SEC Approves NYSE Rule Delaying Companies from Issuing Material News After Exchange Closes, Except to Meet FD Compliance

The SEC has approved a rule change to the NYSE Listed Company Manual Section 202.06 from a proposal it made back in August, which it initially delayed in October until the Exchange later filed an amendment.

A listed company must not issue material news after the NYSE closes trading until the earlier of (a) publication of the company’s official closing price on the Exchange or (b) five minutes after the Exchange’s official closing time.  The NYSE amended its initial rule filing to make clear that the one exception to this revised requirement would be to permit companies to still publicly disclose material information following a nonintentional disclosure, if needed to comply with Regulation FD. Continue Reading

Senator Pushes SEC Commissioner Nominees on Activism, Buybacks and Executive Pay, and May Delay Confirmation Process

Senator Tammy Baldwin (D., Wis.) has placed a hold on the nomination of Robert Jackson and Hester Peirce as commissioners to the SEC, pending their responses to the questions she raised in her letters to each of them. According to news reports,  the senator’s actions may delay the confirmation process for the two candidates, who were expected to be confirmed by expedited votes.

The letters she sent to Jackson and Peirce are identical except for questions related to an academic paper that Jackson, a law school professor, was involved with in 2011 that argued against shortening the 10-day window under Rule 13D , concluding that it would discourage shareholders from buying large blocks of stock that in turn imposes discipline on management. Continue Reading

Glass Lewis Updates Its Policy Guidelines

The board should take action when director elections or say-on-pay votes receive less than 80% support, according to the Glass Lewis updated policy guidelines:

Board responsiveness.  Glass Lewis believes that boards should respond to any ballot item that receives more than 20% approval or dissent votes by shareholders, including say-on-pay, director elections and shareholder proposals. While the policy covers all three types of matters, the guidelines emphasized that it is particularly applicable for say-on-pay proposals and director elections. We urge Glass Lewis to recognize that it is highly common for shareholder proposals to receive more than 20% support, and taking negative action against all of those boards would cast a very broad and unwieldy net. Continue Reading

First No-Action Letter to Use New Staff Legal Bulletin 14I

Apple has submitted a letter to the SEC Staff arguing that the company should be able to exclude a shareholder proposal because its board has made a determination that the proposal is part of the company’s ordinary business.

The proposal asks the company to establish a Human Rights Committee to enhance its policies and practices on human rights, noting concerns about the company’s operations in China and that government’s views on censorship. The company spends nearly two pages of its letter explaining the importance of human rights to its business, including the “substantial time and resources” devoted by the company to “safeguarding and upholding” human rights. Continue Reading

ISS Policy Updates for 2018 Focus on Few Issues

ISS has issued its policy updates, effective for meetings held on or after February 1, 2018.

The updates are more limited in their scope compared to past seasons.  ISS conducted a two-part survey process this year for the first time.  We understand that many of the issues raised in the first survey were intended to be longer-term considerations, and did not result in updated voting guidelines for next year.  These include the appropriateness of capital structures other than one-share, one-vote, board gender diversity, and virtual or hybrid meetings.

We also understand that pay ratio disclosure will be noted, but does not inform any voting recommendations for 2018.   Continue Reading

What We Know So Far about the New SLB on Shareholder Proposals

At a PLI conference, the Division of Corporation Finance Director Bill Hinman spoke about the new Staff Legal Bulletin (SLB) on shareholder proposals, which we previously discussed here.  Next Tuesday, I will talk to Corp Fin’s Matt McNair about how the new SLB should be applied in practice on a webcast on TheCorporateCounsel.net.

Here’s what we know beyond the text of the SLB, including our analysis of the implications of Hinman’s remarks:

  • The board analysis set forth in the SLB is not required for a company to make an argument on the basis of ordinary business or economic relevance.   
Continue Reading

Chairman Clayton Stresses Shareholder Engagement and Proxy Process as Part of Commission’s Long-Term Agenda; May Reopen Proxy Plumbing Concept Release

In a speech yesterday, Chairman Clayton expressed interest in examining the proxy process, including investor participation, as one of the Commission’s key long-term agenda items.  He stated that the Commission should take a “hard look” at whether companies’ and shareholders’ needs are being met.  This includes how shareholders are receiving information, the type of information they are getting, and whether they are effectively participating in voting.  At the same time, Clayton is concerned about the costs and burdens on companies in the proxy system.  The upshot is that the Commission may reopen for comment the 2010 proxy plumbing concept release, an ambitious undertaking to review the proxy voting system that got sidetracked once the Dodd-Frank Act was implemented. Continue Reading

Year-End Compensation Planning in Light of the House Tax Reform Proposal and Proposed Changes to the Taxation of Stock Options

Over the past week, Republican lawmakers in the House of Representatives have proposed sweeping tax reform legislation, including a series of amendments to the initially proposed bill. As companies enter their year-end compensation planning to develop compensation programs for 2018, they may wish to keep in mind certain aspects of the proposed legislation that may dramatically change how companies choose to compensate employees, executives and directors. A memorandum outlining these issues is available here.

Additionally, a blog post summarizing changes proposed by Representative Brady’s amendment to the bill relating to the taxation of stock options and restricted stock units granted by private companies is available here. Continue Reading

House Tax Bill Upends Key Executive Compensation Rules and Makes Changes to Employee Benefits

On Thursday of last week, Republicans in the House of Representatives released a proposed tax reform bill that includes several provisions that would significantly impact compensation of directors, executives and employees. The bill also includes provisions relating to 401(k) plans and other employees benefits.

Blog posts summarizing these provisions are available at https://www.taxreformandtransition.com/2017/11/house-tax-bill-upends-key-executive-compensation-rules/ and https://www.taxreformandtransition.com/2017/11/house-tax-bill-changes-to-employee-benefits/.

These posts summarize the initial version of the tax reform bill proposed in the House. The bill is undergoing changes through the mark-up process in the House, and the Senate is expected to release its own bill soon, which may include very different provisions relating to compensation and benefits. Continue Reading

New SEC Staff Legal Bulletin Shifts Burden to Boards on Ordinary Business and Economic Relevance Exclusions, Clarifies Proposal by Proxy and Retains Status Quo on Use of Images

Yesterday, the SEC Staff issued a new Staff Legal Bulletin (SLB) on shareholder proposals.  The most striking impact it will likely have initially is on the ordinary business exclusion, Rule 14a-8(i)(7), as the SLB requires boards to undertake the responsibility to analyze proposals.  It appears that the SLB is effective immediately.

Ordinary Business.  A long line of no-action letter precedents provides guidance on which proposal topics constitute ordinary business, and therefore need not be included in the proxy statement, as opposed to those that must be voted on because they focus on significant policy issues that transcend ordinary business.  For example, proposals related to environmental matters or executive compensation are generally considered weighty policy matters and not ordinary business.  Continue Reading

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