Posts Tagged ‘ISS’

2014 Proxy Season Review

Editor’s Note: H. Rodgin Cohen is a partner and senior chairman of Sullivan & Cromwell LLP focusing on acquisition, corporate governance, regulatory and securities law matters. The following post is based on a Sullivan & Cromwell publication by Mr. Cohen, Glen T. Schleyer, Melissa Sawyer, and Janet T. Geldzahler; the complete publication, including footnotes, is available here.

During the 2014 proxy season, governance-related shareholder proposals continued to be common at U.S. public companies, including proposals calling for declassified boards, majority voting in director elections, elimination of supermajority requirements, separation of the roles of the CEO and chair, the right to call special meetings and the right to act by written consent. While the number of these proposals was down from 2012 and 2013 levels, this decline related entirely to fewer proposals being received by large-cap companies, likely due to the diminishing number of large companies that have not already adopted these practices. Smaller companies, at which these practices are less common, have not seen a similar decline and, if anything, are increasingly being targeted with these types of proposals.

…continue reading: 2014 Proxy Season Review

Proxy Advisory Firms and Corporate Governance Practices: One Size Does Not Fit All

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday June 18, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Bill Libit, partner concentrating in corporate and securities and municipal finance at Chapman and Cutler LLP, and is based on a Chapman publication by Mr. Libit and Todd Freier.

The 2014 proxy season, like previous seasons, has provided shareholders of public US companies with an opportunity to vote on a number of corporate governance proposals and director elections. Throughout this proxy season, proxy advisory firms have provided shareholder vote recommendations “for” or “against” those proposals and “for” or to “withhold” votes for directors. Certain proxy advisory firms, such as Institutional Shareholders Services Inc. (“ISS”) and Glass, Lewis & Co., LLC (“Glass Lewis”), have also published updated corporate governance ratings reports on public companies, including evaluations of a company’s corporate governance risk profile.

…continue reading: Proxy Advisory Firms and Corporate Governance Practices: One Size Does Not Fit All

Cyber Governance: What Every Director Needs to Know

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday June 5, 2014 at 9:23 am
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Editor’s Note: The following post comes to us from Paul A. Ferrillo, counsel at Weil, Gotshal & Manges LLP specializing in complex securities and business litigation, and is based on an article authored by Mr. Ferrillo.

The number, severity, and sophistication of cyber attacks—whether on our retail economy, our healthcare sector, our educational sector or, in fact, our government and defense systems—grows worse by the day. [1]

Among the most notable cyber breaches in the public company sphere was that hitting Target Corporation (40 million estimated credit and debit cards allegedly stolen, 70 million or more pieces of personal data also stolen, and a total estimated cost of the attack to date of approximately $300 million). [2] Justified or not, ISS has just issued a voting recommendation against the election of all members of Target’s audit and corporate responsibility committees—seven of its ten directors—at the upcoming annual meeting. ISS’s reasoning is that, in light of the importance to Target of customer credit cards and online retailing, “these committees should have been aware of, and more closely monitoring, the possibility of theft of sensitive information.” [3]

…continue reading: Cyber Governance: What Every Director Needs to Know

ISS Recommends Shareholders Withhold Votes for 6 Ashford Trust Directors

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday May 27, 2014 at 9:13 am
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Editor’s Note: The following post comes to us from JJ Fueser, Research Coordinator at UNITE HERE.

UNITE HERE proposals to opt out of Maryland Unsolicited Takeover Act have received resounding support from shareholders of Ashford Hospitality Prime.

Over the past two years, activist shareholder UNITE HERE, the hospitality workers’ union, has been winning corporate governance reforms at lodging REITs, which are nearly all incorporated in Maryland.

Several proposals ask boards to opt out of Maryland statutes which provide a range of anti-takeover tools. The Maryland Unsolicited Takeover Act (MUTA), for example, allows boards to classify at any time without shareholder approval.

UNITE HERE has argued that without opting out of MUTA—and requiring shareholder approval to opt in—a Maryland REIT has not truly declassified its board. The proposals to opt out of Maryland’s anti-takeover statutes have gained traction, with six proposals withdrawn after full or substantial implementation.

…continue reading: ISS Recommends Shareholders Withhold Votes for 6 Ashford Trust Directors

Renewed Focus on Corporate Director Tenure

Posted by David A. Katz, Wachtell, Lipton, Rosen & Katz, on Thursday May 22, 2014 at 8:30 pm
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Editor’s Note: David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz specializing in the areas of mergers and acquisitions and complex securities transactions. This post is based on an article by Mr. Katz and Laura A. McIntosh that first appeared in the New York Law Journal; the full article, including footnotes, is available here.

The issue of director tenure recently has garnered significant attention both in the United States and abroad. U.S. public companies generally do not have specific term limits on director service, though some indicate in their bylaws a “mandatory” retirement age for directors—typically between 72 and 75—which can generally be waived by the board of directors. Importantly, there are no regulations or laws in the United States under which a long tenure would, by itself, prevent a director from qualifying as independent.

Institutional Shareholder Services (ISS) and other shareholder activist groups are beginning to include director tenure in their checklists as an element of director independence and board composition. Yet even these groups acknowledge that there is no ideal term limit applicable to all directors, given the highly fact-specific context in which an individual director’s tenure must be evaluated. In our view, director tenure is an issue that is best left to boards to address individually, both as to board policy, if any, and as to specific directors, should the need arise. Boards should and do engage in annual director evaluations and self-assessment, and shareholders are best served when they do not attempt to artificially constrain the board’s ability to exercise its judgment and discretion in the best interests of the company. In addition, much the same way boards consider CEO succession issues, boards are beginning to address director succession issues as well.

…continue reading: Renewed Focus on Corporate Director Tenure

Governance Priorities for 2014

Editor’s Note: Holly J. Gregory is a partner and co-global coordinator of the Corporate Governance and Executive Compensation group at Sidley Austin LLP. This post is based on an article that originally appeared in Practical Law The Journal. The views expressed in the post are those of Ms. Gregory and do not reflect the views of Sidley Austin LLP or its clients.

As the fallout from the financial crisis recedes and both institutional investors and corporate boards gain experience with expanded corporate governance regulation, the coming year holds some promise of decreased tensions in board-shareholder relations. With governance settling in to a “new normal,” influential shareholders and boards should refocus their attention on the fundamental aspects of their roles as they relate to the creation of long-term value.

Institutional investors and their beneficiaries, and society at large, have a decided interest in the long-term health of the corporation and in the effectiveness of its governing body. Corporate governance is likely to work best in supporting the creation of value when the decision rights and responsibilities of shareholders and boards set out in state corporate law are effectuated.

…continue reading: Governance Priorities for 2014

ISS QuickScore 2.0

Posted by David A. Katz, Wachtell, Lipton, Rosen & Katz, on Wednesday January 29, 2014 at 11:19 am
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Editor’s Note: David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz specializing in the areas of mergers and acquisitions, corporate governance, and complex securities transactions. This post is based on a Wachtell Lipton memorandum by Mr. Katz, Sabastian V. Niles, and Francis J. Stapleton; the complete publication, including annex, is available here.

Institutional Shareholder Services Inc. (ISS) has announced the governance factors and other technical specifications underlying its new Governance QuickScore 2.0 product, which ISS will apply to publicly traded companies for the 2014 proxy season. Companies have until 8pm ET on Friday, February 7th to verify the underlying raw data and can submit updates and corrections through ISS’s data review and verification site. ISS will release company ratings on Tuesday, February 18th, and the scores will be included in proxy research reports issued to institutional shareholders. While previous QuickScore ratings remained static between annual meeting periods, ISS has now committed to update ratings on an on-going basis based on a company’s public disclosures throughout the calendar year.

…continue reading: ISS QuickScore 2.0

ISS Releases FAQs: Defensive Bylaw May Lead to Negative Vote Recommendations

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday January 26, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Rebecca Grapsas, senior associate in the Corporate Department of Weil, Gotshal & Manges LLP, and is based on a Weil alert.

Public companies that have recently adopted or are considering adopting bylaws that disqualify director nominees who receive compensation from anyone other than the company should be aware of new FAQs released yesterday by Institutional Shareholder Services (ISS) and the potential impact the FAQs may have on forthcoming director elections. Such bylaws typically operate in conjunction with advance notice bylaws that require proponents to disclose compensation arrangements with their nominees. Compensation payable by a third party for director candidacy and/or board service—for example, by an insurgent in a contested director election—may call into question a director’s undivided loyalty to the company and all of its shareholders.

…continue reading: ISS Releases FAQs: Defensive Bylaw May Lead to Negative Vote Recommendations

ISS To Revise QuickScore

Posted by Amy L. Goodman, Gibson, Dunn & Crutcher LLP, on Sunday January 19, 2014 at 9:00 am
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Editor’s Note: Amy Goodman is a partner and co-chair of the Securities Regulation and Corporate Governance practice group at Gibson, Dunn & Crutcher LLP. The following post is based on a Gibson Dunn alert by Ms. Goodman and Elizabeth A. Ising.

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.

…continue reading: ISS To Revise QuickScore

ISS Publishes Guidance on Director Compensation (and Other Qualification) Bylaws

Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, Andrew R. Brownstein, Steven A. Rosenblum, Trevor S. Norwitz, David C. Karp, and Sabastian V. Niles.

In the latest instance of proxy advisors establishing a governance standard without offering evidence that it will improve corporate governance or corporate performance, ISS has adopted a new policy position that appears designed to chill board efforts to protect against “golden leash” incentive bonus schemes. These bonus schemes have been used by some activist hedge funds to recruit director candidates to stand for election in support of whatever business strategy the fund seeks to impose on a company.

…continue reading: ISS Publishes Guidance on Director Compensation (and Other Qualification) Bylaws

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