Here’s something Meredith shared earlier this week on our Proxy Season Blog:
Public companies that decide to exclude a shareholder proposal from their proxy statements are no longer the only parties facing lawsuits in the wake of Corp Fin’s move away from Rule 14a-8 no-action letters. Late last week, ICCR and As You Sow filed a lawsuit in the U.S. District Court for the District of Columbia seeking to stop the implementation of the new policy. The complaint in ICCR vs. SEC alleges that the change in approach violated the Administrative Procedure Act.
In this 14-minute episode of the “Inside Track” podcast, Ryan Nowicki Stewart joined me to discuss one of his (many) recent proxy season innovations – Governance Arena. We discussed:
1. The Governance Arena platform – which compares how different AI models analyze and make voting recommendations on real-world proxy scenarios – and the gap it fills in the proxy landscape.
2. How companies can benefit from using Governance Arena.
3. What companies should know about investors’ use of AI tools to make voting decisions.
4. Five-year predictions for AI’s impact on proxy voting and engagement.
Last week on our Proxy Season Blog, I shared another creation of Ryan’s – ProxyGuessr. It’s a quick brainteaser to test your knowledge of who’s who based on their proxy statements. I think there’s a secondary contest playing out for “most creative name” on the leaderboard!
As Meredith recently noted, Nasdaq has been on a roll lately with its proposals. The SEC has been keeping up, too – posting notices over the past couple of weeks on a few of the proposals that we’ve been watching. For micro-caps and China-based companies, the Commission extended time to act on these relevant proposals:
1. Adopt a new continued listing requirement on minimum market cap – extended till April 29th, see our original blog here
2. Adopt additional listing criteria for companies primarily operating in China – extended till May 17th, see our original blog here (the proposal was subsequently amended)
While we don’t know for sure whether the rules will be approved, these extensions are good news for companies that might be affected if they are – e.g., you have a bit more time to consider your options if your market cap is below $5 million.
In addition to extending the period to act on recent market clean-up proposals, the SEC acted last week to approve Nasdaq’s proposal to allow for trading of “tokenized” securities during the pendency of the related DTC tokenization pilot program. Meredith blogged about Nasdaq’s original proposal last fall – it was later amended a couple of times to provide more detail about how the process works. Check out this January blog for key points about how the DTC pilot program works.
Here’s an excerpt from the SEC’s notice:
Nasdaq market participants that are eligible to participate in the DTC Pilot (“DTC Eligible Participants”) would be able to trade tokenized versions of certain equity securities and exchange traded products on the Exchange that are eligible for tokenization as part of the DTC Pilot (“DTC Eligible Securities”). According to Nasdaq, while they are actively assessing multiple methods of tokenization and trading of tokenized securities, the proposed rule change describes and applies to one method by which DTC Eligible Securities can trade on Nasdaq, using DTC to clear and settle trades in token form, per order handling instructions that DTC Eligible Participants may select upon entering their orders for DTC Eligible Securities on Nasdaq.
And:
Pursuant to the Nasdaq proposal, a tokenized share of a DTC Eligible Security must be fungible with, share the same CUSIP number and trading symbol with, and afford its shareholders the same rights and privileges as a share of an equivalent class of the traditional security for it to trade on Nasdaq. Further, Nasdaq has represented that it would trade DTC Eligible Securities “within the confines of existing securities laws and rules” and that its trading system and procedures, except as described above, would be the same regardless of whether a security is tokenized.
A tokenized share of a DTC Eligible Security and its traditional counterpart would trade on the same order book and with the same execution priority. Moreover, market data feeds would not differentiate between tokenized and traditional shares and market surveillance of tokenized and traditional securities would rely upon the same underlying data, which would continue to be accessible by Nasdaq and FINRA.
Talk about a long and storied career! Carl Hagberg started his career as an inspector of elections before handheld calculators existed, and he – and his son Peder Hagberg – are still going strong. As the Co-Editors of The Shareholder Service OPTIMIZER newsletter and magazine – as well as partners of CT Hagberg LLC, which has provided independent inspectors of election since 1992, Carl and Peder are a great source of info on tabulation issues, annual meeting procedures, and “who’s who” in the public company space.
So, as we head into annual meetings, this 35-minute episode of the “Timely Takes” podcast is living up to its name in being especially timely. Meredith was joined by Carl and Peder to discuss:
1. How Carl and Peder came to be experts on the proxy voting process
2. Risks for companies that exclude shareholder proposals in the absence of traditional no-action relief
3. Why this is the year to consider improving your virtual shareholder meeting practices
4. Bad, good, better and best practices for virtual shareholder meetings
5. How companies typically use the option to prerecord portions of the virtual meeting
6. Tips for engaging inspectors
7. How Carl and Peder are trying to improve retail vote turnout and how you can too
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. Email Meredith and/or John at mervine@ccrcorp.com or john@thecorporatecounsel.net.
Earlier this month, the Department of Justice announced its first-ever department-wide corporate enforcement policy, which applies to all corporate criminal cases.
The policy – formally known as the “Corporate Enforcement and Voluntary Self-Disclosure Policy” or “CEP” – is intended to promote consistency, transparency, and predictability and to incentivize voluntary self-disclosure and remediation. It supersedes all existing policies – but seems to incorporate many of their principles.
This Sullivan & Cromwell memo summarizes key changes from existing policies. As far as what the new approach means for companies, the S&C team shared these thoughts in their memo:
The new CEP now ensures that — with the exception of antitrust cases that have long been subject to the Antitrust Division’s unique leniency program — the concrete benefits of voluntary self-disclosure, cooperation, and remediation offered by the Department in corporate criminal cases are governed by a single, uniform policy. For companies facing potential criminal exposure under all other federal criminal statutes, the new policy brings a degree of predictability and consistency that did not exist under the prior regime, where the potential benefits and aggravating circumstances depended on which office or component was handling the matter. The benefits of the CEP are now available across the board, regardless of where a case lands.
The tradeoff is that the prior patchwork of component-specific policies offered companies some degree of flexibility and, in certain instances, more favorable terms. While the new Department-wide CEP makes several changes to the prior Criminal Division CEP, it hews closely to it, and companies can continue to look to precedent cases decided under prior policies to get a sense of what to expect going forward.
At PLI’s “SEC Speaks” conference last week, the Corp Fin Staff shared a status update on the disclosure review program, which had been significantly affected by last year’s record-breaking government shutdown. Here are a few key takeaways (based on our notes from the event and subject to the standard SEC disclaimers):
• The shutdown created a “pens down” situation where staff couldn’t review in-process filings – and by the time it ended, 1,000+ registration statements had accumulated, and of course more kept coming in after the government reopened. When the government reopened on November 13, it was taking about 70 days for the Staff to issue its first round of comments on initial registration statements.
• Now, time-to-first-comment is averaging around 30 days – closer to normal – with some reviews completing the first round under 30 days. In the time period from November 13 to March 19, the Staff processed initial round comments on over 600 filings – compared to just over 300 in the same period the prior year. Not only did they double the volume, they did it with a reduced headcount! People are working very hard.
• The annual review program under Sarbanes-Oxley Section 408 was paused to deal with the registration statement backlog, but it has now been restarted. The Staff will comply with the mandate, though the number of reviews will be lower than in prior years.
• Comment letter dissemination is approximately five months behind. That means that if you’re tracking comment letter trends or volume, the data will look artificially low, and you should know that it’s a function of the delay, not a reduction in comments. Staff is looking at ways to automate what is currently a manual process.
On that last point, one thing that slows down comment letter dissemination is the need to scrub personally identifiable information. If you’re submitting correspondence or exhibits, double-check for bank account numbers, addresses, and tax IDs before you file. Cleaning up on the front end helps Staff on the back end.
Be sure to tune in at 2 pm Eastern tomorrow for our webcast – “From S-1 to 10-K: Avoiding Disclosure Pitfalls” – to hear Tamara Brightwell of Wilson Sonsini, Brad Goldberg of Cooley, Keith Halverstam of Latham & Watkins and Julia Lapitskaya of Gibson Dunn share practical guidance on the most frequent disclosure and compliance challenges that newly public companies face – and offer insights into how to avoid the common missteps that can trigger SEC comments, investor scrutiny, and unnecessary risk. Our panelists will also address questions submitted by members in advance (the deadline was March 19th).
Topics include:
– Entering the Exchange Act Reporting Cycle
– Risk Factors, Forward-Looking Statements, and Earnings Communications
– Form 8-K Current Reports
– Form 10-K and Proxy Statement
– Mechanics of the First Annual Meeting
– SOX, Internal Controls, and Disclosure Controls in the First Year
Members of this site can attend this critical webcast (and access the replay and transcript) at no charge. Non-members can separately purchase webcast access. If you’re not yet a member, you can sign up for the webcast or a membership by contacting our team at info@ccrcorp.com or at 800-737-1271. Our “100-Day Promise” guarantees that during the first 100 days as an activated member, you may cancel for any reason and receive a full refund.
We will apply for CLE credit in all applicable states (with the exception of SC and NE, which require advance notice) for this 90-minute webcast. You must submit your state and license number prior to or during the live program. Attendees must participate in the live webcast and fully complete all the CLE credit survey links during the program. You will receive a CLE certificate from our CLE provider when your state issues approval, typically within 30 days of the webcast. All credits are pending state approval.
This program will also be eligible for on-demand CLE credit when the archive is posted, typically within 48 hours of the original air date. Instructions on how to qualify for on-demand CLE credit will be posted on the archive page.
I blogged earlier this week about proponents taking companies to court over decisions to exclude Rule 14a-8 shareholder proposals from the company proxy statement. Two of the three cases have now settled, with the companies agreeing to include the proposal in the proxy.
The NYC Comptroller announced its settlement yesterday – and emphasized that EEO-1 diversity disclosures are still an initiative:
In 2020, the Comptroller’s Office launched the successful Diversity Disclosure Initiative, encouraging America’s largest companies to voluntarily disclose their Consolidated EEO-1 Reports. The results have been overwhelmingly positive. As of 2025, roughly 80% of S&P 100 companies publicly disclose their Consolidated EEO-1 report, a comprehensive breakdown of the company’s workforce by race, ethnicity, and gender, an increase from about 14 in July 2020. The Comptroller’s Office, on behalf of the Funds, have reached agreements with major companies including the Home Depot, McDonald’s Corporation, Netflix, Nike, and Verizon Inc.
The disclosure of a company’s Consolidated EEO-1 Report is a cost-effective and meaningful way to provide investors with consistent information that allows for comparison of one company to that of its peers. Further, this disclosure imposes few if any additional costs on a company because companies like AT&T are already required to annually submit the report to the Equal Employment Opportunity Commission.
As I noted in my earlier blog, one factor to consider in exclusion decisions is whether the company has previously agreed to do the thing the proposal asks for – that appeared to be a factor in the NYC Comptroller case, even though the macro environment has shifted in the meantime. Another factor, apparently, is whether proponents will litigate – and that risk may be elevated now that there are two settlements on the books.
In other settlement news, Ross Kerber of Reuters reported yesterday that Vanguard had settled antitrust claims with Texas Attorney General Ken Paxton and other state AGs. Here’s more detail (also see this WSJ article):
Vanguard Group will pay $29.5 million and bolster its passive investing approach in order to settle a suit by 13 Republican state attorneys general claiming the fund manager and rivals violated antitrust law through their climate activism.
The suit in U.S. District Court in the Eastern District of Texas has been closely watched as a test of how far Republicans from energy-producing states would push Wall Street firms they accused of overemphasizing environmental matters.
BlackRock and State Street are co-defendants and aren’t part of the settlement. The claims were based on the investors’ membership in investor coalitions focused on climate change commitments, but the investors have already backed away from those. So, the settlement is premised on “passivity commitments.” Vanguard issued this statement – here’s an excerpt:
The terms of the agreement to settle this litigation reaffirm our longstanding practices and standards and the passive nature of our index funds. The settlement also recognizes our innovative Investor Choice program as a tool for empowering investors and bringing new voices into the proxy voting ecosystem. Investor Choice is the largest proxy voting choice program in the world, empowering 20 million index fund investors across more than $3 trillion1 in assets to make their voices heard.
It’s not entirely clear to me what “passivity commitments” means and whether it will affect how Vanguard votes. Maybe it just means the AGs are watching extra close and will swoop in if they see the asset manager support a climate-related shareholder proposal. At any rate, it’s worth noting that institutional investor support (or lack thereof) is another factor to consider in whether to put Rule 14a-8 shareholder proposals in the proxy.
