Bhakti Mirchandani is Managing Director at FCLTGlobal. This post is based on a FCLTGlobal memorandum by Ms. Mirchandani, Steve Boxer, Evan Horowitz, and Victoria Tellez. Related research from the Program on Corporate Governance includes Index Funds and the Future of Corporate Governance: Theory, Evidence, and Policy (discussed on the forum here) by Lucian Bebchuk and Scott Hirst; and The Agency Problems of Institutional Investors by Lucian Bebchuk, Alma Cohen, and Scott Hirst (discussed on the Forum here).
A good stewardship code helps clarify the responsibilities of institutional investors, laying out core principles to foster a shared understanding among stakeholders including regulators, investors, and investees.
To ensure that stewardship codes put primary emphasis on long-term value creation, FCLTGlobal has worked with its members to identify seven principles of long-term ownership that could be incorporated into new or revised stewardship codes. These codes represent the highest common denominator of high-quality codes around the world, using principles that are equally applicable for asset owners and asset managers. Given FCLTGlobal’s mission of focusing capital on the long term, our interest is in the subset of stewardship that is concerned with fostering an ownership mindset to promote long-term value. Valuable work has been done by International Corporate Governance Network (ICGN) and others on the broader universe of issues that can be addressed via stewardship codes. [1]
Comment Letter Regarding SEC Interpretation of 14a-8(i)(7) Ordinary Business Exclusion
More from: Jeffrey Mahoney, Ken Bertsch, Council of Institutional Investors
Ken Bertsch is Executive Director and Jeff Mahoney is General Counsel of the Council of Institutional Investors (CII). This post is based on a comment letter that CII submitted to the Securities and Exchange Commission Division of Corporation Finance. Related research from the Program on Corporate Governance includes The Case for Increasing Shareholder Power, by Lucian Bebchuk.
We are writing on behalf of the Council of Institutional Investors (CII), a nonprofit, nonpartisan association of public, corporate and union employee benefit funds, other employee benefit plans, state and local entities charged with investing public assets, and foundations and endowments with combined assets under management of $4 trillion. Our member funds include major long-term shareholders with a duty to protect the retirement savings of millions of workers and their families. Our associate members include a range of asset managers with more than $35 trillion in assets under management. [1]
We are writing to express concern about evolving SEC Division of Corporation Finance staff (Staff) views on the “ordinary business” exclusion of shareholder proposals (Rule 14a-8(i)(7)).
The Securities and Exchange Commission (SEC or Commission) has indicated that it may consider a proposal to raise ordinary business matters (1) based on the proposal’s subject matter, or (2) the degree to which the proposal seeks to “micromanage” a company “by probing too deeply into matters of a complex nature upon which shareholders, as a group, would not be in a position to make an informed judgment.” Our concern relates to recent no-action letters from the Staff that rely on the second prong of this exclusion—the “micromanagement” or “too-complex-for-shareholders” grounds for omission. We note that the Staff discussed this prong in Staff Legal Bulletin No. 14J, in October 2018. [2]
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