Winter 2025-2026 Corporate Communicator

Dear clients and friends,

We present our traditional year-end issue of Snell & Wilmer’s Corporate Communicator to help you prepare for the upcoming annual report and proxy season. This issue highlights SEC reporting and corporate governance considerations that will likely be important this annual meeting season, as well as in the upcoming year. We are also pleased to present our 2025 Tombstone, which highlights selected deals that Snell & Wilmer’s Corporate & Securities Group helped clients with during the year.

During 2026, members of our Corporate & Securities Group will continue to publish the Corporate Communicator, host business presentations, and participate in seminars that address key issues of concern to our clients. First on the calendar is our Eighteenth Annual Proxy Season Update, on Thursday, January 8, 2026. This year’s event will again take place at our Phoenix office located at Cityscape.

As always, we appreciate your relationship with Snell & Wilmer, and we look forward to helping you make 2026 a successful year.

Very truly yours,

Snell & Wilmer’s Corporate & Securities Group

CLIMATE DISCLOSURE RULES – STATUS UPDATE
 
In March 2024, the Securities and Exchange Commission (the “SEC”) adopted final climate disclosure rules intended to create a disclosure regime relating to climate risks and other climate-related matters (the “Climate Disclosure Rules”). As discussed in our Winter 2024-2025 Corporate Communicator, various parties challenged the Climate Disclosure Rules with the resulting litigation being consolidated in the U.S. Court of Appeals for the Eighth Circuit (the “Eighth Circuit Court”). Consequently, in April 2024, the SEC voluntarily stayed the effectiveness of the Climate Disclosure Rules to facilitate the orderly judicial resolution of the challenges.

In March 2025, the SEC voted to end its defense of the Climate Disclosure Rules and subsequently informed the Eighth Circuit Court of its defense withdrawal. In response, 18 states and the District of Columbia intervened and filed a motion with the Eighth Circuit Court to hold the case in abeyance. In April 2025, the Eighth Circuit Court granted the intervening parties’ motion and directed the SEC to file a status report addressing, among other things, whether the SEC intended to review or reconsider the Climate Disclosure Rules.

In July 2025, the SEC submitted its status report to the Eighth Circuit Court indicating that it did not intend to review or reconsider the Climate Disclosure Rules “at this time” and requested that the Eighth Circuit Court terminate the abeyance, continue considering the parties’ arguments and exercise its jurisdiction to decide the case. The intervening parties responded by asking the Eighth Circuit Court to continue to hold the case in abeyance until the SEC “clearly indicates what it intends to do with the [Climate Disclosure] Rules, including whether it will rescind the [Climate Disclosure] Rules if the [Eighth Circuit] Court upholds them.”

In September 2025, the Eighth Circuit Court ordered that the case be held in abeyance until such time as the SEC reconsiders the Climate Disclosure Rules either by notice-and-comment rulemaking or by renewing its defense. The Eighth Circuit Court also stated that it is the SEC’s responsibility to determine whether the Climate Disclosure Rules will be rescinded, repealed, modified, or defended in litigation. Given the current makeup of the SEC, we believe it is unlikely the SEC will take any such further action at this time. While the Climate Disclosure Rules continue to remain on hold in the judicial system, issuers should continue to follow guidance set forth under the SEC’s February 2010 Commission Guidance Regarding Disclosure Related to Climate Change (the “SEC Climate Guidance”). In addition, issuers are reminded of the SEC’s Sample Letter to Companies Regarding Climate Change Disclosures issued in 2021, which builds on the SEC Climate Guidance, each of which was discussed in greater detail in our Winter 2021-2022 Corporate Communicator.

ROUNDTABLE ON EXECUTIVE COMPENSATION DISCLOSURE REQUIREMENTS

In June 2025, the SEC hosted a roundtable discussion on executive compensation disclosure with panelists comprised of representatives from public companies, investors, advisors, and other stakeholders in the field. SEC Chairman Paul Atkins noted in his opening remarks that the executive compensation disclosure rules should be grounded in achieving the SEC’s three-part mission: investor protection; fair, orderly, and efficient markets; and capital formation. Further, compliance with the rules should be cost-effective for companies, and the information required to be disclosed should be material to the company and understandable to a reasonable investor, including being conveyed in plain English. The roundtable was intended to be one of the first steps in considering whether the current executive compensation disclosure requirements achieve these objectives, and if not, how the rules should be refined.

While the panelists presented a range of differing views on the various topics discussed, many seemed to be of the view that the current executive compensation disclosure rules are overly complex and burdensome. Various panelists also advocated for a more simplified disclosure framework and a shift towards more principle-based (rather than prescriptive-based) disclosure requirements to reduce redundant requirements, better align disclosures with compensation decision processes, and focus on material information for investors.

The pay-versus-performance (PvP), CEO pay ratio, and clawback rules mandated under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, in particular, were extensively debated as some panelists believed these rules in their current form produce a compliance-heavy burden due to the complexity of the rules, limited comparability across companies, and/or disproportionate cost to companies without delivering corresponding benefits to investors. On the other hand, the “say-on-pay” rules generally received praise from panelists as many believed these rules have served as a catalyst for increased shareholder engagement. 

Following the roundtable, the SEC asked members of the public who wished to provide their views on the executive compensation disclosure requirements to submit their comments to the SEC, which are available on the SEC’s website. As the SEC considers the comment letters and roundtable feedback, we expect to see proposed rules from the SEC to meaningfully amend its current executive compensation disclosure requirements. 

CYBERSECURITY DISCLOSURE RULES FACING CRITICISM

In July 2023, the SEC adopted final rules relating to enhanced cybersecurity disclosures as previously discussed in our Fall 2023 Corporate Communicator (the “Cybersecurity Disclosure Rules”). At the time of adoption, Commissioners Hester Peirce and Mark Uyeda each issued a dissenting statement criticizing the rules.

Since then, the Cybersecurity Disclosure Rules have continued to face criticism and calls for recission. For example, in March 2025, the Chairman and members of the U.S. House Financial Services Committee sent a letter to the SEC calling for the withdrawal of several final and proposed rules, including the Cybersecurity Disclosure Rules, arguing that such rules have made the U.S. capital markets less attractive to public companies and imposed undue burdens.

Additionally, in May 2025, Securities Industry and Financial Markets Association, The American Bankers Association, Bank Policy Institute, Independent Community Bankers of America and Institute of International Bankers petitioned the SEC to rescind the Item 1.05 disclosure requirements of Form 8-K relating to material cybersecurity incidents. The petitioning organizations’ concerns related to, among other things: issues with premature disclosure of cybersecurity incidents; conflicts with confidential reporting requirements intended to protect critical infrastructure and warn potential victims; interference with incident response and law enforcement investigations; market confusion and uncertainty resulting from having to distinguish between mandatory and voluntary disclosures; and weaponization of the disclosure requirements as an extortion method by ransomware criminals.

Moving forward, it remains to be seen whether the SEC will take any action to revise or rescind the Cybersecurity Disclosure Rules to address the various concerns.

POTENTIAL ADOPTION OF SEMI-ANNUAL REPORTING

On September 15, 2025, on his Truth Social platform, President Trump revived the call he made during his first term to change the current quarterly public company reporting regime mandated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to reporting on a semi-annual basis as a cost-savings measure for corporations and to promote longer-term focus by management. In response to President Trump’s social media post, the SEC indicated that it is prioritizing the matter,¹ with SEC Chairman Atkins welcoming the reexamination of quarterly reporting rules under U.S. federal securities laws, which have been in place since 1970, in an interview with CNBC’s “Squawk Box” on September 19, 2025.²

The SEC’s Spring 2025 regulatory agenda, released on September 4, 2025 as part of the Office of Information and Regulatory Affairs’ Unified Agenda of Regulatory and Deregulatory Actions (the “Spring 2025 Reg Flex Agenda”), includes, among other things, deregulatory rulemaking proposals to amend existing rules “to improve and modernize them as well as address disclosure burdens.”³ Although the Spring 2025 Reg Flex Agenda does not explicitly include the topic of changes to the frequency of public company periodic reporting, proposed changes to the frequency of periodic reporting could be addressed under topic “Rationalization of Disclosure Practices,” which is in the proposed rulemaking stage. In connection with this agenda item, the “Division is considering recommending that the SEC propose rule amendments to rationalize disclosure practices to facilitate material disclosure by companies and shareholders’ access to such information.”⁴

During his interview with CNBC, Chairman Atkins suggested that a rule change could take the form of public companies determining for themselves the appropriate cadence for their financial reporting, whether semiannually, quarterly, or other timing. Chairman Atkins reminded the audience that foreign private issuers currently are subject to semiannual, rather than quarterly, reporting, and given that the change from semiannual reporting to quarterly reporting was instituted in 1970, it is sensible to review the ways in which investors obtain information in modern times, the information that is provided to investors, and the purpose for periodic reporting in order to assess the appropriate periodic reporting frequency to be required of public companies. 

SEC rulemaking on proposed changes to the frequency of periodic reporting could take some time given that the SEC will need to prepare and vote on a proposal, solicit and consider comments on such proposal, and prepare an adopting release to approve the final rule amendment. However, the SEC may be able to expedite the time it would typically take to prepare a proposal by referring to input gleaned from the public comment period when the same topic was first raised for public comment in December 2018 and from a roundtable discussing quarterly reports and earnings releases in July 2019. 

Another challenge to the speed with which a change to periodic reporting frequency can occur depends on the extent of the SEC’s authority granted under Section 13(a)(2) of the Exchange Act (“Section 13(a)(2)”). Section 13(a)(2) states that every issuer with a security registered pursuant to Section 12 of the Exchange Act must file with the SEC, in accordance with such rules and regulations as the SEC may prescribe as necessary or appropriate for the proper protection of investors and to insure fair dealing with the security, “[s]uch annual reports (and such copies thereof), certified if required by the rules and regulations of the Commission by independent public accountants, and such quarterly reports (and such copies thereof), as the Commission may prescribe” (emphasis added). Since Section 13(a)(2) arguably requires issuers to file quarterly reports, Congressional approval of a change to Section 13(a)(2) may be required in order to eliminate the quarterly report requirement.

In the event that domestic registrants are no longer required to file quarterly reports on Form 10-Q, a company may nevertheless be influenced by investors and analysts to continue to disclose its quarterly results. According to academic data cited in a 2016 SEC release on whether to modify disclosure rules, companies issued quarterly reports as far back as 1923, and 60% of NYSE-listed companies issued quarterly reports before the SEC was created.⁵

Furthermore, should semi-annual reporting be adopted, before taking advantage of the resulting reduction in reporting burdens, a company would be required to consider, among other things, the impact of semi-annual reporting on its ability to raise capital, securities trading by its insiders, possible changes to internal control over financial reporting, and covenants in debt instruments that might require quarterly reporting of financial reporting. NYSE-listed companies should continue to be mindful that Section 203.02 of the NYSE Listed Company Manual requires companies listed on the NYSE to disseminate interim earnings releases as soon as interim financial statements are available.

RULE 14a-8 — SHAREHOLDER PROPOSALS — UPDATE REGARDING THE DIVISION OF CORPORATION FINANCE’S ROLE FOR THE CURRENT PROXY SEASON

On November 17, 2025, the SEC’s Division of Corporation Finance (the “Division”) announced that, except for no-action letters seeking to exclude shareholder proposals under Rule 14a-8(i)(1) under the Exchange Act, which permits a company to exclude a proposal that is not a proper subject for action by shareholders under the laws of the jurisdiction of a company’s organization, the Division will not be responding substantively to no-action requests to exclude shareholder proposals under Rule 14a-8 for the current proxy season (October 1, 2025 – September 30, 2026) or to requests received by the Division before October 1, 2025 to which it has not yet responded. 

Pursuant to Rule 14a-8(j), companies intending to exclude shareholder proposals from proxy materials must still notify the SEC and proponents no later than 80 calendar days before filing a definitive proxy statement. A company that intends to exclude a shareholder proposal pursuant to a basis other than under Rule 14a-8(i)(1) and that wishes to receive a response from the Division must include, as part of its notification pursuant to Rule 14a-8(j), an unqualified representation that the company has a reasonable basis to exclude the proposal based on the provisions of Rule 14a-8, prior published guidance from the SEC staff, and/or judicial decisions. In such situations, the Division will respond with a letter indicating that, based solely on the company’s or its counsel’s representation, the Division will not object if the company omits the proposal from its proxy materials. However, in providing its response, the Division will not evaluate the adequacy of the representation or express a view on the basis or bases the company intends to rely on in excluding the proposal. Alternatively, companies may exclude a shareholder proposal (based on a good faith judgment that such proposal is excludable) without seeking a response from the Division (without including the unqualified representation).

If a company that determines it has a defensible basis or bases for excluding a shareholder proposal (either with or without including an unqualified representation to the Division), in order to protect itself from, for example, concerns raised about governance practices⁷ or litigation risk, a company should memorialize the analysis underlying the determination to exclude a shareholder proposal under Rule 14a-8(i) based on a review of pertinent SEC rules, SEC guidance, SEC responses to no-action letters, and case law. Companies must also consider that the notification under Rule 14a-8(j) must include why the company believes it may exclude the proposal, which should, if possible, refer to the most recent applicable authority, such as prior Division letters issued under Rule 14a-8 and, when such reasons are based on matters of state or foreign law, a supporting opinion of counsel. Finally, in light of the possibility that an activist shareholder may bring a floor proposal at the annual meeting, a company should keep in mind Rule 14a-4(c)(2) under the Exchange Act, which generally allows a company to exercise its discretion to vote on a matter if it includes, in the proxy statement, information about the proposal and states how it intends to exercise its discretion to vote on the proposal.

The Division will continue to review no-action requests to exclude shareholder proposals under Rule 14a-8(i)(1) in light of recent developments regarding the application of state law and Rule 14a-8(i)(1) to precatory proposals, i.e., proposals calling for actions that are not binding on the company. In particular, in his keynote address at the John L. Weinberg Center for Corporate Governance’s 25th Anniversary Gala in October 2025⁶ (the “Keynote Address”), Chairman Atkins posed the question of whether precatory proposals are a “proper subject” for action by shareholders under Delaware law. As the reasoning goes, if there is no fundamental right under Delaware law for a company’s shareholders to vote on precatory proposals, and a company’s governing documents have not created this right, then a precatory shareholder proposal submitted to a Delaware company is arguably excludable under Rule 14a-8(i)(1). Should a company make this argument and obtain an opinion of counsel that the proposal is not a “proper subject” for shareholder action under Delaware law, Chairman Atkins suggested that the SEC staff would honor the company’s position in its no-action request to exclude the shareholder proposal under Rule 14a-8(i)(1).

RULE 14a-8 — LEGAL BULLETIN NO. 14M

When evaluating whether a shareholder proposal may be excluded under Rules 14a-8(i)(5) or 14a-8(i)(7), companies should be mindful of Staff Legal Bulletin (“SLB”) No. 14M that was published by the Division in February 2025, which replaced SLB No. 14L. SLB No. 14M provides updated guidance on the application of the “economic relevance” exclusion set forth under Rule 14a-8(i)(5) (which, inter alia, permits a company to exclude a proposal on the basis the proposal relates to operations which account for less than five percent of the company’s total assets at the end of its most recent fiscal year, and for less than five percent of its net earnings and gross sales for its more recent fiscal year, and is not otherwise significantly related to the company’s business), and the “ordinary business” exclusion set forth under Rule 14a-8(i)(7) (which permits a company to exclude a proposal on the basis the proposal deals with a matter related to the company’s ordinary business operations). 

With respect to the economic relevance exclusion, the Division’s analysis focuses on (or would have focused on) a proposal’s significance to the company’s business when it otherwise relates to operations that account for less than five percent of total assets, net earnings, and gross sales. Such analysis is dependent upon the particular circumstances of the company to which the proposal is submitted. That being said, the Division indicated that it would generally view substantive governance matters to be significantly related to almost all companies.

With respect to the ordinary business exclusion, the SEC has stated that the policy underlying such exclusion rests on two central considerations: (1) the proposal’s subject matter, and (2) the degree to which the proposal micromanages the company. With respect to the first consideration, the Division indicated that the SEC staff will, rather than focusing solely on whether a proposal raises a policy issue with broad societal impact or whether particular issues or categories of issues are universally “significant,” focus on whether the proposal deals with a matter relating to an individual company’s ordinary business operations or raises a policy issue that transcends the individual company’s ordinary business operations.

RULE 14a-8 — SHAREHOLDER PROPOSAL MODERNIZATION

The topic of Shareholder Proposal Modernization is included in the SEC’s Spring 2025 Reg Flex Agenda. In the proposed rulemaking stage, the Division is considering recommending that the SEC propose rule amendments to modernize the requirements of Rule 14a-8 to reduce compliance burdens for registrants and account for developments since the rule was last amended. Action on the proposed rulemaking is slated for April 2026.

SEC’S CONCEPT RELEASE ON FOREIGN PRIVATE ISSUER ELIGIBILITY

Foreign private issuers (“FPIs”) benefit from certain accommodations and exemptions from disclosure and filing requirements under federal securities laws. At the time when such accommodations were adopted, the SEC’s understanding was that most eligible FPIs would be subject to meaningful disclosure and other regulatory requirements in their home country jurisdictions, and that FPIs’ securities would be traded in foreign markets. In light of significant changes in the global capital markets and characteristics of FPIs over the last two decades, on June 4, 2025, the SEC published a concept release soliciting public comment on whether the definition of FPI should be amended to protect U.S. investors while continuing to facilitate capital formation.

Currently, a foreign issuer other than a foreign government qualifies as a foreign private issuer if (i) 50% or less of its outstanding voting securities are directly or indirectly held by U.S. residents, or (ii) more than 50% of its outstanding voting securities are directly or indirectly held by U.S. residents and it has none of the following contacts with the United States: (A) a majority of its executive officers or directors are U.S. citizens or residents; (B) more than 50% of its assets are located in the United States; or (C) its business is administered principally in the United States. FPI eligibility is determined annually as of the end of a foreign issuer’s second fiscal quarter.

After conducting a broad review of reporting FPIs focusing primarily on FPIs filing annual reports on Form 20-F from fiscal year 2003 through fiscal year 2023, the SEC staff found that more FPIs today appear to have disclosure requirements under the rules of their home country jurisdiction that differ from the disclosure requirements imposed on domestic issuers and on issuers in countries whose representation within the FPI population has been decreasing (such as Canada, the European Union, the United Kingdom, Brazil, and Japan). As a result, less information about FPIs may be available to U.S. investors than in the past due to FPI disclosure accommodations under current U.S. federal securities laws and their interaction with home country requirements. 

In addition, the global trading of equity securities of FPIs has become increasingly concentrated in the U.S. capital markets over the last decade. As of fiscal year 2023, approximately 55% of FPIs appear to have had no or minimal trading of their equity securities on any non-U.S. market and appear to maintain listings of their equity securities only on U.S. national securities exchanges. As a result, the United States is effectively those issuers’ exclusive or primary trading market. Because the FPI population has changed such that it may no longer reflect the issuers that the SEC intended to benefit from current FPI accommodations, the SEC is soliciting comments on whether the current FPI definition should be amended.

The concept release seeks public input on the following approaches to amending the definition of foreign private issuer:  (1) updating the existing foreign private issuer eligibility criteria; (2) adding a foreign trading volume requirement; (3) adding a major foreign exchange listing requirement; (4) incorporating an SEC assessment of foreign regulation applicable to the foreign private issuer; (5) establishing new mutual recognition systems; or (6) adding an international cooperating arrangement requirement.

The SEC’s Spring 2025 Reg Flex Agenda includes Foreign Private Issuer Eligibility as a topic that is in the pre-rule stage. No specific timeframe for further action is mentioned.

DEI-RELATED DISCLOSURE TRENDS; UPDATE ON ENHANCED HUMAN CAPITAL MANAGEMENT AND BOARD DIVERSITY DISCLOSURE RULES

In December 2024, the United States Court of Appeals for the Fifth Circuit vacated the Nasdaq board diversity disclosure rules. As a result, Nasdaq-listed companies were no longer required to follow Nasdaq’s board diversity disclosure rules that had previously been in effect. Subsequently, in January 2025, President Trump signed a series of Executive Orders targeting diversity, equity, and inclusion (“DEI”) programs and policies in the public and private sectors. Although such Executive Orders have been challenged in courts, the orders, the Fifth Circuit’s decision to strike down Nasdaq’s board diversity disclosure rules, and a rise in anti-DEI activism marked a change in broader sentiment towards DEI initiatives that ultimately impacted public company annual reports and proxy statements in 2025.

In the wake of such rollback of DEI support, proxy advisory firms and large institutional investors revisited their diversity-related proxy voting policies and guidelines. For the 2025 proxy season, for U.S. companies, ISS indefinitely halted the consideration of gender, racial and/or ethnic diversity of a company’s board when making vote recommendation with respect to the election of directors. Glass Lewis, however, indicated that it would continue to consider boardroom diversity when advising how to vote at U.S. company annual meetings. As a result, Glass Lewis’ U.S. 2025 benchmark guidelines remained unchanged, including its general recommendation that shareholders vote against certain directors (typically the chair of the nominating committee or all members of the nominating committee depending on numerical targets) on boards that lack gender, racial or LGBTQ diversity and general recommendation that shareholders vote against the chair of the nominating/governance committee if there is a lack of disclosure of director diversity and skills.

For its 2025 policy, Vanguard removed references regarding expectations for a company to, at a minimum, include gender, racial and ethnic diversity on its board, and removed previous language stating its expectation for companies to disclose directors’ personal characteristics (such as race and ethnicity) on a self-identified basis. Similarly, for 2025, BlackRock and State Street removed previous numerical diversity targets. Vanguard and BlackRock indicated that they would examine a company’s board composition against market norms. State Street indicated that nominating committees are best placed to determine the most effective board composition, and encouraged companies to ensure that there are sufficient levels of diverse experiences and perspectives in the boardroom.

In light of the shift in DEI sentiment, companies revisited annual reports and proxy statement disclosures to determine whether, and how much, to pare back DEI-related disclosures for the 2025 proxy season.  

According to a report on Board Practices and Composition in the Russell 3000 and S&P 500: 2025 Edition issued by The Conference Board on November 17, 2025, 66% of S&P 500 companies reported data on directors’ racial and ethnic backgrounds, either in the aggregate or individually, in 2025, versus 98% in 2024, and 45% of Russell 3000 companies reported such data in 2025, versus 86% in 2024. However, disclosures about board members’ characteristics indicate continued expansion in human capital expertise, environmental, social, and governance (“ESG“) capability, and corporate governance knowledge, signaling that ESG considerations continue to remain corporate priorities.

With respect to the Nasdaq board diversity matrix, many Nasdaq-listed companies removed the diversity matrix in their 2025 proxy statements and either replaced such information with brief narrative disclosures relating to board diversity or expanded the board skills matrix to include diversity information. Others removed the diversity matrix without any additional disclosures on board diversity, while some retained the Nasdaq style matrix disclosures. 

Although prior SEC regulatory agendas included proposed rule amendments to enhance disclosures regarding human capital management and diversity of board members and nominees, the Spring 2025 Reg Flex Agenda does not include such topics. This does not come as a surprise as Chairman Atkins had indicated that the Spring 2025 Reg Flex Agenda reflected the withdrawal of items from the previous Biden administration that do not align with the focus of the current SEC. 

EDGAR Next Reminders

As of September 15, 2025, all filings on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system must be made in compliance with EDGAR Next, the short-hand reference to amendments intended to improve security of, access to, and account management on EDGAR. To be in compliance with EDGAR Next, filers must either be enrolled in EDGAR Next or have been granted access to EDGAR by the SEC staff on or after March 24, 2025.

Filers that have not enrolled by December 19, 2025 must submit a Form ID application using the amended form, which now requires additional information, as well as notarization. Access to EDGAR will be unavailable until the SEC staff approves the Form ID application and the filer has been granted access to EDGAR.

As of September 15, 2025, CIK and CCC continue to be required to file on EDGAR. Legacy EDGAR passwords and PMACs have been discontinued. To access the EDGAR Filer Management website, the EDGAR Online Forms website, and the EDGAR Filing website, individuals taking action for filers must present Login.gov individual account credentials and complete multifactor authentication.

Individuals taking action for a filer on EDGAR must have a relevant role for the filer. Roles include account administrator, user, technical administrator, and delegated administrator and delegated users.

Additional information, including “How Do I Guides” and instructional videos are available at https://www.sec.gov/submit-filings/improving-edgar/edgar-next-improving-filer-access-account-management. 

SEC COMMENT LETTER TRENDS

During the 12 months ended June 30, 2025, the first and second most common comment areas by the SEC were management’s discussion and analysis of financial condition and results of operations (“MD&A”) (also number 1 in 2024), followed by non-GAAP financial measures (also number 2 in the 2024).⁸ In fact, within the top five areas of comment, the most commented on topics in 2025 were identical to those in 2024, with segment reporting, revenue recognition and goodwill and intangible assets ranking the third, fourth and fifth most commented on topics, respectively.⁹ Other frequent areas of comment included: business combinations; contingencies; accounting error corrections, internal control over financial reporting, and disclosure controls and procedures; and new and emerging risks.¹⁰ According to Ernst & Young’s analysis, the number of registrants-receiving comments from the SEC staff in 2025 was down approximately 21% and 18% compared to 2024 and 2023, respectively.¹¹

The most significant area of SEC staff comment within MD&A was results of operations. According to Ernst & Young, the SEC staff requested companies to explain their operating results with greater specificity, including the underlying drivers for each material factor that affected their results.¹² For example, when a company discloses that two or more factors contributed to a material fluctuation, the SEC staff will direct that Regulation S-K requires disclosure of the reasons for the fluctuation of each factor, in quantitative and qualitative terms. With respect to liquidity and capital resources, the SEC often directs companies to include a more meaningful analysis of the variability in cash flows by challenging discussions that merely recite items that are readily apparent from the statement of cash flows (e.g., changes in working capital) without analyzing the underlying drivers of the material changes to working capital items. 

The SEC staff continues its focus on non-GAAP financial measures, and 2025 was no different. Many of the SEC staff’s comments in 2025 about non-GAAP financial measures focused on undue prominence, reconciliation to the most directly comparable GAAP measure, and misleading adjustments.¹³ With respect to misleading adjustments, the SEC continues to direct filers to the staff’s December 2022 updates to the Non-GAAP Financial Measures Compliance & Disclosure Interpretations (“C&DIs”), specifically C&DIs 100.01 and 100.04.¹⁴ For reference, C&DI 100.01 provides that although not explicitly prohibited, presenting a non-GAAP performance measure that excludes normal, recurring, cash operating expenses necessary to operate a registrant’s business is one example of a measure that could be misleading.¹⁵ In this regard, many of the SEC staff’s comments inquired about whether operating expenses excluded from performance measures were “normal” or “recurring.” Examples of adjustments that the SEC staff have objected to include inventory-related valuation, reserves and impairment charges; certain legal and regulatory expenses; facilities costs (e.g., store pre-opening costs and closing costs and rent expense); cash-based compensation; amortization of acquired in process research and development assets; and costs to be a public company.¹⁶ C&DI 100.04 provides that non-GAAP adjustments that have the effect of changing the recognition and measurement principles required to be applied in accordance with GAAP (i.e., individually tailored accounting principles) could cause the presentation of a non-GAAP measure to be misleading.¹⁷ Examples of measures that the SEC staff may consider to be misleading include, but are not limited to, changing the pattern of recognition, such as including an adjustment in a non-GAAP performance measure to accelerate revenue recognized ratably over time in accordance with GAAP as though revenue was earned when customers were billed; presenting a non-GAAP measure of revenue that deducts transaction costs as if the company acted as an agent in the transaction, when gross presentation as a principal is required by GAAP, or the inverse, presenting a measure of revenue on a gross basis when net presentation is required by GAAP; changing the basis of accounting for revenue or expenses in a non-GAAP performance measure from an accrual basis in accordance with GAAP to a cash basis; adjusting the fair values of assets purchased and/or liabilities assumed in purchase accounting to remove the fair value purchase price adjustment; and combining the results of continuing and discontinued operations.¹⁸

ACCOUNTING DISCLOSURES UPDATE

The following is a summary of a recently adopted Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board. Readers are urged to consult with their relevant accounting experts for further questions and in-depth guidance. 

Disaggregated Expense Disclosures. ASU 2024-03¹⁹ requires additional disclosure in the financial statement footnotes of the specific types of expenses included in the expense captions presented on the face of the income statement, as well as additional disclosures about selling expenses. In summary, ASU 2024-03 requires that in each interim and annual reporting period a public company disclose:

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

GLASS LEWIS

Glass, Lewis & Co. (“Glass Lewis”) has issued its annual update to its voting guidelines for the 2026 Proxy Season.

Structural Changes

The most noteworthy update to Glass Lewis’ annual voting guidelines for the 2026 Proxy Season is its plan to implement significant structural changes to the way it applies proxy voting policies over the next two years. First, to create a customized approach, Glass Lewis plans a shift from standard voting policies to voting frameworks focused on individual investment philosophies and stewardship priorities. Second, Glass Lewis plans to shift from singularly focused research and voting recommendations to providing a range of multiple perspectives to meet varying perspectives and client needs. Glass Lewis cites technological advancements, including artificial intelligence (AI) technology, as allowing this strategic shift in its annual guidance.

Mandatory Arbitration Provisions

For the 2026 Proxy Season, in response to recent SEC policy shifts from its aversion to mandatory arbitration provisions for IPOs, spin-offs or direct listings, Glass Lewis will review whether a company has adopted a mandatory arbitration provision or other potentially negative governance provisions, and may issue a recommendation that shareholders vote against the election of the chair of the governance committee, and potentially the entire committee, as well as any bylaw or charter amendments seeking to adopt such provisions absent appropriate rationale and disclosure.

Pay-for-Performance Methodology

For the 2026 Proxy Season, Glass Lewis has shifted its use of single letter grades for pay-for-performance disclosures to a scorecards approach from zero to 100.

Clarifying Amendments

As is typical in its annual updates, for the 2026 Proxy Season, Glass Lewis clarified several of its previously stated positions. Glass Lewis updated its guidance on cases where shareholder rights have been reduced or removed by the board, including those that (i) limit the ability of shareholders to submit shareholder proposals; (ii) limit the ability of shareholders to file derivative lawsuits; and (iii) implement plurality voting in lieu of majority voting. In addition, Glass Lewis stipulated in its guidelines that it evaluates proposed amendments to a company’s certificate of incorporation and/or bylaws on a case-by-case basis and is strongly opposed to bundling of multiple amendments in a single proposal.

Further, Glass Lewis updated its discussion on supermajority vote requirements to specify it will evaluate proposals seeking to abolish supermajority voting requirements on a case-by-case basis and may oppose elimination of these requirements where companies have a large or controlling shareholder and such requirements may benefit the interests of minority shareholders.

Lastly, Glass Lewis acknowledged the recent shift in the SEC’s regulatory approach to no-action requests on shareholder proposals as discussed above and adjusted some of its language regarding the approach to such shareholder proposals and noted the basic premise that shareholders should be afforded the opportunity to vote on matters of material importance.

INSTITUTIONAL SHAREHOLDER SERVICES (ISS)

Institutional Shareholder Services (“ISS”) issued its own annual benchmark policy changes for the 2026 Proxy Season. As a preliminary matter, ISS opted not to implement significant structural changes to how it offers guidance to its stakeholders, instead addressing specific changes.

Problematic Capital Structures

ISS slightly modified its general recommendation on voting against or withhold against individual directors or the entire board if the company employs an unequal voting rights structure. Specifically, ISS modified its guidance to clarify that it applies to multi-class capital structures regardless of whether such class is preferred or common and also expanded exceptions to this policy for narrowly scoped structures including “as-converted” voting or limited in duration and applicability situations, such as to overcome low voting turnout.

Executive Pay – Pay for Performance Evaluation

ISS made some updates to its quantitative screens for assessing executive pay for performance analysis, including a shift for alignment tests from three to five years for CEO pay.

Time-Based Equity Awards with Long-Time Horizon

ISS revised its approach to provide for greater openness to a higher share and long-vesting time-based equity if vesting and/or retention demonstrates a long-term focus. In addition, ISS added realized pay outcomes as a factor to consider alongside realizable and grant pay. ISS notes that it will still continue to consider well-designed and clearly disclosed performance equity structures as a positive factor in the pay-for-performance qualitative analysis along with the above updated approach.

Compensation Committee Communications and Responsiveness

ISS has updated its approach to say-on-pay proposals where companies disclose meaningful engagement efforts but cannot obtain specific investor feedback. In such circumstances, ISS will evaluate the pay changes and the company’s rationale for shareholder benefit.

Problematic Compensation Practices: High Non-Employee Director Pay 

As it relates to the high non-employee director (“NED“) pay policy ISS implemented back in 2019, ISS has revised its guidance to address multiple instances of problematic NED pay decisions made by companies across non-consecutive years which may otherwise not trigger an adverse recommendation by ISS. ISS has specifically clarified that non-consecutive years or egregious single year awards may trigger adverse recommendations.

Equity Plan Scorecard (“EPSC“)

For S&P 500 and Russell 3000 EPSC models, ISS will score whether plans in which NEDs participate include explicit caps on cash-denominated NED awards.

Even with an overall passing EPSC score, a plan can receive an “Against” recommendation if it lacks sufficient positive features under the Plan Features pillar (e.g., change-in-control vesting clarity, no liberal recycling, minimum vesting, no dividends before vesting). For the 2026 Proxy Season, this will apply to S&P 500, Russell 3000, and non-Russell 3000 EPSC models.

Social and Environmental Shareholder Proposals

Due to a decline in shareholder and popular support for certain types of social and environmental shareholder proposals, ISS has shifted its recommendation on such proposals to a case-by-case basis. This includes climate risk disclosure, greenhouse gas (“GHG”) disclosure, and GHG reduction target proposals, workforce diversity policy/data, human rights, and political contributions.