The hits keep on coming! In this 2-minute video, find out 32 great ways that Prudential Financial (Peggy Foran & her team) enhances the usability of its 2014 proxy statement (with Addison’s help). In particular, check out this infographic about the company’s value creation model – part of its commitment to integrated reporting:
The video above doesn’t address the online version of the proxy statement – which is worth a video on its own!
Exclusive Forum Bylaws: An Illinois Court Weighs In
In this transcript ruling, an Illinois state court dismissed an action brought by purported stockholders of Beam Inc. challenging Beam’s proposed acquisition by Suntory Holdings Limited. The Illinois court ruled that the action was barred by a bylaw adopted by Beam’s board of directors selecting Delaware as the exclusive forum for resolution of certain disputes involving the internal affairs of the corporation. The Illinois court relied heavily on the Delaware Court of Chancery’s decision in Boilermakers Local 154 Retirement Fund v. Chevron Corp., wherein then-Chancellor Strine upheld similar exclusive forum bylaws adopted by the boards of Chevron and FedEx. The Illinois court factually distinguished Galaviz v. Berg, a California federal court case that refused to honor an exclusive forum bylaw adopted by Oracle, but also stated that the Boilermakers decision is “simply more persuasive analytically.”
Courts in New York and Louisiana have also dismissed stockholder actions in reliance on exclusive-bylaws in favor of Delaware.
Transcript: “The Top Compensation Consultants Speak”
We have posted the transcript for the recent CompensationStandards.com webcast: “The Top Compensation Consultants Speak.”
Thanks to Intelligize, here are the most common risk factors during ’13 based on their research looking through both ’34 Act and ’33 Act filings last year:
1. Failure to Compete Successfully
2. Trading Market May Not Develop/Potential Share Price Volatility
3. Dependence on Management Team
4. Difficulty Raising Capital/Insufficient Funding
5. General Economic/Consumer Spending Conditions
6. Failure to Protect Intellectual Property Rights
7. Negative Impact of Changes in Regulations/Policies
8. Dividends May Never Be Paid
9. Principal Shareholders/Management Will Have Significant Control
10. Anti-Takeover Provisions May Prevent a Merger/Acquisition
Here are some runner-ups:
– History of Losses/No Revenue
– Operational Disruptions
– Potential/Current Litigation/Claims
– Dilution in Ownership Due to Future Share Issuances/Conversions
– Failure to Maintain Effective Internal Controls
– Failure to Manage Growth / Expansion Costs
– Integration Challenges from Merger/Acquisition
Too Many Risk Factors vs. Potential Liability: Where Is The Line?
Recently, I blogged – on my “Proxy Season Blog” – about “Will Corp Fin Start Objecting to Too Many 10-Q Risk Factors?” Meanwhile, Doug Greene of Lane & Powell ran this excellent blog on limiting your liability by improving the quality of your safe harbor warnings. I picked his brain by asking: “Now that disclosure reform is being discussed, some investors are complaining about too many risk factors – and I guess perhaps a safe harbor disclaimer that is too much kitchen sink would also be a complaint. How does a company attempt to manage its risk to litigation if only a handful of risk factors is allowed? Think investors want more than just killing the boilerplate.”
Doug responded:
The tension between curtailing risk factors and making them more meaningful is difficult. But it’s possible to harmonize the two goals, and the solution may even be the same: a sharper focus on the company’s real risks and more straightforward descriptions. The problem then becomes how to design and implement a better system for disclosing risks. Companies know their real risks and can plainly describe them, but should we leave them to do it or continue to provide a complex set of instructions? I think that companies, overall, would get it right under a streamlined system.
Dramatic readings are all the rage on YouTube. So to illustrate the silliness of some of the more common risk factors, one of the series on CorporateAffairs.tv features a variety of folks joining together to dramatically read a risk factor. Here are two of them:
To deal with space constraints on voting instruction forms, Broadridge’s Independent Steering Committee recently approved these updated VIF guidelines, updating the original guidelines I blogged about before.
Under the revised guidelines, if Broadridge receives a VIF from a company that has too much language to neatly fit, they will inform the company within 24 hours – and then the company has 3 choices:
1. Direct Broadridge to follow the guidelines about how to pare back the text
2. Submit revised edited language so that it meets the space requirements
3. Request Broadridge to use the lengthy text as originally provided – a Custom VIF – with an extra processing cost incurred
Broadridge Rolls Out More Proxy Cards/VIFs with QR Codes: Mobile Voting Growing Fast for Retail Holders
Recently, Broadridge posted its stats for the ’13 proxy season. Last proxy season, Broadridge rolled out the use of QR codes on proxy card and VIFs, with each QR code being personalized (meaning embedded in the code is the personalized and secure Control Number that is associated with the account’s position). Last year, a handful of companies participated in the pilot – about 1,000 investors used it out of about 1.1 million notices mailed with QR codes printed on them. This proxy season, the number of pilot companies was closer to two dozen.
QR codes appear to be a natural extension of Broadridge’s Mobile ProxyVote since scanning a QR code with a mobile device brings the investor directly to the agenda to vote. Mobile ProxyVote is a version of ProxyVote that is gaining in popularity with about 826,000 accounts voted this proxy season – twice as many as last year. Mobile voting represented about 8% of all positions voted via Broadridge’s Internet platforms for retail shareholders.
Recently, Forbes ran this article entitled “The Broad Reach Of Broadridge, The Most Important Financial Firm You’ve Never Heard Of.”
More on our “Proxy Season Blog”
I continue to post new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net members. 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:
– Shareholder Proposals: “Enhanced” Confidential Voting Policies & Interim Vote Tallies
– 2013 Foxhole of the Year Winner
– Shareholder Proposals: DTC Changes Its Participant List
– Recap: SEC’s Proxy Advisors Roundtable
– The Role of Shareholder Proposals: Ending Apartheid
– Icahn Tweets Intention to Submit Shareholder Proposal at Apple
In this 2-minute video, find out 21 great ways that General Electric enhances the usability of its 2014 proxy statement (with Addison’s help):
In his blog, Mark Borges has written an extensive 2-part analysis of GE’s proxy statement. And if you missed it, here’s a 2-minute video on the 18 cool things in Coke’s proxy…
Delaware’s New Chancellor: Andy Bouchard
Yesterday, as noted in this article, the Delaware Governor tapped Andy Bouchard to serve as the Chancellor of the Court of Chancery, succeeding Leo Strine in that position. Andy is the managing partner of Bouchard, Margules & Friedlander, a firm he and former Vice Chancellor Stephen Lamb founded in 1996 as a litigation boutique after serving a decade at Skadden. Here’s a BusinessWeek article. Andy will be the 21st Chancellor once confirmed by the Senate…
Transcript: “M&A Litigation: The View from Both Sides”
We have posted the transcript for the recent DealLawyers.com webcast: “M&A Litigation: The View from Both Sides.”
Over the last few weeks, there has been a sudden influx of groups issuing guidelines on shareholder engagement practices. A few weeks ago, I blogged about the new SDX protocol – and now we have a group of three documents from The Conference Board Governance Center:
Here’s my Final Four: Michigan over Virginia in the Final; Wisconsin & Kansas round it out. Just love this GIF of Ben McLemore dancing in the locker room last year…
Our “Shareholder Engagement Checklists”
Some good stuff in those new documents. And we do have a lot of good practical stuff in our own “Shareholder Engagement Checklists”:
Yesterday morning, I got this press release announcing that ISS had been sold by MSCI to Vestar Capital Partners to the tune of $364 million. Drats! Fooled again by a rumor in the mass media as I had blogged last week about another likely purchaser due to a WSJ article.
The transaction is expected to close in the second quarter. ISS will operate independently and the current ISS executive team will remain in place. Here’s a Reuters’ article…
CII’s Letter on Interim Vote Tallies
Concerns about who gets to see interim vote tallies continues. Here is CII’s recent letter to the SEC on the topic. And here is my 4-minute video entitled “Broadridge’s Interim Vote Tally Policies”…
Transcript: “The SEC Staff on International Issues”
We have posted the transcript of the recent webcast: “The SEC Staff on International Issues.”
As noted in its Form 8-K, Hologic is the 2nd company holding its annual meeting in 2014 to fail to gain majority support for its say-on-pay with only 34% voting in favor (down from 65% last year).
With 74 say-on-pay failures in ’13 – more than most folks predicted in last year’s poll – what will this year bring? Please take part in this anonymous poll:
survey services
March-April Issue: Deal Lawyers Print Newsletter
This March-April Issue of the Deal Lawyers print newsletter includes:
– A History Lesson: The SEC’s Office of Mergers & Acquisitions
– A Look Back: Regulation M-A & The “Five-Business” Day Rule
– Still Risky Business: Unlicensed M&A Advisors After the Six Lawyers Letter
– The Board’s Evolving Role in Shareholder Communications
– When You’re Selling the Company, Are You Selling the Attorney-Client Privilege Too?
– “Dual Track” Structure Remains Useful to Strategic Acquirors: Even After DGCL Section 251(h)
If you’re not yet a subscriber, try a 2014 no-risk trial to get a non-blurred version of this issue on a complimentary basis.
Shareholder Proposals: Chevedden Wins Another Lawsuit!
Last week, I blogged about how John Chevedden had won two lawsuits involving his shareholder proposals over the past week. Make that now three – as John has won this “proposal by proxy” decision in a lawsuit filed by Chipotle in a federal district court in Colorado…
John is included in this 1-minute video explaining who “shareholder proponents” are:
Last week, Corp Fin issued a revised statement that lays out its framework for how it considers waiver requests for situations that otherwise might render a company ineligible to qualify as a “well-known seasoned issuer.” Corp Fin decided to tweak the framework after its experience to date…
Wanna Know the SEC Chair’s Schedule? You Can…
One of the stranger things posted on the SEC’s website is a list of all of SEC Chair White’s public meetings for last year. It was just posted under the heading of “Frequently Requested FOIA Documents.” I hadn’t focused on this before but former Chair Schapiro also had her meetings for two of her years in office posted too.
Why are people making FOIA requests for what seems like such mundane information? Anyways, not a whole lot of excitement in Chair White’s days. Lots and lots of meetings with staff. As someone who no longer likes meetings, I can feel Chair White’s pain…
Meanwhile, this Reuters article claims that weak trial witnesses is holding back the SEC…
Bylaws Battle: Dissident Director Compensation
Get up to speed in the battle over whether investors should be able to compensate directors in this 2-minute video:
Here’s news from this blog by Davis Polk’s Ning Chiu:
The NYSE has posted its annual letters to its domestic listed and foreign listed companies on its website, with timely reminders of several key annual meeting deadlines and important regulations for U.S. companies, including:
– Broker search cards must be sent at least 20 business days before the record date for annual meetings (10 calendar days for special meetings);
– Notification to the Exchange at least 10 calendar days in advance of all record dates set for any purpose. Any changes will require another 10-day notice;
– Recommendation of a 30-day interval between the record date and meeting date
– Three copies of proxy materials must be sent to the Exchange when they are first sent to shareholders; and
– Annual CEO affirmations are due 30 days after the annual meeting, and interim affirmations are required within 5 business days after the triggering event.
In addition, the letter reminds companies of the Exchange’s recent changes to the compensation committee independence standards, its timely alert policy, and transactions requiring supplemental listing applications and shareholder approval, especially those that may affect voting rights. Companies are strongly encouraged to use egovdirect.com, the Exchange’s complementary website, for notification such as the reporting of dividends, shareholders’ meetings and shares outstanding; submission of news releases; and changes to directors and officers. According to the letter, the website enables companies to compare their corporate governance programs against any subset of their NYSE-listed peers and also includes a Director Lookup feature, which allows companies to easily access a full list of directors from public and non-public companies, which may be helpful in recruiting.
The Exchanges’ letter to foreign private issuers contain much of the same reminders with respect to record dates, submission of proxy materials, written affirmations, supplemental listing applications, the use of egovdirect.com and the Exchange’s timely alert policy. Foreign listed companies that do not distribute proxies in accordance with U.S. rules are also reminded of the requirement to post a prominent undertaking on its website to provide all holders the ability, upon request, to receive a hard copy of the complete audited financial statements free of charge and to issue a press release announcing the annual report filing, including the company’s website address and alerting shareholders how to receive a free copy of the audited financial statements.
Conflict Minerals: Guidance for IPSAs
Certain companies subject to the conflict minerals rules requirement must commission an independent private sector audit, or IPSA, of certain sections of the conflict minerals report. A few weeks ago, as noted in this blog, The Auditing Roundtable issued this guidance for IPSAs.
More on “The Mentor Blog”
I continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. 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:
– Target & the SEC’s Cybersecurity Guidance
– It Might Cost You $39K to Crowdfund $100K Under the SEC’s New Rules
– History Lesson: Securitization of Future Earnings
– SEC Grants Second Rule 506 Bad Actor Waiver
– Wisdom from the Past: Lloyd Cutler
Reversing a steady stream of courtroom losses, John Chevedden has won two lawsuits involving his shareholder proposals over the past week. Jim McRitchie has blogged about both the EMC and Omnicom outcomes. The EMC judge didn’t write up a decision – but here is the transcript that includes his findings. And here’s the Omnicom decision.
Here’s a blog from Davis Polk’s Ning Chiu that explains the decisions in more detail:
A string of corporate success in court cases seeking the exclusion of shareholder proposals, one of which we recently discussed here, has ended with two wins for the defendants.
In deciding Omnicom vs. Chevedden, the U.S. District Court in the Southern District of New York granted Chevedden’s motion to dismiss the complaint. The Court was persuaded that since Chevedden had promised the company not to sue if it rejects his shareholder proposal, and the possibility of SEC investigation or action is remote, the threat of injury was not “actual or imminent” as necessary to grant the company’s declaratory judgment motion. The company had argued otherwise since it must still decide whether or not to include the proposal in its proxy, including facing all the legal consequences of that decision.
The Court did not address the substance of the proposal, which had sought to prohibit the company from obtaining interim vote tallies during proxy solicitation. The SEC staff recently decided that a number of other companies may exclude the proposal on the grounds of vagueness, because the resolutions allowed preliminary voting results to not be available for solicitations made for “other purposes,” but would be available for solicitations made for “other proper purposes.” Omnicom had decided to file suit rather than seek a no-action letter.
The Omnicom decision comes on the heels of a similar finding by the U.S. District Court in the District of Massachusetts in a case brought by EMC on a shareholder proposal asking for an independent chair. Unlike Omnicom, EMC had filed suit after the SEC staff decided the company could not exclude the proposal. Like others, EMC also argued that notwithstanding Chevedden (and also Jim McRitchie’s) agreement not to sue the company if it decided to exclude the proposal, the company faced the possibility of lawsuits from other shareholders or enforcement action from the SEC.
This Court decided that even if there was evidence of a “genuine risk” of such action, declaratory judgment would not bar those suits because those parties would not be collaterally stopped by such a declaration. The Court also noted that dealing with the matter on declaratory judgment, where the company has not presented all of its arguments to the SEC first, would be “reversing the statutory scheme,” and depriving the SEC of its role, as the SEC provides shareholders with a “relatively inexpensive opportunity to get claims disputes resolved.”
Media coverage of the suits included reference to Chevedden’s memorandum to the courts that the “corporate bar has taken notice of this opportunity to create a mismatch in legal firepower between a large publicly traded company and a small shareholder it would like to crush because he has submitted a proposal that management opposes,” with a “let’s do an end run around the SEC and sue Chevedden’ strategy…suing Chevedden from sea to shining sea and drowning him in a barrage of lawsuits.” Chevedden claims that “In January, 2014 alone, in wolf pack fashion, four different public companies sued Chevedden in four different district courts…which may be a record in lawsuits in one month brought by different large corporations against one small individual defendant.”
18 Cool Things About Coke’s ’14 Proxy Statement
Here’s a two-minute video I made featuring 18 great ways that Coca-Cola has made its just-filed proxy statement usable (with Labrador’s help):
By the way, the vast disparity in the quality of corporate IR web pages continues to baffle me. I still think the SEC needs to regulate a bare minimum. For example, some companies post stand-alone PDFs of their glossy annual reports – but not their proxy statements. And many post neither as stand-alone docs – they are just available on EDGAR. Hard to find for some investors. That’s one for the SEC’s disclosure reform project…
