Monthly Archives: March 2018

March 22, 2018

More on “Three Women on Every Board! That’s Progress?”

Recently, I blogged about a California bill that would require at least three women on boards. I’ve also mentioned that it’s sad that quotas are the only solution to a problem that would so easily be solved with common sense. But I do think we are at that stage. And I do worry that quotas will set the “high bar” for women on boards – which would just be plain dumb. A member sent in this note with a similar sentiment:

The chest thumping over how proud companies are to have 20% women directors is really getting to me. Perfectly smart people are just over the moon about having two women on an 11-member board – and they want to say it ten different times plus in a giant pie chart. I think we’ve kind of lost our minds.

Maybe the standards are just too low – or when investors say at least one or at least two, people are thinking that’s best practices. But they really should (and do) know better.

Specialty ISS Policies Push for 30% Diverse Board Composition

Here’s an excerpt from this blog from Davis Polk’s Ning Chiu:

ISS has updated its Socially Responsible Investing (SRI) and Catholic Faith-Based policies so that the proxy advisor will recommend against incumbent governance committee members under the SRI policy, and all incumbent board members under the Catholic Faith-Based policy, at boards that are not at least 30% diverse and include at least one woman and one ethnic minority. Given that only 24% of Russell 3000 boards have such composition, the policies are expected to result in a “substantial increase” in the number of negative recommendations for directors. At the current pace, S&P 500 boards are expected to reach 30% diversity by 2028, but not until 2037 for Russell 3000 companies.

State Street: May “Vote No” for Stewardship Principles Non-Compliance

Here’s the intro from this Ning Chiu blog:

The Chief Investment Officer of State Street Global Advisor (SSGA) has sent letters to board chairs and lead directors at S&P 500 companies requesting that they report on their compliance with the principles outlined by the Investor Stewardship Group (ISG). We previously discussed the ISG Corporate Governance Principles.

Starting this month, SSGA will review governance practices at those companies and seek to “proactively engage with companies to better understand the reasons for non-compliance.” If SSGA believes that companies are not adequately explaining their governance approaches, either publicly or through engagement, SSGA may hold the board accountable by voting against the independent chair, lead independent director or most senior independent director up for election.

State Street’s “Fearless Girl” Campaign: One Year Later

As noted in this State Street press release, 152 public companies that the firm reached out to – through either its voice or its vote – that previously had no women on their boards, now have at least one female board member. Hard to believe that there were companies that were ‘all male’ in this day & age…

Broc Romanek

March 21, 2018

Rule 701: A Rare SEC Enforcement Action

As noted in the memos posted in our “Rule 701” Practice Area, the SEC recently brought an enforcement case to enforce the $5 million limit in that rule. Here’s the intro from this Steve Quinlivan blog:

Subject to its limits, Rule 701 permits non-reporting companies to grant employees equity without registration under the Securities Act of 1933. One component of Rule 701 requires certain disclosure materials to be delivered to employees if the aggregate sales price or amount of securities sold during any consecutive 12-month period exceeds $5 million. Rule 701 provides that for options to purchase securities, the aggregate sales price is determined when an option grant is made (without regard to when the option becomes exercisable).

In a settled enforcement action, the SEC alleged Credit Karma, which the SEC describes as a “pre-IPO internet-based financial technology company headquartered in San Francisco, California”, blew through the $5 million disclosure limit. Specifically, the SEC alleged “From October 2014 to September 2015, Credit Karma issued approximately $13.8 million in stock options to its employees “ and “failed to comply with the disclosure requirements of Rule 701, even though senior executives were aware of Rule 701”.

Data Breach: SEC Brings “Plain Vanilla” Insider Trading Case

Last week, as noted in this press release, the SEC drove home the point that you have to be mindful of the SEC’s recent cybersecurity guidance – that includes a discussion of insider trading policies – as the agency brought an insider trading case against a former officer at Equifax in connection with their data breach. This was not a complex case. He was fired. The executives covered by the special committee review have not been charged.

Just read the SEC’s complaint and Googled the guy. Threw his career & reputation away for $100k – was literally offered the CIO position and had it yanked when they found out about the trading. A wife and two young kids. I’ll never understand how people think they’ll get away with this stuff…

Don’t forget our upcoming webcast: “Insider Trading Policies & Rule 10b5-1 Plans“…

Dodd-Frank’s Coming Rollback

Last week, as noted in this memo (also see this WSJ article), the Senate approved – by a vote of 67 to 31 – the “Economic Growth, Regulatory Relief, and Consumer Protection Act,” which includes certain limited amendments to Dodd-Frank and other targeted modifications to various post-crisis regulatory requirements. This WSJ article notes that the House might not rubber-stamp the Senate bill…

Due to her frequent scrapes with the law, this article says that Lindsay Lohan is the new face of legal directory…

Broc Romanek

March 20, 2018

Shareholder Proposals: Chevedden’s First “Notice of Exempt Solicitation”

The battle over the right to call special meetings intensifies. Here’s an excerpt from this Gibson Dunn memo:

Each year some public pension funds and other institutional shareholders voluntarily file with a Notice of Exempt Solicitation with the SEC under Exchange Act Rule 14a-6(g). This rule requires a person who owns more than $5 million of a company’s securities and who conducts an exempt solicitation of the company’s shareholders (in which the person does not seek to have proxies granted to them) to file with the SEC all written materials used in the solicitation. However, these funds also file these Notices, which appear on Edgar as “PX14A6G” filings, typically to respond to a company’s statement in opposition to a shareholder proposal included in the proxy statement or to otherwise encourage (but not solicit proxies from) shareholders to vote a specific way on shareholder proposals, say on pay proposals and in “vote no” campaigns.

In a new twist, this week John Chevedden (the most prolific individual shareholder proponent given that he submits them in his own name and by using “proposal by proxy” to submit proposals for other shareholders) filed his first “Notice of Exempt Solicitation.” Chevedden’s Notice addresses a proposal included in the AES Corp. proxy materials to ratify the company’s existing 25% special meeting ownership threshold. The SEC staff previously concurred that AES could exclude from its proxy materials Chevedden’s shareholder proposal requesting a 10% special meeting threshold pursuant to Rule 14a-8(i)(9) because the company’s ratification proposal and the shareholder proposal conflicted. See The AES Corp. (avail. Dec. 19, 2017).

Shareholder Proposals: Lobbying

As noted in this press release, corporate lobbying disclosure remains a top shareholder proposal topic. A coalition of more than 70 investors have filed proposals at 50 companies asking for lobbying reports that include federal and state lobbying payments, payments to trade associations used for lobbying and payments to any tax-exempt organization that writes and endorses model legislation.

And as reflected in this no-action response to Citi, Corp Fin doesn’t seem to be interpreting its “economic relevance/(i)(5)” guidance under Staff Legal Bulletin #14I to allow exclusion of these proposals…

The Disney Annual Meeting: Fake News

A few weeks ago, I blogged about a press release from “National Center for Public Policy Research” and the drama at the meeting. At the time, I blogged that this looks like a lot of hard spin to me as this organization likes to stir things up at “liberal” company meetings.

I wanted to follow up to address some of the claims in that organization’s press release that I didn’t blog about – claims about Disney’s CEO Bob Iger. After listening to some of the meeting’s audio archive, I can say there seems to be a lot of “fake new” in that press release. As the audio reveals quite nicely, the organization’s leader is well known to Iger from previous encounters – and was allowed to speak – and his hostile harangue was justifiably booed by the audience. Listening to the audio, I thought that Iger handled an aggressively hostile questioner respectfully, under the circumstances. This episode makes a good case to webcast your annual meeting – so that folks can listen to the audio archive if “fake news” comes your way…

Broc Romanek

March 19, 2018

The Financial Printer Diaries: Tales of an Era Gone By – Part 4

Below is Part 4 of a collection of memories from members about working at the printers (here’s Part 1; Part 2; and Part 3). Please keep them coming and I will only blog them if you give me permission – you can determine whether you want attribution or anonymity:

– Chris Chaffin notes: I started at Vinson & Elkins in Houston in 1995 right as the markets started picking up again. The “Corporate & Securities” section seemed perpetually understaffed so we were thrown right into the fire as first-years. The Spring of my first year, I started dating my eventual wife of now 19 years. After our first date, I told her “I don’t know when I will see you again” which she didn’t understand. I meant of course “well, I’m always at the printer, so I don’t know.”

I was then stuck at the printer and talking about it with one of the salesmen and he suggested that he could order in some really nice food at the printer and I should invite her to dine at the printer. So, I called her up and invited her to a “private” dinner in the corner of the Bowne dining room. Bowne brought in some really nice Italian food with sumptuous desserts and we had a “dinner date” right there at the printer. The rest is history – three beautiful children and we still laugh about our early date at the printer.

– My first night at the printer in 1987 spent proofing, correcting, redrafting, etc. For dinner, I was given a credit card and told to enjoy at the Old Homestead downtown. When I returned, the invoice was examined and it was determined that I had not eaten (or spent) enough, and lobster tails, shrimps and steaks were summarily ordered in. In those days, that was the norm.

– My favorite printer moment was a particularly protracted filing (several days shuttling between the printer and a downtown hotel) – one evening upon submission of hundreds of pages of changes, with time to kill until the turnaround would be complete – traveling uptown to the Beacon Theatre to catch one of the performances of the Allman Brothers during their annual run in March, and thence returning to the Printer to complete the proofing and filing of the documents by morning. All-in-all, a very satisfactory experience.

– In 1986, I was a first year associate at a large prestigious law firm and sent to the printer in Houston for a large bond deal. They had just converted to the computer typesetting and were busy bragging to the attorneys and bankers about how great their system was. About 3 AM, we received what we hoped was the final draft of the indenture to put into the filing package. Turns out that their fancy new system had dropped every “y” in the document. They were horrified. Eventually it was fixed and we had to re-slug a long document. At least I got a few good meals and tickets to the NBA Finals out of it.

– Kent Shafer of Miller Canfield: When I was a kid, I worked part time proofreading for the printer on the next block, which did calendars, advertising fliers, and so on. It was a hot, filthy, noisy place – linotype machines clacking, ink on the floor, and acrid smoke in the air. Shortly after joining our firm, a senior partner dispatched me to “the printer” in New York (Pandick). Having worked at a printer before, I thought I knew what to expect. I was wrong. I will always remember being shown into that elegant, mahogany filled room, with a cheerful fire burning in the fireplace, and being served coffee in a china cup by a uniformed waitress wearing a white apron.

More on “Proxy Season Blog”

We continue to post new items daily on our blog – “Proxy Season 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:

– Shareholder Proposals: Trends
– How Do You Count a Multi-Day Board Meeting?
– Shareholder Proposals: 1st “Economic Relevance” Exclusion Since New Guidance
– Shareholder Proposals: CII Jumps Into “Special Meeting” Conflicts Fray
– Shareholder Proposals: No Exclusion for “Independent Chairs & NYSE Standards”

Broc Romanek

March 16, 2018

Corp Fin Comments: Levels Dropping Significantly?

Shortly after his confirmation, SEC Chair Jay Clayton promised that the agency was “open for business.” This recent memo from Orrick’s Ed Batts says that Corp Fin seems committed to making that slogan a reality. This excerpt summarizes some notable efforts to streamline the Staff’s processes:

– The most significant development is the dramatic shift in receptiveness for waivers for audited financial statements where the production may be burdensome but not clearly material to investors. Such waivers are being granted specifically with respect to financial statements in cases of marginal significance tests or where fully audited financials would involve significant cost but not necessarily provide substantial incremental useful information.

– In addition, the Staff continue to emphasize eligibility for all filers (and not just “emerging growth companies” under the JOBS Act) to take advantage of confidential preliminary registration statements for IPOs as well as follow-on offerings occurring within one year of IPO.

– The number of Staff comments issued upon review of registration statements have declined significantly, in an effort toward a speedier path to encourage use of public markets.

Cybersecurity:  “Yahoo!” for Plaintiffs in Landmark Class Settlement

Over on “The D&O Diary,” Kevin LaCroix recently blogged about Yahoo’s landmark $80 million shareholder class action settlement in a case that arose out of the massive data breaches it announced in 2016.  Kevin points out that although derivative suits have followed on the heels of other high-profile breaches, this settlement represents the first time that shareholder plaintiffs have really hit the jackpot in data breach litigation.

This excerpt suggests that the suit could be a preview of coming attractions:

The Yahoo settlement (assuming it is approved by the court) is the first significant data breach-related shareholder lawsuit settlement. The plaintiffs’ lawyers have now figured at least one way they can make money off of this type of litigation. Interestingly, this settlement coincidentally comes just days after the SEC released new guidance in which the agency underscored the disclosure obligations of reporting companies that have experienced data breaches. It is hard to know for sure, but it could be this milestone settlement together with the SEC’s new disclosure guidelines could mean that data breach-related shareholder litigation could be an area of increased focus for the plaintiffs’ lawyers.

Wells Fargo: When All Else Fails, Send in the Nuns!

To say that Wells Fargo’s had a bumpy ride lately is a big understatement, but it now it looks like the bank may have finally “got religion” – albeit in a rather unorthodox way.  Here’s an excerpt from this CNBC report:

A group of nuns and religiously-affiliated investors said Wells Fargo & Co. has agreed to publish a review that shows the root causes of the systemic lapses in governance and risk management that have led to ongoing controversies, litigation and fines. As a result of the company’s commitment, the Interfaith Center on Corporate Responsibility will withdraw a resolution filed for the 2018 proxy calling for the review.

The engagement was spearheaded by Sister Nora Nash of the Sisters of St. Francis of Philadelphia – and the shareholder proposal had 22 other co-filers from the Interfaith Center for Corporate Responsibility, as well as the Treasurers of Rhode Island and Connecticut.

John Jenkins

March 15, 2018

Revenue Recognition: Storm Clouds on the Horizon?

Last week, Broc blogged about the latest batch of Staff comments on revenue recognition under the new FASB standard.  The folks at Audit Analytics have been pouring through companies’ SEC filings as well – and this recent blog says that there’s trouble brewing.  Here’s the intro:

We have been asked several times whether or not the adoption of the new revenue recognition standard will cause an increase in the number of restatements and control failures. While it may be early to say, our review of SEC filings provides a strong indication that we will see an uptick in revenue recognition accounting failures.

Back in October, based on the analysis of Q2 filings, we found that some companies seemed to be struggling with the ASC 606 adoption. For most of the companies, the moment of truth came on December 15, 2017, the deadline to begin reporting with the new standard.

As we were working on the Q3 update, we identified a number of companies for which the controls were found to be ineffective and a material weakness was directly attributed to the lack of progress in the ASC 606 implementation.

The blog goes on to review specific disclosures by some companies that have encountered hiccups in the implementation process for the new standard.

Former SEC Chair: Securities Lawyers Need to be “Adults in the Room”

This Bloomberg article discusses former SEC Chair Mary Jo White’s comments at a recent conference. She spoke about some of the implications of the current deregulatory mood in DC – but also had some rather pointed comments about the role of lawyers in the current environment:

According to former Chair White, in a deregulatory environment, it is incumbent upon private sector lawyers to step up and be “the adults in the room.” She urged practitioners to focus on what is best in terms of disclosure and business, and not just on what is permissible. It is important to “step up the quality of lawyering” and advise as to what the optimal is, not just what the client can and cannot do.

These steps will reduce the risk of reputational loss to both client and counsel, she noted. She closed by suggesting that attorneys should follow the counsel of the late Archibald Cox, long-time law professor and Watergate special prosecutor, who urged lawyers to have the confidence to tell their clients that “’yes, the law lets you do that, but don’t do it—it’s a rotten thing to do.’”

March-April Issue: Deal Lawyers Print Newsletter

This March-April issue of the Deal Lawyers print newsletter was just posted – & also mailed – and includes articles on (try a no-risk trial):

– Tax Reform’s Impact on Private Equity & M&A
– Delaware Supreme Court Reverses Controversial Dell Appraisal Ruling
– All Merger Side Letters Must Now Be Included in HSR Filings
– California Law Provides Private Company Dissolution Alternatives

Remember that – as a “thank you” to those that subscribe to both & our Deal Lawyers print newsletter – we are making all issues of the Deal Lawyers print newsletter available online. There is a big blue tab called “Back Issues” near the top of – 2nd from the end of the row of tabs. This tab leads to all of our issues, including the most recent one.

And a bonus is that even if only one person in your firm is a subscriber to the Deal Lawyers print newsletter, anyone who has access to will be able to gain access to the Deal Lawyers print newsletter. For example, if your firm has a firmwide license to – and only one person subscribes to the print newsletter – everybody in your firm will be able to access the online issues of the print newsletter. That is real value. Here are FAQs about the Deal Lawyers print newsletter including how to access the issues online.

John Jenkins

March 14, 2018

Our New Checklist: Board Oversight in the #MeToo Era

Over the past several months, media reports involving high profile sexual misconduct & abuse of power by politicians, celebrities, CEOs and other corporate leaders have brought the issue of sexual harassment to the top of the cultural agenda – and placed it prominently on the agenda of boards as well.

We’re posting resources for this emerging area in our “Board Duties” Practice Area – including our own checklist on board oversight of sexual harassment policies. It’s seven pages – check it out!

CII: How Boards Should Combat Sexual Harassment

One of the biggest reasons that oversight of sexual harassment policies has become a priority for boards is that it’s also become a priority for shareholders. The recent experiences of the Weinstein Company, Wynn Resorts & others have demonstrated that high-profile allegations of sexual misconduct by executives can have a potentially devastating effect on shareholder value  – and even threaten the viability of the business itself.

Reflecting rising investor concerns in this area, the Council of Institutional Investors has released a new report that provides boards with advice on how to mitigate the risk of sexual harassment. The report details practical steps that cover five key areas: personnel, board composition, policies and procedures, training and diversity.

Board Oversight: “Is It Just Me, Or Is It Getting Warm In Here?”

Investors aren’t just sharing friendly words of advice when it comes to board oversight of sex harassment & other corporate policies. This “Directors & Boards” article suggests that they’re increasingly seeking to hold directors accountable through fiduciary duty lawsuits alleging failures in oversight. Here’s the intro:

Directors and officers might want to start 2018 by doubling down on their oversight systems. Last year, boards and senior managers at several large corporations faced significant shareholder lawsuits over allegations they were not minding the store when their companies suffered high-profile traumas surrounding data breaches, sexual harassment and discrimination scandals or improper sales practices.

“What I’ve seen in these cases is there were a lot of red flags out there and the board just ignored them,” says Jorge Amador, an attorney representing shareholders in a case against Wells Fargo & Co. over phony customer accounts.

Of course, these oversight claims require plaintiffs to prevail under Delaware’s Caremark doctrine, which requires “bad faith” in the form of intentional dereliction of duty or conscious violations of law on the part of directors.

That’s a demanding standard.  In fact, Delaware’s Supreme Court has said that Caremark may be “the most difficult theory in corporation law upon which a plaintiff might hope to win a judgment.” Still, no less a figure than Chief Justice Leo Strine recently dissented from a Delaware Supreme Court decision dismissing a Caremark claim against Duke Energy’s board – and the article also notes recent landmark settlements of oversight claims by Home Depot & 21st Century Fox.

So, in today’s rather fraught environment, it pays for directors to remember that however remote the risk may appear – breakdowns in oversight could hit them squarely in the wallet.

John Jenkins

March 13, 2018

Tomorrow’s Webcast: “The SEC’s New Cybersecurity Guidance” – Meredith, Keith & Dave

Tune in tomorrow for the webcast – “The SEC’s New Cybersecurity Guidance” – to hear former senior Corp Fin staffers Meredith Cross of WilmerHale, Keith Higgins of Ropes & Gray and Dave Lynn of and Jenner & Block discuss the SEC’s recent guidance on cybersecurity disclosure.

Form DRS: Gets a “Check the Box”

Yesterday, the SEC posted its updated “Edgar Filer Manual.” The most notable change is the addition of “check the box” language to the cover page of Form DRS and DRS/A. Filers of draft registration statements will now be required to check a box to indicate their status as an “Emerging Growth Company” – and to indicate whether they are opting out of the extended transition period for complying with any new or revised financial accounting standards.

Working the “Weed Beat”: Nasdaq Lists Canadian Cannabis Company

So, I was just sitting around last Sunday when Broc shot me an email with this Torys memo on Nasdaq’s decision to list Cronos, a Canadian marijuana cultivator.  He reminded me that I’ve been “covering the space” – and asked me if I wanted to blog about it.

Naturally, I said yes.  After all, who would turn down the chance to be’s “weed beat” reporter?  Anyway, the memo says that strong governance & the fact that the company’s operations were conducted solely in jurisdictions where marijuana has been legalized likely tipped the scales in favor of a listing.  Here’s an excerpt:

The listing of shares of Cronos by Nasdaq demonstrates a willingness by the exchange to accept issuers with material interests in the production and sale of cannabis in jurisdictions in which such activities are legal. Cronos has no operations or activities in the U.S. Each of Cronos’ two wholly-owned LPs and three additional LPs in which it holds a minority interest operate in compliance with the Access to Cannabis for Medical Purposes Regulations (ACMPR).

Furthermore, Cronos’ international operations are located in jurisdictions where medicinal cannabis is legalized nationally—namely, Israel and Australia. In addition, Cronos’ CEO and industry commentators have cited Cronos’ extensive work in strengthening Cronos’ corporate governance as key to achieving the Nasdaq listing.

The emphasis on the legality of Cronos’ operations doesn’t bode well for the listing chances of U.S. cultivators of “the chronic” – particularly in light of the DOJ’s recent decision to end Obama Administration policies that sheltered marijuana producers whose activities complied with state laws.

John Jenkins

March 12, 2018

ICOs: 1st S-1 is Here – Well, Kind of. . .

In a milestone of sorts, the first Form S-1 for a coin offering was filed last week by a company called “The Praetorian Group.” I flipped through it, and it’s . . . interesting.  Here’s a take on the filing from Bloomberg’s Matt Levine:

“The Praetorian Group filed what appears to be the first initial coin offering (ICO) registering tokens with the SEC,” reports Renaissance Capital. Here is the registration statement, and I am sorry to say that it is full of firsts. For instance, this is the first time I have seen this sort of disclaimer in a prospectus for a securities offering:

To the maximum extent permitted by the applicable laws, regulations and rules the Company and/or the Distributor shall not be liable for any indirect, special, incidental, consequential, or other losses of any kind, in tort, contract, tax or otherwise (including but not limited to loss of revenue, income or profits, and loss of use or data), arising out of or in connection with any acceptance of or reliance on this Prospectus or any part thereof by you.

Nope nope nope nope nope nope nope! That is not how a prospectus works! The way a prospectus works is, you write it, and your lawyers read it and make sure it’s right, and then you deliver it to investors so that they can rely on it. That’s the whole point. You don’t just hand the investors some random scribblings and say “here’s some stuff but definitely don’t rely on it.” Come on.

Yeah.  Might draw a comment on that one.  The prospectus goes on to disclaim any “representation, warranty or undertaking in relation to the truth, accuracy, and completeness of any of the information set out in this Prospectus” – which is another thing I’m sure the Staff will be totally cool with.

The registration statement’s also missing a few items – like signatures, exhibits, undertakings (basically all of Part II), for starters. Thanks to Hunton & Williams’ Scott Kimpel for tipping us off to this filing!

ICOs: SEC “Drops a Dime” to Thwart Sketchy Deals

You can’t accuse the SEC of not making use of all available technologies to protect investors – even if some of those technologies originated in the 19th century. Check out the excerpt from this BTC Manager article on how the SEC is using the telephone to put the kibosh on sketchy token offerings before they hit the street:

Well, counter-intuitive as it may seem, the agency is actually showing a preference for the good old telephone over other state-of-the-art technologies to ward off shady ICOs. Before we delve into the details, let’s first take a step back and revisit the fact that the Wall Street’s main regulator has issued multiple warnings time and again urging crypto enthusiasts to steer clear of legally sketchy ICOs no matter how compelling the propositions seem.

Jay Clayton, Chairperson at the SEC, even went as far as saying that crooks were busy harnessing blockchain and the ever-expanding crypto market to pull off serious scams that are as old as the market itself is. That is, to project an asset as the “next best thing” and then selling it once a good amount of “dumb money” pours in.

So how does the SEC use the telephone to deter the bad guys in the fast-growing realm of ICOs?

Apparently, the modus operandi is pretty simple. The folks over at SEC just pick up the telephone and call up the people behind individual ICOs. And believe it or not, the strategy has paid off. According to a key SEC official, over a dozen of cryptocurrency-related companies have abandoned their plans to raise fund from investors after they were contacted by the agency over the telephone.

Score one for us Luddites. I bet they even used a landline.

Transcript: “Auctions – The Art of the Non-Price Bid Sweetener”

We have posted the transcript for the recent webcast: “Auctions – The Art of the Non-Price Bid Sweetener.”

John Jenkins

March 9, 2018

The Disney Annual Meeting: High Drama?

Yesterday, the Walt Disney Company held its annual meeting – and apparently it wasn’t a smooth one. I’m not sure exactly what happened, but here is the intro of this press release from the “National Center for Public Policy Research”:

A veteran of more than 100 corporate shareholder meetings, National Center for Public Policy Research Free Enterprise Project Director Justin Danhof, Esq. is calling out the Walt Disney Company for its shameful manipulation of its annual shareholder meeting held today. Danhof says the company planted adoring fans and company employees in strategic positions in the meeting room so they could praise Disney CEO Bob Iger while blocking investors with serious issues from participating.

“I have never seen anything like the charade that Disney executives executed today. Iger and the rest of Disney’s leadership need to immediately issue a genuine apology to every investor who attended today’s meeting,” said Danhof. “Bob Iger has been called the most powerful person in Hollywood. What a joke that is. Today, he proved he couldn’t even handle a few critical questions from investors.”

Normal protocol for shareholder meetings allows for investors to address CEOs in an open question-and-answer session that follows formal business votes. At today’s meeting – held in Houston, Texas – Disney only allowed questions to be asked by individuals sitting in a few designated rows. Then, in an obvious effort to ensure those questions and comments were complimentary, they allowed members of a specific Disney fan club to enter the arena ahead of regular shareholders. Once inside, these fans occupied nearly all of the designated question-and-answer seats.

The meeting was held in Houston – and news about it got picked up by the papers everywhere (see this article). I have no idea what happened – but let me wager a guess: I would think it likely that Disney imposed a lot of restrictions on its meeting. As noted in this article, there were large protests by Disneyland employees protesting for higher wages who were denied entry. Of course, if it happened, Disney wouldn’t be the first company to plant employees in the audience to lob softballs – but this looks like a lot of hard spin to me. This organization likes to stir things up at “liberal” company meetings. Did it at Apple a few years ago…

This all happened ironically as our own webcast on the “Conduct of the Annual Meeting” was taking place (audio archive now available). Please take a moment to participate anonymously in these surveys: “Quick Survey on Annual Meeting Conduct” – and “Quick Survey on Whistleblower Policies & Procedures.”

SEC Staff’s Guidance on Cryptocurrency Exchanges

A few days ago, the SEC’s Enforcement Division and Division of Trading and Markets issued a joint statement over cryptocurrency exchanges. The statement is the latest effort by the SEC to address potentially fraudulent or manipulative behavior in the burgeoning market for ICOs and token deals – it’s both an informational document for investors using online trading platforms and a warning to operators of those platforms that the SEC is scrutinizing their activities. We’re posting memos about this in our “Blockchain” Practice Area

7 Ways to Sleep at Shareholder Meetings

I know I blogged about this a few years ago, but it’s own of my favorites – my 2-minute video about “7 Ways to Sleep at Shareholder Meetings”:

Broc Romanek