This analysis focuses on publicly traded companies incorporated under the laws of a U.S. state (e.g., Delaware, the most common state of incorporation for U.S. companies) whose securities are listed on a U.S. stock exchange. Non-U.S. foreign private issuer (“REIT”) companies whose securities are traded on a U.S. stock exchange are generally subject to the laws of their home state and amended U.S. stock exchange rules; However, certain U.S. laws also apply to U.S. REITs and companies. Until now, disclosures in the US on ESG and sustainability issues have been primarily driven by private orders, largely thanks to collaboration with large institutional investors who have called for greater transparency and consistency to enable companies to assess ESG and sustainability issues.
This has led companies to adopt a number of approaches to reporting and transparency, with larger U.S. companies typically voluntarily publishing information that is fully or partially compliant with one or more third-party standards such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD), and the Stakeholder Capitalism Metrics Framework, recently announced by the World Economic Forum`s (WEF) International Business Council and the four leading accounting firms, while highlighting the coherence of entrepreneurial policies with the United Nations Sustainable Development Goals (SDGs). Yes. The fiduciary duties of directors and officers under state law are primarily enforced through private lawsuits conducted by plaintiffs` lawyers. These private lawsuits generally fall into two categories: direct lawsuits, usually in the form of class actions on behalf of a specific group of shareholders of the corporation (usually all shareholders who bought or sold within a certain period of time, or all unaffiliated shareholders); and “derivative” lawsuits purportedly brought on behalf of the company itself. The so-called class actions must meet the criteria of the Federal Rules of Civil Procedure or similar provisions of state law before being admitted as a class action, including the number of class members, the similarity of legal and factual issues among the class members, the typicity of claims or defenses of the representative parties of the class. and the fairness and adequacy of the protection of class interests by the representative parties. Derivative lawsuits, creatures of state corporate law, provide a mechanism by which plaintiff shareholders can theoretically represent the corporation by suing their own board of directors or the company`s management, sometimes after going through an “application procedure” in which the plaintiff must request that the company file a lawsuit and be dismissed.
In certain circumstances, particularly if it can be demonstrated that the Board of Directors is in conflict with the alleged breach of duty for any reason, this “demand requirement” is excused and the shareholder may make a claim on behalf of the Corporation without further investigation. Compensation philosophies and programs are often developed with the involvement of external compensation consultants. The appropriate combination of fixed compensation (e.g. annual base salary) and variable remuneration (i.e. short- and long-term performance incentives) and the form of compensation (e.g., stock options, restricted shares, restricted share units or cash payments) vary from company to company, as determined by the compensation committee in its business judgment based on the specific needs of the entity. ESG components are also gradually being integrated into compensation design in some companies. Share-based components are common, and shareholder approval is required for most stock ownership plans under stock exchange rules, including those involving the granting of share-based awards to directors and officers. In addition, Dodd-Frank`s call for non-binding shareholder votes on executive compensation, popularized as a “say in compensation,” gives shareholders the opportunity to express their dissatisfaction with compensation practices, which can also be expressed directly to the company outside of the annual meeting.
While these votes are not binding, companies that receive low approval ratings are under intense pressure to change executive compensation programs. Courts generally respect compensation decisions as long as directors act knowingly, in good faith and not in their private interest. With the exception of certain financial institutions (which are subject to specific safety and soundness provisions), supervisors generally cannot challenge compensation decisions. 5.2 What corporate governance information is required and is there any information that should be published on the websites? Although the specific requirements often found in Europe and other jurisdictions in the context of minority shareholder protection, such as mandatory takeover bid obligations, are generally not closely integrated into US rules and regulations, special attention should be paid to minority shareholders where there is a majority shareholder. Companies with a majority shareholder (and such a majority shareholder) are generally subject to increased legal control and disclosure obligations with respect to transactions between these companies and their controlling shareholders.
