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

You;Soueida, Lena;Bouchard, Leslie-Ann;Silver, Benjamin H.;

? ? ? ? ?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) ESG pushback: a WSJ report/DEI pushback: a WaPo report BlackRock, State Street and JP Morgan depart or reduce participation in prominent climate action group/KPMG survey on how companies have been addressing the ESG pushback:?

? ? ? ? ? ? ? ? ? ?(a) Below is from this WSJ article last Tuesday, "America’s ESG Hiring Boom Is Starting to Cool":

? ? ? ? ? ? ? ? ? ? ? ?"U.S. companies are hiring fewer people for roles related to environmental, social and corporate-governance issues as finance executives assess costs and seek faster returns on investments.?ESG job departures outpaced arrivals for half the months of last year, marking the reversal of a multiyear trend. Companies had 3,071 ESG departures compared with 2,897 arrivals in December 2023, according to employment data provider Live Data Technologies, which reviewed more than 360,000 current and former ESG professionals at U.S. companies......For the full year of 2023, arrivals were still ahead of departures, at 40,884, versus 39,452, but the gap has significantly narrowed compared with previous years, Live Data said.....

? ? ? ? ? ? ? ? ? ? ? "Meta Platforms, Amazon?and Google?had the largest ESG job outflows among U.S. companies in 2023, according to the data.....Companies are facing investor pushback and political pressure targeted at ESG efforts.....Most businesses continue to follow sustainability commitments but are changing how they handle their ESG programs,?in some cases adjusting diversity initiatives by scrapping legally risky and possibly discriminatory practices.

? ? ? ? ? ? ? ? ? ? ? "2023 saw a real cooling in chatter around ESG and in some quarters, quite a pronounced attack on what ESG was about,” said?Joe Dubbin, managing director at Cripps Leadership Advisors, an executive search firm. “It has certainly filtered through into the hiring requirements that we’ve been tasked to go do.”......Corporate boards have been placing less pressure on executives to focus on managing ESG risk compared with that of supply chain, cybersecurity, generative artificial intelligence and geopolitical uncertainty, said?Alexander Bant, chief of CFO research at consulting firm Gartner.?That reduced pressure has in part led to CFOs asking “substantially” fewer questions to advisers about ESG, for example, on how to talk to their investors about their related strategy, he said.

? ? ? ? ? ? ? ? ? ? ? "Companies are reconsidering the priority given to ESG programs and their pursuit of top ESG scores in response to pressure from investors seeking faster returns on investments, Dubbin said. “In delivering meaningful environmental and carbon-reduction programs, the financial returns are a long way away,” he said, adding energy transitions are necessary. “It’s not gone away. It’s just having a repricing and that’s driving hiring trends.”

? ? ? ? ? ? ? ? ? ? ? "A drop in new ESG hires hasn’t necessarily weakened companies’ investments in those areas. Ninety-two percent of chief executives stand by their ESG programs,?while the remaining 8% have ramped them down, according to a Teneo survey from December. The nature of ESG positions, at least on the surface, is changing. ESG job titles sometimes include words such as sustainability, impact, responsibility, climate and diversity.?There are fewer sustainability reporting positions focused on companies’ reporting of ratings and rankings and more positions within or working directly with the finance team,?for example the role of “ESG controller,” said?Ellen Weinreb, managing director at Weinreb Group, a sustainability and ESG recruitment firm....."

? ? ? ? ? ? ? ? ? ? (b) Below is from this Washington Post article this Sunday, "As DEI gets more divisive, companies are ditching their teams":

? ? ? ? ? ? ? ? ? ? ? ".....DEI jobs peaked in early 2023 before falling 5 percent that year and shrinking by 8 percent so far in 2024, according to Revelio Labs data shared with The Washington Post. The attrition rate for DEI roles has been about double that of non-DEI jobs, says Revelio, which tracks workforce dynamics.

? ? ? ? ? ? ? ? ? ? ? ?"In recent weeks, Zoom?axed its internal DEI team amid broader layoffs, and Snap?cut workers who worked on retention and engagement efforts for employees from underrepresented groups. Meta, Tesla, DoorDash, Lyft, Home Depot, Wayfair and?X were among major corporations making steep cuts in 2023, slashing the size of their DEI teams by 50 percent or more, Revelio’s data shows. “The overall number of DEI officers has decreased,” said Lisa Simon, Revelio’s senior economist, “but it’s not enough to destroy all the strides that happened after 2020.”......

? ? ? ? ? ? ? ? ? ? ? "Corporate America’s retreat from DEI has coincided with increased legal risk and political animosity toward systemic efforts to boost racial equity......(S)aid Joelle Emerson, CEO of DEI consultancy Paradigm, not all companies downsizing teams are giving up on the work.....noting that some employers overhired when they established their DEI teams. “I don’t know that it ever made sense to have a 25-person diversity team sitting to the side of a core business function,” Emerson said. “Companies should be able to say, ‘We’ve tried this, it didn’t have an impact, we’re going to try something different.’”.......

? ? ? ? ? ? ? ? ? ? ? "Some companies are bucking the trend. J.M. Smucker, Victoria’s Secret, Michaels, Moderna, Prudential and?ConocoPhillips?were among big corporations that expanded their DEI teams by 50 percent or more in 2023, according to Revelio’s data. Packaged-food giant Conagra Brands?and NASA?both doubled the size of?their DEI teams......"

? ? ? ? ? ? ? ? ? ? ? ??Note this Fortune article last Friday, "No, ESG and DEI don’t just have a branding problem"

? ? ? ? ? ? ? ? ? ?(c) Below is from this FT article last Thursday, "JPMorgan and State Street quit climate group as BlackRock scales back":

? ? ? ? ? ? ? ? ? ? ?"Two of the world’s biggest asset managers are quitting an investor group set up to prod companies over global warming and a third is scaling back its participation, in a major setback to the ambitions of Climate Action 100+. JPMorgan Asset Management and State Street Global Advisors both confirmed they were leaving Climate Action 100+. BlackRock, the world’s largest money manager, is pulling out as a corporate member and transferring its participation to its smaller international arm.?

? ? ? ? ? ? ? ? ? ? ? "The departures weaken the climate group’s plan to use shareholder influence to step up pressure on polluting companies to decarbonise, because they mean that none of the world’s five largest asset managers are fully behind the effort. The moves also highlight a growing split between the largest US-based asset managers,?which are under intense pressure from Republicans over climate issues, and those elsewhere. Smaller competitors and European firms have largely stuck with various climate coalitions.?

? ? ? ? ? ? ? ? ? ? ? "Launched in December 2017, Climate Action 100+ challenges airlines, oil majors and other polluting companies to reduce their carbon footprint. BlackRock, JPMAM and State Street Global Advisors?all joined in 2020. However, the group announced last year that it would be shifting from pressuring companies on climate disclosures to pushing them to actively reduce greenhouse gas emissions.

? ? ? ? ? ? ? ? ? ? ?"SSGA?said these “phase 2” corporate engagement requirements had gone too far. “SSGA has concluded the enhanced Climate Action 100+ phase 2 requirements for signatories are not consistent with our independent approach to proxy voting and portfolio company engagement,” SSGA?said in a statement.?

? ? ? ? ? ? ? ? ? ? ?"BlackRock said in a note that it was dropping its corporate membership because it believes the phase 2 strategy, which takes effect in June, conflicted with US laws requiring money managers to act solely in clients’ long-term economic interest. The $10tn manager is setting up a new stewardship option allowing clients, particularly in Europe, to set decarbonisation as part of their investment objectives. For clients who do not opt do so, BlackRock will continue to prioritise financial results, the note said.?

? ? ? ? ? ? ? ? ? "JPMAM said it had made a “significant investment” in its own stewardship team and corporate engagement: “Given these strengths and the evolution of its own stewardship capabilities, JPMAM has determined that it will no longer participate in Climate Action 100+ engagements.”...... With $4.1tn and $3.1tn of assets under management respectively, SSGA?and JPMAM?are also among the top five asset managers. Vanguard and Fidelity Investments?never became members. Other large US asset managers still in Climate Action 100+ include Goldman Sachs, Invesco and?Pimco......"

? ? ? ? ? ? ? ? ? ?(As regards Pimco, note this Reuters article on Friday, subsequent to the FT one above, "Bond manager PIMCO withdraws from Climate Action 100+ investor coalition")

? ? ? ? ? ? ? ? ? This withdrawal of major asset managers from a prominent climate group has garnered considerable coverage in the business press, including in: this WSJ op-ed last Thursday, "An ESG Asset Manager Exodus"; last Friday's NY Times DealBook Newsletter, "Wall Street’s Climate Retreat-A $14 trillion exit"; this Fortune article last Thursday, "After Larry Fink and Jamie Dimon’s firms bail on climate group, NYC Comptroller lets rip: ‘they are caving to climate deniers’"; and this NY Times article yesterday, "More Wall Street Firms Are Flip-Flopping on Climate. Here’s Why."

? ? ? ? ? ? ? ? ? ? ?(On a different but related topic, note this Fortune article last Thursday, 'How the climate battle moved from boardrooms to courtrooms and backrooms.")

? ? ? ? ? ? ? ? ? (d) Below is from this Bloomberg article last Friday, "KPMG Study Reveals Surprising Plan for ESG Spending by Companies", with reference to this KPMG?survey released last week, "Addressing the Strategy Execution Gap in Sustainability Reporting":

? ? ? ? ? ? ? ? ? ? ? ? "Despite the recent anti-ESG pushback in the US, many companies — roughly 90% in a survey by KPMG — plan to dedicate more financial resources to ESG over the next three years.?About 43% of those surveyed by KPMG are looking to add employees dedicated to environmental, social and governance factors, while roughly 40% plan to invest in ESG-specific software and 38% are looking to train or educate employees, according to the survey.

? ? ? ? ? ? ? ? ? ? ? "Most large companies are pressing ahead with plans to improve their ESG capabilities,?even as almost two dozen Republican-led US states push through anti-ESG legislation.....“The key reason at the moment is really regulatory pressure,” said?Maura Hodge, KPMG’s US ESG Audit Leader,?referring to the increased interest in ESG.?Regulations are forcing companies to?“inject the same level of rigor into its sustainability reporting that is required of financial reporting,” she said.

? ? ? ? ? ? ? ? ? ? ? ?"Just over three-quarters of the 550 board members, executives and managers surveyed globally by KPMG said their organizations are planning to restructure teams with a focus on ESG. Some companies — around 24% — are even planning to significantly increase incorporation of ESG within “non-ESG” roles, while 59% expect to moderately increase ESG within these positions.?“Historically, sustainability reporting has sat with a very small group of under-resourced people,” Hodge said. Now as requirements evolve, “the amount of effort and rigor that needs to go into reporting has changed substantially,” she said.......

? ? ? ? ? ? ? ? ? ? ? ?"In addition to meeting compliance requirements, the survey found that many companies also view building ESG capabilities as a key tool for enhancing organizational performance. According to KPMG, improving ESG data management and reporting capabilities are seen as the best way to enhance the integration of sustainability goals with overall business objectives."

? ? ? ? ? ? ? (ii) WSJ interview with Coca-Cola's chief sustainability officer (including on sustainability 'best practices', and ESG goals in Coca-Cola incentive programs): Bea Perez was appointed The Coca-Cola Company's first chief sustainability officer in 2011, and?was promoted to "executive vice president with global responsibility for sustainability, communications and strategic partnerships"?at the beginning of this year. She spoke last week with the WSJ, and below are excerpts from the interview appearing in this WSJ article last Friday, "Coca-Cola’s Sustainability Chief on Building a Circular Economy and Adding Executive Comp Goals":

? ? ? ? ? ? ? ? ??"WSJ: What are some of the most important sustainability developments in recent times?

? ? ? ? ? ? ? ? ? ? Perez:?Disclosure and greater transparency is crucial to how we all make a meaningful impact and make sure we’re focused on the things that matter to society. The other piece is having the discussion around how these goals are interconnected. I’ve learned that I have to look at water, packaging and climate all together because I don’t want to set a goal that has an unintended impact. Those things aren’t the big shiny toys, but these are some of the basics that will actually unlock the impacts that we’re all looking to make.

? ? ? ? ? ? ? ? ? ?"WSJ: What are your big, thorny sustainability challenges?

? ? ? ? ? ? ? ? ? ? Perez:?One is balancing between the short-term and the long-term. Also, we don’t really know what lies ahead, so we have to leave some space for it. One frustration is when I have to say no to some things because we have to focus on the things that matter most to society and the business—there’s a finite amount of resources.

? ? ? ? ? ? ? ? ? ?"WSJ: Are there best practices that you would recommend?

? ? ? ? ? ? ? ? ? ? ?Perez: Start with the priority matrix: what’s important to your company and to your stakeholder. And then it is the discipline of business planning. Embedding it into the operations, making sure that it is through the processes and systems. Make your planning team your best friend, help them understand why this is so important. Make sure finance understands the economic story. Once you’ve done the work and assured your data, then go to the marketers and talk to them about how to tell the story.

? ? ? ? ? ? ? ? ? "WSJ: Coca-Cola linked ESG goals to the executive annual and long-term incentive programs. How did that happen??

? ? ? ? ? ? ? ? ? ?Perez: Sustainability was part of the business plans and so the compensation committee said, why isn’t it in comp? We figured out what would be required—we already had common definitions but needed a common tool to collect the data and report it. So we got a digital tool in place and moved this into comp. We have two different key [sustainability] metrics: water and packaging. We’re only into our second real year of having it embedded into the compensation metrics at that level, and so far, it is driving the behaviors and the outcomes that we would want to see happen."

? ? ? ? ? ? ? (iii) ACC's 2024 chief legal officer survey: Last week the ACC (Association of Corporate Counsel) released its "2024 Chief Legal Officer?Survey", providing "insights on the evolving role of the chief legal officer (CLO"). Although access to the complete survey is for members only, ACC did post on its website these "10 Key Findings from the 2024 CLO Survey." Below are four of them:

? ? ? ? ? ? ? ? ? ?"3. Data breaches are the biggest data-related threat CLOs want to mitigate in 2024: Thirty-four percent of CLOs say that data breaches are the biggest datarelated threat that they are focused on mitigating in 2024 and 40 percent say they plan on instituting new processes to help defend against these threats, yet just 9 percent are “very confident” in their organization’s ability to mitigate emerging data risks.?

? ? ? ? ? ? ? ? ? ?6. The majority of CLOs oversee at least three additional business functions beyond legal: Fifty-eight percent of CLOs oversee three or more additional business functions beyond legal and 27 percent oversee five or more. These most commonly include areas such as privacy (44 percent), ethics (43 percent), and risk (38 percent).

? ? ? ? ? ? ? ? ? ?9. Three out of four CLOs are involved in leading their organization’s ESG strategy: Despite 77 percent of CLOs being involved in leading their organization’s ESG strategy, just 29 percent say they are “very involved”, and 36 percent say they are “somewhat involved.” Nineteen percent say their organization has no ESG strategy in place at all.

? ? ? ? ? ? ? ? ? 10. The Chief Legal Officer title is becoming more common: Twenty-eight percent of participants hold the “Chief Legal Officer” title.?Although “General Counsel” is still the most common title, there has been a reduction in its usage among respondents, with 57 percent now holding this title compared with 66 percent in 2022", and,

? ? ? ? ? ? ? (iv) press releases of the day:?

? ? ? ? ? ? ? ? ? ? (a) AbbVie Inc.?announced today in this press release?the promotion of its president and COO to the position of CEO, with the current CEO to transition to executive chairman, as follows:

? ? ? ? ? ? ? ? ? ? ? ? "AbbVie today announced that its board of directors has unanimously selected Robert A. Michael, AbbVie's current president and chief operating officer, to succeed Richard A. Gonzalez?as the company's chief executive officer (CEO). Mr. Gonzalez, who has served as CEO since the company's formation in 2013, will retire from the role of CEO and become executive chairman?of the board of directors, effective July 1, 2024. Additionally, the board has appointed Mr. Michael as a member of the board of directors effective July 1, 2024.....

? ? ? ? ? ? ? ? ? ? ? ? "The AbbVie board recognizes that CEO succession planning is one of our most important responsibilities," said Glenn Tilton, lead independent director, AbbVie's board of directors. "The company has been planning for the eventual succession for a long time and has been thoughtful and deliberate to ensure the right plan was in place for a potential successor. The board conducted a thorough process to identify the right leader for AbbVie's next chapter......."

? ? ? ? ? ? ? ? ? ? (b) Lloyd’s of London?(generally known as Lloyd's) announced yesterday in this press release?the appointment of a new General Counsel, as follows:

? ? ? ? ? ? ? ? ? ? ? ? ?"Lloyd’s, the world’s leading marketplace for insurance and reinsurance, has today announced Claire Schrader as General Counsel, responsible for managing legal risk at Lloyd’s, a role she has been performing on an interim basis since August 2023. She remains a member of Lloyd’s Executive Committee.?Claire is a qualified solicitor, with over 20 years’ experience in law and the insurance sector. She has been with Lloyd’s since 2000......"

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