September 21, 2009

Proxy Access: Will It Arrive? And When?

With the expiration of the comment period and rumblings of next proxy season heard in the not-so-far off distance (not to mention the huge attendance for our webcast on the topic last week; audio archive now available), a lot of members are wondering if the SEC indeed will adopt proxy access – and if so, when. Based on statements from the SEC, the short answers seem to be “yes” and “in time for next proxy season.” I’ve heard from quite a number of sources – bear in mind, all of them from outside the SEC – that the SEC will hold an open Commission meeting to adopt something in the mid-November range.

As noted by Prof. Lisa Fairfax in the “Conglomerate Blog,” SEC Chair Schapiro spoke last week and indicated that something would likely be adopted soon. Lisa then went on to provide some notes about what Schapiro said in reaction to some questions at the end of her speech – so it’s worth reading her blog in tandem with Schapiro’s speech

Survey: Shareholders “Just Voting No” Rises

Over the weekend, as noted in this NY Times article, proxy advisor PROXY Governance released a survey showing a significant increase in the percentage of director nominees who received high percentages of shareholder votes cast in opposition in director elections during the first eight months of 2009. Here are the major findings:

– Although the vast majority of director nominees continue to be elected with little opposition, through August 2009, 9.8% of unopposed director nominees had at least 20% of shares voted against them or withheld, up from 5.5% in 2008.

– This trend was apparent at other threshold levels as well, with the percentage of directors having at least 40% of shares voted in opposition doubling from 1% in 2008 to 2.1% in 2009, and the percentage of directors failing to attain support from a majority of shares cast tripling to 0.6% in 2009 from 0.2% in 2008.

– Of all director nominees who had more than 20% of shares withheld or voted against them in board elections, nearly 60% served on compensation committees.

– Despite fewer organized “Vote No” campaigns against directors in 2009, at least 84 directors at 48 companies failed to attain majority support from shareholders through August 2009 at more than 2,400 companies where voting results were available.

– Beginning in 2010, discretionary voting by brokers will no longer be allowed in director elections. Because brokers control up to 20% of the vote at many companies and almost always vote with management’s recommendations in director elections, the new rules could result in many more directors failing to achieve majority support. For example, out of PROXY Governance’s universe of director votes through August 2009, there were 284 director nominees who were elected with less than 60% of shares cast in support and 473 nominees elected with less than 65% support of the shares cast. Many of these directors would likely not have received majority support if broker discretionary votes had not been counted.

Microsoft Becomes First Company to Adopt Triennial Alternative for Say-on-Pay

Late Friday, Microsoft announced that its board authorized moving forward with a triennial say on pay approach starting with this year’s meeting, being held on November 19th. On the “Microsoft on the Issues” Blog, the company’s General Counsel and Deputy General Counsel provide more background on the issue and details of the plan adopted.

You may recall that the Carpenters Union had been pushing this triennial alternative (as noted in this blog) – but that it had more recently withdrawn the proposals it had submitted to 20 companies on the topic in the wake of the House considering but rejecting the idea when it passed a say-on-pay bill in early August. Maybe Microsoft’s action will provide some momentum towards the idea, although it could be too late as the Senate plans to consider a bill in the coming months…

– Broc Romanek