Current Posts


February 3, 2016 | Ning Chiu

When companies engage with BlackRock's corporate governance team, they may be asked about the company's "strategic framework for long-term value creation," according to the letter sent to 500 CEOs from Larry Fink, co-founder and CEO of BlackRock. The framework should focus on the future and provide perspective on how a company is navigating competition and innovation, adapting to technology and geopolitical events, and where it is investing and developing talents.

Companies are expected to explicitly affirm to shareholders that their boards have reviewed their strategic plans. Environmental, social and governmental (ESG) issues, which are integrated into BlackRock's investment framework, should also be recognized as central to companies' businesses, in light of increasing attention to those matters.

The letter... Read More

February 1, 2016 | Kyoko Takahashi Lin, Jean M. McLoughlin

Facebook has announced its settlement of a lawsuit filed in June 2014, alleging that its board of directors breached their fiduciary duties and unjustly enriched themselves and wasted corporate assets through the compensation paid to the non-employee directors. To date, we have discussed this case here, here and here.   

As a refresher of the background facts, in 2013, Facebook’s Compensation & Governance Committee... Read More

January 27, 2016 | Ning Chiu

Shareholders at several companies will vote on proposals asking boards to adopt a payout policy that gives preference to share repurchases instead of cash dividends. The proponents' supporting statement extolled the advantages of repurchases as more flexible than dividends and indicated some concern that dividends automatically caused a tax liability for some shareholders.

Companies did not convince the SEC staff in their arguments that the proposals should be excluded. The most common assertion was that the proposal focused on an ordinary business topic. Companies cited numerous prior no-action letters that permitted proposals asking boards to implement share repurchase programs with specific terms to be excluded. Some also argued that the proposals implicate capital allocation decisions that are fundamental to management functions.

The proponent cited to one prior no-action letter from the SEC staff that determined that the issue of whether to pay dividends involves... Read More

January 22, 2016 | Ning Chiu

The WJS’s interactive graph on the 4,500 directors in the S&P 500 provides an interesting compilation of the hot topics of the day, including the number of women on boards, director independence, director age and tenure and pay. It also allows for those metrics to be view on a company or industry-specific basis or by topic category.

The data is based on information as of October 30th and covers companies with market capitalization ranging from $1.5 billion to over $600 billion. For the S&P 500, nearly three-quarters of boards have at least two women directors. At three companies, women make up half of the board. Eleven companies do not have any women directors, a decrease from 59 companies in 2005.

Former CEOs lead the board at 20% of the companies, and CEOs... Read More

January 20, 2016 | Ning Chiu

The U.S. Government Accountability Office (GAO) estimated in a recent report that even if equal proportions of women and men joined boards each year beginning in 2015, it could take more than 40 years for the representation of women directors to equal that of men. The report is in response to a request from Carolyn Maloney, the ranking member of the Subcommittee on Capital Markets and Government Sponsored Enterprises Committee on Financial Services in the House of Representatives. 

The GAO found some progress. In 2014, women made up 16% of board seats in the S&P 1500, up from 8% in 1997. Women now make up more than 20% of new directors. But 33% of small companies and 17% of medium-sized companies have no women on their boards, compared to 4% of large companies. 

According to the GAO, the factors that may hinder representation of women on boards include boards not prioritizing diversity in... Read More

January 15, 2016 | Betty Moy Huber and Michael Comstock

Ceres, an environmental nonprofit organization, released this week an SEC Sustainability Disclosure Search Tool. This tool, available here, is the next step in Ceres’s campaign for increased, and more transparent and comparable, climate change and other sustainability disclosure. (See prior blog posts on this topic available here, here, and here.

The search tool allows registered users to... Read More

January 15, 2016 | Ning Chiu

In charging senior leaders of a failed bank with fraud, the SEC also held two outside directors responsible.

Eleven executives and board members of the bank were charged by the SEC, which claimed that they improperly extended, renewed and rolled over bad loans in order to avoid impairment charges and reporting increased losses for loans and leases in its financial accounting. This contributed to the bank's failure in 2011 and the bank became the 26th largest bank by asset size to fail during the financial crisis.

The SEC complaint cites numerous specific loans and credit situations involving the bank's management. One of the directors was implicated in a particular restructuring when he agreed to assume some of the payments, but in fact was not personally liable due to other extensions of credit by the bank. The SEC alleged that the director either knew of the borrower's... Read More

January 11, 2016 | Ning Chiu

The New York City Comptroller issued a press release today announcing that the New York City pension funds (the Funds) have filed 72 new proxy access shareholder proposals, though many were sent to companies that also received the proposals in 2015. 

This builds on the Boardroom Accountability Project that the Funds initiated in 2015 with 75 proposals.  According to the release, two-thirds of the proposals that went to vote received majority support and 37 of the companies agreed to enact bylaws to date. 

The focus list provides the names of the companies and why they were targeted by the Funds.  It includes 36 companies that received the proposal in 2015 which have not yet enacted, or agreed... Read More

January 8, 2016 | Ning Chiu

A complaint to force the SEC to adopt rules requiring public companies to disclose the use of corporate funds for political activities was dismissed by the U.S. District Court for the District of Columbia. The Plaintiff and Citizens for Responsibility and Ethics in Washington (CREW) submitted a petition for rulemaking to the SEC in May 2014, and about a year later sued the SEC under the Administrative Procedure Act (APA) to challenge the agency’s inaction as arbitrary, capricious, and contrary to law, as well as to compel the SEC to act. 

The Plaintiff claims that without regulation to provide transparency, he cannot determine whether corporate political contributions are in the best interest of companies and therefore is unable to fulfill his duties as a shareholder.   

The Court dismissed the allegations that the SEC failed to respond for lack of jurisdiction, as initial APA review rests with the courts of appeals. In addition, the Court stated that an APA claim can... Read More

January 7, 2016 | Ning Chiu

Until January 31 or whenever a specified limit is reached, NYSE and Nasdaq listed issuers can sign up for Glass Lewis’ data verification program, known as the Issuer Data Report (IDR) service, here. The service is available to companies with annual meetings between March 1 and June 30.  

IDR is designed to enable public companies to access for free a data-only version of the Glass Lewis proxy report before Glass Lewis completes its analysis and proxy voting recommendations. It is important to note that this is different from the ISS process that allows S&P 500 companies to obtain draft copies of the ISS proxy reports. IDR will not provide any insight into Glass Lewis’ ultimate recommendations for the meeting. In addition, companies can only obtain Glass Lewis proxy reports by buying them.  

The purpose of IDR is to enable companies to review the key data points used by Glass Lewis and confirm... Read More

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