Reminders and new disclosure requirements for the 2025 proxy season

The proxy statement has become an integral component of a public company’s preparation for its annual meeting of shareholders. The rules and regulations under the Securities and Exchange Act of 1934 (the Exchange Act), administered by the US Securities and Exchange Commission (SEC), require public companies to provide shareholders with a proxy statement that meets the requirements of Schedule 14A in order to solicit proxies to vote at annual meetings in connection with the election of directors.

However, for many companies, the proxy statement represents more than just a compliance document – it is a mechanism for communicating with shareholders regarding the company’s operational achievements, corporate governance practices, strategic initiatives, and corporate policies. Accordingly, many companies provide voluntary disclosure regarding these matters in addition to the disclosure required by Schedule 14A.

This article details new and existing disclosure requirements for proxy statements for the 2025 reporting season and how public companies can prepare to meet them. It also discusses disclosure trends and considerations when drafting key sections of the proxy statement and provides guidance on how companies can effectively incorporate them into their proxy statements.

New disclosure requirements for the 2025 proxy season

As discussed in our recent 10-K annual reporting article, beginning with the 2025 reporting season, public companies are required to disclose:

• Whether they have adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of the companies’ securities by directors, officers, and employees, or the companies themselves, that are reasonably designed to promote compliance with insider trading laws, rules, and regulations, and any applicable listing standards (see Item 408(b) of Regulation S-K), or if not, explain why they have not done so; and
  
  
• Their policies and practices regarding the timing of awarding options and other equity-like instruments in relation to the disclosure of material nonpublic information (MNPI) by the company (see Item 402(x) of Regulation S-K).

If companies have awarded any options, stock appreciation rights (SARs), and/or similar option-like instruments to any named executive officer (NEO) during the last fiscal year within a period ranging from four business days before to one business day after the filing of a periodic report on Form 10-Q or 10-K, or the filing or furnishing of a current report on Form 8-K that discloses MNPI, then companies are required to provide a tabular disclosure of these awards in compliance with Item 402(x)(2)(i) of Regulation S-K. For more information on compliance with Item 402(x), see our client alert.

Companies are required to provide these disclosures in their Forms 10-K; however, under General Instruction G to Form 10-K, they may incorporate these new disclosures from their definitive proxy statements in connection with the election of directors, provided they file their proxy statements within 120 days following fiscal year end. Accordingly, many public companies may choose to provide these disclosures in their proxy statements, which will be incorporated by reference into their Forms 10-K.

While some companies have included voluntary disclosure about their insider trading policies and practices in prior years’ proxy statements, all companies will now be required to at least disclose if they have insider trading policies and practices.

While there is no requirement to disclose the details of policies and procedures, some companies may choose to do so, similar to disclosures regarding hedging and pledging policies that companies have made for years. In addition, many companies have not historically adopted insider trading policies and procedures covering company transactions in their own securities, and that trend may continue. Such companies, at a minimum, will need to explain why they have not done so, which could involve disclosure of alternative procedures tailored for how such companies manage risks when transacting in their own securities.

Updates from proxy advisory firms

The two major proxy advisory firms, Institutional Shareholders Services (ISS) and Glass Lewis, annually update their proxy voting guidelines, upon which some institutional investors rely. Accordingly, it may be useful for companies with a large institutional investor shareholder base to understand these proxy advisory firms’ guidelines, including changes for the 2025 proxy season. The proxy advisors’ position on the topic of diversity is discussed under the “Board diversity” section below.

Among the changes ISS adopted for 2025, for short-term poison pills, that firm will now consider additional factors – such as the context of adoption and a company’s corporate governance track record – when evaluating whether to recommend voting against directors. Regarding environmental proposals and community impact assessments, ISS has added the alignment of current disclosures and policies with broadly accepted reporting frameworks, like the Task Force on Nature-Related Financial Disclosures, as a factor in its recommendations.

Among the changes Glass Lewis made to its Benchmark Policy Guidelines is an updated policy on change in control provisions to require companies to provide clear rationales for the treatment of unvested awards. Glass Lewis also clarified that boards should engage with shareholders and disclose shareholders’ concerns if a shareholder proposal receives significant support. Additionally, Glass Lewis will review reincorporation proposals on a case-by-case basis, focusing on changes in corporate governance and shareholder rights. Lastly, Glass Lewis noted its holistic approach in analyzing executive pay programs in which it considers factors like disclosure quality and alignment of pay with performance.

For a more extensive discussion of these and other policy changes, see our Market Edge blog post.

Companies that have policies or practices that may result in a negative vote recommendation from ISS or Glass Lewis are encouraged to consider whether to engage with either or both proxy advisory firms on the matters in question prior to their annual meetings. As these firms rely primarily on a company’s proxy statement disclosure in conducting their analyses and making vote recommendations, there is also an opportunity for companies to address any concerns by instituting appropriate changes and describing them in their proxy statements or clarifying their policies and/or practices in proxy statement disclosure.

Although the proxy advisory firms’ voting guidelines can be influential, many institutional investors have their own proxy voting policies and guidelines. Companies are encouraged to remain informed of the proxy voting guidelines of their major institutional investors. Understanding whether its shareholder base consists of institutional investors that follow the proxy advisory firms’ guidelines or their own guidelines can help a company to determine whether shareholder engagement on a particular issue is appropriate.

New SEC guidance

Staff Legal Bulletin 14M

On February 12, 2025, the staff at the Division of Corporation Finance at the SEC issued Staff Legal Bulletin 14M (SLB 14M), which provides guidance on the SEC’s review of requests under Rule 14a-8 of the Exchange Act, pursuant to which companies may exclude shareholder proposals from their proxy statements in certain circumstances. SLB14M rescinded Staff Legal Bulletin 14L, which had made it more difficult for companies to exclude shareholder proposals – under Rule 14a-8(i)(5) for lack of economic relevance if the proposal involved issues of broad social or ethical concerns related to a company’s business and under Rule 14a-8(i)(7) for ordinary business proposals – if they addressed issues with “broad societal impact.”

Under SLB 14M, the staff will focus on a proposal’s significance to a company’s business in deciding whether it will grant a company’s request for no-action relief related to a shareholder proposal under Rule 14a-8(i)(5). Accordingly, as stated by SLB 14M, proposals that “raise issues of social or ethical significance may be excludable, notwithstanding their importance in the abstract, based on the application and analysis of each of the factors of Rule 14a-8(i)(5) in determining the proposal’s relevance to the company’s business.”

Similarly, for no-action requests relying on Rule 14a-8(i)(7), the staff will focus on whether the proposal relates to a matter involving an individual company’s ordinary business operations, or raises a policy issue that transcends the individual company’s business operations instead of focusing on whether the proposal relates to an issue with broad societal impact or that is universally significant. Also, SLB 14M indicates that companies are no longer required to provide the board’s analysis of the policy issue raised and its significance in their no-action requests.

The timing of the SLB 14M release, when many companies are preparing for the proxy season and getting closer to filing their proxy statements, may provide some relief for companies seeking to exclude shareholder proposals. The staff has indicated that it will consider the guidance in place at the time it issues its response to a no-action request. Accordingly, companies may resubmit or supplement no-action requests to include arguments supported by SLB 14M that were not previously raised.

The staff has indicated that the publication of SLB 14M would be considered “good cause” if a company makes a new no-action request after the prescribed deadline specified for submitting no-action requests under 14a-8(j) has passed. While there are no certainties that the staff will respond to these new no-action requests on time for a company to meet its proxy filing deadlines, especially if a company would need to file a preliminary proxy statement, companies are encouraged to prepare for all eventualities, including drafting a statement in opposition if they ultimately decide to include the proposal given timing uncertainties. For more information regarding SLB 14M, see our blog posts here and here.

Schedule 13G Compliance and Disclosure Interpretation

On February 11, 2025, the SEC issued a new Compliance and Disclosure Interpretation (C&DI) that addresses the eligibility criteria for reporting beneficial ownership on Schedule 13G, rather than the longer and more onerous Schedule 13D. The new C&DI, which is intended to clarify the situations under which a shareholder’s engagement activities would require it to report on Schedule 13D instead of the shorter and more streamlined Schedule 13G that is available to passive investors.

Many institutional investors whose beneficial ownership of a company’s securities exceeds five percent report their ownership on Schedule 13G. Under the new C&DI, a shareholder that exerts pressure on a company to implement specific measures or changes in policy – including by conditioning its support for the election of directors on the adoption of measures or practices advocated by the shareholder – could be considered to be “influencing control,” which would require the shareholder to report its beneficial ownership on Schedule 13D.

This is a critical development, which – as we discuss under the “Shareholder engagement” section below – may impact the tone of the engagement and push investors to rely more heavily on the proxy access rules to drive certain agenda home. For more information on the C&DI, see our blog post here.

Other SEC guidance

While not directly impacting the drafting of the proxy statement, companies are encouraged to be aware of updated guidance from the SEC staff related to notice of exempt solicitations pursuant to Rule 14a -6(g)(1) under the Exchange Act, a discussion of which can be found on our blog post here. Exempt solicitations have been used by some parties as a relatively low-cost method of publicly stating their views and lobbying other shareholders on specific issues that are subject to a shareholder vote.

Board diversity

On December 11, 2024, the US Court of Appeals for the Fifth Circuit vacated the order that approved Nasdaq’s board diversity rules, which were approved by the SEC in August 2021 and were intended to increase disclosure of/improve board diversity. Under the rules, Nasdaq-listed companies were required to disclose certain gender and racial/ethnic demographic information about their directors in a mandated tabular format and to have at least two diverse directors (or explain why they do not). As a consequence of the decision, the disclosure is no longer required in proxy statements.

In addition, in January 2025, the Trump Administration issued an Executive Order (EO) that, among other things, directs the Attorney General and federal agencies “to combat illegal private sector [diversity, equity and inclusion] DEI preferences, policies, programs, and activities.” Attorney General Pam Bondi has also issued various memoranda indicating the US Department of Justice’s Civil Rights Division will investigate, eliminate, and penalize “illegal DEI” policies, programs, and activities in the private sector.

The proposition of federal enforcement actions to DEI programs and initiatives has spurred investors and other stakeholders to rethink some of their diversity policies. In updates to their proxy voting guidelines for the 2025 proxy season, some institutional investors have removed language stating that public companies should have a minimum number or percentage of women and/or racially/ethnically diverse directors.

Similarly, in February 2025, ISS – following the December 2024 announcement of its guideline updates for 2025 – announced that, beginning with the 2025 proxy season, it would no longer recommend “withhold” or “against” votes for the election or reelection of directors at companies that lack gender or racial/ethnic diversity, marking a shift in its policy on board diversity.

In March 2025, Glass Lewis announced that it would not change its diversity-related policies for the 2025 proxy season – but, for US companies with a director “against” vote, it would provide clients “a supporting rationale they can leverage if their preference is to vote differently from its recommendation.”

Furthermore, BlackRock, one of the largest institutional investors in the US, updated its proxy voting guidelines for 2025 to shift its focus from board diversity to board composition and removed references to minimum threshold expectations for board diversity. This is discussed in our related blog post.

In view of these developments, companies should consider a holistic approach in analyzing and determining what, if any, diversity information to include in their proxy statements. As part of this approach, companies may consider the risk of becoming a focus of regulatory authorities, expectations of shareholders and other stakeholders, the guidance from proxy advisory firms, and maintaining consistency with company policies and procedures.

Companies may have certain investors, customers, and employees appreciative of historical DEI efforts, but there are potential legal risks that could result from their diversity policies and practices and related disclosures. Efforts intended to diversify corporate boards (eg, through requiring diverse slates of nominees) could be construed as “illegal DEI” programs that would violate the EO and invite potential enforcement actions or other legal challenges.

While the EO does not define the term “illegal DEI,” and guidance is limited, companies are encouraged to consult with counsel to review their existing DEI policies, practices, and procedures. Public disclosure of DEI activities, including in the proxy statement and on company websites and social media, has invited scrutiny from the Federal Communications Commission – and this trend could continue.

Some companies have already reduced the diversity-related disclosure in their proxy statements. As of March 26, 2025, DLA Piper reviewed the proxy statements of 212 companies in the Fortune 500 or S&P 500 that filed proxy statements since the beginning of 2025 (the Early Proxy Filers) and compared their diversity-related disclosures to those in their 2024 proxy statements. One hundred eighty-two (182) of the 212 companies (over 86 percent), provided fewer diversity-related disclosures in their proxy statements, with 112 (nearly 53 percent) providing significantly less disclosure.

Board skills matrices

Although not required, it is common practice to include skills matrices in the proxy statement to highlight how the board’s composition allows it to exercise appropriate oversight of the company’s management and strategic goals. A skills matrix can identify gaps in the board’s competencies and can improve the board refreshment process.

As expressed in its Board Skills Appendix, Glass Lewis says that a board skills matrix can be a valuable tool for assessing a board’s mix of skills and experience, and can provide meaningful information to shareholders. According to the consulting firm Spencer Stuart, nearly three-quarters of the S&P 500 now include these matrices in their proxy statements. This is nearly double the percentage from four years ago and represents an annual increase of approximately seven percent over the past decade.

As the largest companies in the US continue to lead the trend on the disclosure of both board composition and directors’ skills, smaller public companies are encouraged to evaluate these practices in light of feedback they may be receiving from investors and expectations of proxy advisors.

Board risk oversight

Item 7 of Schedule 14A and Item 407(h) of Regulation S-K require companies to disclose the board’s role in the risk oversight of the company, how it administers its oversight function, and the effect on the board’s leadership structure. Companies are encouraged to ensure that their disclosures of the board’s risk management practices accurately reflect its activities and are aligned with its roles and responsibilities set forth in board committee charters.

Although the entire board may be responsible for overseeing a company’s risks, to the extent that certain risks have been allocated to specific committees, companies are encouraged to specify such allocations in their disclosures. For example, if the board delegates oversight of human capital-related risks to the board’s compensation committee and it is reflected in that committee’s charter, such disclosure is expected in the proxy statement.

Cybersecurity risks

Since the rule adoption on July 26, 2023, the SEC has required mandatory cybersecurity disclosures in a company’s Form 10-K pursuant to Item 106(c) of Regulation S-K. For information regarding the mandatory cybersecurity disclosures under Item 106(c), see our alert.

Among other things, Item 106(c) requires companies to disclose the board’s oversight of risks from cybersecurity threats, any board committee or subcommittee responsible for the oversight of risks from cybersecurity threats, and the process by which such committee or subcommittee is informed of such risks.

While the proxy rules do not require the disclosure of the management of cybersecurity risks – given the importance of cybersecurity matters to shareholders and other stakeholders, including the disclosure requirements of Item 407(h) discussed above – companies continue to address the board’s oversight of cybersecurity risks in their proxy statements and Forms 10-K.

Glass Lewis, for example, advises all companies to provide clear disclosures regarding the board’s role in overseeing cybersecurity issues, including the mechanisms through which companies are ensuring that directors are fully versed on the issue. In cases where companies address the management of cybersecurity risk in their proxy statements, they are encouraged to make sure that the disclosure of the board’s management of cybersecurity risks is consistent in both the Form 10-K and the proxy statement.

Artificial intelligence (AI)

As with cybersecurity matters, investors have a strong interest in understanding how the board is overseeing AI risks and what steps the company is taking to educate directors on new technologies, such as AI. For companies that use or develop AI, proxy advisors recommend they adopt strong internal guidelines that include ethical considerations and ensure adequate oversight of AI, and that skill gaps are addressed by engaging in continued board education and appointing directors with AI expertise. Companies that develop or employ the use of AI are encouraged to provide clear disclosure regarding the board’s oversight of issues relating to AI, including knowledge management and how the board will ensure that directors are versed in the topic.

For the 2025 proxy season, Glass Lewis updated its Benchmark Policy Guidelines to discuss its approach to the oversight of AI-related risks. Although Glass Lewis will generally not make voting recommendations on the basis of a company’s oversight and disclosure of AI-related issues, in situations where insufficient oversight and/or management of AI technologies result in harm to shareholders, Glass Lewis will review a company’s overall governance practices and identify directors and board committees responsible for the oversight of AI-risks.

In such cases, Glass Lewis will evaluate the board’s response to and management of AI, and associated disclosures, and may make negative vote recommendations for directors where it finds insufficient oversight, response, or disclosure concerning AI-related issues. Companies that have shareholder bases that could be influenced by Glass Lewis’s recommendations are encouraged to take note of its policy when crafting their AI-related risk oversight disclosure.

Assess ESG disclosures

In recent years, many US public companies have been voluntarily disclosing information regarding their environmental, social, and governance (ESG) risks and opportunities in their proxy statements. While many shareholders and other stakeholders have supported the disclosure of ESG information and continue to do so, there has also been increased opposition to ESG-related initiatives in the form of anti-ESG shareholder proposals, litigation, and regulations.

Given the rapidly changing regulatory landscape, it may be important for companies to take a close look at their prior disclosures and be thoughtful about what to disclose in their proxy statements regarding ESG related matters. For example, companies may use their proxy statement disclosures to show how their ESG-related initiatives contribute to their specific strategic goals and purpose and decrease business risk.

With the Trump Administration at the SEC, there will likely be less of a focus on ESG-related rulemaking and enforcement. As discussed in our blog post, in February 2025, the SEC requested that the US Court of Appeals for the Eighth Circuit – which is hearing the litigation related to the SEC’s climate risk disclosure rules – not schedule arguments so that the SEC can determine the appropriate next steps. This has been viewed by some as a likely indication that the SEC will abandon the climate rules that were adopted under the SEC’s Former Chairman Gensler.

Under Former Chairman Gensler, the SEC had also indicated that it would propose other ESG disclosure rules related to human capital and board diversity, in anticipation of which some companies had voluntary disclosed related metrics in their proxy statements. Observers believe that it is unlikely that the SEC will propose or adopt these or other ESG-related rules during the Trump Administration.

However, despite increased opposition to ESG, some companies may continue with their ESG programs and related disclosures for risk management, regulatory, or governance reasons. The proxy advisory firms and many institutional investors still have voting guidelines that may penalize directors of companies that do not demonstrate that the board provides adequate oversight of a company’s ESG risks.

For example, Glass Lewis’ Benchmark Policy Guidelines emphasize the importance of robust oversight of environmental and social issues by management and the board. If there is a failure to address these risks adequately, they may recommend shareholders hold directors accountable by voting against them or supporting relevant shareholder proposals. In addition, some US companies may be subject to foreign regulatory regimes, such as the European Union’s Corporate Sustainability Reporting Directive, which require disclosure of ESG information. Several states have also proposed or enacted legislation requiring the disclosure of greenhouse gas emissions and/or climate-related risks to which many companies may be subject, even in the absence of SEC-rulemaking.

Companies that provide voluntary ESG information in their proxy statements are encouraged to consider how ESG initiatives are aligned with the companies’ long-term strategic goals. Companies reassessing whether to reduce their ESG disclosure, including a decision to scale back ESG goals and strategies, may consider seeking feedback from their shareholders and other relevant stakeholders. If planning to revise their ESG goals and strategies, companies can carefully assess the bases of the various assumptions and projections that management will rely upon in establishing these new ESG goals and strategies to ensure that they can be reasonably achieved.

While it is uncertain whether the rise in greenwashing class action claims in the US will continue, it remains beneficial for companies to have appropriate controls and procedures to ensure the accuracy of their ESG-related disclosures. In addition to having strong controls and procedures with respect to the ESG information that is voluntarily disclosed in the companies’ proxy statements, companies are encouraged to actively assess whether these disclosures are consistent with disclosures in their other platforms, such as sustainability reports or company websites.

Some of the Early Proxy Filers have also reduced their ESG-related (excluding diversity) proxy statement disclosures. One hundred fifty-one (151) of the 212 Early Proxy Filers (approximately 71 percent) provided fewer ESG disclosures in their 2025 proxy statements as compared to their 2024 proxy statements, with 89 of the Early Proxy Filers (approximately 42 percent) providing significantly fewer ESG disclosures in 2025 as compared to 2024.

Shareholder engagement

A robust shareholder engagement program generally improves a company’s chances for a successful annual meeting outcome, acts as a bulwark against activism, and may help to inform its proxy statement disclosures. Companies design the scope and extent of such a program based on internal reviews of previous voting outcomes and prior feedback received from institutional investors. Such engagement may result in a company updating corporate policies and practices or enhancing the quality and transparency of its disclosures. By actively engaging with shareholders, companies can address concerns before they escalate, build trust, and demonstrate a commitment to good governance, which may lead to more favorable voting outcomes and stronger support from institutional investors in future meetings.

It may be prudent for companies to disclose their shareholder engagement activities in their proxy statements, as proxy advisory firms may recommend against directors at companies deemed to be unresponsive to shareholder concerns. For example, ISS may recommend against the election of certain directors if a company fails to act on a shareholder proposal that receives support from a majority of shareholders and if there has not been significant shareholder outreach. Similarly, Glass Lewis says that when 20 percent or more shareholders vote contrary to management, boards should engage with shareholders on the issue and demonstrate some level of responsiveness. The proxy advisory firms will generally look to a company’s proxy statement disclosure for evidence of its engagement efforts.

Shareholder engagement can also be instrumental to a company in getting support for its executive compensation program following a low say-on-pay vote. In evaluating executive compensation proposals, ISS will consider whether the company’s compensation committee has been adequately responsive to a prior say-on-pay proposal that received the support of less than 70 percent of votes cast. Also, under its voting guidelines, Glass Lewis expects the board of a company that receives more than 20 percent of votes cast against a say-on-pay proposal to demonstrate “a commensurate level of engagement and responsiveness to the concerns behind the disapproval, with a particular focus on responding to shareholder feedback.”

As a result, many companies will conduct outreach to their major institutional investors following a low say-on-pay voting result to get their input regarding the company’s executive compensation programs and any desired modifications. By conducting outreach to a significant number of these institutional investors following an annual meeting and describing the breadth and scope of a company’s outreach efforts in the proxy statement, a company may improve its chances for increasing support for its current say-on-pay proposal. In describing its engagement efforts in the proxy statement, a company may wish to include in its disclosure:

• The number or percentage of outstanding shares held by the shareholders that the company tried to engage
  
  
• The number or percentage of outstanding shares held by the shareholders with whom the company actually engaged
  
  
• The participants from the company, including the involvement of board members
  
  
• The specific feedback received, and
  
  
• Actions taken by the company in response to shareholder feedback.

It is not clear how institutional investors will modify their engagement activities with companies in response to the new C&DI relating to Schedule 13G eligibility. Some investors announced that they had temporarily halted their engagement activities as they assessed the implications of the guidance provided by the C&DI, although some engagement activities have since resumed. It is possible that institutional investors will be less willing to engage or will adopt less stringent policies and practices regarding voting against directors or management’s proposals in situations where the company’s practices are not aligned with their voting guidelines.

Disclose related party transactions

Related party transactions disclosures have generated recent enforcement activity by the SEC and interest from investors and other stakeholders. Under Item 7 of Schedule 14A and Item 404 of Regulation S-K, companies are required to disclose, subject to certain exceptions, transactions that have occurred since the beginning of their last completed fiscal year or are that are being proposed at the time of filing, with amounts exceeding $120,000, and involving a related person who has or will have a direct or indirect material interest. A related party includes any director or executive officer, any nominee for director, any immediate family member of a director or executive officer or nominee for director, or any person who is known to be the beneficial owner of more than five percent of any class of the company’s voting securities. Companies are required to disclose:

• The name of the related party, and the basis of relation
  
  
• The related party’s interest in the transaction, including the related person’s position(s) or relationship(s) with, or ownership in, a firm, corporation, or other entity that is a party to, or has an interest in, the transaction, and
  
  
• The approximate amount of the transaction and of the related party’s interest in the transaction. Companies must also disclose their policies for reviewing and approving related party transactions.

Failure to comply with the disclosure requirements for related party transactions can have a number of implications. For example, the SEC has recently brought charges against several companies for failure to disclose related party transactions. In addition, if companies are not properly tracking related party transactions with company directors, that could also impair the board’s ability to render informed decisions related to director independence.

The information required to assess the disclosure requirements of Item 7 of Schedule 14A and Item 404 of Regulation S-K is largely solicited through directors’ and officers’ (D&O) questionnaires. These questionnaires, which many companies will distribute near the end of their fiscal year, typically include questions that will allow the company to ascertain whether payments have been made to family members of executive officers or directors of the company, whether through employment or other arrangements, as such relationships have been implicated in recent SEC enforcement actions. Companies are encouraged to assess their internal controls often to ensure that related party transactions are reviewed and approved by the board’s audit committee.

Board independence determinations

Similarly, Item 7 of Schedule 14A and Item 407(a) of Regulation S-K require that companies disclose the independence of the members of their boards of directors and describe the transactions, relationships, and other arrangements involved in their determinations.

Independence determinations are typically dictated by the rules of the stock exchange on which the company’s securities are trading, which set forth the criteria for analyzing the independence of a director or director nominee, including information about current or prior service as an employee or executive officer of the company (or having a family member with such status) and certain business relationships. In addition, the proxy advisory firms and some institutional investors also have requirements for independence under their guidelines that are similar to the stock exchange rules.

Companies listed on New York Stock Exchange and Nasdaq are required to evaluate not only compliance with the “bright line” independence test imposed by the stock exchange rules, but also specific facts and circumstances which, in the opinion of a company’s board of directors, would interfere with a director’s exercise of independent judgment in carrying out the responsibilities of a director.

Moreover, companies are encouraged to discuss with outside counsel learnings from caselaw developments around director independence. Any relationships or situations that may impact a director’s ability to exercise independent judgment should be considered – including personal and business relationships between directors and company executives or other non-independent directors – and disclosed in the proxy statement as necessary. The SEC may bring an enforcement action against a company for failing to consider the impact of such a relationship on a director’s independence, or it may give rise to derivative claims.

Pay versus performance

The 2025 proxy season will mark the third year since the implementation of the SEC’s pay versus performance disclosure requirements. Item 402(v) of Regulation S-K requires companies to provide tabular disclosure of the relationship between executive compensation and financial performance of the company as measured by total shareholder return for the company, total shareholder return for the company’s peer group, the company’s net income, and another financial performance measure chosen by the company.

Companies using non-GAAP measures in these disclosures should be aware that such measures result in frequent comments from the SEC requiring, among other things, disclosure of how the non-GAAP measures are calculated from comparable GAAP measures, and that any discussion of non-GAAP measures be accompanied by an equal or more prominent discussion of the comparable GAAP measure. Other concerns raised by the SEC include the comparability of the selected peer group in terms of size, industry, geographic reach, and business model, as well as any changes in the composition of the peer group from previous filings without proper or sufficient explanation.

Clawbacks

As we discuss in our client alert, pursuant to Exchange Act Rule 10D-1, which was adopted under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), companies are required to adopt clawback policies for the recoupment of erroneously awarded payouts to current or former executive officers in the event of an accounting restatement or correction to previous financial statements.

In addition to certain disclosure requirements in Form 10-K, companies must also disclose in their proxy statements any action taken during the last completed fiscal year to recover erroneously awarded compensation. If a company has recouped an incentive award under its clawback policy, it should be mindful of its obligation pursuant to Instruction 5 to Item 402(c) of Regulation S-K to disclose the effect of any recovered amount in the summary compensation table of the proxy statement.

Proxy advisors support robust and broad clawback policies to mitigate excessive risk-taking and ensure accountability among executives, advocating for broad policies that permit recoupment in cases not just of material financial restatements, but also misconduct, negligence, or other actions that significantly harm the company’s financial position or reputation.

For example, Glass Lewis encourages policies calling for the clawback of variable incentive payments, regardless of whether they are time or performance-based, when there is evidence of problematic decisions or actions. Likewise, ISS has defined a “robust” clawback policy as one more expansive than the minimum Dodd-Frank requirements, to cover all time-vesting equity awards.

Companies that have adopted and disclose policies that go beyond the requirements of Rule 10D-1 may be viewed more favorable by proxy advisors and institutional investors. Accordingly, these companies may consider discussing the full scope of their clawback policies in their proxy statements.

Officer exculpation

Following the amendment to the Delaware General Corporation Law (DGCL) allowing companies to amend their governing documents to exculpate certain officers from personal liability for monetary damages for breaches of fiduciary duties, 600 companies have held votes to amend their charters to provide for officer exculpation as of February 22, 2025, according to data provided by Deal Point Data. Shareholders at 529 of such companies (88 percent) approved those amendments.

Companies considering amending their charter during this proxy season to include officer exculpation provisions must be mindful of its effects on the timing of the proxy statement. Since a charter amendment proposal is not considered to be “routine,” under the SEC’s proxy rules, Delaware corporations are required to file preliminary proxy statements at least ten calendar days prior to the filing of definitive proxy statements.

Such companies should also be mindful of Section 242 of the DGCL, which requires the affirmative vote of a majority of a company’s outstanding shares entitled to vote on the amendment in order to amend its charter. This is a more challenging vote requirement than “the affirmative vote of the majority of shares present in person or represented by proxy,” which is the vote standard typically required to approve a proposal under Section 216 of the DGCL.

Accordingly, companies that have low shareholder participation at their annual meetings may have to undertake additional efforts such as using a proxy solicitation firm to get the requisite number of votes to approve the charter amendment.

ISS’s policy is to review these proposals on a case-by-case basis, and it recommends voting for proposals providing expanded coverage in certain limited cases. Glass Lewis has adopted a policy of recommending against proposals eliminating monetary liability for breaches of the duty of care for corporate officers, unless the board provides a compelling rationale for the proposal, and the provisions are reasonable.

Notwithstanding the policies of the proxy advisory firms, as noted above, a high percentage of such proposals have been approved by shareholders. It is important to note that a supermajority vote was required at roughly half of the companies at which the proposal was not approved.

Confirm applicable voting standards

Item 21 of Schedule 14A requires companies to disclose the vote required for the approval or election for each item required to be voted upon by shareholders at their annual meetings. Accordingly, companies are encouraged to confirm the applicable voting standard for each proposal to be voted on at their annual meeting in advance of drafting the proxy statement. For this analysis, companies must review their organizational documents as amended, as well as any applicable state laws and stock exchange requirements.

Item 21 also necessitates the disclosure of the methods by which votes will be counted, including the treatment of abstentions and broker non-votes, which are votes that cannot be cast by brokers on behalf of beneficial owners that do not provide voting instructions. Failure to accurately disclose the vote required to approve proposals and the treatment of abstentions and broker non-votes can subject companies to liability for making false statements in violation of Rule 14a-9 of the Exchange Act.

Conclusion

Given the new disclosure requirements for the 2025 proxy season, recent SEC staff guidance, and the significant policy changes under the Trump Administration, companies drafting their proxy statements are encouraged to take a proactive approach to ensure compliance with new regulatory requirements, with enough time to facilitate meaningful engagement with shareholders.

In drafting the proxy statement, companies are encouraged to not only fulfill their disclosure requirements under the proxy rules, but also take a hard look at how their voluntary disclosures may be viewed by shareholders and other stakeholders in light of shifting regulations and expectations for corporate conduct.

By understanding the proxy statement’s disclosure requirements, shareholder expectations, and the utility of the proxy statement as a communications tool, companies can craft effective disclosures that could facilitate successful outcomes for their annual shareholder meetings in 2025 and avoid potential legal pitfalls.