Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis have both released updates to their respective proxy voting guidelines.  ISS’s revised policies will take effect for annual meetings occurring on or after February 1, 2015. Glass Lewis’s new policies will take effect for meetings occurring after January 1, 2015, while its clarifications of existing policies are effective immediately.
Posts Tagged ‘Proxy season’
ISS and Glass Lewis, two influential proxy advisory firms, have both released updates to their policies that govern recommendations for how shareholders should cast their votes on significant ballot items for the 2015 proxy season, including governance, compensation and environmental and social matters.
ISS policy updates are effective for annual meetings after February 1, 2015. We understand that the new Glass Lewis policies are effective for annual meetings after January 1, 2015, but clarifications to existing policies are effective immediately.
It is time for calendar year-end public companies to focus on the upcoming 2015 proxy and annual reporting season. This post discusses the following key issues for companies to consider in their preparations:
- Pending Dodd-Frank Regulation
- Say-on-Pay and Compensation Disclosure Considerations
- Shareholder Proposals
- Proxy Access
- Compensation Committee Independence Determinations
- Compensation Adviser Independence Assessment
- Compensation Consultant Conflict of Interest Disclosure
- NYSE Quorum Requirement Change
- Director and Officer Questionnaires
- Proxy Advisory Firm and Investment Adviser Matters
- Conflict Minerals
- Management’s Discussion and Analysis
- Proxy Bundling
- Foreign Issuer Preliminary Proxy Statement Relief
- Technology and the Proxy Season
The 2014 proxy season saw significant growth in audit committee transparency. Continuing the trend of the past several years, an increased number of Fortune 100 companies are going beyond the minimum disclosures required.
These disclosures are also more robust—providing valuable perspectives on the activities of audit committees, including their oversight of external auditors.
The recent movement toward increased audit committee transparency has been encouraged by a variety of factors and entities. In addition to the ongoing disclosure effectiveness review by the US Securities and Exchange Commission (SEC) involving a holistic review of the US corporate disclosure regime, audit committee disclosures are receiving significant attention from a variety of stakeholders. These stakeholders include US and non-US regulators, investors, and policy organizations.
“Proxy season” is stretching longer and longer with each passing year as the “off season” has become the season to engage with institutional shareholders and to prepare for the next season. With 2014’s annual meetings now largely completed and the 2015 proxy season on the horizon, now seems a good time to review lessons learned and themes from 2014. This Corporate Governance Update addresses some of the developments that shaped the proxy season in 2014 and discusses points worth considering as preparations for the 2015 season begin.
Nearly 40 investor representatives shared with us their key priorities for the 2014 proxy season. We review the developments around these topics over the 2014 proxy season through shareholder proposal submissions, investor voting trends, proxy statement disclosures and behind-the-scenes company-investor engagement.
Key Developments in the 2014 Proxy Season
Activist investors are becoming more active and influential: Nearly 150 campaigns by hedge fund activists were launched in just the first half of this year. Both companies and long-term institutional investors are learning to navigate this changing landscape.
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.
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.
This post provides an overview of shareholder proposals submitted to public companies during the 2014 proxy season, including statistics, notable decisions from the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”) on no-action requests and information about litigation regarding shareholder proposals.
It is still early days, but here is what we are seeing as the 2014 proxy season unfolds:
Institutional investors promote governance reforms and engagement efforts. Prior to the season Vanguard sent letters to S&P 500 companies seeking adoption of annual director elections, majority voting and the right of holders of 25% of the common stock to call special meetings. It was an unusually public move for a large institutional investor that, like others of its kind, tends to engage in quiet diplomacy. Also unusual was the call for universal adoption of this set of governance practices, in contrast to the case-by-case approach traditionally taken by institutional investors. It may signal that, at least on the governance side of these institutions, these practices are now viewed more as accepted norms than as just best practices. But there remains a disconnect between the governance and investment sides, as we continue to see institutional investors participate in IPOs for companies with none of these provisions.