CAQ releases 2018 audit committee transparency barometer
The Center for Audit Quality, working with Audit Analytics, has just released a new edition of its annual Audit Committee Transparency Barometer, which, over the past five years, has measured the robustness of audit committee disclosures in proxy statements among companies in the S&P Composite 1500. The bottom line, according to the CAQ, is that the level of voluntary transparency has continued to steadily increase in most areas. The report includes several useful examples of the types of disclosure discussed.
EY offers new analysis of cybersecurity disclosures
In this report, EY discusses an analysis it conducted of voluntary cybersecurity-related disclosures in the 10-Ks and proxy statements of Fortune 100 companies (79 companies that had filed as of September 1, 2018). The analysis notes that, not only are regulators focused on cybersecurity risk management and disclosure, but investors consider cybersecurity risk management as critical to the board’s risk oversight responsibilities and boards are increasingly engaged on the topic. The analysis found a wide variation in the depth and nature of the disclosures.
Do we still need to post XBRL data files on our website?
Now that it’s time for 10-Q filings, questions have been raised about the timing of some of the Inline XBRL-related changes. (See this Cooley Alert and this PubCo post.)
SEC amends disclosure rules for mining companies
The SEC has adopted new rule amendments to modernize disclosures by mining companies.
Glass Lewis posts 2019 proxy and shareholder initiative guidelines
Proxy advisor Glass Lewis has posted its 2019 Proxy Guidelines and 2019 Guidelines Regarding Shareholder Initiatives. One of the more striking points is that GL indicates that it may, albeit in limited circumstances, recommend against the members of the nominating/governance committee simply for successfully requesting no-action relief from the SEC to exclude (and presumably excluding) a shareholder proposal, where GL views the exclusion to have been detrimental to shareholders. GL’s new guidance includes the following updates:
CII petitions NYSE and Nasdaq regarding multi-class share structures
The Council of Institutional Investors has announced that it has filed petitions with the NYSE and Nasdaq requesting that each exchange amend its listing standards to address the issue of multi-class capital structures (i.e., share structures that have unequal voting rights for different classes of common stock). As requested by the petition, the amendment would require that, going forward, companies seeking to list with multi-class share structures include provisions in their governing documents that would sunset the unequal voting at seven years following an IPO and return the structure to “one-share, one-vote” structures, “subject to extension by additional terms of no more than seven years each, by vote of a majority of outstanding shares of each share class, voting separately, on a one-share, one-vote basis.” According to CII, unequal voting rights impair the ability of shareholders “to hold executives and directors accountable.” But companies contend that these measures are being adopted for a valid reason: to protect the company from unwanted interventions by hedge-fund activists with short-term goals and perspectives. Accordingly, the debate has centered around whether these measures are a legitimate effort to protect companies from the pressures of short-termism exerted by hedge-fund activists and others or are a mechanism that causes shareholders to cede power without providing accountability. Of course, the answer depends on where you sit.
New SLB 14J on shareholder proposals revisits the economic relevance and ordinary business exclusions
Corp Fin has just released a new staff legal bulletin on shareholder proposals—we’re up to 14J—that once again examines the exclusions under Rules 14a-8(i)(5), the “economic relevance” exception, and 14a-8(i)(7), the “ordinary business” exception. Notably, these rules were also the subject of SLB 14I. More specifically, the new SLB provides guidance with regard to the following:
the nature of the board analysis the staff would find most “helpful” in evaluating a no-action request to exclude a shareholder proposal,
“micromanagement” as a basis for exclusion under Rule 14a-8(i)(7) and
the application of Rule 14a-8(i)(7) to exclude proposals related to senior executive and/or director compensation matters.
CEO group issues commonsense corporate governance principles, version 2.0
A couple of years ago, a group of CEOs of major public companies and institutional investors, including Jamie Dimon, Warren Buffett, Larry Fink and Mary Barra, among others, developed a list of “commonsense corporate governance principles,” designed to generate a constructive dialogue about corporate governance at public companies. As discussed in a new open letter, the group believes that its principles—along with other sets of principles developed by the Investor Stewardship Group, the Business Roundtable and the World Economic Forum—have become “part of a larger dialogue about the responsibilities and need for constructive engagement of those companies, their boards and their investors.” The group views the discussion as particularly important in light of the “precipitous decline” in the number of public companies, which the group attributes, in large part, to the short-termism of public market participants. In that regard, in its letter, the group endorsed the principles developed by these other groups “as counterweights to unhealthy short-termism,” and revisited its own principles in a new updated Version 2.0. According to the press release, the signatories to Version 2.0 (including a number of well-known new signatories) have committed to apply the principles in their own businesses and call on others to join their ranks.
Corp Fin staff issues new CDIs regarding cross-border exemptions
The staff of Corp Fin have posted a revised set of CDIs interpreting the cross-border exemptions. The new CDIs replace the 17-year old interpretations that were contained in Section II of the July 2001 Interim Supplement to the antediluvian Telephone Interpretations Manual. (You may even have a copy in a three-hole binder somewhere.) Some of the CDIs reflect only technical revisions, some are substantive and some are entirely new interps.
Semiannual reporting, we hardly knew ye—version 2.0—and other agenda items
No sooner had SEC Chair Jay Clayton, in informal comments at a public event, called a halt to speculation that large public companies would be seeing semiannual reporting any time soon (see this PubCo post), then out comes the Fall 2018 Unified Agenda of Regulatory and Deregulatory Actions, which identifies “Earnings Releases/Quarterly Reports” as a pre-rule stage, substantive, non-significant (really?) agenda item for the SEC. The abstract indicates that Corp Fin “is considering recommending that the Commission seek public comment on ways to ease companies’ compliance burdens while maintaining appropriate levels of disclosure and investor protection.” Legal authority: “not yet determined.” Ok, does Clayton take it all back or does it still mean that, notwithstanding this agenda item, the likelihood of anything materializing as a result is—other than, as Clayton had intimated, perhaps for smaller companies—still pretty slim?
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