” or the “Commission”) is publishing guidance regarding the proxy voting responsibilities of investment advisers under Rule 206(4)-6 under the Investment Advisers Act of 1940 (the “Advisers Act”), and Form N-1A, Form N-2, Form N-3, and Form N-CSR under the Investment Company Act of 1940 (the “Investment Company Act”).

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