Current Posts


September 30, 2014 | Ning Chiu

ISS released the results of its policy survey. The responses, from 105 individual institutional investors and 255 members of the corporate issuer community (including advisers), may inform new policies or change existing policies. Investor and issuer views diverged in some cases. Draft policies are expected to be released in October for public comment.  

Unilateral Adoption of Bylaws 

72% of investors indicated that a board should never adopt bylaw amendments that “negatively impact” investors’ rights without shareholder approval. Other investors responded instead that “it depends,” and selected from a list of eight possible unilateral board actions that they would be concerned about. The top three related to “diminishing rights” to shareholders’ ability to call special meetings and act by written consent, classifying boards and... Read More

September 25, 2014 | Ning Chiu

The most interesting element of the SEC’s latest whistleblower award, the largest so far at $30 million, may be the lengthy footnote that explains why the Commission believes an award payment is appropriate even though the claimant resides in a foreign country.

 The SEC order explains that under the Supreme Court Morrison case, a sufficient U.S. territorial nexus may warrant domestic application of a statutory provision even when certain extraterritorial aspects are involved.  In the SEC’s view, this test is met for purposes of the determining whistleblower claims whenever a claimant’s information leads to the successful enforcement by the Commission of a covered action brought in the U.S. concerning violations of the U.S. securities laws.  If those “key territorial connections” exists, then it makes no difference to the SEC whether, for example, the claimant was a foreign national, the claimant... Read More

September 23, 2014 | Ning Chiu

The SEC Dodd-Frank Investor Advisory Committee, established pursuant to Dodd-Frank, has provided notice that it will hold a public meeting on Thursday, October 9, 2014, from 10:00 a.m. until 4:00 p.m. (EDT). 

The agenda includes a review of the recommendations from the Investor as Owner Subcommittee on “impartiality in the disclosure of preliminary voting results.” We have previously discussed the controversy surrounding issuers’ access to so-called interim vote tallies prior to annual meetings, including here. In contested situations, both sides receive preliminary vote results. Currently, those who conduct exempt solicitations, meaning solicitations without a separate proxy card, can receive... Read More

September 22, 2014 | Ning Chiu

Shareholders were asked to vote on almost 1,200 equity plan proposals in the first half of 2014, according to the ISS U.S. Proxy Season Review Report, with an average approval rate of 89%. Slightly more than half of the proposals amended existing plans, while 150 proposals were made solely to comply with Section 162(m) tax deductibility and did not ask for any increased shares.

While it appears that ISS did not support at least a quarter of the proposals, only eight failed to pass, including two that ISS recommended that shareholder vote in favor. Two failures were at S&P 500 companies. 

High shareholder value transfer was the primary concern for ISS, cited in 237 out of 301 “against” recommendations, although usually more than one issue was cited, including option repricing permissiveness and excessive burn rates. The ability to reprice options without shareholder approval is increasingly rare, present in only 7% of the plans ISS reviewed.

Other, less... Read More

September 17, 2014 | Ning Chiu

SEC Chair White has spoken about the SEC's interest in reforming the current disclosure regime, which we discuss here. Perhaps foreshadowing the possible benefits of change, the WSJ recently reported on Corp Fin’s role in prowling through securities filings, dubbed the “the world’s most impenetrable prose,” followed by a story on how an outfit that runs the SAT test graded the filings of six large companies for “readability.”  

In response to the SEC’s request for comments on its disclosure effectiveness project, the Society of Corporate Secretaries and Governance... Read More

September 15, 2014 | Ning Chiu

Rehearing en banc of the conflict minerals case is not warranted because there is no conflict with other court decisions, argues the National Association of Manufacturers, Chamber of Commerce and the Business Roundtable (collectively referred to as “NAM”) in a joint response to the petitions for rehearing en banc submitted by the SEC and Amnesty International (which we previously discussed here.

The dispute between the parties centers on whether, in light of the recent American Meat Institute case, the statement that issuers were previously required to make regarding whether or not products are DRC conflict free is eligible for review under Zauderer, a Supreme Court precedent.  The American Meat Institute case overruled prior circuit precedent limiting Zauderer to disclosure aimed at preventing... Read More

September 11, 2014 | Ning Chiu

As we previously discussed here, in May, a shareholder challenged the validity of an amendment to Cheniere Energy’s 2011 incentive plan that was voted on at the company’s February 2013 meeting. In the complaint, the plaintiff questioned whether abstentions should have been counted as votes “against” the plan, based on the company’s bylaws. According to the plaintiff, treating abstentions as “no” votes would have meant that the plan was not approved by shareholders. 

Citing the litigation, Cheniere Energy postponed its annual meeting originally scheduled for June to September 11, 2004. It also decided to remove proposals to further amend the plan that had been scheduled for that meeting. 

The company has since filed a motion to stay or dismiss the plaintiff’s claim. The company argued that since a shareholder vote for... Read More

September 9, 2014 | Ning Chiu

For those who wondered what happened to the rule proposal that the SEC issued in January 2011 requiring that investment managers report their say-on-pay votes at least annually, the staff is working on drafting final rules for the Commission’s consideration “in the near term,” according to Chair White. 

This was one of many rules that Chair White discussed in her testimony before the Senate Committee on Banking, Housing and Urban Affairs about the SEC's ongoing implementation of the Dodd-Frank Act. She stated that the Commission has focused on eight key areas from the Act: credit rating agencies; asset-backed securities; municipal advisors; asset management, including regulation of private fund advisers; over-the-counter derivatives; clearance and settlement; proprietary activities by financial institutions; and executive compensation.... Read More

September 8, 2014 | Ning Chiu

In the midst of the clamor for disclosure reform that questions whether the current regime requires too much information in public filings, the Council of Institutional Investors (CII) wants companies to provide additional detail about their board evaluation processes.  

In its report, "Best Disclosure: Board Evaluation," surveyed CII members said they value detailed disclosure of the board evaluation process when deciding on director elections. CII makes clear that investors do not expect information about the results of the actual evaluations, but believe that the process discussion “...is an indication that a board is willing to think critically about its own performance on a regular basis and tackle any weaknesses.” 

The report acknowledges that it is not common to find “robust disclosure” of the board evaluation process in the... Read More

September 4, 2014 | Ning Chiu

The SEC staff recently disagreed with Procter & Gamble’s no-action letter, which sought to exclude a shareholder proposal on ordinary business grounds, although a similar proposal sent to Johnson & Johnson was allowed to be kept out of its proxy statement this past February.   

Both proposals requested reports to shareholders explaining the congruency between the companies’ stated “corporate values” and the company’s political contributions, with “justifications for…exceptions” for those contributions which may appear to be misaligned with the values. While the SEC staff did not explain their reasoning in the P&G decision, the different results seem to lie in the focus of the examples used to demonstrate the alleged... Read More

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