Sustainalytics ESG Ratings Publicly Available on Company Yahoo Finance Page

Some companies may not be aware that since February, their Yahoo Finance web page includes a separate tab with the ESG scores from Sustainalytics.  The Sustainalytics quote page shows a company’s numerical rating for three categories, environment, social and governance, along with the overall ESG score.  Scores range from 1 to 100.

There is also a graphic representation of the score that, according to the press release from Sustainalytics, will be tracked against the average in each category and plotted over time.  The graph, currently reflecting data from 2014 to now, is intended to display trends of how a company ranks against industry peers. Continue Reading

What the SEC Staff Said When They Denied Exclusion of Shareholder Proposals Under SLB 14I

  1. Not enough detail to support an argument that the proposal was not significant to the company

In December, the first letter was denied for failure to explain the board’s reasoning.

  • The Staff indicated that “We are unable to conclude, based on the information presented in your correspondence, including the discussion of the board’s analysis on this matter, that this particular proposal is not sufficiently significant to the Company’s business operations such that exclusion would be appropriate.”  The company’s letter stated that the matter was “integral” to the company.
  • Significance was referenced twice in the same explanation, as the Staff concluded with the following: “[T]he board’s analysis does not explain why this particular proposal would not raise a significant issue for the [c]ompany.”
  1. Quantitative or other factors could help.
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Company Prevails in Court Case Disputing Advance Notice Bylaws

HomeStreet received a notice, numbering 133 pages, the day before the advance notice deadline in its bylaws alerting the company that Blue Lion intends to nominate two directors and submit two proposals, seeking annual elections and a binding resolution for an independent chairman. Both the company and the shareholder acknowledged years of engagement that culminated in a decision by the board not to nominate a representative from Blue Lion as a director.

Less than a week later, the company announced that the notice was deficient, attaching a five-page letter to a Form 8-K that it sent to the shareholder. The letter stated that the notice provided by the shareholder failed to meet several of the bylaw’s disclosure requirements, including providing information related to the holder of shares that would be disclosed in a proxy statement governing a solicitation as well as deficiencies in the D&O questionnaires returned by the shareholders’ nominees. Continue Reading

ISS Updated FAQs Focus on Proxy Reports and Engagements

U.S. proxy reports are issued 13 to 30 calendar days before a shareholder meeting, but closer to 13 to 18 days during April to June due to the volume, according to the most recent ISS FAQs on U.S. Proxy Voting Research Procedures and Policies. Updated Q&As are highlighted in the report.

Several revisions relate to engagement with ISS and changing vote recommendations, both timely topics for the current stage of the proxy season. ISS already provides guidance on how issuers should engage with them. A few insights from the FAQs include:

  • Requests for engagement should be made by emailing the Research Helpdesk with (a) a detailed agenda, (b) a list of the company’s participants and (c) preferred dates and times.
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SEC Rulemaking Petition Advocates for Retail Investors to Provide Standing Voting Instructions for Corporate Election in Order to Increase Voter Participation

Retail investors own about 30% of shares but only vote 29% of the time, compared to institutional investors voting 91% of the shares they own, according to a rulemaking petition to the SEC by the American Business Conference (ABC) that asks the Commission to facilitate advanced voting instructions (AVI), also known as client directed voting or standing voting instructions. According to its website, ABC was founded in 1981 by Arthur Levitt and is focused on advocating for mid-sized companies.

ABC laments that the views of retail shareholders are not adequately represented even as corporate ballots contain increasingly contentious governance issues. Continue Reading

What You Should Know About Engaging with BlackRock on Human Capital Management

BlackRock has recently elaborated on what companies can expect when engaging with them on human capital management (HCM) matters, which BlackRock defines as including “employee development, diversity and a commitment to equal employment opportunity, health and safety, labor relations, and supply chain labor-standards, amongst other things.”

For industries and markets where talent is limited or constrained, BlackRock believes corporate strategies must address topics such as “how [companies] are establishing themselves as the employer of choice for the workers on whom they depend.” In these types of business environments, strong HCM can be viewed as a competitive advantage and a contributing factor to a company’s business continuity and success. Continue Reading

More Investors to Vote Against Directors for Lack of Board Diversity, and Specialty ISS Policies Push for 30% Diverse Representation

Certain investors are expected to hold governance committees, and in some cases the entire board, accountable through director elections this proxy season for perceived lack of board diversity.

ISS has updated its Socially Responsible Investing (SRI) and Catholic Faith-Based policies so that the proxy advisor will recommend against incumbent governance committee members under the SRI policy, and all incumbent board members under the Catholic Faith-Based policy, at boards that are not at least 30% diverse and include at least one woman and one ethnic minority.  Given that only 24% of Russell 3000 boards have such composition, the policies are expected to result in a “substantial increase” in the number of negative recommendations for directors.  Continue Reading

SEC Cybersecurity Guidance and Commissioner Comments in the Context of an SEC Cybersecurity Enforcement Case Related to Insider Trading

The SEC cybersecurity guidance, which we discuss in this client memo, reminds companies that their directors, officers and “other corporate insiders” should be aware that they may violate securities laws if they trade company securities while possessing knowledge of a company’s cybersecurity risks and incidents before that becomes public information.

The guidance address some specific actions to review to mitigate the risks of insider trading. It encourages companies to consider (a) how their codes of conduct and insider trading policies take into account and prevent trading on the basis of material nonpublic information about cybersecurity matters; (b) whether and when it may be appropriate to implement restrictions on trading during investigations of cybersecurity incidents before breaches are made publicly known; and (c) adopting “prophylactic measures” through policies and procedures to protect against insider trading in these cases. Continue Reading

State Street Screens S&P 500 Companies for Non-Compliance with Investor Stewardship Group Governance Principles

The Chief Investment Officer of State Street Global Advisor (SSGA) has sent letters to board chairs and lead directors at S&P 500 companies requesting that they report on their compliance with the principles outlined by the Investor Stewardship Group (ISG).  We previously discussed the ISG Corporate Governance Principles here.

Starting this month, SSGA will review governance practices at those companies and seek to “proactively engage with companies to better understand the reasons for non-compliance.”  If SSGA believes that companies are not adequately explaining their governance approaches, either publicly or through engagement, SSGA may hold the board accountable by voting against the independent chair, lead independent director or most senior independent director up for election. Continue Reading

First Wave of Pay Ratio Disclosures Filed

U.S. public companies recently began disclosing their CEO-to-median employee pay ratios, as required by the Dodd-Frank Act and Item 402(u) of Regulation S-K.  It is still too early to draw conclusions, but this memorandum outlines some preliminary observations based on our review of the pay ratio disclosure included in 35 SEC filings through February 2018, including the range of pay ratios and calculation methodologies disclosed.

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