Strategic Governance of AI: A Roadmap for the Future

Posted by Maureen Bujno, Christine Davine, and Lara Abrash, Deloitte LLP, on
Thursday, April 24, 2025
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Maureen Bujno is a Managing Director, Christine Davine is a Managing Partner, and Lara Abrash is the Chair at Deloitte LLP. This post is based on their Deloitte memorandum.

Introducing the Deloitte AI Governance Roadmap

The Deloitte AI Governance Roadmap (“Roadmap”) is designed to help boards of directors (“boards”) understand their role and provide them with guiding questions to support effective oversight of AI. The Roadmap applies the Deloitte Governance Framework (“Framework”) to AI. The Framework, illustrated below, provides an end-to-end view of corporate governance and defines and delineates board and management activities. The board’s role in each of the elements of the corporate governance infrastructure can vary from that of an active participant in the processes themselves (depicted in the top half of the circle) to an overseer of management-led activities running the day-to-day business and executing the strategy (depicted in the bottom half of the circle). The Roadmap focuses on the top half of the Framework—the specific areas depicting the role of the board.

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Presentation of Arguments in a Brief of Current and Retired Practitioners and Professors as Amici Curiae in Support of Reversal of the Opinion of the Delaware Court of Chancery in In Re Tesla, Inc. Derivative Litigation

Posted by Jonathan Macey (Yale Law School), on
Thursday, April 24, 2025
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Jonathan Macey is Sam Harris Professor of Corporate Law, Corporate Finance, and Securities Law at Yale Law School and Professor in the Yale School of Management. This post is based on an amicus brief; the full list of signatories to the brief are listed at the end of the post. This post is part of the Delaware law series; links to other posts in the series are available here.

Tesla directors and stockholders ratified the stock-option incentive compensation contract between Tesla and Elon Musk twice, once in 2018 and again in 2024. Following each ratification, the Delaware Court of Chancery found flaws in the approval process, overrode both the shareholders and the board, and rescinded the compensation agreement.  Following the second opinion, a group of practitioners and professors, including the authors of this Post, filed an amicus brief in the Supreme Court of Delaware in support of reversing the Chancery Court.

Our amicus brief focused on two principal defects in the opinion, although we did not intend for our focus on these two defects to indicate that there are no other issues that should be examined on appeal. First, we challenged the reasoning used to determine that Elon Musk was a “transaction-specific” controller, which the court based, in part, on Musk’s status as a “Superstar CEO.” Second, we challenged the reasoning the Chancery Court used to determine that Tesla’s disinterested stockholders lacked the power to ratify Musk’s compensation contract in 2018 or even in 2024. We of course focus on issues of law and corporate governance and express no views on Elon Musk either as a corporate executive or as a political figure.

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2025 Say on Pay Reports

Posted by Austin Vanbastelaer, Justin Beck, and Nathan Grantz, Semler Brossy LLC, on
Thursday, April 24, 2025
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Austin Vanbastelaer is a Principal, Justin Beck is a Senior Consultant, and Nathan Grantz is a Senior Associate Consultant at Semler Brossy LLC. This post is based on a Semler Brossy memorandum by Mr. Vanbastelaer, Mr. Beck, Mr. Grants, and Andrew Fick.

Say on Pay Results

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FÁCIL: Opening New Paths for the Capital Market in Brazil

Posted by João Pedro Nascimento, Brazilian Securities and Exchange Commission (CVM), on
Wednesday, April 23, 2025
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João Pedro Nascimento is the Chairman at the Brazilian Securities and Exchange Commission (CVM).

All around the world, regulators are redesigning capital market frameworks to attract small and medium enterprises (SMEs), recognizing that public markets offer unique advantages for growth-stage companies, including superior price discovery, enhanced liquidity, greater financial statement comparability, and direct access to institutional capital. And yet, for many smaller businesses, this participation remains costly and complex.

While alternative solutions such as crowdfunding are increasingly used, regulators must remain attentive to the access gaps that prevent smaller companies from entering the capital market. SMEs are not only the predominant form of enterprise globally, but also the primary source of employment in most countries, as recently pointed out by the OECD (Organization for Economic Cooperation and Development) [1]. Facilitating their path to public markets is both economically strategic and socially beneficial. Growth markets serve as transitional platforms for SMEs aiming to access traditional capital market segments.

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A Guide for Boards Evaluating Conflicted Transactions Under the Amended Delaware Law

Posted by Andrew Noreuil, Brian Massengill and Andrew Stanger, Mayer Brown LLP, on
Wednesday, April 23, 2025
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Andrew Noreuil and Brian J. Massengill are Partners, and Andrew J. Stanger is a Knowledge Counsel, at Mayer Brown LLP. This post is based on their Mayer Brown memorandum, and is part of the Delaware law series; links to other posts in the series are available here.

In perhaps one of the most significant revisions to the Delaware General Corporation Law (DGCL), on March 25, 2025, the governor signed into law amendments overhauling much of the state’s law relating to conflicted transactions between corporations and their directors, officers, and controlling stockholders. [1] The amendments are part of a trend to lend certainty to principles developed by Delaware courts over decades, and while likely to be welcomed by corporate boards and transaction advisors, the amendments themselves will be subject to further interpretation as corporate actors wrestle with the implications of these changes.

This Legal Update summarizes the amendments to DGCL §144, focusing on the step-by-step process boards may use to evaluate and structure conflicted transactions under the new framework. This update is intended to guide boards through the various options under the amended §144 to achieve “safe harbor” status for conflicted transactions and minimize exposure to potential litigation. Where relevant, this update notes the historical context of the amendments and offers further considerations on their practical nuances.

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Considerations in Proxy Disclosure

Posted by Rachael Lee and Krunal Billimoria, Meridian Compensation Partners, on
Tuesday, April 22, 2025
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Rachael Lee is a Principal and Krunal Billimoria is a Senior Consultant at Meridian Compensation Partners. This post is based on their Meridian Compensation Partners memorandum.

As companies prepare their proxy disclosures, ensuring transparency and clarity in executive compensation reporting remains a top priority. Investors expect well-structured disclosures that provide insight into board decisions, pay-for-performance alignment, and responsiveness to shareholder concerns.

This update highlights three key areas in proxy disclosure with sample disclosure guidance on why this disclosure may be helpful to include:

1. A letter from the Chair of the Human Resources/Compensation Committee (HRC)

2. Realizable pay: Enhancing pay-for-performance transparency

3. Shareholder engagement following a below 80% say-on-pay vote

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Skin in the Game: Does Outside Directors’ Equity-based Compensation Induce or Mitigate Stock Price Crash Risk?

Posted by Weiqiang Tan (The Education University of Hong Kong), on
Tuesday, April 22, 2025
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Weiqiang Tan is an Associate Professor of Finance at The Education University of Hong Kong. This post is based on an article forthcoming in the Journal of Accounting and Public Policy by Professor Tan, Professor Yuting Qian, Professor Bo Qin, Professor Daifei Troy Yao, and is part of the Delaware law series; links to other posts in the series are available here.

Stock price crashes—sudden and extreme negative movements in share prices—pose serious threats to shareholder value and corporate reputations. While these events often appear unpredictable, a growing body of research links them to weak corporate governance, especially the failure to disclose bad news in a timely manner. Our recent study, Skin in the Game, sheds light on the role of outside directors in mitigating such crash risk—and how their equity-based compensation (DEC) might provide the right incentives to enhance oversight.

Drawing on a comprehensive dataset of U.S. public firms between 2008 and 2021, we investigate whether awarding equity pay to outside directors strengthens their monitoring role or compromises their independence. The key question is whether this form of compensation induces or mitigates stock price crash risk.

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Riding Out the Storm – A Non-Exhaustive Punch List for Compensation in Volatile Times

Posted by Kate Napalkova, Krista Hanvey, and Sean Feller, Gibson, Dunn & Crutcher LLP, on
Tuesday, April 22, 2025
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Kate Napalkova, Krista Hanvey, and Sean Feller are Partners at Gibson, Dunn & Crutcher LLP. This post is based on a Gibson Dunn memorandum by Ms. Napalkova, Ms. Hanvey, Mr. Feller, Michael Collins, and Gina Hancock.

During any period of business uncertainty, board and compensation committee members, executive management teams and human resources leaders will feel pressure to act quickly. A singular proven strategy underscored successful compensation decisions through both the 2008 financial crisis and the COVID-19 pandemic—zoom out far enough to see the full picture and act in a manner that is systematic and consistent with your organization’s broader philosophy (including your compensation philosophy) and mission.

As compensation-decision makers navigate this period of macroeconomic uncertainty, there are many considerations to keep in mind. Below, in no particular order, are a few that we see arise time and time again.

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2024 Sustainable Fund Trends: Index ETFs Are the Silver Lining

Posted by Subodh Mishra, ISS STOXX, on
Monday, April 21, 2025
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Subodh Mishra is Global Head of Communications at ISS STOXX. This post is based on an ISS ESG client memorandum by Hernando Cortina, CFA, Managing Director; and Moe Phyu, Senior Associate, at ISS ESG.

Navigating global crosscurrents, total assets under management (AUM) in sustainable funds grew at high single-digit rates in 2024. Nevertheless, these growth rates represented a meaningful slowdown compared with prior years. The sustainable ETF category, which is 91% index-based, grew a healthy 19%, which was still below the growth in conventional ETFs. This report, a follow-up to the 2023 review of sustainable funds, examines 2024 trends in the sustainability category based on data from ISS MI MarketPulse.

Regulatory, economic, and investor preferences reveal a mixed picture for sustainable fund assets and flows in 2024. While sustainable assets grew by 9% and net flows remained positive at about 2% of prior-year assets, this growth was lower than that of conventional funds for the first time in at least five years. Europe and North America, which jointly account for approximately 97% of sustainable fund assets, show contrasting trends. In addition, ETFs (20% of sustainable fund assets) remain the relative bright spot, with more robust growth reflecting the appeal of index-based sustainable strategies. This analysis focuses on the overall equity and fixed income funds categories, which totaled $49.7 trillion in total AUM globally as of December 2024.

The distinction between sustainable and conventional funds relies upon the Morningstar classification available on MarketPulse. “Unclassified” funds are included within the conventional category. Based on this definition, there are $46.9 trillion in conventional funds and ETFs while $2.8 trillion are in sustainable funds and ETFs, as shown on Table 1. Drilling down, the majority of sustainable AUM, around 85%, is domiciled in Europe (including “International funds”).

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Are CEOs Overpaid?

Posted by Martina Andreani (INSEAD), Atif Ellahie (The University of Utah), and Lakshmanan Shivakumar (London Business School), on
Monday, April 21, 2025
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Martina Andreani is an an Assistant Professor of Accounting and Control at INSEAD, Atif Ellahie is an Associate Professor of Accounting at David Eccles School of Business at The University of Utah, and Lakshmanan Shivakumar is the Lord David Sainsbury of Turville Professor at London Business School. This post is based on their recent article forthcoming in the Journal of Finance.

This question has been debated by regulators, practitioners, and the media for at least the past 40 years. Pick up The Wall Street Journal, Forbes, or any of the world’s business press on a given day, and there is a decent chance that you will see a feature questioning whether CEOs of large companies deserve the pay they get.

The frequent nature of such accusations has led regulators worldwide to require companies to provide greater transparency on CEO compensation decisions. These laws do not directly regulate the amount of CEO compensation, but they require listed firms to disclose it, along with the processes and criteria used to determine it. More recently, regulators have also required companies to give their shareholders a say on CEO compensation through a vote on executive compensation. Despite these interventions, the apparent overpayments have not been eliminated, according to investors and media coverage. One just needs to see the raging debate and the ensuing litigation over Tesla’s $50 billion pay package in 2018 for Elon Musk or the $212 million salary of Amazon’s CEO, Andy Jassy, in 2021, which half of the company’s shareholders felt was an overpayment.

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