Current Posts

July 7, 2015 | Ning Chiu

Jim McRitchie at provides an interesting discussion on whether he should withdraw his shareholder proposal at Whole Foods, since the company has now adopted proxy access.   

The company is permitting shareholders owning at least 3% for three years to make proxy access nominations for up to 20% of the board, rather than 25% as sought in his proposal. At the moment, both alternatives would allow for two directors when rounded down to the nearest whole number. He also questions whether the company’s definition of ownership that permits funds under common management and investment control to count as one shareholder is sufficient and believes that the provision that prohibits any proxy access nominee who did not receive at least 25% of the votes in favor of his or her election from being a proxy access nominee again for two years to be a... Read More

July 6, 2015 | Ron Aizen

Davis Polk has submitted a comment letter on the SEC proposal for companies to disclose pay versus performance. We previously summarized the rule proposal here

Our comment letter focuses on alternative performance measures to be disclosed, the requirement to use company and peer group TSR as the performance measures, the executive officers covered by the disclosure, vesting date requirements and XBRL formatting.  

July 2, 2015 | Ning Chiu

The SEC is seeking public comment through a concept release (Possible Revisions to Audit Committee Disclosures) that it issued yesterday on whether the disclosure of the role of the audit committee should be expanded.  

The SEC believes that current disclosures do not describe how the audit committee executes its responsibilities, particularly related to the oversight of the auditors. The Commission is interested in determining whether additional information would help investors make voting decisions about auditor ratification and election of audit committee members. The concept release is seeking comments on a wide variety of topics, as noted below. 

Audit committee's oversight of the auditor

1.  Additional information regarding communications between the audit committee and the auditor, which could include all communications required under the PCAOB rules, the nature of the committee’s communication with the auditor related to the auditor’s... Read More

July 2, 2015 | Ning Chiu

At an open meeting yesterday, the Commission voted to propose broad rules directing the national exchanges and associations to establish listing standards requiring companies to develop and implement clawback policies.  We will issue a client memo on the proposal shortly.  The key provisions are complex and are set forth below, based on the fact sheet released by the SEC:

Companies covered:  all listed companies, including foreign private issuers, emerging growth companies and controlled companies

Applicable executives current and former executive officers modeled on Section 16 of the Exchange Act

Incentive-based compensation subject to recovery any incentive-based compensation that is granted, earned or vested, based wholly or in part on the attainment of any “financial... Read More

July 1, 2015 | Ning Chiu

The PCAOB is asking for public comment on whether to require audit firms to file a new form to make public the name of the engagement partner and information about other participants in the audit. This is viewed as a “middle ground approach” to balance investors’ requests for the information with audit firms’ concerns about increased liability risks, and replaces the original idea broached in December 2013 to require that the engagement partners’ names be included in the auditors' reports filed on Form 10-K.  Comments are due by the end of August. 

PCAOB Form AP (Auditor Reporting of Certain Audit Participants) would be publicly available on the PCAOB's website in a searchable format, by engagement partner and by company. Audit firms would be responsible for the disclosure. Auditors could also voluntarily provide the same disclosures in their 10-K reports. As proposed, Form AP... Read More

June 30, 2015 | Ning Chiu

We previously discussed two elements of Chair White's keynote speech on proxy matters at the National Conference of the Society of Corporate Secretaries and Governance Professionals here. In its reporting, the Wall Street Journal has characterized her talk as an admonition to companies to “act like grown-ups,” and instead of seeking regulatory solutions, to “figure it out yourselves.” 

Shareholder proposals was another topic in the speech. She believes that shareholders were not confused by being offered both a management proposal and a shareholder proposal on proxy access at seven companies this season, which occurred after the SEC suspended the availability of Rule 14a-8(i)(9). The... Read More

June 29, 2015 | Ning Chiu

It comes as no surprise that Chair White addressed proxy matters in her keynote remarks at the Society of Corporate Secretaries and Governance Professionals' National Conference, which was attended by more than 750 in Chicago. 

Her talk focused on certain company communications with shareholders that may put the two “at odds,” where the SEC staff or Commission has been asked to clarify rules, mediate disputes or propose rulemaking solutions. She started with the fairly controversial and often misunderstood topic of interim vote tallies, which we previously discussed here

Companies currently receive preliminary vote results from the agent for banks and brokers who hold shares in... Read More

June 26, 2015 | Ning Chiu

The SEC has announced that it will hold an open meeting on Wednesday, July 1, 2015, at 10:00 a.m. to consider whether to propose rules under Section 954 of the Dodd-Frank Act.

Section 954 is titled “Recovery of Erroneously Awarded Compensation.” It would add Section 10D of the Exchange Act and require the listing exchanges to prohibit the listing of any security of an issuer that is not in compliance. Each issuer would need to develop, disclose and implement a clawback policy as follows:

  • In the event that the issuer is required to prepare an accounting restatement due to the material noncompliance of the issuer with any financial reporting requirement under the securities laws,
  • The issuer will recover from any current or former executive officer who received incentive-based compensation (including stock options awarded as compensation),
  • During the 3-year... Read More
June 24, 2015 | Ning Chiu

According to a filing by Nabors, four directors received less than a majority of the shares voted (or withheld) and tendered their resignations, in accordance with the company’s majority vote policy. After considering the structure and needs of the board and the company and the contributions of the directors, especially in the strategic review process that included an important merger transaction recently, the board decided to reject the resignations.  

The company noted that feedback from shareholders revealed three reasons underlying the withhold votes, which were considered in the board decision. First, the company stated that “several institutional shareholders’ voting policies call for their shares to be automatically voted solely in accordance with the recommendations of certain proxy advisory services,” which had recommended against the election of these directors. The board estimates that one third of institutional investors’ shareholdings are “automatically voted”... Read More

June 17, 2015 | Ning Chiu

The question of whether companies should be required to disclose how long they have retained the same auditors may be part of the concept release on audit committees that the SEC plans to issue soon, according to a Financial Times article that quoted a member of the SEC's investor advisory committee. 

The concept release was one of the topics addressed in a recent speech by James Schnurr, the SEC Chief Accountant in the Office of the Chief Accountant. He indicated that the SEC staff has been actively developing recommendations to the Commission on a concept release that is intended to seek feedback on how investors currently use the publicly disclosed information about audit committees, along with the usefulness of... Read More