Latest updates

Board gender diversity reaches new milestone
Cooley LLP
  • Company & Commercial
  • USA
  • 26 August 2019

A new milestone has finally been reached for board gender diversity: there are no longer any companies in the S&P 500 with all-male boards. According to a publication on US Board Diversity Trends in 2019, 45% of new board positions among the Russell 3000 were filled by women in 2019. This is up from 34% in 2018 and a substantial improvement compared with only 12% in 2008. Under the new law, public companies will be required to have at least one woman on their board of directors by the end of 2019.

FASB tentatively decides on new staggered approach to effective dates for major standards
Cooley LLP
  • Company & Commercial
  • USA
  • 19 August 2019

The Financial Accounting Standards Board recently signalled its intent to adopt a new two-bucket approach to stagger the effective dates for new major accounting standards. Under the new approach, the new standards' effective dates would be delayed for entities in bucket two (ie, smaller reporting and private companies, employee benefit plans and not-for-profit organisations) for at least two years after the effective dates for entities in bucket one (ie, other Securities and Exchange Commission filers).

Delaware Supreme Court allows Caremark duty of loyalty claims against directors to survive dismissal motion
Cooley LLP
  • Company & Commercial
  • USA
  • 12 August 2019

What does it take to plead a Caremark case that can survive a motion to dismiss? A recent case illustrates that a board can help establish one if it simply leaves compliance and risk oversight entirely to the prerogatives of management. However, the case is also a warning that directors should be proactive in conducting risk oversight and could face liability if they fail to make a good-faith effort to implement an oversight system and then monitor it.

FASB to consider delaying required adoption dates of new standards for some companies
Cooley LLP
  • Company & Commercial
  • USA
  • 29 July 2019

The Financial Accounting Standards Board will consider whether the adoption dates for new accounting standards should be delayed for small public companies and privately held businesses. Small business finance professionals at a recent Financial Accounting Standards Advisory Council meeting indicated that, while they may be comfortable following the same rules, smaller companies do not have the same resources as large public companies and need extra time to implement significant new accounting rules.

Spot survey shows use of ESG metrics in incentive compensation plans
Cooley LLP
  • Company & Commercial
  • USA
  • 22 July 2019

A compensation consultant recently conducted a spot survey of 135 companies which looked at the prevalence and type of environment, social and governance (ESG) metrics used in incentive compensation plans, including metrics relating to the environment, employee engagement and culture and diversity and inclusion. Efforts to link ESG factors to executive compensation have been a common thread in numerous shareholder proposals.

ISS takes early look at 2019 proxy season
Cooley LLP
  • Company & Commercial
  • USA
  • 15 July 2019

With 70% of the Russell 3000 annual meetings completed, Institutional Shareholder Services (ISS) has taken an early look at the 2019 proxy season. ISS found increases in opposition to director elections and say-on-pay proposals, as well as increases in the number of and withdrawal rates for environmental and social (E&S) proposals relative to governance proposals. In addition, the disparity between the levels of support for E&S proposals and the historically more popular governance proposals has narrowed dramatically.

Is there a business case for environmental social governance?
Cooley LLP
  • Company & Commercial
  • USA
  • 08 July 2019

Do companies that ignore long-term environmental or social costs in the pursuit of near-term profits pay another price in foregoing potentially long-term sustainable profit opportunities? A recent business case for environmental social governance from Stanford University's Rock Centre for Corporate Governance suggests that, properly analysed, sustainability can not only affect externalities, but also benefit businesses.

New PCAOB guidance on auditor communications regarding CAMs
Cooley LLP
  • Company & Commercial
  • USA
  • 01 July 2019

The Public Company Accounting Oversight Board recently published new guidance on auditors' communication of critical audit matters (CAMs) in auditors' reports. The guidance includes new frequently asked questions relating to how auditors should describe their principal considerations in determining CAMs, the relationship between CAMs and company disclosures and the treatment of recurring CAMs.

Is 'stale' a reason for 'male and pale' boards?
Cooley LLP
  • Company & Commercial
  • USA
  • 20 May 2019

California's new board gender diversity mandate is expected to fuel a greater effort towards board gender diversity. Under the new law, public companies will be required to have at least one woman on their board of directors by the close of 2019. That minimum increases to two women by 31 December 2021 if the company has five directors and to three women if it has six or more directors. While the first of its kind in the United States, this mandate may not be the last.

Help is here for audit committees – CAQ offers updated auditor assessment tool
Cooley LLP
  • Company & Commercial
  • USA
  • 22 April 2019

To fulfil their oversight responsibilities, audit committees typically evaluate external auditors at least annually to determine, in part, whether they should be engaged for the subsequent fiscal year. The Centre for Audit Quality (CAQ) recently published an updated External Auditor Assessment Tool. Like many other helpful CAQ tools, this one provides a number of sample questions to help audit committees satisfy their oversight obligations with regard to external auditors.

PCAOB to engage in proactive communications with audit committees
Cooley LLP
  • Company & Commercial
  • USA
  • 08 April 2019

The Public Company Accounting Oversight Board recently issued a staff inspection brief discussing its new strategic plan, which includes conducting an ongoing dialogue with audit committee chairs whose companies' audits are subject to inspection. The board reports that its 2019 inspections will focus on, among other things, firms' technological developments, procedures on new accounting standards and systems of quality control.

Activist CEOs speak out – is there a better way to do it?
Cooley LLP
  • Company & Commercial
  • USA
  • 18 March 2019

There has recently been a lot of pressure on CEOs to voice their views on political, environmental and social issues. According to the global chair of reputation at Edelman, the expectation that CEOs will be leaders of change is high. As such, to the extent that CEOs are considering taking stands on contentious social, political or environmental issues, are there effective ways for CEOs to decide when and how to do it?

Corp Fin no-action letters address ordinary business exception and executive compensation
Cooley LLP
  • Company & Commercial
  • USA
  • 04 March 2019

In October 2018 the Division of Corporation Finance (Corp Fin) issued a staff legal bulletin on shareholder proposals that examined the ordinary business exception under Rule 14a-8(i)(7), addressing (among other topics) the application of the rule to proposals relating to executive or director compensation. Since the government shutdown, Corp Fin has posted several no-action letters that consider the exception in that context – but do they provide any colour or insight?

California legislature amends required Civil Code Section 1542 language
Cooley LLP
  • Company & Commercial
  • USA
  • 25 February 2019

Section 1542 of the California Civil Code precludes the waiver of unknown claims unless the protections of the section are expressly relinquished. In order to effectively waive these protections, the language of the statute must be included in any agreement and the parties to the agreement must acknowledge that they are waiving the rights and benefits of the statute. These requirements are not new, but the California legislature recently amended the statutory language required to be included in any waiver.

CII advises on disclosure of board evaluation processes
Cooley LLP
  • Company & Commercial
  • USA
  • 18 February 2019

The Council of Institutional Investors (CII) Research and Education Fund recently released a report regarding disclosures of board evaluation processes in proxy statements. While companies have been discussing their board evaluation processes in their proxies with increasing frequency, the CII suggests that these discussions could be more robust and has identified seven indicators of strong board evaluation processes, including a three-tiered review.

Overcoming short-termism: calling time on earnings per share?
Cooley LLP
  • Company & Commercial
  • USA
  • 28 January 2019

To deter short-termism, which can affect stock repurchases, R&D investments and capital expenditures, among other things, some have recommended that companies should stop giving quarterly guidance, while others have advocated an end to quarterly Securities and Exchange Commission reporting. However, a new theory suggests that getting rid of earnings per share may be the solution.

No-action letters provide additional insight into ordinary business exclusion
Cooley LLP
  • Company & Commercial
  • USA
  • 24 December 2018

On the heels of the release of Staff Legal Bulletin (SLB) 14J, Corp Fin recently posted two no-action letters that shed further light on the ordinary business exclusion under Rule 14a-8(i)(7). In SLB 14J, the staff had addressed the nature of the board analysis which they would find most helpful in evaluating a no-action request to exclude a shareholder proposal under Rule 14a-8(i)(7), as well as micromanagement as a basis for exclusion under that same rule. The latest response letters provide further clarity in this regard.

CAQ releases 2018 Audit Committee Transparency Barometer
Cooley LLP
  • Company & Commercial
  • USA
  • 17 December 2018

The Centre for Audit Quality (CAQ), working with Audit Analytics, recently released a new edition of its annual Audit Committee Transparency Barometer, which, over the past five years, has measured the robustness of audit committee disclosures in proxy statements among companies in the S&P Composite 1500. According to the CAQ, the bottom line is that the level of voluntary transparency has continued to increase steadily in most areas.

Corp Fin updates CDIs relating to smaller reporting companies
Cooley LLP
  • Company & Commercial
  • USA
  • 10 December 2018

The Division of Corporation Finance (Corp Fin) recently updated its compliance and disclosure interpretations (CDIs) relating to smaller reporting companies. In connection with these updates, Corp Fin has also withdrawn a number of CDIs. Under the new amendments, companies can now be both accelerated filers and smaller reporting companies. Further, in determining whether a company is a smaller reporting company, its annual revenues should be calculated on a consolidated basis.

Low board turnover? Less opportunity for board diversity
Cooley LLP
  • Company & Commercial
  • USA
  • 26 November 2018

A recent study showed that in 2018, 428 new directors were elected to boards of companies in the S&P 500 – the most new directors since 2004 – representing an increase of 8% from 2017. Further, 57% of boards added at least one new director and 22% appointed more than one new director. However, overall turnover remained modest. While these new directors added fresh skills, qualifications and perspectives, the study concluded that progress regarding boardroom diversity has been mixed.

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