Corporate Governance

Shearman & Sterling LLP 1 | Introduction Shearman & Sterling is proud to present its 2021 Corporate Governance and Executive Compensation Survey. In last year's Survey, public companies and boards of directors were challenged with a traumatic year of unprecedented events. A global pandemic was raging with no end in sight, and corporate leaders were struggling with how best to respond to social justice protests, recognizing that silence was not an option. A contentious presidential election capped off the year, and it was only in the first months of 2021 that the nation seemed to be returning to a new "normal." With this slow emergence from these difficult times, a number of new corporate imperatives are taking shape and some older ones are getting new attention as a new administration has empowered a new U.S. Securities and Exchange Commission (SEC) with a new direction. These developments are forcing directors and management to reckon with a heightened focus on the place of the corporation in society, and the ability to generate long-term sustainable value creation. Among the many developments and themes that have emerged in the last twelve months as we slowly emerge from the pandemic, we highlight a few below. Introduction DIVERSITY, EQUITY AND INCLUSION The social justice movement that emerged during the pandemic in the aftermath of the killing of George Floyd has led to even greater focus by companies, investors, communities and other stakeholders about how to combat systemic racism and other inequities in the workplace. We expect these issues to continue to be a priority for boards and anticipate heightened attention among investors and in the media to actions (or inactions) by public companies designed to increase diversity in board rooms and throughout the organization, address pay equity and compensation disparities and combat racial and other forms of bias and promote inclusion. External factors are also pushing in this direction with the SEC approving a new Nasdaq board diversity disclosure mandate in August and the SEC's regulatory agenda, including new disclosure rules regarding diversity of board members. In addition, there continue to be numerous shareholder proposals focused on board diversity and pay equity, and more companies are adopting "Rooney Rule" type policies for director nominations and disclosing EEO-1 information to increase transparency about pay levels across their organizations. The 2021 Survey was produced under the leadership of the following Shearman & Sterling attorneys: Richard B. Alsop Matthew H. Behrens George A. Casey Natalie Ko Gina H. Lee Doreen E. Lilienfeld Ilya Mamin Karen Mann Gillian Emmett Moldowan Lona Nallengara Scott D. Petepiece Kristina L. Trauger CLIMATE CHANGE AND ENERGY TRANSITION With the intensity of the global pandemic slowly receding, climate change issues have returned to front of mind in recent months, punctuated periodically by extreme weather events. The new SEC Chair has announced plans for ambitious new rules requiring mandatory disclosures related to climate change and has made it clear in his public remarks that his objective is to ensure that climate risk disclosures are consistent and comparable, as well as "decision- useful" to investors. At the same time, institutional investors such as Blackrock, who were formerly more circumspect about supporting shareholder proposals on climate change or other environmental topics have now become much more active in their support, buttressing their public statements and policies in emphasizing the need for sustainable long-term growth. In addition, shareholder activists are finding new successes focusing on climate change and environmental issues, the most notable example being activist Engine No. 1's successful proxy battle with Exxon, in which it was able to install three new directors, consisting of a quarter of the board.

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