Corporate Governance

Shearman & Sterling LLP Introduction | 2 CYBER SECURITY Cybersecurity continues to be an important concern for boards and companies as the last twelve months saw an unprecedented level of very public ransomware and cyber attacks against companies and other high-profile targets. The SEC has included potential new rules on cybersecurity risk disclosures in its regulatory agenda and has also formally requested information from numerous companies about cyber incidents, including the well- publicized SolarWinds hack. In the cybersecurity space, the SEC continues to focus on integration of risk management and event response for cyber attacks with a company's disclosure controls and procedures to ensure that investors have a full picture of potential risks and the impact of actual events. In a recent cybersecurity enforcement action discussed later in this Survey, the SEC found a failure in disclosure controls, even in the absence of an actual misstatement or omission. Companies will need to continue to be vigilant about integrating cybersecurity preparedness and response programs with disclosure controls and related matters, such as their insider trading policies. HUMAN CAPITAL The global pandemic put new demands on boards to ensure employee safety and wellbeing and balance those critical needs with maintaining the business. The experience of the pandemic has contributed to a new labor shortage in certain industries that will require thoughtful management. The pandemic has also accelerated the pace of change in the workplace, including as a result of remote working, and the development of new paradigms for use of office space and office time and the best ways to collaborate and interact with customers and clients. Companies will need to determine what is right for their workforces and how to get the greatest productivity and commitment from their human capital. As we move into the second annual report and proxy season with required human capital management (HCM) disclosure, it is clear that this topic will require increased focus and thoughtful disclosure. Human capital is a key source of value for companies and workforce considerations can be critical to shareholders as well. The SEC's HCM disclosure rules currently provide flexibility for issuers, but we have observed trends in the current disclosures reflecting the impact of the COVID-19 global pandemic on workforces, the intersection of social justice concerns and human capital management and discussions around corporate purpose and community involvement. Although HCM disclosure is not required in a proxy statement, a number of companies included enhanced HCM disclosure in their proxy statements in keeping with the increasing importance of the proxy statement as a vehicle for stakeholder engagement efforts, including around environmental, social and governance (ESG) topics such as HCM. The SEC's rulemaking agenda also includes HCM disclosures, which we expect to enhance the existing general disclosure requirement with some of the specific disclosures we saw from companies this year on diversity, training and retention. We hope you enjoy our 2021 Corporate Governance Survey (our 19th Annual). Throughout this Survey, we provide insights on specific topics of interest in the current environment, including practical advice for boards and management. Across all topics our goal is to provide an overview of the current corporate governance landscape and to identify best practices. In addition to the Insights articles, the Survey consists of a review of key governance characteristics of the Top 100 Companies, which we define as the 100 largest companies that have securities listed on the NYSE or Nasdaq, measured by market capitalization and revenue. A list of the Top 100 Companies can be found in "The Survey" section at the end of this publication.

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