Governance No Longer a Sleeper in ESG

 In 2005, as ESG Analytics documents, the United Nations Environment Programme coined the term “ESG” (Environmental Social Governance). Until relatively recently the governance part of that had been a sleeper. The boards, for example, at Theranos and the first version of WeWork had been passive.

That was then.

PROXY BATTLES – EXPECT THEM

Now public companies should anticipate proxy battles. 

On April 22, 2022, Forbes reported:

“Ahead of McDonald’s annual shareholder meeting … investor Carl Icahn has doubled down on his effort to overhaul the chain’s animal welfare, sending a letter to investors … and urging shareholders to vote in favor of his two activist board members.”

PROXY BATTLES – PUBLIC CORPORATIONS CAN WIN THEM

Icahn lost. That should embolden corporations to push back.

Wall Street law firm Paul Weiss had represented McDonald’s. Paul Weiss has a formal Governance Practice.

WHAT WENT DOWN

As Paul Weiss brings us up-to-date, McDonald’s shareholders overwhelmingly rejected the Icahn agenda. Only 1% voted for his nominees.

The 12 existing directors had been reelected to the board. Both proxy advisory firms Institutional Shareholders Services (ISS) and Glass Lewis supported the current directors.

PAUL WEISS DOCUMENTS RISING SHAREHOLDER ACTIVISM

In a January 2022 edition of Corporate Counsel, Paul Weiss Chairperson Brad Karp and David Curran, Chief Sustainability Officer, explain how ESG issues are generating challenges to corporate governance. Not all public companies have had victories such as that of McDonald’s.

Karp and Curran explicitly point out:

“… previously marginalized groups such as disgruntled employees and activist shareholders [are] winning proxy battles and gaining access to previously undisclosed documents. This is a game-changer. Shareholder activism will continue in 2022.”

ESG INVESTING

Meanwhile, the SEC is focusing on Sustainable Investments and the conduct of advisers. On May 25th, it issued Proposed Amendments to Form ADV.

Paul Weiss zeroes in on that in its Client Memorandum.

Connect with Editor-in-Chief Jane Genova at janegenova374@gmail.com. She is a corporate writer who now and then does freelance assignments for law firms such as Paul Weiss.

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