'THE DAILY CORPORATE GOVERNANCE REPORT’ (for public company boards, the C-suite and GCs)
Please see the items below with the related links (NOTE: access to link content may be metered, require a no-charge registration or require a paid digital subscription)
(i) talking (or not) about ESG: Much has been written recently on companies cutting back on their use of the term "ESG". More on this in John Authers' Bloomberg 'Point of Return' Newsletter last Monday, "Trump Will Bury ESG, But It Was Already Dead":
"As was obvious even before voters went to the polls, ESG was already a decisive loser in the US. The concept of Environmental, Social and Governance investing became hopelessly entangled with the culture war agenda, failed to deliver on its promises, and went into retreat.....ESG as a term has been demonized by politicians on the right, to the point that BlackRock’s Larry Fink said that it had been “weaponized” and should no longer be used......
"Supporters of the concept were already disillusioned that ESG had become little more than a marketing wheeze.....In the US, the Securities and Exchange Commission has watered down its requirements on companies to disclose ESG statistics — and the whole concept is close to unworkable unless everyone has to disclose standardized statistics. In September, it quietly disbanded its task force on ESG enforcement. Now, the Trump administration is likely to make dismantling such rules one of its first acts in office.
"That will complete a retreat that has largely already taken place.....Interest among the public has waned in the US — although not elsewhere. Google Trends shows that US searches for ESG and its synonyms tanked over the last two years, while continuing at much the same level elsewhere. The rest of the world still seems happy to give it a try, but America is no longer going along for the ride: ....
"The pattern recurs in the news media. Counting stories published on the Bloomberg terminal from all sources shows interest peaking in 2016, when Donald Trump was first elected, and long before the flow of money went into reverse. By the time that Fink said ESG had been “weaponized,” interest was barely a third its 2016 level and has continued to dwindle: ......
"Critically from the point of view of how capitalism is operating, the same pattern shows up in earnings call transcripts. Bloomberg’s Document Search function shows that executives — not just Larry Fink — no longer want to talk about it. This is our quarter-by-quarter measure of mentions of ESG and its various synonyms since 2010. Mentions exploded after the pandemic, and have tumbled since 2022. With this earning season roughly 90% over, interest from executives in ESG looks to be right back to pre-pandemic levels: .....
"This is at least in part because fund managers are no longer forcing the issue. BlackRock is admirably transparent about the way it votes its shares, and produces regular reports; here is the latest. As this chart from the report..... demonstrates, the amount of support from shareholders for environmental and social proposals has declined markedly over the last three years: ...... BlackRock itself upped its support for corporate governance proposals, but only backed 4% of social and environmental proposals (down from 20% two years earlier). It also declined to support any of the various anti-ESG proposals that were put forward, and complained that many of them were duplicative or poorly drafted. But the notion that ESG was going to change the way companies operate seems to be in retreat......."
(ii) DEI post Trump election: anti-DEI activist on his targets post Trump/HBR on 'what Trump’s second term could mean for DEI':
(a) This WSJ article appeared last Thursday, "Companies Walk a Tightrope on Diversity; ‘No Industry Should Feel Safe.’" A good summary of it is in last Friday's WSJ CFO Journal Newsletter with the same tile:
"The conservative activist who pushed Tractor Supply, Lowe’s and other companies to abandon their diversity efforts says he is preparing a new list of targets, arguing that a Trump victory supports such a reckoning. “No industry should feel safe,” said Robby Starbuck, the former Hollywood director-turned-activist. “As we head into Christmas, I will likely turn my sights to retailers who depend on the majority of Americans who just elected Trump with the popular vote.”
"Starbuck added that companies need to revert to the philosophy “that the customer is king.” Roughly 15 companies already have felt the heat of his attacks, and all have announced retreats from their diversity, equity and inclusion policies in response, he said. Farm-equipment seller Deere said in July that it would dial back some of its DEI initiatives after online pressure started by Starbuck, including by ensuring the absence of what it described as “socially motivated messages” from company-mandated training materials and policies unless otherwise required."
(b) Below is the headnote summary of this HBR post last Thursday, "What Trump’s Second Term Could Mean for DEI":
"Summary: Proponents of DEI face an enormous struggle over the next four years. The incoming Trump administration has signaled it will escalate the already virulent anti-DEI backlash in the workplace. Leaders who want to build just and inclusive organizations amid these challenging conditions can look to a framework developed eight years ago to help multinational corporations support LGBTQ+ inclusion in countries that are hostile to LGBTQ+ rights. Companies can follow: 1) the “When in Rome” model, in which they adhere to local norms and laws, even if that means diluting some of their DEI commitments; 2) the “Embassy” model, in which they adopt DEI policies internally but do not push for larger societal change; or 3) the “Advocate” model, in which they seek to shift local laws and social norms in a pro-DEI direction."
(c) On the subject of DEI, see also this HBR post yesterday, "Reframe the Value Proposition of Diversity". Below is the headnote summary:
"Summary: The word diversity appears to trigger a wide variety of emotions from its equally wide array of definitions. And in our current moment of political polarization, it appears to be getting worse. What if we could frame a value proposition for diversity that emphasizes the return on investment for the organization, benefits every individual and team, and is rooted in science and backed by empirical research? We have this at our fingertips: Diverse teams outperform consistently. This model is better suited to our current social tensions and avoids some of the pitfalls of the common value propositions we’ve discussed."
(iii) CVS Health adds board members in deal with activist and enters into Confidentiality Agreement with activist to share certain confidential information with it/press release, SEC filing and precedent of the day (Confidentiality Agreement with activist to share certain confidential information): As reported in this Bloomberg article on Monday, "CVS Adds Glenview’s Robbins to Board Under Activist Pressure", CVS Health Corp. on Monday "named Glenview Capital Management founder Larry Robbins to its board as part of an agreement with the activist firm that’s been pressuring the company for change." Below is from the CVS press release announcing the agreement:
"The Board of Directors of CVS Health today announced the appointment of four new board members: Leslie Norwalk, Larry Robbins, Guy Sansone, and Doug Shulman, following productive discussions with Glenview Capital Management. "In our discussions with the leadership at Glenview, we agreed that we can deliver greater value from our integrated businesses to all of our stakeholders, including our customers, consumers, colleagues, and shareholders," said Roger Farah, Executive Chairman of the Board, CVS Health......
"Norwalk will join the Health Services Committee, Sansone will join the Audit Committee, and Shulman will join the Management Planning and Development Committee. With these four new directors, the Board now comprises 16 members. In connection with the Board appointments, CVS Health and Glenview entered into a confidentiality agreement under which Glenview has agreed to customary confidentiality, standstill and other provisions....."
This is the Confidentiality Agreement entered into between CVS and Glenview Capital Management, and below are excerpts form the related Current Report filed with the SEC describing some of the terms of the Confidentiality Agreement:
"On November 17, 2024, CVS Health Corporation entered into a confidentiality agreement with Glenview Capital Management, LLC. The Confidentiality Agreement provides for, among other things, the sharing of certain of the Company’s confidential information with Glenview and imposes confidentiality and related obligations on Glenview and its affiliates and representatives with respect to such information.
Pursuant to the Confidentiality Agreement, the Company also agreed to increase the size of the Company’s Board of Directors by four and to appoint Leslie Norwalk, Larry Robbins, Guy Sansone and Doug Shulman to the Board......Pursuant to the Confidentiality Agreement, Glenview and its affiliates and representatives have agreed to abide by certain customary standstill restrictions, which remain in effect until the thirtieth day prior to the commencement of the stockholder director nomination window for the Company’s 2026 annual meeting of stockholders, subject to earlier termination in certain limited circumstances as set forth in the Confidentiality Agreement. The Company and Glenview have also agreed to certain non-disparagement obligations......"
(iv) press release of the day: NYSE-listed, railroad holding company Union Pacific Corporation announced on Monday in this release the retirement of its chief legal officer, with the appointment of a new deputy general counsel during a transition period, as follows:
"Union Pacific Railroad today announced Craig Richardson, executive vice president, chief legal officer and corporate secretary, will retire March 31, 2025, after nearly 10 years with the railroad. In anticipation of the transition, Christina Conlin, who most recently served as chief risk officer and associate general counsel with Goodyear Tire and Rubber Company, will join Union Pacific effective Dec. 2 as senior vice president and deputy general counsel....
"Richardson has served in his current role since December 2020, overseeing all aspects of the company’s legal affairs and leading its claims management team.......In her new role, Conlin will help advance Union Pacific’s Safety, Service and Operational Excellence strategy, infusing it with her legal expertise. She will serve as steward of legal affairs, protecting the railroad’s reputation and mitigating risk, and provide strategic counsel to the railroad’s senior leadership team......."
-----------------------------------------------------
Please contact me if you would like to be on the distribution list and receive every issue of this newsletter directly in your inbox.