After Slight Text Changes, the SEC Staff Decides Proposal Governing Company Access to Vote Tallies Cannot Be Excluded

Several companies excluded proposals this season related to their receipt of periodic vote tallies from Broadridge after receiving no-action letter decisions similar to the SEC staff’s views from two years ago. The proposals asked boards to adopt bylaws so that the running tally of votes cast for matters on the proxy card would not be made available to management or the board, and cannot be used to solicit votes.

The proponent of the proposal proclaims that the objective is “confidential voting,” although the real purpose seems to be curtailing corporate solicitation. The version of the proposal that the SEC staff decided could be excluded asked for the bylaws to govern the tallies related to the “outcome of votes cast by proxy on uncontested matters,” and included all management proposals seeking approval of executive pay, proposals required by law to be subject to shareholder vote and shareholder proposals. Continue Reading

Mr. Clayton Goes to Washington

SEC Chair nominee Jay Clayton’s March 23rd hearing before the Senate Banking Committee covered much of the expected ground. In a series of responses designed to avoid controversy, Clayton repeatedly returned to the three core mandates of the SEC – capital formation, investor protection and efficient markets – as touchstones for his future leadership of the Commission, should he be confirmed. Beyond these general areas, Clayton offered few specifics or signals as to how he might steer the Commission during his term as Chair. He did, however, discuss concerns about growing companies finding the U.S. public markets unattractive due to the burdens of being a public company. Continue Reading

Davis Polk Submits Comment Letter to the SEC on Implementation of Pay Ratio Rule

Davis Polk has submitted a comment letter on the SEC’s implementation of the pay ratio rule. We previously summarized the final rule here.

Our comment letter focuses on implementation challenges and the significant administrative and financial burdens facing companies in connection with compliance with the pay ratio rule.

Law Clerk Charlotte Fabiani contributed to the drafting of this letter. Continue Reading

Senators Object to Any Delays in Pay Ratio Disclosure Requirements

A group of senators have written to SEC Acting Chair Piwowar opposing any delay in the implementation of the pay ratio rules. The senators are “extremely troubled” by Commissioner Piwowar’s decision to seek additional comments on the rule, and his directive to the staff to reconsider the rule’s implementation, which we previously discussed here.

The senators note that the statute requiring the rule was passed nearly seven years ago, and during the proposal stage the SEC received more than 270,000 letters, including many from investors in support of having the information as a way to assess companies’ approaches to executive compensation and human capital. Continue Reading

CII and Others Defend Shareholder Proposal Process to the White House

A group of investor organizations sent a letter to Gary Cohn, the Director of the National Economic Council, disputing the Business Roundtable’s assertion that the shareholder proposal process under Rule 14a-8 is among the list of unduly burdensome regulations. A prior discussion of the October 2016 Business Roundtable report on possible Rule 14a-8 reforms is here.

CII, the Principles for Responsible Investment, the Interfaith Center on Corporate Responsibility, the Investor Network on Climate Risk and the Forum for Sustainable and Responsible Investment support the current SEC rule. The group argues that the shareholder proposal process is “well functioning” and does not need to be amended or repealed. Continue Reading

BlackRock Issues Engagement Priorities for the Coming Year

BlackRock’s Investment Stewardship team of over 30 specialists globally is responsible for engagement with portfolio companies, viewing engagement as an important way to provide feedback and note concerns about factors that affect company performance. The investor emphasizes that they intend to engage “in a constructive manner” by asking questions, not telling companies what to do. If they have concerns, they will explain them and provide companies with time to respond. However, BlackRock also declares that “our patience is not infinite” and they will make voting decisions against companies if they do not see any progress after ongoing engagement.

For 2017 to 2018, BlackRock has issued its priority themes to help company boards and management prepare for engagement with the investor. Continue Reading

Interview with the New York City Comptroller’s Office on Their Advocacy for Proxy Access

New York City Comptroller Scott Stringer and the New York City Pension Funds launched the Boardroom Accountability Project in the fall of 2014, by submitting shareholders proposals to 75 companies at once, and asking them to give their shareholders the right to nominate directors using the corporate ballot, known as “proxy access.” 

By all accounts, this project has led to the tremendous uptick in providing for proxy access rights through private ordering.  Almost 400 companies have enacted proxy access bylaws, including more than half of the S&P 500.  Below are some thoughts on the topic from Rhonda Brauer, Director of Corporate Engagement in the New York City Comptroller’s Office. Continue Reading

State Street Targets Companies for Lack of Board Gender Diversity and Provides a Gender Diversity Framework to Promote Increased Representation

Wall Street, Meet Fearless Girl. See the picture and watch the video.

That’s the tagline used by State Street in announcing, on the eve of International Women’s Day, that it has placed a temporary statute right near Wall Street of a girl with her arms crossed facing the Wall Street bull, to represent the future. On the same day, State Street called on the 3,500 companies it holds to take concrete steps to increase the number of women on their boards, as a governance issue of critical importance to boards and investors in 2017.

In a three-page guidance, State Street provides its position on gender diversity and a framework to help boards enhance the representation of female directors. Continue Reading

Two Quick Reminders for the Proxy Season

As many of you prepare to file your proxy statements this month, two quick reminders on new developments to keep in mind:

  • There is no longer a requirement to send the SEC hard copies of the company’s annual report that accompanies the proxy statement if you post the report on the company’s website, and keep the report on the website for at least a year.  See our prior post on the CDI issued in November of last year.
  • Companies including a say-on-frequency vote in their proxy statements should remember to announce publicly the board’s decision on the frequency selected after the meeting. 
Continue Reading

SEC Requires Hyperlinks to Exhibits Starting in September

The SEC approved rules yesterday to require issuers to include a hyperlink to the exhibits listed in the exhibit index. This applies to registration statements and reports subject to the exhibit requirements under Item 601 of Regulation S-K, as well as Forms F-10 and 20-F. The filings must be submitted in HTML format.

The rules are effective for filings submitted on or after September 1, 2017, although the Commission encourages early compliance. Smaller reporting companies or a company that is neither a large accelerated filer or an accelerated filer, and that submits filings in ASCII, can wait an additional year to comply. Continue Reading

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