Well, folks, enjoy the New Year’s lull while it lasts—because we predict a bracing year of new compliance measures in 2006.

Judges, regulators, investors, lawmakers and even the United Nations are poised at the starting gate, ready to reshape the corporate governance landscape yet again both in the United States and abroad. Expect us to delve deeper into these various issues in future columns as the year unfolds, but below is a brief run-down of what should be on your compliance calendar for 2006.

The Courts. Judges and juries will soon begin repositioning governance compliance goalposts in high-profile cases involving Enron and News Corp. Consider that the Delaware Chancery Court, even as it absolved “sycophantic” Disney directors last year of negligence, sent two clarion signals to boardrooms. First, implied Chancellor William Chandler III, directors face higher standards of responsibility today than they did pre-Sarbanes-Oxley when they casually enriched ex-Disney executive Michael Ovitz for failing at his job. Chandler took pains to say that he had to judge the board on standards prevailing in 1995, when the payoff took place; directors now have stricter responsibilities to examine executive decisions than they did back then. Second, Chandler put investors on notice that they must use their watchdog rights to make sure directors are independent, competent and active. Corporate lawyers and fund executives are ramping up fiduciary defenses in response.

Expect judges and juries handling Enron fraud cases to further define corporate responsibility. They will rule, for instance, on whether Ken Lay has a defense in arguing that, as board chair, he was unaware of—and therefore not responsible for—fraud. And Chandler, who is also presiding over the international shareowner lawsuit against News Corp., could use that case to strengthen Delaware’s growing appreciation of shareowner authority; his Dec. 20 ruling allowing the case to proceed could be an early sign of that. Boards, he cautioned, cannot use the cover of fiduciary duty “to silence shareholders.” Funds complain that News Corp. wrongly reneged on a promise to put takeover defenses to a shareowner vote. If the funds win, boards could face an authoritative new precedent illuminating the boundaries between board and shareowner powers. The trial may begin in March. *

Shareowners. Two issues will overshadow all others at 2006 annual meetings: executive pay and majority rule for director elections. Executive compensation, of course, is a perennial. What makes 2006 different? For one, outrageous golden payouts last year—think the jaw-dropping $188 million Proctor & Gamble bestowed on Gillette CEO James Kilts after P&G acquired his company—reignited investor outrage.

State treasurers met behind closed doors last autumn to brand pay their top issue for 2006, and to coordinate joint activism on the matter. Usual shareholder activists CalPERS and CalSTRS led a 10-fund Nov. 30 letter to the Securities and Exchange Commission pleading for improved compensation disclosure rules; new Chairman Christopher Cox looks ready to comply as quickly as in the next few weeks. Plus, the issue jumped a deep partisan divide last month when the Republican-dominated Florida State Board of Administration stunned the market with a new promise to aggressively attack “fat cat” compensation.

Finally, 2006 will be the first year a popular foreign antidote—putting the compensation committee report to a non-binding annual shareowner vote—reaches U.S. shores. Such ballots are now routine in Great Britain and Australia. Union activism leader AFSCME has filed landmark dissident resolutions at five 2006 annual meetings—Bank of America, Home Depot, US Bancorp, Countrywide Financial and Merrill Lynch—asking the same of U.S. companies.

Then there’s the investor push for majority rule to elect board directors. Funds want corporations to scrap the common but archaic plurality system, where even a single vote can elect an entire board if every other share vote is withheld. The issue reached critical mass in 2005 with a striking 44 percent average vote in favor of majority rule at more than 60 companies. Expect the investor rebellion to spread this year as a key American Bar Association panel prepares a report and recommendation on this issue for release in February, and a stampede of Canadian blue-chips convert to majority rule.

Oh, and consider this: shareowner activism will get turbocharged this year thanks to three developments internal to shareowners and their organizations. First is the Florida SBA’s decision to focus on executive compensation issues. Second, the split in the labor movement is causing the AFL-CIO and its new rival, the Change to Win federation, to compete with each other over which can mount the most effective activism. Third, the Council of Institutional Investors, under new director Ann Yerger, is re-energized as a force for governance reform. It intends to help lead the charge on executive pay, for instance.

Policymakers. Welcome to an election year. With November in sight, not even a CEO-friendly, Republican-led Congress will champion a roll back of Sarbanes-Oxley, especially as Enron trials fill the headlines. Regulators may tinker with SOX rules, particularly for smaller public companies. But the SEC plans stricter disclosure on executive pay and has launched a first-ever enforcement probe to make sure mutual funds and investment advisers vote shares solely in their clients’ interests. Expect that threat to persuade funds to do more chest-thumping in 2006 with votes against corporate managements.

The SEC is also pushing proposals that would shift proxy distribution to the Web, slashing cost burdens for companies—but also for investors eager to mount campaigns to contest director elections. New compliance challenges are due from Europe, too: the European Commission is rolling out legislation for its Action Plan addressing auditing standards and financial reporting. Once finalized, they could affect U.S. companies just as foreign corporations have been hit by Sarbanes-Oxley.

United Nations. What does the U.N. have to do with corporate governance? You’ll find out this spring when Secretary General Kofi Anan unveils his Principles for Responsible Investment. These ambitious guidelines are meant to persuade mainstream funds to treat a corporation’s extra-financial challenges—such as climate change and human capital—as bottom-line investment risks.

The Principles were hammered out in 2005 by big private-sector funds and coordinated by the U.N. Environment Programme Finance Initiative. That same group recently released the path-breaking Freshfields study, a legal opinion demonstrating that funds have a fiduciary obligation to consider a company’s social performance when buying, selling and owning stocks. Sponsors are quietly recruiting fund endorsers before going public in a worldwide campaign. Corporate executives, meanwhile, can expect fresh demands for extra-financial data.

So drain the champagne—it’s time to prepare for a very busy year.

* Stephen Davis is a consultant to Grant & Eisenhofer, a law firm representing plaintiffs in the action against News Corp.

This column solely reflects the views of its authors, and should not be regarded as legal advice. It is for general information and discussion only, and is not a full analysis of the matters presented.