Current Posts


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

April 15, 2015 | Ning Chiu

As has been reported, the U.S. Court of Appeals for the Third Circuit has decided that Wal-Mart does not have to include in its 2015 proxy materials a shareholder proposal requesting that the Compensation, Nominating and Governance Committee charter be amended to add oversight of implementation of policies that would evaluate whether the company should sell certain types of guns that the proponent argues endangers public safety, has the substantial potential to impair the company's reputation or would be considered offensive to the values that are integral to the company’s brand.

The court order was made in time for Wal-Mart to distribute its proxy materials.  A full opinion will be issued later.

We previously discussed the appeals ... Read More

April 13, 2015 | Ning Chiu

In a letter to SEC Chair White, the U.S. Chamber of Commerce, through the Center for Capital Markets Competitiveness (CCMC), has expressed “significant concern” regarding the enforcement action that the SEC took against KBR regarding whistleblowers and the company’s confidentiality agreements.  Our memo on the KBR action is here.

CCMC indicates that they believe that the KBR enforcement action is the “result... Read More

April 9, 2015 | Ning Chiu

The SEC staff has determined that a shareholder proposal can be excluded under Rule 14a-8(i)(3) because the supporting statement is false and misleading, a position that they have generally been reluctant to take in numerous other requests.

Every season, without exception, companies write no-action letters to the staff arguing that the supporting statement in shareholder proposals contain objectively incorrect information, either directly or by implication. These tend to be proposals seeking an independent chair of the board, and the supporting statement make claims that essentially question the independence and qualifications of not only the current chair, but also other directors. Sometimes the information is blatantly wrong because the data is outdated, or perhaps is relevant to another company. We have described prior examples ... Read More

April 6, 2015 | Ning Chiu

A Towers Watson survey found that only about 27% of Fortune 500 companies provided some type of pay-for-performance discussion in 2014. Only 4% of companies added new disclosure, while 5% eliminated it after including it in the prior year.

According to the survey, 29% of those that disclosed pay-for-performance at all offered an alternate pay calculation, such as realizable or realized pay. The vast majority used a pay-for-performance alignment approach that tied the achievement of performance metrics, typically total shareholder return, with the level of pay.  Three to five years was the most common time horizon. Last fall, Towers Watson found that while most companies conduct a pay-for-performance analysis, many do not disclose it. It appears companies are waiting for... Read More

April 2, 2015 | Ning Chiu

The SEC, which has recently been investigating workplace agreements out of concern that they may impede whistleblowing activity protected by the Dodd-Frank Act, announced yesterday its first enforcement action against a company related to the use of restrictive language in confidentiality agreements. Companies should be mindful of this type of enforcement action and take the necessary steps to review and revise their own various agreements addressing confidentiality.

The Davis Polk memo on this action is here.

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