Current Posts

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

June 15, 2015 | Ning Chiu

Last week, the Delaware House of Representatives unanimously passed a bill that amends the Delaware General Corporation law to prohibit stock corporations from inserting “fee-shifting” provisions in their governance documents.  We previously discussed the bill here.  The Delaware Senate passed the same bill in May and it is expected to be signed by the governor.  The effective date is August 1, 2015.

The bill prohibits public companies from having provisions in either their charters or bylaws that would “impose liability for the attorneys’ fees or expenses of the corporation or any other party in connection with an internal corporate claim,” which would generally include M&A litigation.

In addition, Delaware companies can expressly adopt forum-selection bylaws, though Delaware must be either the... Read More

June 11, 2015 | Ning Chiu

Of the 63 companies that opposed proxy access shareholder proposals and have announced voting results, 36 proposals received more support than in opposition and 27 proposals did not obtain majority votes.  

Not all companies opposed the proposals. A few boards supported it and one company took a neutral position, which resulted in higher votes than the overall average vote tallies. On the other hand, companies showing very low votes supporting the proposal generally had significant insider holdings of company stock. 

Two companies argued against the shareholder proposals by adopting their own version of proxy access, usually by providing access rights requiring higher ownership threshold than those in the shareholder proposals, with mixed voting results. About seven companies provided alternative management and shareholder proposals on the same ballot with different ownership thresholds. Those results were also mixed. 

Companies that want to be prepared for... Read More

June 9, 2015 | Ning Chiu

Twenty-one comment letters have been submitted about the SEC’s proposed rules on disclosure of hedging by employees, officers and directors, including ours linked here.  

The Council of Institutional Investors (CII) states that 54% of Russell 3000 companies and 84% of the S&P 500 companies prohibit employees from hedging shares. CII supports the proposed requirement that the disclosure should cover all employees, not just officers, in order to obtain information about whether employees are “allowed to effectively avoid restrictions on long-term compensation through hedging.” While acknowledging that the disclosure about employees’ equity holdings below the executive level may not be as relevant for investors, CII believes that it may still have implications for a company's “bottom line.” The Florida State Board of... Read More

June 5, 2015 | Ning Chiu

Continuing to add to the speculation that the pay ratio disclosure rules will be finalized by fall as we recently discussed here, the SEC issued a press release yesterday that the staff has made available additional analysis related to the proposed rules. 

The analysis by the Division of Economic and Risk Analysis (DERA), posted on the SEC website, considers the potential effects of excluding different percentages of employees from the pay ratio calculation. According to the press release, the staff believes that the analysis will be informative for evaluating the potential effects on the accuracy of the pay ratio calculation of excluding different percentages of certain categories... Read More

June 4, 2015 | Ning Chiu

According to the Regulatory Flexibility Agenda recently published, we can expect to see a host of governance rulemaking from the SEC on or before April 2016. However, the Agenda has generally proved to be unreliable in predicting the timing of SEC actions, and even rulemaking topics. Many may recall the outcry when the SEC once placed proposed rules requiring political contributions disclosure on the agenda and later eliminated it.   

As the SEC noted several years ago, the Regulatory Flexibility Act (RFA) requires each federal agency in April and October of each year to publish in the Federal Register an agenda identifying rules that the agency expects to consider in the next 12 months that are likely to have a significant economic impact on a substantial number of small entities. The... Read More