Daily Archives: Friday, July 26, 2019

Remarks to the SEC Investor Advisory Committee

Jay Clayton is Chairman of the U.S. Securities and Exchange Commission. This post is based on Chairman Clayton’s recent remarks to the SEC Investor Advisory Committee, available here. The views expressed in this post are those of Mr. Clayton and do not necessarily reflect those of the Securities and Exchange Commission or its staff.

Thank you, Anne [Sheehan]. Good morning everyone, and I want to extend a special welcome to our new commissioner, Allison Lee.

I am interested in today’s discussion. I understand the Committee first will be talking about the SEC approach to regulation in areas where competition may be limited. Competition is important to the functioning of our capital markets and, over the years, some of the Commission’s most effective actions have fostered competition.

Personally, I often think of the work of the Commission under Chairman Levitt, where the elimination of opacity in our trading markets fostered competition which, in turn, brought down transactions costs for both institutional and Main Street investors and enhanced price discovery and other market functions. [1]


Recent Ruling on Advance Notice Bylaws

Trevor S. Norwitz and Sabastian V. Niles are partners at Wachtell, Lipton, Rosen & Katz. This post is based on their Wachtell Lipton memorandum, and is part of the Delaware law series; links to other posts in the series are available here. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here); Dancing with Activists by Lucian Bebchuk, Alon Brav, Wei Jiang, and Thomas Keusch (discussed on the Forum here); and Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System by Leo E. Strine, Jr. (discussed on the Forum here).

A recent decision of the Delaware Court of Chancery provides a valuable reminder both of the validity and efficacy of advance notice bylaws, and of the importance of ensuring that they are carefully crafted and judiciously applied in a contested election.

In its ruling, which the companies have appealed, the Court held that two closed-end funds “went too far” in disqualifying board candidates proposed by an activist hedge fund based on its failure to respond to a lengthy supplemental questionnaire within the five-business day deadline stipulated in the funds’ bylaws. (The hedge fund submitted the completed questionnaires “shortly after” this deadline and receiving a notice of disqualification.) Based on a close reading of the bylaws and fact-specific circumstances, and reminding that the bylaws “constitute part of a binding broader contract among the directors, officers and stockholders” and that “[i]f charter or bylaw provisions are unclear, we resolve any doubt in favor of the stockholder’s electoral rights,” the Court overruled the disqualification and allowed the activist hedge fund to run its candidates.


2019 Proxy Season Review: Part 1—Rule 14a-8 Shareholder Proposals

Marc Treviño is a partner at Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell memorandum by Mr. Treviño, Melissa Sawyer, H. Rodgin Cohen, and June Hu.

A. Overview of Shareholder Proposals

The following table and pie charts summarize, by general category, the Rule 14a-8 shareholder proposals submitted in 2018 full-year and 2019 year-to-date, the number voted on and the rate at which they passed. Overall, the total number of shareholder proposals significantly declined, continuing a downward trend from 2015. A total of 678 shareholder proposals have been submitted to-date in 2019, relative to 751 at this time last year, 788 for 2018 as a whole and 836 for 2017. The decline relative to this time last year is led by a 12.5% drop in environmental, social, and political (“ESP”) proposals, closely followed by compensation-related proposals (11.9% drop), with governance-related proposals declining by a smaller proportion (6.2% drop). The overall decline would have been steeper but for the increase in proposals against investing or managing on the basis of ESP factors (so-called anti-ESP proposals).


Weekly Roundup: July 19-25, 2019

More from:

This roundup contains a collection of the posts published on the Forum during the week of July 19-25, 2019.

Defining Corwin’s Limits

Comment Letter Regarding Earnings Releases and Quarterly Reports

Statement on Short-Term/Long-Term Management & Periodic Reporting System

The Bad Actor Disqualification Act and Expected Impact on SEC Settlements

Rulemaking Petition on More Restrictive SEC Buyback Rules

Individual Director Assessments

Violation of DGCL Section 203 and Stockholder Enforcement Rights

A Banner Proxy Season for Political Disclosure and Accountability

First Successful Use of a Universal Proxy Card for a Control Slate in the United States

How Much Do Directors Influence Firm Value?

Under Pressure: Directors in an Era of Shareholder Primacy

The Importance of Climate Risks for Institutional Investors

A Look inside H.R. 2534: Insider Trading Prohibition Act

The Future of Shareholder Activism