Current Posts

October 8, 2015 | Ning Chiu

CII indicated that shareholders plan to “get tough” on boards adopting what it calls “troublesome access provisions.” See here for the headline. CII’s data shows that one-third of companies that have adopted proxy access require ownership thresholds of 5% in order to nominate candidates, and this could turn into “votes against directors at these firms in the 2016 proxy season.”

The introduction discusses ISS’s policy survey results, which we previously discussed here. As expected, ISS could issue negative recommendations against boards if a shareholder proposal to provide proxy access receives majority support and a board adopts bylaws with restrictions not contained in the proposal. For example, a board that mandates ownership thresholds higher than 3%, in response to a proxy access proposal... Read More

October 6, 2015 | Ning Chiu

The SEC plans to hold a vote on adopting a final resource extraction rule on or before June 27, 2016, which is within 270 days of the filing of a recent notice with the U.S. District Court in Massachusetts. The notice of proposed expedited rulemaking schedule responds to the court's order that the SEC must promulgate rulemaking pursuant to a litigation initiated by Oxfam, which we previously discussed here. In order to meet the 270-day schedule, the Commission anticipates voting on a proposed rule before the end of the year and permitting a 45-day comment period thereafter.  

The notice included several caveats explaining why the SEC could miss the timing that it has sets for itself. To complete and issue a proposed rule, allow for public comments and analyze those comments for a final draft within 270 days is viewed as highly demanding,... Read More

October 5, 2015 | Ning Chiu

Just before the deadline on Friday, both the SEC and Amnesty International filed petitions for a review of the most recent court decision on the SEC's conflict minerals rule. The petitions ask the U.S. Court of Appeals for the District of Columbia to reconsider the decision in August, when a three-judge panel upheld, in a 2-1 ruling, the District Court's finding that the requirement to report that products have "not been found to be DRC conflict free" violates the First Amendment.

We previously described the August court decision and its impact on companies in a memorandum ... Read More

September 28, 2015 | Ning Chiu

ISS has released the results of its survey, which will govern changes to its policies beginning with annual meetings after February 1, 2016. A draft of the updated policy will be issued on October 26, and final policies in November. 412 responses to the survey were received, with 114 identifying as institutional investors. Below is a summary of certain of the survey questions and the responses noted by ISS. 

Proxy access.  The types of “material restrictions” in proxy access provisions adopted by companies where a proxy access shareholder proposal passed in 2015, that would be considered problematic enough to recommend against directors. 

Survey response.  Investors indicated the following provisions would be problematic: 

  • Ownership threshold of more than 3% (72% of investors) or more than 5% (90% of investors)... Read More
September 28, 2015 | Ning Chiu

As has been widely mentioned by SEC Commissioners and Staff, the Staff has been undertaking a broad-based review of disclosure requirements, known as the Disclosure Effectiveness Initiative. The Staff’s initial focus is on business and financial information required in current and periodic reports. On Friday, the SEC published its first request for public comment regarding the financial disclosure requirements in Regulation S-X for certain entities other than a registrant.  

Four rules being considered.  Regulation S-X contains disclosure requirements that dictate the form and content of financial statements to be included in filings with the Commission. The discrete subset of the Regulation S-X disclosure requirements being evaluated for possible amendment include: 

  • Rule 3-05, Financial Statements of Businesses Acquired or to be Acquired (requires issuers to... Read More
September 24, 2015 | Ning Chiu

Those following the latest developments on proxy access may be interested in Jim McRitchie’s recent blog post, where he posted the language of a new version of proxy access that he is submitting to companies, using CII’s recent best practices that we previously discussed here.

The three key differences between proposals that companies faced during the 2015 proxy season from different proponents include reference to: (a) the nomination by a shareholder or “an unrestricted number of shareholders forming a group,” (b) the request that the number of board seats available is the greater of two or 25% of the board and (c) the 3% ownership requirement to include “recallable loaned stock.” There is also a sentence that “no... Read More

September 17, 2015 | Ning Chiu

The importance of the retail shareholder vote came out in force this past season, as 85% of retail shares were cast against proxy access shareholder proposals at over 80 companies. At the same time, 61% of the shares held by institutional investors supported proxy access.

ProxyPulse, a report from Broadridge and PwC’s Center for Board Governance, examined 4,280 companies that held meetings between January 1, 2015 and June 30, 2015. Over the last four years, retail investors have held about 32% of all shares. Unfortunately for companies, retail shareholders voted only 28% of the shares they owned, leaving over 97 billion shares not voted.

This gives institutional investors an undue influence even relative to the size of their holdings, since institutions voted 91% of the shares they own. While institutional investors held 68% of outstanding shares of all public... Read More

September 15, 2015 | Ning Chiu

The SEC’s recent concept release on possible revisions to audit committee disclosure has ignited debate about whether additional information, and the type of information, that would be useful to investors regarding the audit committees’ oversight of external auditors. Our memo on the concept release is here, and our comment letter to the SEC is here.

Regardless of whether the SEC takes formal action, the recent review by EY's Center for Board Matters shows a continuing increase in audit committee disclosures since EY started analyzing these findings in 2012.  After... Read More

September 9, 2015 | Ning Chiu

Oxfam America scored a recent victory when the U.S. District Court in the District of Massachusetts decided that the SEC must file with the Court an expedited schedule for promulgating a final rule on resource extraction disclosure within 30 days of the decision.  The Court intends to monitor the schedule and ensure compliance.  We previously discussed Oxfam's complaint here and our memo on the original resource extraction rules is here.

Section 1504 of Dodd-Frank requires publicly traded oil and gas companies to annually disclose payments made to foreign governments or the federal... Read More

September 8, 2015 | Ning Chiu

NYSE listed companies are currently required to notify the Exchange before disseminating material news so that it can halt trading if needed.  Now the NYSE has proposed, in a rule filing with the SEC, to expand the pre-market hours during which companies are required to notify the Exchange, the circumstances under which it can stop trading and also provide guidance related to the release of material news after the close of trading. 

Currently, Section 202.06 requires listed companies to notify the Exchange at least ten minutes in advance of releasing material news shortly before trading opens or during trading hours (9:30 a.m. to 4:00 p.m. Eastern Time).  The rule proposal would require companies to comply with this policy between 7:00 a.m. and 4:00 p.m. instead, since the Exchange has determined that most companies release news between 7:00 a.m. and 9:30 a.m., and that such news can cause volatility in pre-market trading on other market centers as well as on the NYSE once... Read More