September 29, 2010

The Proxy Access Lookback Test: March 15th of 2010 is the D-Day

I’ve seen too many people report that proxy access doesn’t apply to companies that mail their proxy materials before March 15th, 2011 – that is an incorrect statement of how the SEC’s transitional rules work. As noted earlier in this blog, since the SEC’s adopting release was published in the Federal Register on September 16th, the new access rules will become effective on November 15th – which would mean that companies who mailed their 2010 proxy statement prior to March 15, 2010 would have a window period that fully pre-dated the effective date of the rules for this proxy season – thus meaning that these companies would not be subject to proxy access for the 2011 proxy season.

Below is the excerpt from the adopting release that lays out the transition period:

Rule 14a-11 contains a window period for submission of shareholder nominees for inclusion in company proxy materials of no earlier than 150 calendar days, and no later than 120 calendar days, before the anniversary of the date that the company mailed its proxy materials for the prior year’s annual meeting.671 Shareholders seeking to use new Rule 14a-11 would be able to do so if the window period for submitting nominees for a particular company is open after the effective date of the rules. For some companies, the window period may open and close before the effective date of the new rules. In those cases, shareholders would not be permitted to submit nominees pursuant to Rule 14a-11 for inclusion in the company’s proxy materials for the 2011 proxy season. For other companies, the window period may open before the effective date of the rules, but close after the effective date. In those cases, shareholders would be able to submit a nominee between the effective date and the close of the window period.

I know this excerpt can be challenging to understand – but during the SEC’s open Commission meeting adopting the rules, Staffers did explain in plain language how it works in practice and what I have blogged from the beginning is correct.

If you’re trying to figure out what your “mailing date” was for this past season, I imagine the SEC will look for that date the way it does under Rule 14a-8 (as that issue is not clearly addressed in the access adopting release). So the date of the proxy statement likely controls (although if your affidavit of mailing has a different date, that might control – the date on the affidavit hopefully would not be earlier than the date on the proxy statement since definitive proxy materials need to be filed with the SEC before delivery commences.

Join us on October 20th for the webcast – “The ‘Former’ Corp Fin Staff Speaks on Proxy Access & Dodd-Frank” – to hear former Senior Staffers Marty Dunn of O’Melveny & Myers; John Huber of Latham & Watkins; Brian Lane of Gibson Dunn and Dave Lynn of and Morrison & Foerster weigh in on the open issues related to the new proxy access rules plus all the latest from Corp Fin on other matters.

SEC Approves Nasdaq’s (and NYSE’s) Rule Change on Broker Nonvotes and Executive Pay

Yesterday, the SEC approved a Nasdaq rule change on an accelerated basis that amends its proxy voting rule – Rule 2251 – to prohibit broker-dealers from voting on the election of directors, executive compensation, or any other significant matter, as determined by the SEC, unless instructed by the beneficial owner of the shares.The amendment was required to comply with Section 957 of Dodd-Frank.

A few weeks ago, the SEC approved a change to the NYSE’s Rule 452 that prohibits broker-dealers from voting uninstructed shares if the matter to be voted on relates to executive compensation. The change expressly provides that “executive compensation matters” include the three Say-onPay votes created under new Section 14A of the Exchange Act (as added by Section 951 of Dodd-Frank).

Dissecting the Modern Poison Pill

Tune in tomorrow for the webcast – “Dissecting the Modern Poison Pill” – to hear Rick Alexander of Morris Nichols, David Katz of Wachtell Lipton and Cliff Neimeth of Greenberg Traurig examine the use of poison pills and how they are constructed in the wake of Selectica, Yucaipa and Barnes & Noble, including factors you should consider when devising a pill. If you are not yet a member, try a 2011 no-risk trial and get the rest of 2010 for free (including access to this program).

– Broc Romanek