CEO and corporate activism–the practice of CEOs taking public positions on social and political issues not directly related to their business–has become a hotly debated topic in corporate governance. How should a board respond when a traditionally political question suddenly becomes a matter of corporate policy? Should CEOs and boards take positions on matters as diverse as voting rights legislation, gun safety laws, immigration, content control (for media platforms), gender issues, geopolitical conflicts, and presidential politics? After the last U.S. presidential election and the events on January 6, many corporations halted their political giving or made permanent changes to their approach. As we approach another presidential election in an increasingly polarized environment, how should corporations handle political contributions? Even when corporations are not taking political positions, they have to navigate sometimes impossibly conflicting demands from employees, customers, investors, and state governments around Environmental, Social, and Governance (ESG) matters. Some states legislate against ESG initiatives as manifestations of an anti-social “woke” agenda. Other states take the opposite view and mandate respect for ESG initiatives that are elsewhere prohibited. How can boards address the disparate concerns coming from investors, employees, and customers, while navigating various state laws and the possibility that state governments may retaliate? When and how should corporations be proactive in confronting these challenges and when should they lie low and be reactive? This session will present a framework that boards can use to assess the pros and cons of corporate advocacy, and discuss how boards can be prepared to respond to resulting criticism in the face of companies or CEOs taking public positions or remaining silent.

Shareholder activism is evolving in a manner that demands intense boardroom attention. The advent of the universal proxy empowers shareholder activists seeking to change corporate strategy or to bring fresh blood to the CEO suite. Activists commonly advocate for buybacks, increased dividends, and changes in capital allocation, as well as shakeups in the CEO suite. Indeed, recent data suggest that the probability of CEO turnover doubles in the two years after insurgents win even one board seat, whether negotiated or by proxy vote. Activists also advocate for a range of social policy initiatives, ranging from climate measures to racial equity audits. Employees are also beginning to flex their muscle by introducing shareholder initiatives designed to further employee interests. And some large institutional investors have announced that they will be targeting individual directors whom they believe have been insufficiently attentive to climate, compensation, or other governance matters. The proxy process is becoming increasingly political and personal. It is evolving in some cases to resemble a scrum for a local school board seat, and not all boards or directors are prepared for the occasionally personal and uncomfortable implications of this new reality. This session will address these developments at both a tactical and strategic level. It will review the changes in law and policy that animate these developments, and it will explore optimal responses by directors who must navigate through these challenging situations.

Serving as a director of a publicly traded corporation has never been more difficult. Politicians are forcing corporations to confront controversial social and political issues in a manner calculated to alienate key constituencies. “Diversity, equity, and inclusion” programs are under increasing scrutiny. “ESG” has become a dirty word. The SEC’s climate proposals are broadly criticized, and present difficult compliance challenges. Universal proxies give activists new tools that help them target individual directors on a highly personalized basis. The declines in average CEO and CFO tenure force boards to develop management talent on a more frequent basis and create multiple retention and compensation challenges. Federal enforcement authorities are dramatically increasing incentives for whistleblowers to report corporate wrongdoing. Boardroom incentives to self-report and to conduct internal investigations are rapidly evolving in response to this change in enforcement strategy. Delaware courts have expanded the definition of “mission critical” operations and are creating new officer and director liability for failure to monitor those operations. Meanwhile, concerns over artificial intelligence and cybersecurity often pervade board level discussions. The challenges facing modern boards are head-spinning. This panel, in a focused, rapid-fire fashion, will address a set of contentious boardroom issues with pragmatic suggestions designed to help directors manage today’s most difficult boardroom challenges.