September 12, 2014

CII: Investors Seek Proxy Disclosure of Board Evaluation Process

As noted in this blog by Davis Polk’s Ning Chiu, CII has issued this report about “Best Disclosures of Board Evaluation Process.” Based on a survey of CII members, investors want disclosure of the board evaluation process (but not the actual evaluation results themselves).

Exemplars of disclosure about the mechanics of the evaluation process include Potash, Agrium and General Electric – while the report points to BHP Billiton, Dunelm and Randstad Holding (all non-US companies) for “particularly effective” disclosures of the most recent board evaluations.

Shareholder Proposals: Different Outcomes for Political Contribution Proposals

Last week, I narrowly missed the hubbub outside the SEC’s DC headquarters as protestors gathered in support of the petition asking the SEC to require political contribution disclosures (I was down there for other reasons) – the group now has a website: “” It’s still a hot topic. The protest celebrated the 2011 rulemaking petition that now has over 1 million supporters. Wow!

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

The SEC staff recently disagreed with Procter & Gamble’s no-action letter, which sought to exclude a shareholder proposal on ordinary business grounds, although a similar proposal sent to Johnson & Johnson was allowed to be kept out of its proxy statement this past February.

Both proposals requested reports to shareholders explaining the congruency between the companies’ stated “corporate values” and the company’s political contributions, with “justifications for…exceptions” for those contributions which may appear to be misaligned with the values. While the SEC staff did not explain their reasoning in the P&G decision, the different results seem to lie in the focus of the examples used to demonstrate the alleged incongruency.

The J&J proposal questioned the company’s public commitment to the Patient Protection and Affordable Care Act (ACA), since, according to the proponent, 30% of the company’s political contributions were directed at legislators who voted against ACA and related regulations, or to politicians who favored legislation to prohibit the enforcement of ACA. In that case, the SEC staff stated that the proposal was directed toward specific political contributions that relate to the operation of the business, not general political activities, and therefore permitted the company to exclude the proposal.

Procter & Gamble’s shareholder proposal focused on two different issues. The proposal criticized making donations to politicians who voted to deregulate greenhouse gasses as contrary to the company’s stated goal toward environmental sustainability. In addition, the proposal also questioned the company’s support of candidates who voted against hate crimes legislation or who disfavored same sex marriage, which the proponent claimed is at odds with the company’s stated nondiscrimination policy.

In a letter, the proponent’s attorney distinguished the P&G proposal, noting that in the J&J proposal the focus was on a single issue, the ACA, which was of direct relevance to J&J’s business because the company is a “healthcare industry stakeholder.” According to the attorney, the examples of legislation used in the P&G proposal, however, are “general public policy issues” and not aimed at legislation that directly affected the company.

Chamber: ISS Survey Lacks Empirical Research Linking Policies to Enhanced Shareholder Value

In a letter to ISS – responding to the current ISS policy survey – the Chamber of Commerce disputes the survey results gather by ISS about investment advisors who rely exclusively on ISS voting recommendations. Meanwhile, SEC Commissioner Gallagher has taken the unusual step of writing a report for publication outside the agency’s walls – this report on proxy advisors published by the Washington Legal Foundation…

– Broc Romanek