August 5, 2010

August 25th? SEC Set to Consider Adopting Proxy Access

I normally don’t blog about rumors, but the SEC repeatedly has indicated that it would hold an open Commission meeting to adopt proxy access soon so that it will be in place for the next proxy season. So when Kara Scannell wrote in this WSJ article earlier this morning that the SEC’s meeting would be Wednesday, August 25th – according to “people familiar with the matter” – I thought I would pass it along and stem the flow of emails asking me when it would happen. Of course – until we see the SEC’s official meeting notice – that date may change, as rumored meeting dates often do…

Three Prominent UK Pension Funds Urge Companies to Resist Annual Director Elections

Here is news culled from this Wachtell Lipton memo written by Adam Emmerich, William Savitt and Brian Walker:

In response to new “good governance” guidance from the UK’s Financial Reporting Council (FRC) that requires companies either to put their directors up for annual reelection or to explain why they have opted for triennial elections, three of the UK’s largest institutional investors wrote an open letter urging companies to resist.

The letter, published in the Financial Times and delivered to every company listed in the FTSE All-Share index, criticizes the FRC’s guidance as unnecessary and damaging to the interests of companies and shareholders. The measure threatens to “engender a short-term culture with the risk of effective boards being distracted by short-term voting outcomes,” the investors write, which would be “detrimental to the interests of shareholders such as the pension funds we represent, who seek to have long-term, constructive, relationships with the directors of companies in which they invest.” The letter closes with a promise to support boards of directors who provide a reasonable argument for retaining triennial elections.

The investors manage three of the UK’s biggest pension funds – Hermes Equity Ownership Services, Railpen Investments and Universities Superannuation Scheme – who between them manage assets of £106 billion (US$169 billion). The letter is a powerful reminder that corporate governance arrangements should be designed to encourage the long-term strategic vision and direction necessary to maximize value for all constituencies. Replacing experienced and contemplative stewardship with myopic proxy politics encourages asymmetric risk-taking and similar tactics that pay off today at the expense of tomorrow.

As we have long argued, subjugating the corporate enterprise to the whims of the moment benefits no one – least of all shareholders, as these influential investors recognize. This very public resistance by large, sophisticated, long-term investors to the one-size-fits-all prescriptions of “good governance” may well mark a turning point in the fight for the preservation of shareholder capitalism in a form that allows for the continued strength and growth of American and European public companies.

July-August Issue: Deal Lawyers Print Newsletter

This July-August issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:

– Will Mandatory Shareholder Approval of Golden Parachutes Dull Their Luster?
– Mini-Tender Offers: More Frequent – No Less Troubling
– Latest Developments in Use of Top-Up Options
– Blood in the Water? Use of Delaware’s Two-Record Date Statute May Provide Flexibility, But Can Also Expose a Weak Hand
– Delaware Protects Attorney-Client Privilege for Investment Banker Communications
– Leveraged Acquisitions: A New Post-Credit Crisis Structure
– Delaware Court of Chancery Announces New Rules for Controlling Shareholder Freeze-Out Transactions

If you’re not yet a subscriber, try a “Rest of ’10 for Half-Price” no-risk trial to get a non-blurred version of this issue on a complimentary basis.

– Broc Romanek