Since January, three new surveys have become available that provide insights on corporate governance practices at public companies. The surveys, which are released annually, are from Institutional Shareholder Services Inc. (“ISS”), The Conference Board, Inc. (in collaboration with NASDAQ OMX and NYSE Euronext), and Deloitte LLP (in collaboration with the Society of Corporate Secretaries and Governance Professionals). These surveys can be a useful tool for companies seeking to benchmark their board practices against those of their peer companies.
Topic: Corporate Governance
Proposed Amendments to DGCL Section 251 Increasing Attractiveness of Tender Offer Structure
The Delaware State bar recently proposed an amendment to Section 251 of the Delaware General Corporation Law (DGCL) to add new subparagraph (h) that would greatly enhance the appeal of the tender offer over a one-step merger structure.
SEC Issues Guidance on Disseminating Corporate Information Through Social Media
Today the Securities and Exchange Commission (the “SEC”) issued a report of investigation under the Securities Exchange Act of 1934 providing guidance to public companies on the application of Regulation FD and SEC interpretive guidance to corporate disclosures made through social media. The report [1] clarifies that public companies under certain circumstances may disseminate material, nonpublic information via social media in compliance with Regulation FD if investors previously have been alerted that the specific social media will be used to disseminate such information.
SEC Staff Explains Analysis For Assessing Vague Shareholder Proposals Under Rule 14a 8(i)(3)
During the 2012 proxy season, the SEC staff concurred that a number of high profile shareholder proposals could be excluded from company proxy statements because various key terms in the proposals were not adequately defined or explained within the text of the proposal and supporting statement. See e.g., WellPoint, Inc. (SEIU Master Trust) (avail. Feb. 24, 2012, recon. denied Mar. 27, 2012) (concurring with exclusion of an independent chair proposal that referred to the New York Stock Exchange standard of independence without defining it because “neither shareholders nor the company would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires”); Textron Inc. (avail. Mar. 7, 2012) (arguing that a reference to the Rule 14a-8 eligibility requirements in a proxy access shareholder proposal was vague and indefinite, although the staff ultimately concurred with the exclusion of the shareholder proposal on other grounds); Dell Inc. (avail. Mar. 30, 2012) (concurring with the exclusion of a similar proxy access shareholder proposal because the proposal’s reference to the Rule 14a-8 eligibility requirements was vague and indefinite). While these no-action letters reflected long-standing SEC staff precedent, in the current proxy season, there has continued to be a large number of no-action requests arguing that various terms in shareholder proposals are undefined or vague and therefore excludable under Rule 14a-8(i)(3).
Senate Banking Committee Holds Hearing on Nomination of Mary Jo White to Chair SEC
The Senate Committee on Banking, Housing and Urban Affairs held a hearing today on the nomination of Mary Jo White to chair the Securities and Exchange Commission. The Senators showed high support for White’s nomination and, contrary to expectation, asked few tough questions about her ties to Wall Street banks arising from her work at the law firm Debevoise & Plimpton LLP and other potential conflicts of interest.
U.S. Supreme Court Issues Two Significant Decisions Involving Securities Law Matters
On February 27, 2013, the U.S. Supreme Court issued opinions in two significant securities law cases, Gabelli v. Securities and Exchange Commission, 568 U.S. ___ (2013) and Amgen Inc., v. Connecticut Retirement Plans and Trust Funds, 568 U.S. ___ (2013). In the Gabelli decision the Court addressed the ability of the government to bring civil enforcement actions seeking civil penalties where the alleged fraudulent conduct occurred outside the five-year statute of limitations period. In the Amgen decision the Court addressed the class certification pleading requirements in security holder class action suits.
SEC Petitioned for Rulemaking to Accelerate 13F Filing Deadline
Last week, the NYSE Euronext, the Society of Corporate Secretaries and Governance Professionals, and the National Investor Relations Institute submitted a joint petition (available here) to the SEC, requesting that the Commission amend the beneficial ownership reporting rules under Section 13(f) of the Securities and Exchange Act of 1934, as amended. Fund managers subject to the 13(f) reporting requirements currently have until 45 days after the last day of each calendar quarter to file their Form 13F; the petition suggests that the time period be shortened to two business days.
SEC Approves PCAOB Auditing Standard No. 16 – Communications with Audit Committees
Yesterday, the SEC issued an order approving new Auditing Standard No. 16, Communications with Audit Committees (“AS 16”). AS 16 was previously approved by the Public Company Accounting Oversight Board (“PCAOB”) at an open meeting held on August 15, 2012. As we noted in our August client alert reporting on this new standard (available here), AS 16 retains most of the preexisting communication requirements, but also adds a number of new topics that the auditor must discuss with the audit committee and requires that the auditor seek specific responses from the audit committee when discussing certain topics. In response to comments, the SEC also clarified that the new standard will apply to audits of foreign private issuers. Significantly, the SEC concurred with the PCAOB that AS 16 will apply to emerging growth companies (“ECGs”) and will be effective for fiscal periods beginning on and after December 15, 2012.
ISS Offers Companies Opportunity to Update Peer Group Information; Action Required by December 21, 2012
As part of its 2013 Policy Updates, ISS is revising its methodology for determining the peer group used to perform its quantitative pay-for-performance evaluation. In determining a company’s peer group, ISS’s new methodology will incorporate information from companies’ self-selected pay comparison peer groups, as disclosed in the proxy statement. ISS recognizes that some companies may have modified their peer groups since their most recent disclosure or may intend to do so in the preparation of their 2013 proxy statements.
Departure of SEC Chairman Schapiro Creates Uncertainty Regarding Rules to Remove the General Solicitation Ban in Certain Private Offerings
On November 26, 2012, SEC Chairman Mary Schapiro announced that she will leave the Commission on Friday, December 14. Commissioner Elisse Walter will take over as Chairman.
On August 29, 2012, the SEC proposed rules to implement Section 201(a) of the JOBS Act, which requires the SEC to eliminate the prohibition against general solicitation and general advertising (together, “general solicitation”) in securities offerings conducted pursuant to Rule 506 of Regulation D under the Securities Act of 1933 (the “Securities Act”) and Rule 144A under the Securities Act. The Commission voted 4-1 to propose the rules, with Democratic Commissioner Aguilar as the lone dissent, but Commissioner Walter, also a Democrat, expressed reservations about the proposal in her opening statement at the Commission’s meeting. Republican Commissioners Gallagher and Paredes strongly supported the proposed rules.