Current Posts

October 24, 2014 | Ning Chiu

Companies may want to mark their calendars now for the period beginning 9 a.m. EST on November 3 through 8 p.m. EST on November 14 for the data verification period related to ISS Governance Quickscore 3.0. The updated scores and data will be released on November 24.  

One of the major changes for U.S. companies includes a new factor based on annual performance evaluations for the board. Since most companies already conduct those evaluations, what this new methodology may simply lead to is additional proxy disclosure. The impact of other changes is not as clear at the moment, including a factor that is based on whether ISS’ review has found that the board “recently took action that materially reduces shareholder rights.” 

There are additional questions related to regulatory investigations, such as whether a regulator has initiated enforcement action against the company or any of its officers or directors in the past two years, and whether the company or any of its... Read More

October 23, 2014 | Ning Chiu

24 companies have adopted fee-shifting bylaws since May, according to Professor John Coffee in his testimony before the SEC Investor Advisory Committee. Fee-shifting bylaws impose a “loser pays” rule that transfers a company’s costs and expenses in shareholder litigation to the plaintiff shareholder if the plaintiff is unsuccessful.  

The concept gained momentum after the Delaware Supreme Court upheld such a bylaw adopted by a Delaware non-stock corporation as “facially valid.” As Professor Coffee notes, even in that case (ATP Tour, Inc. v. Deutscher Tennis Bund), the court indicated that a legally permissible bylaw that is adopted for an improper purpose will not be enforceable. An intent to deter litigation, however, would not necessarily be improper since fee-shifting provisions, by their nature, serve that purpose.  

Professor Coffee... Read More

October 21, 2014 | Ning Chiu

According to Proxy Voting Analytics by The Conference Board, hedge funds submitted 39 shareholder proposals, an increase from 24 last year, and accounted for slightly more than 5% of the total. The main recipients of proposals were health technology companies and those in the financial sector. Most topics related to business strategies, such as requests to break up a company, divest it of noncore assets, engage advisers to evaluate a business combination, issue dividends or return capital to shareholders.  

The number of actual campaigns focused on shareholder meetings at Russell 3000 companies declined, to 101 from 113 in the prior year, even while announcements of activism campaigns increased to 176 compared to 155 in 2013. For The Conference Board, this represents a growing number of activists seeking to publicize their views of a company’s business strategy or performance,... Read More

October 20, 2014 | Betty M. Huber

Anadarko Petroleum Corporation and EOG Resources, Inc. agreed with the New York State Attorney General earlier this month to provide additional disclosure regarding hydraulic fracturing risks in, and outside of, their SEC filings. These agreements, available here and here, effectively set forth disclosure checklists for the companies’ annual reports on Form 10-K for any material financial effects of current and future hydraulic fracturing regulation, litigation and impacts to drinking water, air and the environment resulting from hydraulic fracturing, including disclosure of each company’s management of these matters. In addition, Anadarko and EOG agreed to publicly disclose (outside of their SEC filings) detailed information regarding hydraulic fracturing risk mitigation techniques, chemical and... Read More

October 17, 2014 | Ning Chiu

For companies considering a review of the audit committee disclosure in proxy statements, the recent review by EY's Center for Board Matters provides several insights on some of the additional information that Fortune 100 companies included in 2014. We previously discussed some of the background related to the increased disclosure here

The increased disclosures focus on three areas of audit-related matters: the audit... Read More

October 15, 2014 | Ning Chiu

ISS has published its draft 2015 voting policies for public comment, which are due on October 29. The final release is expected around November 7 and any new updates will apply for meetings taking place on or after February 1, 2015. 

The biggest news may be what is not being covered for the U.S. market. After a fairly extensive policy survey, which we previously discussed here, the draft does not address some of the key issues asked in the survey regarding unilateral board adoption of bylaws, failures of risk oversight (such as major cybersecurity breaches), pay for performance and CEO pay limits. Instead, the draft policy covers two narrow, though critical, matters as described below. We note, however, that ISS has in the past... Read More

October 15, 2014 | Ning Chiu

Last Wednesday, an 8-K from Icahn Enterprises L.P. reported that its chairman, Carl Icahn, intends to use Tumblr, Facebook, Twitter and a particular website (www. to communicate about the company and “other issues.” The 8-K acknowledges that it is possible that the information he posts could be deemed to be material information, and therefore the company encourages investors, the media and other interested parties to review this information along with traditional investor relations communications channels such as its own website, SEC filings and press releases.  

The 8-K notes the SEC staff guidance issued in April on the appropriate use of social media in different circumstances, which we previously discussed ... Read More

October 14, 2014 | Betty M. Huber

The European Council adopted on September 29, 2014, a Directive requiring large public interest entities with more than 500 employees to disclose in their annual reports “relevant, useful information” necessary for an understanding of such companies’ environmental, social, employee, human rights, anti-corruption and bribery matters. These companies will also be required to disclose board diversity matters. The disclosure would focus on the companies’ governing policies, related risks and the management of such risks. The Directive will become law 20 days after it is published in the European Union Official Journal (which is expected in due course). Member states will have two years to transpose the Directive into national legislation. Companies will need to begin reporting as of their financial year 2017.  

What will become market practice?  As a... Read More

October 13, 2014 | Ning Chiu

SEC Chair White signaled that the proposed rules on CEO pay ratio would be adopted before the end of the year at a Senate Banking Committee hearing last month, or at least that was her “hope and expectation.” Senator Menéndez, Congressional author of the rule under the Dodd-Frank Act, responded that he wanted “more expectation and less hope” for meeting that timetable, indicating that the proposal in its current form reflects the “legislative intent.” 

Chair White had also cautioned that the SEC staff was still working through 128,000 comment letters received on the topic. Since the hearing, the Center on Executive Compensation submitted a set of follow-up comments, in part responding to letters from other organizations, namely the AFL-CIO, Calvert Investments and Trillium Asset Management, that... Read More

October 7, 2014 | Ning Chiu

Since some companies have made significant changes to the presentation of their proxy statements, Keith Higgins, Director of the SEC’s Division of Corporation Finance, is encouraging companies to make “similar strides” with their periodic reports, such as experimenting with layout, reducing duplication and eliminating stale information. The SEC staff is willing to discuss potential changes with companies, although they will not pre-clear specific disclosures.  

The possibility of companies taking their own initiative toward revising their periodic reports was one idea noted in his recent speech on the SEC’s disclosure effectiveness project. The Division’s goal is to ultimately recommend rule changes, principally on Regulation S-K and Regulation S-X, to the Commission. 

Perhaps in response to concern among some constituents that disclosure changes correlate to less disclosure, Higgins was careful to point out that the objective is not to reduce the volume of disclosure... Read More