TheCorporateCounsel.net

Join us for tomorrow’s webcast – “Drilling Down: Doing an IPO After the ’33 Act Reform” – featuring Justin Bastian of Morrison & Foerster; Steve Bochner of Wilson Sonsini, Goodrich & Rosati; and Michael Wishart of Goldman Sachs. With the help of a banker on this panel, there will be a discussion on recent developments in the IPO market beyond just the impact of the ’33 Act Reform.

SEC Posts ’33 Act Reform Q&A

Today, the SEC Staff posted the much-anticipated transitional Q&A guidance on the ’33 Act reform.

Fidelity Votes Against Board Over Executive Pay

As an indication that executive pay will play a prominent role in the majority vote movement, Fidelity Investments opposed the reelection of the board at Clear Channel Communications after the company renewed about $90 million in severance arrangements for the Chair, CEO and CFO.

This action came to light when Fidelity recently disclosed in one of its many Form N-PXs that its mutual funds withheld their votes for all 10 directors at the company’s annual meeting in April (starting last year, mutual funds are required to annually disclose their voting records). Fidelity ranked as the largest shareholder at the time with a 15.5% stake. This resulted in at least 18% of the total votes being withheld for each director.

Many of you will recall that it was not too long ago that Fidelity traditionally sided with management when casting ballots – here they opposed management even though ISS had recommended votes in favor of 9 of the 10 Clear Channel directors!

Fidelity withheld its support for the Clear Channel board after the company renewed employment agreements in March with the founder (who is the board chair) and his sons (who serve as the CEO and CFO). The new agreements retained provisions from their former contracts that provide each officer with a cash severance payment of 7 times their base salary and highest annual bonus during the prior three years, as well as 1 million options. Under its voting policy, Fidelity casts its ballots against directors who permit severance payments exceeding three times annual salary and bonus without obtaining a shareholder vote.

Fidelity also administers Clear Channel’s 401(k) retirement plan – at least three of the funds offered in the Clear Channel 401(k) plan withheld votes for the company’s board. In other words, Clear Channel employees who invested in these funds ended up siding against their own company’s board. The company was not aware of Fidelity’s vote until published reports came out last week.

Besides this obvious lack of communcation between the company and its largest shareholder, there are enough lessons learned in this story to fill up my blog for a week. I will save it for the many experts, who are better qualified than me, who will speak at the “2nd Annual Executive Compensation Conference.” For those of you planning to attend live in Chicago – rather than by video webcast – I understand that the hotel is nearly sold out, so you might want to reserve rooms now.