Harvard Corporate Governance Roundtable March 20–21, 2019 Background Materials TABLE OF CONTENTS I. Keynote Session with Chief Justice Leo E. Strine, Jr. • Who Bleeds When the Wolves Bite?, Chief Justice Leo E. Strine, Jr., Feb. 2017 • Corporate Power is Corporate Purpose I: Evidence from My Hometown, Chief Justice Leo E. Strine, Jr., Feb. 2017 II. Toward the 2019 Proxy Season A. 2018 Proxy Season • 2018 Proxy Season Review, Sullivan & Cromwell LLP, Jul. 2018 [selected pages] • 2018 Annual Corporate Governance Review, Georgeson LLC, Dec. 2018 B. The Coming Proxy Season • 2019 Proxy Season Preview, EY Center for Board Matters, Feb. 2019 • Preparing for the 2019 Proxy Season: Practical Guidance for Directors and Board Committees, Sullivan & Cromwell LLP, Dec. 2018 C. ISS / Glass Lewis Updates for the 2019 Proxy Season • ISS and Glass Lewis Policy Updates for the 2019 Proxy Season, Sidley Austin LLP, Dec. 2018 III. Social Responsibility A. Corporate Purpose and Culture • Purpose & Profit, BlackRock, Inc., Jan. 2019 • 2019 Proxy Letter—Aligning Corporate Culture with Long-Term Strategy, State Street Global Advisors, Jan. 2019 • It’s Time to Adopt the New Paradigm, Martin Lipton, Feb. 2019 B. Social Responsibility Proposals • 2018 Proxy Season Review, Sullivan & Cromwell LLP, Jul. 2018 [selected pages] • Climate Change and Proxy Voting in the U.S. and Europe, ISS-ESG and ISS Analytics, Jan. 2019 • Shedding Light on Diversity-Based Shareholder Proposals, Equilar, Inc., Oct. 2018 C. ESG Metrics and Disclosures • Remarks to the SEC Investor Advisory Committee, SEC Chairman Jay Clayton, Dec. 2018 • Clayton Q&A and ESG at the SEC’s Investor Advisory Committee Meeting, Cooley LLP, Dec. 2018 • Making Sense of the Current ESG Landscape, Skadden, Arps, Slate, Meagher & Flom LLP, Oct. 2018 [selected paragraphs] D. Exclusion of “Ordinary Business” Proposals • The SEC’s New Shareholder Proposal Guidance, Skadden, Arps, Slate, Meagher & Flom LLP, Nov. 2018 • The Economic Relevance and Ordinary Business Exclusion for Shareholder Proposals, Cooley LLP, Nov. 2018 IV. Current Legal Developments and Proposals A. Federal Incorporation • EHF18429: The Accountable Capitalism Act, U.S. Senator Elizabeth Warren, Aug. 2018 [selected pages] • Further to the Warren Bill, The New Paradigm and a Better Way, Wachtell, Lipton, Rosen & Katz, Aug. 2018 B. Mandatory Arbitration • Keeping Investors out of Court – The Looming Threat of Mandatory Arbitration, Bernstein Litowitz Berger & Grossmann LLP, Feb. 2019 • The Division of Corporate Finance’s Response to Mandatory Arbitration Proposals, Cooley LLP, Feb. 2019 • Statement on Shareholder Proposals Seeking to Require Mandatory Arbitration Bylaw Provisions, SEC Chairman Jay Clayton, Feb. 2019 • Delaware Law Status of Bylaws Regulating Litigation of Federal Securities Law Claims, Lawrence Hamermesh, Nov. 2018 C. The California Bill on Board Diversity • California Law Awaiting Governor’s Signature Exceeds State’s Jurisdiction, Wachtell, Lipton, Rosen & Katz, Sept. 2018 • My Beef with Stakeholders: Remarks at the 17th Annual SEC Conference, SEC Commissioner Hester M. Peirce, Sept. 2018 • Mandating Women on Boards: Evidence from the United States, Sunwoo Hwang, Anil Shivdasani, and Elena Simintzi, Nov. 2018 D. Eligibility for Shareholder Proposal Submissions • What Happened at the SEC’s Proxy Process Roundtable?, Cydney Posner, Cooley LLP, Nov. 2018 • Clearing the Bar: Shareholder Proposals and Resubmission Thresholds, Council of Institutional Investors, Dec. 2018 E. Universal Proxy • Universal Proxies: What Companies Need to Know, Latham & Watkins LLP, Dec. 2018 • Were Reports on the Demise of the Universal Proxy Premature?, Cooley LLP, Oct. 2018 • The Universal Proxy Gains Traction: Lessons from the 2018 Proxy Season, MacKenzie Partners, Inc., Sept. 2018 V. Boards A. Board Skills, Diversity and Composition • The 2018 U.S. Spencer Stuart Board Index, Spencer Stuart, Nov. 2018 [selected parts] • Director Skills: Diversity of Thought and Experience in the Boardroom, Institutional Shareholder Services, Inc., Oct. 2018 [selected parts] • Boardrooms Without Female Representation, Equilar, Inc., Jan. 2019 • Q3 2018 Gender Diversity Index, Equilar Inc., Oct. 2018 B. Boards in the Age of #MeToo • The Board, CEO Misconduct, and Corporate Culture, Edelman, Jan. 2019 • Corporate Governance Update: Shareholder Activism Is the Next Phase of #MeToo, Wachtell, Lipton, Rosen & Katz, Sep. 2018 • How to Fire an Accused CEO: Moonves Departs CBS, Glass, Lewis & Co., Oct. 2018 • Bringing the #MeToo Movement into the Boardroom, Cleary Gottlieb Steen & Hamilton LLP, Mar. 2018 C. Board Independence and Evaluation • The Role of the Lead Independent Director, Legal & General Investment Management Ltd., Nov. 2018 • Today’s Independent Board Leadership Landscape, EY Center for Board Matters, Nov. 2018 • Effective Board Evaluation, EY Center for Board Matters, Oct. 2018 VI. Engagement Between Issuers and Investors A. Current Thinking on Engagement • Engaging with Rakhi Kumar of State Street Global Advisors, CamberView Partners, Sept. 2018 • Talking Governance with Donna Anderson, Gladstone Place Partners LLC, Jan. 2019 • BlackRock Investment Stewardship Engagement Priorities for 2019, BlackRock, Jan. 2019 B. Emerging Consensus? • An Investor Consensus on U.S. Corporate Governance & Stewardship Practices, Florida State Board of Administration, May 2018 • Open Letter: Commonsense Corporate Governance Principles 2.0, Sard Verbinnen & Co, Oct. 2018 • Commonsense Principles 2.0: A Blueprint for U.S. Corporate Governance?, Weil, Gotshal & Manges LLP, Oct. 2018 C. Virtual Meetings • A Practical Guide to Virtual-Only Shareholder Meetings, Hunton & Williams LLP, Nov. 2017 • Virtual-Only Shareholder Meetings: Streamlining Costs or Cutting Shareholders Out?, Glass, Lewis & Co., Nov. 2017 D. Proxy Access • Proxy Access Proposals, Shearman & Sterling LLP, Oct. 2018 Tab I: Keynote Session with Chief Justice Leo E. Strine, Jr. Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday, February 23, 2017 Editor’s note: Leo E. Strine, Jr. is Chief Justice of the Delaware Supreme Court, the Austin Wakeman Scott Lecturer on Law and a Senior Fellow of the Harvard Law School Program on Corporate Governance. This post is based on Chief Justice Strine’s recent essay, Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System, forthcoming in the Yale Law Journal. Related research from the Program on Corporate Governance includes Can We Do Better by Ordinary Investors? A Pragmatic Reaction to the Dueling Ideological Mythologists of Corporate Law (discussed on the Forum here) and Securing Our Nation’s Economic Future (discussed on the Forum here), both by Chief Justice Strine, and The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here). Leo E. Strine, Jr., Chief Justice of the Delaware Supreme Court, the Austin Wakeman Scott Lecturer on Law and a Senior Fellow of the Harvard Law School Program on Corporate Governance, recently issued an essay that is forthcoming in the Yale Law Journal, which is available here. The abstract of Chief Justice Strine’s essay summarizes it as follows: This essay examines the effects of hedge fund activism and so-called wolf pack activity on the ordinary human beings—the human investors—who fund our capital markets but who, as indirect of owners of corporate equity, have only limited direct power to ensure that the capital they contribute is deployed to serve their welfare and in turn the broader social good. Most human investors in fact depend much more on their labor than on their equity for their wealth and therefore care deeply about whether our corporate governance system creates incentives for corporations to create and sustain jobs for them. And because human investors are, for the most part, saving for college and retirement, they do not gain from stock price bubbles or unsustainable risk taking. They only gain if the companies in which their capital is invested create durable value through the sale of useful products and services. But these human investors do not typically control the capital that is deployed on their behalf through investments in public companies. Instead, intermediaries such as actively traded mutual funds with much shorter-term perspectives and holding periods control the voting and buy and sell decisions. These are the intermediaries who referee the interplay between activist hedge funds and corporate managers, an interplay that involves a clash of various agents, each class of which has a shorter-term perspective than the human investors whose interests are ultimately in the balance. 1 Because of this, ordinary Americans are exposed to a corporate republic increasingly built on the law of unintended consequences, where they depend on a debate among short-term interests to provide the optimal long-term growth they need. This essay humanizes our corporate governance lens and emphasizes the living, breathing investors who ultimately fuel our capital markets, the ways in which they are allowed to participate in the system, and the effect these realities have on what corporate governance system would be best for them. After describing human investors’ attributes in detail—their dependence on wages and locked-in, long-term investment needs—this essay examines what people mean when they refer to “activist hedge funds” or “wolfpacks”