Posts Tagged ‘Shareholder voting’

Shareholder Proposals on Social and Environmental Issues

Editor’s Note: Matteo Tonello is managing director of corporate leadership at The Conference Board. This post relates to an issue of The Conference Board’s Director Notes series authored by Melissa Aguilar and Thomas Singer. The complete publication, including footnotes, is available here.

Political spending and climate change, key topics during the 2014 proxy season, are expected to feature heavily again in 2015 shareholder proposals. This post reviews the content of the social and environmental proposals voted on most frequently by shareholders of Russell 3000 companies during the 2014 season, including the topics that received the highest average shareholder support. The complete publication provides examples of proposal text and sponsor supporting statements, as well as board responses and related corporate disclosure.

Nearly 40 percent of all shareholder proposals submitted at Russell 3000 companies that held meetings during the first half of 2014 were related to social and environmental policy issues, up from 29.2 percent in 2010, as documented in Proxy Voting Analytics (2010-2014). Social and environmental policy proposals now represent the second-largest category of the subjects in terms of both the number submitted and the number voted, narrowly behind corporate governance.

…continue reading: Shareholder Proposals on Social and Environmental Issues

The Efficacy of Shareholder Voting in Staggered and Non-Staggered Boards

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday December 2, 2014 at 8:58 am
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Editor’s Note: The following post comes to us from Ronen Gal-Or and Udi Hoitash, both of the Department of Accounting at Northeastern University, and Rani Hoitash of the Department of Accountancy at Bentley University. Recent work from the Program on Corporate Governance about staggered boards includes: How Do Staggered Boards Affect Shareholder Value? Evidence from a Natural Experiment (discussed on the Forum here).

In our paper, The Efficacy of Shareholder Voting in Staggered and Non-Staggered Boards: The Case of Audit Committee Elections, which was recently made available on SSRN, we study the efficacy of audit committee member elections in staggered and non-staggered boards.

Voting in director elections and auditor ratifications is a primary mechanism shareholders can use to voice their opinion. Past research shows that shareholders cast votes against directors that exhibit poor performance, and these votes, in turn, are associated with subsequent board reaction. However, because a significant number of U.S. public companies have staggered boards, not all directors are up for election every year. Therefore, the efficacy of shareholder votes may not be uniform. Under the staggered board voting regime, shareholders and proxy advising firms can typically voice their opinion on any given director only once every three years. This election structure may increase the likelihood that directors who are not up for election following poor performance will be insulated from the scrutiny of shareholders and proxy advisors. In turn, this may influence the accountability of staggered directors and the overall efficacy of shareholder votes.

…continue reading: The Efficacy of Shareholder Voting in Staggered and Non-Staggered Boards

ESG Risks and Opportunities Facing Investee Companies

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Sunday November 30, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Rakhi Kumar, Head of Corporate Governance at State Street Global Advisors, and is based on an SSgA publication; the complete publication is available here.

As part of our active ownership process, State Street Global Advisors (“SSgA”) considers environmental, social and governance (“ESG”) matters while evaluating and engaging with investee companies. SSgA believes that ESG factors can impact the reputation of companies and can also create significant operational risks and costs to businesses. Conversely, well-developed corporate social responsibility (“CSR”) programs [1] can generate efficiencies, enhance productivity and mitigate risks, all of which impact shareholder value.

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ISS and Glass Lewis Update Proxy Voting Guidelines for 2015

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Saturday November 29, 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.

Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis have both released updates to their respective proxy voting guidelines. [1] 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.

…continue reading: ISS and Glass Lewis Update Proxy Voting Guidelines for 2015

Global Banks at a Strategic Crossroad

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Friday November 28, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Rakhi Kumar, Head of Corporate Governance at State Street Global Advisors, and is based on an SSgA publication; the complete publication, including appendix, is available here.

In Q1 and early Q2 2014, SSgA actively engaged with 15 global banks ahead of the proxy voting season. These engagements were conducted jointly with members of SSgA’s investment and governance teams. Our engagement addressed specific governance issues at each bank and also encompassed a wider discussion on the changing regulatory landscape and its impact on business strategy, capital requirements, operations and risk management, and the bank’s global footprint. Below we have provided the perspectives and insights gleaned from our engagement activities with banks this year.

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The Next Wave of Proxy Access Proposals

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday November 24, 2014 at 9:14 am
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Editor’s Note: The following post comes to us from David J. Berger, partner focusing on corporate governance at Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum.

The Comptroller of the City of New York, who oversees pension funds with a combined $160 billion in assets, recently submitted proxy access shareholder proposals at 75 U.S. public companies as part of its Boardroom Accountability Project. [1] These 75 companies, representing a wide range of industries and market capitalizations, were targeted based on three “priority issues”: climate change, board diversity, and executive compensation.

“Proxy access” proposals seek to provide shareholders with a mechanism for placing their nominees for director in a company’s proxy statement and on its proxy card, thereby avoiding the cost to a shareholder of sending out its own proxy statement. Under a typical proxy access bylaw, shareholders must hold a specified amount of stock in the company (e.g., 3 percent) for a certain period (e.g., 3 years), in addition to meeting other procedural requirements. Proponents of proxy access argue that it provides shareholders with a cost-effective means of running their own candidates for director, providing all shareholders with greater ability to shape the composition of the board.

…continue reading: The Next Wave of Proxy Access Proposals

ISS and Glass Lewis Voting Guidelines for 2015 Proxy Season

Posted by Kobi Kastiel, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday November 20, 2014 at 9:39 am
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Editor’s Note: The following post comes to us from Edmond T. FitzGerald, partner and head of the Executive Compensation Group at Davis Polk & Wardwell LLP, and is based on a Davis Polk client memorandum by Kyoko T. Lin and Ning Chiu.

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.

…continue reading: ISS and Glass Lewis Voting Guidelines for 2015 Proxy Season

Proxy Access Proposals for the 2015 Proxy Season

Posted by David A. Katz, Wachtell, Lipton, Rosen & Katz, on Friday November 7, 2014 at 5:04 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, corporate governance, and complex securities transactions. This post is based on a Wachtell Lipton memorandum. Work from the Program on Corporate Governance about proxy access includes Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

A number of U.S. companies have recently received “proxy access” shareholder proposals submitted under SEC Rule 14a-8. Many of the recipients have been targeted under the New York City Comptroller’s new “2015 Boardroom Accountability Project,” which is seeking to install proxy access at 75 U.S. publicly traded companies reflecting diverse industries and market capitalizations. Underlying the Comptroller’s selection of targets is a stated focus on climate change, board diversity and executive compensation.

…continue reading: Proxy Access Proposals for the 2015 Proxy Season

Shareholder Scrutiny and Executive Compensation

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday October 22, 2014 at 9:00 am
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Editor’s Note: The following post comes to us from Mathias Kronlund of the Department of Finance at the University of Illinois at Urbana-Champaign and Shastri Sandy of the Department of Finance at the University of Missouri at Columbia.

As a result of the Dodd-Frank Act of 2010, public firms must periodically hold advisory shareholder votes on executive compensation (“say on pay”). One of the main goals of the say-on-pay mandate is to increase shareholder scrutiny of executive pay, and thus alleviate perceived governance problems when boards decide on executive compensation. In our paper, Does Shareholder Scrutiny Affect Executive Compensation? Evidence from Say-on-Pay Voting, which was recently made publicly available on SSRN, we examine how firms change the structure and level of executive compensation depending on whether the firm will face a say-on-pay vote or not.

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Influence of Public Opinion on Investor Voting and Proxy Advisors

Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday September 25, 2014 at 9:07 am
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Editor’s Note: The following post comes to us from Reena Aggarwal, Professor of Finance at Georgetown University; Isil Erel of the Department of Finance at Ohio State University; and Laura Starks, Professor of Finance at the University of Texas at Austin.

In our paper, Influence of Public Opinion on Investor Voting and Proxy Advisors, which was recently made publicly available on SSRN, we address the question of how public opinion influences the proxy voting process. We find strong influence of public opinion on the evolution in both investor voting behavior and proxy advisor recommendations. Therefore, our results suggest that an additional channel through which the public can communicate with corporate management (and potentially influence corporate behavior) is the proxy voting process. We provide new evidence that media coverage can also influence firm behavior through the voting channel. This channel is important because media coverage captures the attention of proxy advisors, institutional investors and individual investors, and is thus reflected in recommendations and votes.

…continue reading: Influence of Public Opinion on Investor Voting and Proxy Advisors

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