Tag: Proxy season


2015 Annual Corporate Governance Review

Rajeev Kumar is a senior managing director of research at Georgeson Inc. This post is based on the executive summary of a Georgeson report; the full report is available here.

The stage for the 2015 proxy season was set early by the actions of the New York City Comptroller’s Office in sponsoring 75 shareholder proposals, with proxy access playing out as the dominant governance issue. The total number of shareholder proposals, as a result, reversed its decline and registered its highest total in the past five years. Support for say-on-pay proposals remained high, support for director elections continued to increase and the issues of board composition and succession planning remained in the spotlight. There were continued calls for engagement between issuers and shareholders, emphasizing increased participation by directors and a focus on long-term value creation and related issues. Proxy fight activism continued to raise interesting issues and discussions about how best to deal with activists.

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2016 Proxy Season: Engagement, Transparency, Proxy Access

Howard B. Dicker is a partner in the Public Company Advisory Group of Weil, Gotshal & Manges LLP. This post is based on a Weil publication; the complete publication, including footnotes and appendix, is available here. Related research from the Program on Corporate Governance includes Lucian Bebchuk’s The Case for Shareholder Access to the Ballot and The Myth of the Shareholder Franchise (discussed on the Forum here), and Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

While shareholders have a wide spectrum of views on corporate objectives, the time horizon for realizing these objectives and environmental, social and governance (ESG) issues, there is an emerging consensus that—regardless of size, industry or profitability—public companies must achieve greater accountability to their shareholders, through engagement and transparency, than ever before. Corporate engagement and transparency now take two forms: direct dialogue, increasingly involving directors, and enhanced proxy statement and other public disclosure that sheds light on the company’s strategy and the performance of its board, board committees and management, demonstrates responsiveness to shareholder ESG concerns, and justifies the composition of the board in light of the company’s present needs. Throughout this post, we offer practical suggestions about “what to do now” to meet shareholder expectations about engagement and transparency and to address a host of other new developments for the 2016 proxy season.

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Proxy Access: Preparing for the 2016 Proxy Season

Thomas W. Christopher is a partner in the New York office and Ryan J. Maierson is a partner in the Houston office of Latham & Watkins LLP. This post is based on a Latham publication by Mr. Christopher, Mr. Maierson, Tiffany Fobes Campion, and Charles C. Wang. Related research from the Program on Corporate Governance includes Lucian Bebchuk’s The Case for Shareholder Access to the Ballot and The Myth of the Shareholder Franchise (discussed on the Forum here), and Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

As the 2016 proxy season approaches, every public company should consider its position on proxy access and should have a plan for responding to a shareholder proxy access proposal. Based on lessons learned from the 2015 season, this post summarizes:

  1. Actions a public company can take to prepare for receipt of a proxy access proposal.
  2. Whether a company should wait and react to a shareholder proxy access proposal or preemptively adopt its own proxy access regime.
  3. Alternatives available to a company following receipt of a proxy access proposal.

Proxy access is a mechanism that gives shareholders the right to nominate directors and have those nominees included in the company’s annual meeting proxy statement. Proxy access gained significant momentum in 2015, with approximately 100 proposals submitted to shareholders and approximately 58% of those proposals being approved by shareholders. [1] Very likely a number of public companies will be subject to proxy access proposals during the 2016 proxy season.

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Recap of the 2015 Proxy Season

Avrohom J. Kess is partner and head of the Public Company Advisory Practice at Simpson Thacher & Bartlett LLP. This post is based on a Simpson Thacher presentation by Mr. Kess, Yafit Cohn, Arthur B. Crozier and Lissa Perlman. The complete presentation is available here.

Simpson Thacher & Bartlett LLP recently released a PowerPoint deck, titled “Recap of the 2015 Proxy Season: What Happened, Lessons Learned and Looking Ahead to 2016.”  The deck (available here) provides an overview of the 2015 proxy season, as well as in-depth analysis regarding key developments, proposals and trends from the proxy season.

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Getting Ready for Proxy Access

Nicolas Grabar is a partner at Cleary Gottlieb Steen & Hamilton LLP focusing on international capital markets and securities regulation. This post is based on a Cleary Gottlieb publication by Mr. Grabar & associate Leah LaPorte Malone. Related research from the Program on Corporate Governance about proxy access include Lucian Bebchuk’s The Case for Shareholder Access to the Ballot and The Myth of the Shareholder Franchise (discussed on the Forum here), and Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

Proxy access will be a leading issue in the 2016 proxy season, and now is the time to make a plan. We have a detailed deck on these questions, available here, but in a nutshell this is what’s happening:

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ISS Preliminary 2016 Voting Policy Updates

Andrew R. Brownstein is partner and co-chair of the Corporate practice group at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum by Mr. Brownstein, David M. SilkDavid A. KatzSabastian V. Niles, and S. Iliana Ongun.

Today [October 26, 2015], ISS announced it is considering changing its U.S. voting policies in three areas heading into the 2016 proxy season: (i) when a sitting CEO or a non-CEO director will be viewed as “overboarded “on account of service on multiple boards, (ii) unilateral board actions that reduce shareholder rights (with a focus on newly classified boards and supermajority voting provisions) and (iii) compensation disclosure at externally managed issuers. Notably, the areas highlighted for change in the U.S. market do not address proxy access, “responsiveness” to majority-supported shareholder proposals or other current topics. ISS is also proposing changes to non-U.S. policies, including with respect to Brazil, Canada, France, Hong Kong & Singapore, India, Japan, the Middle East & Africa and the U.K. & Ireland.

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Exceptions to Rule 14a-8 Shareholder Proposals Exclusion

David A. Katz is a partner specializing in the areas of mergers and acquisitions and complex securities transactions at Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum by Mr. Katz and Sabastian V. Niles. Mr. Niles is counsel at Wachtell Lipton specializing in rapid response shareholder activism and preparedness, takeover defense, corporate governance, and M&A.

Yesterday [October 22, 2015], the Staff of the Securities and Exchange Commission’s Division of Corporation Finance issued Staff Legal Bulletin No. 14H. SLB14H formally narrows the long-standing approach to interpreting Rule 14a-8(i)(9), which permits a company to exclude a shareholder proposal that otherwise complies with Rule 14a-8 from its proxy statement “[i]f the proposal directly conflicts with one of the company’s own proposals to be submitted to shareholders at the same meeting.”

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Is Proxy Access Inevitable?

Holly J. Gregory is a partner and co-global coordinator of the Corporate Governance and Executive Compensation group at Sidley Austin LLP. The following post is based on a Sidley update by Ms. Gregory, John P. Kelsh, Thomas J. Kim, Rebecca Grapsas, and Claire H. Holland. The complete publication, including footnotes, is available here. Related research from the Program on Corporate Governance about proxy access include Lucian Bebchuk’s The Case for Shareholder Access to the Ballot and The Myth of the Shareholder Franchise (discussed on the Forum here), and Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

This post revises our August 3, 2015 post to include additional information relating to the prevalence of certain types of proxy access provisions. In particular, the charts included in Appendix A and Appendix B highlight, on a company-by-company basis, the following terms of proxy access provisions adopted so far this year.

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2016 Proxy Season Update

Laura D. Richman is counsel and Michael L. Hermsen is partner at Mayer Brown LLP. This post is based on a Mayer Brown Legal update, available here, authored by Laura D. Richman, Robert F. Gray, Michael L. Hermsen, Elizabeth A. Raymond, and David A. Schuette.

It is time for public companies to think about the upcoming 2016 proxy and annual reporting season. Preparation of proxy statements and annual reports requires a major commitment of corporate resources. Companies have to gather a great deal of information to produce the necessary disclosures. In addition, with increasing frequency, companies are choosing to implement the required elements of their proxy statements with a focus on shareholder engagement, seeking to clearly present, and effectively advocate for, their positions on annual meeting agenda items. As the process for the 2016 proxy and annual reporting season begins, there are a number of recent developments that public companies should be aware of that will impact current and future seasons.

This post is divided into five sections covering the following topics:

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Proxy Access Bylaw Developments and Trends

Janet T. Geldzahler is of counsel at Sullivan & Cromwell LLP. This post is based on a Sullivan & Cromwell publication by Ms. Geldzahler, H. Rodgin Cohen, Robert W. Reeder III, and Marc Trevino. The complete publication, including Annexes, is available here. Related research from the Program on Corporate Governance includes Lucian Bebchuk’s The Case for Shareholder Access to the Ballot and The Myth of the Shareholder Franchise (discussed on the Forum here), and Private Ordering and the Proxy Access Debate by Lucian Bebchuk and Scott Hirst (discussed on the Forum here).

The significant success of shareholder proxy access proposals this year is likely to result in even more shareholder proposals for proxy access in the 2016 proxy season. As of August 13, 2015, 82 shareholder proxy access proposals have come to a vote in 2015, and 48 have passed. In many cases, shareholder proposals were approved despite a pre-existing bylaw (most often adopted after the receipt of the shareholder proposal) or a conflicting proposal by the company with modestly more restrictive terms. The average vote in favor of all proposals was 54.4%, and ISS recommended for all shareholder proxy access proposals.

This post summarizes developments in the area of proxy access, including an analysis of the record of company responses to shareholder proxy access proposals received during 2015 (with further detail set forth in Annex A of the complete publication). Those companies that receive a proxy access shareholder proposal or that are evaluating preemptive adoption of a proxy access provision will want to consider the appropriate terms and requirements. In all cases, as a matter of preparedness, companies should be aware of options to respond to potential shareholder proxy access proposals. For more information regarding shareholder proposals generally, our 2015 Proxy Season Review (discussed on the Forum here), which we distributed on July 20, details the results of these proposals during the 2015 proxy seasons.

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