Glass Lewis Reports: Companies Can Now Include Unfiltered Opinions

Late yesterday, Glass Lewis (GL) announced that a company now has the option of having its opinion or position included in GL’s proxy research reports without being edited by the proxy advisor. This new service ensures that a company’s position will be delivered directly to every GL investor client and included on or accessible from the front page of the report. The option to include a statement is offered at no extra cost, but only upon purchase of the relevant GL report and satisfying other eligibility requirements. Shareholder proponents may also use the service.

A company wishing to use the new service must submit a Report Feedback Statement (RFS) within the 7-day window immediately following the publication of the GL research report, and no later than 14 days before the applicable annual or special meeting.
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Glass Lewis Outlook on COVID-19’s Impact on the Present and Future of Governance for Boards and Companies

Glass Lewis (GL) shared last Thursday more of its perspective and outlook of the effect that the coronavirus (COVID-19) pandemic may have on corporate governance for the 2020 proxy season. GL explains that it is issuing further updates because “it is important to provide the market with certainty and transparency on [GL’s] established approach” given that it believes that all governance issues and most proposal types will be impacted by the pandemic. Anticipating that the pandemic will continue for up to 18 months, GL states that the proxy advisor is monitoring the markets; the sentiments of institutional investors and shareholder proponents; disclosures by public companies; and the approaches and actions of public companies.
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Davis Polk Client Alert: Families First Coronavirus Response Act: Key Takeaways Regarding Paid Leave Benefits

On March 18, 2020, Congress passed the Families First Coronavirus Response Act (“FFCRA”), a sweeping legislative bill to address the growing concerns surrounding the novel coronavirus, COVID-19. The FFCRA includes measures aimed at expanding paid employee leave in connection with the coronavirus emergency and providing employers with tax credits to cover the cost of those benefits

Read the full alert here.

Law Clerk Elizabeth Smith contributed to this publication.
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Delaware Supreme Court Validates Exclusive Federal-Forum Provisions for Federal Securities Claims

On Wednesday, the Delaware Supreme Court held in Salzberg, et al. v. Sciabacucchi (C.A. No. 2017-0931) that exclusive federal-forum provisions, which require shareholder claims under the federal Securities Act of 1933 (1933 Act or Securities Act) only be filed in federal court, are valid under Delaware law. As a result of the United States Supreme Court’s 2018 ruling in Cyan, Inc. v. Beaver County Emp. Retirement Fund that federal and state courts have concurrent jurisdiction, many companies have faced multi-forum litigation of Securities Act claims that often resulted in higher litigation costs and inconsistent rulings. Among other reasons articulated in the opinion, the Delaware Supreme Court in Sciabacucchi found that federal-forum provisions advance certainty, predictability, and judicial economy.
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BlackRock Releases Its 2020 Public Company Engagement Priorities

While managing COVID-19 related risks and impacts may be the current priority for many public companies, BlackRock provided a reminder yesterday that environmental, social and governance (ESG) issues will form a core part of its engagement strategy this proxy season.  Publishing its investment stewardship team’s public company engagement priorities for 2020 (Priorities), BlackRock stressed, among other things, that it intends to hold board directors accountable for demonstrating “material progress” on ESG-related disclosures and practices.

BlackRock’s 2020 Investment Stewardship Engagement Priorities

The Priorities place an enhanced focus on sustainability-related issues and disclosures. Moreover, the Priorities articulate key performance indicators against which the asset manager will track companies’ progress and identify those directors whom it will hold responsible for demonstrating progress on these issues. 
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EU Publishes Final Taxonomy Report to Support its Sustainable Finance Regulations

Last week, the European Commission’s Technical Expert Group on Sustainable Finance (TEG) published its final report along with a technical annex setting forth its recommendations regarding the design and implementation of a unified classification system, known as EU Taxonomy, which will define what economic activities are considered environmentally sustainable under the EU’s sustainable finance regulations.  The final report is the result of a nearly two year long process conducted at the direction of the European Commission to assist in the implementation of the Taxonomy regulation.  The European Commission will consider the final report as it develops legislation to implement elements of the Taxonomy regulation.
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ISS Releases Specialty Climate Voting Policy

On Monday, Institutional Shareholder Services Inc. (ISS) announced the launch of a new specialty proxy voting guideline focusing on climate-related issues. ISS explains that the new Climate Voting Policy aids investors in “incorporate[ing] climate-related considerations systematically into their engagement and proxy voting strategies across their portfolios.” This development is likely based on ISS’s 2019 annual policy survey results, which we shared in a prior summary. Those results show that 60% of the investor respondents believe that “all companies should be assessing and disclosing climate-related risks and taking action to mitigate them where possible.” Second to engaging with the company, both investor and non-investor survey respondents indicated that voting for a shareholder proposal seeking increased climate-related disclosure is a preferred way to respond to a company that fails to effectively report or address its climate change risk.
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SEC Closely Monitors the Impact of the Coronavirus and Offers Conditional Regulatory Relief and Assistance

Yesterday, the Securities and Exchange Commission (SEC) announced that the agency was concurrently issuing an Order that provides relief, subject to certain conditions, for publicly traded companies affected by the coronavirus (COVID-19). The relief is necessitated by the fact that COVID-19 may impede certain companies’ timely communication to the trading markets, the SEC and shareholders. Chairman Clayton observed that, “The health and safety of all participants in our markets is of paramount importance. While timely public filing of Exchange Act reports is a cornerstone of well-functioning markets, [the SEC] recognize[s] that this situation may prevent certain issuers from compiling these reports within required timeframes.”
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SEC and PCAOB Leadership Announce Potential Relief to Companies Affected by the Coronavirus

Yesterday, senior leaders of the Securities and Exchange Commission (SEC) and the Chairman of the Public Company Accounting Oversight Board (PCAOB) issued a joint statement (Statement) noting the potential effect that the coronavirus (COVID-19) may have on reporting companies, reminding companies of their disclosure obligations and notifying companies affected by the virus that they may contact the SEC for guidance or a determination of their eligibility for relief from filing deadlines. The Statement comes in the wake of numerous articles contemplating the virus’ effect on businesses that rely on global supply chains. On Tuesday, one Wall Street Journal commentator posited that “the coronavirus could cause supply-chain disruptions that are unlike anything we have seen in the past 70 years.”
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SEC Chairman Releases Statement on Proposed Changes to Financial Reporting and Discusses Climate-Related Disclosure

Today, the U.S. Securities and Exchange Commission (“SEC” or “Commission”) voted to propose amendments to certain financial disclosure requirements under Regulation S-K, specifically those requirements related to Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A).  In addition to these proposed amendments, the SEC issued guidance for registrants to consider when using metrics and key performance indicators in their MD&A disclosures.  The press release announcing these developments explains that the proposals are part of an overarching effort by the SEC to improve and “modernize” the disclosure regime for the benefit of both investors and issuers.

SEC Chairman Jay Clayton issued a statement in support of the proposed amendments and related guidance, a statement that largely focuses on a topic that the Chairman himself notes is “not the particular focus of today’s Commission action” – environmental and climate-related disclosures.
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