David M. Silk

Wachtell Lipton Discusses SEC Staff’s Move to Limit Exclusion of “Social Policy” Shareholder Proposals

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The SEC Staff has issued revised guidance rescinding prior Staff Legal Bulletins addressing the exclusion of Rule 14a-8 shareholder proposals based on the social significance to a company, “micromanagement” or  “economic relevance.”  The changes will likely facilitate a larger number of shareholder proposals, including ESG proposals, coming to a shareholder vote.

Ordinary Business Exception: The new guidance revises the SEC’s application of the “ordinary business” exclusion, which considered whether a proposal was of social policy significance or sought to micromanage a company.  While the Staff has previously focused on the significance of a social policy issue to a particular issuer, … Read more

Wachtell Lipton Discusses Mandatory Climate Change Disclosure Rules – A Preview From the SEC Chair?

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As noted in our previous memos, the SEC is considering and has sought input from investors on potential new disclosure requirements related to climate change and other sustainability issues.  Yesterday, SEC Chairman Gary Gensler made remarks that add some clarity as to what can be expected:  a combination of qualitative and quantitative climate-risk disclosures that are consistent, comparable and decision-useful to investors. Examples of potential qualitative disclosures include how the company’s leadership manages climate-related risks and opportunities, how such matters impact corporate strategy and, potentially, the use of scenario analyses.  Quantitative disclosures may include disclosure of Scope 1, 2 … Read more

Wachtell Lipton Discusses the Other “S” in ESG:  Building a Sustainable and Resilient Supply Chain

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The current pandemic, blind spots in information flows through supply lines, the shutdowns in meat processing plants around the world, the ongoing shortages in personal protective equipment and, most recently, the scandal involving British retailer Boohoo, have all underscored the importance of resilient, sustainable, legally compliant and ethical supply chains.  In addition to geographic and industry-specific challenges, issues relating to health and safety, labor practices and climate risk have become top priorities for investors, regulators and consumers.  Failure to ensure proper oversight and management of supply chains can result in significant reputational and economic losses, as well as regulatory scrutiny.  … Read more

Wachtell Lipton Discusses Using ESG Tools to Help Combat Systemic Racism and Injustice

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Events of recent weeks and months have starkly illuminated the effects of systemic racism and injustice on Black Americans, including threats to physical safety, psychological trauma and economic disparity.  CEOs worldwide and across industries have spoken out, expressing their horror and outrage, as well as their resolve to do more.  Companies have announced significant financial commitments; others have referred to actions to be taken, and early movers have begun to announce or amplify business-related initiatives.  Institutional investors, asset owners, asset managers, private equity fund limited partners and investor groups have also begun speaking out and considering action with respect to … Read more

Wachtell Lipton Pushes Back Against Attack on Stakeholder Governance

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In an article posted yesterday [March 2] on the Harvard Law School Forum on Corporate Governance blog, Professor Lucian Bebchuk rejects stakeholder governance and, in so doing, attacks the committed positions of influential institutions as varied as the Business Roundtable, the World Economic Forum, BlackRock, State Street, Vanguard, the UK Financial Reporting Council, and the European Union High-Level Expert Group on Sustainable Finance.

Professor Bebchuk summarizes his article as follows:

“Following the publication of the [Business Roundtable] statement, in December 2019 the World Economic Forum took the unusual step of publishing a manifesto that urged companies to move from the … Read more

Wachtell Lipton Discusses Boards’ Role in Sustainability and Corporate Social Responsibility

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In light of evolving—and sometimes actively debated—perspectives on the role of public companies with respect to sustainability, corporate social responsibility and other ESG matters (e.g.,  Barron’s recent report on Sustainable Investing), we are providing a high-level overview of how boards of directors and senior management teams may wish to approach these issues:

  • Be aware that sustainability has become a major, mainstream governance topic that encompasses a wide range of issues, including a company’s long-term durability as a successful enterprise, climate change and other environmental risks and impacts, systemic financial stability, management of human capital, labor standards, resource

… Read more

Wachtell Lipton Discusses Labor Department’s Cautionary Tone on ESG-Related Matters

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With shareholder proposals regarding ESG and sustainability matters becoming the most common kind of proposal, proxy advisory firm ISS marketing a new “Environmental & Social QualityScore” product for rating public companies, asset managers developing ESG-related guidelines and voting policies, and significant activist and investor fundraising efforts underway with ESG-linked themes, the U.S. Department of Labor (the “DOL”) has issued new guidance that may influence the going-forward behavior of some market participants.

On April 23, 2018, the DOL issued Field Assistance Bulletin No. 2018-01, clarifying previous DOL guidance for ERISA-covered private-sector employee benefit plans regarding proxy voting, shareholder engagement, and … Read more