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March 25, 2015 | Ning Chiu

The SEC’s proposed rules on pay ratio disclosure is again the focus of Congressional attention, as three members of the House, Congressional Progressive Caucus Co-Chairs Representatives Raúl Grijalva (D-AZ) and Keith Ellison (D-MN), joined by Financial Services Committee member Maxine Waters (D-CA), sent a letter to the SEC asking them to finalize those rules. 

The letter states that as Dodd-Frank was enacted more than four years ago, the SEC should finalize the rule since boards, investors and others “need this information to better understand and assess CEO compensation” when casting say-on-pay votes, and also “whether company employees are fairly compensated.”  The letter goes on to discuss ongoing concerns regarding the level of executive compensation. 

In December, 15 Senate Democrats organized by Sen. Robert Menendez (D-N.J.), the author of the... Read More

March 23, 2015 | Ning Chiu

As companies that received proxy access shareholder proposals for this proxy season are determining their the best course of action, which we recently discussed here, others are waiting and watching to see how the developments may impact future proposals.  One open question is whether the conflicting proposal provision under Rule 14a-8(i)(9), that Whole Foods originally relied on to put forth its own management proposal instead of the shareholder proponent’s version, could be available again as a basis to exclude proxy access shareholder proposals, and under what terms.

In a recent speech, Chair White discussed her direction to the staff to examine the application of the rule, noting that there has been “some not insignificant... Read More

March 20, 2015 | Ning Chiu

It has been nearly four years since April 17, 2011, the original deadline under Dodd-Frank for the SEC to adopt a resource extraction disclosure rule.  After the SEC adopted a rule 2012, the U.S. District Court for the District of Columbia vacated it the next year, which we previously discussed here.  The court remanded it to the SEC, and it has not been re-proposed since then.

Last fall, Oxfam America sued the SEC to get the agency to act, filing a summary judgment motion for an injunction in the U.S. District Court for the District of Massachusetts.  Oxfam contends that the SEC should be forced to propose a rule by August 2015 and issue a final rule by November 1.

In early March, the SEC asked the judge to reject Oxfam’s suit, calling it an “extraordinary” remedy given that the agency is already burdened with other Dodd-... Read More

March 17, 2015 | Ning Chiu

Two press releases announced that the New York City Comptroller has agreed to withdraw proxy access shareholder proposals at Staples and Abercrombie & Fitch.  Agreements have also been reached with Big Lots and Whiting Petroleum.   

Staples will include a management proposal to amend its bylaws to be voted on at its 2016 meeting.  The press release includes a quote from Staples’ CEO indicating that the agreement is a result of ongoing discussions with the company’s shareholders.  Comptroller Stringer stated that “[t]he momentum for proxy access is evident and we expect more companies to follow Staples’ lead... Read More

March 16, 2015 | Ning Chiu

A derivative suit filed in the United States District Court for the Western District of Washington alleges that Nordstrom violated securities laws in not fully disclosing aircraft-related costs in its proxy statements and that the board breached its fiduciary duties in approving the related party transactions without analyzing the actual expenses.

Nordstrom maintained an aviation department for its two company planes and eight personal planes owned by members of the Nordstrom family.  According to the complaint, for many years the proxy statements have disclosed that the company charged the Nordstrom family market prices for these related party services, and that the payments received from the Nordstrom family exceed the estimated cost to the company of providing these services.

Plaintiff and counsel sought and obtained the company’s books and records, and now alleges that the board “has never conducted any analysis of the costs of providing the services to the... Read More

March 13, 2015 | Ning Chiu

At its annual meeting on March 10, Apple’s shareholder proposal on proxy access received a little more than 39% of the votes cast in favor of the proposal. The proposal asked the board to provide access rights to shareholders owning 3% for at least 3 years, which is the same threshold others are using this season.

The company’s opposition statement argued that the proposal is an “unconventional and potentially risky version of proxy access, which not only lacks protection against abuse but may actually invite it.” They note that the proposal does not provide many of the safeguards that were in SEC Rule 14a-11 at the time of adoption, including nominees who must be independent and represent that they do not have a control intent and agree to retain shares through the meeting date. The company acknowledges that a proper proxy access proposal could be thoughtfully designed, and intends to continue discussions regarding the adoption of proxy access, including proper... Read More

March 12, 2015 | Ning Chiu

433 resolutions have been filed so far on a wide range of environmental and social issues, a record number, according to Proxy Preview 2015, a publication by As You Sow, the Sustainable Investments Institute and Proxy Impact.  The report provides a detailed examination of the wide range of topic areas covered in the proposals, an index of the companies that received them and brief discussions with some of the most prominent and prolific proponents about specific proposals.

39% of the topics focus on environmental and sustainability matters, predominately climate change, with political activity accounting for another 26%.  The primary filers are socially responsible investors, such as Calvert Investments, Walden Asset Management and Trillium Asset Management, as well as faith-based institutions.  Excluding proxy access proposals, pension funds and labor unions, including AFSCME, the UAW Retiree... Read More

March 10, 2015 | Ning Chiu

With universal proxy cards as the recent focus of an SEC roundtable, CII asked the SEC to prioritize facilitating universal proxies on the SEC’s regulatory agenda. CII had already made this the subject of a rulemaking petition to the SEC in January 2014, which we described here.

In its letter, CII argues that investors are currently disenfranchised in a proxy contest because they have no practical ability to “split their ticket” and vote for a combination of shareowner nominees and management nominees without attending the meeting. Although SEC roundtable participants disagreed over whether the use of universal proxies would favor company-nominated or dissident-nominee candidates, CII believes that this determination should be irrelevant, with the focus being on providing investors with the ability to exercise their right to... Read More

March 9, 2015 | Ning Chiu

As is the practice from time to time, the Corporation Law Section of the Delaware State Bar Association has proposed amendments to the Delaware General Corporation Law (the DGCL) for the Delaware Legislation to pass. 

The proposed legislation prohibits a company’s certificate of incorporation and bylaws from containing a fee-shifting provision, or in other words, a provision “that would impose liability on a stockholder for the attorneys’ fees or expenses of the corporation or any other party in connection with an intracorporate claim.” 30 companies have adopted these provisions and 6 companies have gone public with them. 

The synopsis indicates that the DGCL amendment is not intended to disturb the ruling in ATP Tours related to nonstick corporations, or prevent the application of these types of provisions pursuant to a stockholders’ agreement. We have previously discussed fee-shifting provisions ... Read More

March 4, 2015 | Ning Chiu

The CEO of Vanguard has issued letters regarding shareholder engagement to the independent chair or lead director of approximately 500 of Vanguard’s largest holdings. The letter is published on Vanguard’s website, and discusses the importance of effective engagement for both shareholders and boards, with the “best boards” working to seek feedback and perspectives independent of management, and engagement functioning as a dialogue with both parties listening to and informing each other. 

The letter emphasizes that there is no assumed optimal structure for engagement and no one-size-fits-all engagement program, but rather, boards should create a process that meets their needs and the needs of their shareholders. However, it does advocate that “having an established channel or process for shareholder interaction works better than handling engagement requests in an ad hoc or... Read More

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