Tag: Proxy materials


Latest CD&A Template Offers Best Practices, Is Win-Win for Issuers, Investors

Matt Orsagh is a director at CFA Institute.

Matt Orsagh is a director at CFA Institute.

To help companies produce a more clear and concise executive compensation report that attends to the needs of both companies and investors, CFA Institute has released an updated Compensation Discussion & Analysis (CD&A) Template. It is an update of the 2011 template of the same name and aims to help companies draft CD&As that serve as better communications tools, not simply as compliance documents.

CFA Institute worked with issuers, investors, proxy advisers, compensation consultants, legal experts and other associations to update the manual so it would best serve the needs of investors and issuers. One of the main enhancements in the latest version of the template is a graphic executive summary that presents the main information investors are looking for in a concise format that takes up only one or two pages.

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SEC Releases Proposed Rules on Dodd-Frank Pay vs. Performance Disclosure Rule

Michael J. Segal is partner in the Executive Compensation and Benefits Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum by Mr. Segal, Andrea K. Wahlquist, and David E. Kahan.

Michael J. Segal is partner in the Executive Compensation and Benefits Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum by Mr. Segal, Andrea K. Wahlquist, and David E. Kahan.

On April 29, 2015, the SEC released proposed rules under Section 953(a) of the Dodd-Frank Act, regarding required proxy and other information statement disclosure of the relationship between executive compensation actually paid by a company, and the company’s financial performance. The proposed rules are subject to public comments for 60 days following their publication in the Federal Register. The new requirements could become effective as early as the 2016 proxy season.

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Optimizing Proxy Communications

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

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

Proxy statements continue to evolve. New disclosure trends are sharpening company messaging to investors, while other disclosure practices leave investors seeking clarification.

To learn what kinds of disclosures are most valuable to investors, EY asked them where they would like to see disclosure enhancements and the kinds of disclosure practices they prefer.

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

This post is the third in a series of four posts based on insights gathered from those conversations and previewing the 2015 proxy season. The first post (available here) focused upon board composition; the second (available here) upon shareholder activism. The upcoming final post will focus on the shareholder proposal landscape.

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Ensuring the Proxy Process Works for Shareholders

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent public statement; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Luis A. Aguilar is a Commissioner at the U.S. Securities and Exchange Commission. This post is based on Commissioner Aguilar’s recent public statement; the full text, including footnotes, is available here. The views expressed in the post are those of Commissioner Aguilar and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.

Today’s [February 19, 2015] Roundtable on Proxy Voting is certainly timely since over the course of the next several months, thousands of America’s public companies will hold annual shareholders meetings to elect directors and to vote on many important corporate governance issues. The start of the annual “proxy season” is an appropriate time to consider the annual process by which companies communicate with their shareholders and get their input on a variety of issues. Whether it’s voting on directors, executive compensation matters, or other significant matters, the annual meeting is the principal opportunity for shareholders—the true owners of public companies—to have their voices heard by the corporate managers of their investments. At these annual meetings, shareholders can express their support, or disappointment, with the direction of their companies through the exercise of their right to vote.

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SEC to Review Excluding Conflicting Proxy Proposals under Rule 14a-8

The following post comes to us from Robert B. Schumer, chair of the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP, and is based on a Paul Weiss client memorandum.

The following post comes to us from Robert B. Schumer, chair of the Corporate Department at Paul, Weiss, Rifkind, Wharton & Garrison LLP, and is based on a Paul Weiss client memorandum.

SEC Chair Mary Jo White has directed the Division of Corporation Finance (“Corporation Finance”) to review its position on Rule 14a-8(i)(9), which allows a company to exclude a shareholder proposal from the company’s proxy materials if it “conflicts” with the company’s own proposal to be submitted to shareholders at the same meeting. As a result of this direction, Corporation Finance will express “no views” on the application of Rule 14a-8(i)(9) this proxy season.

The catalyst for this development was a shareholder proposal submitted by proponent James McRitchie to Whole Foods Market, Inc., requesting that the company adopt “proxy access” procedures generally to allow one or more shareholders owning at least 3% of the company’s voting securities for three or more years to nominate up to 20% of the board of directors via the company’s proxy materials. Whole Foods countered with its own proposal that included significantly different share ownership and holding period thresholds and director nominee caps, but nevertheless was granted no-action relief by Corporation Finance, allowing it to exclude the McRitchie proposal under Rule 14a-8(i)(9) on the basis that it conflicted with Whole Foods’ proposal and the proposals would “present alternative and conflicting decisions for the Company’s shareholders that would likely result in inconsistent and ambiguous results”. Thereafter, Mr. McRitchie, the Council of Institutional Investors and others have called for the SEC to review its position on these “conflicts”, which SEC Chair White has now done. Corporation Finance has since effectively rescinded its no-action relief to Whole Foods and stated that it has no view of Rule 14a-8(i)(9).

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Guidance on the Ordinary Business Exception to Rule 14a-8

The following post comes to us from Steve Bochner, partner focusing on corporate and securities law at Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum.

The following post comes to us from Steve Bochner, partner focusing on corporate and securities law at Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum.

A tenet of corporate law is that directors—not shareholders—manage a company’s business and affairs. Recognizing that proposals adopted through the Rule 14a-8 process could allow shareholders to intrude on matters traditionally within the directors’ discretion and control, Rule 14a-8(i)(7) permits the exclusion of shareholder proposals from a company’s proxy statement that relate to a “company’s ordinary business operations.” This ordinary business exception to Rule 14a-8 is an acknowledgement that certain “tasks are so fundamental to management’s ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight.”

In interpreting Rule 14a-8(i)(7), the staff of the Securities and Exchange Commission (SEC) has found that proposals otherwise related to an ordinary business matter may not be permissibly excluded from a company’s proxy statement where they also relate to a significant social policy issue. In this circumstance, the SEC’s staff will not provide its concurrence (in the form of a no-action letter) with a company’s decision to exclude a shareholder proposal on the basis of the ordinary business exception if the staff determines that the issue “transcend[s] the day-to-day business matters and raise[s] policy issues so significant that it would be appropriate for a shareholder vote.” The line between a proposal related to ordinary business and one related to a significant social policy issue is often blurry, and it is the subject of intense debate between companies and shareholder proponents.

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Updated CD&A Template Aims to Improve Communication

Matt Orsagh is a director at CFA Institute.

Matt Orsagh is a director at CFA Institute.

In 2011, CFA Institute released the Compensation Discussion and Analysis (CD&A) Template as a tool to help companies produce a more succinct and informative CD&A that served the needs of both companies and investors. At the time there were complaints from both issuers and investors that the typical CD&A was seen by too many issuers as a compliance document that was too lengthy and too opaque to serve as the communication tool investors desired.

In the intervening years disclosures in the CD&A have improved a great deal, due in part to increased engagement between issuers and investors, a better understanding of disclosure best practices by issuers, and more willingness by some issuers to experiment with more creative ways of telling their stories.

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2014 Proxy Season Mid-Year Review

Mary Ann Cloyd is leader of the Center for Board Governance at PricewaterhouseCoopers LLP. This post is based on an edition of ProxyPulse™, a collaboration between Broadridge Financial Solutions and PwC’s Center for Board Governance; the full report, including additional figures, is available here.

Mary Ann Cloyd is leader of the Center for Board Governance at PricewaterhouseCoopers LLP. This post is based on an edition of ProxyPulse™, a collaboration between Broadridge Financial Solutions and PwC’s Center for Board Governance; the full report, including additional figures, is available here.

This post looks at results from 2,788 shareholder meetings held between January 1 and May 22, 2014. We provide data and analyses on areas such as share ownership composition, director elections, say-on-pay, proxy material distribution and the mechanics of shareholder voting. We also look at differences in proxy voting by company size.

With about three-quarters of the 2014 proxy season complete, voting results continue to show that public company executives and directors must remain vigilant regarding corporate governance matters. In comparison to last proxy-season at this time, large-cap ($10b+) companies have attained higher levels of shareholder support both for directors and for executive compensation plans. In contrast, support levels for executive compensation plans fell at mid-cap ($2b–$10b), small-cap ($300m–$2b) and micro-cap ($300m or less) companies, and support for directors fell at mid-cap companies.

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SEC Issues Guidance on Use of Social Media in Offerings and Proxy Fights

Trevor Norwitz is a partner in the Corporate Department at Wachtell, Lipton, Rosen & Katz, where he focuses on mergers and acquisitions, corporate governance and securities law matters. This post is based on a Wachtell Lipton firm memorandum by Mr. Norwitz, Sabastian V. Niles, Eitan S. Hoenig, and Matthew I. Danzig.

Trevor Norwitz is a partner in the Corporate Department at Wachtell, Lipton, Rosen & Katz, where he focuses on mergers and acquisitions, corporate governance and securities law matters. This post is based on a Wachtell Lipton firm memorandum by Mr. Norwitz, Sabastian V. Niles, Eitan S. Hoenig, and Matthew I. Danzig.

The SEC staff has released new guidance regarding the use of social media such as Twitter in securities offerings, business combinations and proxy contests (as a senior SEC official telegraphed at the Tulane Corporate Law Institute conference). Until now, SEC legending requirements have restricted an issuer’s ability to communicate electronically using Twitter or similar technologies with built-in character limitations before having an effective registration statement for offerees, or definitive proxy statement for stockholders (as the legends generally exceed the character limits). Companies using Twitter and similar media with character limits can now satisfy these legend requirements by using an active hyperlink to the full legend and ensuring that the hyperlink itself clearly conveys that it leads to important information. Although the SEC guidance does not provide example language, hyperlinks styled as “Important Information” or “SEC Legend” would seem to satisfy this standard. Social media platforms that do not have restrictive character limitations, such as Facebook and LinkedIn, must still include the full legend in the body of the message to offerees or stockholders.

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SEC Exempts “Foreign Issuer” From Filing a Preliminary Proxy Statement

The following post comes to us from Yafit Cohn, Associate at Simpson Thacher & Bartlett LLP, and is based on a Simpson Thacher memorandum by Ms. Cohn.

The following post comes to us from Yafit Cohn, Associate at Simpson Thacher & Bartlett LLP, and is based on a Simpson Thacher memorandum by Ms. Cohn.

On January 31, 2014, the Securities and Exchange Commission (“SEC”) issued a no-action letter to Schlumberger Ltd. (“Schlumberger” or “the Company”), permitting the Company not to file a preliminary proxy statement under Rule 14a-6(a) when the only matters to be acted upon by stockholders at the Company’s annual meeting were either specifically excluded from the filing requirements by Rule 14a-6(a) or were certain ordinary and routine matters required to be submitted for stockholder approval under Curaçao law on an annual basis.

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