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
ISS and Glass Lewis publish 2015 voting policies
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
Game on: ISS and Glass Lewis issue 2015 voting policies
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
Oops, they did it again – ISS proposes new voting policies
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
Just in time for Halloween: Are the latest PCAOB auditing standards a treat or a trick?
The SEC has approved new PCAOB auditing standards relating to related party transactions, significant unusual transactions, and financial relationships and transactions between a company and its executives, including executive compensation. You can find the SEC’s release on the new standards here.
When the PCAOB first proposed these standards, a number of us were concerned
My inaugural Uptick: How about never? Does never work for you?
I have read several reports quoting Mary Jo White, Chair of the SEC, as saying that the remaining Dodd-Frank corporate governance rulemakings will be out by year-end. Admittedly, the reports aren’t clear as to what Chair White means. Does she mean that the so-called pay ratio rule will be adopted in final form by year-end (in which case the disclosures wouldn’t be required until 2016)? Or that by year-end the Commission will have proposed rules on hedging, clawbacks and pay-for-performance? All of the above? It’s anyone’s guess.
I have also read the daily emails I receive from the SEC entitled “Upcoming Events Update.” (I get several of these “Updates” every day, even though they are identical and don’t seem to have been updated at all. For those of you who don’t get these emails, they purport to announce things like every meeting of the SEC and every speech to be given by Commissioners and Staff members.) For the last month or two, no open meetings of the SEC have been scheduled (and it’s virtually impossible for these rules to be proposed or adopted otherwise than at an open meeting). So when I saw today that
Continue Reading My inaugural Uptick: How about never? Does never work for you?
10 nuggets on corporate governance hot topics
On September 30, Bob Lamm moderated a panel at a “Say-on-Pay Workshop” held during the 11th Annual Executive Compensation Conference in Las Vegas, Nevada. The Conference is an annual event sponsored by TheCorporateCounsel.net and CompensationStandards.com – and emceed by our good friend, Broc Romanek – and features many of the pre-eminent practitioners in corporate governance and securities law.
The panel, entitled “50 Nuggets in 75 Minutes,” may just be the CLE equivalent of speed dating – each of five panelists covers 10 “nuggets” – practical and other takeaways to help them do their jobs better – in a 75-minute panel.
Here are Bob’s 10 “nuggets,” reprinted courtesy of the Conference sponsors and Broc.
1. Engagement is a Two-Way Street – At this stage of the game, shareholder engagement is – or should be – a given, and one of a company’s normal responsibilities. Along with that is the mantra “engage early and often”; in other words, don’t wait until you are faced with a negative vote recommendation to start reaching out to your major holders.
What may not be part of the mantra is that engagement is a two-way street. Your job (and that of your colleagues and even some directors) is to
Continue Reading 10 nuggets on corporate governance hot topics
The shape of things to come in corporate governance
Interest in corporate governance has increased exponentially over the last several years, as has shareholder and governmental pressure – often successful – for companies to change how they are governed. Since 2002, we’ve seen Sarbanes-Oxley, Dodd-Frank, higher and sometimes passing votes on a wide variety of shareholder proposals, and rapid growth in corporate efforts to speak with investors. And that’s just for starters.
These developments represent the latest iteration of what has become part of our normal business cycle – scandals (e.g., Enron, WorldCom, Madoff, derivatives), followed by significant declines in stock prices, resulting in public outrage, reform, litigation, and shareholder activism. Now that the economy is rebounding, should we anticipate a return to “normalcy” (whatever that may be)? Are we back to “business as usual”?
Gazing into a crystal ball can be risky, but I’m going to take a chance and say “no.” While our economic problems have abated, I believe that the past is prologue – in other words, we’re going to continue to see more of the same: investor pressure on companies, legislation and regulation seeking a wide variety of corporate reforms, and the like. Some more specific predictions follow:
- Increased Focus on Small- and Mid-Cap Companies: Investors have picked most if not all of the low-hanging governance fruit from large-cap companies. Sure, there are some issues that may generate heat and some corporate “outliers” that investors will continue to attack. However, most big companies have long since adopted such reforms as majority voting in uncontested director elections, elimination of supermajority votes and other anti-takeover provisions, and shareholder ability to call special meetings, to name just a few. If investors (and their partners, the proxy advisory firms) are to continue to grow,
Continue Reading The shape of things to come in corporate governance
GUEST BLOGGER: Lessons learned in corporate governance from the Jerry Sandusky tragedy
Mr. Lamm is Assistant General Counsel and Assistant Secretary at Pfizer Inc. and a Gunster alumnus. The views expressed in this posting are Mr. Lamm’s personal views and should not be attributed to Pfizer Inc. or to Gunster.
While nothing good has come out of the Jerry Sandusky sexual abuse scandal at Penn State, I am not aware of anyone who has focused on the lessons learned, particularly the link between corporate governance and the scandal. However, in my view, anyone who professes to be interested in corporate governance (or compliance) should read the report prepared by former FBI Director Louis Freeh and give it some thought. It is comprehensive, well organized, well written and thoughtful; in short, it is an important document, notwithstanding the sordid subject matter and the massive human tragedy involved.
Of course, Penn State is an educational institution rather than a publicly traded company, and the facts of the Sandusky scandal are arguably not likely to be replicated in a public company setting. However, many of the issues outlined in the Freeh Report apply equally to public companies – or to almost any form of organization – as much as to educational institutions, including the following (just to cover a few):
- Boards of directors (or trustees, governors, etc.) tend to be blamed when bad things happen, even if they are not given the information they should be given and have no way of knowing that information. Penn State’s trustees were excoriated in the press and other media for not dealing with the matter early on, despite the fact that they hadn’t been informed about the matter, didn’t even know of its existence and had no reason to know of its existence. It’s really no different in the corporate world; the media tend to ask “where was the board?” even when the board could not possibly have known what was going on. For example, was it really the board’s responsibility to review specific derivative trades that resulted in losses to financial institutions – particularly when the managements of the institutions provided information about the trades and assured their boards that the risks were minimal? If – as most corporate practitioners agree – the proper function of the board is to oversee management (rather than to supplant it), why should the board be blamed?
- Of course, good directors understand that they have an obligation to ask questions, including tough questions, to test what they are being told and to ferret out more than what they’re being told. Reading the Freeh Report, one gets the impression that
Continue Reading GUEST BLOGGER: Lessons learned in corporate governance from the Jerry Sandusky tragedy