November 13, 2019

ISS Issues ’20 Policy Updates

Yesterday, ISS announced its new policy updates for next year. In addition to firming up its board diversity policy (which is effective for the upcoming proxy season), clarifying its policies on independent chair & share repurchase proposals and making a few other changes, the policy updates for the US create two distinct policies for newly public companies that address: (1) problematic governance provisions – e.g. supermajority voting for bylaw or charter amendments, classified boards and (2) multi-class capital structures with unequal voting rights.

The multi-class policy now includes a framework for addressing acceptable sunset requirements for problematic capital structures in newly public companies. ISS says that a number of considerations will be taken into account when assessing the reasonableness of a time-based sunset provision – but sunset periods beyond seven years from the date of the IPO will not be considered reasonable.

See this Steve Quinlivan blog for a better summary…

Lost: Corp Fin’s Logo!

The Corp Fin logo is lost! Have you seen it? Back in the ‘aughts,’ I remember Corp Fin introducing its own logo. It looked pretty similar to the well-known SEC logo. However, I can’t recall that logo ever being used – and after scouring the Web, there’s no trace of this logo. Where has it gone? At the time, it wasn’t so strange since Enforcement had its own logo (many thanks to Bruce Carton of the “Securities Docket” for digging that one up) which I believe is not available anywhere on the Web except for the below:

SEC’s Enforcement: Do Stats Matter?

Every year, the SEC’s Enforcement Division releases stats about the number of actions it has brought, etc. – here’s the latest stats that were released last week (and here’s what the Enforcement co-Directors said about them). It’s good fodder for the media. But why does Enforcement do it? They’ve made this annual announcement well before our current “Big Data” era – when analytics drives so many corporate decisions.

I would argue that some of the motivation is driven by the fact that Congress requires some proof that its money is going to good use. The SEC is not self-funded – and the Senate & House Committees that oversee the SEC need something to hang their hat on. Of course, the stats can’t improve every year – at some point, they have to fall to earth. That’s when the SEC argues that quality is better than quantity – such an argument was made just last year.

Anyway, here’s a Debevoise & Plimpton memo covering the latest stats. And here’s a speech by SEC Commissioner Hester Peirce about them – this excerpt from the beginning is pretty funny:

It is hard to believe that 2019 is almost over. When I think back on the year, one defining theme is broken windows. Why is 2019 the “Year of the Broken Window”? I live in an condominium building with a lobby that has three sides of floor to ceiling windows. Three times this year, I have come down into the lobby to find one of these large windows broken. The first time was the routine, upset resident taking a soul-satisfying, hand-crushing whack at a window. The second two incidents though were a bit less commonplace.

One morning, I came down around 7 a.m. to find a van nose-first in the lobby. Rather than rounding the semicircular driveway in front of the building, the van headed straight into the lobby. Texting while driving? Medical emergency? Brake failure? I am not sure which, but I did feel bad for the driver, who, although apparently uninjured, was obviously unhappy. Misery loves company, however, and this driver got company. A couple months later, I once again came down in the morning to find a shattered window. No vehicle this time. It had already been cleared out of the lobby. From the condo rumor mill, I gleaned that an early morning car chase had ended with one of the vehicles in my building’s lobby.

Broc Romanek