Current Posts

May 4, 2015 | Ning Chiu

This season ISS is tracking only 10 proposals seeking to declassify boards, a two-third drop from the number of proposals in 2014. This is likely attributable to the absence of assistance from the Harvard Shareholder Rights Project. The Harvard group indicated that it has completed the declassification project that it started in 2011 and the clinic is not operating during the current academic year. Of S&P 500 companies, 75% now have annually elected boards.   

Majority voting proposals also dropped, from 50 in 2014 to 10 this year. 86% of large-cap companies use majority voting standards for election of directors. 

Even the number of independent chair proposals decreased, to 42 compared to 63 in 2014. Proxy access proposals instead account for the bulk of governance proposal topics this season. 

Overall, ISS is monitoring around 780 shareholder proposals, 6% less than last year. 60% of those are focused on environmental and social issues.  Many never end up... Read More

May 1, 2015 | Ron Aizen

On Wednesday, the SEC proposed a rule that would require U.S. public companies to disclose, in any proxy or information statement, the relationship between executive compensation and financial performance. Depending on when the rule is finalized, companies may be required to provide this “pay versus performance” disclosure as early as the 2016 proxy season. 

The Davis Polk memo on this proposal is attached here.

April 29, 2015 | Ning Chiu

Dodd- Frank directs the Commission to require public companies to disclose 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. Below is a summary of the proposed rules as discussed at today’s SEC open meeting that just concluded. The full rule proposal will provide additional details, and we will issue a memo on the proposal.

At the open meeting, the Commission voted to propose amending Item 402 of Regulation S-K and requiring a new table with a new measure of executive compensation – executive compensation “actually paid” – for the CEO and an average of the same measure for the other NEOs. “Actually paid” compensation will start with the total compensation in the summary compensation table, adjusting for the pension amount reported and including only equity awards that have vested... Read More

April 28, 2015 | Ning Chiu

Senator Tammy Baldwin (D-WI) has sent a letter to SEC Chair White to express her concerns about the increase in stock buybacks and asks for information on Rule 10b-18, including analytic work done by the SEC on the long-term economic impact of the rule, an accounting of investigations by the SEC into possible violations of the rule and an assessment of whether the rule is adequate to foster capital formation and prevent fraud. Rule 10b-18 provides a company with a safe harbor when repurchasing its own stock, so long as it meets the rule’s manner, timing, price and volume conditions.   

The letter focuses on recent research that claims, from 2003 to 2012, S&P 500 companies used 54% of their earnings on stock buybacks, while dividends accounted for an additional 37%.... Read More

April 27, 2015 | Ning Chiu

At ten companies where shareholders have cast votes on proxy access shareholder proposals this season, four companies received more votes in favor of the proposal than against it, while a majority of shareholders did not support the proposal at six companies. 

Counting only “for” and “against” votes, Arch Coal’s proposal received the lowest support at 36%. The company had previously adopted proxy access bylaws allowing shareholders owning at least 5% of shares holding for three years to nominate access candidates, with a maximum number of 20 shareholders permitted to aggregate their holdings. 

Other proposals that did not receive majority support ranged from 39% in favor at Apple, which we previously discussed here, and 42% to 46% support at Domino’s Pizza, PACCAR, Cabot Oil & Gas and VCA. At three companies, the shareholder... Read More

April 23, 2015 | Ning Chiu

The SEC has announced an open meeting on Wednesday, April 29, 2015, at 10:00 am to consider whether to propose amendments requiring companies to disclose the relationship between executive compensation actually paid and the financial performance of the company. The rulemaking is required under Section 14(i) of the Dodd-Frank Act.

The Commission will also consider whether to propose amendments and re-propose a rule governing the application of certain Title VII requirements to security-based swap transactions connected with a non-U.S. person's dealing activity that are arranged, negotiated, or executed by personnel located in a U.S. branch or office or in a U.S. branch or office of an agent.

April 22, 2015 | Ning Chiu

Companies with proxy access shareholder proposals on their annual meeting ballots are confronting a notice of exempt solicitation filed by the California Public Employees Retirement System (CalPERS) and the New York City Pension Funds urging shareholders to vote in favor of the proposals. 

A notice of exempt solicitation is coded as PX14A6G and can be a surprise to companies when it appears on the company’s SEC EDGAR website. 

The exempt solicitation argues that providing access to a company’s proxy to allow shareholders (or “shareowners” according to the notice) the ability to nominate directors to the board is “one of the most important rights given to the owners of a company.” Without proxy access, director elections are essentially “a ratification of corporate management’s slate of nominees.”  

It defends the proposed terms of proxy access in the... Read More

April 21, 2015 | Ning Chiu, Edmond T. FitzGerald, Joseph A. Hall and Kyoko Takahashi Lin

Davis Polk has submitted a comment letter on the SEC proposal  for companies to disclose their equity hedging policies. We previously summarized the rule proposal here

Our comment letter focuses on the persons covered under the corporate hedging policy disclosure, the scope of hedging transactions subject to the disclosure requirement and the nature of the disclosure.  

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