Are New Presidential Administration Pronouncements and Initiatives Pushing the Boardroom Toward Uncertainty or Opportunity

Directors joined us for a virtual event to discuss key developments under the new administration and their impact on the boardroom, focusing on what directors should discuss with their management teams related to key changes related to the US SEC, state attorneys general, state corporation laws, the evolving legal landscape, and critical tariff and supply-chain changes.

Thank you to our panelists: board director Christine Gorjanc, and partners from Foley & Lardner LLP, Ed Burbach, Patrick Daugherty, Jessie Lochmann, Louis Lehot, and Christopher Swift.

View The Recording

Key takeaways provided by our speakers:

SEC and Antitrust Authorities:

• New SEC Leadership:
  • Paul Atkins, a former SEC commissioner, is expected to become the next chairman. Known for his traditionalist approach, Atkins is on record as favoring deregulation of capital formation and workable solutions for offering crypto assets in the US. He has criticized the SEC’s climate disclosure rules that are currently tied up in litigation. 
  • Early indicators suggest that the SEC is shifting from regulation by enforcement to regulation through rulemaking and interpretation, focusing on engaging with constituents before writing rules and providing guidance.
  • The new SEC is expected to emphasize economic and quantitative materiality, focusing on the direct economic impact of events on a particular company rather than broader or double materiality concepts. Chair Gensler’s last Director of Corporation Finance is predicting that “qualitative materiality” will not matter much in the Atkins SEC. Foley believes it’s important to engage with the SEC as they are open to input.

• SEC Priorities:
  • Focus on Digital Assets: The first thing that Acting Chairman Uyeda did was organize a Crypto Task Force and promise to fix problems caused by his predecessor. This is a top priority for Uyeda, Commissioner Peirce (who heads that task force), and also Chairman nominee Atkins. Legislation is pending on market structure reforms and stablecoins and Foley expects it to be adopted. 
  • Climate Change: Foley expects the Genler Commission’s climate change rule to be rescinded.
  • Financial Fraud: Foley expects continued focus on maintaining the integrity of financial disclosures, a core concern of the SEC since it was created in 1934. 
  • Capital Raising Initiatives: The SEC is expected to attempt to facilitate capital formation, creating more opportunities for companies to raise capital in private and public markets with less exposure to risk, streamlined to be more appealing to businesses. Structural impediments, including regulation and disclosure requirements, exposure to litigation, publication of research, and pricing rules as they apply to brokerage trading and shareholder proposals may require new legislation as well as regulation to encourage companies to go public, although the SEC does have very broad exemptive authority which it has not used much yet. Some enhanced and expanded regulation of privately held companies that are widely held with large valuations may also be considered.
• Proxy Season:
  • Although the movement to adopt ESG and climate disclosure rules in the U.S. seems to have lost steam, companies still face reporting obligations under EU rules, and California regulations are not to be ignored. Investors and other constituents, such as key customers may also still place value on sustainability practices. This changing dynamic creates an opportunity for boards to reassess how climate and ESG issues can impact business strategy and where and how to invest to create long-term shareholder value.
  • Publicly traded companies are evolving their philosophies with respect to diversity, equity, and inclusion policies (DEI) to focus on DEI in practice, not policy, and are refining language in their proxies accordingly. As always, companies will want to take care to ensure that their disclosures align with what they are actually doing. Some companies may hold off on major changes until after the proxy season, while others—particularly those working with the federal government—need to ensure compliance with new prohibitions. Privately held companies, particularly those run by financial sponsors, are moving away from both DEI policies and practices. It is again imperative for boards to evaluate their overall strategy in this area, taking into account regulations and changing expectations. It is likely time to review the company’s corporate governance guidelines and governance committee charter in this regard to ensure the board knows what it has committed to do.
  • Transparency is key in proxy statements—be clear about DEI and ESG policies, showing how their policies (whatever they may be) are aligned with the company’s strategy and the best interests of the shareholders. 
• Antitrust Environment:
  • There are expectations that M&A activities will become easier under the new administration, especially with the chair of the FTC. The President’s appointment to lead the antitrust division of the Department of Justice (DOJ), however, has pursued the prior administration’s prosecution of Google and has filed suit to block the acquisition of Juniper Networks (a networking company) by HPE (a software company).
• Impact of DOGE on Doing Deals:
  • Although there is minimal impact at the moment, DOGE may close offices and offer buyouts for early retirements, which could affect staffing and the government’s ability to respond in a timely way to taxpayers as well as enforcement.
  • Foley expects significant cuts to the DOJ and other regulatory and enforcement bodies, and the consistency of individual government interlocutors is not assured.
• Foreign Corrupt Practices Act (FCPA) Enforcement:
  • The DOJ has temporarily paused FCPA enforcement, but this does not mean there is a free pass for bribery. Most local, state, and international laws still prohibit bribery.
  • Currently, the statute of limitations for FCPA violations extends beyond the current administration, so violations may still be prosecuted in the future.

Executive Orders and State Reactions:

• Executive Order Impacts:
  • The new administration is using executive orders (EOs) to reshape government, reduce regulation, and aggressively implement Trump administration social policies and initiatives. Board directors should monitor these EOs closely for potential impacts on business operations.
  • With personnel changes, it’s difficult for businesses to plan effectively. Boards should prepare for more EOs and be ready to adjust operations accordingly. Boards need to be resilient and nimble.
• State Dynamics:
  • Attorney Generals (AGs) are increasingly politicized, and their broader jurisdiction influences corporate strategies. Boards should stay informed about AG priorities, which can be found here: DAGA, RAGA.
  • Texas has created new appointed (rather than elected) business trial courts and a new statewide appointed intermediate court of appeals designed to be more business-friendly than traditional Texas state courts. Governor Abbott has announced reductions in business regulations.
  • New legislation has been proposed in Texas that would codify the business judgment rule, limit stockholder activism, and implement other more business-friendly norms to favorably compare with Delaware and Nevada. Some boards are considering reincorporating in Texas, Nevada, and states other than Delaware, especially in light of taxes, incentives,  and state-specific benefits.

Tariffs and Geoeconomics:

• Tariff Policies:
  • The shift toward protectionism is affecting global trade dynamics. Boards should prioritize short-term, mid-term, and long-term strategies, including scenario planning and aligning with evolving policies.
  • Boards whose management teams are considering adjustments to supply chain or other operations should ask them to quantify each potential change and look around corners before making precipitous moves.
  • Expect potential reciprocal tariffs on the EU, more on China, and possibly on India.
  • There are three types of executive orders
    • Performative EOs: Designed to generate headlines.
    • Indicative EOs: Influence foreign investment and cause uncertainty without changing rules.
    • Operative EOs: EO’sthat the President can activate and deactivate at his discretion, which is what is being used for tariffs. As boards and Wall Street push back, the market effect may cause a reduction over time.
• Geopolitical Strategy:
  • The new administration is remaking geopolitics and geoeconomics, emphasizing a nationalized economy similar to the late 19th and early 20th centuries. The free movement of goods, capital, and people is giving way to more regionalization.
  • Cross-border investment is facing increased scrutiny, particularly under the Committee on Foreign Investment in the U.S. (CFIUS) and reverse CFIUS processes. 
  • Regulatory regimes are being securitized, meaning that political and policy-driven factors could impact capital movement without a mandatory CFIUS filing.

Technology and Security Concerns:

• National Security Implications:
  • The board should distinguish between AI that is convenient versus game-changing. Game-changing AI may attract national security scrutiny.
  • Collaboration with allies in technology, particularly AI and quantum, is becoming more difficult as security concerns rise.

Boardroom Questions:

• On SEC Governance:
  • Do we understand - and are we engaging adequately with - the SEC regarding its regulations and priorities, especially regarding digital assets, financial disclosures, and capital formation, and how potential changes could impact the company?
  • How does the company define materiality, particularly regarding its economic impact on the business? How is this materiality standard used in practice, including in disclosure documents filed or furnished with the SEC?
  • Are we aligned with evolving regulations and changing investor preferences around ESG and DEI, and how should we incorporate these into our corporate strategy to enhance long-term shareholder value? Do our policies and other governance documents match our practices?
• On Executive Orders and State Reactions:
  • How have recent executive orders been implemented, and do they affect our operations?
  • If the company moves its source of supply or location of operations, what will it cost?
  • If tariffs are imposed against the United States, how will the company be impacted?
  • How are state attorneys general responding to federal actions, and does this influence the company’s view on its location of operations?
  • What initiatives are being pursued by states and their attorneys general, and how could they influence the company’s operations?
  • Should we consider relocating our incorporation from Delaware to another state like Texas to benefit from a more business-friendly environment?
• On Tariffs and Geoeconomics:
  • How are we assessing the impact of tariffs on our supply chains, cost structures, taxes, and pricing power, including contract language?
  • Understand your costs and do scenario planning to enhance decision-making.
  • What are the long-term opportunities or risks associated with reshoring manufacturing or moving operations to countries like Vietnam or Indonesia?
  • What contingency plans do we have to mitigate risks from changing trade policies or tariffs?
  • How are we managing cross-border investments to avoid regulatory scrutiny under CFIUS?
• On Technology and AI Security:
  • Are we distinguishing between convenient AI and game-changing AI that could attract national security concerns?
  • How are we using AI to drive efficiencies in our operations, and what is our overall AI strategy?
  • Are we prepared for regulatory scrutiny related to access to critical chips and security protocols in AI or quantum technologies?
  • Do we have the right talent and safeguards in place to protect sensitive information while using AI for business strategy?

Thank you to our partner for making this event possible: