Category Archives: Corporate Governance

European Parliament approves conflict minerals rules for the EU

by Cydney Posner

Last week, the  European Parliament approved, by a vote of 558 to 17 with 45 abstentions, new rules on conflict minerals, 3TG—tin, tungsten, tantalum and gold.  Proceeds from the sale of conflict minerals, which are used in the production of products such as mobile phones, cars and jewelry, are sometimes used to finance armed conflict in high-risk areas. The rules are designed to prevent the sale of conflict minerals from continuing to fuel this violence.  According to the press release, the rules impose supply chain due diligence requirements based on the OECD Guidance on companies importing 3TG into the EU. The rules are expected to cover up to 95% of imports as of January 1, 2021.  Following the European Parliament vote, the EU conflict minerals regulation will be finalized when formally approved by EU member countries and published in the EU Official Journal and will go into effect in 2021.

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Just as the U.S. seeks to roll back regulations, the European Parliament adopts new corporate governance rules

by Cydney Posner

Just when the U.S. is looking at how to roll back its regulations on corporations (among others) (see, e.g., this PubCo postthis PubCo post and this PubCo post), the rest of the world seems to be headed in the opposite direction.  On Tuesday, the EU Parliament approved a Shareholder Rights Directive, which introduces, among other things, the concept of binding say-on-pay votes for companies listed in EU markets (over 8,000 of them). The Directive also includes some interesting measures intended to impede short-termism.  According to the press release fact sheet issued by the European Commission, the Directive must still be adopted by the European Council (expected shortly) and, assuming adoption, will become effective two years thereafter. Continue reading

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BlackRock sets its priorities for board engagement

by Cydney Posner

Asset management firm BlackRock (reportedly the largest, with $5.1 trillion under management) has identified its “Investment Stewardship” priorities for 2017-2018, intended to help companies prepare for engaging with BlackRock. Among the hot topics are governance (including board composition and diversity), corporate strategy for long-term value creation in light of shifting assumptions, executive pay linked to long-term strategy, climate risk disclosure and human capital management.  According to BlackRock, its engagement process is designed to be constructive, and its goal is “to build mutual understanding and ask probing questions, not to tell companies what to do. Where we believe a company’s business or governance practices fall short, we explain our concerns and expectations, and then allow time for a considered response.” However, Blackrock’s approach is not limited to engagement; although, as a long-term investor, the firm will be “patient” as companies work to address concerns, in the absence of progress, BlackRock “will not hesitate to exercise our right to vote against management recommendations.” Continue reading

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SEC committee discusses multi-class common with unequal voting rights

by Cydney Posner

An interesting topic of discussion at a meeting last week of the SEC’s Investor Advisory Committee was “unequal voting rights of common stock” — the trend over the last decade (plus) for a small number of IPO companies, particularly tech companies, to offer low-vote or, more recently, no-vote common shares to the public. (Of course, the concept of dual class common with unequal voting rights is not novel at all.  Many companies, particularly some that are family run, have in decades past had a class of common shares with 10:1 voting rights, not to mention the highly respected Berkshire Hathaway with a class holding voting rights of 10,000:1.)  The debate centered around whether these measures are a legitimate effort to protect companies from the pressures of short-termism exerted by hedge fund activists or are a mechanism that causes shareholders to cede power without providing accountability.  Of course, the answer depends on where you sit. Continue reading

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State Street Global Advisors talks the talk on board gender diversity, but will it walk the walk?

by Cydney Posner

Happy International Women’s Day!

In this press release, State Street Global Advisors, which manages $2.47 trillion in assets, announced, on the eve of International Women’s Day, that it is “calling on the more than 3,500 companies [in which] State Street invests on behalf of clients, representing more than $30 trillion in market capitalization to take intentional steps to increase the number of women on their corporate boards.” According to State Street’s president and CEO, diversity is important to good governance:  “A key contributor to effective independent board leadership is diversity of thought, which requires directors with different skills, backgrounds and expertise.” Although State Street’s preferred approach is to encourage change through active engagement, it may well use stronger measures, including voting against directors. According to the WSJ, State Street plans to “send letters about gender diversity this week to the heads of the more than 700 Russell 3000, FTSE 350 and S&P/ASX 300 companies with no women on their boards.” Continue reading

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SEC continues to grant no-action relief in connection with proxy access fix-it proposals

by Cydney Posner

The SEC has posted a number of additional Corp Fin responses to requests for no-action, as well as to requests for reconsideration of previous denials of relief, regarding shareholder proposals to amend proxy access bylaws, so-called “fix-it” proposals. In all cases, the companies argued that they should be permitted to exclude the fix-it proposals as “substantially implemented” under Rule 14a-8(i)(10). The requests were successful in obtaining no-action relief in all cases except one. As in the past, the staff has not identified the key determining factor, but companies now seem to have found a formula for successfully excluding these proposals. Continue reading

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Another theory on Corp Fin’s position on proxy access fix-it proposals

by Cydney Posner

Corp Fin has refined its position with regard to exclusion of proposals to amend existing proxy access bylaws.  However, the basis for the staff’s determination to grant or refuse no-action relief in that context remains a conundrum.
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