Directors' Cut

Each year, numerous firms weigh in on topics for the Audit Committee’s annual agenda. In this post: “What Should be on the Audit Committee’s 2025 Agenda,” Dan Goelzer, founding member of the PCAOB and former acting chair of the PCAOB and General Counsel of the SEC, highlights and summarizes common topics across these resources, as well as suggested action items. [02/26/25] KPMG’s “On the 2025 not-for-profit audit committee agenda” highlights and provides guidance on six topics for audit committee consideration—including enterprise risk management; data and cyber security; federal funding developments; and committee responsibilities and related factors— in the context of numerous macro challenges that have the potential for an outsized impact on the nonprofit sector in particular, as well as other developments.

Deloitte and the Center for Audit Quality released the fourth edition of their "Audit Committee Practices Report" based on a recent survey of predominantly US public and private company audit committee members across industries. See key takeaways here.

The Society conducted a survey among its public company members to explore how companies gather data, determine what information to disclose, and make disclosure in their proxy statements about their directors' skills and experiences. Among other takeaways, the most important criteria in assessing the relevance of director skills and experience in relation to board composition for disclosure purposes are the alignment of director skills and experiences with the company’s business, operations, industry, and strategy. See additional key takeaways here.

Based on empirical research, Harvard Business Review’s “Why Your Board Should Include a Long-Tenured Director” advocates boards include one or two long-tenured, independent directors—a practice that is associated with better stock price performance than boards with no long-tenured directors and boards with many long-tenured directors.

Spencer Stuart’s survey of public and private company directors on director succession and board refreshment practices revealed these key takeaways.

KPMG’s “On the 2025 compensation committee agenda” highlights five topics for compensation committee focus based on the firm’s interactions with directors and executives, including human capital management oversight and alignment of environmental and social pay metrics with the company’s strategy. Simpson Thacher’s “2025 Compensation Season: What Public Companies and Their Compensation Committees Should Keep in Mind Heading Into the New Year” highlights numerous areas of regulatory and shareholder scrutiny, including the compensation committee’s pay-setting processes and practices, the expansion of “covered employees” under IRC Section 162(m), and executive security-related disclosure. [02/05/25] Wachtell Lipton's "Compensation Season 2025" identifies and discusses several discrete compensation practice and disclosure-related areas for near-term management and compensation committee consideration. Coverage includes compensation committee best practices.

Wachtell Lipton's “Compensation Committee Guide" provides an overview of the key duties, laws, rules, regulations, and standards applicable to listed company compensation committees and compensation-related disclosures; compensation methods and types and associated legal considerations; shareholder and shareholder-related proposals & developments; suggested compensation committee practices; and much more. A model compensation committee charter, which also suggests provisions for committees with broad management development and culture responsibilities, is included as an exhibit for reference and/or tailoring to company-specific facts and circumstances.

Meridian’s “Key Issues Awaiting Compensation Committees in 2025” identifies an array of macroenvironmental developments and circumstances that should prompt compensation committees’ reevaluation of various aspects of the company’s pay programs, including incentive pay metrics and structure, the availability of discretion, retention mechanisms, and the treatment of equity awards upon retirement.

This collaborative Society/EY report: “The delegation edge: A guide to successful delegation and authority” provides benchmarking data on current delegation of authority practices based on a survey of Society members and practical guidance on developing and enhancing delegation policies and processes. See key takeaways here.

According to Glass Lewis, reporting on data from the 2024 proxy season, 82% of S&P 500 companies disclosed a director commitments policy. Of those, 64% limited non-employee director commitments to three external boards; about one-third limited CEO commitments; more than half imposed a limit on all executives; and 41% imposed limits on audit committee members. More than two-thirds of S&P 500 policies provided the board with discretion to grant exceptions.

The Conference Board reported a significant uptick in the prevalence of director overboarding policies, particularly among the S&P 500, from 68% in 2020 to 81% in 2024. Among the Russell 3000, the percentage of companies adopting such policies increased from 44% to 53% over that same time period.

“Board Governance in the Age of AI: Navigating Risks of Note-Taking Tools” from Robins Kaplan outlines governance risks associated with the use of AI note-taking tools in the boardroom and suggests best practices for mitigating the risks, which include loss of confidentiality, privilege, and privacy; quashed candor and changed dialogue in the boardroom; regulatory and legal risks; and data ownership exposures.

Appendix A of this memo from Sidley: “ISS and Glass Lewis Proxy Voting Policy Updates for the 2025 Proxy Season” outlines circumstances by topic and category that may trigger ISS’s and Glass Lewis’s negative vote recommendations in uncontested director elections. Weil’s “Heads Up for the Proxy Season: ISS and Glass Lewis 2025 Voting Policies and Director Vulnerability Update” identifies and summarizes by topic and targeted director roles ISS and Glass Lewis policies that hold directors accountable for discrete corporate practices.

The Society and certain other organizations have long maintained listings of reputable, established director/board education program offerings. The latest Society listing is here. See also the most current listings from Cooley, Gibson Dunn, and Woodruff Sawyer.

Cleary's "Selected Issues for Boards of Directors in 2025" provides information and practical recommendations on a number of discrete hot topics that can help bring the board and C-suite up to speed on current events, as well as focus the boardroom dialogue. Each topic is presented on a stand-alone basis (also online here) to suit the organization’s current areas of interest. According to EY’s annual board agenda report, a majority of directors ranked these topics—economic conditions, capital strategy, innovation and evolving technologies, cybersecurity and data privacy, regulatory developments, and talent agenda—among their top priorities for 2025. The report offers recommendations for effective governance that integrate these priorities with reference to relevant benchmarking data, targeted questions, and links to relevant resources. [02/05/25] Wachtell Lipton's “Thoughts for Boards: Key Issues in Corporate Governance for 2025” aims to help focus directors on core functions that support the breadth of evolving and complex topical issues boards are encountering today. Discussions of core functions are accompanied by relevant facts, insights, and guidance, and links to additional resources.

The NACD’s “Directors Should Prepare to Address Five Board Dilemmas in 2025” (part of the NACD’s 2025 Governance Outlook) suggests considerations and guidance for boards tasked with: (i) balancing of risks and opportunities; (ii) determining when and how to engage on social and political issues; (ii) adhering to a long-term strategy in the face of short-term pressures; (iv) effectively managing time and resources in the context of an expanded board remit; and (v) balancing the board’s need for specialized expertise with broad-based experience.

PwC’s “The nine questions you need to ask to take your board from good to great” facilitates a back-to-basics approach in examining and reexamining important governance fundamentals that can significantly impact board effectiveness. Coverage includes board composition, board committee structure and operations, board leadership, board agendas, board materials, board culture, management engagement, performance assessments, and director education and training.

Fenwick summarized key updates to BlackRock’s 2025  proxy voting policies, including, as respects board composition, the elimination of a 30% board diversity expectation (particularly for large companies); references to director gender, race/ethnicity, and age; and other specific board diversity expectations.

CalSTRS provided an annual update to its Investment Committee on its three-year Stewardship Priorities initially adopted in 2024. See the 2024 Stewardship Highlights and PPT overview.

Vanguard released its updated proxy voting policy for the 2025 proxy season. Key changes compared to its 2024 policy include board composition and environmental and shareholder proposals, as summarized here.

Norges Bank Investment Management and Wellington Management posted their updated proxy voting guidelines for the 2025 proxy season.

State Street posted its updated proxy voting and engagement policy (redline here) and related resources for the 2025 proxy season. See key director accountability and board diversity and composition-related takeaways here.

Goldman Sachs Asset Management’s updated proxy guidelines exclude board gender and ethnicity expectations that triggered votes against members of the Nominating Committee in its 2024 proxy voting guidelines (pages 5-6). See this redline for these and additional changes. 

According to its “2024 Annual Stewardship Report,” Dimensional most frequently voted against management’s recommendations at its portfolio companies on proposals relating to shareholder rights and defenses, followed by compensation, and extraordinary transactions.

CalPERS released an overview of its voting practices and decision making for the 2024 proxy season. See key takeaways here.

CalPERS’ updated proxy voting guidelines provide for its withholding of votes from director nominees who have demonstrated a lack of commitment and/or failed oversight surrounding human capital management and other labor issues in line with its Labor Principles. The Board Diversity policy remains unchanged from the 2023 guidelines, as revealed in this redline.

Spencer Stuart’s “Nominating/Governance Committees: Top Issues for 2025” homes in on common board composition practices that impede or fail to promote optimal board composition and suggests ways in which nominating/governance committees can more proactively foster the types of changes on the board that meet shareholders’ expectations and best support the company’s interests. Key recommendations are summarized here.

Among the public company respondents to this Society Quick Survey on the role of the nominating/governance committee in CEO selection, the majority (64%) indicated that their committee does not play a role in the selection of a new CEO separate from the role of the board as a whole.

The Society submitted a letter to SEC Commissioner Mark Uyeda while he served as acting chair of the agency that outlined a series of near-term policy suggestions for the Commission to consider over the next few months.

Informed by a 50+- member working group, the Society submitted a Position Paper to EU officials that identified and summarized key proposals to help streamline and reduce the reporting requirements, administrative burdens, and compliance costs associated with the CSRD, CSDDD, and EU Taxonomy Regulation in advance of the planned late February release of the EU Commission’s Omnibus Simplification proposal.

The Society submitted this comment letter in response to the California Air Resources Board’s information solicitation  to inform the implementation of California’s climate disclosure legislation. The letter was informed by a 55-member working group in addition to a member benchmarking survey, as well as interviews with nearly 30 Society members regarding their companies’ climate disclosure practices and associated cost, burden, and resource implications.

In advance of an April 1 plenary session of the European Parliament, the Society joined a statement led by the American Chamber of Commerce to the EU (AmCham EU) urging the European Parliament and Council to proceed promptly with the recently released Omnibus stop-the-clock proposal to delay the implementation of effectiveness of the CSRD and CSDDD for Wave 2 and 3 companies pending the undertaking of the legislative process on the broader omnibus simplification proposal.

In this post: “Enforcement offers a reminder about disclosures of related-person transactions,” Cooley summarizes a recent SEC enforcement action against a company for failing to disclose in-scope Item 404(a) related party transactions involving  immediate family members of executive officers and directors over a three-year period. Both the post and the SEC’s order include helpful refreshers on the Item 404(a) disclosure requirements.

Covington & Burling’s “Governance and Compliance Considerations for Executive Officer Security Arrangements” addresses board oversight of executive security, public company SEC disclosure obligations (including valuation/quantification), and tax and employee benefits implications of executive security arrangements. Polsinelli’s “Tax and Disclosure Considerations Related to Executive Security Benefits” provides an overview of the potential tax benefits afforded by 26 CFR § 1.132-5(m) relative to personal executive security. The resource summarizes the alternative approaches to meeting the “overall security program” requirement that enables companies to deduct certain eligible expenses.

Society in-house members across sizes and industries responding to a recent benchmarking survey provided insights on their organizations’ executive security practices.  A summary of the survey findings is here.

In “The U.S.-China Trade War: Rising Risks for Public Companies,” Intelligize provides an overview of the history to date of trade relations between the US and China as a precursor to sharing some recent Form 10-K and Form 10-Q risk factor and other trade-related disclosures and statistics that reveal perceptions and determinations of increased risk exposure by public companies.

Bloomberg Tax noted at least 70 US public companies that identified the EU Artificial Intelligence Act in their most recent Form 10-K risk factors. Among the types of risks cited are financial penalties, compliance costs, inconsistencies among EU regulations, increases in civil claims, adverse business impacts, and impacts on AI commercialization. 

We are pleased to share Key Takeaways from the Society’s recent Corporate Executive Security Practices Virtual Roundtable featuring Holland & Knight Partner David Cole, Kroll Managing Director, Enterprise Security Risk Management Matthew Dumpert, and Northrop Grumman Corporation Vice President, Security and Chief Security Officer Terry Phillips.

In “The Passive/Aggressive Investor: Significant New SEC Staff Interpretive Guidance on Schedule 13G Eligibility,” Gibson Dunn unpacks the SEC staff’s recently updated guidance on Schedule 13G eligibility; forecasts its potential and likely implications; and offers practical considerations for both investors and companies that aim to identify opportunities for ongoing engagement that would not disqualify 13G eligibility.

In view of the unintended consequences of the SEC staff’s recently updated guidance on Schedule 13G eligibility - specifically as respects institutional investors’ reluctance to engage with companies or to engage in the same manner, Cooley’s alert: “Shareholder Engagement on Compensation Matters: Special Time-Sensitive Complications for the 2025 Proxy Season” notes the increased value associated with good proxy disclosure on executive compensation programs and suggests other considerations for companies seeking to manage the implications of the changed shareholder engagement environment.