'THE DAILY CORPORATE GOVERNANCE REPORT’ (for public company boards, the C-suite and GCs)

???Please see the items below with the related links (NOTE: access to link content may be metered, require a no-charge registration or require a paid digital subscription)

???????(i)?Nasdaq?report on how boards are addressing ESG: Below are some of the "key takeaways" from this recent joint?Nasdaq/Corporate Board Member?report,?"Dissecting the ESG Landscape: What the most recent ESG trends mean for boards", based on?a?survey of "311 public company directors about how ESG is being addressed in the boardroom", as summarized in this Dec. 20?Society of Corporate Governance?blog post, "Public Company Directors Weigh in on ESG Priorities & Practices":

?????????"Board oversight structure—A majority of boards delegate ESG issues to one or more committees. By topic, 38% of boards retain oversight of environmental and social issues at the full board only, compared to 27% of boards that retain full board only oversight of governance issues.

??????????"Committee reports to the board—Committees with ESG oversight responsibilities report progress toward goals, recommend strategic goals and metrics, and provide educational information to the board on their areas of oversight.

??????????"Board education—Boards most commonly (32%) look to internal ESG experts (e.g., CSO) for education on ESG matters, followed by the GC/corporate secretary (21%).

??????????"Targets & timelines—A plurality (nearly 40%) of directors reported their companies having set environmental and governance targets?with?defined timelines for achieving those targets. This compares to a plurality (40%) of directors indicating their companies set social targets?without?a defined timeline.

???????????"Progress indicators—Most boards (68%) rely on company-specific metrics/frameworks to measure the company’s progress on ESG goals, although more than 40% also or instead look to SASB, and nearly one-quarter use other frameworks (GRI, TCFD, CDP) for this purpose.

???????????"Priorities—A majority of directors described enhancing their oversight of environmental and social issues, and enhancing their governance practices, as important—but not pressing, and not a top priority.

???????????"Shareholder engagement—The board chair/lead director is most commonly tasked with representing the board in shareholder engagements on ESG matters (43%), while more than one-quarter of respondents said board representation depends on the matter and the shareholder...."

???????(ii)?ISSB chair with?update on ISSB's proposed rules for?disclosures of climate-related risks:?Chair of?the International Sustainability Standards Board?(ISSB),?Emmanuel Faber,?spoke last week with the?WSJ?on the status of the ISSB's?proposed rules for disclosure of climate-related risks,?and is quoted in this Jan. 2?WSJ?article, "ISSB Plans to Finalize Rules on Disclosure of Climate-Related Risks in 2023":

???????????"The International Sustainability Standards Board?this year plans to complete two rule proposals that would cover companies’ disclosures of climate-related risks to their business?and broaden the sustainability standard-setter organization’s focus to include corporate reporting on biodiversity and other topics.?Launched in 2021, the standard-setter in recent months has received thousands of comments from finance chiefs, academics, audit firms and investors following the proposals that were introduced in March,?Chair Emmanuel Faber said. The ISSB intends to move fast to finish the two standards, with the effective date yet to be decided, he said.?“Climate is going to be finalized in the next few months. And then quite naturally, we’re now looking at what’s next,” Mr. Faber said......

???????????"The ISSB is monitoring the actions of the SEC as well as that of others, Mr. Faber said,?pointing to a working group with authorities from the U.S., China, Japan, the European Union and the U.K., which is meeting regularly. “We are not standard-setting in a vacuum,”?he said.?The ISSB in October voted to require companies to disclose Scope 3 emissions,?which includes those from suppliers, in addition to their own emissions. Companies in response to the rule proposals have said they are concerned about the methodologies used to calculate Scope 3 emissions as well as the lack of data.?“We’ve dealt with the feedback,”?Mr. Faber said, adding that companies won’t have to disclose these emissions under the ISSB proposal for at least a year.?They will also be able to include information that isn’t aligned with their reporting period if their suppliers have a different reporting cycle, which was another concern raised by companies.......

???????????"In 2023, the ISSB will also look into potential new disclosures around the impact of businesses on biodiversity, human capital and reporting on human rights within companies.?The ISSB in December announced proposed rules aimed at considering the connection between climate and nature, including one with the goal of cutting companies’ negative effects on biodiversity by up to half by 2030......These “adjacent topics” are top of mind for investors, according to Mr. Faber.?Extensions to the two existing proposals, on subjects such as water and deforestation, may be finalized in 2024, he said,?while additional standards likely won’t take effect before 2026."

????????(iii)?KPMG U.S. chair and CEO on 'focusing ESG engagement on financial values'?(and more):?Paul Knopp is?KPMG U.S. Chair and CEO, and?In this?Fortune?commentary last Wednesday, "KPMG’s playbook for CEOs navigating uncertainty in 2023", he suggests three ways CEOs can meet the challenges ahead in 2023. Below is one of them:

???????????"Focus ESG engagement on financial value:?With a recession on the horizon,?corporate ESG commitments made during boom times will face near-term tests amidst heightened scrutiny.?The backdrop:?70% of the business leaders we surveyed said that their company’s ESG programs improve their financial performance–significantly up from 37%in our previous survey. ESG engagement reduces costs of capital, enhances employee and customer retention, and improves resilience of key assets.?Yet,?59% of CEOs are pausing or reconsidering their existing or planned ESG efforts in the face of economic uncertainty.

????????????The short-term-versus-long-term tension creates a clear opportunity for leaders who can stay the course on ESG to harness a competitive edge. At the same time, CEOs must continue to listen to their stakeholders. Aligning ESG strategy to deliver financial value and actively telling that story will help sustain momentum across the organization.?CEOs will also need to continue addressing the ongoing risks to their enterprises, such as the increase in cyberattacks. Persistent investment in security infrastructure is a must in 2023."

??????????(iv)? Farient report on the prevalence of? incorporating stakeholder metrics into executive compensation plans and related trends at ?t he largest corporations?(plus arguments 'for' and 'against' using ESG metrics in compensation plans): Leading U.S. executive compensation consultants, Farient Advisors, recently released?its 6th. annual report?analyzing the executive compensation practices of 500+ of the world’s largest companies, including the S&P 100 and the TSX 60 companies, this "2023 Global Trends in Stakeholder Incentives: The Staying Power of ESG", which?documents a "now three-year worldwide trend for the largest corporations to incorporate stakeholder metrics into executive compensation."

???????????Below is from?the related news release?describing some of the "key takeaways" from the report:

????????????"....Farient’s conclusion:?Linking executive pay to stakeholder incentives is here to stay.?For boards of companies, the research provides important insights into how corporate pay is being aligned with stakeholder metrics to better assess management performance and accountability.?Other key takeaways from this year’s research include:

????????????--?More than three-fourths of large companies now incorporate stakeholder measures into their incentive plans?????????

????????????-- This prevalence is up by 5 percentage points compared to 2021 and 14 percentage points compared to 2020

????????????-- Differences between regions are reflective of each region’s industrial base, cultural norms, and local regulations. However,?all regions but?Canada?are moving in the same direction—up......"

???????????From the report itself, note this interesting table on p.10, "Arguments For vs. Against Including Stakeholder Measures in Incentives":

???????????"Arguments For:

?????????????-- Shows that the company is “walking the talk”

?????????????-- Aligns incentives with a company’s ESG strategy and commitments

?????????????-- Focuses participants on areas requiring improvement

?????????????-- Most investors view ESG metrics favorably

?????????????-- Some investors are expecting companies to consider ESG and stakeholders in compensation decisions

?????????????-- Responds to valid risk factors previously unrecognized

?????????????-- Adds value through customer and/or investor demand, and community and regulator support

?????????????--Addresses value sustainability beyond typical incentive period

?????????????Arguments Against:

?????????????-- ESG metrics can contribute to incentive plan complexity

?????????????-- Incentives may not be the most effective way to mobilize the organization around ESG initiative

?????????????-- It is a challenge internally to agree on which ESG measures to use

?????????????-- Some ESG goals may not be easily quantifiable and it can be costly to ensure what is promised is actually delivered

?????????????-- There is a perception among some investors that ESG measures are being used to augment incentive payouts

?????????????-- Some ESG measures do not add value and there is an unnecessary cost to them

?????????????-- Effectiveness cannot be measured within a reasonable timeframe"

????????????Below are further excerpts from the report:

?????????????"--?Environmental measures made the most significant gains in prevalence, up by 20 percentage points in one year from 30% to 50% of companies now using environmental measures

??????????????--?Social measures continue to be the most prevalent type of stakeholder measure used in incentives, gaining a further 5 percentage points since last year, from 67% to 72%

?????????????--?Customer and governance measures are used by approximately one-third of companies, but have gained little in prominence?

??????????????-- Similarly, community-related measures are used minimally, possibly because the link back to financial materiality can be more difficult to affirm and/or investor and public pressures have focused more on environmental and employee metrics.....

???????????????--?Of those companies using environmental measures in incentives, about half are focusing on GHG emissions; outside of GHG emissions, companies also are using environmental measures tied to improvements in air quality, land management, and water conservation......

??????????????"Investors continue to focus heavily on social issues, primarily workforce diversity,?which has driven up the use of diversity, equity, and inclusion (DEI) measures in incentive plans.?In prior years, investor pressure focused on disclosure, pushing companies to publish their diversity metrics. But now, while the pressure on disclosure remains, there are expectations for companies to demonstrate progress on their gender and/or racial and ethnic diversity, particularly for companies that may be lagging relative to others in their industry.

???????????????--?Globally,?60% of companies using social measures in incentives focus on diversity, up 15 percentage points from last year.....

????????????????"Stakeholder measures in compensation have typically been adopted in short-term incentive (STI) plans because these plans have traditionally been the “home” for other non-financial measures?(e.g., strategic, operational, and individual).?In addition, since many stakeholder strategies and the underlying measures are in development, it remains difficult for many companies to define measures and set goals over the longer term,?making it helpful to “pilot” stakeholder measures and goals in the short-term plan.?Nevertheless, given the long-term time frame of many stakeholder measures and targets (e.g., net zero?by 2050), it can be appropriate to consider these measures for long-term incentive (LTI) plans. Long-term sustainability plans can span decades, so companies often break down long-term aspirations into interim milestones to capture progress on stakeholder measures.?Given the architecture of most LTI plans, this break- down most often comes in the form of three-year goals, though some may use four or five years.?

??????????????????--?More than one-quarter (28%) of global companies with stakeholder measures now use those measures in their long-term incentive plans,?an increase of?11 percentage points from 2020......."

???????????????Note that?Brian Bueno, ESG leader at Farient,?discusses some aspects of the report in this Dec. 28?Corporate Secretary?blog post, "More companies linking executive pay to stakeholder measures, survey finds":

??????????????"Brian Bueno, ESG leader at Farient,?says fewer US companies are linking executive pay to ESG and other metrics than those in other regions in part because there is a shorter history of them considering ESG issues in general....In terms of investor expectations, there is still a focus in the US on corporate disclosures around issues such as climate change and diversity, equity and inclusion, Bueno says. The pressure then shifts to companies showing progress toward ESG goals, after which pressure builds to include ESG metrics in executive pay as a means to incentivize meeting those goals, he explains.?Bueno notes that over the past year some institutional investors have been formalizing their expectations around how issuers link ESG to executive pay. They do not necessarily expect companies to do so, but they expect those that do ensure the ESG metrics they use are relevant to the business, material to its long-term value and tied to rigorous targets, he says......"

????????(v)?Blackrock's?2023 proxy voting guidelines?(for both Canada and the U.S.)?and?2023?global principles/State Street's voting policy on sustainability-related issues:?

???????????(a) Each year,?Blackrock, the world's largest asset manager (over $8.5 trillion assets under management) reviews and updates its?Global Principles?and its Proxy Voting?Guidelines. In late December it posted on the?Blackrock Investment Stewardship (BIS)?website its?"2023 Investment Stewardship Global Principles, its "2023?BlackRock Investment Stewardship Proxy Voting Guidelines for Canadian Securities" and?"2023 BlackRock Investment Stewardship Proxy Voting Guidelines for U.S. Securities", as well as this short 6-page, stand-alone "2023 Policies Summary", summarizing both the 2023 Global Principles and the 2023 market-specific proxy voting guidelines. The latter includes the following "two?modifications to the 2023 Global Principles, both prompted by market-level developments":

??????????????"--?Nature-related factors: We continue to encourage companies to consider reporting on material sustainability-related risks and opportunities in their business models. While guidance is still under development for a unified disclosure framework related to natural capital, given the growing materiality of these issues for many businesses, we believe enhanced?reporting would help investors’ understanding, and we?note that the emerging recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD) may prove useful to some companies. We recognize that some companies may report using different standards, which may be required by regulation, or one of a number of other private sector standards.

?????????????????--?Sustainability reporting: We recognize that companies may need time after fiscal year-end to collect, analyze and report accurate climate- and sustainability-related data. To give investors time to assess the data, we encourage companies to produce climate and other sustainability- related disclosure sufficiently in advance of their annual meeting."

????????????(b)?State Street,?the fourth-largest US asset manager ($3.3 trillion assets under management), recently posted this short memorandum on its "Insights"?website, "Making It Plain: Our Asset Stewardship Approach", and below is from the section, "Proxy Voting on Sustainability-Related Issues":

??????????????"As environmental, social and governance (ESG) factors have risen in importance to the broader market, State Street Global Advisors has seen a rise in shareholder proxy proposals related to sustainability issues. We consider sustainability-related shareholder proposals on a case-by-case basis and analyze many different factors to determine our approach. As such,?we only vote in favor of sustainability-related shareholder proposals when we believe it is reasonable and will maximize long-term shareholder value for our clients.?With this in mind, we will only consider supporting sustainability-focused shareholder proposals if they address an environmental or social topic deemed to be financially material to a particular sector. Figure 2 outlines our proxy voting approach, which is meant to help mitigate risks and support business practices that create long-term value......"

???????(vi)?Morgan Stanley's announcement of the departure of its COO?(one of the 4 contenders for the CEO position)/SEC filing of the day: As reported in this?FT?article today, "Morgan Stanley CEO contender Jonathan Pruzan to depart Wall Street bank",?Morgan Stanley?announced in?this Form 8-K?filed yesterday with the SEC the departure of its chief operating officer, briefly as follows:

??????????"On January 9, 2023, Morgan Stanley announced that Jonathan M. Pruzan, Executive Vice President and Chief Operating Officer, is retiring from his position effective January 31, 2023."

???????????Some context and background to the departure in the?FT?article:

???????????"Morgan Stanley chief operating officer Jonathan Pruzan, a leading contender to become the bank’s next chief executive, has decided to leave at the end of this month. Pruzan, 54, was one of four candidates in the running to replace James Gorman?when he decides to retire from Morgan Stanley, one of the most powerful institutions on Wall Street.

???????????"?Internally the all-male list of candidates is referred to as the “four horsemen”......?In a memo to staff on Monday, Gorman said Pruzan was leaving “in order to pursue other opportunities”......According to a person briefed on the matter, recent conversations Pruzan held with senior Morgan Stanley figures about the likelihood and timeline of him succeeding Gorman factored into his decision to depart......"

????????????

????????(vii)?press release/(other)?SEC filings/precedents of the day?(GC and CFO employment agreements/executive performance share award agreement):?

??????????(a)?Alcoa Corporation?announced today in?this press release?a "restructuring of its executive leadership team", including the appointment of a new CFO and a new COO (the current CFO becoming the new COO), as follows:

?????????????"Alcoa Corporation today announced?a restructuring of its Executive Leadership Team to further improve the Company’s rigorous focus on operational excellence, cost, and innovation.?The changes, effective February 1, 2023, will include the reassignment of responsibilities for two existing members of the Executive Leadership Team and the appointment of a new Chief Financial Officer.

???????????????--?William F. Oplinger, currently Executive Vice President (EVP) and Chief Financial Officer, will become EVP and Chief Operations Officer.

???????????????--?Molly Beerman, currently Senior Vice President and Controller, has been appointed EVP and Chief Financial Officer.?She will also be the executive member to oversee Alcoa’s Information Technology and Automation Solutions team.

???????????????-- Renato Bacchi, currently EVP and Chief Strategy Officer, will take on added responsibilities to become EVP, Chief Strategy & Innovation Officer, including overseeing Alcoa’s breakthrough research and development technologies.......

?????????????"As part of the restructuring, John D. Slaven, current EVP and Chief Operations Officer, and Benjamin D. Kahrs, EVP and Chief Innovation Officer,?will be leaving the Company......William F. Oplinger?has served as Alcoa Corporation’s Chief Financial Officer since November 2016,?when the Company completed a legal and structural separation from Alcoa Inc. (the Separation)......Molly S. Beerman?served as the Company’s Vice President and Controller from December 2016 through October 2019, when she was promoted to Senior Vice President and Controller......"

????????????Compensations arrangements for the new CFO and COO?are disclosed in?the related Form 8-K?filed with the SEC.

??????????(b)?Netflix, Inc.?announced in?this Form 8-K?filed yesterday with?the SEC?the appointment of a new? Chief Accounting Officer, reporting to the CFO,?as follows:

???????????? ?" On January 6, 2023, Netflix, Inc.?appointed Jeffrey Karbowski, age 45, as the Company’s Principal Accounting Officer, effective February 13, 2023, where he will assume the role of VP, Chief Accounting Officer. Mr. Karbowski will report to Spencer Neumann, the Company's Chief Financial Officer,?who will continue to serve as the Company's Principal Financial Officer.?Mr. Karbowski served in various roles at?PayPal Holdings, Inc.?since May 2013,?most recently as the VP, Chief Accounting Officer since August 2020, the VP, Global Controller from October 2019 to August 2020 and Senior Director, Controller from June 2015 to September 2019......"

?????????????Compensation arrangements for the new?Chief Accounting Officer?are disclosed in the said Form 8-K.

???????????(c) NYSE-listed? Live?Nation Entertainment, Inc.?disclosed in?this Form 8-K?filed with the SEC on Dec. 23/22 that it had entered into?5-year employment agreements with its CFO and its General Counsel,?as follows:

?????????? " Joe Berchtold Employment Agreement:? On December 21, 2022, Live Nation Entertainment, Inc. entered into an?employment agreement with Joe Berchtold effective as of January 1, 2023 to serve as Live Nation’s President and Chief Financial Officer. The term of the Berchtold Agreement ends on December 31, 2027.?After that date, unless earlier terminated, Mr. Berchtold’s employment with Live Nation will be on an at-will basis. Mr. Berchtold’s existing employment agreement is set to expire on December 31, 2022.

???????????"Under the Berchtold Agreement,?Mr. Berchtold receives a base salary of $2,000,000 per year, and will be eligible to receive annual salary increases at the discretion of the Compensation Committee......?In connection with, and pursuant to, the Berchtold Agreement, Mr. Berchtold (a) on December 21, 2022 received a grant targeted at 744,691 performance shares......

????????????"Michael Rowles Employment Agreement:? On December 21, 2022, Live Nation entered into an?employment agreement with Michael Rowles effective as of January 1, 2023 to serve as Live Nation’s Executive Vice President, General Counsel and Secretary.?The term of the Rowles Agreement ends on December 31, 2027.?After that date, unless earlier terminated, Mr. Rowles’ employment with Live Nation will be on an at-will basis. Mr. Rowles’ existing employment agreement is set to expire on December 31, 2022.

????????????? "Under the Rowles Agreement,?Mr. Rowles will receive a base salary of $1,100,000 per year, and will be eligible to receive annual salary increases at the discretion of the Compensation Committee......In connection with, and pursuant to, the Rowles Agreement, on December 21, 2022 Mr. Rowles received a grant targeted at 74,469 performance shares........

????????????This is the?Employment Agreement?entered into with the CFO; this is the?Employment Agreement?entered into with the GC; and this is the?Form of Performance Share Award Agreement?entered into with both the CFO and the GC.

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