March 22, 2019

Shareholder Approval: SEC Approves NYSE “Price Requirement” Changes

On Wednesday, the SEC approved changes to the price requirements that companies must meet to qualify for exceptions under the NYSE’s shareholder approval rules. Broc blogged about the proposal last fall – noting that it would make NYSE rules more similar to previously-approved Nasdaq updates. Maybe that’s why the SEC received zero comments in five months. Among other things, the amendments:

– Change the definition of “market value,” for purposes of determining whether exceptions to the shareholder approval requirements under NYSE Sections 312.03(b) and (c) are met, by proposing to use the lower of the official closing price or five-day average closing price and, as a result, also remove the prohibition on an average price over a period of time being used as a measure of market value for purposes of Section 312.03

– Eliminate the requirement for shareholder approval under Sections 312.03(b) and (c) at a price that is less than book value but at least as great as market value

Shareholder Engagement: Tips for Director Involvement

In this 10-page memo, DLA Piper suggests ways to use your proxy statement as a shareholder engagement tool – as well as best practices for disclosing your shareholder engagement efforts. It notes that this type of disclosure is becoming a lot more common. That’s not too surprising since according to this “Director-Shareholder Engagement Guidebook” from Kingsdale Advisors, the vast majority of large companies are now involving directors in regular shareholder engagement – and of course they want to get credit for that.

The Guidebook highlights the benefits of involving directors in engagement efforts and responds to some common objections. And whether your directors already have relationships with shareholders or you’re still evaluating the pros & cons of a direct dialogue, it provides some tips to get the most “bang for your buck.” Here’s an excerpt:

Director-level engagement has to be convenient, otherwise boards and shareholders aren’t going to keep up with the expectations that have been set. Engaging shareholders does not necessarily mean traveling and sitting down for an hour or two. Ideally boards engage face-to-face annually, perhaps on the back of board meetings or institutional investor days, but follow-up may occur over the phone or in video-conferencing.

One of the most convenient set ups we have seen (for directors) is to invite shareholders in the day after a board meeting, when the directors are already prepared and gathered for a series of back-to-back meetings. We recommend invitations to shareholders for director-level meetings come from the corporate secretary, not the IRO. This will signal shareholder engagement is a board-level priority and the meeting will not cover the same topics that may have been previously covered with management.

Engagement should take place well before proxy season, not simply because there is time, but because you will have plenty of runway to address any governance issues that come up.

Transcript: “Earnouts – Nuts & Bolts”

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

Liz Dunshee