Posts Tagged ‘Proxy materials’

Ensuring the Proxy Process Works for Shareholders

Posted by Luis A. Aguilar, Commissioner, U.S. Securities and Exchange Commission, on Friday February 20, 2015 at 9:00 am
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Editor’s Note: Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent public statement; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today’s [February 19, 2015] Roundtable on Proxy Voting is certainly timely since over the course of the next several months, thousands of America’s public companies will hold annual shareholders meetings to elect directors and to vote on many important corporate governance issues. The start of the annual “proxy season” is an appropriate time to consider the annual process by which companies communicate with their shareholders and get their input on a variety of issues. Whether it’s voting on directors, executive compensation matters, or other significant matters, the annual meeting is the principal opportunity for shareholders—the true owners of public companies—to have their voices heard by the corporate managers of their investments. At these annual meetings, shareholders can express their support, or disappointment, with the direction of their companies through the exercise of their right to vote.

…continue reading: Ensuring the Proxy Process Works for Shareholders

SEC to Review Excluding Conflicting Proxy Proposals under Rule 14a-8

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday February 10, 2015 at 9:02 am
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Editor’s Note: The following post comes to us from Robert B. Schumer, chair of the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP, and is based on a Paul Weiss client memorandum.

SEC Chair Mary Jo White has directed the Division of Corporation Finance (“Corporation Finance”) to review its position on Rule 14a-8(i)(9), which allows a company to exclude a shareholder proposal from the company’s proxy materials if it “conflicts” with the company’s own proposal to be submitted to shareholders at the same meeting. As a result of this direction, Corporation Finance will express “no views” on the application of Rule 14a-8(i)(9) this proxy season.

The catalyst for this development was a shareholder proposal submitted by proponent James McRitchie to Whole Foods Market, Inc., requesting that the company adopt “proxy access” procedures generally to allow one or more shareholders owning at least 3% of the company’s voting securities for three or more years to nominate up to 20% of the board of directors via the company’s proxy materials. Whole Foods countered with its own proposal that included significantly different share ownership and holding period thresholds and director nominee caps, but nevertheless was granted no-action relief by Corporation Finance, allowing it to exclude the McRitchie proposal under Rule 14a-8(i)(9) on the basis that it conflicted with Whole Foods’ proposal and the proposals would “present alternative and conflicting decisions for the Company’s shareholders that would likely result in inconsistent and ambiguous results”. Thereafter, Mr. McRitchie, the Council of Institutional Investors and others have called for the SEC to review its position on these “conflicts”, which SEC Chair White has now done. Corporation Finance has since effectively rescinded its no-action relief to Whole Foods and stated that it has no view of Rule 14a-8(i)(9).

…continue reading: SEC to Review Excluding Conflicting Proxy Proposals under Rule 14a-8

Guidance on the Ordinary Business Exception to Rule 14a-8

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday January 14, 2015 at 9:00 am
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Editor’s Note: The following post comes to us from Steve Bochner, partner focusing on corporate and securities law at Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum.

A tenet of corporate law is that directors—not shareholders—manage a company’s business and affairs. Recognizing that proposals adopted through the Rule 14a-8 process could allow shareholders to intrude on matters traditionally within the directors’ discretion and control, Rule 14a-8(i)(7) permits the exclusion of shareholder proposals from a company’s proxy statement that relate to a “company’s ordinary business operations.” This ordinary business exception to Rule 14a-8 is an acknowledgement that certain “tasks are so fundamental to management’s ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight.”

In interpreting Rule 14a-8(i)(7), the staff of the Securities and Exchange Commission (SEC) has found that proposals otherwise related to an ordinary business matter may not be permissibly excluded from a company’s proxy statement where they also relate to a significant social policy issue. In this circumstance, the SEC’s staff will not provide its concurrence (in the form of a no-action letter) with a company’s decision to exclude a shareholder proposal on the basis of the ordinary business exception if the staff determines that the issue “transcend[s] the day-to-day business matters and raise[s] policy issues so significant that it would be appropriate for a shareholder vote.” The line between a proposal related to ordinary business and one related to a significant social policy issue is often blurry, and it is the subject of intense debate between companies and shareholder proponents.

…continue reading: Guidance on the Ordinary Business Exception to Rule 14a-8

Updated CD&A Template Aims to Improve Communication

Posted by Matt Orsagh, CFA Institute, on Friday October 24, 2014 at 9:02 am
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Editor’s Note: Matt Orsagh is a director at CFA Institute.

In 2011, CFA Institute released the Compensation Discussion and Analysis (CD&A) Template as a tool to help companies produce a more succinct and informative CD&A that served the needs of both companies and investors. At the time there were complaints from both issuers and investors that the typical CD&A was seen by too many issuers as a compliance document that was too lengthy and too opaque to serve as the communication tool investors desired.

In the intervening years disclosures in the CD&A have improved a great deal, due in part to increased engagement between issuers and investors, a better understanding of disclosure best practices by issuers, and more willingness by some issuers to experiment with more creative ways of telling their stories.

…continue reading: Updated CD&A Template Aims to Improve Communication

2014 Proxy Season Mid-Year Review

Editor’s Note: Mary Ann Cloyd is leader of the Center for Board Governance at PricewaterhouseCoopers LLP. This post is based on an edition of ProxyPulse™, a collaboration between Broadridge Financial Solutions and PwC’s Center for Board Governance; the full report, including additional figures, is available here.

This post looks at results from 2,788 shareholder meetings held between January 1 and May 22, 2014. We provide data and analyses on areas such as share ownership composition, director elections, say-on-pay, proxy material distribution and the mechanics of shareholder voting. We also look at differences in proxy voting by company size.

With about three-quarters of the 2014 proxy season complete, voting results continue to show that public company executives and directors must remain vigilant regarding corporate governance matters. In comparison to last proxy-season at this time, large-cap ($10b+) companies have attained higher levels of shareholder support both for directors and for executive compensation plans. In contrast, support levels for executive compensation plans fell at mid-cap ($2b–$10b), small-cap ($300m–$2b) and micro-cap ($300m or less) companies, and support for directors fell at mid-cap companies.

…continue reading: 2014 Proxy Season Mid-Year Review

SEC Issues Guidance on Use of Social Media in Offerings and Proxy Fights

Editor’s Note: Trevor Norwitz is a partner in the Corporate Department at Wachtell, Lipton, Rosen & Katz, where he focuses on mergers and acquisitions, corporate governance and securities law matters. This post is based on a Wachtell Lipton firm memorandum by Mr. Norwitz, Sabastian V. Niles, Eitan S. Hoenig, and Matthew I. Danzig.

The SEC staff has released new guidance regarding the use of social media such as Twitter in securities offerings, business combinations and proxy contests (as a senior SEC official telegraphed at the Tulane Corporate Law Institute conference). Until now, SEC legending requirements have restricted an issuer’s ability to communicate electronically using Twitter or similar technologies with built-in character limitations before having an effective registration statement for offerees, or definitive proxy statement for stockholders (as the legends generally exceed the character limits). Companies using Twitter and similar media with character limits can now satisfy these legend requirements by using an active hyperlink to the full legend and ensuring that the hyperlink itself clearly conveys that it leads to important information. Although the SEC guidance does not provide example language, hyperlinks styled as “Important Information” or “SEC Legend” would seem to satisfy this standard. Social media platforms that do not have restrictive character limitations, such as Facebook and LinkedIn, must still include the full legend in the body of the message to offerees or stockholders.

…continue reading: SEC Issues Guidance on Use of Social Media in Offerings and Proxy Fights

SEC Exempts “Foreign Issuer” From Filing a Preliminary Proxy Statement

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday April 12, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Yafit Cohn, Associate at Simpson Thacher & Bartlett LLP, and is based on a Simpson Thacher memorandum by Ms. Cohn.

On January 31, 2014, the Securities and Exchange Commission (“SEC”) issued a no-action letter to Schlumberger Ltd. (“Schlumberger” or “the Company”), permitting the Company not to file a preliminary proxy statement under Rule 14a-6(a) when the only matters to be acted upon by stockholders at the Company’s annual meeting were either specifically excluded from the filing requirements by Rule 14a-6(a) or were certain ordinary and routine matters required to be submitted for stockholder approval under Curaçao law on an annual basis.

…continue reading: SEC Exempts “Foreign Issuer” From Filing a Preliminary Proxy Statement

Three Courts Dismiss Lawsuits for Lack of Subject Matter Jurisdiction

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday April 6, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Yafit Cohn, Associate at Simpson Thacher & Bartlett LLP, and is based on a Simpson Thacher memorandum; the full text, including footnotes, is available here.

This proxy season, rather than following the traditional route of seeking no-action relief from the Securities and Exchange Commission (“SEC”) (or, in one instance, after receiving a no-action denial), at least four companies have filed lawsuits against activist investor John Chevedden, in each case requesting declaratory judgment that the company may properly exclude Chevedden’s proposed shareholder resolution from the proxy materials for its 2014 annual meeting. While companies have enjoyed judicial victories against Chevedden in the recent past (including during the current proxy season), this month, for the first time, three federal courts dismissed actions against Chevedden, citing lack of subject matter jurisdiction.

…continue reading: Three Courts Dismiss Lawsuits for Lack of Subject Matter Jurisdiction

Sustainability Disclosure in Annual Reports and Proxy Statements

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday August 1, 2013 at 9:22 am
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Editor’s Note: The following post comes to us from Betty Moy Huber, co-head of the Environmental Group in the Corporate Department of Davis Polk & Wardwell LLP, and is based on a Davis Polk publication by Ms. Huber.

Public interest groups and socially responsive investors have been for decades pushing for increased sustainability (also known as environmental, social, and governance or ESG) disclosure by public companies. Surprisingly, many mainstream investors (in the United States and worldwide) are now joining the call for better and more uniform sustainability disclosure, arguing that such disclosure is required for them to be able to make informed investment decisions. Some global stock exchanges have also thrown their support behind this campaign and the U.S. Securities and Exchange Commission (SEC) appears to be listening, too.

Shareholder activism, specifically submitting shareholder proposals to U.S. public companies for inclusion in such companies’ annual proxy statements on form DEF 14A was one of the original tools of public interest groups to compel companies to disclose and consider sustainability matters. This strategy had manifold benefits to the public interest groups, including forcing companies to focus on their sustainability issues, generating helpful written statements from the SEC in response to company no-further action letter requests to exclude these proposals from their proxies, and gaining media attention for the cause. This activism proved to be a fertile training ground for the interest groups who continue to submit various sustainability shareholder proposals, but are now focusing their sights on the next frontier, i.e., binding sustainability disclosure requirements.

…continue reading: Sustainability Disclosure in Annual Reports and Proxy Statements

How Well Do You Know Your Shareholders?

Editor’s Note: Mary Ann Cloyd is leader of the Center for Board Governance at PricewaterhouseCoopers LLP. This post is based on an edition of ProxyPulse™, a collaboration between Broadridge Financial Solutions and PwC’s Center for Board Governance; the full report, including additional figures, is available here.

ProxyPulse™ provides data and analysis on voting trends as the proxy season progresses. This first edition for the 2013 season covers the 549 annual meetings held between January 1, and April 23, 2013 and subsequent editions will incorporate May and June meetings. These reports are part of an ongoing commitment to provide valuable benchmarking data to the industry.

The analysis is based upon Broadridge’s processing of shares held in street name, which accounts for over 80% of all shares outstanding of U.S. publicly-listed companies. For purposes of this report, the term “institutional shareholders” refers to mutual funds, public and private pension funds, hedge funds, investment managers, managed accounts and voting by vote agents. The term “retail shareholders” refers to individuals whose shares are held beneficially in brokerage accounts.

…continue reading: How Well Do You Know Your Shareholders?

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