Even though proxy advisors catch a lot of flak, my longstanding view has been that it’s actually helpful to have organizations that serve as the in-between on voting policies. On the issuer side, I’d rather keep track of a handful of policies than monitor variances across every single investor. You can also look like a hero if you really do understand the proxy advisor voting policies and can spare your company from surprises.
That’s one reason our “Navigating ISS & Glass Lewis” panel is always so popular at our annual “Proxy Disclosure & 22nd Annual Executive Compensation Conferences.” This practical session features a conversation with representatives from both proxy advisors – moderated by Davis Polk’s Ning Chiu. They’ll be covering the types of disclosures & practices that will (or won’t) help your cause on say-on-pay recommendations, compensation committee elections, and equity incentive plan approvals.
Our 2025 Conferences will be taking place Monday & Tuesday, October 21-22 in Las Vegas, Nevada, with a virtual option for those who can’t attend in person. Join us for engaging sessions full of essential and practical guidance, direct from the experts. Register now to lock in our early bird rate and save your seat!
If you track any of the “daily digests” for Staff comments, you might have noticed that the volume of Staff comments seems lower lately. It’s not always straightforward to estimate changes to comment letter practices, but Olga Usvyatsky recently took a stab at it in her “Deep Quarry” newsletter – and it appears the decrease for disclosure review comments wasn’t just in our imaginations. Here’s what she found:
Based on my analysis of the Audit Analytics data, 263 SEC reviews of periodic filings were released on EDGAR between January and April 2025 – a decline of 20% and 26% compared to the first four months of 2023 and 2024, respectively. However, it is unclear whether the decrease compared to the 2023-2024 level reflects a shift in SEC priorities or if this is merely a mechanical decline related to a lower number of reviews initiated in the second half of 2024.
The former explanation implies that the number of reviews is likely to revert to the 2020-2021 level, while the latter suggests we may see an even sharper decline on a full-year basis.
To arrive at these numbers, Olga compared the number of conversations with a closing letter on EDGAR during the applicable periods. Olga also shared data that shows a longer-term decline:
Over the past decade, the total number of SEC comment letter conversations referencing periodic filings has generally declined, with a peak in 2015 and a low in 2021, followed by a brief rebound through 2022 before declining again in 2024, according to a report by Ideagen Audit Analytics.
For the scoop on the comment letter process for both ’33 Act registration statements and ’34 Act reports, check out our 52-page handbook…
Over on CompensationStandards.com, I recently highlighted an interesting trend identified by Exequity: ISS’s adverse say-on-pay recommendations tend to spike in June. Exequity has now published additional data that shows this “June Phenomenon” also applies to director elections. Here’s an excerpt:
But the June Phenomenon for directors has an added twist: The trend of adverse recommendations in June appears to be increasing over time, whereas with say on pay the “Against” rate has been stable. In 2015 and 2016, the average rate in June was below 15%, and beginning in 2018, the recommendations “Against” have been above 20%. It is unclear what has caused the increase in “Against” recommendations during this time. Recommendations “Against” in other months have trickled up slightly, from 8% to 10%.
Unlike say on pay, votes for directors are not advisory and over the past 10 years, less than 0.1% of director nominations have failed. Failures in June appear equally likely as in other months, and Exequity finds no discernible trend in the number of companies with directors failing to be re-elected.
On average since 2015, directors have received 96% support when ISS recommends “For” and 83% when “Against.” Average support for directors when ISS recommends “Against” has trickled 1.7% higher since 2015 (from 82.4% in 2015 to 84.2% in 2025), but average support when ISS recommends “For” trickled down by 1.6% (from 97.6% in 2015 to 96.0% in 2024).
The cause of the June spike isn’t clear – and it’s probably not worth getting too neurotic over it. But with June being a popular time for annual shareholder meetings, a significant number of companies could be affected. Those with meetings this month may want to pay extra attention to proxy advisor expectations – if for no other reason than to avoid surprises.
As you may have seen, Donna Anderson is soon leaving her position as T. Rowe’s Global Head of Corporate Governance. Courtney Kamlet & I were lucky enough to catch up with her for the latest episode of “Women Governance Trailblazers” podcast before she moves on to her next chapter. With such a lengthy and impactful career in the corporate governance world, Donna had a lot of insights to share! In this 34-minute episode, we discussed:
1. Donna’s career path, including pivotal moments that led to her leading Corporate Governance at T. Rowe Price, and her compass for decision-making along the way.
2. What has changed the most – and what has stayed the same – over the time that Donna has been involved in the investment and corporate governance world.
3. Predictions for the future of corporate governance.
4. Donna’s favorite part of leading T. Rowe’s proxy voting and engagement process.
5. The types of ongoing engagement interactions that can help if a company is targeted by an activist.
6. Advice for the next generation of women governance trailblazers.
To listen to any of our prior episodes of Women Governance Trailblazers, visit the podcast page on TheCorporateCounsel.net or use your favorite podcast app. If there are governance trailblazers whose career paths and perspectives you’d like to hear more about, Courtney and I always appreciate recommendations! Drop me an email at liz@thecorporatecounsel.net.
The transition to EDGAR Next began in late March. I’ve talked to a few people who said the transition was easier than they expected. For others, the transition has been “truly horrendous” – an actual quote from our Q&A Forum (#12,717). Here’s the question that prompted that response:
Is anyone else having serious issues transitioning to EDGAR Next? For some of our submissions, it’s taking multiple weeks for processing to occur and we’ve actually had clients be locked out of filing. Sytsems going down, getting locked out, resets taking an inordinately long time and staff generally communicating being overwhelmed.
To date, no one has missed a filing that would have cost them S-3 eligibility, but we’re telling clients to try to plan to transition at a time when they don’t think they will need to file anything on EDGAR for a couple weeks (which is sometimes just beyond the client’s control). I have to imagine that if someone did have to request an S-3 waiver as a result of being unable to file that the staff would grant the waiver if you could show the communications and submission materials and related issues. Not sure what you do about a plaintiff suit if something just can’t be disclosed for that period of time. I guess one could still do press releases though that seems a bit odd/potentially an FD issue.
Just curious if we are the only ones having these issues and if anyone is aware of anything being done to address this at the SEC. Maybe they’ve just lost too many people?
It sounds like finding a quiet two-week window is good advice. Here are some other tips that members have shared – please feel free to email Meredith, John or me with any other processes that are working well for you (mervine@ccrcorp.com, john@thecorporatecounsel.net, liz@thecorporatecounsel.net):
1. Promptly reset the CCC to match the code used on the old platform
2. Take the lead for directors who have additional directorships
3. Handle insiders one by one at a time when they don’t expect upcoming filings
Check out our March Section16.net/NASPP webcast – “How to Prepare for EDGAR Next” – for additional info & suggestions, as well as our “Q&A Forum” on this site where we and other members of the community are continuing to receive and respond to questions.
If you’ve started transitioning your company and/or directors to EDGAR Next, how’s it going? Please participate in this anonymous poll to share your experience:
Check out John’s latest “Timely Takes” podcast – featuring Cleary’s J.T. Ho and his monthly update on securities & governance developments. In this 22-minute installment, J.T. reviews:
1. Rule 10b5-1 CDIs
2. Clawback “checkbox” CDIs
3. Tariff disclosure implications
4. Mid-season proxy trends
5. DOJ enforcement priorities
6. Latest SEC happenings
As always, if you have insights on a securities law, capital markets or corporate governance issue, trend or development that you’d like to share in a podcast, we’d love to hear from you. You can email John and/or Meredith at john@thecorporatecounsel.net or mervine@ccrcorp.com.
In Q1 2025, the US IPO market saw a 55% uptick in the number of deals and a modest increase in total proceeds. The health care and technology sectors led the activity, while significant deals across various industries pointed to broader market interest.
That’s from an EY recap of Q1 IPO stats. However, momentum is choppy at best, and as this WSJ article points out, few venture-backed tech companies are rushing to market:
Just nine venture-backed companies went public in the US this year, including several biotechs and a couple of Chinese financial and consumer companies, according to Renaissance. That is fewer than the 11 that began trading in the same period last year.
No American tech company with a large ownership by venture investors has gone public this year yet.
One reason for pause is that new IPOs are likely to be a down-round for VCs who invested at sky-high valuations. A recent article from The Information says that’s been the case for every venture-backed IPO for the past 12 months! Even so, some of those investors may be willing to patiently recover their capital in the public markets. The WSJ notes:
“For many VC-backed names, it’s not a matter of avoiding a down round entirely,” Kennedy said, “as much as mitigating it.”
Companies go public to raise capital and provide liquidity to their investors. And a down-round IPO isn’t destiny—shares can rebound and soar over the longer term. Venture-backed ServiceTitan, for example, went public in December at $71 a share, well below the $118.96 paid by investors for its Series G stock in 2021. At $126.71 at Tuesday’s close, the company’s share price is up almost 80% since the IPO.
So, take heart, set expectations, and be ready to gear up if the IPO window really does open!
If you’re looking for a treasure trove of IPO data, check out these stats from Professor Jay Ritter at the University of Florida. Maybe some of you are already familiar with his work – as his data informs a lot of financial reporting – but I had not done a deep dive.
This particular set looks at info from initial public offerings from 1980 to 2024 – 44 years! – including the type of backing the companies had at the time they went public, age and profitability, and first-day and three-year returns by lead underwriter. We all hear the common refrains that the volume of IPOs has been lower lately and that companies have been waiting longer to go public – but seeing the data puts things in perspective:
1. The median number of IPOs from 1980-2019 was 158 – well above the 72 IPOs last year, 54 in 2023, and 38 in 2022.
2. The average age of companies going public was 9.5 years from 1980-2019, but it’s been ticking up the past several years – from 8 in 2022, to 10 in 2023, to 14 years in 2024.
3. For tech IPOs, valuations at IPO are higher – and IPO profitability is lower. For example, in 2024, the median price-to-sales ratio was about $9-$11, compared to about $3-$4 in 1980. But that’s nothing compared to the dot-com bubble, which reached a height of $49.5!
If you’re interested in these trends, make sure to check out Jay’s page, where you’ll find info on direct listings, SPACs, industry trends, and more.
The Center for Audit Quality (CAQ) SEC Regulations Committee recently published notes from the Committee’s March 5th meeting with the SEC Staff from Corp Fin and the Office of the Chief Accountant. John shared an update from this meeting a couple weeks ago – that segment disclosures (and AI disclosures) rank high on the Staff’s agenda.
Additionally, the meeting involved a discussion about how to apply the “investment test” under Reg S-X Rule 1-02(w)(1)(i)(A)(1) – for purposes of determining the significance of business acquisitions pursuant to Regulation S-X Rule 3-05 – when consideration includes repurchase of the acquiror’s own shares. Here’s an excerpt:
The staff did not analogize to Financial Reporting Manual section 2015.11 in responding as they noted that current Rule 1-02(w) requires adjustments for intercompany eliminations for both the asset and income tests but does not include adjustments for intercompany eliminations for the investment test, including in circumstances when total assets should be used instead of aggregate worldwide market value (i.e., when a company does not have AWMV).
With respect to the use of AWMV in the denominator of the investment test, the staff indicated that because Rule 1-02(w) does not include any adjustments in the investment test for intercompany transactions as the other tests do, there does not appear to be a basis to exclude the repurchase of a registrant’s own shares.
Further, S-X 1-02(w) uses the term “consideration transferred” to determine the numerator of the investment test. The staff notes that “consideration transferred” is a concept in US GAAP (ASC 805) and IFRS. Therefore, if the company includes the value of the shares repurchased in determining the “consideration transferred” under US GAAP or IFRS, the staff believes the full amount of the “consideration transferred” should be reflected in the numerator and there does not appear to be a basis to exclude a portion of the consideration related to the repurchase of shares for the purposes of the investment test.
The usual caveats apply to these notes – they are a summary of discussions, not authoritative, and not an official statement of the Staff. That said, they shed some light on how the Staff views various accounting-related topics. The next Joint Meeting of the Committee and the Staff is set for June 26, 2025.