Tag Archives: shareholder proposals

It’s baaaack — the Financial CHOICE Act of 2017

by Cydney Posner

A draft of the Financial CHOICE Act of 2017 (fka version 2.0), a bill to create hope and opportunity for investors, consumers, and entrepreneurs — a masterpiece of acronyming — has just been released (and weighs in at 593 pages).   The bill, sponsored by Jeb Hensarling, Chair of the House Financial Services Committee, was framed as a Republican proposal to reform the financial regulatory system and relieve the affliction of Dodd-Frank. In addition to taking aim at much of Dodd-Frank, among other things, the bill places a heavier burden on regulators and proxy advisory firms generally, eliminates a lot of studies and repeals or eases a number of regulations. A hearing in the House has been scheduled for this week. The bill never made much progress when it was originally introduced last year (as version 1.0), but with Congress and the Presidency now in Republican hands, its chances of survival in some form are immensely greater.  Of course, the Senate Dems could filibuster — assuming, that is, that the legislative filibuster survives that long — the Senate version of the bill, or threaten to do so, which could lead to some negotiation.

While the vast majority of provisions in the draft bill relate to the banking provisions of Dodd-Frank and the Consumer Financial Protection Bureau, some are related to new requirements for agency rulemaking, capital formation, compensation and corporate governance matters, and other matters of interest. Selected provisions are summarized below: Continue reading

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Filed under Accounting and Auditing, Corporate Governance, Executive Compensation, Litigation, Securities

Shareholder proposal process in the crosshairs

by Cydney Posner

According to this report in Bloomberg BNA,  the plans for changing the shareholder proposal process in the Financial CHOICE Act 2.0 are quite dramatic and could effectively curtail the process, if that is, the current version of the provision ever makes it into law.   Continue reading

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More opposition to the virtual-only annual meeting

by Cydney Posner

In case you missed it, Gretchen Morgenson’s column in the Sunday NYT railed against virtual-only annual meetings, which according to her data (provided by Broadridge), have increased in number from 21 in 2011 to 154 in 2016.  And joining in the condemnation of the practice was NYC Comptroller Scott Stringer, who, you may recall, submitted 75 shareholder proposals for proxy access at major companies in 2014, triggering the movement toward wider adoption of proxy access bylaws.  Interestingly, the virtual annual meeting was initially viewed as “CPR” for the debilitated annual shareholders’ meeting, which had, over time, evolved into a moribund ritual of corporate governance, as fewer and fewer shareholders were able or willing to overcome the logistical and financial burdens of attendance in person. With virtual technology, large numbers of shareholders were suddenly able to attend meetings on their laptops. Ironically, however, it is shareholders — the designated beneficiaries of the virtual annual meeting — that have raised objections. 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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Shareholder proposals regarding lead director tenure: a harbinger of things to come?

by Cydney Posner

The topic of director tenure has increasingly become the focus of both academics and investors. Some argue that long-term directors contribute deep knowledge of the company and provide experience, historical memory and continuity to the board — along with the gravitas sometimes necessary to challenge management. Others contend that directors with long tenure are “stale” and rarely contribute fresh perspectives.  Moreover, they suggest, the independence of directors with long tenure may even be compromised — not in the technical sense of the NYSE or Nasdaq definitions of course, but rather more in the sense of “social independence,” meaning that the development over time of shared social connections might bias them or taint their objectivity. According to the WSJ, the head of a corporate governance center at the Conference Board has observed that “’[t]he tenure issue is one that is bubbling below the surface.’“ (See this PubCo post and this PubCo post.) Continue reading

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Why does management seek to exclude shareholder proposals?

by Cydney Posner

In this recent preliminary working paper, Why Do Managers Fight Shareholder Proposals? Evidence from No‐Action Letter Decisions, academics at the USC Marshall School of Business attempt to determine why corporate management seeks to exclude shareholder proposals: are corporate managers acting as “responsible managers” who view shareholder proposals as “value‐destroying — either misguided or intended to benefit the narrow interests of proponents” —  or as a “self‐interested managers” who oppose shareholder proposals “to preserve corporate practices that provide them with private benefits”?  Apparently, the results of prior studies have supported both views. Although proponents of shareholder proposals may insist otherwise, the results of this study led the authors to conclude that, in using the no‐action letter process to try to exclude shareholder proposals, managers act “based on a genuine concern that shareholder proposals harm firm value, and… not merely [to provide] a convenient rationalization in order to preserve managerial private benefits.” Continue reading

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