In the past year, Mayer Brown’s Larry Cunningham has twice testified before Congress on aspects of corporate governance and securities disclosure, along with co-authoring several comment letters on such topics as the SEC’s climate disclosure proposal and the FDIC’s corporate governance proposal.  Most recently, his written testimony from last month’s hearing on oversight of the SEC is now posted on SSRN where it may be downloaded for free (registration may be required).  

Download Larry’s testimony here.

The SEC’s Chief Accountant is a watchdog, among those who ensure high quality auditing in the complex world of financial reporting. For years, this role has admonished auditors to be skeptical and audit committees to be independent, as the Sarbanes Oxley Act of 2002 mandated. Paul Munter, current SEC Chief Accountant, recently gave an important speech that briefly, but powerfully, reaffirmed these basic rules. All directors should pay attention, especially audit committee members.

As the legal supervisors of a company’s auditor, audit committees have a crucial role in promoting audit quality and protecting investors, Mr. Munter said. Audit quality is necessary for making financial reporting reliable and useful, which in turn affects investor trust and market efficiency. However, audit quality can be impaired by various factors, such as management preferences, auditor optimism, or audit committee supineness, Mr. Munter noted.

To do their duties and protect investors, audit committees should follow these guidelines, Munter said, which I have restated as a kind of ten commandments for audit committees:

  • pick an auditor based on its ability and skill to perform a high-quality audit with professional skepticism, considering the auditor’s industry expertise and its record in professional inspection reports
  • pay and oversee the auditor to focus on and improve audit quality and protect investors
  • avoid close ties with the company or its management that may impair audit quality or investor interests
  • review the auditor’s performance regularly using relevant measures and feedback, including engagement hours and staffing mix and audit judgments
  • back the auditor’s independence and help it use professional skepticism
  • build a strong professional relationship with the auditor, separate from management
  • have regular, candid and thorough conversations with the auditor on financial reporting and internal control issues
  • ask the auditor tough but reasonable questions to check audit quality
  •  talk directly with the audit team and show the audit committee’s support
  • observe and assess the tone and quality of the auditor’s interactions with management
  • intervene when necessary to present or resolve any conflicts or disputes between management and the auditor    

These guidelines are not new, and they can be stated in different ways. But they are worth repeating, remembering and upholding, especially in times of uncertainty and rapid change, which create significant challenges and risks for financial reporting and auditing. While all audit committee members are and must be financially literate—and all committees include at least one accounting expert—they all must also remember that they too are watchdogs.

Directors & Boards has published Larry Cunningham’s thought leadership piece on how the ESG movement has fizzled and what hurdles it might face over the next three months to three years.

Over the past few years, the ESG movement gained a broad following across corporate America, with a proliferation of related management and investment strategies to advance ESG priorities.

But in the past year, the ESG movement risked stalling, amid scrutiny revealing the insincerity of managerial proponents and a declining level of both returns and enthusiasm among funds and individuals alike.

What accounts for the rise and stall of ESG and what might we expect in the next three years?

Continue reading at Directors & Boards here.

We use generative AI to turn the first batch of 10-K filings describing cybersecurity into a model that can guide others in creating their own disclosure.

The SEC’s new rules on the disclosure of cybersecurity matters were finalized on July 26, 2023, and in effect since December 2023. Directors & Boards recently published a review of filings disclosing cyber incidents, required since December 18, 2023, to be reported in a Current Report on Form 8-K. This companion post draws on the vastly larger number of filings of Annual Reports on Form 10-K disclosing cybersecurity management, strategy and governance, that is now required. 

In a novel exercise, we enlisted generative AI trained on a large sampling of such Annual Reports to produce a template of the disclosures being made under the new regulations. While it is no substitute for a context-based tailored disclosure exercise, it is likely to be illuminating to those responsible for drafting and approving this disclosure. We first set forth the text of the rule before presenting the template.  Read more >>

Bloomberg Law has published Larry Cunningham’s opinion piece on this high-visibility lawsuit.

Exxon Mobil Corp. recently attracted significant attention after suing two climate activists who sent a shareholder proposal asking that the company set stringent targets to slash its greenhouse gas emissions and those of its customers. 

If implemented, the proposal would effectively place a hard limit on the company’s growth and ability to deliver returns for its shareholders, a clear misuse of a process intended to give shareholders a voice on important issues that affect their economic interests.

However, shortly after being confronted with the prospect of having a court of law—instead of the Securities and Exchange Commission—review whether their proposal was legal, the activists, Arjuna Capital and Follow This, decided to withdraw. Their action is likely a tacit acknowledgement that the proposal ran afoul of the SEC’s rules governing shareholder proposals. While this episode may appear to be an Exxon-specific issue, it is a sign of a bigger problem: how the SEC has allowed the misuse of shareholder proposals by a few individuals and groups with private agendas despite their own rules.

Read more on Bloomberg Law.

The SEC announced late last week that it has abandoned its rulemaking efforts begun last May to compel disclosure of share buyback rationales and data. The turnabout follows an October court ruling that the SEC failed to follow required procedures in adopting the rule and the SEC’s indication in December that it could not cure the defects in the time the court allotted. The SEC therefore announced that applicable requirements revert to those in effect before its rulemaking effort.

The episode not only ends the SEC’s efforts on the share buyback front but bodes ill for the SEC’s other recent rulemaking efforts, including its climate disclosure rule proposal. On the buyback front, state law lets corporations repurchase their shares and leading investors say buybacks can be a rational shareholder-friendly decision. But proponents of the stakeholder model of corporate governance criticize buybacks as harmful to workers or social equality. 

Read more>>

It’s well known that the SEC’s pending climate disclosure rule stoked a great deal of debate, particularly concerning the costs and benefits and questions of the SEC’s authority. Equally important are some less dramatic but more profound practical concerns about the rule’s auditing requirements. 

Consider the views on this topic of CohnReznick, a national accounting firm with an SEC audit practice consisting of middle-market public companies. CohnReznick supports the SEC’s objective to bring about consistent, comparable and reliable information to investors to enable them to make informed judgments about the material impacts of climate-related risks and mitigation activities of SEC issuers.

However, the firm also expresses concerns related to the integrity and auditability of information that the proposal envisions be included in the scope of SEC issuers’ annual audited financial statements pursuant to Regulation S-X. The firm encourages the SEC to consider alternative placement of such disclosures and reduction of their granularity. 

Read the firm’s thoughtful comment letter here, on our Across The Board Resources page.  

Mayer Brown’s Larry Cunningham testified today before the House Financial Services Committee at a hearing titled: Oversight of the SEC’s Proposed Climate Disclosure Rule: A Future of Legal Hurdles.

The SEC’s proposed climate risk disclosure rules, which we discussed here have proven to be quite controversial and generated significant comment from market participants.  The SEC is anticipated to finalize the rules soon and these may be subject to challenge.

Watch Larry’s testimony here. Read Larry’s testimony here.


Private companies face unique challenges and opportunities when it comes to designing and implementing executive compensation plans. Unlike public companies, which are subject to extensive disclosure and regulatory requirements, private companies have more flexibility and discretion in determining how to reward and retain their key talent.  Private companies must balance a variety of interests as well, including those of owners and other investors as well as employees and customers.  Compensation practices should align with strategic goals and market realities. In this post, we review some trends and insights gleaned from executive compensation surveys that focus on private companies, especially startups, and discuss some implications and best practices for our private company clients.

In the second of three reviews of compensation surveys, we examine trends in private company compensation. Read more >>


Historically, public company directors served without pay and with light workloads. Even after 1969, when Delaware law first authorized directors to set their own compensation, pay remained nominal. Directors generally kept a low profile, with a mandate often limited to advising or cheering on the chief executive. 

All that has changed—gradually for several decades and more rapidly in recent years. Today, serving as a public company director entails increased demands on directors, along with related liability risks.  Directors are expected to adhere to stringent independence standards; preside over both strategic direction and oversight of every possible risk; and be on call to respond to crises. 

In the first of three reviews of compensation surveys, we examine trends in director compensation. Read more >>