While the number of virtual-only annual meetings has increased, critics continue to contend that virtual-only meetings limit an important shareholder right, precluding shareholders from direct eye-to-eye engagement with management and the board. With this in mind, a group of interested representatives of retail and institutional investors, public companies, proxy advisers and legal counsel have developed a set of best practices designed to ensure that the needs of all constituents are satisfied.
The EY Centre for Board Matters has identified investors' top priorities for companies in 2018, based on its annual investor outreach involving interviews with institutional investors. According to EY, the top investor priorities include board composition, with a particular focus on enhanced diversity; board-level expertise that is more aligned with business goals; and enhanced attention to talent and human capital management.
The Federal Trade Commission (FTC) has issued its annual inflation-adjusted thresholds for determining whether an acquisition of voting securities requires prior notification under the Hart-Scott-Rodino Act. If any person or entity will hold voting shares that exceed the set amount as a result of an acquisition, all parties must submit a filing and observe a mandatory waiting period before acquiring the shares. The FTC also revised the potential maximum penalty for violations of the act.
The new tax act is expected to trigger a spike in the levels of stock buybacks. Since one of the most prolific proponents of shareholder proposals recently submitted a proposal to eliminate the impact of stock buybacks in determining executive compensation, it seems likely that this type of proposal may resurface more frequently, especially if, in light of the recent tax law change, the level of stock repurchases resumes a sustained upward climb.
The National Association of Corporate Directors has released the results of its 2017-2018 Public Company Governance Survey of over 1,000 directors and executives. The survey looked at directors' outlooks for 2018 on key business trends and critical board priorities, the board's role in overseeing an organisation's culture, the state of board risk oversight – especially cybersecurity risk – and the growing challenge of hedge fund activist investors.
The Securities and Exchange Commission Division of Corporation Finance recently revised some of the guidance in its Financial Reporting Manual relating to the adoption of new accounting standards. One revision relates to the adoption of a new accounting standard in the context of a significant acquisition and the second relates to transition period accommodations for emerging growth companies. This new guidance could take on particular significance in the context of the new revenue recognition standard.
While no one likes receiving an audit notice in the mail, the process can be less daunting for parties that understand some of the basics, including if and when an audit will happen, what is likely to happen during an audit, whether the Internal Revenue Service can extend the statute of limitations and what to do if an agent has made a mistake.
According to a recent report, relative total shareholder return (rTSR) is still the most common performance measure used in long-term incentive plans for chief executive officers among S&P 500 companies. However, it has been suggested that rTSR does not adequately reflect individual or company performance, but rather frequently reflected market or industry trends as a whole. The report advocates a different approach based on operating performance measures, such as revenue growth.
The Centre for Audit Quality and Audit Analytics recently posted their annual Audit Committee Transparency Barometer, which measured the quality of proxy disclosures regarding audit committees among companies in the S&P Composite 1500. The report shows continued voluntary enhancements to transparency and broadly increased disclosure around audit committee oversight of the external auditor.
Just in time for the beginning of proxy and shareholder proposal season, the Securities and Exchange Commission Division of Corporation Finance has posted Staff Legal Bulletin (SLB) 14I on Shareholder Proposals. The SLB addresses the scope and application of the rules regarding ordinary business and economic relevance exclusion, the proposals submitted on behalf of shareholders (shareholder proposals by proxy) and the use of graphics and images.
Recently, corporate cultures – or, more particularly, serious lapses in the same – have emerged as flashpoints, often with significant negative press coverage and severe economic consequences. A timely new report from the National Association of Corporate Directors suggests that boards should be paying more attention to the oversight of company culture – not just for scandal avoidance, but also "as a way to drive sustained success and long-term value creation".
In 2014 New York City (NYC) Comptroller Scott Stringer, who oversees the NYC pension funds, submitted proxy access proposals to 75 companies – and ignited the push for proxy access at public companies across the United States. The NYC Comptroller's Office recently announced the Boardroom Accountability Project 2.0, which will focus on corporate board diversity, independence and climate expertise. Will Project 2.0 have an impact comparable to that of the drive for proxy access?
The Delaware Supreme Court recently held that fee-shifting provisions in the bylaws of a Delaware non-stock corporation were valid on their face and were enforceable against members who joined before their adoption. The court further stated that adopting fee-shifting provisions with an intent to deter litigation would not necessarily render such bylaws unenforceable.
In a recent decision the Delaware Chancery Court fashioned an extraordinary remedy by converting the convertible preferred stock issued by Loral Space and Communications Inc to its controlling stockholder into non-voting common stock based upon a court-determined 'fair price' for Loral common stock.
Two recent decisions of the Delaware Court of Chancery, the nation’s pre-eminent business court, concern one of a corporation’s key tools to regulate investor activism: advance notice bylaws, which control the process and timing for shareholder nominations to the board.
Investors acquiring significant equity positions in a company typically try to negotiate agreements which will allow them to protect their investment - the most desirable protection is often thought to be the right to designate a director to the company’s board. Although it may seem that a designated director will benefit the investor, such a designation carries with it considerable risks and uncertainties.
Shareholder proposals continue to be the focus of investor activism, boardroom attention and Securities and Exchange Commission (SEC) reform. Two forces appear to be shaping the 2008 proxy season: the SEC’s rulemaking and the trend towards more meaningful corporate engagement with investor groups.
The New York legislature has approved a bill which significantly toughens the publication rules to which limited liability entities are subject. The bill and a further proposed amendment may be seen as a response to what was perceived as a widespread rebellion against the publication requirement, which some commentators argue merely subsidizes the local print media.