3/6/25 – Issue 10.09 – Your weekly news on all things board. 

Tariff uncertainty, bold regulatory shifts, and ongoing investor activism dominate the governance landscape. Many boards are getting a crash course in how quickly tariffs can impact supply chains, partnerships, and prices and seeking a steady path amid the Trump Administration’s rapidly shifting policies. Soon they may also be studying up on Delaware’s proposed corporate law changes, which could make it easier to dismiss shareholder lawsuits. Bank boards may find that the FDIC’s rollback of Biden-era merger scrutiny will give them greater latitude in shaping strategic deals. And activist investors remain, well, active, with Elliott Management seeking boardroom changes at oil companies Phillips 66 and BP in a broader push for financial discipline. Amid this heightened level of change and uncertainty, directors must also navigate crises—from executive misconduct to cybersecurity failures. Paradoxically, as boards face more high-stakes challenges, they may also find themselves with more room to maneuver and more opportunity to make an outsized impact.

In the Spotlight

A Boardroom Perspective on Tariff Uncertainty

For directors, proactive leadership is essential to mitigate risks and protect shareholder value

“Tariffs can be imposed overnight, but their impact lingers for years. While these economic tools can serve as leverage in trade negotiations, they also introduce long-term volatility. As chair of OTC Industrial Technologies and CEO of Arrowhead Engineered Products, I have spent decades navigating industrial growth and global trade. I've witnessed firsthand how tariffs reshape supply chains, increase costs and disrupt market stability. For public company boards, the challenge is clear: proactive leadership is essential to mitigate risks and protect shareholder value…. For public company boards, the priority must be to stay agile, anticipate market disruptions and guide their organizations toward sustained growth. Political activism to influence political actors may be considered, if feasible. By addressing tariff risks proactively and leveraging opportunities where possible, boards can play a pivotal role in securing their companies' futures in a global economy that is extraordinarily difficult to predict or influence.” DIRECTORS & BOARDS

Turbulent Times Ahead Call for a Governance Update

Amid uncertainty and complexity, boards can get overwhelmed – or get moving

“First sustainability, now generative AI and political tensions. The business environment today is more complex than ever – and it’s not letting up, going by the state of the world. Amid seismic shifts, boards must evolve…. The directors surveyed were not confident in their companies’ ability to anticipate new threats or opportunities related to sustainability, GenAI and geopolitics. Moreover, the findings highlight that many boards continue to struggle with developing strategies to turn disruptions in these areas into competitive advantages…. The report highlights four steps directors can take to ensure that their governance approach meets these challenges. 1. Enhance horizon scanning and risk management … 2. Take a long-term perspective grounded in purpose …. 3. Lead across divides… 4.Drive impact beyond business boundaries….” INSEAD

From Boardspan this Week:

Governance in a Time of Turmoil: Geopolitics, Risk, and More with Globalist Michèle Flournoy

The world today demands more from boards than ever before. What was once a relatively stable landscape for governance has been upended by a convergence of global disruptions: Events like the COVID-19 pandemic and the Russia-Ukraine war have exposed vulnerabilities across industries, while rising economic nationalism and shifting regulatory frameworks have made long-term planning increasingly complex. Risks are no longer isolated; geopolitical turmoil bleeds into operational disruptions, and technological advances bring both innovation and unforeseen threats. Yet within this complexity lies opportunity.

Across the Board

What Boards Should Know About Delaware’s Planned Reforms 
Proposed law could curb shareholder litigation and give boards new defenses

“It’s no secret that Delaware – the state of choice for so many companies to incorporate – has come under fire recently, with certain judicial decisions receiving unusually widespread criticism and high-profile companies choosing to reincorporate elsewhere. These events have prompted Delaware lawmakers to release proposed amendments to the Delaware General Corporation Law in Senate Bill 21 (SB 21). If these amendments become law – and all indications are that they will, and soon – they will have significant ramifications for all Delaware corporations and their fiduciaries. SB 21, if enacted, is likely to substantially reduce the volume of stockholder litigation and will arm boards with additional defenses at the motion-to-dismiss stage for those claims that are filed.” GOVERNANCE INTELLIGENCE

FDIC Withdraws Merger Policy

The regulator’s board voted Monday to scrap four Biden-era proposed rules and a policy that applied greater scrutiny to bank mergers

“The FDIC board’s actions Monday to ditch Biden-era policies are further evidence the banking agency is shifting gears following President Donald Trump’s return to the White House. Bankers and analysts have expected certain policies to be walked back as part of a lighter approach to regulation during Trump’s second term. The board appears to be quickly acting on priorities outlined by Acting Chairman Travis Hill in late January. Hill said he wanted to speed up the merger approval process and see the agency withdraw ‘problematic proposals’ adopted in recent years, such as that concerning brokered deposits, or ‘hot money.’” BANKING DRIVE

Elliott Ratchets Up Pressure at Phillips 66

Activist investor nominates 7 directors, including John Pike who is leading the campaign

“Elliott Investment Management nominated seven directors to Phillips 66's, laying the groundwork to push for changes that include spinning off or selling its midstream business, two people familiar with the matter said. The activist investment firm last month disclosed a $2.5 billion stake in the oil refiner, returning for a second campaign just over a year after it made a $1 billion investment in late 2023 and pressed, with limited success, for strategic improvements… Elliott is also taking aim at the company's corporate governance, namely its classified board. Phillips 66 tried and failed a handful of times in recent years to change its charter so that all directors stand for election annually.” REUTERS

BP to Add Directors as it Pivots Back to Oil and Gas

Chair Helge Lund responds to investor pressure after scrapping plans to become major renewable energy player

“BP plans to hire two new directors to help it pivot back to oil and gas, as its chair Helge Lund responds to pressure from investors to strengthen the board. Lund wants the BP board to reflect the company’s new strategy, after it abandoned a drive towards green energy last week to refocus on its core oil and gas business… It was not clear what stage BP has reached in the recruitment process, or whether it has consulted with US activist investor Elliott Management, which has built a stake of nearly 5 per cent in the company and wants reduced spending on renewable energy.” FINANCIAL TIMES

Kroger CEO Rodney McMullen Resigns After Personal Conduct Investigation
McMullen’s ouster follows Kroger’s failed $20 billion takeover of smaller rival Albertsons, which aimed to unite the two largest pure-play supermarket operators in the biggest grocery deal ever

“Kroger Chief Executive Rodney McMullen resigned from the company following a board investigation into his personal conduct, ending a more than four-decade career at the grocery chain… Lead independent director Ronald Sargent will serve as chairman and interim CEO while the company searches for a permanent replacement for McMullen… The Cincinnati-based company said Monday its board was made aware of certain personal conduct by McMullen, who also served as chairman, on Feb. 21 and immediately retained outside counsel to conduct an investigation, which was overseen by a special board committee.” WALL STREET JOURNAL

Disney Employee’s AI Tool Download Leads to Major Cybersecurity Breach

This incident highlights the critical importance of adhering to strict cybersecurity protocols within organizations

“In July 2024, Disney experienced a significant cybersecurity breach when employee Matthew Van Andel downloaded AI software from GitHub, which contained hidden malware… leading to extensive data exposure. The breach resulted in the leak of over 44 million internal messages, revealing sensitive company information and personal data of employees and customers. Van Andel faced severe personal repercussions, including identity theft and job loss, underscoring the profound risks associated with unauthorized software downloads.” NATIONAL CIO REVIEW

Board Oversight of Cybersecurity Incidents

Approximately 74% of companies in the Russell 3000 index have taken the additional step of codifying oversight of cybersecurity at the full board level 

“Public companies are frequently the target of cyberattacks and cannot reasonably prevent all of the attacks they face. Furthermore, companies experience many different types of cyberattacks depending on their industry and the sensitivity of data they handle.

While many attacks are defended, can be characterized as routine, or are primarily motivated by the payment of a data ransom, others are carried out by nation-state threat actors and can carry serious implications for national security depending on the sensitivity of the data that company handles.... Various stakeholders may be increasingly concerned that boards have overburdened their audit committees, as boards often delegate risk oversight to these committee members by broadening their definitions of enterprise risk to include oversight of technological developments, such as cybersecurity.” HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE

Board Diversity: Policy Updates and Considerations for Proxy Season

Public companies find themselves rethinking disclosures relating to the diversity of their board and their director recruitment practices as they head into proxy season

“Companies and their boards should ensure that they are aligned in terms of risk tolerance with respect to their current practices, and that they describe lawful recruitment practices accurately in their proxy statements, governance documents and other public disclosures. Board dynamics, stakeholder expectations, federal government contractor status and other factors may inform a company’s ongoing assessment of risk in this area as events continue to unfold.” COOLEY

Seat at the Table

• DuPont welcomes to its board Kurt McMaken, CFO of valuables management firm Brinks

• UPS elects to its board Kevin Clark, CEO of tech firm Aptiv PLC

• Dollar Tree announces to its board Bill Douglas, former EVP at Coca-Cola Enterprises; and Tim Johnson, Chief Financial and Chief Administration Officer at Victoria’s Secret

• American Express appoints to its board Michael Angelakis, Chairman and CEO of investment firm Atairos

• Build-A-Bear Workshop welcomes to its board Richard Johnson, former President and CEO of Foot Locker

• Hilton announces to its board Marissa Mayer, former CEO of Yahoo

• Workers compensation firm Employers Holdings adds to its board Marvin Pestcoe, former Executive Chair and CEO of reinsurer Langhorne RE

• Piping firm Perma-Pipe International Holdings appoints to its board Jon Biro, former CFO of marketing firm Harte-Hanks

• MFA Financial elects to its board Christopher Small, former Managing Director and Head of Diversified Financials for FIG Corporate and Investment Banking

• Lincoln National welcomes to its board Jim Morris, former Chairman, President and CEO of Pacific Life Insurance

• Research firm Wiley announces to its board Dr. Karen Madden, SVP and CTO of life sciences firm MilliporeSigma

• Kenvue adds to its board Sarah Hofstetter, President of Profitero; Erica Mann, former President and Head of the Consumer Health Division at Bayer; and Jeffrey Smith, CEO and CIO of Starboard Value

• Micron Technology appoints to its board Mark Liu, former SVP of Taiwan Semiconductor Manufacturing; and Christie Simons, Senior Audit and Assurance Partner at Deloitte & Touche

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