Blog Posts Tagged With Annual Meetings

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Company Declines to Use Universal Proxy Card in Contest, Citing Lack of Proven Processes and Potential for Shareholder Confusion

ADP rejected Pershing Square’s recommendation to use a universal proxy card, arguing that given the solicitation has already commenced, changing the voting procedures for a new and untested process could disenfranchise shareholders.

Pershing Square has nominated three candidates to ADP’s board.  In September the activist wrote to the board calling for both sides to use a universal proxy card that would list all the nominees, calling it a “hallmark of good corporate governance” and citing to the CII report advocating for the practice.  The activist had to seek approval from the company because the company nominees must consent to be named in its proxy statement.  Continue Reading

A Look at BlackRock’s Engagement Activity

We are in the busiest annual meeting week of the year, with 350 meetings expected to take place during this week alone, making it the appropriate time to examine how investors view voting and engagement.

BlackRock reported that it conducted 126 engagements in the first quarter of 2016 with issuers in the Americas region (U.S., Canada and Latin America), focused on corporate strategy, board composition and skills, executive compensation, bylaw amendments, as well as issues related to capital structure, executive succession planning and sustainability reporting. The first quarter tends to have lower meeting volume, and BlackRock voted at only 379 meetings in the U.S., making decisions on 3,015 proposals. Continue Reading

Plurality Carve-Out in Majority Voting Standards

Ethan Allen’s seven nominees for the company’s board received overwhelming support in the recent proxy contest against the six candidates proposed by Sandell Asset Management.

The contest received some unusual attention, as noted in this WSJ article, after ISS criticized the company for using majority voting for the election of directors as a “potential entrenchment device.”  Over 40% of the Russell 3000 companies require directors to be elected by a majority of the votes cast.  However, in a contested election, most often the standard reverts back to plurality, meaning that nominees who receive the most number of votes are elected regardless of whether they obtained a majority. Continue Reading

Post-Season Review from Vanguard

In preparing for the upcoming proxy season, it is helpful to examine the information that investors provide about their most recent voting and engagement efforts.  We start with Vanguard.

In the 12 months ended June 30 of this year, Vanguard funds voted at more than 13,000 meetings covering 120,000 items.  The funds supported 93% of director nominees, voting against candidates for reasons related to attendance, independence or committee actions.  Similarly, Vanguard supported 95% of say-on-pay proposals and 88% of equity compensation plans, but did vote against nearly 350 compensation committee members.

On shareholder proposals, Vanguard tended to vote in favor of certain types of governance proposals, such as declassifying boards, while generally abstaining on environmental or social matters.  Continue Reading

Delaware Court Finds “On or About” Did Not Specify Actual Date to Trigger Advance Notice Bylaw Notification Requirements

A company’s reference to the next annual meeting date as “on or about” June 10 refers to an approximate or anticipated time frame, and not an actual specified date, held the Supreme Court of the State of Delaware in a case on appeal. As a result, a shareholder did not need to provide notice of proposals within the time period disclosed in the proxy statement under the company’s advance notice bylaws. 

Hill International disclosed in its 2014 proxy statement that its 2015 annual meeting would be held on or about June 10, 2015, and that shareholders must submit nominations or proposals under its bylaws between March 15 and April 15, 2015, which was 60 and 90 days before the meeting. Continue Reading

Reliance on Proxy Advisory Firm Recommendations May Have Contributed to Majority Withhold Votes for Directors

According to a filing by Nabors, four directors received less than a majority of the shares voted (or withheld) and tendered their resignations, in accordance with the company’s majority vote policy. After considering the structure and needs of the board and the company and the contributions of the directors, especially in the strategic review process that included an important merger transaction recently, the board decided to reject the resignations.  

The company noted that feedback from shareholders revealed three reasons underlying the withhold votes, which were considered in the board decision. First, the company stated that “several institutional shareholders’ voting policies call for their shares to be automatically voted solely in accordance with the recommendations of certain proxy advisory services,” which had recommended against the election of these directors. Continue Reading

How Equity Plan Proposals Fared in the 2014 Proxy Season and ISS Equity Plan Data Verification

Shareholders were asked to vote on almost 1,200 equity plan proposals in the first half of 2014, according to the ISS U.S. Proxy Season Review Report, with an average approval rate of 89%. Slightly more than half of the proposals amended existing plans, while 150 proposals were made solely to comply with Section 162(m) tax deductibility and did not ask for any increased shares.

While it appears that ISS did not support at least a quarter of the proposals, only eight failed to pass, including two that ISS recommended that shareholder vote in favor. Two failures were at S&P 500 companies. Continue Reading

Company Disputes Claims Related to Vote Counting for Equity Plan Approval

As we previously discussed here, in May, a shareholder challenged the validity of an amendment to Cheniere Energy’s 2011 incentive plan that was voted on at the company’s February 2013 meeting. In the complaint, the plaintiff questioned whether abstentions should have been counted as votes “against” the plan, based on the company’s bylaws. According to the plaintiff, treating abstentions as “no” votes would have meant that the plan was not approved by shareholders.

Citing the litigation, Cheniere Energy postponed its annual meeting originally scheduled for June to September 11, 2004. It also decided to remove proposals to further amend the plan that had been scheduled for that meeting. Continue Reading

Eliminating Shareholder Ability to Call a Special Meeting

Approximately 60% of S&P 500 companies provide shareholders with the right to call special meetings. Coupled with the move away from classified boards and toward annual director elections, which generally permit shareholders to remove directors for cause, there has been increasing concern that companies are dismantling their defensive mechanism and leaving themselves vulnerable to activist attacks. 

Time Warner announced on Monday in a Form 8-K that its board has amended the company’s bylaws, effective immediately, to delete provisions regarding shareholders’ ability to call a special meeting. No reason was given in the company’s filing, although reports in the press indicate that the company recently rejected an unsolicited takeover bid. Continue Reading

ISS Reports on Preliminary Postseason Results

According to the ISS US preliminary postseason update, the win rate for dissidents, measured by whether they won at least one board seat through negotiations or a vote, was 59% at 22 contested elections in the first half of 2014, compared to 24 contests with a 68% success rate by June 2013.  The size of the target continues to increase, as seven of the companies had market capitalizations greater than $1 billion.  Notable for 2014 were what ISS dubbed “hydra-headed activist challenges,” where multiple dissidents targeted the same company but with competing visions, including at Darden and Sotheby’s.

Boards were also the focus through 13 “vote no” campaigns.  Continue Reading

Success of Proxy Access Proposals Depends on Threshold Ownership Levels

McKesson Corporation announced that it intends to submit a proxy access bylaw amendment for shareholder vote at the company’s 2015 annual meeting. The company has not yet filed its proxy statement for this year’s meeting.

This season, proxy access shareholder proposals have divided along two fronts, seeking different threshold ownership levels before nominations can occur by using either the original SEC rulemaking of 3% ownership for three years or following what is known as the retail approach. That approach, submitted by individual shareholder proponents, asks boards to allow shareholders who own at least 1% but less than 5% to nominate directors onto company proxies, or any party where 25 or more shareholders have held at least $2,000 of shares. Continue Reading

Litigation Alleging Failure to Properly Count Abstentions for Determining Approval of Existing Equity Plan Causes Company to Delay Annual Meeting

Facing a lawsuit alleging that shares were improperly awarded because of the failure to count abstentions in determining whether an equity plan received shareholder approval, Cheniere Energy announced that it is delaying its annual meeting, originally scheduled for June 12, until September. A copy of the complaint is attached as an exhibit to the company’s release.

Plaintiff filed suit in the Delaware Court of Chancery to recover 25 million shares that it accuses the company of improperly awarding to employees, consultants and directors under a 2011 incentive plan and to enjoin the upcoming 2014 until a recent bylaw amending the voting standard is invalidated.  Continue Reading

SEC Staff Guidance on Proxy Advisory Firms May be Issued This Week

The WSJ is reporting that the SEC staff may issue guidance as early as this week to cause proxy advisory firms to disclose more information about potential conflicts of interests. According to the article, the guidance will indicate that it is not sufficient for the firms to require investors to simply contact them about potential conflicts. 

ISS is the only firm that also provides corporate services. The advisory firm has been in the news lately by taking the unusual and harsh step of recommending against the election of a majority of the directors, 7 of the 10, at Target, finding them accountable for the company’s cybersecurity breach. Continue Reading

Broadridge Explains Its Current Policies on Interim Vote Tallies with Issuers as Decision-Makers, while CII Pursues Regulatory Solutions

There remains some confusion about who exactly is getting information about vote tallies before an annual meeting, since the controversy in May 2013 surrounding the independent chair proposal at J.P. Morgan. Broadridge’s recent report clarifies this and other mysteries about the proxy voting process. As the report emphasizes, there are no SEC rules or other rules governing the practice of providing voting information in advance of the meeting, including to issuers.

Contested meetings. At meetings where there is more than one proxy card, Broadridge will continue its practice of providing all soliciting parties with interim vote information at the same time. Continue Reading

Will Shareholders Ask About the New COSO Framework at Annual Meetings?

The list of possible topics that shareholders may raise at an annual meeting compiled by BDO USA includes many that companies would expect, such as questions about strategic business decisions, global economic concerns, cybersecurity and executive compensation. Perhaps surprisingly, however, the firm advises companies to also be prepared for questions about the new COSO framework.

As summarized in this March Deloitte briefing, in May 2013, the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) updated the Internal Control-Integrated Framework. The older framework from 1992 is expected to be transitioned out by the end of 2014, and the SEC staff has publicly stated that they are monitoring the changes to the new model since SEC rules require the use of a “suitable, recognized control framework” in companies’ internal control over financial reporting. Continue Reading

To Seek Withdrawal of the Proxy Access Proposal, Disney Amends Governance Guidelines on Independent Chair

As reported, a proxy access proposal was withdrawn at Disney’s annual meeting today after the company made changes to its governance guidelines related board leadership.

According to a company filing, the revised paragraph reads as follows: “The Chairman of the Board shall in the normal course be an independent director unless the Board concludes that, in light of the circumstances then present when any such decision is made, the best interests of shareholders would be otherwise better served. In any circumstances in which the Board determines that the best interests of shareholders would be better served by a Chairman that is not an independent director, the Board shall (a) provide a written statement in its next proxy materials discussing why the different arrangement is in the best interests of shareholders, (b) in connection with each proxy statement thereafter for an annual meeting after which the Board expects the arrangement to continue, determine whether the arrangement remains in the best interests of shareholders and include a written statement in the proxy materials giving the reasons for this determination, and (c) designate one independent Director to serve as Lead Director, with the duties and responsibilities described below.” Continue Reading

Proxy Advisory Firms’ Policy Positions on Director Compensation

Glass Lewis recently announced a policy of voting against members of the corporate governance committee at companies that adopt bylaws disqualifying director nominees who receive third-party compensation, if those companies do not seek shareholder approval of the bylaw. ISS adopted a similar policy last month. It has been reported that about 30 companies have adopted bylaws that prohibit director nominees from accepting compensation from third parties. 

Glass Lewis recognizes the concern that these types of supplemental compensation arrangements raise in terms of conflicts of interests and dissension in the boardroom. However, the advisory firm is focused on the possibility that the bylaws could restrict the ability of shareholders to recruit candidates in proxy contests, where dissident director nominees may be expected to commit extensive time and face negative attacks, and ultimately hamper shareholder activism that may prove beneficial. Continue Reading

Virtual-Only Annual Meetings Remain Controversial

After adopting bylaws to allow for annual meetings to be held solely via online technology (known as virtual-only meetings), both PNC Financial Services and Bank of New York Mellon received shareholder proposals requesting that the companies affirm their continuation of in-person annual meetings in addition to allowing for electronic access. The resolutions seek in-person meetings as a way for shareholders to interact directly with the board and management and state that virtual-only meetings would “insulate” companies from shareholder opposition or difficult questions.

Neither company has announced that it intends to hold virtual-only meetings, so the proposals appear to be preemptive. The bylaws were amended this year to permit that annual and special meetings may be held only by means of remote communications, Internet or other electronic communications technology.  Continue Reading

Talking to the NYSE about the Proxy Season

Recently, in the second of the NYSE Governance and Proxy interview series, I discussed the events this season surrounding proxy disclosure, say-on-pay, activism and proxy advisory firms with Judy McLevey, Vice President, Corporate Action & Market Watch at the NYSE.

The NYSE publishes an informative proxy analytics alert that it updates weekly, summarizing the 2013 management and shareholder proposals. It reveals very few failed say-on-pay votes this season, especially among the S&P 500 companies, although more than 10% of those companies faced at least 30% opposition. Similar to past seasons, only a handful of directors received less than majority support for their elections. Continue Reading

Shareholder Suit to Compel Annual Meeting to Elect Directors

Last week, Starboard Value, which with nearly 15% of the shares of Office Depot is the company’s largest shareholder, filed a complaint in the Delaware Court of Chancery to order the company to promptly hold an annual meeting to elect directors. On Monday, the company announced that it will hold an annual meeting on August 21.

Section 211 of the Delaware General Corporation Law allows shareholders to compel a meeting for the purpose of electing directors if such a meeting has not been held for 13 months. The company’s last annual meeting was on April 29, 2012.

Office Depot has called a special meeting of shareholders for July 10 to vote on a proposed merger with OfficeMax. Continue Reading

Bucking the Trend of S&P 500 Companies

Governance surveys indicate that the S&P 500 companies have largely dismantled their takeover defenses and have established so-called “good” governance practices, but that is not the case for all of the large-cap companies. Netflix recently held its annual meeting where a nearly unprecedented five governance shareholder proposals were on the ballot. While none of the proposals’ sponsors actively campaigned, not even filing any notices of exempt solicitations, almost all of the proposals won by a vast majority that was far above the average vote results. The outcomes were particularly high given that insiders own more than 9% of the company.

A proposal to declassify the board received 89% in support. Continue Reading

Groupon Shareholders Allege Improper Bundling of Incentive Plan Proposal

Seeking injunctive relief, shareholders of Groupon complained that the company improperly aggregated separate and distinct amendments to Groupon’s 2011 incentive plan to be voted on at its annual meeting on June 13, 2013. In the initial proxy statement, a proposal on the company’s ballot asks shareholders to approve amending the plan to increase the total number of shares currently authorized as well as the amount that could be granted to any individual. 

After plaintiffs filed a demand letter seeking supplemental disclosures, the company amended its proxy statement to inform shareholders that the board has already granted its chief operating officer an amount of shares in excess of the individual limit back in January. Continue Reading

Occidental’s Interesting Majority Vote Provision and Recent Governance Changes

The resignation of Occidental’s chairman at the company’s annual meeting, which has been widely reported, was subject to an unusual majority vote provision. 76% of the votes cast opposed Mr. Irani’s election to the board. As is fairly common with majority voting, the company’s bylaws require any nominee who receives a greater number of votes against his election than in support of such election to tender his resignation. However, rather than having the board consider whether to accept the director’s resignation and publicly announce its decision within 90 days, Occidental’s bylaws provide that the resignation becomes effective upon the earlier of acceptance by the board or October 31 in the year of election. Continue Reading

Protests Continue at Bank Annual Meetings

With over 50 S&P 500 meetings scheduled for this week, the proxy season begins in earnest.  Similar to last year, the Wells Fargo meeting on Tuesday appears to be one of the first targets of protestors. Reports indicate that while many proclaimed their grievances outside, the meeting was disrupted by dozens who had to be removed, in particular one individual who tried to make a citizen’s arrest of the CEO. The demonstrators complained about the bank’s consumer lending and mortgage practices. There was also some grumbling about the location of the meeting site being in Salt Lake City, after 15 years in San Francisco.  Continue Reading

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