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August 14, 2014 | Ning Chiu

ISS has launched a new Equity Plan Data Verification portal to better reflect the most up-to-date data for investors voting on equity plans. While this process is optional for issuers and does not affect whether they receive ISS recommendations, given that issuers frequently criticize the proxy advisory firms for having errors in the voting reports, this portal represents a unique opportunity to ensure those errors are minimized, especially in the complex area of equity plan proposals. Favorable proxy advisory firm recommendations can be crucial to the passage of those plans. 

This portal will be available to all U.S. companies with an equity plan proposal on the ballot after September 8, 2014. It does not apply unless a company has such a proposal on the upcoming meeting agenda. 

Companies must take action to have the ability to confirm the accuracy of the information before ISS... Read More

August 13, 2014 | Ning Chiu

The Council of Institutional Investors (CII) sent a letter to Keith Higgins, the director of the SEC Division of Corporation Finance, related to the Dodd-Frank requirement for the SEC to promulgate rules for disclosure of the link between executive pay and company performance. Companies must provide a “clear description” of the relationship between executive compensation “actually paid” and the “financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions.” These highlighted areas represent several challenges for interpretation in formulating rules. 

CII’s letter indicates that a prior meeting took place with the SEC staff to discuss Dodd-Frank rulemaking and urges the SEC not to change the existing Summary Compensation Table in... Read More

August 12, 2014 | Ning Chiu

The latest SEC award to a whistleblower was notable for having been initially denied because the SEC decided that the information was not “voluntarily” provided. Under the SEC rules, a submission is not being made voluntarily if a request, inquiry or demand related to the subject matter is directed to the whistleblower by the SEC, PCAOB or any self-regulatory organization (SRO) or in connection with an investigation by federal or state authorities. 

In this situation, the SEC’s preliminary determination found that although the claimant provided original information that led to a successful enforcement action, that information was not “voluntarily” provided as required because of a prior inquiry into the matter conducted by an SRO. The SEC ultimately waived this requirement, however, after reviewing the response that the claimant filed, including a detailed description of the claimant’s efforts to... Read More

August 6, 2014 | Ning Chiu

The Citizens for Responsibility and Ethics (CREW) has filed a comment in response to the Chamber of Commerce’s petition asking the Commission to increase the voting approval threshold for resubmitting a Rule 14a-8 shareholder proposal. We previously discussed both the Chamber’s rulemaking request and CREW’s separate petition related to disclosure of corporate political spending here.  

In its comment on the Chamber’s request to the SEC, CREW is particularly interested in proposals asking companies to provide public information on corporate political spending beyond those required by election laws. CREW argues that the Commission should reject the Chamber’s request because it would obstruct those resolutions, since... Read More

August 4, 2014 | Ning Chiu, Joseph A. Hall and Sarah Ashfaq

In a decision that may predict the outcome of the ongoing SEC conflict minerals court case, a divided U.S. Court of Appeals for the D.C. Circuit, sitting en banc, ruled that a regulation mandating disclosure of country-of-origin information about meat products was permissible.  

In implementing a congressional statute, the Secretary of Agriculture initially promulgated rules in 2009 that sought labeling of meat products with a phrase starting with “Product of,” followed by one or more countries. If the meat product was “commingled,” the label could name all of the countries of origin. However, after the World Trade Organization found the rule to be imprecise, the Secretary responded with a rule that required the revelation of the location of each production step and eliminated the flexibility allowed in labeling commingled products.  Trade groups subsequently sued, alleging a violation of the First Amendment.  

In its decision, the court considered the... Read More

July 31, 2014 | Ning Chiu

As a result of the controversy regarding the availability of interim vote tallies during the 2013 proxy season, which we've previously discussed here, numerous companies received shareholder proposals earlier this year asking that those tallies not be available to management and the board. The resolution contained a list of the types of proposals this would apply to, as well as a list of exceptions.

Interim vote tallies generally refer to Broadridge's report to the company of the number of votes cast in favor, against or abstentions for the proposals on the proxy card, beginning 15 days before the meeting. The debate concerned perceived advantages of management knowing how shareholders were voting, while a shareholder who may solicit in opposition to the company would not have access to that information.

Companies made numerous arguments to the SEC staff for excluding... Read More

July 28, 2014 | Ning Chiu

A vast majority of companies have adopted similar practices and protocols for their earnings calls, but there were some notable differences and perhaps a few surprises, from the results of a survey conducted by the National Investor Relations Institute (NIRI). The full report is available only to members but the highlights are listed here

Earnings calls are widely embraced as useful communication tools, evidenced by the fact that 97% hold them quarterly. 94% are conducted by telephone and 89% through webcasting. Companies also share the same methods for announcing the calls, with 93% issuing press releases and 83% posting to the company website. 75% of companies sponsor calls on the same day as earnings are released, and the calls lasted 46 to 60 minutes for 68% of companies. Larger companies tend to have... Read More

July 23, 2014 | Ning Chiu

Approximately 60% of S&P 500 companies provide shareholders with the right to call special meetings. Coupled with the move away from classified boards and toward annual director elections, which generally permit shareholders to remove directors for cause, there has been increasing concern that companies are dismantling their defensive mechanism and leaving themselves vulnerable to activist attacks. 

Time Warner announced on Monday in a Form 8-K that its board has amended the company’s bylaws, effective immediately, to delete provisions regarding shareholders’ ability to call a special meeting. No reason was given in the company’s filing, although reports in the press indicate that the company recently rejected an unsolicited takeover bid. The press also reports that the move buys the company several additional months, before shareholders would be asked to consider any offers. Time Warner’s 8-K stated that its board intends to reinstate the provisions at the company’s... Read More

July 22, 2014 | Ning Chiu

As politicians spar over whether the seminal Dodd-Frank Act has achieved its objectives on its fourth anniversary that passed on Monday, and attempts continue to repeal many of its provisions, Davis Polk reviewed the status of its implementation in our Dodd-Frank Progress Report.

As of July 18, 2014, 280 Dodd-Frank rulemaking requirement deadlines have passed. Slightly more than half, 153, or 54.6%, have been met with finalized rules. Many of the rulemaking requirements do not contain deadlines, as the Act includes a total of 398 requirements. Overall, 208, or 52.3%, rules have been finalized and adopted, while 94, or 23.6%, have only been proposed, including rulemaking on disclosure of the ratio of CEO pay to average employee compensation. Roughly the same number, or 95 rules, have not yet been proposed. 

The SEC is only one of several regulators... Read More

July 18, 2014 | Ning Chiu

Yesterday, ISS announced the issuance of its 2015 proxy voting policy survey. Investors, issuers and their advisors are encouraged to respond to the survey by August 29. In prior years, feedback to the survey has often informed changes to the voting policy for the upcoming proxy season. Policy updates will be issued in November.

A summary of the questions is set forth below.  Not surprisingly, the survey incorporates the latest governance hot topics, much of which has been discussed in this blog and other publications.  If new policies on these matters are adopted by ISS, it could strongly impact or otherwise restrict the direction of these trends, including a board's right to adopt controversial bylaw amendments, gender diversity on boards, when to hold boards responsible for risk oversight failures, additional proxy disclosure about auditors and... Read More

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