Status of SEC Staff Decisions on Proposals to Amend Proxy Access Bylaws

Since the SEC staff first decided that a shareholder proposal asking to amend several terms of an existing proxy access bylaw could not be excluded from a proxy statement, which we previously discussed here, not much has changed.

The SEC staff has since made similar rulings in several other no-action letters whenever a company had already adopted a market standard 3/3/20/20 proxy access bylaw, and a shareholder proposal asked that company to amend parts of the bylaw. In the situations addressed by the staff so far, the proposals have sought to eliminate the provision that limits to 20 the number of shareholders who can form a nominating group. Continue Reading

Board Composition at the S&P 500 Companies

The composition of boards continues to be a focus for investors, and companies are responding by paying increased attention both to who sits on their boards and to enhancing their disclosure and engagement with investors. The data reported in the 2016 Spencer Stuart Board Index  on S&P 500 boards highlights emerging practices, compiled from proxy disclosure and a related survey. Overall, the trends have stayed steady from last year but represent a meaningful departure from 10 years ago.

Composition of new directors.  345 new directors joined 233 boards, with 87 boards adding more than one new director. Nearly one-third of the independent directors are serving on their first outside corporate boards, compared to 26% last year. Continue Reading

First Proxy Access Contest Ends with Nominee Withdrawal

After National Fuel Gas declared GAMCO’s proxy access nomination to be invalid, which we previously discussed here, GAMCO filed amendment no. 10 to its Schedule 13D, announcing that its proxy access nominee has informed the investor that he has decided to withdraw his name as a candidate. The 13D then stated that “GAMCO will not pursue proxy access.”

The company’s deadline for proxy access aligned with its deadline to make director nominations under its advance notice bylaws, with both ending on November 10, 2016. Continue Reading

Company Disputes Validity of First Proxy Access Nominee

National Fuel Gas (NFG) has informed GAMCO Asset Management (GAMCO) that its board has concluded that the company does not need to include GAMCO’s nominee in its 2017 proxy materials because GAMCO did not comply with the proxy access bylaws. We previously discussed the background of the nomination here.

Like other proxy access bylaws, NFG’s bylaws require a shareholder making a nomination to represent that it acquired the shares in the ordinary course of business and not with the intent to change or influence control of the company, and does not presently have such intent. NFG argues that GAMCO has failed this standard by continuing to advocate for a spinoff of parts of its business. Continue Reading

ISS Policy Updates for 2017

Right on the heels of the Glass Lewis policy updates, ISS has also issued its updates that will apply to meetings held on or after February 1, 2017. Similar to Glass Lewis, the ISS policy updates are generally not significant for existing public companies. However, there are several new and revised policy changes related to equity plans, including on director compensation. These policy updates are quite technical in their details, and warrant a careful examination and thoughtful disclosure to ensure that the plans are appropriately evaluated within the correct policy framework.

Overboarding.  Similar to Glass Lewis, ISS also deferred its new overboarding policy until this season.  Continue Reading

Glass Lewis Policy Updates for 2017

Glass Lewis has updated its governance policies for how it evaluates boards and makes recommendations beginning with the 2017 proxy season.

OverboardingIn last year’s update, Glass Lewis deferred until this season its new overboarding policy. Beginning in 2017, Glass Lewis will generally recommend voting against an executive officer of any public company who serves on a total of more than two public company boards, and any other director who serves on a total of more than five public company boards. Note that unlike ISS, the policy applies to all executives, not just a CEO.

In applying the policy, Glass Lewis will consider relevant factors, including the size and location of the other companies where the director serves on the board, the director’s board duties, whether the director serves on the board of any large privately-held companies, the director’s tenure on the boards, and the director’s attendance record at all companies. Continue Reading

Business Roundtable Urges Improvements to Rule 14a-8 and Related Processes

The Business Roundtable recently issued a paper on Modernizing the Shareholder Proposal Process, focused on improving how shareholder proposals are submitted under Rule 14a-8.

The organization argues that the rules that were originally intended to replicate attendance and participation by shareholders at annual meetings are now outdated, as the current process is dominated by a few individuals who file common proposals across a range of companies pursuing “special interests.”  The Roundtable claims that the shareholder proposal process costs companies tens of millions of dollars and countless hours of management time, including negotiating with proponents, seeking SEC no-action relief and preparing opposition statements. Continue Reading

First Proxy Access Nomination Surprises

The question of whether investors would use proxy access bylaws to make director nominations has been answered.

First came the Schedule 13D  with the announcement that GAMCO Asset Management and its affiliates have notified National Fuel Gas Company (NFG) that it is nominating one director pursuant to the company’s proxy access bylaws. The investor owns 7.81% of the company’s outstanding shares. This was the ninth amendment to the Schedule 13D since 2010. GAMCO indicated that it believes its nominee’s skill sets and relevant experience “will be extremely valuable to the [i]ssuer and GAMCO is confident that its [n]ominee will have an immediate positive impact on the Board.” Later in the day, GAMCO filed with the SEC the Schedule 14N required to make proxy access nominations. Continue Reading

Empirical Analysis of the Impact of Universal Proxies on Proxy Contests

It seems fitting to talk about elections today, albeit of a very different kind.  Our memo on the SEC proposal to mandate universal proxies is here.

A paper by the Harvard Law School Program on Corporate Governance offers the first empirical analysis of proxy contests and the potential impact of universal proxies, and concludes that a universal proxy rule is unlikely to strongly favor either companies or dissidents.  In fact, it would have slightly favored management nominees if it had been used at the proxy contests reviewed in the paper.

Dissidents put forth competing slates at 0.5% of elections every year.  Continue Reading