Tag: Proxy access


Public Pension Funds’ Shareholder-Proposal Activism

James R. Copland is the director of the Manhattan Institute’s Center for Legal Policy. The following post is based on a report from the Proxy Monitor project; the complete publication, including footnotes, is available here.

America’s largest publicly traded companies are facing more shareholder proposals in 2015, driven principally by a “proxy access” campaign led by New York City Comptroller Scott Stringer, who oversees the city’s $160 billion pension funds for public employees. Elected in 2013, Stringer has launched a Boardroom Accountability Project seeking, in part, proxy access, which grants shareholders with a certain percentage of a company’s outstanding shares the right to list a certain number of candidates for the company’s board of directors on the company’s proxy statement. As noted in an earlier finding, Comptroller Stringer’s proxy-access campaign has won substantial shareholder support at most companies where his proposal was introduced.

Although it is too soon to assess the impact of Comptroller Stringer’s push for proxy access, we can evaluate shareholder-proposal activism by state and municipal public employee pension funds in previous years. From 2006 to the present, state and municipal pension funds have sponsored 300 shareholder proposals at Fortune 250 companies. More than two-thirds of these were introduced by the pension funds for the public employees of New York City and State.

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Building Meaningful Communication and Engagement with Shareholders

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. The following post is based on Chair White’s remarks at the national conference of the Society of Corporate Secretaries and Governance Professionals, available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

I am honored to be with you here in Chicago at the Society’s 69th National Conference. Over the years, the Society has consistently provided thoughtful comments to the Division of Corporation Finance and the Commission on a wide variety of issues and proposed rules. You understand the complexities that can affect multiple parties and recognize the importance of the interests of shareholders. All of you play a critical role in corporate governance. It is the decisions you make, the practical solutions you advance and the views you share with your boards that can, in large part, dictate the relationship between shareholders and companies.

Because of your central roles in your companies, many of the Commission’s initiatives are of interest to you: our disclosure effectiveness review; the audit committee disclosures concept release the staff is working on; and any number of our rulemakings. My hope is that you will see near-term activity in these and other areas, including rules mandated by the Dodd-Frank Act, such as the clawbacks rule as required by Section 954, the pay ratio rule under Section 953(b) and the joint rulemaking on incentive compensation as required by Section 956. So stay tuned for those developments.

But today my focus is on a selection of proxy-related issues, another area of particular interest to you. And my overall theme complements the theme of your conference, “Connect, Communicate, Collaborate.” Be proactive in building meaningful communication and engagement with your shareholders.

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Proxy Monitor 2015 Mid-Season Report

James R. Copland is the director of the Manhattan Institute’s Center for Legal Policy. The following post is based on a memorandum from the Proxy Monitor project, available here.

As we near the close of corporate America’s “proxy season”—the period between mid-April and mid-June when most large, publicly traded corporations in the United States hold annual meetings to vote on company business, including resolutions introduced by shareholders—a clear picture has begun to emerge. By May 27, 2015, 211 of the nation’s 250 largest companies by revenues, as listed by Fortune magazine and in the Manhattan Institute’s ProxyMonitor.org database, had filed proxy documents with the Securities and Exchange Commission. This post bases its analysis on those companies’ filings, as well as voting results for 186 of those companies that had held their annual meetings by May 22.

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US Proxy Season Halftime Report—Governance Trends

Frank B. Glassner is the Chief Executive Officer of Veritas Executive Compensation Consultants, LLC (Veritas). This post is based on a Veritas publication.

As we hit the halfway point for the 2015 U.S. proxy season, a number of trends related to governance practices are carrying through from recent years, an analysis of ISS Voting Analytics data shows.

Director Elections

Shareholders have largely endorsed directors standing for election in 2015, with average support levels of upwards of 96 percent, similar to last year. However, as is the case every year, a number of directors have not fared well at the ballot box. Fourteen directors have failed to receive majority support so far this season, compared with 12 board members at this time last year.

The lion’s share (12 of the 14) of year-to-date 2015 failed director votes have been at firms outside the Russell 3000 index. On a sector basis, most of the failed director elections have occurred at firms in the Technology Media and Telecom sector (with seven failed votes) and financial services firms (3 failed votes). Companies in the financial services sector topped last year’s list with the most failed director votes.

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Shareholder Involvement in the Director Nomination Process

Stephen Erlichman and Catherine McCall are Executive Director and Director of Policy Development, respectively, at Canadian Coalition for Good Governance (CCGG). This post is based on a CCGG policy publication, titled Shareholder Involvement in the Director Nomination Process: Enhanced Engagement and Proxy Access; the complete publication is available here. Related research from the Program on Corporate Governance includes Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

Proxy access is the corporate governance cause célèbre in the 2015 U.S. proxy season. There has been a concerted push on the part of institutional shareholders and others to convince companies to adopt proxy access, most commonly in the form of a trigger of 3% of outstanding voting shares held for 3 years. Shareholders have responded very favourably to the proxy access shareholder proposals put forward by institutions such as the New York City Pension Funds through its Board Accountability Project. A surprising (to many) number of companies [1] have adopted proxy access on the 3%/3 year basis, including some of the largest, best known and established of U.S. companies, some voluntarily and without a majority approved shareholder proposal on the matter. In Canada, the Canadian Coalition for Good Governance (CCGG), an organization which represents institutional shareholders that collectively own or manage approximately Cdn $3 trillion of assets and which has a mandate to promote good corporate governance at Canadian public companies, has just released its own proxy access policy. The policy, entitled Shareholder Involvement in the Director Nomination Process: Enhanced Engagement and Proxy Access (available here), has been developing for over a year following widespread input and consultation among CCGG’s members and other market participants.

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Shareholder Proposal Landscape

The following post comes to us from Ernst & Young LLP, and is based on a publication by the EY Center for Board Matters.

Institutional investors are increasingly communicating their expectations around governance through direct engagement and letter writing campaigns. Still, some continue to rely on shareholder proposals to trigger dialogue and help ensure a topic is raised at the board level.

Investors that submit proposals generally view them as an invitation to a discussion, preferring to reach agreement with the targeted company without the proposal going to a vote. If agreement cannot be reached, they generally believe that votes on shareholder proposals provide management with valuable insights into investor views.

The EY Center for Board Matters recently had conversations with 50 institutional investors, investor associations and advisors on their corporate governance views and priorities for the 2015 proxy season.

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A Few Observations on Shareholders in 2015

Mary Jo White is Chair of the U.S. Securities and Exchange Commission. This post is based on Chair White’s recent address at Tulane’s 27th Annual Corporate Law Institute; the full text, including footnotes, is available here. The views expressed in this post are those of Chair White and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today [March 19, 2015], I will share a few observations on three specific areas: the current state of shareholder activism; the shareholder proposal process; and fee-shifting bylaws. I know your next two panels take up aspects of these important topics, but I think the space is lively and big enough for all of us to comment.

The Current Activism Landscape

There are different views on what is meant by “shareholder activism,” but just the word “activism” triggers an adverse reaction from many companies. Reflexively painting all activism negatively is, in my view, using too broad a brush and indeed is counterproductive. To me, the term activism captures the range of efforts by investors to influence a company’s management or decision-making. Some of it is constructive. In certain situations, activism seeks to bring about important changes at companies that can increase shareholder value. Now, some of you may find the juxtaposition of the word “activism” with “shareholder value” does not comport with your sense of reality. Some of you also believe that activists are not interested in increasing long-term value for shareholders and other stakeholders. Still others will assert that activists are simply short-term traders looking to make a quick dollar. I did say this was a lively topic with many different views.

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Proxy Advisors Clarify Proxy Access and Bylaw Amendments Voting Policies

The following post comes to us from Ariel J. Deckelbaum, partner and deputy chair of the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP, and is based on a Paul Weiss client memorandum.

On the heels of SEC Chair White’s direction to the Division of Corporation Finance to review its position on proxy proposal conflicts under Exchange Act Rule 14a-8(i)(9), both Institutional Shareholder Services (“ISS”) and Glass Lewis have issued clarifying policies on proxy access, entering the fray of what is becoming the hottest debate this proxy season. The publication of ISS’s updated policy in particular means that market forces may have outpaced the SEC’s review process. In order to avoid risking a withhold or no-vote recommendation from ISS against their directors, many companies will be faced with the choice of (i) including any shareholder-submitted proxy access proposal in their proxy materials (either alone or alongside a management proposal) (ii) excluding the shareholder submitted proposal on the basis of a court ruling or no-action relief from the Division of Corporation Finance on a basis other than Rule 14a-8(i)(9) (conflict with management proposal) or (iii) obtaining withdrawal of the proposal by the shareholder proponent.

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Proxy Access—a Decision Framework

Richard J. Sandler is a partner at Davis Polk & Wardwell LLP and co-head of the firm’s global corporate governance group. Margaret E. Tahyar is a partner in the Financial Institutions Group at Davis Polk & Wardwell LLP. This post is based on a Davis Polk client memorandum.

Recent high-profile developments have thrust proxy access back onto the agenda for many U.S. public companies. Here is a framework for how to approach the topic.

Proxy access is back in the news and back on the agenda for many U.S. public companies. Four years after the DC Circuit invalidated the SEC’s proxy-access rule, we are seeing company-by-company private ordering with a vengeance, including a record number of Rule 14a-8 shareholder proposals in the current 2015 proxy season. Events have moved at high speed in the past few weeks, leading many companies to wonder whether they should be initiating their own approach to proxy access.

As we argued in 2009 in response to an earlier SEC proxy-access proposal, we believe that each company’s approach to proxy access should be grounded in a consideration of its particular circumstances. Despite recent high-profile adoptions of proxy-access procedures, we don’t believe that most U.S. public companies should, in knee-jerk fashion, be preparing to revise their bylaws proactively. We do, however, think that boards should be assessing on an ongoing basis the broader issues of board composition, tenure and refreshment, which are not only important in their own right but also relevant to potential vulnerability to proxy-access proposals. We also think that boards should communicate a willingness to exercise their discretion in considering all shareholder suggestions regarding board membership in order to assure shareholders of a means of expressing their views and to create a level playing field for shareholders.

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2015 Benchmark US Proxy Voting Policies FAQ

Carol Bowie is Head of Americas Research at Institutional Shareholder Services Inc. (ISS). The following post relates to ISS’ 2015 Benchmark Proxy Voting Policies.

ISS is providing answers to frequently asked questions with regard to select policies and topics of interest for 2015:

Proxy Access Proposals

1. How will ISS recommend on proxy access proposals?

Drawing on the U.S. Securities and Exchange Commission’s (SEC) decades-long effort to draft a market-wide rule allowing investors to place director nominees on corporate ballots, and reflecting feedback from a broad range of institutional investors and their portfolio companies, ISS is updating its policy on proxy access to generally align with the SEC’s formulation.

Old Recommendation: ISS supports proxy access as an important shareholder right, one that is complementary to other best-practice corporate governance features. However, in the absence of a uniform standard, proposals to enact proxy access may vary widely; as such, ISS is not setting forth specific parameters at this time and will take a case-by-case approach when evaluating these proposals.

Vote case-by-case on proposals to enact proxy access, taking into account, among other factors:

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