Sure, we’re now in a bear market – but hope springs eternal. IPOs will return – eventually – and Latham’s 148-page guide is a “must read” for anyone getting up to speed on the process. I have always loved how this guide is formatted like an actual prospectus and shares the “secret sauce.” Here’s what it covers:
– Summary (Preliminary Checklist, Pros & Cons, Timeline)
– The IPO Business (Basics, EGCs, Gun-Jumping)
– Financials
– Upsizing & Downsizing
– Specific Issues & Industries (FPIs, MLPs, REITs, Life Sciences)
– FINRA Review Process
– Beginning Life as a Public Company
– Liability Under the US Federal Securities Laws
– IPO Checklist
– NYSE & Nasdaq Listing Criteria & Governance Requirements
– Exchange Act Reporting Requirements
See our “IPOs” Practice Area for more resources – including surveys & memos that delve into specific topics.
We continue to post new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net members. With shareholder activism, amped-up engagement, and larger numbers of debt holders, “proxy season” now feels like a year-round affair – and this blog covers trends in proposals & engagements, no-action requests, shareholder meeting issues, and more.
Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Icahn’s Animal Welfare Activism Comes to a Close
– Record Support to Eliminate Dual-Class Structures
– Early Returns From ’22 Proxy Season
– Engine No. 1 Makes a U-Turn?
– Shareholders Approve Proposal for Third-Party Human Rights Assessment at Firearms Manufacturer
– Plan for Continued Focus on Diverse Board Composition
America’s labor shortage is getting lots of attention – here’s a recent analysis from the US Chamber that points out some industry differences, while Forbes blames retiring Boomers. One thing is pretty clear – the strategic importance of “human capital” isn’t going to fade anytime soon.
That may be why more companies are now disclosing board involvement in things like “talent management” and “employee engagement” – even though hearing & responding to “worker voice” has not traditionally been viewed as part of the oversight role of the board. Boards that are able to keep their finger on the pulse of worker sentiment are better positioned to chart corporate HR strategies and monitor when things might be getting off-course.
Yet, just how boards can do that is pretty murky. Most information gets filtered through management. I blogged last fall about several ideas for incorporating “worker voice” into the boardroom. Now, “friend of the sites” and PracticalESG.com Advisory Board member Doug Chia has republished his full analysis & recommendations on the topic – “Reimagining Board Committees to Accommodate Worker Voice.” Here are Doug’s concluding recommendations:
If worker voice is to be made a board priority, that initiative should start with a dedicated board committee with worker engagement specifically in mind. A board typically creates committees, either standing or ad hoc, for a subset of the board to dive deep into particular board responsibilities or subject matters and report back to the full board, sometimes with recommendations for board action. Many public company boards maintain standing committees (in addition to the obligatory audit, compensation, and nominating committees) that focus on finance, risk, science and technology, and environmental health and safety.
Board committees are of particular interest because, unlike so many other areas of corporate governance, boards have unencumbered power to form their own committees for specific purposes. Boards are in control their own committee structures, charters, members, and agendas. Boards also have authority to retain independent experts to serve as resources to its committees, thereby reducing its otherwise exclusive reliance on senior management for information and engagement with employees.
Board committees dedicated to hearing and understanding worker voice can be creative in how they approach their task. This could be done through a combination of employee advisory committees, focus groups, site visits, town hall meetings, and other forms of engagement, both formal and informal. While many experts and policymakers are calling for worker representation on boards in the form of directors who are selected by the employees, creating and effectively using board committees dedicated to worker voice is a more practical and achievable means of hearing worker sentiment to inform board oversight, decision-making, and CEO evaluation.
Privacy compliance is getting more complex – and costly – as state-by-state laws proliferate. This Morrison Foerster memo flags possible federal legislation that will be important to watch. Here’s the intro:
In the wake of numerous privacy bills introduced in Congress over recent years, on June 3, 2022, three key House and Senate committee leaders released the first bipartisan and bicameral discussion draft for a comprehensive federal privacy bill. If enacted, the proposed American Data Privacy and Protection Act (the “Act”), to be enforced primarily by the Federal Trade Commission (FTC), would largely preempt state privacy legislation recently implemented in California, Virginia, Colorado, Utah, and Connecticut, as well as possible future privacy legislation in other states. It would also afford to individuals across the nation extensive rights to correct, delete, access, and port their covered data, and require covered entities to comply with general data governance principles such as data minimization and restrictions on data retention. Unlike the majority of its state counterparts, the Act offers U.S. residents a conditional private right of action against covered entities for violations. The Act would go into effect 180 days after enactment—a short timeframe as compared to the state privacy laws that were enacted in recent years.
Because Congress will be in recess for much of the month of August, followed by the 2022 midterm elections, there is only very limited time in the current legislative session for Congress to come to an agreement on the Act, including controversial provisions like those relating to the private right of action of individuals and the preemption of state laws. If it does not pass this legislative session, a version of this bill could be reintroduced in the next legislative session, although which party controls each chamber of Congress and the resulting committee assignments in the next legislative session will impact the bill’s likelihood of passage. Although the prospects of enactment remain uncertain, this bill represents the most concrete effort to date to pass a national privacy law in the United States, and, as a result, organizations that have been focused on compliance with state privacy laws should monitor the development of this bill as they continue to review and refine their privacy compliance program.
This write-up from The Hill says that the bill is facing opposition and is unlikely to pass… but it’s a start.
The May-June issue of the Deal Lawyers newsletter has been posted and mailed. This issue contains the following articles:
– SEC Proposed New Rules to More Tightly Regulate SPAC Activity
– Let’s Talk About Tender Offers
Remember that, as a “thank you” to those that subscribe to both DealLawyers.com & our Deal Lawyers newsletter, we are making all issues of the newsletter available online. There is a big blue tab called “Back Issues” near the top of DealLawyers.com – 4th from the end of the row of tabs. This tab leads to all of our issues, including the most recent one.
And a bonus is that even if only one person in your firm is a subscriber to the Deal Lawyers newsletter, anyone who has access to DealLawyers.com will be able to gain access to the newsletter. For example, if your firm has a firmwide license to DealLawyers.com – and only one person subscribes to the print newsletter – everybody in your firm will be able to access the online issues of the print newsletter. That is real value. Here are FAQs about the Deal Lawyers newsletter including how to access the issues online.
Last fall, BlackRock unveiled a new “Voting Choice” program to give certain institutional investors the option to vote the shares that they hold through BlackRock index funds. We blogged about the ins & outs – and the potential impact on portfolio companies. Yesterday, the world’s largest asset manager announced that 25% of eligible assets are now participating – which works out to investors holding $530 billion of assets out of $2.3 trillion eligible. Now, BlackRock is expanding the program to cover clients representing 47% of its index equity assets – including public & private pension plans serving more than 60 million people, insurance companies, endowments, foundations and sovereign wealth funds.
This is a notable uptake & expansion for a new program that’s still in its first year of existence. And BlackRock isn’t stopping with institutions. In this new 21-page whitepaper, BlackRock outlines its ambition to expand Voting Choice to all investors – including individual investors in funds. Whether this would extend to individuals was one of the big question marks at the time of BlackRock’s original announcement – but apparently it is already rolling out pilots in the UK and with a small subset of US individuals, and working with policymakers on legal, regulatory & infrastructure changes that would allow more pass-through voting in the US. BlackRock acknowledges that Voting Choice would look different for retail funds than it does for currently eligible institutional investors.
Currently, BlackRock Voting Choice offers 4 options, which the asset manager explains as:
1. Clients exercise control over their voting – Some of our largest institutional clients have the resources and the expertise to create their own voting policies, as well as the infrastructure needed to conduct the voting. This option gives clients in our pooled vehicles the ability to apply their stewardship preferences in a consistent way across a broader share of their overall portfolio allocation and to exercise a high degree of control over the decision-making process and the voting implementation. We stress, however, that BlackRock Voting Choice is available to institutional clients of all sizes and resourcing levels.
2. Clients take a hybrid approach to voting – This option gives institutional clients in separately managed accounts (but not pooled vehicles) the ability to exercise their voting decisions on the topics or at the companies that matter most to them. Clients can choose to vote their own preferences on some categories of votes, rather than all; these may be specific proposals (for example on governance), specific sectors (such as energy or finance), or specific markets (often the client’s home market). The client can choose to leave all other voting decisions to the manager’s discretion.
3. Clients choose from a slate of third-party policies – Under this option, institutional clients in both separately managed accounts and certain pooled vehicles can choose to follow an off-the-shelf voting policy from third-party proxyadvisers, choosing the policy that best aligns with their views and preferences. Institutional Shareholder Services (ISS), Glass Lewis, and others already offer ready-made policies. Our clients can currently choose from at least seven different third-party policies, and we expect and hope that the range of choices will expand over time in line with growing investor demand for a diversity of choices.
4. Clients rely on BlackRock’s informed judgment for all voting decisions – In this option, clients may choose to rely on BlackRock for all of their voting decisions. Continuing to rely on us to exercise voting authority is itself a choice and a deliberate decision to trust BlackRock as a fiduciary to look after our clients’ long-term economic interests.
For companies, more dispersed voting could amplify the workload for engagements & solicitations – but could also lessen the impact of any one holder. BlackRock will still be important. The whitepaper emphasizes that it will continue to engage with portfolio companies throughout the year on issues that it believes are material to a company’s ability to create long-term economic value for shareholders, including governance and long-term strategic planning. It says that these engagements inform BlackRock’s own voting decisions, and they see it as a fundamental part of their approach to investment stewardship. BlackRock Investment Stewardship remains core to the asset manager’s fiduciary responsibility to its clients.
Don’t miss hearing important updates from Michelle Edkins, the Global Head of BlackRock’s Investment Stewardship team, at our “Proxy Disclosure Conference” and our “1st Annual Practical ESG Conference.” These events are being held virtually the week of October 11th. Our “Early Bird” rate ends this Friday, so sign up now to get the best price. You can sign up online, email sales@ccrcorp.com, or call 1-800-737-1271.
Last week, a shareholder proposal requesting an annual report on climate passed with 96% approval at Caterpillar (hat tip to Maynard’s Bob Dow for alerting us). Management recommended in favor of the proposal (see page 52 of the company’s proxy statement). Specifically, the proposal called for:
Shareholders request that Caterpillar issue a report within a year, and annually thereafter, at reasonable expense and excluding confidential information, disclosing interim and long term greenhouse gas targets aligned with the Paris Agreement’s goal of maintaining global temperature rise at 1.5 degrees Celsius, and progress made in achieving them. This reporting should cover the Company’s full scope of operational and product related emissions.
It’s becoming more common for the board to support shareholder proposals or choose to not make a recommendation, according to a recent report from Georgeson that I blogged about last week on our Proxy Season Blog. It’s unclear what the long-term consequences of that approach will be for companies – goodwill amongst shareholders? More proposals? Additional disclosure & scrutiny? For now, the most immediate result is that some shareholder proposals are achieving a very high level of support.
Some are viewing this result as favorable for “say on climate.” But this type of proposal is slightly different than “say-on-climate” – so the voting results don’t tell the whole story for that angle. As the say-on-climate proposals were emerging in fall of 2020 and during the 2021 proxy season, I blogged about early misgivings among investors. Just in the past few weeks, Vanguard updated its “Perspective on Say-on-Climate Proposals” to say:
– At this time, Vanguard does not proactively encourage companies to hold a “Say on Climate” vote given the lack of established standards or widely accepted market norms that govern these votes.
– When a company chooses to hold a “Say on Climate” vote, Vanguard expects the board to provide clear disclosure of the rationale for the vote, to articulate the oversight mechanisms and implications of the vote, and to produce robust reporting in line with the Task Force on Climate-related Financial Disclosures (TCFD) framework.
– Vanguard does not seek to direct company strategy. We view “Say on Climate” votes as a signal on the coherence and comprehensiveness of the reporting and disclosures a company provides to explain its climate plan to the market, rather than an endorsement of, or an expression of lack of confidence in, the plan itself.
This Insightia blog notes that investors, asset managers and proxy advisors continue to worry that plans are just another path to greenwashing – winning high support even though they aren’t clearly aligned with Paris Agreement goals. Here are a couple of nuggets:
– Proxy adviser Glass Lewis shared with Insightia Monthly in March that its fears about the campaign have been “fully realized”, with some “objectively bad climate plans winning upwards of 90%+ support.”
– ShareAction’s claims that climate transition plans from Barclays and Standard Chartered were insufficient, on the grounds that they featured loopholes to ensure continued fossil fuel financing, fell largely on deaf ears. Both U.K. banks’ climate plans won upwards of 80% support at their 2022 annual meetings.
For now, the investors that are actually casting the votes seem enamored with the ability to have a “say” – and some companies seem happy to provide it. But with say-on-climate resolutions calling for annual reporting, more transparency is on the way. That means it probably won’t take long for these plans – and anyone involved with establishing & executing them – to draw more scrutiny. Not to mention, companies that set goals may find themselves with greater disclosure obligations (and liability risks) under the SEC’s proposed climate disclosure rules.
Emily blogged yesterday that proposals to eliminate dual-class structures are receiving record support this proxy season. A new $1 trillion coalition of investors – including the CII, New York City Comptroller, and several state retirement funds – is committing to stopping unrestrained dual-class structures as companies go public. Here’s an excerpt from the announcement:
The group, which is expected to grow over time to include additional asset owners and potentially asset managers, will dialogue with key market participants and policymakers, emphasising the importance of the proportionate shareholder voice to effective stewardship and long-term sustainable company performance – and ultimately preventing the further enabling of dual-class share structures, without strict mandatory time-based sunset clauses, in jurisdictions like the US and UK.
In the first phase of the initiative, ICEV will undertake a campaign with pre-IPO companies and their advisers, as well as policymakers, commentators and index providers in priority jurisdictions. This will take place through engagements with both private and public market participants as well as in policy forums.
The announcement includes a reminder that CII has drafted legislation that would require national stock exchanges to bar listings of new dual-class companies unless they have seven-year sunset provisions, or if each class, voting separately, approves the unequal structure within seven years of the IPO.
These Conferences are in a league of their own in terms of the expert lineup and the focus on practical guidance. With a record number of shareholder proposals this year, universal proxy coming into effect, a deluge of SEC rulemaking, and unprecedented scrutiny of corporate disclosures & actions, attending is the best thing you can do to arm yourself for the 2023 proxy season.
ESG is at the forefront of board agendas, regulatory agendas, enforcement agendas, and shareholder agendas. Yet, it’s very difficult to get useful information about what real-world steps to take to make progress, to measure results, and to validate the data needed to support disclosures. Join our lineup of experienced practitioners virtually on October 11th for candid, practical guidance – in these sessions:
– ESG Hot Topics: Forewarned is Forearmed
– Carbon Accounting Risks: Offsets, Disclosures & More
– ESG Litigation & Investigations: Are You at Risk?
– ESG’s Employment Law Landmines & How to Avoid Them
– DEI Trends in the Midst of Rapid Change
– Your ESG Team: Candid Board & Staffing Considerations
