Here are stats about this year’s no-action letters for shareholder proposals, courtesy of this Bloomberg blog:
– An increase in number of no-action letter requests: Over 220 requests were submitted – almost a 10% increase over 2016.
– E&S requests were most common: Together, human rights & environmental proposals were the subject of 71 no-action requests. Companies were successful in excluding 62% of the human rights proposals – but only 17% of the environmental proposals.
– Ongoing attention to proxy access: 49 companies attempted to exclude proposals on proxy access – and the Corp Fin Staff granted relief more than 75% of the time. Most of these were probably “fix-it” proposals. As I blogged today on our “Proxy Season” blog, companies are starting to find a roadmap for excluding these proposals on the basis of “substantial implementation.”
– Requests vary by industry: Most of the no-action requests were submitted by companies in the financials, consumer discretionary & health care industries. In the financial sector, 9 out of 40 no-action requests dealt with shareholder proposals relating to executive compensation. In consumer discretionary, most of the requests related to human rights/social issues.
Also note that the Manhattan Institute recently released its shareholder proposal stats for the proxy season…
Director Communications: Convenience v. Security
How does your board balance convenience & security? Directors need to be able to access & interact with documents while traveling – but their accounts & devices are prime targets for hackers.
Recently, NYSE & Diligent surveyed 350 directors to understand current practices. Among other findings: 92% use unsecured personal email accounts for at least some board communications – yikes! Here’s another nugget:
It’s a bit perplexing that the auditing of board communications, accompanied by cybersecurity training for directors, has not yet become routine. At most companies, board members are on the front lines of a pitched battle; directors are targeted for cyberattack precisely because they have access to the most sensitive information with the least amount of oversight…
Experts agree, the company’s information security officers should provide a similar level of oversight, cyber risk auditing, and cybersecurity training for directors as for the rest of the company, and a director’s ability to adhere to proper procedure should be considered a basic standard for continued membership on the board.
Transcript: “Whistleblowers – What Companies Should Be Doing Now”
We have posted the transcript for our recent webcast: “Whistleblowers – What Companies Should Be Doing Now.”
– Liz Dunshee
We now have a 593-page discussion draft of the revised version of the “Financial Choice Act,” which Broc previewed a few days ago. Check out Steve Quinlivan’s summary of a couple key sections (also see this Cydney Posner blog):
Section 845 of the Act would prohibit the SEC from requiring the use of a universal proxy. It states “The Commission may not require that a solicitation of a proxy, consent, or authorization to vote a security of an issuer in an election of members of the board of directors of the issuer be made using a single ballot or card that lists both individuals nominated by (or on behalf of) the issuer and individuals nominated by (or on behalf of) other proponents.”
Section 844 of the Act would drastically alter the shareholder proposal rules. The Act would require the SEC to eliminate the option to satisfy the holding requirement by holding a certain dollar amount, require the shareholder proponent to hold one percent of the issuer’s voting securities and increase the holding period from one year to three years. It would also increase thresholds for resubmission of proposals. Interestingly, it would also prohibit the common practice of having a proxy submit a proposal on behalf of a shareholder.
The House Financial Services Committee will hold a hearing on the bill next Wednesday…
A Few New Cover Pages For You…
Recently, the SEC changed the cover pages for most ’33 Act & ’34 Act forms by adding a box relating to “emerging growth companies.” Hat tip to Bass Berry’s Jay Knight for providing these new cover pages in Word:
– Form 8-K
– Form 10-K
– Form 10-Q
Director Viewpoints: Changing Domestic Strategies & More
The annual “What Directors Think” survey – by Corporate Board Member/Spencer Stuart – addresses a wide range of topics ranging from deregulation & tax policy to the board’s role in long-range strategic planning & cybersecurity. Key findings include:
– While a full third of board members agreed Dodd-Frank should be completely repealed, the majority (58%) argued in favor of tweaking only certain provisions.
– Half of the respondents believe a one-time deemed repatriation of 10% on offshore profits would support their company’s domestic growth.
– Two-thirds of directors said it is unlikely they’ll adjust their global strategy over the near term, though 46% speculated about the likeliness of doing so domestically.
– Thirty-nine percent of directors said they discuss cybersecurity at every meeting, a slight uptick from the 35% reported six months earlier.
– Four out of 10 respondents reported their board has at least one director with cyber expertise, with an additional 7% who are in the process of recruiting one.
– Only 8% of directors reported being in favor of federal regulations for overboarding.
– Liz Dunshee
Last week, Broc blogged that companies are lagging in preparing for the upcoming changes to the “revenue recognition” accounting standard that takes effect the start of next year. And it’s notable that companies may also be lagging in 10-Q transition disclosure. Over on our “Proxy Season Blog,” Broc recently identified this as “The Key MD&A Item in 2017 10-Qs” & highlighted a sample disclosure.
This blog excerpt from Dorsey’s Gary Tygesson provides more pointers:
Of more immediate concern, companies should be reviewing their Form 10-Q disclosures this quarter and for the balance of the year to make sure that they have addressed the SEC staff’s transitional disclosure requirements set forth in Staff Accounting Bulletin No. 74 regarding the expected impact of the new revenue recognition rules. If a company does not know, or cannot reasonably estimate, the expected financial statement impact of the new rules, that fact should be disclosed.
In that case, however, as noted in a recent speech by the SEC’s Chief Accountant, Wes Bricker, the SEC staff expects a qualitative description of the effect of the new accounting standard, and a comparison to the company’s current accounting, to aid investors in understanding the anticipated impact. Mr. Bricker said that companies “should also disclose the status of its implementation process and significant implementation matters yet to be addressed.” Based on a preliminary look at disclosures in SEC filings to date, Mr. Bricker reported that a number of companies have enhanced their transition disclosures, while for others “there is still more work to do.”
Mr. Bricker also advised caution for companies that conclude in their transitional disclosures that the impact of the new revenue recognition standard is not expected to be material. Because the new standard includes comprehensive new disclosures about contracts with customers and related judgments made by companies, he warned that “the basis of any statement that the impact of the new standard is immaterial should reflect consideration of the full scope of the new standard, which covers recognition, measurement, presentation and disclosure for revenue transactions.”
A New “Intrastate Integration” CDI: Rule 147
Yesterday, Corp Fin issued this new CDI 141.06 regarding how offerings under Rule 147 can transition to those relying on Rule 147A…
PCAOB’s “AuditorSearch” Database: Auditors & Engagement Partners Now Searchable
Recently, the PCAOB launched “AuditorSearch” – a public database of engagement partners & auditors. This search tool allows you to surf through the data filed as part of the new Form AP. The database can provide insight into the relative experience of various engagement partners – such as whether they’ve been associated with restatements or disciplinary proceedings. It also shows whether other auditors performed work underlying the audit report.
Poll: Another Editor??
It’s official – my first week of blogging is here. Readers everywhere are checking their bookmarks & emailing Broc. I can confirm he’s well (albeit in Japan on vaca) – and that all of our content remains subject to our quality-control procedures.
I’m joining TheCorporateCounsel.net after 10 years in private practice. Everyone – including me – thought I’d spend my life in the law firm trenches. Who doesn’t love the adrenaline rush of an FD slip or an unexpected shareholder proposal? But when opportunity knocks…
When we know each other better, I’ll share some reactions to my job change by former colleagues. Let’s just say they were all across the board. In the meantime, Broc & I thought it would be fun to get your reactions too – in this anonymous poll:
polls
– Liz Dunshee
