Today the Securities and Exchange Commission (“SEC”) staff announced that it will no longer express views on the application of Rule 14a-8(i)(9), one of the bases for excluding shareholder proposals from company proxy materials, during the current proxy season. The staff’s announcement is a result of today’s announcement by SEC Chair Mary Jo White that she has directed the staff of Division of Corporation Finance to review the rule and report to the Commission on its review.
Topic: Corporate Governance
ISS TO LAUNCH NEW “QUICKSCORE 3.0”
Last week, proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) released information about the updated version of its corporate governance benchmarking tool, ISS Governance QuickScore 3.0 (“QuickScore 3.0”), which will launch on November 24, 2014. Companies should take certain actions now and in early November to prepare for the launch of new QuickScore 3.0, as discussed below. QuickScore 3.0 includes both new data points and updates to existing data points for U.S. companies. ISS is expected to release the details of these changes later this week, but below is a summary of the changes we have been able to determine based on the preliminary information released by ISS.
SEC Approves PCAOB’s New And Amended Standards On Related Party Transactions And Significant Unusual Transactions
Earlier this week the SEC approved, without amendment, the PCAOB’s new auditing standards that expand audit procedures required to be performed with respect to three important areas: (1) related party transactions; (2) significant unusual transactions; and (3) a company’s financial relationships and transactions with its executive officers (including executive compensation). The standards also expand the required communications that an auditor must make to the audit committee related to these three areas and amend the standard governing management representations that the auditor is required to periodically obtain. See SEC Release No. 34-73396, Order Granting Approval of PCAOB’s Proposed Rules on Auditing Standard No. 18, Related Parties, Amendments to Certain PCAOB Auditing Standards Regarding Significant Unusual Transactions (October 21, 2014), available at http://www.sec.gov/rules/pcaob.shtml.
ISS Announces Proposed Changes to Proxy Voting Policy on Independent Chair Shareholder Proposals Voted on at 2015 Shareholder Meetings
Today, the proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) announced proposed changes to its voting policy on independent chair shareholder proposals and opened the comment period until October 29, 2014, to solicit feedback on the changes. This is one of two significant proposals ISS announced today that would impact U.S. companies for the 2015 proxy season.
ISS Provides Additional Information on New Proxy Voting “Scorecard” Approach for Evaluating Equity Compensation Plan Proposals at 2015 Shareholder Meetings
Today, proxy advisory firm Institutional Shareholder Services Inc. (“ISS”) provided additional information on its plans to implement a new “scorecard” approach to evaluating equity compensation plan proposals at U.S. shareholder meetings and requested comments on its proposed policy change. This is one of two significant proposals ISS announced today that would impact U.S. companies for the 2015 proxy season, with the other proposed policy change relating to voting recommendations on independent chair proposals (which we discuss here). Companies considering seeking shareholder approval of equity plans at shareholder meetings in 2015 should consider these proposed changes now to the extent they want ISS to recommend votes “For” the equity plan.
ISS Releases Survey for 2015 Policy Updates
Institutional Shareholder Services Inc. (“ISS”), the most influential proxy advisory firm, today launched its 10th annual global policy survey. Each year, ISS solicits comments in connection with its review of its proxy voting policies. At the end of this process, in November 2014, ISS will announce its updated proxy voting policies applicable to 2015 shareholders’ meetings.
House Financial Services Committee Approves Eight Bills Affecting Securities Regulation
Earlier this summer, on May 22, 2014, the Financial Services Committee of the House of Representatives approved eight bills relating to issuer disclosures, public and private capital raising, the liquidity of restricted securities and SEC regulations generally. These bills, if enacted into law, would incrementally ease the many burdens imposed by the current securities regulatory regime.
SEC Issues Guidance on the Use of Social Media and the Intrastate Offering Exemption
Solicitations using Social Media
During a webcast earlier this year, our partner Jim Moloney, who formerly worked in the SEC’s Office of Mergers & Acquisitions (“OM&A”), spoke with the current Chief of OM&A, Michele Anderson. On that webcast, Ms. Anderson acknowledged that “social media is here to stay,” noting that the Commission was “trying to find a way to make it work.” Following the webcast, the SEC’s Division of Corporation Finance (“Corp Fin”) posted a new round of Securities Act Compliance and Disclosure Interpretations (“C&DIs”) that approved hyperlinking to legends or required statements in satisfaction of the requirements of Rules 134, 165 and 433 in certain situations. Under three new interpretations, Corp Fin clarified that an electronic communication containing a hyperlink to a legend (or a required statement in the Rule 134 context) would be acceptable so long as:
PCAOB Adopts Auditing Standards Governing Related Parties, Significant Unusual Transactions And Financial Relationships With Executive Officers
The Public Company Accounting Oversight Board (“PCAOB”) yesterday adopted new and amended auditing standards that expand audit procedures required to be performed with respect to three important areas: (1) related party transactions; (2) significant unusual transactions; and (3) a company’s financial relationships and transactions with its executive officers. The standards also expand the required communications that an auditor must make to the audit committee related to these three areas. They also amend the standard governing representations that the auditor is required to periodically obtain from management.
PCAOB Public Meeting on Proposed Changes to the Auditor’s Reporting Model
Last week, the Public Company Accounting Oversight Board (the “PCAOB”) convened a series of ten panels as part of a two-day public meeting regarding proposed changes to the auditor’s reporting model. The proposed changes have elicited a range of opinions from various stakeholders and commentators, a majority of which have been critical of the proposals. Individuals invited to appear as panelists at last week’s meeting, however, were generally supportive of the proposed changes and offered various recommendations for ways in which the PCAOB could modify its proposals in order to move forward.