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Yesterday, just a week after oral argument, the 3rd Circuit overturned the district court in the much-awaited Trinity Wall Street v. Wal-Mart case. Here’s the news from Skadden:

The U.S. Court of Appeals for the Third Circuit issued a decision earlier today that reversed a U.S. District Court opinion and vacated a permanent injunction that would have required Wal-Mart Stores to include a controversial shareholder proposal in its 2015 annual meeting proxy statement. The court’s decision allows Wal-Mart to exclude the proposal from its proxy materials and appears to adhere to the SEC staff’s longstanding interpretation of Exchange Act Rule 14a-8(i)(7), commonly referred to as the “ordinary business exception.”

The shareholder proposal under consideration by the court requested that Wal-Mart’s board of directors amend the charter of its Compensation, Nominating and Governance Committee to provide that the committee oversee “the formulation and implementation of, and the public reporting of the formulation and implementation of, policies and standards that determine whether or not [Wal-Mart] should sell a product that: 1) especially endangers public safety and well-being; 2) has the substantial potential to impair the reputation of [Wal-Mart]; and/or 3) would reasonably be considered by many offensive to the family and community values integral to [Wal-Mart]’s promotion of its brand.” Wal-Mart excluded the proposal from its proxy materials in reliance on the written concurrence of the SEC staff with the company’s view that the proposal interfered with its ordinary business operations by impacting the products and services for sale by the company. The shareholder proponent challenged these determinations in an action in the U.S. District Court for the District of Delaware.

The opinion of the Court of Appeals has not been released yet. When it is available, the court’s views on the careful balance that the SEC and its staff have struck between the rights of shareholders under Rule 14a-8 and the authority granted to directors to manage the business and affairs of corporations under state corporate law will be closely analyzed. Members of the corporate governance community have closely monitored this legal action because of the concern that an unfavorable result could have encouraged shareholders to submit proposals that relate to ordinary business matters by framing them as requests for corporate governance reform. An expansion of Rule 14a-8 in this way would increase costs and expenses and disrupt management and board efforts to effectively manage the proxy process and corporations’ day-to-day business affairs.

BlackRock Speaks Out Against Knee-Jerk Buybacks

This DealBook column notes how BlackRock’s CEO has sent letters to the CEOs of 500 companies about buybacks and other issues. Here’s a memo from Marty Lipton on these letters…

How Audit Reports Look in Other Countries

This Fortune article by Jack Ciesielski does a nice job explaining how audit report reform has gone forward in many countries as it has stalled here in the US. Here’s an excerpt:

In January, the International Auditing and Assurance Standards Board (IAASB), an independent standard-setting body supported by the International Federation of Accountants (IFAC), issued its new standard auditor’s report to be used by adopting countries – and the new audit report bears little resemblance to the tired opinion investors see in the United States. How so?

First of all, there will be an entirely new section that will inform investors in publicly-traded companies about key audit matters – issues that the auditor judged the most significant in performing the audit of the current period financial statements. That’s probably the single most dramatic change, and one that’s sure to grab investor attention: the views of an auditor about the trickiest part of an audit. It gets back to the basic relationship between the auditor and the shareholder: The auditor is supposed to be inside party for the shareholder, and this new communication puts them in touch with each other in a big way, one that’s completely neglected these days.

The new report will also expand on ongoing matters – issue of whether or not the financial statement presentation makes sense, in view of the company’s ability to continue operating. If needed, the new information will describe the material uncertainties related to ongoing concerns going concern issues, and auditors will be called upon to state that a company is not a going concern if they disagree with management’s cheerier view. Expect to see more amplification about the auditor’s independence and ethical responsibilities, too – and the name of the engagement partner. All of this new information will appear in auditor’s reports on 2016 December year-end financial statements.

– Broc Romanek