Climate change

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It’s early days, but I’m pleased to report that the optimism I expressed about the SEC in the aftermath of the 2024 election may have been warranted.  At a minimum, the actions taken by the SEC since January 20 demonstrate support for the issuer community, an interest in pursuing the traditional goals of the SEC, and a willingness to help those of us who advise clients with respect to SEC rules and the many interpretations of those rules.

What the Commissioners Are Saying

First, on January 27, Commissioner Hester Peirce spoke before the Northwestern Securities Regulation Institute.  Her remarks were witty (as always) and, for the most part, spot on, to the point that I considered copying them here.  (I haven’t, though I have copied some of her choice remarks below.)  I do take issue with a few of her remarks (also as always), including her view that a corporation’s singular focus should be on building value for shareholders; it seems to me that it is not possible to build value without focusing on other constituencies such as customers, suppliers, and – yes – even the community at large.  Those matters aside, Ms. Peirce made the following good points, among others:Continue Reading So Far, So Good

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I’ll start by making a few things clear: I support a clean environment, stopping or slowing climate change, and many other good things.  I also believe that corporations should (and many do) consider constituencies other than shareholders and seek to do more than increase shareholder value.   There.  I’ve gotten that out of my system.

But that doesn’t mean…

I have long thought that the SEC is among the best, if not the best, government agency.  Over the years, I’ve worked with and gotten to know many folks on the SEC’s staff, who have consistently impressed me as bright, hard-working, serious about the SEC’s mission, and very nice people.  I am sure that most people on the staff continue to possess these and other great attributes.

However.

As with most organizations, the tone at the top is critical.  And, at least from outward appearances, the tone at the top of the SEC is at best dismissive, if not hostile, towards business, and disingenuous.  I’m not saying that the SEC should bow to corporate America’s wishes and do its bidding.  But it’s in the interest of our capital markets and the participants in those markets that the SEC consider a wide range of views and engage in thorough and thoughtful deliberation (part of what is known in the corporate world as the fiduciary duty of due care) before making decisions.

That does not seem to be the case.  In the last year or so, the SEC has repeatedly demonstrated fealty to the institutional investor community by such things as announcing, early in Chair Gensler’s tenure, that the SEC would not enforce rules providing for a more level playing field between companies and proxy advisory firms, adopted by the SEC barely two years earlier, and then formally rescinding those rules (see here).  I’m not saying those rules were perfect – far from it; in fact, they met the classic definition of compromise, in that all sides were dissatisfied with the outcome.  However, they were a start, and instead of getting rid of them the SEC could and, IMHO, should have worked to improve them.
Continue Reading Rooting for the other guys?

Image by haengematteORG from Pixabay

Lest you think that the summer is a quiet time for those of us in the wacky world of securities and corporate governance, think again.  Here’s some of what’s going on:

Legislation

On July 30, the House Financial Services Committee passed 11 bills and sent them to the full House. One of the bills would authorize the SEC to revise the reporting period for 13F disclosures from quarterly to monthly, change the time period to submit such reports, and expand the list of items to be disclosed to include certain derivatives.  The issuer and investment communities support these moves, and House passage seems likely, but the Senate is another matter altogether.

Another bill would impact family offices in a number of ways, including limiting the use of the family office exemption from registration as an investment adviser with the SEC to offices with $750 million or less in assets under management; requiring family offices with more than $750 million of assets under management to register with the SEC as “exempt reporting advisers”; and preventing persons who are barred or subject to final orders for conduct constituting fraud, manipulation, or deceit from being associated with a family office.
Continue Reading Summer Doldrums? Not So Much!

Image by Tumisu from Pixabay

I have long been a champion of shareholder engagement.  Since as far back as the 1980s, I have believed that companies and investors alike greatly benefit from engagement; I even advocated for engagement by individual directors – a view that generated some strong adverse commentary from those in the corporate community who disagreed with me.  It’s therefore extremely gratifying to me that what was a rare and often disparaged occurrence has become the norm.  Even prestigious law firms that referred to director-investor meetings as “corporate governance run amok” now embrace the practice.

I also admit that, despite my disagreement with the principles behind say on pay votes, such votes have had the very positive unintended consequence of making engagement commonplace.  In fact, there is so much engagement going on that some investors can’t find the time to meet with the companies they own.

So far, so good.

However, I believe that things may be going too far.  I refer, specifically, to the new movement to have a “say on climate” vote at every public company’s annual meeting (or, as the corporate community increasingly refers to it, the annual general meeting, or AGM – as opposed to an annual “specific” meeting, I suppose).  The vote would be similar to the say on pay vote – advisory, non-binding, and so on.  I have not yet heard anything about a second advisory vote to determine how often a say on climate vote would need to be taken, but I would not be surprised to learn that it’s under consideration somewhere.
Continue Reading Say what???