February 7, 2012

Hewlett-Packard Will Put Proxy Access Bylaw to 2013 Vote

Just ahead of becoming the first major company with a proxy access shareholder proposal in its proxy materials, Hewlett-Packard filed its proxy statement on Friday without the proposal as it negotiated the withdraw of the shareholder proposal instead. Here is a WSJ article explaining that the company agreed to put up a proxy access bylaw for a vote at the 2013 annual meeting at the access threshold previously adopted by the SEC (3% ownership for 3 years), though nominations would be limited to 20% of the board:

In a major victory for activists, Hewlett-Packard Co. agreed to a step that could give investors more power to oust its board members. The Palo Alto, Calif., technology giant will give its stockholders the chance to approve so-called proxy access through a bylaw vote at its 2013 annual meeting. If the measure passes, investors who own at least 3% of H-P shares for at least three years would be allowed to nominate up to 20% of the company’s directors, the company said. The vote would be binding, meaning H-P would be bound by the results. Currently, proxies only list directors that the company nominated.

Activist shareholders have been trying to get proxy access for some time. In the case of H-P, Amalgamated Bank’s LongView Fund, which owns around 400,000 shares of H-P, was expected to succeed at bringing such a nonbinding proposal to a vote at H-P’s 2012 annual meeting, which takes place in March. But a proposal wasn’t included in H-P’s proxy materials, which were filed Friday.

Instead, an H-P spokesman said in a statement that the company had already reached a deal with Amalgamated Bank. Under the agreement, H-P has “agreed to put a board-recommended proxy access proposal to a vote at our 2013 annual meeting of stockholders,” he said, noting that the company “is committed to good corporate governance and open and frequent communication with its stockholders.”

A spokesman for Amalgamated Bank said it withdrew its proposal after H-P agreed to present a proxy-access proposal in 2013. H-P’s move represents “a recognition by a significant company that proxy access has potential merit and number two, that the shareholder resolution probably would have passed without management support,” said Charles Elson, head of the Weinberg Center for Corporate Governance at University of Delaware’s business school. Proponents say proxy access should improve returns by forcing boards to be more responsive to shareholders. Without proxy access, investors keen to shake up boards must wage costly campaigns and foot the bill for distributing their own ballots.

Last year, the Securities and Exchange Commission decided not to appeal a federal court ruling throwing out an agency rule that broadly required proxy access at U.S. companies. The agency put the rule on hold in August after business groups sued to overturn it. H-P’s board has come under scrutiny several times in recent years for issues including a spying scandal and its ousting of a popular chief executive. Last year, a shareholder watchdog criticized the involvement of its then-CEO Leo Apotheker in the selection of five new board members. The 3% ownership bar is a high one, however, as only four H-P shareholders own that much of the technology company, according to filings.

Inadequate Cost-Benefit Analysis: Plaintiffs Challenging CFTC Rulemaking Dealt Setback

Back in December, I blogged about how SIFMA and the International Swaps and Derivatives Association filed a complaint in US District Court for DC to challenge the CFTC’s new rule that seeks to curb excessive speculation (like proxy access, this rule was approved 3-2 by the CFTC Commissioners). The groups had petitioned the higher US Court of Appeals for the DC Circuit to hear the case – which is the court that ruled against the SEC in the proxy access lawsuit filed by the Business Roundtable and US Chamber of Commerce. And like that lawsuit, this one claims the CFTC didn’t conduct a proper cost-benefit analysis. In his “ Blog,” Steve Quinlivan notes that the US Court of Appeals for the District of Columbia Circuit recently dismissed the petition for review.

In this report issued a few weeks ago, the SEC’s Inspector General provided its latest review of Dodd-Frank rulemaking’s cost-benefit analysis.

More on “Is Corp Fin Too Lenient with Waiver Letters?”

Last week, I blogged a note from an anonymous member – which I had received before the NY Times made front-page news of its own thoughts – about Corp Fin’s practice of considering waiver requests for being an “ineligible issuer” under Rule 405.

I received a number of emails from members who stated that their experience with the Staff has been contrary to what the anonymous member wrote. They noted they had submitted a request to Corp Fin and struck out – as a result, they thought the Staff was pretty miserly in granting these requests. So I the NY Times’ article perhaps was driven by the often erroneous perception that regulators are in the back pocket of Wall Street. I don’t think this perception is necessarily fair, but “it is what it is” in this post-financial crisis era…

Speaking of perceptions, this piece entitled “Ex-Lehman Brothers Trader: Only On Wall Street Could You ‘Get Paid So Much For Doing So Little’” won’t be good for how the public views the Street…

– Broc Romanek