May 11, 2016

Proxy Advisors: Upcoming House Bill Would Enhance Oversight

Here’s an excerpt from this WSJ article by Andrew Ackerman:

Firms that advise shareholders in corporate elections would be subject to stricter government oversight under bipartisan legislation set to be introduced this week, amid complaints from public companies that such firms hold too much sway over investors. The legislation, sponsored by Reps. Sean Duffy (R., Wis.) and John Carney (D., Del.), would require U.S. regulators to impose new registration and disclosure requirements on firms like Institutional Shareholder Services Inc. and Glass, Lewis & Co. that weigh in on governance debates such as executive compensation or the composition of corporate boards. It is the latest sign of how contentious the roles of such firms have become at a time when corporate elections have grown more competitive amid a rise in activist investing. Proxy advisers analyze corporate proxy statements and make voting recommendations to investors. A “no” recommendation from an adviser can make the difference in a close ballot.

Both ISS and Glass Lewis were at the center of a fierce debate in 2013 about whether to split the chairman and CEO jobs at J.P. Morgan Chase & Co., a proposal the firms supported but which ultimately was rejected by shareholders. They also have played a key role in the successful campaign prodding companies to allow shareholders to nominate their own directors directly onto company proxies. Proxy firms oppose the proposed legislation, saying concerns about their businesses are overblown and that they already operate transparently.

The House Financial Services Committee is expected to hold a hearing on the bill next week, a sign the legislation could advance quickly through the chamber.

Disclosure of Audit Partner: SEC Approves PCAOB’s New Rules

A few days ago – and five months after the PCAOB’s adopting release came out – the SEC issued this order approving the PCAOB’s new rules requiring disclosure of the identities of audit engagement partners & other audit firms participating in the audit. Let’s see those Form APs! These PCAOB rules will be effective as follows:

– Disclosure of engagement partner: for audit reports issued on – or after – January 31, 2017
– Disclosure of other auditors: for audit reports issued on – or after – June 30, 2017

More on “The Mentor Blog”

We continue to post new items daily on our blog – “The Mentor Blog” – for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Nominating Committee: Heightened Scrutiny & Responsive Tips
– Why Open Door Policies Don’t Work
– CIOs/CISOs Pressured to Unleash IT Projects Prematurely
– Stanford/S&C Launch FCPA Database
– Helping the Board Understand & Impact Corporate Culture
– Social Media Analytics: Corporate Investigations Tool

Broc Romanek