July 7, 2011

Shareholder Proposals: The Rise of Rebuttals to Company’s Statements in Opposition

Until this year, I think it was fairly rare that a shareholder proponent would bother to file something with the SEC to disagree with a company’s Statement in Opposition to the shareholder proposal. These Statements in Opposition are disclosed in a company’s proxy statement directly after the 500-word-or-less proposal and are governed by Rule 14a-8(m).

Under that rule, the company must provide a copy of its Statement at least 30 calendar days before definitive proxy materials are filed (or a 5-day timeframe if the SEC Staff requires the proponent to revise its own proposal under a no-action response). Once a proponent sees the company’s Statement, it can contest what it says if it feels its materially false and misleading with the SEC Staff.

In the alternative, the proponent can just “go public” with how it feels about the company’s Statement if it first files a Notice of Exempt Solicitation under Rule 14a-6(g) – the information in this Notice can then serve as the proponent’s formal rebuttal (technically, the proponent doesn’t have to file this Notice unless they cross the $5 million ownership threshold of Rule14a-6(g). For the larger institutions, you can assume that to be the case, but necessarily for the smaller ones – thus, not all of these responses get filed with the SEC).

With the ability for proponents to easily publicize their views on the Web, it seems that proponents are now more willing to publicize their displeasure about how a company comments on their proposal by filing a Notice of Exempt Solicitation with the SEC rather than just complaining to the Corp Fin Staff. For example, As You Sow filed this Notice of Exempt Solicitation recently relating to a fracking proposal submitted to Exxon Mobil. And here’s another one filed by As You Sow rebutting First Energy’s Statement in Opposition. And here is one from the Detroit Province of the Society of Jesus sent to OM Group. Hat tip to Simon Billenness for pointing this trend out and Keir Gumbs for being the legal beagle!

Study: A Ten-Year Comparison of Restatements

In a recent study, Audit Analytics looked back over ten years of restatements and, among other things, found the following:

– The quantity of restatement and non-reliance disclosures peaked in 2006 with 1795 disclosures.

– Each of the three years thereafter experienced a decline in the number of disclosures with 683 restatements in 2009.

– After three years of decline, financial restatements experienced an uptick in quantity in 2010, largely due to non-accelerated filers, but the severity remained low.

– In 2010, the number of restatements disclosed by accelerated filers decreased.

We have posted the study in our “Restatements” Practice Area.

Managing Foreign Subsidiaries

In this podcast, Kevin Penzien of Citco Corporate Services explains how companies manage the complexities of multiple foreign subsidiaries, including:

– Why should foreign subsidiaries be a priority for the corporate secretary? Don’t they have bigger fish to fry?
– Why not just hire local outside counsel to assist with foreign subsidiaries?
– Which foreign markets are particularly hot among your clients? And which jurisdictions are most difficult for US multinationals to manage legal entities?
– What are the typical foreign subsidiary implications in M&A transactions?

– Broc Romanek