It has been a little over three months since the new administration assumed office and uncertainty still exists around the administration’s approach to securities regulations, although deregulation is anticipated. Such uncertainty is compounded as the leadership of the Securities and Exchange Commission (SEC) hangs in the balance. There are currently two commissioners, Acting Chairman Michael S. Piwowar and Kara M. Stein. The new administration’s nominee, Walter “Jay” Clayton, a Wall Street lawyer, expected to become the next chairman of the SEC has yet to be confirmed by the Senate. As public companies await the new chair, they find themselves expecting opportunities that would come with deregulation. Companies, however, should not expect that deregulation will completely alter the world of corporate governance. Concerns by shareholders with respect to corporate governance matters may actually gain strength in the wake of deregulation, and thus companies should expect the power of private ordering. We consider in this article that shareholder activism will shape corporate conduct regardless of the new administration, particularly in response to predictions that the new administration will reduce regulations and make it harder for shareholders to police public companies.
Private ordering is not novel and has been initiated over the years by shareholders championing issues that matter to them. As the direction of the securities regulations and the makeup of the SEC are in transition, shareholders continue to inform companies of their priorities with respect to corporate governance matters through no action letter campaigns, shareholder proposals, shareholder activist campaigns and pressure for shareholder engagement. Public companies can expect the current trend in shareholder proposals to continue around the topics related to, among others, board composition and diversity, sustainability and corporate social responsibility issues, clawback provisions with respect to executive compensation and political contribution disclosures. In order to provide a flavor of the power of private ordering, this article addresses two of these areas, namely board diversity and sustainability as it relates to climate change.
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