February 16, 2016

Proxy Access & “Substantially Implemented”: Corp Fin Rules on 18 Shareholder Proposals

On Friday, Corp Fin posted 18 no-action responses over proxy access shareholder proposals for which companies had argued they should be excluded under Rule 14a-8(i)(10) – the “substantially implemented” basis. Looks like the Staff is favoring the 3% ownership threshold requirement as compared to other terms (egs. number of nominees, group size) as Corp Fin denied three no-action requests (Flowserve; NVR; SBA Communications), each of which involved a 5% ownership requirement adopted by the company. In other words, Corp Fin considers the ownership threshold to be a key determinant in its decision regarding substantial implementation, versus other provisions that don’t appear to be as material to the Staff. The other 15 no-action requests were granted, as detailed in this Cooley blog and Weil memo

ESG: Say-on-Sustainability?

We had a lot of feedback on Abby Jones’ blog about “Shareholder Engagement: How to Handle ESG Inquiries.” For example, I heard from Sarah Wilson, the CEO of Manifest (a UK proxy advisor) who noted that Manifest just published this new report entitled “Say on Sustainability” – which has garnered praise from the likes of Harvard’s Bob Eccles who had this to say:

“The Manifest ‘Say on Sustainability” is a carefully done and important action-oriented research project. While it notes some modest progress in sustainability disclosures by some of the world’s largest companies, it also points out some very specific areas where improvements are needed such as in quality through standardized metrics, timeliness with financial reporting, more explicit linkages between financial and nonfinancial performance, and materiality determination. The latter ultimately rests with the board. Here too the report notes progress but areas where corporate governance needs to be improved. Manifest rightly points out that boards have a fiduciary duty to the company, not only to shareholders. This means they need to identity the significant audiences to the company which is the basis of determining materiality for reporting purposes. I suggest that this be done on an annual basis through a simple one-page board of directors ‘Statement of Significant Audiences and Materiality.’ This modest suggestion will lead to big improvements in all the key areas this report discusses.”

Where to Hold Board or Annual Meetings? The Answer May Have Surprising Consequences

Here’s an excerpt from this interesting blog by Keith Bishop:

In my experience, companies most often hold board and shareholder meetings at or near their principal executive offices. As a result, many corporations hold their meetings in California even though they may be incorporated in Delaware, Nevada or some other jurisdiction. Geographical convenience, however, can have unforeseen consequences. Several provisions of the California General Corporation Law apply to foreign corporations based on where they hold their board or shareholder meetings.

Broc Romanek