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From our recent proxy disclosure conference, we felt that the keynote remarks of Gibson Dunn’s John Olson are so important for all practitioners to hear that we transcribed them and are making them freely available among other important remarks made at our conferences over the years…

Tune in today to hear John speak during the webcast: “Dealing with the Board: Presentations, Etiquette & More.”

ISS Issues Survey Results for 2014 Policy Updates

Here’s news from Davis Polk’s Ning Chiu from this blog:

ISS received more than 500 responses on emerging issues that could make up its policy update for the 2014 season, with a total of 128 institutional investors and 350 corporate issuers. Over 90% of the issuers were based in the United States, compared to 66% of the investors.

Last year, ISS implemented a controversial policy that they will recommend against any board that fails to respond to a shareholder proposal that receives a majority of votes cast. Recognizing the flak that resulted, ISS included a question about the policy in this year’s survey. Only 36% of investors indicated that the board should implement specific actions, while 40% wanted the board to exercise its discretion freely. Another 24% of investors suggested it depended on the circumstances, including the level of shareholder support on the proposal. It is unclear whether these survey answers will change the policy.

Investors were more inclined to rally around concerns of director tenure, as more than 10 years would be deemed problematic by 74%, with concerns related to independence and limitations on the board’s ability to change its membership. Over half of investors encouraged rotation of key positions such as board chair, lead director and committee chairs.

Service on other public company boards is one way investors assess director performance, including positive factors such as a director’s breadth of experience and expertise, or negative aspects such as governance concerns at those other companies. Fifty-four percent of investors believe ISS should consider company performance, primarily TSR, when evaluating directors.

More than half of the investors indicated it would be appropriate for ISS to distinguish policies based on company size when it comes to equity compensation plans, but not as many investors supported differentiation for issues such as chair and CEO separation.

Performance conditions on equity awards in equity-based compensation plans seeking shareholder approval were considered very significant by 75% of investors if ISS moves to a holistic approach to equity plan evaluation, while the cost of the plan and other features such as vesting requirements were similarly viewed by a majority of investors.

For share authorizations, a large number of investors found the size of the requested increase, the ratio of outstanding compared to new potential shares and the use of the shares to be important. More than half indicated that a company’s governance structure was very important in these voting decisions.

The next step is for ISS to release draft policies for open comment, before issuing new policy updates in November.

California Overhauls State Anti-Securities Fraud Statute

A few weeks ago, California Governor Jerry Brown signed into law Senate Bill 538–which overhauls the anti-fraud provision of the California Securities Law of 1968, and will likely make it more difficult for would-be plaintiffs to maintain lawsuits for securities fraud. Specifically, SB 538 revises California Corporations Code § 25401 to make it unlawful, in connection with the offer, sale, or purchase of a security, to: (a) employ a device, scheme, or artifice to defraud; (b) make an untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engage in an act, practice, or course of business that operates or would operate as a fraud or deceit upon another person.

Learn more in the memos posted in our “California” Practice Area – and in this Keith Bishop blog entitled “Die Verwandlung: How The Legislature Likely Raised The Bar On Securities Fraud Actions”…

– Broc Romanek