March 13, 2015

Proxy Access: GE Permitted to Exclude “Substantially Implemented” Shareholder Proposal

As I predicted in my blog last month, companies that adopt proxy access bylaws in the face of a shareholder proposal are successfully arguing that the shareholder proposal is “substantially implemented” under Rule 14a-8(i)(10). General Electric is the first company to receive a favorable Corp Fin response along these lines (signed by Corp Fin’s Chief Counsel). The now-mooted shareholder proposal sought thresholds of 3%/3 years, with a cap of 20% of the board. GE’s bylaw included these same thresholds, but added a group limit of 20.

And here’s a nice piece of “SEC posting practices” trivia! This was a reconsideration of GE’s initial no-action request that originally argued another exclusion basis (but not (i)(9)) before GE adopted its own proxy access bylaw. So if you’re one of the crazies that looks at the SEC’s chronological list of responses posted every day and didn’t see this one – that’s because it’s included in the “2014 list” of responses because it’s a follow-up to a request made in December 2014. Meanwhile, here’s news how 40% of shareholders supported the proxy access shareholder proposal at Apple…

Speaking of access, although the type of provision that Jim McRitchie criticizes at Pru in his blog was not adopted as part of Rule 14a-11, it’s become standard as part of the “private ordering” that is going on. As of today, 19 of the 24 companies that have adopted proxy access included this type of provision – and 15 of those impose exactly the same provision as Pru (a 25% minimum vote threshold and a two-year delay period). Personally, I think it’s reasonable to cut someone off if they don’t get 25%. Bear in mind that under this limitation, a shareholder who doesn’t cross the 25% threshold can still renominate the candidate – they just have to bear the expense themselves instead of causing the company to be the only one bearing the expense of a contest.

Proxy Statements: GE & Coca-Cola File!

Two of my favorite companies have filed their proxy statements:

General Electric’s proxy statement (Mark Borges has already blogged about GE’s comp disclosure)
Coca-Cola’s proxy statement (here’s the interactive version – and here’s a blog post by Coke’s comp committee chair!)

Come hear GE’s Aaron Briggs & Coca-Cola’s Jared Brandman (along with Compensia’s Mark Borges & Addison’s Nina Eisenman) during the panel entitled “Disclosure Effectiveness: What Investors Really Want to See” at our big conference in San Diego & video webcast. Register now for the early bird discount and save 33%!

Senate Bill: Seeks to Raise Rule 701 Threshold

Here’s this Cooley blog by Cydney Posner:

Senators Pat Toomey (R., PA) and Mark Warner (D., VA) have introduced Senate Bill 576, the ‘‘Encouraging Employee Ownership Act.’’ The bill would require the SEC, within 60 days after enactment, to raise the threshold in Section (e) of Rule 701, the exemption from registration for privately held companies for offers and sales of compensatory securities to employees. Currently, Rule 701(e) requires that, if the aggregate sales price or amount of securities sold during any 12-month period exceeds $5 million, the company must deliver additional disclosure to the employees, including financial statements and other potentially confidential information. The bill would raise the disclosure threshold from $5 million to $10 million, and index it for inflation every five years to reflect changes in the CPI.

Warner’s press release explains that “companies that wish to issue more than $5 million in stock to employees must comply with sensitive reporting and disclosure requirements. For new and fast-growing companies, stock compensation is a valuable tool, but many privately-held companies are reluctant to issue their workers more than the $5 million in stock that would trigger mandatory reporting of potentially sensitive information.” According to the WSJ, the “bill’s path through Senate is unclear. There’s no stand-alone companion legislation in the House, but the same changes were included as part of a broad package of financial services bills the House passed in January by a vote of 271-154. The broader House bill included a controversial delay to a provision requiring that banks sell stakes in certain complex securities, a provision many congressional Democrats and the White House oppose.”

– Broc Romanek