Yesterday, after an open Commission meeting, the SEC issued this 150-page concept release (double-spaced) regarding proxy mechanics, etc. Here’s the related press release – and Chair Schapiro’s opening statement. There is a 90-day comment period – and we should expect a large number of comments on a wide variety of topics given the complexity of some of the issues. The existing voting framework is a labyrinth that is difficult to untangle – so there is much work to be done. For a refresher about what a concept release really is, see my blog from last week…
Director Resignations as a Risk Factor
As happens more often than you would think in the blogosphere, Nell Minow beat me to the punch in blogging about an interesting new article. Below is what Nell blogged in The Corporate Library Blog:
Kevin LaCroix has an important piece in his D&O Diary Blog on unexpected director resignations as a leading indicator of risk. It “increases the probability of a securities class action lawsuit filing by 31 percent to 35 percent, with the likelihood increasing as firm size increases; if a company’s stock and accounting performance were poor in the prior year’ and if the firm raised relatively more external financing in the prior year.” According to a copyrighted March 2010 paper titled “The Dark Side of Outside Directors: Do They Quit When They Are Needed Most?” by Rüdiger Fahlenbrach of the Ecole Polytechnique Fédérale de Lausanne, Angie Low of the Nanyang Technological University and René Stultz of Ohio State University:
Among other things, a company with a surprise outside director departure has a “significantly higher likelihood of being named in a federal class action securities fraud lawsuit.” The study’s authors call this risk of future adverse events following a director’s departure the “dark side of outside directors.”…[O]utside directors have “incentives to leave when they anticipate that the firm on whose board they sit will perform poorly and/or disclose adverse information.”
“At a minimum,” LaCroix concludes, “the authors’ analysis suggests a potentially important new underwriting criterion.”
Social and Environmental Shareholder Proposals
– Why was the proxy preview written?
– What were the major social and environmental shareholder proposals this year?
– Any surprises in the votes so far this year?
– Do you have any recommendations for companies that receive a social or environmental shareholder proposal?
– Broc Romanek