Recent Developments for Directors — April 2026

Capital Strategy Has Become a Core Oversight Responsibility

Capital strategy has emerged as an important issue for boards. The financing landscape has shifted materially in recent years and remains dynamic. Capital has diversified beyond traditional banks to include private credit and insurance capital, and a robust hybrid instrument market now sits between equity and debt, even for investment grade companies. In stressed environments, liability management techniques can provide additional flexibility. These changes affect not only liquidity and cost of capital but also strategic flexibility, M&A readiness, exposure to shareholder activism, and overall enterprise resilience. As a result, boards are overseeing capital structure as an ongoing governance matter rather than engaging only when a financing need becomes imminent. Regular board-level oversight includes ensuring management maintains a continuous, comprehensive view of financing options, regularly evaluates alternatives, and stress tests the durability of the capital structure under a range of scenarios. Latham’s Capital Strategies Practice supports this mandate by bringing an independent, market-wide perspective to capital structure decisions, complementing traditional transaction-focused legal advice.

Increased Artificial Intelligence Use Brings New Risks

New risks are emerging as artificial intelligence becomes both a central operational tool for companies of all sizes and a major new governance issue. Recent court decisions have held that interaction with AI chatbots — the prompts, outputs, and uploaded materials — may be discoverable and may not be protected by attorney-client privilege or work-product immunity. In a recent Delaware case, the court cited transcripts of a CEO’s chatbot prompts and responses seeking to avoid a $250 million earnout obligation. These decisions highlight the legal risks of AI use. When executives use generative AI for strategy, legal positioning, or takeover planning, those conversations may later serve the same evidentiary role as emails, slide decks, or slack messages, often with greater candor and specificity. Boards are uniquely positioned to address these risks as they work to oversee AI governance frameworks, which also address data integrity, bias controls, accountability, and record retention, while ensuring that AI-related disclosures are precise and accurate.

Cybersecurity Oversight Enters a New Phase

Cybersecurity remains a persistent oversight challenge even as regulatory attention has moderated. Threats are becoming more sophisticated, particularly with AI enabled malware, and cyber incidents remain a common trigger for securities litigation, activist pressure, and reputational harm. Companies are increasingly judged not on whether a breach occurs, but on preparedness, escalation, and the quality of disclosure. Clear governance structures around incident response, materiality assessment, and disclosure timing are essential to a company’s post-incident defensive posture.

Added Flexibility in Excluding Shareholder Proposals Carries Greater Responsibility

Shareholder proposals are easier to exclude, but companies now face more responsibility for the exclusion process. In most cases, the SEC Staff will no longer oversee a company’s decision to exclude a shareholder proposal, and companies must make these decisions independently and bear the legal and reputational consequences. Some proponents have responded by turning to litigation and public escalation. Boards may see greater involvement in close calls, and companies are reviewing escalation protocols heading into proxy season.

Shareholder Activism Affects Governance and M&A Process

Shareholder activism continues to rise, with recent campaigns relying more on settlements, vote-no strategies, and off-cycle pressure rather than traditional proxy contests. Governance vulnerabilities, gaps in succession planning, M&A and capital allocation narratives have become common entry points, even at companies with strong performance. Activism preparedness has become a year-round governance responsibility rather than a seasonal exercise tied to annual meetings.