Glass Lewis Will Not Incorporate Pay Ratio Data into Say-On-Pay Analysis in 2018

As year-end companies begin preparing to disclose pay ratio information in their 2018 proxy statements, Glass Lewis announced that it does not intend to make the ratio a part of the proxy advisor’s assessment of how investors should vote on say-on-pay “at this time” because it is not material for the analysis of the structures that companies use to pay their NEOs and the disclosures of those pay decisions.  The information will be included in the Glass Lewis reports as a data point since shareholders may consider it useful insight into a company’s practices.

The firm notes the two sides of the argument on the importance of the pay ratio.  Continue Reading

Seven Key Ways the SEC’s Disclosure Proposal May Affect Your Periodic Reporting

On Wednesday, the SEC proposed amendments to its disclosure requirements for public companies based on recommendations in the staff’s FAST Act Report and as part of a broader review of the disclosure system.  The comment period is open for sixty days.

The WSJ fairly characterized the changes as “modest and technical,” and Commissioner Piwowar is quoted as saying the amendments are intended to be incremental.  Our client memo describing all of the proposed reforms will be issued shortly.  The main areas that would impact periodic reporting and do not relate to securities offerings include:

You may not need to describe any propertiesContinue Reading

Keeping Track of the SEC Disclosure Effectiveness Projects as They Gain Traction

Through the SEC open meeting announcement and Chairman Clayton’s recent testimony, it appears that the SEC is ramping up efforts to modernize public disclosure and finally implement the disclosure effectiveness initiatives for which the prior administration started laying the groundwork two years ago.

Even those who are fairly informed of recent developments may be unable to recall the different proposals that the SEC has issued. As the SEC’s own webpage on disclosure effectiveness shows, myriad staff reports, proposed and final rules, requests for comments and concept releases all touch on different, and sometimes similar or even overlapping, requirements under Regulation S-K and Regulation S-X.  Continue Reading

SEC Open Meeting to Consider Proposed Rules to Largely Technical Regulation S-K Changes Recommended by SEC Staff Under the FAST ACT

The SEC will hold an open meeting on Wednesday, October 11 at 10:00 a.m. to consider whether to propose amendments based on the recommendations in the staff’s Report on Modernization and Simplification of Regulation S-K.  The report was required by the FAST Act and issued in November 2016.  Some of the suggestions are fairly technical, and some have been incorporated in the recent adoption of the requirements to include hyperlinked exhibits.  Others, including those related to MD&A disclosure, are more meaningful.  A brief summary of the main points are set forth below, with the relevant rules listed.


  • Permit incorporation by reference of documents that have been on file with the Commission for more than five years, but require specific descriptions of the locations of such documents and a hyperlink to the incorporated document on EDGAR. 
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SASB Releases ESG Disclosure Standards: Public Companies and Private Equity Industry Take Note

The Sustainability Accounting Standards Board (SASB) released this Monday its draft standards for Environmental, Social and Governance (ESG) disclosure, launching a 90-day public comment period which ends on December 31, 2017. These standards set forth ESG topics covering 11 different sectors and 79 industries for public companies to disclose annually.

The draft standards, over four years in the making, were created by SASB working groups open to the public, including registrants, investors and service providers to public companies. The 90-day public comment period provides registrants and other stakeholders another opportunity to shape these disclosure frameworks before they are finalized. This opportunity is important as certain observers expect these standards will have some meaningful uptake. Continue Reading

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

Largest Companies Continue to Provide Political Spending Disclosure According to Latest CPA-Zicklin Index

Politics and governance intersect in the 2017 version of the CPA-Zicklin Index, which examines the disclosure practices of the S&P 500 companies on political spending, scores those companies and divides them into five tiers.  The score distribution shows a strong positive correlation with the average market capitalization of the companies.

Irrespective of the political environment, companies are continuing to provide more information about their corporate political spending, with an increasing number prohibiting certain types of payments. Fifty companies have been designated “trendsetters” for scoring 90% or above, an increase from 28 companies in 2015 and 41 in 2016.

Political spending disclosure Continue Reading

ISS Survey Results Provide Investor Sentiments on Hot Topics, Including Pay Ratio and One Share-One Vote, and May Influence Next Year’s Voting Guidelines

ISS received 602 responses from 572 organizations, including 121 institutional investors, on its governance survey.  Key findings on the governance principles survey are set forth below.  ISS also asked more detailed questions in a supplemental survey, which is still open until October. These survey responses may inform ISS’ voting policies, and updates are generally issued in November.

One-Share, One-Vote.  Among investors, 43% indicated that they find unequal voting rights never appropriate for public companies in any circumstances.   Another 43% said unequal voting rights structures may be acceptable for newly-public companies if they are subject to automatic sunset requirements, or at other public companies if the capital structure is put up for periodic reapproval by the holders of the low-vote shares. Continue Reading

SEC Issues Interpretative Guidance on Pay Ratio Rules, Reinforcing Flexibility and Providing Relief

As companies are coming to grips with the reality that the pay ratio rules will not be delayed, the SEC yesterday issued interpretative guidance that went a long way toward reassuring companies that they have sufficient flexibility and can exercise their best judgment in determining the median employee and the resulting pay ratio, thereby reducing compliance costs.

This came in the form of a brief Commission guidance and separate Staff interpretations.  In addition, although no mention was made in the press release touting these SEC actions, the Staff also updated and in one case withdrew its prior pay ratio guidance in the Division of Corporation Finance compliance and disclosure interpretations (CDIs) from last year (see Section 128C). Continue Reading

For the First Time, Delaware Loses Number One Spot in Survey on Lawsuit Climate

The state of Delaware fell from the top-ranked position to number 11 in the most recent survey on the business-friendly environment for lawsuits in state courts, ceding ground to the state of South Dakota.  Delaware had been in the highest perch for the last ten surveys, going back to 2002 (the surveys were not conducted every year).

The 2017 Lawsuit Climate Survey:  Ranking the States, was conducted for the U.S. Chamber Institute for Legal Reform to explore how U.S. businesses perceive the fairness and reasonableness of the states’ liability systems.  More than 1,300 in-house general counsel, senior litigators or attorneys and other senior executives at companies with at least $100 million in annual revenues who indicated they had firsthand, recent litigation experience in the states they evaluated and were knowledgeable about litigation matters participated in the survey. Continue Reading