It remains to be seen whether the new administration will actually drain the swamp or do away with political correctness, but one hope that some of us have – regardless of our views on the election – is that the SEC may finally get around to some issues that have been on the back burner for years.
One such issue is a long-overdue overhaul of the rules surrounding shareholder proposals, including the submission and resubmission thresholds for proposals under SEC Rule 14a-8. Many organizations, including the Society for Corporate Governance, have repeatedly urged the SEC to update these rules, which have been in place for many years. However, the SEC has been reluctant to plunge into the area due to the likely political firestorm that would result.
Now, another organization has jumped in. At the end of October, the Business Roundtable published “Modernizing the Shareholder Proposal Process”, a rational and well thought-out series of suggestions for bringing shareholder proposals into the 21st Century.
The SEC has issued its much-anticipated Staff Legal Bulletin on two rules impacting shareholder proposals. You can find the SLB here. The SLB looks a bit more benign than some had feared; in other words, it’s got some bad news, but the good news is that it’s not as bad as some feared. Rule 14a-8(i)(9)… Continue Reading
Last week I attended the National Conference of the Society of Corporate Secretaries and Governance Professionals in Chicago. It was a great conference – wonderful, substantive programs and a chance to catch up with many friends and colleagues.
With some exceptions.
One exception was the opening speech by SEC Chair Mary Jo White. Now don’t get me wrong – I’m a fan (particularly when Senator Warren and others go after her – as in my last post). Among other things, I love the fact that she speaks clearly; unlike so many others in Washington, whose statements make me think I know what it must have been like to visit the Delphic Oracle, she’s perfectly straightforward about her views. It was her views – or at least most of them – that I didn’t like.
Chair White addressed four topics, and on all but one of them she basically told the corporate community to give up. Her topics and views can be summarized as follows:
Something shocking happened at the SEC yesterday. SEC Chair Mary Jo White directed the SEC Staff to review its long-standing position on when a shareholder proposal conflicts with a company proposal and may be excluded from the proxy statement. As a result, the SEC’s Division of Corporation Finance withdrew a no-action letter that had given Whole Foods the green light to exclude a shareholder proposal on proxy access by including its own (less shareholder-friendly) proposal on the subject. Corp Fin also said that it would not be issuing any additional no-action letters under the rule in question. It’s worth noting that these actions were taken at a sensitive time, as calendar-year companies approach peak proxy season and a major investor campaign is under way to impose proxy access upon companies that have been resisting it.
The SEC’s shareholder proposal rules are very complex, and I won’t go into details here. However, as a general matter, the rules lay out the process by which eligible shareholders can submit proposals for inclusion in a company’s proxy statement. Relevant here is that (1) the rules provide certain conditions under which a company can exclude a proposal and (2) companies can avail themselves of a “no-action” process to get the SEC’s permission to exclude a proposal if the conditions are satisfied. It’s worth noting that the no-action process isn’t dispositive; the proponent or the company can take the matter to court, and there are usually a couple of cases each year in which that happens.
On Tuesday, the Securities Law Committee of the Society of Corporate Secretaries and Governance Professionals met with officials from the Divisions of Corporation Finance, Investment Management, and Trading and Markets and the Office of the Whistleblower. While neither new Chair Mary Jo White (confirmed in April) nor new Director of Corporation Finance Keith Higgins (starts… Continue Reading
Are the CEO and the Chairman of the Board the same executive at your company? While there can be very good reasons to have these positions held by the same person, the separation of these posts continues to be a hotly debated topic. Since the early 1980s, much attention has been paid to corporate boards… Continue Reading
Late last week, a shareholder activist filed, what is believed to be, the first proxy access resolution for this proxy season. The target of the proposal, MEMC Electronic Materials, Inc., is an S&P 500 company that manufactures and sells wafers and related products to the semiconductor and solar industries. As discussed in a previous blog… Continue Reading
Despite the SEC’s decision not to appeal the recent decision by the U.S. Court of Appeals for the D.C. Circuit to vacate the proxy access rules, proxy access is still alive and well. In Tuesday’s release by the SEC, the SEC noted that the amendment to Rule 14a-8, which had been stayed pending the litigation… Continue Reading