Tune in today at 2pm Eastern for the webcast – “The Latest: Your Upcoming Proxy Disclosures” – to hear Mark Borges of Compensia and CompensationStandards.com, Alan Dye of Hogan Lovells and Section16.net, Dave Lynn of Goodwin Procter and TheCorporateCounsel.net, and Ron Mueller of Gibson Dunn discuss the latest guidance on how to improve your executive & director pay disclosure – including pay-versus-performance disclosure and clawbacks – to improve voting outcomes and protect your board. Understand what to expect for the upcoming proxy season, so that you can prepare your directors and C-suite – and handle the challenges that 2024 will throw your way.
We are making this CompensationStandards.com webcast available on TheCorporateCounsel.net as a bonus to members – it will air on both sites. And because there is so much to cover, we have allotted extra time for this program! It’s scheduled to run for 90 minutes.
If you attend the live version of this 90-minute program, CLE credit will be available in most states. You just need to fill out this form to submit your state and license number and complete the prompts during the program. All credits are pending state approval.
Members of TheCorporateCounsel.net and CompensationStandards.com are able to attend this critical webcast at no charge. The webcast cost for non-members is $595. If you’re not yet a member, try a no-risk trial now. 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. If you have any questions, email sales@ccrcorp.com – or call us at 800.737.1271.
BlackRock Investment Stewardship has unveiled its Global Principles and U.S. Proxy Voting Guidelines for 2024 annual meetings. The 21-page Principles give a comprehensive view of BIS’s stance on 7 key themes that impact companies worldwide – ranging from board responsibilities, to shareholder protections, to sustainability.
The Voting Guidelines get more specific on how BlackRock’s perspectives on these themes apply to specific ballot items & topics in different markets. Overall, the U.S. Voting Guidelines didn’t change too much. While BlackRock seems to have backed off some of its more controversial positions, it still encourages disclosure and strong governance practices. Here are a few updates worth noting:
● CEO & Management Succession Planning – The guidelines now say that where there is significant concern regarding the board’s succession planning efforts, BlackRock may vote against members of the responsible committee, or the most relevant director. (See Meredith’s blog from earlier this month about trends in “succession planning” disclosure…)
● Committee Leadership – Where boards have adopted corporate governance guidelines about committee leadership and/or membership rotation, BIS appreciates clear disclosure of those policies.
● ISSB Standards – Recognizing that the TCFD framework has been absorbed by the International Sustainability Standards Board (ISSB) standards, BIS encourages disclosures on governance, strategy, risk management, and metrics & targets that are aligned with IFRS S1 and S2. BIS understands that companies may phase in ISSB reporting over several years and that some companies use different reporting standards.
● Climate Disclosures – BlackRock continues to seek to understand companies’ strategies for managing material climate risks & opportunities under various scenarios. BIS emphasizes that it is not dictating strategy, which is the role of the board & management, and that it can be challenging for companies to predict the impact of climate issues on their business. But it notes that this is a structural shift in the global economy that may affect regulations, technology & consumer preferences, which be material for many companies.
● Key Stakeholders and HCM – While BlackRock continues to encourage disclosure on DEI approaches, workforce demographics, and natural capital issues, it no longer indicates that it will vote against directors if it determines that a company is not appropriately considering their key stakeholders or if a company’s disclosures or practices fall short relative to market peers on human capital management.
● Shareholder Proposals – A new section says that when assessing shareholder proposals, BIS evaluates each proposal based on merit and long-term financial value creation. BIS does not support proposals that it believes would result in over-reaching into the basic business decisions of the company. In addition, BIS believes it’s helpful for companies to disclose the names of the proponent or organization that has submitted or advised on the proposal. BIS may support shareholder proposals when they are focused on a material business risk that the company has not adequately addressed, if the proposal is reasonable and not unduly prescriptive.
● Responsiveness – Alternatively, or in addition, BIS may vote against the election of one or more directors if, in its assessment, the board has not responded sufficiently or with an appropriate sense of urgency to a shareholder proposal. BIS may also support a proposal if management is on track, but it believes that voting in favor might accelerate efforts to address a material risk.
Most of the other changes are clarifications & what the more cynical among us would call “refined corporate-speak” around ESG/sustainability, BIS’s focus on long-term financial value, and its voting authority. A new 15-page spotlight from BIS – with input from the BlackRock Investment Institute – underscores the asset manager’s focus on “financial resilience” in the face of big geopolitical & economic changes, AI disruption, demographic changes, and the worldwide transition to a low-carbon economy. If you’re engaging with BlackRock this year, expect questions on these topics.
BIS’ Engagement Priorities for 2024 are consistent with those from prior years as they continue to reflect the corporate governance norms, that in our view, drive long-term financial value. There are no material changes in our approach to engaging companies on these themes.
We do note however, that the macroeconomic and geopolitical backdrop companies are operating in has changed. This new economic regime is shaped by powerful structural forces that we believe may drive divergent performance across economies, sectors, and companies. Amid these shifts, we are particularly interested in learning from investee companies about how they are adapting to strengthen their financial resilience.
In our Viewpoint, Financial resilience in a new economic regime, we highlight the structural shifts that we believe are shaping this new regime and discuss how companies are adapting to manage risks and harness opportunities spurred by it.
The Investment Stewardship team provides more detail on engagement priorities – including how it discusses these topics with companies – in its 7 thematic commentaries:
If you were following Dave’s dispatches last week from the Northwestern Securities Regulation Institute, you know that the week was both informative & eventful. I always find it energizing to catch up with friends & fellow practitioners who come from across the country to geek out together over securities law. When you throw in a flash flood and a SPAC release, there is definitely a lot of bonding.
One thing that made this year extra special was that our editorial team for TheCorporateCounsel.net was there in force! If we didn’t catch you at this conference, let’s connect at the next one – the Proxy Disclosure & Executive Compensation Conferences will be here before we know it!
Traveling from a very snowy mid-Atlantic to a warmer (but very wet) Southern California this week reminded me of how much I miss summer at this time of year. Memorial Day weekend is always the unofficial start of the summer season, and this year it will serve to usher in the T+1 settlement cycle for U.S. securities markets. While I wouldn’t expect a ticker-tape parade to celebrate this momentous occasion, there will certainly be a lot of work in back offices around the country to facilitate the shorter settlement cycle.
Yesterday, SEC Chair Gary Gensler addressed the European Commission on the topic of a shortened settlement cycle, noting in the title of his speech that “Time is Money. Time is Risk.” Citing the meme stock insanity that was unfolding as President Biden took office, Gensler outlined how the market plumbing of clearing and settling transactions matters to the markets and investors, similar to how the plumbing in your house is so important, as demonstrated when your plumbing backs up. Gensler noted:
Shortening the clearance part of the market plumbing (the time to ensure that all parties agree to the trade details) also lowers risk. The sooner the parties have allocated, confirmed, and affirmed the trade information for their transaction, the lower the likelihood of a settlement failing since the parties will have more time to identify and resolve any potential errors. The Bank of International Settlements first recommended T+0 affirmations 22 years ago. A decade later, CPMI-IOSCO reaffirmed this in their Principles for Financial Market Infrastructures.
Shortening the cycle also means reducing the credit, market, and liquidity risks of the clearinghouse.
Lowering risks for market participants and clearinghouses, alike, reduces the likelihood that any one entity’s failure spreads risk to the financial system, making the system safer for everyone.
After providing a history of settlement developments over the years and around the world, Gensler noted the while many Americans will be celebrating the unofficial start of summer over Memorial Day weekend, the U.S. will transition to securities settlements of T+1 on May 28, 2024, returning us to “the settlement cycle that we had in the United States most of the first 50 years of Memorial Days.” Further, starting May 28, 2024, trades relating to initial public offerings will be shortened from T+4 to T+2. Gensler noted that both Canada and Mexico are joining the U.S. in moving to T+1 on Monday, May 27, 2024.
Gensler closed his speech by encouraging the European Union and the U.K. to shorten their settlement cycles to bring them in line with where North America will be when summer kicks off later this year.
Last week, Nasdaq Regulation published Issuer Alert 2024-1, which is focused on the impending changes to the settlement cycle and the impact on certain distributions with a record date after May 28, 2024. Nasdaq recently adopted a rule addressing this topic. With respect to regular distributions, the Nasdaq alert notes:
Among the rules and processes that are impacted by this change is Nasdaq Rule 11140(b)(1), which establishes the “ex-dividend date” for most distributions of cash, stock or warrants. The ex-dividend date is the date on which a security is first traded without the right to receive that distribution. While previously the ex-dividend date was generally one business day before the record date, that will change for distributions with a record date after Tuesday, May 28, 2024, and the ex-dividend date after that will generally be the same date as the record date. In addition, Nasdaq and the other Self-Regulatory Organizations have agreed with the DTCC, which processes distributions for publicly traded securities, that no securities will be ex-divided on May 28, 2024, to avoid confusion about the proper settlement.
Issuers should be aware that the first RECORD DATE to which the new ex-dividend date ruling rationale will be applied will be Wednesday, May 29, 2024.
With respect to large distributions, the alert notes:
Nasdaq Rule 11140(b)(2) establishes the ex-dividend date for cash dividends or distributions, stock dividends and/or splits, and the distribution of warrants, which are 25% or greater of the value of the subject security. These distributions are declared ex dividend on the first business day following the payable date for the distribution. While Nasdaq did not amend Rule 11140(b)(2), in order to avoid an ex-dividend date of May 28, 2024 under this rule, issuers are advised to NOT set May 24, 2024 as the payment date for any dividend or distribution that may exceed 25% of the value of the subject security.
For more information regarding the SEC’s move to T+1 settlement, check out our “Settlement” Practice Area.
Before we can enjoy the summer season we need to get through the upcoming proxy season, and as you prepare of the onslaught, you will definitely want to join me, Mark Borges, Alan Dye and Ron Mueller next Tuesday at 2:00 pm Eastern time for our annual webcast “The Latest: Your Upcoming Proxy Disclosures.” We are planning to delve into a wide range of topics, including:
– Clawbacks
– Pay vs. Performance Disclosures
– CD&A Enhancements & Trends
– Shareholder Proposals
– Proxy Advisor & Investor Policy Updates
– Perquisites Disclosure
– ESG Metrics & Disclosures
– Say-on-Pay & Equity Plan Trends, Showing “Responsiveness” to Low Votes
– Status of Related Rulemaking
This is a webcast that you don’t want to miss! I know that I always learn a lot during our annual program.
Members of this site are able to attend this critical webcast at no charge. If you’re not yet a member, subscribe now. The webcast cost for non-members is $595. You can sign up by credit card online. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.
We will apply for CLE credit in all applicable states (with the exception of SC and NE who require advance notice) for this 1-hour webcast. You must submit your state and license number prior to or during the 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.
The SEC’s years-long effort to address its concerns with SPACs culminated in the adoption of final rules yesterday by a 3-to-2 vote. As summarized in this fact sheet, the final rules, among other things:
1. Require additional disclosures about SPAC sponsor compensation, conflicts of nterest, dilution, the target company, and other information that is important to investors in SPAC IPOs and de-SPAC transactions;
2. Require, in certain situations, the target company in a de-SPAC transaction to be a co-registrant with the SPAC (or another shell company) and thus assume responsibility for the disclosures in the registration statement filed in connection with the de-SPAC transaction;
3. Deem any business combination transaction involving a reporting shell company, including a SPAC, to be a sale of securities to the reporting shell company’s shareholders; and
4. Better align the regulatory treatment of projections in de-SPAC transactions with that in traditional IPOs under the Private Securities Litigation Reform Act of 1995 (PSLRA).
In addition, the Commission provided guidance for assessing when SPACs may meet the definition of an investment company under the Investment Company Act of 1940 and regarding statutory underwriter status under the Securities Act of 1933 in connection with de-SPAC transactions.
The final rules will become effective 125 days after publication in the Federal Register, and compliance with the Inline XBRL tagging requirements will be required 490 days after publication of the final rules in the Federal Register.
Commission Peirce noted in her dissenting statement: “[t]he Commission has failed to identify a problem in need of a regulatory solution. To the contrary, the rule will exacerbate a problem—the shrinking pool of public companies—by closing down one road into the public markets.” In his dissenting statement, Commissioner Mark Uyeda notes in his dissenting statement: “there may be a far simpler explanation behind what the Commission is doing for SPACs: we simply do not like them. In order to achieve this desired outcome, the Commission seeks to impose crushingly burdensome regulations on SPACs as a form of merit regulation in disguise.”
During the open meeting, Chair Gensler citing Aristotle, noted yet again a desire to treat “like as like” and, in that vein, to consider SPACs and the related de-SPAC transactions as alternative IPOs that should be subject to investor protections that are available to investors in traditional IPOs — including as it relates to disclosures and gatekeeper protections. This ignores that the business combination is subject to a state law process applicable to business combinations and that boards of directors have duties. And, of course, one wonders, is it truly “like as like” when companies that begin life as SPACs even once subject to the new, enhanced disclosure requirements will not be treated (once they cease being “shell companies” or former shell companies) like other filers? What would Aristotle have thought about this? A rhetorical question certainly since the great philosopher probably would not have known what to make of our securities laws.
As the blog notes, the final rules take into account only some of the concerns raised during the public comment period. The Commission determined not to adopt the controversial Rule 140a, which related to statutory underwriter status, and an Investment Company Act safe harbor. Instead, the Commission provided guidance on Investment Company Act and underwriter status.
Tune in today at 2 pm eastern for our “The ABCs of Schedule 13D and 13G” webcast to hear Scott Budlong of Barnes & Thornburg, David Korvin of Gibson, Dunn, Jennifer Nadborny of Simpson Thacher, and Andrew Thorpe of Gunderson Dettmer provide insights into the basics of beneficial ownership reporting, the changes to the reporting scheme resulting from the amendments, and the implications of the SEC’s new guidance on cash settled derivatives and Schedule 13D “group” formation.
Members of this site are able to attend this critical webcast at no charge. If you’re not yet a member, subscribe now. The webcast cost for non-members is $595. You can sign up by credit card online. If you need assistance, send us an email at info@ccrcorp.com – or call us at 800.737.1271.
We will apply for CLE credit in all applicable states (with the exception of SC and NE who require advance notice) for this 1-hour webcast. You must submit your state and license number prior to or during the 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.
