Category: Corporate Governance

As issues of corporate social responsibility continue to gain ground, will the issue of gun safety become more prominent this proxy season?

A lot has been written about institutional investors’ turn toward issues of corporate social responsibility.  One CSR topic that has received a lot of attention in the last few years has been firearms safety. In this post, published last week on The Harvard Law School Forum on Corporate Governance and Financial Regulation, a coalition of investors, including CalPERS, CalSTRS, Rockefeller Asset management and State Street Global Advisors, has developed The Responsible Civilian Firearms Industry Principles, intended to encourage companies involved in the manufacture, distribution, sale and enforcement of regulation of the firearms industry to take action in support of the responsible use of firearms. According to the post, in asserting its “role as investors,” the group identifies “expectations for the firearms industry that will reduce risks and improve the safety of civil society at large. Further, we commit to monitoring progress by companies over time and engaging with them regularly on this issue, especially in support of enterprises that champion adoption of responsible practices….We call on companies within the civilian firearms industry to publicly demonstrate and publish their compliance with each of these principles, failing which, we will consider using all tools available to us as investors to mitigate these risks.”

Clayton reviews 2019 regulatory priorities and risks the SEC is monitoring

In a speech given yesterday at Columbia University, SEC Chair Jay Clayton reviewed the SEC’s regulatory achievements over the past year, metaphorically slapping the SEC and the staff on the back for a job well done in accomplishing 88% of the items identified on the SEC’s near-term agenda for fiscal 2018. Of particular interest, however, was his discussion of the some of the priority items on the 2019 agenda.  In closing, Clayton hammered again at three risk areas that the SEC is currently monitoring—yes, those three. Clearly, the signal is that companies should consider these risks.

The impact of short-term pressures on long-term decision-making

In this article in the WSJ and this article in the New Yorker, the authors discuss the challenges companies encounter when they try to make long-term investment decisions in the face of short-term market pressures: the debate between short-term and long-term thinking on Wall Street “is a key concern for chief executives trying to justify major capital investments that can take years to pay off. Long-range strategies can be hard to pull off in an era when Wall Street is fixated on three-month reporting periods.” Should companies try to please long-term investors or investors who are “playing the quarterly game?” What about hedge-fund activists that threaten to force the company to adopt a short-term perspective?

Members of Chevedden group shift focus to environmental, social and political proposals

Companies that have long battled the prolific John Chevedden group on corporate governance shareholder proposals, as first noted on theCorporateCounsel.net proxy season blog, may be heartened to hear — or maybe not—that some members of the group are changing their focus.

No-action letters provide more insight into “ordinary business” exclusion under Rule 14a-8(i)(7)

On the heels of the release of SLB 14J, Corp Fin has posted a couple of new no-action letters that shed some more light on the “ordinary business” exclusion of Rule 14a-8(i)(7).  As you may recall, in SLB 14J, the staff addressed the nature of the board analysis the staff would find most “helpful” in evaluating a no-action request to exclude a shareholder proposal under Rule 14a-8(i)(7), as well as “micromanagement” as a basis for exclusion under that same Rule.  Most impressive is that, in the response letters, the staff actually includes a sentence or two that provides some insight into the staff’s reasoning.  If you recall, a request for more clarity from the staff was one of the comments raised at the SEC’s proxy roundtable, and the staff appears to have heard.  (See this PubCo post.) Both of the letters were submitted in connection with proposals to Walgreens Boots Alliance.

ISS posts 2019 policy updates

Yesterday, ISS announced updates to its policies for next year.  Like Glass Lewis a month ago, ISS is also—shall we say “unfriendly”— to boards of companies that submit to shareholders a charter or bylaw ratification proposal while excluding, as permitted under SEC rules and staff no-action positions, a conflicting shareholder proposal.  Below are some of the highlights of the ISS updates:

What happened at the SEC’s proxy process roundtable?

At last week’s proxy process roundtable, three panels, each moderated by SEC staff, addressed three topics:

proxy voting mechanics and technology—how can the accuracy, transparency and efficiency of the proxy voting and solicitation system be improved?
shareholder proposals—exploring effective shareholder engagement, experience with the shareholder proposal process, and related rules and SEC guidance
proxy advisory firms—can the role of proxy advisors and their relationship to companies and institutional investors be improved?
The first panel, on proxy plumbing, was characterized by the panelist who began the discussion as “the most boring, least partisan and, honestly, the most important” of the three topics. (But it was surprisingly not boring.)  The last panel, on proxy advisory firms, was characterized by Commissioner Roisman as the “most anticipated,” but the expected fireworks were notably absent—except, perhaps, for the novel take on the subject offered by former Senator Phil Gramm.   Here are the Commissioners’ opening statements: Chair Clayton, Stein and Roisman