A wide array of developments have significantly increased the focus by public companies on board and board committee oversight of environmental, social, and governance (ESG) issues in recent years. These developments have included the heightened consideration of institutional investors and proxy advisory firms on ESG board oversight and ESG considerations more generally, as well as various recent proposed rules and initiatives of the Securities and Exchange Commission (SEC) with respect to ESG matters, including the proposed climate rules issued by the SEC earlier this year. This post addresses issues and trends concerning whether the full board or particular board committees should be primarily responsible for oversight of ESG considerations.
Continue Reading ESG Board Oversight Considerations: What Board Committee(s) Should Oversee ESG in the Current Environment?
[WEBINAR] What’s Next in ESG? Understanding the Proposed SEC Climate Change Disclosure Rules
After months of anticipation, on March 21, the U.S. Securities and Exchange Commission (SEC) voted 3:1 to propose climate change-related disclosure rules that would implement prescriptive climate-related disclosure requirements (which would be applicable for most public companies) in a wide array of climate-related areas, including with respect to governance, outlook, risk management, GHG emissions, climate-related targets and goals and financial statement disclosures. These proposed rules, which are intended to provide investors with consistent, comparable, and reliable climate-related information, would represent a major shift in the public company disclosure landscape and will require significant advance effort by public companies to facilitate compliance.
Join Bass, Berry & Sims and leading environmental, social and governance (ESG) thought leaders for the next installment in our ESG Impact Webinar series on Tuesday, May 24, 2022. Our panelists will share their experience and perspectives on what in-house counsel should consider as it relates to these proposed climate change disclosure rules. Discussion topics will include:
- Overview of the Proposed Rules.
- Required Disclosure under Regulation S-X.
- Required Disclosure under Regulation S-K.
- Phase-In Periods.
- Practical Takeaways and Next Steps.
A Summary of Certain Proxy Advisory Firm and Institutional Investor Board Diversity Policies
Institutional investors and proxy advisory firms continue developing and refining their policies regarding board diversity. While gender diversity on public company boards has been in focus for some time now, institutional investors and proxy advisory firms are also increasingly focusing on racial and ethnic diversity as part of their evolving approach to board diversity.
This post summarizes published board diversity policies of several institutional investors and proxy advisory firms into a singular resource for ease of reference. Below the initial breakdown is a description of specific policies concerning board diversity shareholder proposals. Continue Reading A Summary of Certain Proxy Advisory Firm and Institutional Investor Board Diversity Policies
Key ESG Disclosure Developments
I recently co-authored an article for Corporate Counsel with Stephanie Bignon, assistant general counsel at Delta Air Lines, highlighting key environmental, social and governance (ESG) disclosure developments. “Public companies are facing a rapidly changing regulatory and investor landscape with respect to climate and other environmental, social and governance (ESG) disclosures,” the authors observed.
One area of particular regulatory focus from the Securities Exchange Commission (SEC) is climate change, as several new initiatives aim to revamp the existing disclosure framework in this area, including:
- Indications from SEC Chairman Gary Gensler that new climate change disclosure rules will be proposed in late 2021 or early 2022.
- Significantly enhanced focus of the SEC’s Division of Corporation Finance on climate-related disclosure in public company filings, including a sample SEC Staff comment letter sent to at least dozens of companies questioning whether consideration had been given to including climate-related disclosures in SEC filings.
- SEC Division of Enforcement announcement in early 2021 that it is creating a Climate and ESG Task Force, and signaling that enforcement actions in the climate change area under existing SEC rules may be forthcoming.
With this heightened focus, we concluded the article with five practical takeaways for companies:Continue Reading Key ESG Disclosure Developments
Should Public Companies Establish an ESG Disclosure Committee?
In light of the increasing level of investor and Securities and Exchange Commission (SEC) focus on environmental, social and governance (ESG) disclosure matters and the associated increase in the scope of ESG disclosures included by public companies both within and outside of SEC filings, public companies are well-advised to assess whether their disclosure control and procedures should be modified to address ESG disclosures.
Background on ESG Disclosures
As background, the SEC rules that implemented the Sarbanes-Oxley Act of 2002 require public companies to have disclosure controls and procedures (which are designed to ensure that the information required to be disclosed by a public company in its Exchange Act filings is recorded, processed, summarized and reported in accordance with SEC rules). Additionally, the SEC recommended that public companies establish disclosure committees as a component of their disclosure controls and procedures, and a significant majority of public companies have disclosure committees consistent with the SEC’s recommendation.
Disclosure committees may also be helpful to public companies as a means to support the Section 302 and 906 certifications required to be provided by the CEO and CFO on a quarterly basis under the Sarbanes-Oxley Act in connection with disclosures provided in periodic reports.
The amount of ESG disclosures included in SEC filings has significantly increased in recent years. This trend will no doubt continue once the SEC’s climate change rules expected to be proposed later this year or early next year become effective. Additionally, there has been a significant expansion in the scope of ESG disclosures being provided by many public companies (particularly large-cap companies) outside of SEC filings, including via corporate social responsibility or similar reports, and company website disclosures.Continue Reading Should Public Companies Establish an ESG Disclosure Committee?
Periodic Reporting for Public Companies in 2021: What Lies Ahead
I, along with Delta Air Lines Assistant General Counsel Stephanie Bignon, recently authored an article for Corporate Compliance Insights addressing the latest developments impacting SEC periodic reporting disclosure practices.
“Public companies have been monitoring and rapidly adapting to a wide array of developments impacting periodic reporting disclosure practices over the last year,” we wrote in the article.
In addition to various SEC rules changes that have been adopted over the last year, we provided an extensive overview of four key areas which are anticipated to impact periodic reporting for the remainder of 2021:Continue Reading Periodic Reporting for Public Companies in 2021: What Lies Ahead
A Summary of Certain Proxy Advisory Firm and Institutional Investor Board Diversity Policies
Institutional investors and proxy advisory firms continue to develop and refine their policies regarding board diversity. While gender diversity on public company boards has been in focus for some time now, institutional investors and proxy advisory firms are also increasingly focusing on racial and ethnic diversity as part of their evolving approach to board diversity.
This post is a summary of published board diversity policies of certain institutional investors and proxy advisory firms into a singular resource for ease of reference. Below the initial breakdown, certain policies concerning board diversity shareholder proposals are described. Continue Reading A Summary of Certain Proxy Advisory Firm and Institutional Investor Board Diversity Policies
Preparing for the Upcoming Proxy Season: Public Company Reporting & Disclosure Considerations
Bass, Berry & Sims attorneys Kevin Douglas, Eric Knox and Sehrish Siddiqui were co-presenters alongside Stephanie Bignon, Assistant General Counsel, Delta Air Lines and Priya Galante, Vice President, Assistant General Counsel & Assistant Secretary, AutoZone at the Society for Corporate Governance’s Southeastern Chapter webinar earlier this month.
This program, titled, “Preparing for the Upcoming Proxy
Adjusting for COVID-19 in Non-GAAP Financial Measures: A Survey of 2020 Fourth Quarter Disclosure Practices
Following up on our prior blog post regarding 2020 first quarter COVID-19 adjustments in connection with the presentation of non-GAAP financial measures, we surveyed 102 S&P 500 companies who presented Adjusted EBITDA in their earnings release filed from October 1, 2020, to December 31, 2020.
We focused on Adjusted EBITDA in this survey (recognizing that such measure is utilized more frequently in some industries than others) because such measure is commonly utilized by public companies to measure their operational performance and frequently includes adjustments for items that are believed not to reflect the ongoing operational performance of the company. While we limited our survey to S&P 500 companies that presented Adjusted EBITDA, we believe that the survey results have relevance for companies that present other types of non-GAAP performance measures that are adjusted for special items or items outside of the ordinary course of business.
Survey Results
Of the surveyed companies, 16 companies, or approximately 16%, included an adjustment in their calculation of Adjusted EBITDA related in some form to the COVID-19 pandemic, and 84% did not. The companies that included a COVID-19 adjustment in their Adjusted EBITDA calculation span across various industries, including, but not limited to, oil & gas, real estate, telecom services, lodging/hotel, and medical/scientific instruments.
Continue Reading Adjusting for COVID-19 in Non-GAAP Financial Measures: A Survey of 2020 Fourth Quarter Disclosure Practices
SEC Adopts New E-Signature Rules
On November 17, 2020, the Securities and Exchange Commission (SEC) adopted rules (which are now effective) permitting electronic signatures for SEC filings, provided that certain procedures are followed. There are potential advantages to the utilization of e-signatures by public companies in SEC filings, including from a facilitation perspective (particularly for filings such as registration statements and 10-Ks which need to be signed by a significant number of individuals) and a record-keeping perspective.
Overview of E-Signature Rules
Before the adoption of the SEC’s e-signature rules which recently became effective, SEC filings needed to be manually signed by the signatories to such filings, and public companies were required to retain such manual signatures for a period of at least five years (and provide such signatures to the SEC upon request). The amendments to Regulation S-T resulting from these new rules allow for e-signatures instead of manual signatures (manual signatures will continue to be permitted as well) for SEC filings, provided that the following conditions are met:
- The signatory must present a physical, logical, or digital credential that authenticates the signatory’s identity (this may involve a driver’s license, passcode or a credential chip on a workplace ID).
- The signature process must provide for non-repudiation, which is defined as “assurance that an individual cannot falsely deny having performing a particular action” (this may involve public-key encryption tools provided by commercially available e-signature platforms).
- The e-signature must be attached, affixed, or otherwise logically associated with the signature page or document being signed.
- There must be a timestamp to record the date and time of the signature.