Category: Corporate Governance

What were the results of the NYC Comptroller’s Office Boardroom Accountability Project 3.0?

You might recall that, in October last year, the Office of the NYC Comptroller launched its Boardroom Accountability Project 3.0, an initiative designed to increase board and CEO diversity. This third phase of the initiative called on companies to adopt a version of the “Rooney Rule,” a policy originally created by the National Football League to increase the number of minority candidates considered for head coaching and general manager positions.  Under the policy requested by the Comptroller’s Office, companies were asked to commit to including women and minority candidates in every pool from which nominees for open board seats and CEOs were selected. Last week, Stringer announced the initial results of the initiative.

Preparing for the possibility that the CEO tests positive

Given the pervasiveness of COVID-19, one issue that boards have had to face is what to do if the CEO or other executive critical to business continuity is suddenly taken ill or required to self-isolate because of exposure to the virus.  What about succession planning? How should the absence be communicated?  A couple of recent pieces from prominent consultants provide some guidance on these issues.

Want to know the number of virtual meetings planned for this proxy season, so far? Ask ISS

ISS now has established a COVID-19 resource center, which offers, among other things, a searchable list of companies that are holding virtual meetings this proxy season.  As of April 15, the tally for virtual meetings in the U.S. held or to be held this proxy season is 1,015; according to ISS, that number was 286 for all of calendar 2019.  In addition, 83 meetings have so far been cancelled or postponed. 

The Conference Board weighs in on key areas for board focus during the pandemic

In this article, the executive director of the ESG Center and the managing director, ESG, of The Conference Board identify seven key areas for board focus in light of the COVID-19 pandemic, essentially an update, given today’s practices and today’s crisis, of the Board’s 2009 report in the wake of the financial crisis. At the end of the day, while the pandemic has led to “increased responsibility, scrutiny, and uncertainty” for boards, the authors advocate that boards address those demands with “increased humanity. This is a time for board members to acknowledge their own abilities and limitations, as well as those of others; to act with increased understanding, compassion, and respect toward each other; and to call upon the untapped reserves of resilience and resourcefulness that abide in us all.”

Glass Lewis considers impact on policy of the COVID-19 pandemic

Like ISS (see this PubCo post), proxy advisor Glass Lewis has also revisited the application of its policies to take into account the impact of COVID-19—having conducted, in its words, “scenario planning in order to consider how this will impact governance and broader ESG issues in the present and future.”  Glass Lewis advises that it expects, currently and probably through 2021, “all governance issues and most proposal types to be impacted by the pandemic,” including balance-sheet and executive comp issues, on which Glass Lewis expresses some rather strong opinions.  Relying on the flexibility inherent in its “contextual approach,” Glass Lewis plans to exercise its “existing discretion and pragmatism” in connection with voting on any affected proposals. 

ISS provides guidance on the impact on policy of the COVID-19 pandemic

Today, ISS provided special policy guidance on the impact of the COVID-19 pandemic, observing that, in light of the current uncertainty, it is appropriate “to provide our stakeholders with some specific guidance on a number of voting policy issues that are likely to be directly implicated over the coming months by the pandemic and the global response to it.”  While the guidance suggests that ISS will apply its policies more flexibly under the circumstances, some things never change: option repricings—still disfavored.

NYSE temporarily eases shareholder approval requirements for certain equity issuances

After the 2008 financial crisis, many companies sought to raise capital by selling equity in private placements, often to existing major shareholders, but faced limitations resulting from the NYSE’s shareholder approval requirements. To address that concern in the Covid-19 crisis, the NYSE has proposed, and the SEC has approved and declared immediately effective, an NYSE rule change to waive, through June 30, 2020 and subject to compliance with conditions, application of certain of the shareholder approval requirements in Section 312.03 of the NYSE Listed Company Manual. That rule requires listed companies to obtain shareholder approval prior to certain types of equity issuances. The general effect of the waivers, according to the NYSE, is to make these NYSE shareholder approval requirements more comparable to the similar Nasdaq requirements on a temporary basis.   The waivers are intended to provide temporary relief to listed companies that may have urgent liquidity needs in the coming months as a result of the impact of COVID-19.

Glass Lewis to publish unedited company feedback with its research reports

You might recall that, in November 2019, the SEC proposed amendments to the proxy rules to add new disclosure and engagement requirements for proxy advisory firms, such as ISS and Glass Lewis. Among the amendments included in that proposal was a new provision that would require proxy advisory firms to allow companies time to review and provide feedback on the advisory firm’s advice in advance of dissemination of the advice to the firm’s clients. (See this PubCo post.)  Although there has been a substantial amount of pushback with regard to the SEC proposal and its earlier related guidance, including litigation filed by ISS (see this PubCo post), as noted on thecorporatecousel.net blog, proxy advisor Glass Lewis has announced that it will now include “unedited company feedback on its research…with all its proxy research papers” and will deliver that information “directly to the voting decision makers at every investor client.”   Will ISS follow suit?

Delaware emergency order provides relief regarding changes to annual meetings

As you may know, even though Corp Fin staff had provided relief allowing public companies a relatively simple way to advise their shareholders of a change in the date or location of their annual meetings (including a change to a virtual-only format), companies incorporated in Delaware that needed to make those same changes still had to address the complications associated with compliance with Delaware law. Fortunately, tonight, the Governor of Delaware appears to have come to the rescue with an emergency order that may ease many of those complications.

Corp Fin issues Disclosure Guidance: Topic No. 9 Coronavirus (COVID-19)

Today, the staff of Corp Fin issued Disclosure Guidance Topic No. 9, which offers the staff’s views regarding disclosure considerations, trading on material inside information and reporting financial results in the context of COVID-19 and related uncertainties. The guidance includes a valuable series of questions designed to help companies assess, and to stimulate effective disclosure regarding, the impact of the coronavirus.  As always these days, the guidance makes clear that it represents only the views of the staff, is not binding and has no legal force or effect.