USA Law and Practice Contributed by: Lisa Fontenot, Jennifer Broder, Per Chilstrom and Lothar Determann, Baker McKenzie
termination or change-in-control payments, and provide estimated payouts. • Nasdaq: disclose material terms of director/nomi - nee compensation, including third-party payments. Additional required disclosures include: • Compensation Committee Report; • executive compensation tables and related nar - rative (equity/bonus grants, year-end outstanding awards, option exercises and vested awards); • pension and non-qualified deferred compensation; • risk and overall compensation disclosure; and • clawback disclosure. See 1.3 Companies With Publicly Traded Shares for discussion of required CD&A. The discussion below focuses on corporations, rather than other entity types. See 1.1 Corporate Forms and Governance Requirements and 2.2 Types of Deci- sions for further discussion. Shareholders are the ultimate owners of a company. They vote on director elections and other fundamental matters required by law, and generally do not owe fiduciary duties to the company or other sharehold - ers. However, a controlling shareholder, as determined under applicable state law, may owe fiduciary duties under certain circumstances (traditionally, in con - nection with an interested transaction), the scope of which varies by jurisdiction. 4. Shareholders 4.1 Companies and Shareholders As further discussed in 1.2 Corporate Governance Legislation and Regulation , the relationship is gov - erned by state corporate law, the company’s govern - ing documents (including the certificate of incorpo - ration, bylaws and shareholders’ agreements) and federal securities laws. These sources define key rights, including fiduciary duties and economic, vot - ing and information rights, as well as related proce - dures. Public companies are also subject to additional rules and regulations, including federal proxy rules,
exchange listing standards and other federal laws, such as Sarbanes-Oxley. A complete shareholder list is generally not publicly available. Companies are typically required by state law to maintain a stock ledger and to permit share - holders to inspect it for proper purposes. For public companies, certain ownership information – such as beneficial owners of more than 5% and insider hold - ings – is disclosed through regulatory filings with the SEC. 4.2 Role of Shareholders Shareholders generally do not manage a company; management authority is vested in the board of direc - tors and officers. Shareholders participate in govern - ance in limited ways, and primarily exercise their gov - ernance rights through: • electing directors; • nominating board candidates (subject to any appli - cable advance notice requirements); • voting on fundamental transactions (eg, mergers, charter amendments); and • submitting proposals (including under SEC Rule 14a-8 for public companies). Shareholders may negotiate for additional governance rights by contract, subject to compliance with applica - ble law. For example, Delaware law expressly permits shareholders’ agreements that restrict or direct cor - porate action, provided they are consistent with the certificate of incorporation and applicable law. Shareholders may also influence management through private engagement with the board or through public campaigns, both of which are common strategies of activist investors. 4.3 Shareholder Meetings Annual meetings are generally required under state law and, for public companies, under exchange listing standards. Special meetings may be held to address matters arising between annual meetings, such as mergers or charter amendments.
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