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The Securities Edge Securities Blog for Middle-Market Companies

Monthly Archives: November 2014

You heard it here first

Posted in Bob's Upticks

In my first UpTick (“How about never?  Does never work for you?”), I questioned statements by SEC Chair White that the remaining corporate governance rulemakings under Dodd-Frank would be out by year-end.  Well, the SEC has now updated its regulatory rulemaking agenda and – lo and behold – final action on the pay ratio rule is now set for October 2015 (you can find the reference here).  Assuming that a final rule is adopted in that time frame (which in turn assumes, among other things, that a Republican-controlled Congress won’t do something to the relevant provisions of Dodd-Frank – or to the Act in general), the pay ratio rule will first be in effect for the 2017 proxy season.

Further, based on the regulatory agenda, we shouldn’t expect rulemaking on the three other rules comprising the “four horsemen” (namely, hedging, clawbacks, and pay for performance) until October 2015 as well.

In other words, never may just work for us.  Perhaps that’s another reason to give thanks?

Your thoughts?

Bob

Pushing the envelope with bylaws restricting derivative suits?

Posted in Securities Litigation

  How to stop frivolous plaintiff lawsuits?  Since 2010, when Vice Chancellor Laster of the Delaware Court of Chancery noted that “if boards of directors and stockholders believe that a particular forum would prove an efficient and value promoting locus for dispute resolution, then corporations are free to respond with charter provisions selecting an exclusive… Continue Reading

From the same wonderful folks who brought you conflict minerals (among other things)

Posted in Bob's Upticks

Connecticut Senator Richard Blumenthal has written to SEC Chair White urging that the SEC label so-called “fee-shifting” bylaws major risk factors and require companies to disclose them before any initial public offering.  Moreover, Blumenthal believes the SEC should take the position that fee-shifting provisions are inconsistent with the federal securities laws and should refuse to permit registration statements to move forward for any company that has adopted these provisions.

I believe that Senator Blumenthal is a good and decent man, and I base this in part on some indirect personal knowledge of him.  I also think that there are legitimate concerns with fee-shifting bylaws and that a debate on those and other provisions is perfectly appropriate.  However, I find it seriously troubling that our legislators feel obliged to tell the SEC how to do its job, particularly at such a granular level.  Are they trying to do away with the SEC?  Do our senators and congressmen believe that they can do a better job regulating our capital markets and disclosure directly rather than through the SEC?

I happen to think that, in general, the SEC has done a superlative job in both areas.  Of course, there have been errors of commission (no puns intended) and omission (e.g., can you say “Madoff”?), but over the 80+ years of its existence, the SEC has generally been an apolitical beacon of serious and legitimate regulation.  And I suspect there’s a strong correlation between the SEC’s screw-ups and congressional interference (or lack of funding).

I don’t think for a nanosecond that Senator Blumenthal wants to do away with the SEC.  So why is he trying to do so by more subtle means?

What do you think?

Bob

ISS and Glass Lewis publish 2015 voting policies

Posted in Corporate Governance, Uncategorized

Institutional Shareholder Services and Glass Lewis have issued their voting policies for the 2015 annual meeting season.  For the most part, both proxy advisory firms’ 2015 policies are refinements of those already in place.  However, companies should carefully review their 2015 annual meeting agendas against the updated policies to anticipate possible issues.  A summary of… Continue Reading

Game on: ISS and Glass Lewis issue 2015 voting policies

Posted in Bob's Upticks, Corporate Governance

Last week I posted an UpTick about the rollout of ISS’s voting policies for 2015.  This week saw what appears to be the completion of that rollout, and we were also blessed with the publication of Glass Lewis’s 2015 voting policies.

On a quick read, neither set of voting policies seems to contain anything shocking, but both sets continue the march towards what the proxy advisors see as shareholder democracy.  To paraphrase Jules Feiffer, I sympathize with their aspirations, but in some ways it looks like shareholder tyranny.  Both ISS and GL are adamant about two types of by-law amendments: those that make the loser pay in meritless lawsuits and those that arguably impact shareholder rights without getting shareholder approval.  ISS also tinkers with shareholder proposals on CEO/board chair separation.  GL is also concerned about by-law amendments and continues to rail against companies that don’t satisfactorily implement majority-approved shareholder proposals.  GL also continues to focus “material” transactions with directors.

I really do sympathize with at least some of the aspirations of ISS and GL.  However, their policies reinforce the notion – with which I’m not at all sympathetic – that shareholders have the right to second-guess each and every decision that the board makes.  For example, why does ISS think that shareholders are in a better position than the board to determine the board’s leadership structure?  And if the board has no business deciding on its own leadership structure, why give it the power to do anything at all?

We’ll be posting a more detailed analysis of the 2015 voting policies on The Securities Edge within the next few days.  For the time being, let us know what you think of them (or of my views).

 

Bob

Oops, they did it again – ISS proposes new voting policies

Posted in Bob's Upticks, Compensation, Corporate Governance

Britney Spears has nothing on Institutional Shareholder Services, better known as ISS.  ISS is rolling out proposed new voting policies for the 2015 proxy season.  ISS often uses more words to tout how transparent it is than to explain its voting policies clearly, and the draft policies being considered for 2015 are no different.

One new proposed policy addresses voting on shareholder proposals on independent board chairs.  ISS proposes to expand the list of factors that will be considered in developing a voting recommendation and to look at these factors in a more “holistic” manner.  (The current policy is to support the proposals unless the company meets all of the criteria.)  So this seems like a good thing.  However, ISS indicates that the new policy is not expected to change the percentage of independent chair proposals that it will support.  The obvious question is, then, how will the new policy really work?  Your guess is as good as mine (which frankly isn’t very good).

The other new proposed policy provides additional information regarding the “scorecard” that ISS will use to evaluate equity plans.  Like the independent chair policy above, some more criteria are laid out, but it’s impossible to tell how the factors – or, indeed, the new scorecard, will be weighed or will work – thus assuring that companies seeking shareholder approval of equity plans will have to continue to use ISS’s consulting service to find out whether a new plan will pass muster.

I could just as easily have referred to Yogi Berra as to Britney Spears, because if this isn’t déjá vu all over again, I don’t know what is.

Your thoughts?

Bob