Monthly Archives: November 2018

November 30, 2018

Next Wednesday! SEC’s Open Meeting on Quarterly Reports

Yesterday, the SEC posted this Sunshine Act notice of an open Commission meeting next Wednesday – December 5th – to consider a “request for comment” on the nature & content of quarterly reports and earnings releases. As we’ve blogged several times, the request is bound to seek comment on the reduction (and even elimination) of quarterly reporting – as tweeted by President Trump. Here’s an excerpt from this WSJ article that John is quoted in:

One question the SEC may ask in its release, up for a vote next Wednesday, is whether quarterly guidance about expected earnings from companies unnecessarily drives expectations for investors, and whether that guidance could be pared back. Earnings guidance is voluntary and isn’t required by the government. Among possible changes, the SEC could also reduce the number of disclosures required in quarterly reports, which some companies view as excessive in an age when company information is readily available to the public.

“Do we really need the ’thou shalts’ from the SEC in an age when we have so much more information at our fingertips?” said John Jenkins, partner at Calfee, Halter & Griswold LLP and an editor of

Federal securities rules have required quarterly reporting since 1970, when the SEC required it as part of a formalization of stock-exchange practices that preceded the agency’s creation in 1934. The SEC’s planned meeting isn’t the start of a formal rule-making process and is intended to solicit feedback on how the quarterly reporting system is functioning and what improvements could be made, a step that could in the future lead to regulatory changes.

Upcoming Webcast: “Shareholder Proposals – Corp Fin Speaks”

I just calendared a webcast – “Shareholder Proposals: Corp Fin Speaks” – with Corp Fin’s Matt McNair, who has headed the Division’s “Shareholder Proposal Task Force” for the past five years. Tune in to learn the experiences with implementing Staff Legal Bulletin 14I from this past proxy season – and learn the intricacies of new SLB 14J. Also see this blog by Cydney Posner about some no-action positions taken on “ordinary business” since SLB 14J came out last month…

Edgar: SEC Seeks Feedback

Recently, I blogged about how the SEC has started to post notices of Edgar outages – and that you’re encouraged to contact “Edgar Filer Support” to report a problem. Now, the SEC has posted an Edgar questionnaire, hoping to get feedback concerning the user-filing experience…

Blockchain & Audits

Recently, PCAOB Board Member Kathleen Hamm gave this speech about the intersection of blockchain & auditing…

Don’t forget to tune into our upcoming webcast: “Audit Committees in Action: The Latest Developments“…

Broc Romanek

November 29, 2018

Insider Trading: Don’t Do It!

We’re in a strange business when it comes to insider trading. Over the years, I’ve had interesting – and sometimes humorous – brushes with it. Here are a few thoughts:

1. We Often Don’t Have As Much MNPI As Folks Think – Even if you’re a deal lawyer, you often won’t have material nonpublic information except in those narrow windows when a deal is being first negotiated. When I was young, I was with a friend at a reggae bar and he told some local that he worked for the SEC. This happened in San Diego (which isn’t relevant but felt I should share). The guy then proceeded to harass my friend, begging for some “inside information.” We quickly left. When you work in Corp Fin, you very rarely gain access to MNPI. Be wary of any stories that begin “we were at a reggae bar.”

2. Don’t Accept MNPI – You might have friends in this field that might be wearing their ‘ethics hat’ crooked. I once had an acquaintance – who was in-house – who unsolicited offered some MNPI. Out of the blue. I politely declined. There are many SEC enforcement actions against lawyers in our field who trade on MNPI. Tippee liability still exists.

3. The SEC Knows Who’s Trading Your Stock – When I first went in-house, I got a call from SEC Enforcement because my new employer had just announced a deal and there was suspicious trading right before the announcement. The call was just to confirm that the folks doing the suspect trading had no connection with our company (they didn’t).

It always amazes me that folks engaging in trading on MNPI don’t think they’ll get caught – but yet a quick glance at their phone records reveals a call with the original tipper, followed by a big trade – a trade far greater in size than they’ve ever made before. Circumstances that just can’t be explained away. Dummies. How do you explain why you’re texting using a Nigerian dialect to discuss a certain trade?

4. Maybe Insider Trading Shouldn’t Be Illegal? – Then again, I’ll admit that it just doesn’t feel right that insider trading is illegal (the ‘victimless crime’ angle). We are conditioned to know it’s illegal because of our occupation – but for those not in our community, all they know is that obtaining inside information is the only way to get ahead. A hot tip about a job opportunity. Buying a house that hasn’t come on the market yet. Goes on & on. Only in our field is insider trading something that isn’t tolerated. Insider trading in stocks isn’t illegal in some countries fyi.

Do All Pro Athletes Engage in Insider Trading?

With the SEC’s recent announcement that a former CEO tipped off a former pro baseball player – Doug DeCinces – it reminded me of the numerous other sports figures that have been caught by the SEC for insider trading over the years. Just a few months ago, a NFL player got nabbed. And there are many more instances.

So I ask the question – do pro athletes have more of a propensity to be involved in insider trading than our average citizen? Or is it that the SEC just likes to bring these high-profile cases as a deterrent? My guess is that it’s both. On the one hand, sports figures might have more people trying to kiss their behinds and nothing says “I really want you to like me” like the sharing of some material nonpublic information. And the SEC has never hid the fact that a high-profile case always trumps a low-profile one as they are juggling scarce resources.

I would be remiss not to mention that Doug Decinces is a former Rochester Red Wing. This is my way of kissing John’s behind since he hails from that god-forsaken cold place…

Poll: Your Views on Insider Trading?

Please participate in this anonymous poll about your feelings about trading on material nonpublic information:

online polls

Broc Romanek

November 28, 2018

Corp Fin Overhauls CDIs “Landing Page”

Hats off to Corp Fin for overhauling the “look” – meaning the layout & organization – of the landing page for its “Compliance & Disclosure Interpretations.” The new layout makes it more logical for newbies doing research.

But I have heard complaints that this new layout makes it difficult to determine what are the latest CDI changes. Here’s one of these complaints: “I get notified by text that they’ve issued new C&DIs, but the link just drops you in that landing page. I used to do a word search on the date, but that no longer works.”

Meanwhile, Corp Fin continues its project of overhauling the CDIs, doing so in waves (so far, the CDIs related to smaller-reporting companies, cross-border deals & the last of the telephone interps have been changed). Corp Fin is seeking input on the project – so if you see CDIs that you think need tweaking, let them know…

“Hidden” Right Wing Groups Called Out

We’ve blogged before about the “Main Street Investors Coalition” – a right-wing group with a big budget who entered our space this year. Some in the mass media have caught onto their strategy, like this LA Times article. This article also notes the activities of the American Council for Capital Formation (aka “ACCF) and the American Association of Senior Citizens, both of whom also are right-wing groups who issued “studies” ahead of the SEC’s recent “proxy process roundtable” about proxy advisors.

Not only is the mass media catching on, so are other folks. For example, see this article about Morningstar being upset about the “hidden” nature of these groups. And here is a note that I received from a member:

This strategy seems really dumb to me. Why do they put these astroturf organizations out front on this issue? Funny thing is, like a lot of people who work with public companies, I think proxy advisors could use some oversight, but this is so transparently manipulative & deceptive that it sours me on the whole effort.

Ain’t that the truth. And then you wind up with this type of article that ties large CEO pay packages to the whole effort and things really start to feel squishy. Companies need to remember: when you bash proxy advisors, you are also bashing their clients – your institutional investors – since they are the ones paying the proxy advisors. And many institutional investors are pretty vocal that they vote independently & thoughtfully. That’s literally the title of this note from Investment Company Institute. My hunch is that the SEC hasn’t been fooled by all this propaganda either…

Silicon Valley’s New “Stock Exchange” Stalled at the SEC

Here’s the intro from this WSJ article:

Silicon Valley’s plan to build a better stock exchange for the nation’s hottest startups hit a snag earlier this year when a member of the Securities and Exchange Commission opposed it, people familiar with the matter said. The Long-Term Stock Exchange—a proposed new market backed by venture capitalist Marc Andreessen, LinkedIn co-founder Reid Hoffman and other tech luminaries—was criticized by SEC Commissioner Robert Jackson Jr. He questioned whether the exchange’s model could entrench the power of founders and early investors in startup companies while hurting other shareholders, the people said.

The agency’s approval is needed to approve major changes to how exchanges work, and any member of the SEC can slow the process by calling for a full commission vote. Mr. Jackson’s move, which hasn’t been previously reported, overrode a decision by SEC staff to approve LTSE’s rules for listing companies, the people said.

The exchange that joined with LTSE to advance its listing rules, IEX Group, withdrew its proposal in August, after Mr. Jackson voiced his concerns but before the full commission could vote on it. LTSE had struck a partnership with IEX so it could launch its business more quickly and because it doesn’t yet have a license to run a stock exchange. An IEX spokesman said the firm withdrew the plan to give institutional investors more time to study LTSE’s tailored rules. “While we have decided to end our work together, IEX continues to support LTSE’s mission and focus on long-termism in the market,” spokesman Gerald Lam said.

Broc Romanek

November 27, 2018

ISS’ New “Prelim” Comp FAQs: One-Year Deferral of Director Pay Policy

Last week, as noted in this Steve Quinlivan blog, ISS released five “preliminary” compensation FAQs, which includes a one-year deferral of its controversial policy over excessive director pay. There are no changes to the quantitative pay-for-performance screens nor changes to the passing scores for Equity Plan Scorecard (EPSC) evaluations of stock plan proposals (but there are new EPSC ‘overriding’ factors and a change to the change-in-control vesting factor). “Final” FAQs are expected in a few weeks…

Hats off to my pal – Bass Berry’s Jay Knight – for having his family featured on the season finale of “Property Brothers”! Jealous! Read Jay’s blog about it…

How Often Does the SEC Chair Have Meetings?

I despise meetings. Probably the best part of my current job is that I have very few meetings. By “few,” I mean none. Lucky me! Many of the other jobs that I’ve had were full of meetings. Particularly working in-house. That had multiple meetings every single day. Ugh.

Anyway, how many meetings do you think the SEC Chair has each day? The answer is a lot. The weird thing is that the SEC publishes a regular list of these meetings. Apparently, that’s been going on for some time. No idea why – but the URL for the list has “FOIA” in it. So I imagine that someone made a request. Given my distaste for meetings, I would say that it looks like a tough job…

Tomorrow’s Webcast: “How Boards Should Handle Politics as a Governance Risk”

Tune in tomorrow for the webcast – “How Boards Should Handle Politics as a Governance Risk” – to hear CalPERS’ James Andrus, Downey Brand’s Bruce Dravis, Politicom Law’s Erin Lama and Richard Levick discuss the increasing risks caused by the entanglement of business & politics and how boards oversee the different dimensions of political speech.

Broc Romanek

November 26, 2018

Smaller Reporting Companies: SEC Lists 43 Rules for Review

One of the top priorities for SEC Chair Jay Clayton – and Corp Fin Director Bill Hinman – has been the easing of the burdens of being a public company, with the ultimate goal of convincing more companies to go public. This theme has been mentioned many times over the past few years – including raising the threshold for the definition of “smaller reporting company” earlier this year.

So it’s no surprise that the SEC published a larger list than usual to be reviewed last week as part of the SEC’s annual exercise – as required under the Regulatory Flexibility Act – to review how the agency’s rules are faring for smaller reporting companies. This year’s list boasts 43 rules (compare that to 2004; only 7 rules). Like in prior years, the rules listed for review aren’t limited to rules that affect small companies. Notably, the list doesn’t include the elimination of quarterly reports entirely for smaller companies – which I do think will eventually be proposed based upon comments made by Bill at the ABA meeting a few weeks ago.

Although some of the listed rules don’t apply to public operating companies (ie. apply to mutual funds, etc. instead), some do apply to our community including:

1. Executive pay & related-party disclosures (this is the “biggie” on pages 5-6; rethinking the 2006 rule amendments)
2. Shareholder proposals regarding director nominations by shareholders
4. E-delivery
5. E-proxy (aka “notice & access”)
6. E-forums
7. Proxy disclosure enhancements (ie. board leadership, comp consultants, board oversight of risk)
8. E-filing of Form D
9. S-3 eligibility

Although this list is open for public comment, the annual list typically results in only an average of one comment per year, as noted in this statement by then-Commissioner Piwowar in ’16…

The Latest “Director Views” Stats

We’ve added this directors survey from BDO to our comprehensive library of governance surveys. The highlights include:

– Total Tax Liability: Only 44% indicate a strong understanding of their organization’s total tax liability and how it impacts the company’s tax strategy.
– Non-GAAP Measures & KPIs: More than three-quarters (76%) of corporate board directors say they do not believe additional guidance from regulators on non-GAAP and other KPIs in their financial statements is necessary. However, when asked if auditor involvement would promote higher investor confidence in non-GAAP measures, a majority (54%) of public company directors say that it would.
– Diversity & Service Limits: When asked if their board was addressing the issue of board diversity, more than 8-in-10 (81%) directors said yes, an increase from 2017, when only 66 % of respondents said the same. Nearly one-fifth (19%) of directors believe their board has room to grow on this measure.
– Sustainability Reporting: While sustainability disclosures were a priority for public company board members in last year’s survey, data indicates the focus on sustainability has perhaps temporarily been put on the back-burner. 74% of public company board directors surveyed do not believe that disclosures regarding sustainability matters are important to understanding a company’s business and helping investors make informed investment and voting decisions.
– Tax Law: 61% of directors note a favorable impact from the Tax Cuts &Jobs Act of 2017, while 39% say this law change had no impact at all on their business.

Broc Romanek

November 21, 2018

Cooking With Snoop Dogg

Mock me all you want, but before I had kids I was a fanatic for live music of all genres – and watching Snoop Dogg in the pouring rain at an “indie” rap festival stands out as one of the most memorable performances I’ve seen. And since one of my other hobbies is cooking, my worlds collided when I read this Bloomberg article about Snoop’s new 192-page cookbook – “From Crook to Cook.”

Apparently, the compilation has all the (cannabis-free) edibles you need for a solid Thanksgiving…and lots more. Snoop is probably picking up some of Martha Stewart’s cooking game, now that they have an (Emmy-nominated!?) VH1 show together – but no doubt his creations have some special twists. If anyone out there actually buys this book and tries a recipe, please let me know how it is. I’m already intrigued by this concept for sweet potato pie, as described by Bloomberg:

“These days everyone is into pumpkin spice, but I skip the pumpkin—sweet potato pie is a real ’hood staple and Broadus family favorite. [Pop-culture fact: Snoop was born Calvin Cordozar Broadus.] A little orange makes the sweet potato flavor stronger, and that’s what you’re here for, right?”

Liz Dunshee

November 20, 2018

ISS Releases ’19 Voting Policy Updates

Yesterday, ISS announced the 2019 updates to its proxy voting policies. We’re posting memos in our “Proxy Advisors” Practice Area (also see this blog from Exequity’s Ed Hauder – and this Davis Polk blog). Here’s the highlights for US companies – except as otherwise noted, the policies apply to meetings held on or after February 1st:

1. Board Diversity: Beginning in 2020 for Russell 3000 and S&P 1500 companies, the chair of the nominating committee (or other directors on a case-by-case basis) will receive an “against” recommendation when there are no women on the company’s board. Mitigating factors include a firm commitment in the proxy statement to appoint at least one female director in the near term, the presence of a female on the board at the preceding annual meeting, or other relevant factors.

2. Economic Value Added Data: During 2019, ISS research reports will feature Economic Value Added data as a supplement to GAAP-based measures that measure the alignment between CEO pay & company performance. Moving into 2020, ISS will consider the inclusion of EVA-based measurements as part of its Financial Performance Assessment methodology.

3. Board Meeting Attendance: ISS is codifying its case-by-case approach to chronic poor attendance without reasonable justification. In addition to voting against the director(s) with poor attendance, it will recommend voting against other directors. After three years of poor attendance, the policy applies to the chair of the nominating or governance committee; after four years, the full committee; and after five years, all nominees.

4. Management Proposals to Ratify Existing Charter or Bylaw Provisions: Similar to Glass Lewis’s new policy on conflicting & excluded proposals, ISS is codifying its policy to vote against individual directors, members of the governance committee, or the full board, where boards ask shareholders to ratify existing charter or bylaw provisions – taking into account factors such as the presence of a shareholder proposal addressing the same issue, the board’s rationale for seeking ratification, the actions to be taken by the board should the ratification proposal fail, whether the current provision was adopted in response to the shareholder proposal, previous use of ratification proposals to exclude shareholder proposals, the company’s ownership structure, etc.

5. Board Responsiveness to Ratification Proposals: ISS’s existing responsiveness policy is updated to reflect that failure to act on a failed “ratification” proposal will trigger a board responsiveness analysis at the next annual meeting.

6. Director Performance Evaluations: When identifying companies that have long-term underperformance, ISS will look at three- and five-year TSR during the initial screen – rather than using five-year TSR as part of a secondary step in the evaluation.

7. Reverse Stock Splits: ISS broadened its policy to allow analysts to take a case-by-case approach for companies that are not listed on major stock exchange and may have a legitimate need to carry out a reverse stock split. ISS is also broadening the factors it will consider for all companies – exchange listed and non-exchange listed, where substantial risks exist.

8. E&S Proposals: ISS is codifying its case-by-case approach to E&S proposals – to make more explicit that significant controversies, fines, penalties or litigation are considered.

Proxy Process Roundtable: Worthwhile Written Comments

Last week, I blogged about what it was like to attend the SEC’s “Proxy Process Roundtable” – you can also check out Cydney Posner’s blog for more details on the substantive discussions. One thing I noted was that there were many people on each panel. The SEC invited a lot of speakers in an effort to get a wide range of views. But since time was limited, not everyone got to delve into their specific recommendations – so at many points, people made reference to the written comments that they’d submitted.

During the ABA meeting the following day, Corp Fin Director Bill Hinman noted that over 80% of the comments came in during the last week – and the Staff thinks they’ve been very constructive. Here are some of the many submissions, from panelists and others:

Neuberger Berman
The Capital Group
Glass Lewis
Egan Jones
Broadridge Independent Steering Committee
Proxy Insight
Carl Hagberg & Associates

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:

– Math With Broker Non-Votes
– An Anti-ESG Campaign Begins
– Vote Tabulations: A Handy Primer
– Iran Disclosure: Impact of Latest Sanctions
– Revenue Recognition: Corp Fin Comments

Liz Dunshee

November 19, 2018

Earnings Release Headlines: The Problem With Numbers

Nearly 30% of companies highlight quantitative information at the top of their earnings release – and after writing my fair share of headlines, I can understand why! Numbers are succinct, eye-catching, and (presumably) accurate. But a recent study shows that this practice may lead to some pretty big swings in stock price – and might foreshadow lower earnings over the long-term. This article summarizes the findings – here’s an excerpt:

The study of more than 17,000 earnings releases over an 11-year period finds that increasing headline salience (for example, when earnings exceed forecasts, headlining by how much), gives a hefty lift to a firm’s stock price beyond the rise that is normally occasioned by good news. On average, adding one strong performance number to a headline increases a results-inspired boost by an extra one third in the three-day period around the announcement.

Citing psychology research, the professors see this extra boost as due to the effectiveness of headline numbers in attracting investor attention. In addition, “an initial favorable impression can lead investors to underweight contradictory information elsewhere in the report.”

But investors beware: after a quick stock-price lift, salience likely portends a considerable reversal over the 60 days following the earnings announcement, a reversal greater than the initial boost that the salience bestowed. In other words, as the professors write, “investors not only undo their initial reaction due to salient headlines but even revise their beliefs in the opposite direction in the subsequent period.” In sum, “headlining quantitative information incites investor overreaction to the earnings news at the time of the earnings announcement…This suggests that headline salience misleads investors.”

And here are some other interesting takeaways:

– Companies that flaunt strong current results in headlines tend to have lower long-term earnings (beyond the current quarter)

– High salience is strongly correlated with increased insider stock sales in the month following earnings announcements and also with the recent vesting of executives’ stock

– Both 3-day stock returns and 60-day reversals increased with greater headline salience, both being higher as the number of headline statistics increased (for example, from zero to one or from one to two).

– While headline salience is effective when earnings exceed analyst forecasts, that is not the case when they do not. In other words, greater salience does not spur investor interest when earnings barely meet or fall short of predictions.

– Headlined earnings numbers have more effect when expressed as percentages than when stated in dollars.

Farewell to Penny Stocks?

I mentioned in a blog last month that there are an estimated 10k publicly-traded microcaps – but most aren’t listed on an exchange (h/t to Adam Epstein for that stat). But we might see a decline in those numbers if the secondary market evaporates – and there are signs that it’s heading in that direction. Here’s the intro from this Forbes op-ed by Richard Levick:

An event that rather significantly affects the financial markets has just occurred without much if any fanfare in the financial press. Bank of America’s Merrill Lynch announced that, as of September 30, it will not allow clients to sell microcap stocks, known as penny stocks, without a regulatory review and will outright ban sales of the riskiest ones. The bank had already discontinued purchases in July.

If enough other financial institutions follow suit, the penny stock market could disappear altogether. As of this writing, Morgan Stanley and UBS have not followed Merrill’s lead, according to sources cited by CNBC reports, but investors sense a chill wind has begun to blow. Shares from companies valued under $300 million and traded for under $5 on an over-the-counter market are the ones affected – in other words, virtually the entire microcap market.

By the way, catch Richard Levick in our upcoming webcast: “How Boards Should Handle Politics as a Governance Risk“…

Transcript: “Proxy Solicitation – Nuts & Bolts”

We have posted the transcript for our recent webcast: “Proxy Solicitation – Nuts & Bolts.”

Liz Dunshee

November 16, 2018

Proxy Process Roundtable: 8 Interesting Things

Since I was in Washington DC for the Fall Meeting of the ABA Business Law Section, I thought I’d arrive a day early to attend the SEC’s “Proxy Process Roundtable.” Broc encouraged me to share the “look & feel” of the experience for those that have never visited the Mothership. So here’s eight interesting things that I noticed:

1. Lots of Speakers on Panels – There were three panels for the roundtable – each scheduled for 90 minutes. One panel had 10 speakers, another had 11 – and one had 14! That one ended up running over two hours – and one of the panelists didn’t even get to introduce himself till the very end. For comparison, we’re setting the agendas right now for next year’s “Women’s 100” events – and we have 9 speakers for all of our panels for an entire day.

In some cases, it was hard to get a good feel for a speaker’s views & ideas because their speaking time was limited (but some panelists definitely didn’t let that stop them!) – and as a listener it was hard sometimes to stay focused for such a long discussion, with no audience interaction. This is what a 14-speaker panel looks like – a total of 21 people up on the dais with all the SEC officials…

2. Short Opening Remarks – Chair Clayton limited his opening remarks to allow more time for the panelists to share their views. Remarks from Commissioner Stein, as well as Commissioner Roisman and Corp Fin Director Bill Hinman, were also very brief. In fact, the first panel started about 30 minutes early! Bill did take a moment to pay tribute to Evelyn Y. Davis, though.

3. Surprising In-Person Turnout – Broc warned me that the roundtable might be lightly attended. He said that in the old days, the SEC’s open Commission meetings & roundtables were well-attended. But now that they are webcast, people understandably watch online. So it was surprising to see that more than a hundred people were there in person, despite DC having the worst November snowstorm in 29 years. Here’s a picture of what the audience looked like.

4. NAM/Chamber’s Campaign Encouraged Attendance – Recently, the National Association of Manufacturers & the US Chamber have been running ads against proxy advisors – including full-page spreads in the WSJ and Washington Post. They’ve spent six figures on their media campaign! Here’s what the ads looked like. As part of this campaign, the groups operate – a site that had been encouraging folks to attend the last panel of the day (the one about proxy advisors).

5. Minor Infotainment (for a Conference) – Although not as riveting perhaps as “Bodyguard” (new Netflix series that Broc recommends; I haven’t seen it), the panels tended to be more entertaining than a typical conference panel. There were speakers on all sides of the issues & sparks flew on more than one occasion.

Chair Clayton, the Commissioners & Corp Fin Staff emphasized throughout the day that they were hoping to get some specific recommendations. A surprising number of panelists thought the shareholder proposal rules and proxy advisor framework is okay ‘as-is.’

This wasn’t everyone’s view (tended to be people who could be disadvantaged if the rules change, though not in every case) – and there were calls for targeted improvements like giving all companies some time to respond to voting reports before they’re public and some tweaks to the proposal submission thresholds. But when it came to proxy plumbing, there were more calls for change – maybe even a total overhaul. Even speakers that weren’t on that panel said they thought that’s where the SEC should focus its time & resources.

6. A Tweet War? – Recently, John blogged about “Tweet Fight! Nell Minow v. Main Street Investors Coalition.” For this roundtable, there was some live tweeting from the audience under #proxyroundtable – with most of the tweets coming from opposite ends of the spectrum: Main Street Investors Coalition v. ValueEdge Advisors (for whom Nell Minow is a part of) – as well as Minerva Analytics and others.

7. Going Through Security – Broc also shared stories about the old days & how visitors to the SEC used to be able to go upstairs and deliver packages, etc. without even checking in. Now, he warned me to go early, because you need to get a badge & go through a metal detector. They were efficient – but with the large attendance, I’m pretty sure it took me longer than airport security! In the morning line, I happened to befriend a fellow Minnesotan. And it was in the after-lunch line that I learned of the Main Street Investors Coalition’s ad campaign. So it wasn’t time wasted.

8. DC is Magical? – The night before the roundtable, Broc picked me up at the airport and we grabbed dinner at “The Wonderland Ballroom.” We soon met Frank Namin – who saddled up next to us and seemed to be this establishment’s resident magician. We had close-up seats as he fashioned a rose from a cocktail napkin – then levitated it (seriously, it levitated one foot away from us – just stayed floating in the air!) – along with many other illusions. Free entertainment! And nearly as exciting as that “Proxy Advisors” panel…

Broc’s Take: The Proxy Process Roundtable Might Not Mean Much

Broc’s ten cents on this topic is that it’s akin to oral arguments during a Supreme Court case. Broc believes that oral arguments don’t have a major impact how the SCOTUS Justices intend to vote except in rare instances (this study seems to argue otherwise). Broc doesn’t believe the roundtables really mean much – particularly with so many people on each panel. He recalls only one notable instance where a roundtable was truly worth listening too – when Evelyn Y. Davis was on a shareholder proposal roundtable in the early 2000s. Evelyn put on quite a show.

Broc feels there is some value to roundtables. The speakers can connect with each other. And even more importantly, the SEC Commissioners can get a sense of what each speaker is all about – and figure out which ones they might want to contact privately to learn more about a particular idea. But remember, we did this entire “song & dance” over a decade ago with “proxy plumbing” – with a roundtable & everything – and not much came out of that. But maybe this time will be different…

Poll: Will the Proxy Process Roundtable Mean Anything?

Let us know how you feel about the impact of the SEC’s roundtables in this anonymous poll:

web survey

Liz Dunshee

November 15, 2018

Lawyers as Pro Wrestlers

Recently, I paid a visit to my old firm (Fredrikson & Byron) to interview my former colleague Zach Olson, a partner in the M&A group – about his side gig as a professional wrestler. You may have seen John’s blog about Zach’s bold adventures on “The Mentor Blog,” but I wanted to get more info about this unique endeavor – and how a deal lawyer has time (and nerve) for it.

In our 19-minute podcast, Zach confirmed my suspicion that he’ll dive into just about anything he thinks is remotely interesting. We also covered:

– How do you think your skills as a lawyer help you in the ring?
– How do you think your skills as a wrestler help you in negotiations/practicing?
– What’s been the most surprising thing about wrestling since you started?
– What’s the most common question people ask you?

MSCI Plans to Launch New “Dual-Class” Indexes

I have to say, MSCI strikes me as the “middle child” of stock indexes. “Dual-class” (or more) share structures have been a hot-button issue, especially since Snap’s IPO. Unlike FTSE Russell & S&P Dow Jones – which both quickly announced last August that they’d exclude companies with unequal voting rights – MSCI took 18 months to gather everyone’s opinions. And as I’ve blogged, it turns out that institutional investors are more interested in a regulatory fix that encourages equal voting structures, versus restrictions by indexes. So recently, MSCI announced a compromise that’s intended to satisfy everyone.

As described in this WSJ article, in early 2019, MSCI will launch a new suite of market indexes that exclude companies with unequal voting structures. They’ll be an addition to MSCI’s existing indexes, which will continue to include broader investment alternatives. Here’s what MSCI says about its solution (also see this Davis Polk blog – and this “Money Stuff” column that questions the impact of choices like this on so-called “passive” investors):

MSCI supports fully the one share one vote principle as we believe that having equal voting rights should be an important consideration in equity investing. The one share one vote principle has also gathered overwhelming support from participants in the consultation. The treatment of unequal voting structures in equity benchmarks, however, has proven to be a polarizing question among international institutional investors.

For instance, while many participants felt strongly that benchmarks should be adjusted to reflect unequal voting structures, other participants highlighted that the question of unequal voting rights should be addressed holistically by the stakeholders that are responsible for operating, regulating and investing in equity markets. These stakeholders include, among others, securities regulators, stock exchanges, asset owners and asset managers.

MSCI continues to believe that global market benchmarks, such as the MSCI Global Investable Market Indexes, should aim to represent the broadest investment opportunity set available to international institutional investors based solely on the investability of the underlying markets. Investable market benchmarks should not be constrained by specific investor opinions, preferences or constraints including governance issues. This point has been articulated by many international investors, including asset owners and managers globally, who clearly highlighted the critical need to find the right balance between investor views and comprehensive representation of the investable equity universe.

It’s Done: 2019 Executive Compensation Disclosure Treatise

We recently wrapped up Lynn, Borges & Romanek’s “2019 Executive Compensation Disclosure Treatise” — and it’s printed. This edition has the latest insights from the first year of pay ratio disclosure – as well as Corp Fin’s recently-updated proxy CDIs. All of the chapters have been posted in our “Treatise Portal” on

How to Order a Hard-Copy: Remember that a hard copy of the 2019 Treatise is not part of a membership so it must be purchased separately. Act now as this will ensure delivery of this 1620-page comprehensive Treatise soon. Here’s the “Detailed Table of Contents” listing the topics so you can get a sense of the Treatise’s practical nature. Order Now.

Liz Dunshee