SEC Chair Jay Clayton has streamlined the Regulatory Flexibility Act Agenda to limit it to the rulemakings that the SEC actually expects to take up in the subsequent period. Clayton has previously said that the short-term agenda signifies rulemakings that the SEC actually plans to pursue in the following 12 months. (See this PubCo post and this PubCo post.) The SEC’s Fall 2019 short-term and long-term agendas have now been posted, reflecting priorities as of August 7, the date on which the SEC’s staff completed compilation of the data. Items on the short- and long-term agendas are discussed below.
In November, the SEC voted to propose amendments to add new disclosure and engagement requirements for proxy advisory firms and to “modernize” the shareholder proposal rules by increasing the eligibility and resubmission thresholds. (See this PubCo post and this PubCo post.) At the SEC open meeting, in explaining his perspective on the proposals, SEC Chair Jay Clayton indicated that, following the SEC’s proxy process roundtable (see this PubCo post), the SEC had received hundreds of comment letters, but there were seven letters that were most striking to him. Clayton seemed to be genuinely moved by these letters, ostensibly submitted by various Main Street investors, a group that Clayton considers to be core to the SEC’s protective mission. (See this PubCo post.) But, according to Bloomberg, there was something not quite right—something “fishy”—about those letters. (See this PubCo post.) Now, Bloomberg reports, a Democratic watchdog group is calling for an investigation into what is behind the “fishy” letters. And, as reported in this Bloomberg article, Clayton has said that the SEC is investigating.
You’d have to assume that the SEC didn’t spend a whole lot of time agonizing over the rule proposal—as reported by CNBC and Reuters, it took only a little over a week for the SEC to reject the NYSE’s proposed rule change that would have allowed companies going public to raise capital through primary direct listings. (See this PubCo post.) It remains to be seen whether the SEC is opposed to the concept in general, making rehabilitation of the proposal unlikely, at least in the near term, or whether the proposal could be quickly resurrected after some fixes to the proposal (or to other rules to accommodate the proposal).
How many people have strong opinions about most hot topics in corporate governance— staggered boards, proxy advisory firms or dual-class share structure? In Pay for Performance… But Not Too Much Pay: The American Public’s View of CEO Pay, from the Rock Center for Corporate Governance at Stanford, the authors take a look at a corporate governance subject on which everyone seems to have an opinion—CEO pay—and the public’s perceptions about it. While academics may be arguing about labor market efficiency, much of the public takes a more intuitive or pragmatic approach: “the issue of CEO pay boils down to a personal assessment of whether any executive deserves to be paid so much money.” The authors’ conclusion from the survey: “the disconnect between observed pay levels and the public’s view of pay is stark.” Overall, the survey results were quite fascinating.
In July, Representative Carolyn Maloney contacted SEC Commissioner Robert Jackson to solicit his views on legislation that would require public companies to disclose their corporate political spending. Jackson has now responded. In his view, the absence of transparency about political spending has led to a lack of accountability, allowing executives to “spend shareholder money on politics in a way that serves the interests of insiders, not investors.” But because investors typically put their money into mutual funds and other similar investment vehicles, their voting rights are typically exercised, not by the investors themselves, but instead by these institutions on their behalf—and most often not in sync with the surveyed preferences of investors: “while ordinary investors overwhelmingly favor transparency in this area, the biggest institutions consistently vote their shares to keep political spending in the dark.” And, he charges, it’s not just corporations that are opaque about their own political spending—institutional investors are likewise opaque about their votes against shareholder proposals for spending disclosure.
The NYSE has filed with the SEC a proposed rule change that would allow companies going public to raise capital through a primary direct listing. Under current NYSE rules, only secondary sales are permitted in a direct listing. As a result, thus far, companies that have embarked on direct listings have been more of the unicorn variety, where the company was not necessarily in need of additional capital. If approved by the SEC, will the new proposal be a game changer for the traditional underwritten IPO?
You may recall that, last month, Corp Fin announced that it had revisited its approach to responding to no-action requests to exclude shareholder proposals. In essence, under the new policy, the staff may respond to some requests orally, instead of in writing, and, in some cases, may decline to state a view altogether, leaving the company to make its own determination. (See this PubCo post.) In describing the new approach in remarks to the PLI Securities Regulation Institute, Corp Fin Deputy Director Shelley Parratt said that the plan was to post a chart on the SEC website with the bottom line responses to these no-action requests and to inform both the company and the proponent by email that the response would shortly be posted on the chart. (See this PubCo post.) As reported on thecorporatecounsel.net blog, the 2019-2020 Shareholder Proposal No-Action Responses chart is now available. Parratt had suggested that the chart might actually be easier for readers to follow—and she may well be right.