Posts Tagged ‘Proxy voting’

Commissioner Gallagher Offers Advice to Public Companies on Handling Proxy Advisors

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday September 7, 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.

Commissioner Daniel M. Gallagher of the Securities and Exchange Commission (“SEC”) authored a working paper, published last month by the Washington Legal Foundation, regarding the outsized power and influence of proxy advisory firms. [1] In his paper, Commissioner Gallagher provides his view of the most important aspects of Staff Legal Bulletin No. 20 (“SLB 20”), in which the SEC staff recently “moved toward addressing some of the serious issues” resulting from the emergence of proxy advisory firms as a dominant player in American corporate governance. Notably, Gallagher also offers some critical advice to public companies engaging with proxy advisory firms.

…continue reading: Commissioner Gallagher Offers Advice to Public Companies on Handling Proxy Advisors

Outsized Power & Influence: The Role of Proxy Advisers

Posted by Daniel M. Gallagher, Commissioner, U.S. Securities and Exchange Commission, on Friday September 5, 2014 at 9:00 am
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Editor’s Note: Daniel M. Gallagher is a Commissioner at the U.S. Securities and Exchange Commission. The following post is based on a Washington Legal Foundation working paper by Mr. Gallagher; the complete publication, including footnotes, is available here.

Shareholder voting has undergone a remarkable transformation over the past few decades. Institutional ownership of shares was once negligible; now, it predominates. This is important because individual investors are generally rationally apathetic when it comes to shareholder voting: value potentially gained through voting is outweighed by the burden of determining how to vote and actually casting that vote. By contrast, institutional investors possess economies of scale, and so regularly vote billions of shares each year on thousands of ballot items for the thousands of companies in which they invest.

…continue reading: Outsized Power & Influence: The Role of Proxy Advisers

SEC Guidance May Lessen Investment Adviser Demand for Proxy Advisory Services

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 a Sidley update.

Recently issued SEC staff guidance addresses concerns that have been raised about proxy advisory firms by emphasizing that the investment adviser that retains and pays a proxy advisory firm is uniquely positioned to monitor the proxy advisory firm and is required to actively oversee the firm if it wants to benefit from the firm’s services to discharge its fiduciary duty. As a result of the greater oversight exercised by all of their investment adviser clients, the proxy advisory firms will presumably respond by enhancing their policies, processes and procedures, as well as the transparency of these policies, processes and procedures. In turn, the corporate community may indirectly benefit to some degree.

…continue reading: SEC Guidance May Lessen Investment Adviser Demand for Proxy Advisory Services

The Peril of an Expectations Gap in Proxy Advisory Firm Regulation

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday July 29, 2014 at 9:08 am
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Editor’s Note: The following post comes to us from Asaf Eckstein of Tel Aviv University-Buchmann Faculty of Law.

Over the last few years, Congress and Securities and Exchange Commission (SEC) were put under pressure to seriously consider regulating proxy advisory firms. Financial industry and government leaders have voiced concern that proxy advisory firms exert too much power over corporate governance to operate unregulated. The SEC as well as the Congress have investigated and debated the merits of proxy advisory regulation. The U.S. House of Representatives held a hearing on the matter in June of 2013, and the SEC followed this hearing with a roundtable discussion in December of 2013. On June 30, 2014, the Investment Management and Corporate Finance Divisions of the SEC issued a bulletin outlining the responsibilities of proxy advisors and institutional investors when casting proxy votes. As of yet, no binding regulation has been promulgated, despite repeated calls for it.

…continue reading: The Peril of an Expectations Gap in Proxy Advisory Firm Regulation

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

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

SEC Staff Releases Guidance Regarding Proxy Advisory Firms

Posted by Amy L. Goodman, Gibson, Dunn & Crutcher LLP, on Thursday July 3, 2014 at 9:21 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.

On June 30, 2014, the staff of the Securities and Exchange Commission’s (the “Commission”) Division of Investment Management and Division of Corporation Finance (the “Staff”) issued much-anticipated guidance regarding proxy advisory firms, in the form of 13 Questions and Answers. Published in Staff Legal Bulletin No. 20 (“SLB 20″), available at http://www.sec.gov/interps/legal/cfslb20.htm, the Staff’s guidance addresses both (1) investment advisers’ responsibilities in voting client proxies and retaining proxy advisory firms (Questions 1-5), and (2) the availability and requirements of two exemptions to the proxy rules often relied upon by proxy advisory firms (Questions 6-13).

…continue reading: SEC Staff Releases Guidance Regarding Proxy Advisory Firms

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.

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Best Practice Principles for Proxy Advisors and Chairman’s Report

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday June 10, 2014 at 9:20 am
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Editor’s Note: The following post comes to us from Dirk A. Zetzsche, Propter Homines Chair for Banking and Securities law at the Institute for Financial Services of the University of Liechtenstein and Director of the Center for Business & Corporate Law at Heinrich Heine University in Duesseldorf/Germany. Following the European Securities and Markets Authority (ESMA)’s push for self-regulation of the proxy advisory industry, an industry group published its “Best Practice Principles for Providers of Shareholder Voting Research & Analysis”. Professor Zetzsche functioned as independent chairman of the group.

Regulation of proxy advisers is a widely discussed subject matter worldwide. The European Securities and Markets Authority (ESMA), the regulator responsible for enforcing European securities regulation, declared in its ESMA Final Report and Feedback Statement on the Consultation Regarding the Role of the Proxy Advisory Industry in February 2013, to favor a self-regulatory approach over mandatory regulation of the industry. “In order to ensure a robust process in developing, maintaining, and updating the Code of Conduct,” ESMA set up a list of key governance for developing a Code of Conduct for the industry (see ESMA, Final Report, at p. 11). These included, inter alia, a transparent composition and the appointment of an independent Chair that possesses the relevant skills and experience. The Code of Conduct was required to “adequately address the needs and concerns of all relevant stakeholders (including proxy advisors themselves, institutional investors, and issuers).” ESMA’s Final Report offered guidance for the detailed elaboration of the Code of Conduct on certain subject matters. In particular, ESMA asked the industry to respond to concerns regarding conflicts of interests and communication with issuers.
…continue reading: Best Practice Principles for Proxy Advisors and Chairman’s Report

2014 Proxy Season: Early Indications

Editor’s Note: Richard J. Sandler is a partner at Davis Polk & Wardwell LLP and co-head of the firm’s global corporate governance group. This post is based on a Davis Polk client memorandum.

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.

…continue reading: 2014 Proxy Season: Early Indications

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