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Majority Voting, Proxy Issues

Below is some of the most recent Compliance Week coverage related to the proxy issues, majority voting, proxy access, and other components of the shareholder democracy movement. Includes coverage of proxy fights, broker voting, "advisory votes," and director elections. See also columns by institutional experts Stephen Davis and Jon Lukomnik, as well as related Compliance Week data offerings, like our searchable database of corporate bylaws and policies.

More Taking Extreme Measures to Tie Pay to Performance

February 19, 2014

Companies, facing pressure from investors and proxy advisory firms to strengthen the connection between pay and performance, are increasingly taking sweeping measures to increase the at-risk portion of executive pay. Some compensation consultants caution, however, that companies can go too far and that some pay practices bring only short-term results or could provide incentives to game the numbers. More inside.

Proxy Advisers Have New Playbooks for 2014 Annual Meetings

January 14, 2014

Proxy advisory firms Institutional Shareholder Services and Glass Lewis have released changes to their proxy voting policies for 2014. While the firms aren't introducing any radical changes, companies and boards will have to prepare for several shifts if they want to avoid negative votes, including changes to how the firms view pay-for-performance and compensation committee independence. Details inside.

Many Activist Investors Keep Coming Back for More

December 17, 2013

Boards and managements are often tempted to consider a matter closed once they have engaged with an activist shareholder group, especially if they have made some concessions. Yet such an approach can backfire—because many activist investors come back for a second bite of the apple. "These investors tend to be aggressive, well-capitalized, and thoughtful. They won't just go away," says Spencer Klein, a partner at law firm Morrison & Foerster.

SEC Hears Plans, Ideas to Reform Proxy Advisory Firms

December 10, 2013

Proxy advisory firms are again in the spotlight as the Securities and Exchange Commission may prepare to take steps to increase regulation of the industry. At a roundtable last week, SEC Commissioner Daniel Gallagher fretted that proxy advisory firms have gained "an outsized role in corporate governance in the United States," largely as a result of "the unintended consequences of SEC action."

Companies Revising Pay Programs in Response to Say-on-Pay Results

July 23, 2013

Few companies have failed shareholder advisory votes on executive pay, but that doesn't mean the votes don't still sting pay practices. According to benefit consulting firms, companies that see support levels under 80 percent are making changes to their plans, and in many cases, boosting shareholder support the next year. "A lot of companies are trying to answer investor concerns," says Robin Ferracone, CEO of consulting firm Farient Advisors.

Tying Pay to Compliance: Will Walmart's Plan Work?

May 07, 2013

Walmart will soon begin basing a portion of compensation for top executives, including CEO Michael Duke, on the company's ability to meet compliance goals, as it works to move past a massive bribery scandal. Compensation advisers say the move, while rare, could be the beginning of a trend. "It certainly has the potential to draw imitators," says Chris MacDonald, senior fellow at Duke University's Kenan Institute for Ethics.

Shareholders Are Scrutinizing Compensation Practices. Are You?

April 09, 2013

This proxy season shareholders are continuing to pressure companies to adopt more pay-for-performance practices. With changes to proxy advisers' voting recommendation policies, the emergence of "say-on-pay" lawsuits, and other factors, many companies are feeling the heat. Inside, guest columnist Arden Phillips, governance officer at Washington Gas Light Co., provides some tips on gaining shareholder support for compensation practices.

Proxy Access Efforts Fizzle

March 05, 2013

Companies, once concerned that proxy access would throw the boardroom doors open to shareholder activists, are breathing a sigh of relief; campaigns to gain proxy access haven't really materialized, with only a handful of proxy access proposals filed so far this year. "If anything, we're actually seeing a drop-off in the level of activity," says Patrick McGurn, executive director at proxy advisory firm Institutional Shareholder Services.

Shareholder Lawsuits Push for More Pay Disclosure

February 12, 2013

Shareholder are pushing for more executive compensation disclosure with lawsuits that contend companies aren't providing enough information for investors to make sound decisions about executive pay. Some see them as a tactic by plaintiffs' attorneys to force companies into pricey settlements. They're "putting virtually no time into researching the merits of their claims," asserts Michael Melbinger, partner at law firm Winston & Strawn.

Looking Ahead to the 2013 Proxy Season

December 18, 2012

The 2013 proxy season will bring some new twists, with a fresh crop of companies putting executive compensation to a shareholder vote and a group of activists bent on putting proxy access on several ballots. Companies are increasingly reaching out to large investors and working to get a better idea of how shareholders are likely to vote on several issues. Inside, we take a look at the topics that will dominate the 2013 proxy season.

C-Suite and Board May Need to Work Around Tax Cliff

October 23, 2012

With the Bush tax cuts set to expire and potential higher rates for dividend payments on the horizon, some consultants are advising companies to accelerate bonus and dividend payments into 2012, despite political promises from both sides of the aisle to preserve many of the cuts. Companies that pursue such tactics may save employees and investors money, but the moves come with compliance challenges. Details inside.

Companies Look to the SEC to Rein in Proxy Advisory Firms

June 05, 2012

While the SEC has put rulemaking for a Dodd-Frank Act provision on regulating proxy advisory firms on the back burner, advocates of the measure continue to push for increased oversight of firms such as ISS and Glass Lewis. The biggest complaint: Companies have no recourse when proxy advisers get it wrong, and they often do. Details inside.

Facebook Board Reignites the Debate Over Diversity

June 05, 2012

Facebook's all male, all white board has rekindled a discussion on the benefits of board diversity, and shareholder activists have targeted some boards that lack women and minorities. While progress on board diversity has been slow, few think that mandated quotas for women and minorities, such as those in place in France and Spain, are a good idea. More inside.

Britain's 'Shareholder Spring'

May 30, 2012

A wave of shareholder activism is hitting the United Kingdom, where companies are seeing much higher levels of negative votes on compensation plans and a few CEOs have even resigned after losing say-on-pay votes. Some say it could be a sign of things to come in the United States. "It seems highly unlikely that this trend will be confined to the United Kingdom," says Bob Mecrate-Butcher, a partner at law firm Charles Russell.

Proxy Access Efforts Starting Slow

May 15, 2012

Efforts by shareholders to win the right to nominate board members directly haven't fared well so far this proxy season. Many companies successfully petitioned the SEC for permission to ignore proxy access proposals. Of 22 proposals, only three have gone to a vote and all of them lost. Still, shareholder activists say they aren't about to give up the fight. Details inside.

Sustainability Grows on the Shareholder Agenda

April 17, 2012

Social and environmental issues continue their upward march in importance to shareholders, comprising 46 percent of the shareholder proposals filed so far this proxy season. "It's really about transparency: reporting what you're doing so that investors can decide if they agree with it or not," says Steve Starbuck, leader of Ernst & Young's climate change and sustainability practice. How can companies avoid nasty proxy fights? Read inside.

With Pay-for-Performance, It's the Performance That Really Counts

April 10, 2012

New evidence is emerging that for all the complex calculations that go into tying executive pay to performance, investors view it pretty simply: If they don't like the company's performance, they'll vote against the pay package, details be damned. "Overwhelmingly, it's the criteria investors across the spectrum use to evaluate whether they'll vote for the pay plan," says Tim Smith of Walden Asset Management. More inside.

Many Struggling With Risk Disclosures

April 03, 2012

Two years after the Securities and Exchange Commission enacted new proxy disclosure rules requiring companies to reveal more about how their boards oversee risk, many companies are still struggling with how to communicate aspects of their risk-management programs effectively. According to a recent study, disclosures are too basic and lack details on the company's approach to risk.

PCAOB Kicks Off Auditor Rotation Debate

March 27, 2012

A who's who of the auditing world convened at the Public Company Accounting Oversight Board last week for two days of discussion about term limits for audit firms' engagement with clients. Opinions were predictably diverse, and consensus was rare. Goodyear CFO Darren Wells, for example, said auditor rotation should only be required after an audit failure. More views inside.

SEC Speaks on Proxy Access

March 27, 2012

The SEC's latest batch of decisions on no-action letters offers a bit more insight for companies looking to thwart shareholder proposals about access to the proxy statement. The good news: The SEC did give several companies permission to ignore such proposals. The bad news: Most of those were issued for technical reasons, not any broad attempt by the SEC to limit shareholder proxy access. More details inside.

Proxy Access Moves Forward at Two Companies

February 07, 2012

Meanwhile, shareholders are having more success with proposals to gain proxy access. So far they have launched proposals to put proxy access to a vote—a process known as private ordering—at 18 companies, and two of those companies are moving toward adopting provisions to allow investors to nominate board candidates. "We're in private-ordering land now. I think we'll be there for the extended future," says Patrick McGurn, executive director at ISS.

Investor Groups File Auditor Rotation Proxy Proposals

February 07, 2012

Two investor groups recently filed proxy proposals to compel companies to adopt auditor rotation policies. So far, their arguments have fallen on deaf ears. Companies have either ignored the proposals or petitioned the SEC for no-action letters, which they have won. But don't expect the battle to stop there. Details inside.

Demystifying ISS' Evaluation of Pay-for-Performance

January 10, 2012

Institutional Shareholder Services issued a revised methodology for how it determines its recommendation for say-on-pay votes, to put more emphasis on pay for performance. The new method involves "some fairly sophisticated analytics in order to ensure the results produce a reliable average trend line," says Carol Bowie head of compensation research development and products at ISS.

What to Expect: Preparing for the 2012 Proxy Season

November 22, 2011

Now is the time, say governance experts, to begin preparing for the 2012 proxy season. Shareholders are expected to focus on chairman and board committee independence, majority voting, political spending disclosure, proxy access proposals, and, of course, compensation. "Investors are going to try to take a harder look at pay levels," says Amy Borrus, deputy director at the Council of Institutional Investors.

SEC Opens a Back Door to Shareholder Proxy Access

September 20, 2011

We all know that a federal appeals court invalidated the SEC's rule for shareholder proxy access—but the SEC slipped another, less-noticed provision into the rulebook that still gives investors an avenue to secure proxy access by shareholder proposal. "It allows for private ordering, coming up with proposals specific to a company instead of using the one-size-fits-all approach," says Michael Littenberg, a partner at law firm Schulte Roth & Zabel.

More Legal Challenges to Dodd-Frank Could Be in the Works

August 30, 2011

The U.S. Chamber of Commerce is mulling what rules of the Dodd-Frank Act to challenge next, now that it has defeated a rule to allow shareholder proxy access. Likely targets include proposed rules for conflict minerals, pay-ratio disclosures, and clawbacks. "We will focus specifically on rules and provisions that impact the ability of companies to raise capital and remain competitive globally," Chamber spokesman Tom Quaadman says.

Shareholders Want More Transparency on Political Spending

April 19, 2011

Last year's Citizens United decision undid limits on corporate political spending. Now shareholders are demanding more disclosure on the topic, with a record number of proxy resolutions this season. "As shareholders, we just think they should be very transparent about this," says Laura Berry, executive director at the Interfaith Center on Corporate Responsibility.

Proxy Exclusions: When Close Isn't Close Enough

March 15, 2011

Companies can exclude shareholder proposals from the proxy statement if they can demonstrate that they are already doing what the investors' resolution asks them to do—an approach known as the "substantial implementation" exclusion. But it's getting a lot harder to convince the SEC to grant one. Details inside.

Delaware Sides With Shareholders in ‘Plurality Plus’ Case

October 19, 2010

Companies with a “plurality plus” standard for electing corporate board directors have a new warning to contemplate from the Delaware Supreme Court: Yes, you can ignore shareholder votes calling for a director’s ouster, but it will come at a price.

Prepping for Proxy Access

October 05, 2010

While the courts are now weighing the long-expected legal challenge to the Securities and Exchange Commission’s controversial new proxy access rule, lawyers are advising companies to take no chances and begin preparing for its potential effects on director elections during the next proxy season.

What’s Driving Shareholder Anger and Activism

September 21, 2010

Two emerging trends are likely to have a dramatic influence on investor and market behavior. One is the unbridled advance in technology. The other is the will of a majority of commissioners at the Securities and Exchange Commission and of lawmakers in Congress to give more power to investors.

Activists Flex Muscle, Get Proxy Access

July 13, 2010

With the smoke still swirling on the Dodd-Frank regulatory reform bill, Compliance Week readers are doubtless turning attention to how governance provisions in the bill (or possibly the law, by the time you read this) will affect corporations and investors. That’s as it should be; the legislation promises to hand shareowners more say in director nominations and executive compensation in ways that we have flagged in the past. For now, however, let’s turn to a striking but under-appreciated legacy of this epic battle. Dodd-Frank readjusts the balance of power in boardrooms, but it also illuminates a potentially tectonic power shift in Washington. For the first time, investors showed—in dramatic fashion—that they can go head to head against the established business lobbies and win.

Congress Nails Down Governance, Compliance Reforms

June 29, 2010

Washington’s long-promised reforms to corporate governance, financial reporting and regulatory compliance now seem at hand, thanks to the final 2,000-page bill settled by lawmakers late last week.

As Financial Reform Looms, Directors Ponder Implications

June 15, 2010

As efforts to revamp U.S. financial regulation move closer to the finish line, a panel of current and former Securities and Exchange Commission officials recently offered their thoughts on what the new regulatory landscape will mean for corporate board directors.

Early Reviews on 2010 Proxy Disclosures

June 08, 2010

For any company wondering what grade it may have received for the proxy disclosures it made this spring, listen up.

Giving Institutional Shareholders Food for Thought

June 08, 2010

We’ve always had a soft spot for challenges to conventional wisdom—and as financial reform legislation looms, there is no better time for a bout of it.

Senate Chews Through Amendments to Dodd Bill

May 18, 2010

Anyone in the corporate governance world wondering when Congress will move forward with its massive reform of financial regulation will need to keep waiting.

A Closer Look at Dodd Bill’s Governance Provisions

April 06, 2010

Within a week of Sen. Christopher Dodd (D-Conn.) unveiling his 2,200-page finance reform legislation, more than 750,000 articles had been published about it, pushing, prodding, and analyzing its provisions. The “Restoring American Financial Stability Act of 2010” has engendered venom and praise, and enough punditry to restock every cable network’s complement of talking heads. Is there really anything left to say?

Reforms Proposed for Reg FD, Proxy Voting

March 02, 2010

A panel created to give input to the Securities and Exchange Commission on investor concerns approved its first recommendations last week, which aim to improve dialogue between investors and boards and to make proxy voting by institutional investors more transparent.

Getting Ready for the 2010 Proxy Season

February 17, 2010

Are you ready for the 2010 proxy season? Companies are faced with new rules for expanded disclosure of executive compensation and director experience in the proxy statement. They have more issues that will come under more scrutiny from more people, be they activist investors, proxy advisory services, pension and union funds, or the media. Here’s what you need to consider to be prepared for the proxy season ahead.

Comment Period Ends for Proxy Access; Now What?

January 26, 2010

The extended comment period for the Securities and Exchange Commission’s proposal to allow shareholder access to the proxy statement has now closed—and the controversial idea still seems as divisive and unclear as ever.

SOX Out; Shareowners Get Their Chance in 2010

January 12, 2010

Welcome to the 2010s. You’re just in time for the move from Sarbanes-Oxley to shareowners.

EU Plans Governance Advances for 2010

January 05, 2010

2010 is shaping up to be a year where the European Union will implement previously planned measures to tighten the screws of financial regulation. The question is whether those efforts will line up with reform plans hatched by the G-20 or be diluted under pressure from lobbyists—and so far, the answer is “who knows?”

Boards Brace for Regulatory, Shareholder Storms in 2010

January 05, 2010

A perfect storm of investor anger, regulatory reform, and economic meltdown is hurtling towards the 2010 proxy season—and directors should brace for their own elections to be at the center of the hurricane.

Advocating New Best Practices for Governance

November 10, 2009

Corporate boards and institutional investors are bracing for a tide of corporate governance changes after the financial crisis. We (and others) have written reams about majority voting, the end of broker-dealer voting in director elections, say-on-pay, and shareholder proxy access. How you feel about those issues largely depends on what hat you wear in the vast corporate governance realm.

Preparing for Broker Vote Change

November 03, 2009

The elimination of broker votes in director elections may well to tip the scales of power from corporate boards to shareholders. Companies should prepare now so they won’t be left dizzy by the rule change.

Proxy Access Debate Rages On

August 18, 2009

Well, the deadline has now passed for public comment on the Securities and Exchange Commission’s proposal to allow shareholder access to the proxy statement. Now comes the waiting, to see what the SEC will do next with the controversial idea.

Investors Need to Hone Ownership Abilities

August 11, 2009

It’s all about power. And, as Compliance Week readers know, power is about to shift noticeably away from corporate boards and management toward shareowners, particularly institutional investors.

Preparing Now for SEC Disclosure Changes

July 21, 2009

Compliance officers, corporate secretaries, and other governance executives pondering the 2010 proxy season have some potent new variables to consider: the Securities and Exchange Commission’s proposals to overall proxy disclosure and solicitations.

What’s in Store for 2010 Proxy Season?

June 23, 2009

With the 2009 proxy season winding down, governance experts are already looking ahead at what the 2010 proxy season will hold for public companies and their shareholders.
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