As we begin 2014, calendar-year companies are immersed in preparing for what promises to be another busy proxy season. We continue to see shareholder proposals on many of the same subjects addressed during last proxy season, as discussed in our post recapping shareholder proposal developments in 2013. To help public companies and their boards of directors prepare for the coming year’s annual meeting and plan ahead for other corporate governance developments in 2014, we discuss below several key topics to consider.
Posts Tagged ‘Amy Goodman’
On January 8, 2014, Institutional Shareholder Services, Inc. (“ISS”) announced that it will launch a new version of QuickScore (“QuickScore 2.0”) on February 18, 2014. QuickScore benchmarks a company’s governance risk against other companies in the Russell 3000 Index based on a number of weighted governance factors. QuickScore 2.0 will use a different method to score companies’ governance risk and will automatically reflect changes in companies’ governance structures based on publicly disclosed information.
Gibson Dunn successfully represented DeVry Inc. in obtaining no-action relief from the SEC staff (the “Staff”) for the exclusion of a shareholder proposal requesting that DeVry “annually report to shareholders on the expected ability of students at Company-owned institutions to repay their student loans.” The shareholder proposal, which was submitted by the New York City Comptroller’s Office on behalf of several New York City pension funds, specified particular quantitative and other information to be included in the requested report.
Today, the Public Company Accounting Oversight Board (“PCAOB”) proposed for public comment two audit standards that, if adopted, would significantly change the audit report model, and dramatically expand the auditor’s responsibilities in reporting on management’s disclosures outside the financial statements. PCAOB Chairman Doty remarked that the proposed standards—running to almost 300 pages—mark a “watershed moment” for auditing in the United States.
The first proposal—The Auditor’s Report on an Audit of Financial Statements—moves well beyond the traditional audit report and would require the following additional statements:
Institutional Shareholder Services (“ISS”), the most influential proxy advisory firm, today launched its annual global policy survey. Each year, ISS solicits comments in connection with its review of its proxy voting policies. At the end of this process, in November 2013, ISS will announce its updated proxy voting policies applicable to 2014 shareholders’ meetings.
Results from the policy survey that ISS posted on its website today will be used by ISS to inform its voting policy review. The survey includes questions on a variety of governance and executive compensation topics, including:
Shareholder proposals continued to attract significant attention during the 2013 proxy season. This post provides an overview of shareholder proposals submitted to public companies during the 2013 proxy season, including statistics, notable decisions from the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) on no-action requests  and other Staff guidance, majority votes on shareholder proposals and litigation seeking to exclude shareholder proposals.
1. Shareholder Proposal Statistics and Voting Results
According to data from Institutional Shareholder Services (“ISS”), shareholders submitted approximately 820 proposals to date for 2013 shareholder meetings, up from approximately 739 proposals submitted for 2012 shareholder meetings.  The most common 2013 shareholder proposal topics, along with the approximate number of proposals submitted, were:
Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and new Commodity Futures Trading Commission (CFTC) rules require that, subject to certain exceptions, swap counterparties clear swaps at a clearing house and execute them on a facility or exchange. One of these exceptions is the “end-user exception,” which may be available for companies that are not “financial entities” and that use swaps to manage risk. There are several requirements that these entities must meet in order to rely on the end-user exception. For public companies, these include taking certain governance steps that involve board-level approval of the company’s use of uncleared swaps and review of company policies on swaps. With the CFTC clearing requirements applicable to non-financial entities scheduled to take effect September 9, public companies can position themselves to take advantage of the end-user exception by completing these steps in the next few months.
During the 2012 proxy season, the SEC staff concurred that a number of high profile shareholder proposals could be excluded from company proxy statements because various key terms in the proposals were not adequately defined or explained within the text of the proposal and supporting statement. See e.g., WellPoint, Inc. (SEIU Master Trust) (avail. Feb. 24, 2012, recon. denied Mar. 27, 2012) (concurring with exclusion of an independent chair proposal that referred to the New York Stock Exchange standard of independence without defining it because “neither shareholders nor the company would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires”); Textron Inc. (avail. Mar. 7, 2012) (arguing that a reference to the Rule 14a-8 eligibility requirements in a proxy access shareholder proposal was vague and indefinite, although the staff ultimately concurred with the exclusion of the shareholder proposal on other grounds); Dell Inc. (avail. Mar. 30, 2012) (concurring with the exclusion of a similar proxy access shareholder proposal because the proposal’s reference to the Rule 14a-8 eligibility requirements was vague and indefinite). While these no-action letters reflected long-standing SEC staff precedent, in the current proxy season, there has continued to be a large number of no-action requests arguing that various terms in shareholder proposals are undefined or vague and therefore excludable under Rule 14a-8(i)(3).
Institutional Shareholder Services (“ISS”) and Glass, Lewis & Co., Inc. (“Glass Lewis”), the two major proxy advisory firms, recently released updates to their proxy voting policies for the 2013 proxy season. The ISS U.S. Corporate Governance Policy 2013 Updates (the “ISS Policy Updates”), which are available at http://issgovernance.com/policy/2013/policy_information, apply to shareholder meetings held on or after February 1, 2013. ISS also has released updated Frequently Asked Questions (the “ISS FAQs”), available at the link above, relating to its 2013 policies. The Glass Lewis Proxy Paper Guidelines for the 2013 Proxy Season (the “Glass Lewis Guidelines”) will be effective for annual meetings held on or after January 1, 2013. A summary of the updates to the Glass Lewis Guidelines is available here. This alert reviews the most significant ISS and Glass Lewis updates and suggested steps for companies to consider in light of these updated proxy voting policies.
With the arrival of fall, calendar-year companies are gearing up for what promises to be another busy proxy season, preparing for new rules that will impact their disclosures and governance practices, and planning their 2013 board and committee calendars. To assist public companies in these endeavors, we discuss below ten key items for corporate secretaries and in-house counsel to consider.