USA Law and Practice Contributed by: Matt Hurd, Melissa Sawyer and Scott Crofton, Sullivan & Cromwell LLP
ters has significantly increased year over year. There has also been a substantial increase in so-called “anti-ESG” proposals in recent years, reflecting the fact that ESG issues, particularly issues relating to climate change and diversity, have become increasingly polarised in the USA. This growing divide has led some major insti - tutional investors, including BlackRock, State Street and Vanguard, to revise their proxy vot - ing guidelines to de-emphasise ESG as a stand- alone focus area and instead emphasise the importance of managing risks, including envi - ronmental and social risks. Failure to provide appropriate disclosures related to such issues can result in votes against the company, both on stockholder proposals and in director elections. For a discussion of examples of topical ESG issues, see the USA Trends & Developments chapter in this guide. Companies often engage with investors on ESG matters through a broad array of channels, including providing ESG information in periodic sustainability reports, proxy statements and oth - er public filings and hosting ESG-related confer - ence calls. As Regulation FD prohibits selective disclosure of material, non-public information, companies that engage with investors on ESG matters in private meetings may be required to make additional public disclosure in order to sat - isfy their obligations under Regulation FD. 3. Management of the Company 3.1 Bodies or Functions Involved in Governance and Management Corporations In the USA, most public companies are corpora - tions. State law generally delegates the authority to manage the business and affairs of a corpora -
tion to the board of directors. A board of direc - tors typically delegates day-to-day manage - ment of the corporation to its executive officers but exercises oversight over management. The boundaries of a board’s delegation to manage - ment may be documented by a board-approved delegation of authority that sets forth what types of decisions and transactions require board approval (such as transactions above a speci - fied threshold). The board may also delegate certain of its over - sight responsibilities to its committees, including its standing committees and/or new committees established by the board for the purpose of pur - suing certain objectives, such as a transaction committee to manage the execution of certain strategic transactions or a special litigation com - mittee to address stockholder derivative litiga - tion. However, because the board as a whole remains responsible for ensuring it is satisfy - ing its fiduciary duties, including its oversight responsibilities, it is important for the board to receive periodic updates regarding material issues it has delegated to management or its committees. Stockholders do not actively manage the busi - ness and affairs of a corporation, but instead exert influence on a corporation by voting, submitting stockholder proposals, privately or publicly engaging with the board and/or man - agement or obtaining representation on the corporation’s board either by nominating direc - tor candidates for election by stockholders or reaching an agreement with the board. Limited Liability Companies The governance structure of an LLC depends on whether the LLC has one or more members and whether it is managed by its members or managers. A single-member LLC will typically be
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