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Consider Updates to D&O Questionnaire as Pressure Mounts for Voluntary Racial, Ethnic and Gender Diversity Disclosures

As the pandemic and racial unrest continue in 2020, companies should consider whether to update their D&O questionnaires to gather information in response to the growing pressure for voluntary diversity disclosures from investors, proxy advisors, activists and others, as noted in our recent posts on August 3 and August 10.

Boards grappling with the possibility of voluntary diversity disclosures must consider how to accurately collect data.  In February 2019, the SEC issued Compliance and Disclosure Interpretation 133.13 requiring certain disclosures if a board or nominating committee considers self-identified diversity characteristics of an individual who has consented to the company’s disclosure of those characteristics.  Companies understandably were slow to address self-identification of diversity traits in D&O questionnaires, given the sensitivity of the topic.

But now, as pressures mount and some companies publicly pledge to add diverse directors to their boards within one year, the annual D&O questionnaire can be a useful way to document the issue and provide a basis for any voluntary disclosures a company may decide to make.  Given the sensitivity of the issue, companies could consider discussing the topic in advance of circulating the questionnaire in order to evaluate whether or how directors wish to proceed. To maintain collegiality, companies should make clear responses are optional, and take care to avoid any implication that particular directors were appointed because of their race, gender or other characteristics.  In lieu of a questionnaire, the board could consider addressing self-identification disclosures during a board meeting or in

Registered U.S. Securities Offerings in the COVID-19 Pandemic

Despite the ongoing COVID-19 pandemic, companies continue to access the capital markets.  In fact, liquidity concerns have put even greater emphasis on securities offerings for some companies.  But there can be no question that COVID-19 has affected capital market transactions and companies should be mindful of the new environment.

Companies should consider a variety of offering issues that have been affected by the ongoing health crisis.  These include:

Access to the market.  Companies should consult with financial advisors as to the feasibility of offerings during this turbulent time.  Companies may need to be much more flexible in timing and pricing their offerings.

Disclosure.  As always, companies must evaluate the sufficiency of their disclosures.  The difference now is that there may be a higher risk than usual as to whether all material nonpublic information has been disclosed.  The SEC staff has encouraged disclosure to be as timely, accurate and as robust as practicable under the circumstances created by the COVID-19 pandemic.  The Chairman of the SEC and the Director of the Division of Corporation Finance have pressed publicly for these robust disclosures to include management’s expectations about the effects of the pandemic going forward as well as the effects thus far.  They suggested that detailed discussions of current liquidity positions and expected financial resource needs, as well as company actions to protect worker health and well-being and customer safety, could all be material to investors and encouraged disclosure.  As we have previously discussed, companies need to give special

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