Current Posts


April 20, 2015 | Betty Moy Huber

Ceres, on behalf of institutional investors representing nearly $2 trillion in assets under management, sent a letter to the SEC on April 17, 2015, requesting that the agency scrutinize the lack of “carbon asset risk” disclosure in oil and gas company filings. The letter defines “carbon asset risk” broadly to include risks associated with capital expenditures on high cost/carbon intensive oil and gas exploration projects, government efforts to limit carbon emissions and the possibility of reduced global demand for oil as early as 2020. Ceres claims that carbon asset risks are material “known trends” requiring disclosure under SEC rules. The New York State Office of the State Comptroller and the New York City Office of the Comptroller simultaneously sent a ... Read More

April 17, 2015 | Ning Chiu

According to Amalgamated Bank, the Trustee to the LongView Funds, five companies have agreed to adopt new measures to limit payments in the event of a change in control. Amalgamated Bank submitted several shareholder proposals asking boards to adopt a policy that there will only be vesting on a partial, pro rata basis upon a senior executive’s termination in a change in control situation, instead of acceleration of vesting. In 2014, four companies received more votes in favor of these proposals than against them. Valero Energy has adopted such a policy, which is posted on its website.

Prior to this season, the SEC staff permitted companies that were asking shareholders to approve equity plans... Read More

April 15, 2015 | Ning Chiu

As has been reported, the U.S. Court of Appeals for the Third Circuit has decided that Wal-Mart does not have to include in its 2015 proxy materials a shareholder proposal requesting that the Compensation, Nominating and Governance Committee charter be amended to add oversight of implementation of policies that would evaluate whether the company should sell certain types of guns that the proponent argues endangers public safety, has the substantial potential to impair the company's reputation or would be considered offensive to the values that are integral to the company’s brand.

The court order was made in time for Wal-Mart to distribute its proxy materials.  A full opinion will be issued later.

We previously discussed the appeals ... Read More

April 13, 2015 | Ning Chiu

In a letter to SEC Chair White, the U.S. Chamber of Commerce, through the Center for Capital Markets Competitiveness (CCMC), has expressed “significant concern” regarding the enforcement action that the SEC took against KBR regarding whistleblowers and the company’s confidentiality agreements.  Our memo on the KBR action is here.

CCMC indicates that they believe that the KBR enforcement action is the “result... Read More

April 9, 2015 | Ning Chiu

The SEC staff has determined that a shareholder proposal can be excluded under Rule 14a-8(i)(3) because the supporting statement is false and misleading, a position that they have generally been reluctant to take in numerous other requests.

Every season, without exception, companies write no-action letters to the staff arguing that the supporting statement in shareholder proposals contain objectively incorrect information, either directly or by implication. These tend to be proposals seeking an independent chair of the board, and the supporting statement make claims that essentially question the independence and qualifications of not only the current chair, but also other directors. Sometimes the information is blatantly wrong because the data is outdated, or perhaps is relevant to another company. We have described prior examples ... Read More

April 6, 2015 | Ning Chiu

A Towers Watson survey found that only about 27% of Fortune 500 companies provided some type of pay-for-performance discussion in 2014. Only 4% of companies added new disclosure, while 5% eliminated it after including it in the prior year.

According to the survey, 29% of those that disclosed pay-for-performance at all offered an alternate pay calculation, such as realizable or realized pay. The vast majority used a pay-for-performance alignment approach that tied the achievement of performance metrics, typically total shareholder return, with the level of pay.  Three to five years was the most common time horizon. Last fall, Towers Watson found that while most companies conduct a pay-for-performance analysis, many do not disclose it. It appears companies are waiting for... Read More

April 2, 2015 | Ning Chiu

The SEC, which has recently been investigating workplace agreements out of concern that they may impede whistleblowing activity protected by the Dodd-Frank Act, announced yesterday its first enforcement action against a company related to the use of restrictive language in confidentiality agreements. Companies should be mindful of this type of enforcement action and take the necessary steps to review and revise their own various agreements addressing confidentiality.

The Davis Polk memo on this action is here.

April 1, 2015 | Ning Chiu

The SEC charged that the former CEO of Polycom used corporate funds to pay for about $190,000 of personal perks for several years that were not disclosed. During that time, the CEO's total compensation as reported ranged from more than $4 to over $7 million annually.

The SEC complaint contains numerous allegations that the former executive had falsified expense reports and provided fake business descriptions in order to obtain reimbursement for personal meals, clothing, entertainment and travel. 

The company was charged with inadequate proxy disclosure from 2010 to 2013.  It appears that at least one incident of the CEO’s abuse of expense reporting was uncovered by the company in 2011, but the full scope was unknown to the company and the CEO’s activities continued.  In the same year that the company highlighted in its 2013 proxy statement that it provided “no excessive perquisites” to its executives, the entirety of the false reporting by the CEO was revealed.

... Read More
March 31, 2015 | Ning Chiu

T. Rowe Price’s proxy voting policies explains that its Proxy Committee develops the firm’s positions on major proxy voting issues.  The Proxy Committee comprises portfolio managers, investment analysts, operations managers and internal legal counsel, and relies upon its own research, independent research provided by ISS and Glass Lewis, and information presented by companies’ management and shareholder groups, in establishing policies.

Recommendations set by the Proxy Committee are distributed to the firm’s portfolio managers as voting guidelines.  For T. Rowe Price, the portfolio managers decide ultimately how to vote on the proxy proposals of the companies in their portfolios.  When portfolio managers cast votes that are counter to the Proxy Committee's guidelines, they are required to document their reasons in writing... Read More

March 27, 2015 | Ning Chiu

According to a recent speech by PCAOB board member Jay Hanson, the PCAOB is evaluating the comments they have received on their proposal to add a discussion of “critical audit matters” to an auditor’s report, which we discussed in this September 2013 client newsflash.

Hanson stated that a re-proposal of a standard governing the auditor’s report is expected later in 2015, which is likely to result in a “narrower, more focused” requirement that would cover “only the most relevant information about the audit.”

In the comment letters the PCAOB received, some suggested that the requirements do not go far enough, while others believe that most of the matters would be duplicative of disclosures already in financial statements or MD&A.  Boilerplate... Read More

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