The economic playing field is being reordered. What does that mean for boards?

“Decisions that are being made today are going to be existential to the long-term viability of the companies that they're overseeing,” suggests Kevin Kajiwara, co-president of Political Risk Advisory at Teneo, who advises Fortune 100 CEOs on geopolitical risks and their strategic implications.

Kevin joins Michael Leiter, head of Skadden’s National Security Practice, and host Ann Beth Stebbins, a Skadden M&A partner, in a conversation about how boards can effectively exercise oversight in today's geopolitical environment.

The U.S. had a remarkably consistent role shaping the general economic trajectory of the regulated free market for decades, Kevin says, but that playing field is now being reshaped, and “boards need to ask themselves if the type of economic actors that prevailed during the previous period will continue to be the preeminent actors going forward.” It is not yet clear what shape the new global paradigm will take, he says.

Mike emphasizes that political risk is no longer just dinner conversation at board retreats. Political decisions around the globe directly impact quarterly results, annual performance and future viability through effects on supply chains, tariffs, technology controls and data access. Business decision in one region now trigger counter-reactions from other jurisdictions. “If boards aren't thinking about it in those terms — the political decisions around the globe that will have direct impact on their quarter, on their year, on their viability in the future — they're not very good boards, and the company may not be around very long,” he says.

Boards can no longer focus only on the fundamentals of a company, because too much depends on external, political factors, he says. And political risk is no longer limited to the consequences of the next election.

Both guests recommend that boards incorporate international expertise when evaluating their own composition. Boards should also institute regular updates from management on geopolitical risks, and consider conducting scenario planning exercises to test management assumptions. Companies should review and update disclosures, including risk factors, to demonstrate board engagement and support management in navigating an increasingly complex global environment.

Name: Ann Beth Stebbins

Title: Partner at Skadden

Connect: LinkedIn

Name: Mike Leiter

Title: Partner, National Security; CFIUS; Cybersecurity and Data Privacy; Congressional Investigations; Artificial Intelligence, Skadden

Connect: LinkedIn

Name: Kevin Kajiwara

Title: Co-President, Political Risk Advisory, Teneo

Connect: LinkedIn

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Delaware is home to more than two-thirds of the Fortune 500, and 1.8 million business entities. “The Delaware General Corporation Law is widely considered to be the most thoughtfully developed corporate law in the country,” explains Hon. Lori W. Will, vice chancellor of the Delaware Court of Chancery. In addition, sophisticated judges, responsive executive and legislative branches and extensive supporting infrastructure have solidified Delaware’s reputation as flexible and business-friendly.

Still, a handful of high-profile companies have recently announced plans to reincorporate outside of the state. “I think states like Texas and Nevada are sensing potential market opportunity and are seizing on a moment in time when Delaware is being challenged,” observes Skadden litigation partner Edward Micheletti of the firm’s Delaware office.

Recent amendments to the Delaware corporate code show how responsive the state’s governor, legislature and bar are to the need to update corporate law regularly to stay abreast of changes in the business world, Ed stresses.

Vice Chancellor Will and Ed join host Skadden M&A partner Ann Beth Stebbins to explore the factors that make Delaware the preferred jurisdiction for incorporation. They discuss the importance of corporate incorporations to the state, and the ecosystem that has evolved over time to support corporations. They compare Delaware’s flexible approach to the more rigid, code-based systems of competing states, and provide insight into how corporations should evaluate a potential reincorporation decision.

Name: Ann Beth Stebbins

Title: Partner at Skadden

Connect: LinkedIn

Name: Hon. Lori W. Will

Title: Vice Chancellor of the Delaware Court of Chancery

Connect: State of Delaware on LinkedIn | Facebook | X | YouTube | Instagram

Name: Ed Micheletti

Title: Litigation Partner, Skadden

Connect: LinkedIn

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How do you know if your company is likely to be a target for activists? And what is the best way to respond when approached by an activist?

Skadden M&A partner Ann Beth Stebbins discusses the activist’s playbook with Ted White of Legion Partners Asset Management, a veteran activist investor, and Elizabeth Gonzalez-Sussman, head of the firm’s Shareholder Engagement and Activism Practice.

Activists seek to identify companies where value can be increased. Some activists will focus on operational or governance improvements, while others will press for transactions that could release value, Ted and Elizabeth explain.

Ted and Elizabeth observe that shareholders are not always forthcoming with management, which may make it difficult of a board to understand shareholder concerns. Ted notes that, as an investor, he has observed cultural misalignment in some companies experiencing underperformance, and stresses that it may be important for board members to hear directly from shareholders.

Elizabeth says that, when meeting with activist investors, management and directors should listen to the issues that are raised. Ted says his firm will be trying to gauge if management and the board are aware of the concerns expressed in a meeting, and are willing to address, or at least consider, those. He also notes that directors should assume that the activist has talked to other shareholders about the company and the potential issues that the activist has identified.

Companies should be careful about responding defensively to activists, Ted and Elizabeth say. If the company reacts hostilely or dismissively, that may cause other shareholders to perceive that there is a problem. It could also prompt a more aggressive campaign by the activist to replace directors in the future, and cause proxy advisory firms to be more critical of the company.

If activists succeed in electing new directors, the existing board should attempt to work with them collaboratively, Elizabeth and Ted say, even though the contentious nature of a proxy fight may make cooperation challenging. Ted notes that board dissonance may encourage shareholders to seek to replace more directors at the next annual meeting.

Name: Ann Beth Stebbins

Title: Partner at Skadden

Connect: LinkedIn

Name: Elizabeth Gonzalez-Sussman

Title: Partner; Head of Skadden’s Shareholder Engagement and Activism Practice

Connect: LinkedIn

Name: Ted White

Title: Co-founder and a Managing Director of Legion Partners Asset Management

Connect: LinkedIn

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