Current Posts

August 27, 2014 | Ning Chiu

Amnesty International filed a supplemental brief to its late May petition for rehearing of the conflict minerals case, based on the American Meat decision from late July, which we previously discussed here

Amnesty argues that the opinion in American Meat expressly overruled a portion of the conflict minerals decision, and made clear that the court in the conflict minerals litigation erred in failing to apply the First Amendment standard for review set forth in Zauderer. The court had declined to apply Zauderer in the conflict minerals dispute since the SEC had not claimed that the rule was related to the government interest of preventing consumer deception. Subsequently, the American Meat court expressly overruled the view that Zauderer is limited to disclosures based on “an... Read More

August 25, 2014 | Ning Chiu

Facebook is seeking to dismiss a lawsuit challenging the compensation paid to its non-executive directors, which we previously discussed here.

Although a board’s decision to grant compensation to its members generally falls outside the business judgment rule because board members are deemed personally interested in their compensation levels, if the board’s decision is approved by a majority of independent, disinterested and informed stockholders, then the business judgment rule presumption applies rather than the entire fairness standard. 

Facebook argues in its motion to dismiss that the director compensation at issue was approved by the necessary stockholder majority because the company’s CEO and chairman, Mark Zuckerberg, beneficially owns approximately 17% of the company, and 55% of the voting power, as a result of... Read More

August 21, 2014 | Ning Chiu

The NYTimes Dealbook recently focused on a Proxy Monitor study that found that 70% of shareholder proposals submitted by individuals to Fortune 250 companies in 2014 were sponsored by three people and their family members − John Chevedden, William Steiner and James McRitchie. Over the last nine years, the Cheveddens have filed 232 proposals, with about 19% receiving majority support, while the Steiners made 215 submissions, with 29% passing. According to the report, Evelyn Davis only submitted one proposal in 2014, and none in 2013. Although her success rate for passing proposals is around 1%, the Dealbook article discusses her newsletter that many companies felt compelled to buy and other perks she received. 

The focus on "corporate gadflies" is one... Read More

August 14, 2014 | Ning Chiu

ISS has launched a new Equity Plan Data Verification portal to better reflect the most up-to-date data for investors voting on equity plans. While this process is optional for issuers and does not affect whether they receive ISS recommendations, given that issuers frequently criticize the proxy advisory firms for having errors in the voting reports, this portal represents a unique opportunity to ensure those errors are minimized, especially in the complex area of equity plan proposals. Favorable proxy advisory firm recommendations can be crucial to the passage of those plans. 

This portal will be available to all U.S. companies with an equity plan proposal on the ballot after September 8, 2014. It does not apply unless a company has such a proposal on the upcoming meeting agenda. 

Companies must take action to have the ability to confirm the accuracy of the information before ISS... Read More

August 13, 2014 | Ning Chiu

The Council of Institutional Investors (CII) sent a letter to Keith Higgins, the director of the SEC Division of Corporation Finance, related to the Dodd-Frank requirement for the SEC to promulgate rules for disclosure of the link between executive pay and company performance. Companies must provide a “clear description” of the relationship between executive compensation “actually paid” and the “financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions.” These highlighted areas represent several challenges for interpretation in formulating rules. 

CII’s letter indicates that a prior meeting took place with the SEC staff to discuss Dodd-Frank rulemaking and urges the SEC not to change the existing Summary Compensation Table in... Read More

August 12, 2014 | Ning Chiu

The latest SEC award to a whistleblower was notable for having been initially denied because the SEC decided that the information was not “voluntarily” provided. Under the SEC rules, a submission is not being made voluntarily if a request, inquiry or demand related to the subject matter is directed to the whistleblower by the SEC, PCAOB or any self-regulatory organization (SRO) or in connection with an investigation by federal or state authorities. 

In this situation, the SEC’s preliminary determination found that although the claimant provided original information that led to a successful enforcement action, that information was not “voluntarily” provided as required because of a prior inquiry into the matter conducted by an SRO. The SEC ultimately waived this requirement, however, after reviewing the response that the claimant filed, including a detailed description of the claimant’s efforts to... Read More

August 6, 2014 | Ning Chiu

The Citizens for Responsibility and Ethics (CREW) has filed a comment in response to the Chamber of Commerce’s petition asking the Commission to increase the voting approval threshold for resubmitting a Rule 14a-8 shareholder proposal. We previously discussed both the Chamber’s rulemaking request and CREW’s separate petition related to disclosure of corporate political spending here.  

In its comment on the Chamber’s request to the SEC, CREW is particularly interested in proposals asking companies to provide public information on corporate political spending beyond those required by election laws. CREW argues that the Commission should reject the Chamber’s request because it would obstruct those resolutions, since... Read More

August 4, 2014 | Ning Chiu, Joseph A. Hall and Sarah Ashfaq

In a decision that may predict the outcome of the ongoing SEC conflict minerals court case, a divided U.S. Court of Appeals for the D.C. Circuit, sitting en banc, ruled that a regulation mandating disclosure of country-of-origin information about meat products was permissible.  

In implementing a congressional statute, the Secretary of Agriculture initially promulgated rules in 2009 that sought labeling of meat products with a phrase starting with “Product of,” followed by one or more countries. If the meat product was “commingled,” the label could name all of the countries of origin. However, after the World Trade Organization found the rule to be imprecise, the Secretary responded with a rule that required the revelation of the location of each production step and eliminated the flexibility allowed in labeling commingled products.  Trade groups subsequently sued, alleging a violation of the First Amendment.  

In its decision, the court considered the... Read More

July 31, 2014 | Ning Chiu

As a result of the controversy regarding the availability of interim vote tallies during the 2013 proxy season, which we've previously discussed here, numerous companies received shareholder proposals earlier this year asking that those tallies not be available to management and the board. The resolution contained a list of the types of proposals this would apply to, as well as a list of exceptions.

Interim vote tallies generally refer to Broadridge's report to the company of the number of votes cast in favor, against or abstentions for the proposals on the proxy card, beginning 15 days before the meeting. The debate concerned perceived advantages of management knowing how shareholders were voting, while a shareholder who may solicit in opposition to the company would not have access to that information.

Companies made numerous arguments to the SEC staff for excluding... Read More

July 28, 2014 | Ning Chiu

A vast majority of companies have adopted similar practices and protocols for their earnings calls, but there were some notable differences and perhaps a few surprises, from the results of a survey conducted by the National Investor Relations Institute (NIRI). The full report is available only to members but the highlights are listed here

Earnings calls are widely embraced as useful communication tools, evidenced by the fact that 97% hold them quarterly. 94% are conducted by telephone and 89% through webcasting. Companies also share the same methods for announcing the calls, with 93% issuing press releases and 83% posting to the company website. 75% of companies sponsor calls on the same day as earnings are released, and the calls lasted 46 to 60 minutes for 68% of companies. Larger companies tend to have... Read More