In late July, S&P Dow Jones and FTSE Russell announced that they were changing or proposing to change the standards that govern whether a company is included in their indices.  Although their approaches differ, the changes would effectively bar most companies with differential voting rights from their indices, as follows:

  • In its July 31 announcement, S&P Dow Jones said that companies with multiple share classes will no longer be included in the indices comprising the S&P Composite 1500 – which includes the S&P 500, S&P MidCap 400 and S&P SmallCap 600. There are some exceptions; companies currently in these indices will be grandfathered, as will any newly public company spun off from a company currently included in any of the indices.
  • Five days earlier, FTSE Russell proposed to require more than 5% of a company’s voting rights – across all equity securities, whether or not listed or traded – to be held by “free float” holders to be eligible for inclusion in the FTSE Russell indices.

Continue Reading Class Acts: Stock Indices Bar Differential Voting Rights

monkey-557586_1920A few weeks ago, The Wall Street Journal reported that two former directors of Theranos – the embattled blood testing company – “did not follow up on public allegations that…the firm was relying on standard technology rather than its much-hyped proprietary device for most tests”.

The report states that the two board members in question – a former admiral and Secretary of State, respectively – were on the Theranos board when concerns about the company’s device were aired publicly.  However, they seem to have believed that it wasn’t their job to ask questions, at least not in the absence of some sort of proof that the concerns were valid.  The former admiral said he “did not have the information that would tell me that it’s true or not true”; the former Secretary of State said that “it didn’t occur to” him to ask questions, adding “[s]ince I didn’t know, I didn’t have anything to look into”. Continue Reading Ducks and monkeys

This time I’m not writing about disclosure or governance. Rather, I’m posting my annual list of my 10 favorite books. For those of you who haven’t seen these lists before, (1) I apologize if this seems hubristic (or “braggadocious”, if you will) – I do it because some folks have told me they like it; and (2) the list involves books that I happened to read (or re-read) in 2015, not necessarily books that were published in 2015.

I didn’t encounter lots of great fiction last year; for me, the great books were non-fiction. Let’s see if the trend continues in the New Year.

So here goes (in order of preference):

Continue Reading My top 10 for 2015

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 the new policies and some issues they raise follows.  You can find the ISS policies here and the Glass Lewis policies here.

ISS

Unilateral Bylaw/Charter Amendments:  Under its current policy, ISS treats the following as “governance failures”: material failures of governance, stewardship, risk oversight or fiduciary responsibilities; failure to replace management; and “egregious” actions relating to a director’s service on another board.  In what ISS refers to as “extraordinary circumstances,” the occurrence of one or more of these failures will generally result in withhold or negative votes for individual directors, committee members or the full board.

Beginning in 2015, ISS will create a separate category of “governance failures” consisting of bylaw or charter amendments, adopted without shareholder approval, that “materially diminish shareholder rights” or that “could adversely impact shareholders.” ISS regards the creation of a separate category as little more than a codification of current policy.  As is typical, these standards leave ISS lots of wiggle room in determining voting recommendations.

Continue Reading ISS and Glass Lewis publish 2015 voting policies