The last time I wrote about In Re Caremark International Inc. (“Caremark”), and its protections for a board of directors from breach of fiduciary duty claims, was in early 2021 following a year of cases that had eroded its historical strong defenses. Now, almost two years later, boards have paid attention to the judicial opinions and added compliance practices, including implementing written oversight systems, resulting in a dramatic uptick in the dismissal of plaintiff’s attempts to satisfy Caremark claims.
In Re Caremark International Inc. Derivative Litigation was a civil action in the Delaware Court of Chancery in 1996 which drilled down on a director’s duty of care in the oversight context. A Caremark claim “seeks to hold directors accountable for the consequences of a corporate trauma.” To adequately allege such a claim, a plaintiff must allege that the board had some level of involvement in the trauma such that it knew or should have known about
In a series of blogs, that is likely to be an ongoing topic for the foreseeable future, I have been discussing the barrage of environmental, social and governance (ESG) related activity and focus by capital markets regulators and participants. Climate change initiatives and disclosures have been singled out in the ESG discussions and as a particular SEC focus, and as such was the topic of the first blog in this series (see HERE). The second blog talked more generally about ESG investing and ratings systems and discussed the role of a Chief Sustainability Officer (see HERE). The last blog on the topic focused on current and prospective ESG disclosure requirements and initiatives, including the Nasdaq ESG Reporting Guide (see HERE).
ESG is not just a topic impacting social position disclosures but can go directly to the financial condition of a reporting company, and as such its financial statements. Accordingly, ESG reporting requires auditor and audit committee
In a series of blogs, I have been discussing the barrage of environmental, social and governance (ESG) related activity and focus by capital markets regulators and participants. Former SEC Chair Jay Clayton did not support overarching ESG disclosure requirements. However, new acting SEC Chair Allison Herron Lee has made a dramatic change in SEC policy, appointing a senior policy advisor for climate and ESG; the SEC Division of Corporation Finance (“Corp Fin”) announced it will scrutinize climate change disclosures; the SEC has formed an enforcement task force focused on climate and ESG issues; the Division of Examinations’ 2021 examination priorities included an introduction about how this year’s priorities have an “enhanced focus” on climate and ESG-related risks; almost every fund and major institutional investor has published statements on ESG initiatives; a Chief Sustainability Officer is a common c-suite position; independent auditors are being retained to attest on ESG disclosures; and enhanced ESG disclosure regulations are most assuredly forthcoming.
Over the past few years, the term “Environmental, Social and Governance” or “ESG” has been both first used and brought into daily use by capital market participants. Multiple publications have been written on the subject, Nasdaq has published an ESG Reporting Guide, the House Financial Services Committee has debated multiple bills that would require various ESG disclosures and the SEC top brass is vocal, and divided, on the subject. SEC Chair Jay Clayton and Commissioner Hester M. Peirce both believe that ESG matters are too abstract and undefined to result in meaningful disclosure while Commissioners Robert J. Jackson Jr. and Allison Herren Lee just issued a joint statement expressing disappointment in the recently proposed changes to Regulation S-K (see HERE) for omitting the topic of climate risk.
It is clear that ESG matters are an important factor for analysts and investors and thus for reporting companies to consider. It is also clear that companies have increasing pressure to