Proceed With Caution

In an article for Directors & Boards, corporate partner Doug Raymond explained how governance interests will likely continue to change in the new year as companies exit Delaware for more favorable jurisdictions. 

A 2025 executive order included steps to rein in what the administration saw as the excessive influence of proxy advisors, particularly regarding their positions on climate change and environmental concerns, as well as what the administration deems an over-emphasis on diversity, equity and inclusion initiatives. Raymond noted that proxy advisors play a central role in shaping shareholder voting, especially for institutional investors who may not have the resources to analyze every proposal in detail. 

Additionally, the Securities and Exchange Commission has proffered several changes to board governance, including by reducing compliance costs and moving from quarterly to semiannual financial reporting. 

“As the regulatory pendulum swings, it can be tempting to swing with it,” Raymond added. “Boards should nonetheless continue to look to the long-term interests of the corporation and consider whether taking advantage of these changes is in the corporation’s best interest, regardless of whether it may now be permitted. Trust, transparency and commitment to long-term value are the foundations of sound governance and remain so, even as the politics of the day create distractions and whipsaw the regulatory environment.”