This dismissal highlights that a board that makes a good-faith effort to establish, use and monitor an appropriate oversight system – including documents that support this sound process – is a powerful defense against Caremark claims. Strong records can help not only at the motion-to-dismiss stage, but even earlier as materials produced in a books & records investigation under Section 220 may convince plaintiffs’ counsel that there simply isn’t a viable Caremark case to bring.

The post Delaware Chancery Reaffirms Challenges In Pleading a Caremark Case appeared first on The Governance Beat.

1. Shareholder Proposal Modernization: we request the title appear on reginfo.gov as “Rescission of Rule 14a-8’s Federal Regulation of Shareholder Proposals and Amendments to Rule 14a-4.”
   
   
2. Amendments to Certain Proxy Rules: we request the title appear on reginfo.gov as “Proxy Solicitation Modernization.”

As we’ve noted, OIRA has 90 days to complete its review but it often moves faster. Meaning the SEC will likely be proposing these rulemakings relatively soon. Hang onto your hats. It’s going to be a wild year…

The post Coming Soon! SEC to Propose Rescinding Rule 14a-8 appeared first on The Governance Beat.

The post “Executive Compensation Disclosure Reform” Proposal Coming Soon! appeared first on The Governance Beat.

The proposal would also narrow a potentially meaningful difference between the NYSE and Nasdaq for companies deciding where to list. The Nasdaq doesn’t require listed companies to maintain an internal audit function (although many of the larger companies do).

Even with the proposed five-year transition period, the NYSE requirement would remain more stringent than Nasdaq’s. Nevertheless, the substantially longer transition period could make an NYSE listing more attractive to companies for which the existing one-year deadline is a consideration in choosing between the exchanges.

The post NYSE Proposes Extending Internal Audit Transition Period appeared first on The Governance Beat.

Although not required, many companies have policies that help guide what is permissible – and what’s not – when it comes to director travel and reimbursement. Director travel and expense reimbursement policies are either embedded into a broad corporate travel and expense policy – known as a T&E policy – or exist as a stand-alone policy just for outside directors.

The policy typically is overseen by the corporate secretary. But its implementation, such as the collection of the receipts, might be handled by another department, like finance or treasury. Your company might even have a separate travel department that handles much of the details and paperwork.

Here are five hot tips about director travel you should know:

1. Bare-bones policies should set boundaries
2. Duck problems with air travel
3. Use the policy to say ‘no’
4. Train those implementing the policy
5. Never delegate all the menial travel tasks

1. Bare-bones policies should set boundaries

Let’s start by acknowledging that this travel stuff for directors is a real pain in the butt to administer. The key is to have a conversation with the board up front about what their expectations are.

Get them invested in the policy. What’s in a policy often depends on who’s on your board the last time it was revisited. Changes to policies often take place after there’s been a particular issue with a particular director.

Talk to the board about the limits concerning what you can deduct for tax purposes. Talk to them about proxy disclosure.

Be strong. You have to be grown up about this stuff. You don’t want to be constantly dealing with, “Can I bring my son on the plane? My dog?”

Having said that, most policies are bare bones and cover only the basics. If you’re lucky, it will have 10 pages of guidance regarding “dos” and “don’ts.”

A T&E policy should outline what expenses are covered. And on rare occasion, it might include deadlines for when a director can seek reimbursement and the particulars of the documentation process. Normally, that stuff is not in the policy itself; instead, instructions about how to accomplish that are given to the directors informally.

2. Duck problems with air travel

If you’re going to have a problem, it’s likely going to be about a plane. For example, a director has their own personal plane, and it looks inequitable compared to other directors if they’re reimbursed for the costs of that director flying themselves in.

It winds up hurting feelings, not to mention the complexity of how to handle it. So it’s good to have parameters about flying. A smart policy provision? Only reimburse for a first-class ticket’s value?

Remember the goal of a policy is to provide clarity to directors regarding expenses that are considered “reasonable.” A first-class ticket reimbursement sure seems reasonable to me, but it might not seem reasonable for boards of smaller companies.

3. Use the policy to say ‘no’

Don’t wilt. Unfortunately, being the corporate secretary means sometimes you have to be the “no” guy or gal. Sometimes you have to push back, even though the customer service professional inside of you is screaming otherwise. Only by setting boundaries can you properly do your job.

That’s why it’s smart to have a policy that addresses issues you foresee with a particular group of directors. You need a written document to lean on so you can make that the “no” guy instead of you.

4. Train those implementing the policy

Quite often – and surprisingly – your staff won’t be the ones collecting the receipts. It might be someone in finance, treasury or internal audit. If so, you’ll need to train those handling the receipts. Train them on disclosure issues, tax issues and what the independent auditors will be checking on. And, of course, train them on what isn’t permitted under the director’s T&E policy.

You want to train them so they know enough to come to you with very specific questions. You need them to be issue-spotters.

5. Never delegate all the menial travel tasks

This tip may surprise you, but it’s the best tip I have here. Sometimes call the director yourself. Explain that your right-hand assistant made the arrangements but they’re too busy to make this call. You’ll be surprised what nuggets you’ll learn.

They’ll be happy to hear from you and will tell you things they might not otherwise because it’s more of a social call. They’re not put on the spot. “I’ve been meaning to tell you … .” Real substantive, critical things that you may not have otherwise heard about until it was too late.

The post Five Hot Tips for Director Travel and Reimbursement Policies appeared first on The Governance Beat.

1. “Sometimes I think AI has become my favorite colleague. Then it cites a regulation that doesn’t exist and “oops, there it is,” I remember why humans are still employed.”

2. “The number of vendors pitching AI platforms to help craft disclosures at the last conference I went to was beyond mind-boggling. Half of those service providers won’t exist next year is my prediction. Bet on it.”

3. “Our disclosure committee meetings haven’t gotten shorter due to using AI for prep. Some would say they’ve gotten better. Some would say why have the meetings at all in reality.”

4. “I honestly think AI is following the same path as email. First it was controversial. Then it became accepted. Eventually it’ll just become infrastructure.”

5. “Every vendor promises AI will revolutionize legal. I’ve lived through enough ‘revolutions’ to know that reality is usually somewhere in the middle.”

6. “From conversations across the profession lately, many seem to be in a deliberate, early-innings phase – experimenting in low-risk areas while working through guardrails around confidentiality, privilege and data handling.
   
   Honestly, the common use cases I hear about are the unglamorous but genuinely useful ones: first-draft summaries, organizing and comparing documents, surfacing relevant precedent and taking a first pass at routine correspondence that a lawyer then reviews and owns.
   
   I’d expect adoption to increase meaningfully in the near term, but I think the key question stays the same: ‘who’s driving the car?’ The tools can give lawyers a faster starting point, but the lawyer stays accountable for the output.”

7. “The first draft comes from AI. The judgment comes from lawyers. That’s a partnership I’m comfortable with. At least right now in 2026.”

8. “We’re a Fortune 100 company so our biggest challenge isn’t whether AI works. It’s making sure thousands of people use it consistently, securely and responsibly. Technology problems are usually easier than change-management problems. I sometimes ask “what Bing Crosby would do?”

9. “I don’t use AI because I think it’s smarter than I am. I use it because it never gets tired of comparing fifty versions of the same disclosure.”

10. “I am so tired of talking about AI already.”

11. “I’m cautiously optimistic. Every month it gets noticeably better. Every month I also find new ways it can be confidently wrong.”

12. “Legal don’t usually get rewarded for resisting productivity improvements. We get rewarded for delivering sound advice quickly. AI happens to help with one of those things. The other one still belongs to us.”

The post Yet Another Dozen Things In-House Practitioners Are Saying About Using AI appeared first on The Governance Beat.

1. When is the Annual Confirmation Due? – This confirmation is due by the end of the quarter the filer selects as their ongoing confirmation deadline: March 31, June 30, September 30 or December 31 (or the next business day if the date falls upon a weekend or a holiday when EDGAR is not operating). It’s easy to figure out a particular filer’s annual confirmation due date as its displayed at the top of a filer’s dashboard.
   
   
2. What Does the Annual Confirmation Say? – Two things. One is that the users, account administrators, technical administrators and/or delegated entities listed on the filer’s dashboard are authorized by the filer to act on its behalf; and two that all information related to the filer reflected on the filer’s dashboard is accurate.
   
   
3. Can Someone Else Submit an Annual Confirmation on a Section 16 Insiders Behalf? – Yes, any one of the filer’s account administrators can complete annual confirmation for the filer.
   
   
4. Can an Annual Confirmation Be Submitted Early? – Yes, an account administrator doesn’t need to wait until the deadline to submit an annual confirmation – it can be submitted on earlier date within the quarter when a confirmation is due.
   
   
5. How Does the Annual Confirmation Get Submitted – Follow the nine steps listed near the bottom of this SEC EDGAR Filer Management web page.
   
   
6. What If an Annual Confirmation Fails to Be Submitted Timely? – First, a delinquent filer has a 3-month grace period in which to complete confirmation. During this grace period, the filer’s account administrators will receive daily reminders to make the submission. During the 3-month grace period, filers will maintain EDGAR access, the ability to make submissions and the ability to take actions on the filer’s account as they had previously.
   
   But after the 3-month grace period, bad things happen. The filer’s account will be deactivated – and the filer will be required to re-apply for access to file on EDGAR on Form ID. If SEC staff grants the Form ID, the filer will continue to have the same EDGAR account number/CIK previously assigned and the account’s filing history will be preserved.

The post Section 16 Insiders Owe an “Annual EDGAR Confirmation”? You Might Not Know That… appeared first on The Governance Beat.

So what should you do when a topic becomes so mainstream and important that it needs a permanent home on a board committee? This is the process that’s used at some boards:

• The Governance Committee is key here. It’s a core duty. The committee should review all of the board committee charters and schedules, look again at the board governance guidelines and discuss which committees have the capacity and expertise to take on the new topic.
• The board evaluation should include questions on potential new topics and which committees should handle a particular topic. No one is better suited to answer the question of which committee is the best fit for this particular board than the directors themselves. Routine discussions of potential new topics should help lay the groundwork for adding new committee duties and avoiding surprises.
  
  If you’ve been doing that, you can look at the responses of the most recent board evaluation and there likely will be commentary about this new topic made by some of the directors since it’s hot. And from there, you can make a more informed decision about where the topic might best fit, both expertise-wise and collegiality-wise so that the ultimate decision is least likely to make waves. 

It might well be that none of the board committees want a heavier workload and one of them will need to be coaxed to take it on. But what if there is a turf war where more than one board committee wants jurisdiction over a new important topic? In this case, here are two tips:

1. Consider which committee has relevant expertise and time to devote to the issue, and include the discussion on the governance committee’s agenda.
   
2. The governance committee should consider whether the new topic should be a full board duty for an initial period of time due to the importance or newness of the topic.

The post Board Committees: Figuring Out Which Committee Should Handle the New Hot Thing appeared first on The Governance Beat.

1. Use clear and consistent terminology: Avoid jargon and ambiguous phrases, and use standard terms consistently. For example, say: “Adjusted EBITDA increased 12%” – and avoid, “We saw meaningful progress in operating performance.”

2. Structure your narrative clearly: Use bullet points, clear headings and consistent section ordering (e.g., Results ? Drivers ? Outlook). AI tools digest structured, predictable formats more accurately.

3. Include key metrics in both text and tables: AI extracts better from numerical tables, but duplicating metrics in text ensures redundancy. Include EPS, revenue, margins and cash flow in both formats.

4. Avoid overuse of boilerplate risk language: AI can detect hedging or overly generic disclosures (e.g., “may,” “could,” “possibly”). Add specific context to risk factor and MD&A disclosures.

5. Be precise in forward-looking statements: Include quantified guidance ranges, time frames and assumptions. Instead of: “We expect growth to continue,” say, “We expect 4-6% revenue growth in FY2025, driven by … .”

6. Minimize PDF formatting issues: AI parsing tools struggle with poorly tagged PDFs or unusual layouts. Publish in machine-readable HTML or ensure tagged PDF/XBRL formatting is clean.

7. Cross-link sections thoughtfully: Use internal hyperlinks between key financial tables, footnotes and narratives when digital formats allow. This improves navigation for both human and machine readers.

8. Tag disclosures consistently in XBRL: Ensure key metrics and narrative blocks are properly tagged. Inaccurate or missing tags hinder AI scraping and comparison.

9. Keep earnings call transcripts human and honest: Investors use AI to analyze tone and evasiveness. Be authentic and avoid robotic scripts.

10. Monitor how your report is being read: Use market surveillance tools to see how your disclosures are flagged, quoted or rated by AI-driven investor platforms.

The post 10 AI-Friendly Drafting Pointers for Earnings Release Drafters appeared first on The Governance Beat.

Here are 10 things we learned from the survey:

1.  AI Is Now Mainstream in Investment Research – 68% of institutional investors report extensive or moderate use of AI in investment research and decision-making, including 26% using it extensively across multiple stages. Only 12% are aware of AI but not actively using it.

2.  AI Adoption Is Poised to Accelerate – 83% expect their use of AI in investment research to increase over the next two years (42% significantly and 42% somewhat).

3.  Proprietary AI Is Still Under Construction – Only 38% currently have proprietary AI tools, another 31% are developing them – and 23% plan to do so, meaning relatively few firms appear not use AI at all.

4. Proprietary vs. Third-Party AI Tool Use is Mixed – The market is divided among hybrid in-house/third-party tools (37%), primarily third-party tools (29%) and primarily in-house tools (26%).

5.  How Investors Are Using AI to Read Corporate Disclosure – For company filings, the leading applications are:

– Extracting financial or operational metrics – 60%

– Summarizing MD&A and risk factors – 58%

– Comparing peer-company filings – 50%

– Identifying inconsistencies between narrative and financial information – 48%

– Detecting changes over time – 47%

– Synthesizing insights across multiple disclosures – 46%

– Identifying anomalies or red flags – 45%

6.  Earnings Calls Are AI’s Favorite Hunting Ground – 60% regularly use AI to analyze earnings-call transcripts, followed by risk-assessment scenarios (49%), financial modeling and projections (46%), investment screening (45%), and 10-K/10-Q analysis (41%).

7. “Trust but Verify” Is the Governing Principle – 54% say they trust AI-generated insights but verify them, while 33% mostly or completely trust them. More importantly, 60% say AI informs investment decisions with human oversight; only 10% say AI plays a primary and directing role.

8. Efficiency Is AI’s Clearest Current Value Proposition – Investors give AI its highest marks for speed of analysis (80% high/very high value) and reducing manual workload (79%). They also see substantial value in identifying anomalies (68%), non-obvious patterns (64%), generating deeper insights (63%) and identifying important risks (62%).

9.  Data Integrity Is the Big Red Flag – Not surprisingly, the leading concerns are:

– Hallucinations or incorrect outputs – 67%

– Biased or inaccurate information/data quality – 62%

– Lack of transparency about how outputs are generated – 60%

– Uncertainty about underlying data reliability – 59%

– Regulatory compliance – 45%

– Overreliance on AI – 45%

10.  Investors Believe AI Is Already Improving Returns – 67% report that AI improved their firm’s investment performance over the prior year versus 20% reporting no meaningful impact – and only 3% reporting worsening performance. Among those reporting improvement, cited benefits include better investment decisions, faster data analysis, improved risk assessment and earlier identification of market trends.

The post How Institutional Investors Are Using AI for Investment Decisions appeared first on The Governance Beat.