ISS Peer Group Submission Window Is Currently Open

Each proxy season, Institutional Shareholder Services Inc. (“ISS”) constructs a peer group for each company prior to the company’s next proxy disclosure. ISS’ methodology for constructing the peer group is based in part on the company’s self-selected peer group. ISS recently invited submissions from certain U.S. and Canadian companies with annual meetings scheduled between September 16, 2020 and January 31, 2021. The submission deadline is next Friday at 8:00 PM EDT, July 17, 2020.

As one input in its peer group selection methodology, ISS will generally look to the peer group disclosed in the company’s last proxy and utilized by the company in determining CEO pay.
Continue Reading

SEC’s Q2 Roundtable Offers Insight to Investor Views

On June 30, 2020, Chairman Jay Clayton moderated a virtual roundtable titled “Q2 Reporting: A Discussion of COVID-19 Related Disclosure Considerations” to solicit views from a small panel of highly experienced and well-informed private investors and asset managers (“Roundtable”).  The Roundtable included the following panelists: Gary Cohn, Former Director of the U.S. National Economic Council; Glenn Hutchins, Chairman of North Island and Co-Founder of Silver Lake; Tracy Maitland, President and CIO of Advent Capital Management; and Barbara Novick, Vice Chair and Co-Founder of BlackRock. The Director of the Division of Corporation Finance, William H. Hinman, also participated in the Roundtable.

Standardization, Transparency and Forward-Looking Information

There was a general consensus among panelists that companies’ providing greater transparency and forward-looking information is crucial when there is a lot of economic uncertainty, such as presented by the COVID-19 pandemic.
Continue Reading

SEC’s Spring 2020 Reg Flex Agenda Indicates Universal Proxy Rule May Be Coming Soon

The SEC’s 2020 spring agenda of its rulemaking actions under the Regulatory Flexibility Act (RFA) has been posted. The agenda, commonly referred to as the “Reg Flex Agenda,” is published semiannually and reflects the actions the SEC Chairman anticipates the agency will complete in the short term (within a year and almost all items are listed in the “Proposed Stage” or “Final Rule Stage”) or the long term (longer than a year and the items are listed as “Long-Term Actions”).  Under Chairman Jay Clayton’s leadership the agenda is meant to be viewed as a transparency and accountability tool of the agency’s initiatives, as opposed to a list of merely aspirational goals. 
Continue Reading

Department of Labor Proposes Investment Duties Rule Affecting ESG Investments

The U.S. Department of Labor issued a proposed rule on June 23, 2020 to clarify how and when ERISA fiduciaries can select and monitor plan investments based on environmental, social or corporate governance (“ESG”) and similar objectives.

  • Who is subject?

The proposed rule would apply to fiduciaries of private-sector retirement plans, such as company-sponsored defined benefit pension plans and 401(k) plans. Fiduciaries of public pension plans are not subject.

  • Why was the rule proposed?

The Labor Department believes that the proposed rule will help plan fiduciaries navigate ESG investing and separate the consideration of risk-return factors from investments that may sacrifice investment return, increase costs or assume additional investment risk to promote “non-pecuniary” objectives.
Continue Reading

SEC Urged to Mandate Disclosures on COVID-19 Risks and Responses

On June 15, 2020, Americans for Financial Reform (AFR), a nonprofit coalition founded in the wake of the 2008 financial crisis, called on the Securities and Exchange Commission (SEC) to require public companies to disclose how they are protecting employees from coronavirus (COVID-19), citing that consistent, comprehensive information is critical to investors and public health.

Although the SEC Division of Corporate Finance issued Staff Guidance in March 2020 providing companies with its views on COVID-19 disclosures, followed by a joint statement on COVID-19 disclosures in April 2020 by SEC Chairman Clayton and Corp Fin Director Hinman which statement recommended that companies “provide as much information as is practicable” about how they are responding to the pandemic, AFR claims that these efforts were only one step in the right direction.
Continue Reading

SEC Asset Management Advisory Subcommittee Provides Report on ESG Practices in Asset Management Space

Earlier today, the Securities and Exchange Commission (“SEC”) held an open virtual meeting with the Asset Management Advisory Committee to discuss the impact of the coronavirus (“COVID-19”) and, in particular, to hear updates and recommendations from its subcommittee on ESG (the “ESG Subcommittee”).  The ESG Subcommittee provided an overview of its current areas of research, which has taken the form of five separate workstreams.  Moreover, the ESG Subcommittee offered preliminary recommendations for regulatory measures which could provide consistency to ESG investment policies and disclosures in light of the growing push by asset management stakeholders to implement ESG practices, which has become a particularly important consideration in light of COVID-19.
Continue Reading

COVID-19: Reductions in Executive Pay

Recent market volatility due to the coronavirus (COVID-19) pandemic has disrupted many companies’ day-to-day operations resulting in economic hardship that has caused companies to consider or implement various measures to reduce personnel costs, including pay cuts, furloughs and/or layoffs. When implementing such personnel cost-cutting measures, a number of companies have reduced executive pay, including reductions in base salary and bonus opportunities, and some have also reduced director retainers.

This memo summarizes the actions that a number of companies have already taken and provides guidance for companies considering reductions in executive or director pay.

Read the full memo here.

The COVID-19 pandemic and the ensuing market uncertainty, as well as recently enacted legislation, have upended the compensation and benefit programs of many companies.
Continue Reading

COVID-19: Impact on Nonqualified Deferred Compensation Plans

Recent economic instability caused by the coronavirus (COVID-19) pandemic has caused many companies and their employees to suffer economic hardships that do not have a clear end in sight. As a result of ongoing fluctuations in the markets, uncertainty about job security and increased medical and other expenses, people are experiencing a real need for increased liquidity in the short term. Companies that maintain nonqualified deferred compensation plans may be approached by employees seeking to take distributions of deferred compensation from their plan accounts or to cancel or suspend currently outstanding deferral elections under the plan.

The challenge for both companies and their employees is that nonqualified deferred compensation is subject to Section 409A of the Internal Revenue Code, which was designed to prevent the early payment of deferred compensation amounts and often fails to provide needed flexibility in a crisis like we are experiencing today.
Continue Reading

NYSE Rule Temporarily Extends Deadline for Brokers to Send Physical Proxy Materials

On April 23, 2020, the New York Stock Exchange (NYSE) proposed a temporary rule change of NYSE Rule 451(b)(1) with immediate effectiveness that extends the deadline by which NYSE member organizations (typically broker/dealers) under selected circumstances must send physical copies of proxy materials to beneficial owners. In light of delays related to the novel coronavirus (COVID-19) pandemic, the NYSE designed the modification with the intention of helping issuers meet their quorum requirements at shareholder meetings and possibly alleviating the need for adjournments or postponements. The temporary rule change applies only to shareholder meetings scheduled to be held up to and including May 31, 2020.
Continue Reading

World Economic Forum Pledges to Stand By Stakeholders in the COVID-19 Era

The novel coronavirus (COVID-19) pandemic has posed unprecedented health risks and has led to global economic disruptions. The World Economic Forum (WEF), an international organization that fosters public-private cooperation on global, regional and industry agendas, released this month the “Stakeholder Principles in the COVID Era” (Stakeholder Principles) as part of its COVID Action Platform and called businesses to action stating that, during this time of crisis, “[t]he business community’s contribution: [is] to be leaders of responsiveness and stewards of resilience.” In January 2020, the WEF made headlines by issuing its Davos Manifesto 2020, challenging companies to incorporate stakeholders into their corporate purpose, as well as issuing, through its International Business Council (IBC) a draft corporate sustainability disclosure framework, “Towards Common Metrics and Consistent Reporting of Sustainable Value Creation.”
Continue Reading

LexBlog