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“On June 4, 2026, the US Supreme Court held that the Securities and Exchange Commission (SEC) need not prove that investors suffered actual financial loss to obtain disgorgement in a civil action. In a unanimous opinion authored by Justice Neil Gorsuch, Sripetch v. SEC, the Court reached this conclusion by relying on “traditional equitable principles,” which “do not require a showing of pecuniary loss before a court may issue an award of unjust profits.”

This ruling creates uniformity nationwide on an issue that had split the circuits, with the US Court of Appeals for the Second Circuit previously holding that pecuniary loss was required to obtain disgorgement, and the First and Ninth Circuits holding it was not. The SEC’s ability to continue seeking disgorgement without showing pecuniary loss is meaningful, given the SEC obtained orders for $10.8 billion in disgorgement of ill-gotten gains and prejudgment interest in fiscal year 2025.[1]

Sripetch marks the third time in 10 years that SCOTUS has addressed SEC disgorgement – and the issue may be back for a fourth round soon. The Court’s opinion resolved the pecuniary loss question, but Justice Clarence Thomas’s concurrence raised another – whether SEC disgorgement is a legal rather than equitable remedy, a determination that would give defendants a Seventh Amendment jury trial right. While that question is not yet before SCOTUS, Justice Thomas noted that a circuit split has developed on the issue, signaling it may be ripe for review.”

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1. No surprises – ever: Audit chairs appreciate frequent, transparent communication. If something could be awkward later, bring it up now.

2. Proactive outreach from the audit partner: They don’t want passive auditors. They want partners who flag issues early and often.  Think: “Here’s what’s coming around the corner”; not “Here’s what just hit us.”

3. Consistency plus industry expertise on the audit team: Low turnover and deep company knowledge translates into more trust and better audits. Chairs notice when the team changes every year – and not in a good way.

4. A culture of continuous improvement (yes, even for auditors): Audit firms are expected to evolve – particularly on tech, communication and fee transparency.

5. A meaningful (not check-the-box) auditor assessment process: Most committees evaluate auditors annually using: management and committee feedback, surveys, firm self-assessments and external data (e.g. PCAOB inspection reports).  Chairs want a 360° view of audit quality, not just “they showed up on time.”

6. Real insight from PCAOB inspection reports: Audit committee chairs look at deficiency trends, peer comparisons and red flags – but they rely heavily on audit firms to interpret this data. “Don’t just hand me the report—tell me what it means for us.”

7. Tight control over auditor independence: Audit committee chairs want:

• Detailed pre-approval info (scope, fees, independence impact)
• Conservative use of non-audit services
• Efficient interim approvals when needed

8. Serious attention to fraud risks: Audit committee chairs want to talk about fraud risks regularly, including whistleblower activity, management override, revenue recognition and cyber-enabled fraud.

9. Confidence in the audit firm’s quality control systems: Audit committee chairs want visibility into staffing and expertise, National office involvement, independence monitoring and remediation of deficiencies. Chairs are basically asking: “Is this audit firm built to deliver quality every time?”

10. Robust, ongoing dialogue on complex and emerging risks: Audit committee chairs increasingly are curious – and skeptical – about AI in auditing. And they’re also interested in: critical audit matters (CAMs), cybersecurity and tech used in the audit itself.

By the way, you may also want to check out this recent CAQ report entitled “Voices from the audit committee: A supplemental report.”

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1. Board Effectiveness Is Improving – But Not Universally: Executive confidence in boards reached a record high, with 41% rating their boards as “excellent” or “good” (up from 35% the prior year). However, perceptions vary dramatically based on proximity to the board. Executives who regularly attend board meetings are far more likely to view boards positively than those with limited interaction, suggesting potential disconnects across leadership teams.

2. Director Capacity and Agility Are Major Concerns: Executives identified three primary obstacles to board effectiveness:

• Directors serving on too many boards (47%)
• Slow response to emerging risks and opportunities (35%)
• Failure to keep pace with digital transformation (34%)

The findings suggest boards may need to rethink agenda design, information flow, director commitments, and how they engage between meetings.

3. AI Expectations Far Exceed Current Board Adoption: Nearly 99% of executives believe boards should use AI in their oversight role, yet only 35% of directors report that their boards currently do so. Executives see AI as a tool to improve governance processes, monitor emerging trends and benchmark peer practices, while most boards remain in the early stages of adoption.

4. Board Assessments Need to Drive Real Action: Although board evaluations are now standard practice, 90% of executives believe assessment processes could be improved. The top recommendations are:

1. Link assessment results to succession planning (56%)
2. Commit to follow-up actions (41%)
3. Conduct individual director assessments (35%)

Executives want evaluations to influence board composition, skills development, and accountability – not merely generate reports.

5. Management Plays a Critical Role in Board Effectiveness: Executives acknowledge that management can do more to help boards succeed. The most frequently cited opportunities are:

• Greater transparency regarding risks and challenges (32%)
• Better follow-through on board feedback (31%)
• Increased director education and training (24%)

The report emphasizes that board effectiveness depends as much on management’s engagement and candor as it does on board processes.

6. External Pressures Are Reshaping Board Agendas: Executives want boards to devote more time over the next year to:

• The U.S. political environment (70%)
• Supply chain management (43%)
• Artificial intelligence (28%)
• Regulatory change (26%)

Boards are increasingly expected to address rapidly changing geopolitical, technological and regulatory risks while remaining strategically focused.

7. Board Committees Face Rising Expectations: Executives see opportunities for improvement across board committees:

• Audit Committees: More rigorous challenge of management assumptions and risk assessments.
• Nominating/Governance Committees: Stronger director evaluations, succession planning, and governance refreshment.
• Compensation Committees: Better integration of non-financial metrics and greater transparency around executive pay decisions.

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And since it appears that the SEC won’t likely be holding many – or any – open Commission meetings for the foreseeable future (see this recent blog), we won’t be faced with that type of awkwardness.

Let me back up. Since Commissioner Hester Peirce is close to having her term expired, she will be leaving for academia in November (her term actually expired in June 2025 but she is allowed to serve a 18-month extension – and that soon will expire). According to this recent speech, she is moving to the beach.

It’s possible that someone will be nominated and confirmed as a Commissioner by then to replace her – or fill one of the other two open slots – but it’s possible that the Commission would merely consist of Chairman Atkins and Commissioner Uyeda for a spell.

Would a Commission consisting of two people be capable of getting any work done? Would they reach quorum to be able to conduct business?

The answer is “yes, there is a Rule of 2” that was adopted in 1995. The SEC’s quorum rule states that a minimum of three members is generally required to conduct official business – but the “Rule of 2” flexibly allows for a quorum of two members during personnel shortages, vacancies or recusals.

Specifically,  Section 200.41 ‘Quorum of the Commission’ provides: “A quorum of the Commission shall consist of three members; provided, however, that if the number of Commissioners in office is less than three, a quorum shall consist of the number of members in office; and provided further that on any matter of business as to which the number of members in office, minus the number of members who either have disqualified themselves from consideration of such matter pursuant to §200.60 or are otherwise disqualified from such consideration, is two, two members shall constitute a quorum for purposes of such matter.”

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The key is not developing separate narratives for each stakeholder group. Instead, companies should focus on building a single, coherent set of facts that can withstand scrutiny across jurisdictions and support a consistent business narrative.

1. Move Beyond a Compliance-Only Mindset

Sustainability should not be viewed solely through the lens of regulatory compliance. While disclosure requirements remain important, many companies continue to communicate about sustainability because their investors, employees, customers, and business partners expect it.

Rather than asking, “What is the minimum we need to disclose?” companies should ask, “What information is essential to understanding our business operations, risks, and long-term strategy?”

The objective should not be to create different sustainability stories for different jurisdictions. The objective should be to create one credible story, grounded in facts, that is tied to the company’s operations and strategy and can withstand scrutiny wherever it is reviewed.

2. Inventory Sustainability Claims Across the Enterprise

Many companies focus their attention on sustainability reports while overlooking other sources of sustainability-related statements.

Organizations should conduct a comprehensive inventory of sustainability claims across all communication channels, including:

• Sustainability reports
• Corporate websites
• Marketing materials
• Product packaging
• Sales and customer proposals
• Supplier communications
• Investor presentations
• Social media content

In practice, some of the most problematic statements are not found in formal ESG reports but in decentralized communications that may never have received legal or compliance review.

3. Build a Robust Documentation File for Key Claims

Companies should treat significant sustainability claims with the same rigor applied to other material corporate disclosures.

A useful test is simple: if a regulator, plaintiff’s lawyer, journalist, customer or investor asked the company to substantiate a claim tomorrow, what evidence would be available to support it?

Particular attention should be paid to:

• Terms such as “sustainable,” “responsibly sourced,” “ethical,” or “environmentally friendly”
• Net-zero commitments and other long-term sustainability pledges
• Sustainable sourcing commitments
• Human rights and supply chain representations

Companies should be particularly cautious with absolute statements, including:

• “We do not use forced labor.”
• “Our suppliers adhere to our code of conduct.”
• “Our products are sustainably sourced.”

As regulatory expectations and supply-chain due diligence obligations continue to evolve, companies should ensure these claims are supported by documented evidence and appropriate controls.

4. Bring Legal Into the Process Earlier

Companies should move beyond viewing sustainability communications as a negotiation between sustainability teams seeking ambitious messaging and legal teams seeking to reduce risk.

Both functions share the same objective: communicating an accurate and compelling story while satisfying compliance obligations and managing legal and reputational risk.

The best outcomes occur when legal is involved early in the planning process – not merely at the end for a final “red flag” review. Early involvement allows legal and sustainability teams to develop a common fact base, align messaging across channels and identify potential risks before public commitments are made.

Legal’s role is not to make sustainability communications less ambitious. Its role is to make them more durable, defensible, and resilient when challenged.

The Bottom Line

In today’s environment, sustainability communications are being scrutinized from every direction. The companies best positioned to navigate this landscape will not be those that create separate messages for different audiences.

They will be the companies that develop a single, evidence-based narrative that is consistent across jurisdictions, supported by documentation and aligned with business strategy. A well-supported sustainability story is not just a compliance exercise – it is a governance exercise, a risk management exercise and increasingly, a business imperative.”

The post Four Practical Sustainability Communication Lessons for Multinational Companies appeared first on The Governance Beat.

“An even earlier look at 2027:

Prospects for Rule 14a-8 repeal

The SEC’s 2026 rulemaking agenda includes a potential proposal addressing Rule 14a-8, and many observers have speculated that the SEC may seek to rescind the rule entirely. Any such proposal would be subject to the SEC’s standard rulemaking process, including notice-and-comment procedures. Given Rule 14a-8’s central role in the shareholder proposal landscape, a rescission proposal would likely generate a substantial volume of public comments (e.g., investor groups are already petitioning to keep Rule 14a-8 in place), requiring meaningful consideration by the SEC before adoption of a final rule.

Recent SEC rulemakings have frequently taken more than a year to progress from proposal to adoption, suggesting that one or more proxy seasons could continue under the SEC staff’s current no-action policy before any rescission could become effective. In addition, a rescission of Rule 14a-8 would almost certainly face legal challenges, which could result in injunctive relief or a voluntary SEC stay (as occurred with the SEC’s 2024 climate rules). Consequently, uncertainty surrounding the future of Rule 14a-8 could persist past the 2028 presidential election.

2027 shareholder proposal landscape

Regardless of the timing of any SEC rulemaking, the prospect of a Rule 14a-8 rescission is likely to influence the 2027 proxy season. An imminent or pending rescission proposal may create a highly contentious “last chance” environment in which proponents seek to maximize leverage while the SEC staff’s current no-action policy remains in effect. One potential consequence may be proponents submitting precatory or binding bylaw proposals designed to provide shareholders with proposal access rights independent of Rule 14a-8.

The 2027 season could be further complicated if the SEC staff maintains its current no-action policy. Under that scenario, companies may have reduced leverage in negotiations with proponents, particularly given proponents’ demonstrated willingness during the 2026 season to use litigation as a means of challenging proposal exclusions.

Faced with elevated proposal volumes and heightened litigation risk, some companies may conclude in 2027 that allowing a greater number of proposals to proceed to a vote presents the lower-risk path, particularly on E&S topics, where shareholder and proxy advisor support continues to erode. That calculus may differ, however, for proposals addressing more consequential matters, such as binding bylaw amendments, or proposals with a greater likelihood of attracting substantial shareholder support.

To date, no company has taken up Atkins’ invitation to seek exclusion of a shareholder proposal on state law grounds under Rule 14a-8(i)(1). As the shareholder proposal landscape continues to evolve, however, some companies may become more willing to explore that avenue during the 2027 proxy season.

Evolution of proponent tactics

Even in the absence of further SEC staff policy changes, shareholder proponents continue to experiment with new ways to pressure companies to advance their objectives. Facing headwinds from the SEC staff’s current no-action policy, declining levels of shareholder support for certain proposal categories and the prospect of a future rescission of Rule 14a-8, proponents have continued to test innovative strategies in 2026, many of which may provide insight into how proponents could seek to maintain influence in a world where Rule 14a-8 plays a diminished role or has been repealed. These strategies include:

• Litigation challenging proposal exclusions.
• Running or threatening Rule 14a-4 “zero slate” campaigns where multiple shareholder proposals are submitted on the proponent’s universal proxy card while sidestepping the parameters of Rule 14a-8 (see, e.g., BJ’s Wholesale Club and Nexstar Media Group in 2026, following a strategy similar to that employed at Warrior Met Coal, as discussed in our 2024 shareholder proposal alert).
• Withhold campaigns targeting directors, threatening to make director elections an alternative forum for E&S and governance activism.
• Public campaigns criticizing companies that exclude proposals or are perceived as insufficiently responsive to shareholder concerns.
• Binding bylaw amendment proposals submitted pursuant to Rule 14a-8 or through independent solicitation efforts.

The 2026 proxy season has been characterized by significant policy changes, strategic experimentation and legal uncertainty, and those dynamics are likely to persist into 2027. The practical effects of SEC skepticism toward shareholder proposals and E&S activism, political and regulatory scrutiny of proxy advisors, and declining support for certain categories of E&S proposals may be offset, at least in part, by evolving proponent strategies and continued uncertainty regarding the future of Rule 14a-8.

In this environment, companies should prepare for a range of potential outcomes. Boards and management teams may benefit from ongoing education regarding developments in the shareholder proposal landscape, proactive engagement with shareholders and other key stakeholders, and periodic reassessments of governance and disclosure practices in light of evolving investor expectations and regulatory developments.”

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“Governance proposals remained steady in volume and continue to receive relatively robust support. Proponents submitted 319 governance proposals in 2026, compared to 305 in 2025 and 316 in 2024, and average support of 33.8% is only slightly below the 35.2% and 35.1% averages observed in 2025 and 2024, respectively. As in prior seasons, governance proposal submissions were heavily concentrated among a small group of serial proponents, who collectively accounted for more than 75% of this season’s submissions.

Several governance proposal topics stand out this season:

• Independent board chair – Submissions surged to 99 submissions in 2026 from just 31 in 2025, with average support of 24.6% (down from 31.3% in 2025).
• Shareholder written consent rights – Submissions increased sharply to 51 submissions in 2026 from 11 in 2025, all from the same group of proponents referenced above, and average support increased to 38.3% (from 26.3% in 2025).
• Shareholder special meeting rights – This remained a prominent proposal topic in 2026, with 59 submissions (down from 70 in 2025), and average support of 39.2% (up from 32.8% in 2025).
• Simple majority voting – Proposals to eliminate supermajority voting provisions from governing documents declined to 32 submissions in 2026 from 40 in 2025, but remain among the highest-supported proposal topics at 59.1% average support, albeit down from 71.9% in 2025.

The following governance proposal topics have achieved majority support in 2026 to date:

• Elimination of supermajority voting provisions from governing documents (5 proposals)
• Establishment of shareholder special meeting rights (4)
• Establishment of shareholder written consent rights (3)
• Board declassification (3)
• Shareholder approval prior to issuance of blank check preferred shares (2)
• Adoption of a majority vote standard for director removal (1)
• Shareholder approval of certain change-in-control severance agreements (1)

Notably, Exxon Mobil Corporation received a proposal this season relating to its new retail voting program, launched in September 2025, which allows retail holders to opt in to provide standing instructions to vote their shares at all future meetings in line with the board’s recommendations. The proposal requested that the company modify the program to offer additional voting options not aligned with the board’s recommendations. It failed with 23.5% support, but litigation challenging Exxon’s program remains ongoing.”

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