Current Posts


November 19, 2014 | Ning Chiu

The D.C. Circuit Court of Appeals has granted the petitions for panel rehearing by the SEC and Amnesty International on the conflict minerals case, and have ordered the parties to file supplemental briefs to address the following specific questions:

  • What effect, if any, does this court's ruling in the American Meat Institute case have on the First Amendment issue in this case regarding the conflict minerals disclosure requirement;
  • What is the meaning of “purely factual and uncontroversial information” as used in the Zauderer case and American Meat Institute case; and
  • Is the determination of what is “uncontroversial information” a question of fact?

As we previously discussed here, Amnesty International argued in a supplemental briefing filed in late August asking for rehearing of the... Read More

November 18, 2014 | Ning Chiu

Directors can provide more insight on how they govern their companies, and investors can give more information on how they cast their votes, so that there is less mystery from both sides, stated Vanguard Chairman and CEO F. William McNabb in a recent speech at the University of Delaware's Weinberg Center for Corporate Governance.

According to McNabb, Vanguard is the world’s largest mutual fund and owns about 5% of every U.S. public company, and the fact that they are “permanent shareholders” as an index fund is exactly the reason that they care about good governance.

Engagement was the primary focus of his discussion, and the impetus behind the more than 900 letters Vanguard sent to U.S. companies last year, with 358 of those requesting that companies make specific changes, which we previously discussed ... Read More

November 13, 2014 | Ning Chiu

The final day for companies to verify the data that will form the basis of their ISS QuickScore 3.0 is tomorrow, November 14. The program closes after that time until the launch of QuickScore 3.0 on November 24. While data verification can still take place after that date, by that point companies may already be assigned a governance score based on possibly faulty information. 

QuickScore is published in a company’s proxy voting recommendations report, and a new format will show the history of changes to the score over time for the company (it appears more space in the report will be devoted to the score). The rating is also made publicly available through Yahoo! Finance and Bloomberg on a regular basis. While the utility of QuickScore is debated, we understand that some institutional investors may question companies when there is a red flag notation next to a particular topic. 

It is also useful to examine the data to determine how ISS classifies a company’s directors... Read More

November 11, 2014 | Ning Chiu

A new form of shareholder proposal focused on environmental and social issues does not ask the company to, for example, report on reducing emissions. Instead, the proposal is focused on how institutional investors vote on those kinds of proposals. 

The proposal from Walden Asset Management to Bank of New York (BONY) asks the bank’s board to review BONY’s proxy voting policies, given BONY’s corporate responsibility and environmental positions. The proposal notes that BONY publishes an annual Corporate Social Responsibility (CSR) Report describing a broad spectrum of policies, including reporting on its own greenhouse gas emissions and its role in addressing climate change. BONY is also a signatory to the Principles for Responsible Investing (PRI). 

The proposal then criticizes the proxy voting record of the bank. According to the proposal, BONY “uniformly votes against most if not all shareholder resolutions on social, environmental and climate change issues.” The... Read More

November 7, 2014 | Ning Chiu
In preparation for the 2015 proxy season, companies should be aware of the updates to the policies that govern how the two influential proxy advisory firms, ISS and Glass Lewis, will be advising shareholders on significant ballot items, including governance, compensation and environmental and social matters. Davis Polk’s memo on the these changes is here.
November 7, 2014 | Ning Chiu

In what is being called the “Boardroom Accountability Project,” the New York City Comptroller, on behalf of the New York City Pension Funds, issued a press release yesterday announcing that they had submitted proxy access shareholder proposals to 75 companies. The New York Times reported on this initiative on the same day. 

According to the press release, the 75 companies were targeted based on three issues: climate change, board diversity and CEO pay. Resolutions were filed at (a) 33 carbon-intensive coal, oil and gas, and utility companies; (b) 24 companies due to concerns regarding board diversity; and (c) 25 companies that received significant... Read More

November 6, 2014 | Ning Chiu

Both ISS and Glass Lewis have released their policy updates for the 2015 proxy season, with new guidelines for board adoption of bylaws, IPO companies, independent chair shareholder proposals, and equity plans seeking shareholder approval, among others.  

We will be providing a client memo with more information shortly.

November 5, 2014 | Ning Chiu

study by the CFA Institute has been quoted in shareholder proposals seeking proxy access for a particularly notable statement: that proxy access has the potential to raise U.S. market capitalization by between $3.5 billion and $140.3 billion. 

The report challenges the D.C. Circuit Court’s holding that the SEC should have provided more detailed cost-benefit analysis when the Commission adopted the rule, since there were limited examples globally, and limited availability of corresponding market impact data, at that time. Since then, however, several event studies have been conducted. The report analyzes those studies to determine whether the availability of proxy access would be beneficial or harmful to market performance, stock performance, and board performance and whether the potential use of proxy access by special interest groups would reduce... Read More

November 4, 2014 | Ning Chiu

A database of compliance policies for Fortune 500 companies, launched by the University of Houston Law Center, should help companies that want to benchmark their protocols.

The free database contains the 2012 and 2013 policies at the largest companies. It covers a wide range of over 40 topics, including codes of conduct, whistleblower reporting, conflicts of interest, related person transactions, political activities, insider trading, export controls, intellectual property, money laundering, antitrust, social media, and numerous FCPA-related policies. It can be searched by company name and three types of policies, three companies across three types of policies or by SIC code.

According to its press announcement, social media policies have exploded since 2011, showing 150% growth with 220 companies reporting them in 2013, compared to 88 in 2011. During that same period, the number of whistleblower... Read More

October 31, 2014 | Ning Chiu

In a novel request, Whole Foods has submitted a no-action letter to the SEC seeking to exclude a proxy access shareholder proposal under Rule 14a-8(i)(9), because the company’s board has decided to seek shareholder approval to amend its bylaws for its own proposal that the company argues conflicts with the shareholder proposal. 

The shareholder proposal from Jim McRitchie asks Whole Foods to allow any shareholder or group of shareholders that collectively own at least 3% of the company’s shares continuously for three years to nominate candidates onto the company’s ballot, for up to 20% of the board. The company’s proposal would permit any shareholder (but not a group of shareholders) owning 9% or more of the company’s stock for five years to make proxy access nominations, limited to the greater of (a) one director or (b) 10% of the board. 

... Read More

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