ISS Benchmark Survey for Next Season Focuses on Recent Governance Debates – Part I

ISS has launched its benchmark policy survey, which helps formulate policies that guides the proxy advisory firm’s voting recommendations. For the first time, the policy has two parts: a high-level survey covering what it believes to be fundamental and high-profile topics that closes on August 31; and a more expansive version to drill down on key issues that closes on October 6. In addition to the surveys, ISS also seeks input through roundtables and other outreach.

The press release announcing the survey along with the links for downloading and filling it out are here. New policies for the upcoming proxy season are generally issued in November. Continue Reading

Chairman Clayton Suggests Potential for Shareholder Proposal Rule Reform, Invoking the Quiet Shareholder, as the Chamber of Commerce Makes Specific Recommendations

The Center for Capital Markets Competitiveness, part of the Chamber of Commerce, issued seven recommendations for shareholder proposal reform.  On the same day, SEC Chairman Jay Clayton spoke to the Chamber about a range of issues.  He questioned the viability of continuing to load up on the disclosure system, likening it to a football coach giving the ball to a good running back over and over because he can, and whether increased amounts of disclosure corresponds to useful disclosure.

He spoke about the proxy advisory firms, noting that while he does not have a definitive view at this point, he recognizes that some entities have a “fair amount of influence” on public company governance, and developments that have an impact on the markets are something regulators should examine.   Continue Reading

The Proxy Access Battlefront for Next Season? SEC Staff Rejects Attempt to Exclude Proxy Access Shareholder Proposal

The 2017 season that just passed witnessed two kinds of proposals asking companies to amend existing proxy access bylaws. The first type sent to companies earlier in the season sought to amend several provisions, including requesting that the number of board seats available for nomination increase to 25% of the board instead of 20%, and also that an unlimited number of shareholders be allowed to aggregate their holdings to form a nominating group. Companies that had adopted the standard proxy access formulation of permitting a shareholder or a group of no more than 20 shareholders owning 3% or more for three years to nominate up to 20% of the board (known by the shorthand “3/3/20/20”) were denied no-action relief on the basis of substantial implementation. Continue Reading

Comparing the SEC’s Rulemaking Agendas Indicates Potential for Less Rulemaking, but Significant Disclosure Initiatives Remain

Like other federal agencies, the SEC recently released its regulatory agenda. The agenda is published by the Office of Information and Regulatory Affairs at the Office of Management and Budget within the Executive Office of the President (OMB) and purports to reflect the rulemaking initiatives for the coming year. In the past, the agenda was generally not predictive of the rules the SEC ended up either proposing or adopting, but in light of the new administration’s deregulatory objectives, there is increased focus whether the agenda fulfills that mandate.

Mick Mulvaney, the Director of OMB, personally emphasized the importance of the unified regulatory agenda for all agencies on the day it was released. Continue Reading

Report Finds Shareholder Activism Evolving from Niche Strategy to Acceptance Across Investors

With 371 public campaigns against U.S. companies, according to a recent J.P. Morgan report on the new normal in shareholder activism, the 2017 proxy season proved to be fairly active. Although only 19 of the 54 actual contests that were completed by June went to vote, while the same number settled and the remainder were withdrawn, activists were able to obtain at least one board seat 46% of the time, compared to 41% last year.

Settlements continue to be on the rise, even though several major institutional investors have urged companies not to agree with activists so quickly and at least make public the reasons for the settlement.  Continue Reading

SEC Chairman Clayton on His Agenda

SEC Chairman Jay Clayton gave his first public address yesterday, with some meaningful remarks directed at public company regulations.

The long-term interest of the Main Street Investor (the term is not defined but capitalized in his speech) is the cornerstone of how the SEC will measure whether it is being true to its mission regarding the protection of investors, facilitating capital formation and maintaining markets properly. The Main Street Investor is also characterized as “Mr. and Ms. 401(k)” and it is the SEC’s primary responsibility to ensure that they are informed and have the right opportunities to invest in their future. Continue Reading

Investor Group Petitions SEC to Require Disclosure on Human Capital Management

The Human Capital Management Coalition has submitted a rulemaking petition to the SEC to require all public companies to disclose information about its workforce. The petition is signed by Meredith Miller from the UAW Retiree Medical Benefits Trusts, and a list of members is available here.

While the success of any efforts to mandate disclosure through the SEC seems fairly uncertain, the petition represents increasing demands on companies for ESG-related information. The requests, usually in the form of surveys to fill out, may come directly from investors or just as often if not more, from data providers that use whatever information they can gather to assess and rate companies for investors. Continue Reading

NYSE Rule Filing Contemplates Direct Listings Without Concurrent IPO

The NYSE has proposed to change its rules to provide for companies to list without the usual process of an underwritten IPO and registering under the Exchange Act. Various news articles indicate that Spotify is considering a direct listing in early 2018.

The traditional methods of listing on a stock exchange include either an underwritten IPO, transfer from another market or a spinoff. The NYSE also has discretion to list companies that have previously sold common stock in a private placement, at the time a registration statement is filed to allow existing shareholders to sell their shares becomes effective. It considers whether a company has met the $100 million aggregate market value of the publicly held share requirement based on a third-party valuation and the most recent trading price in a private placement market. Continue Reading

Company Drops Plans to Issue No-Vote Share Class

In the midst of the controversy over Snap’s issued no-vote shares, and Blue Apron’s authorized but not issued no-vote shares, one company has discarded its efforts to form a class of stock without any voting rights.

In November 2016, IAC/Interactive Corp. announced a plan to adjust its capital structure through a charter amendment to enable a new class of non-voting capital stock, Class C. The company intended to declare and pay a dividend of one share of Class C for each outstanding share of IAC common stock and Class B common stock. Shareholders were asked to vote on the recapitalization at the company’s December annual meeting. Continue Reading