Deal Diary

Recent rulings underscore the attention boards of directors and management must continue to pay to the risks faced by companies across all sectors of the economy and their potential impact on business operations. Last year’s decision in In re Boeing Co. Derivative Litigation¹ only serves as the most recent reminder of the potential exposures (including personal liability) companies, boards of directors and management may face.

On November 17, 2021, the Securities and Exchange Commission (SEC) adopted final rules requiring the use of a universal proxy card by all parties in contested elections for directors at shareholder meetings. The rules require registrants and dissidents to provide shareholders with a proxy card listing all the registrant and dissident director nominees presented for election. Shareholders will no longer have to choose between submitting their votes on either the registrant’s proxy card or the dissident’s. Putting all candidates on the same ballot will make proxy voting more closely resemble voting in person at a meeting, as shareholders will be able to select their preferred combination of candidates to serve on the board.

In mid-March 2020, concerned about opportunistic activist stockholders, a precipitous decline in oil prices and corresponding stock volatility, as well as uncertainty created by the unprecedented COVID-19 pandemic, the board of directors of the Williams Companies, Inc. (“Williams” or the “Company”) adopted a one-year stockholder rights plan with a five percent trigger (the “Williams Plan”). Less than a year later, the Delaware Court of Chancery, after reviewing the Williams Plan under the Unocal standard, permanently enjoined it, and found that the directors had breached their fiduciary duties, thereby rendering it unenforceable.

The world has changed a lot since our 2020 report. A global pandemic; a reckoning on race, inequality and social justice; a climate crisis; an economic shock; and increased political polarization have created challenging dynamics for companies and boards globally. The role of the board in managing risk and charting the course ahead is more critical today than ever before. This report delves into these wide-ranging and interlocking issues and offers insight on how directors and management must proactively embrace their stewardship roles in this brave new world.

Election and Impeachment

The presidential race will garner much of the attention during the 2020 election cycle, but there is fierce competition elsewhere, too. Republicans and Democrats are fighting for both U.S. House of Representatives and U.S. Senate seats in the 116th U.S. Congress, with the Republican Party trying to regain House majority. Meanwhile, impeachment proceedings against President Donald Trump are shaping up to be a potential game changer for certain members of the Senate who are running for president. They’ll lose valuable time on the campaign trail while serving as jurors for the duration of the impeachment trial.

Growth in Activism

There has been a general increase in activism campaigns in 2018, with industry studies documenting rises in both the number of companies targeted in 2018 compared to 2017 and the number of board seats won by these campaigns. As one may expect, changes to the board composition and mergers and acquisitions initiatives continue to be the primary aims of these campaigns.