The past year has been one of change and challenge for public companies and their boards, as companies have moved to implement "say-on-pay" and other provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"). With the 2012 proxy season on the horizon, public companies and their directors will continue to feel the impact of Dodd-Frank as the Securities and Exchange Commission ("SEC") proceeds with its ongoing efforts to implement the law. At the same time, public companies and their boards are operating in an environment where the balance of power between boards and shareholders continues to shift. The traditional, board-centric model of corporate governance continues to gravitate toward a paradigm that includes an increased role for shareholders. Activist shareholders are seeking greater participation in companies’ governance and operations, and they are exerting increased pressure on companies to adopt so-called corporate governance "best practices."
Proxy Access
ISS Releases Policy Updates for 2012 Proxy Season
On November 17, 2011, Institutional Shareholder Services ("ISS"), a leading proxy advisory firm, released its U.S. and international corporate governance policy updates for the 2012 proxy season. For details, please see the U.S. Corporate Governance Policy 2012 Updates ("2012 Policy Updates"), available at http://www.issgovernance.com/policy/2012/policy_information. The 2012 Policy Updates apply to shareholder meetings held on or after February 1, 2012. This client alert reviews the most significant U.S. policy updates and additional detail on the policies provided by Patrick McGurn, Special Counsel at ISS, at the November 18, 2011 meeting of the American Bar Association’s Business Law Section’s Subcommittee on Shareholder and Investor Relations. The client alert concludes with commentary and recommendations in light of the ISS policy updates.
D.C. Circuit Vacates Securities and Exchange Commission’s Proxy Access Rule
Today the federal appellate court in Washington, D.C. invalidated the SEC’s "proxy access" rule, which would have required that director candidates nominated by certain large shareholders be included in a company’s proxy materials.
Proxy Access Litigation and Next Steps
The following provides an update on the litigation challenging the “proxy access” rules adopted by the Securities and Exchange Commission (“SEC” or “Commission”), and also discusses steps companies should consider during the pendency of the litigation. Our client alert dated August 25, 2010, available here, provided an overview of the proxy access rules.
U.S. SEC Adopts Final Rules on Proxy Access
Today the U.S. Securities and Exchange Commission ("SEC") adopted amendments to its proxy rules to permit shareholders to include their director candidates in a company’s proxy materials–commonly referred to as "proxy access." The vote on the amendments was 3-2, with Commissioners Casey and Paredes dissenting due to numerous concerns, including that the proxy access rules encroach on state corporate law and interfere with private ordering by companies and their shareholders.
Securities and Exchange Commission Issues Concept Release Seeking Public Comment on U.S. Proxy System
The principal mechanism for U.S. shareholder participation in corporate governance is being comprehensively scrutinized by the Securities and Exchange Commission (the "SEC") for the first time in almost thirty years. On July 14, 2010, the SEC issued a concept release seeking public comment on numerous fundamental aspects of the U.S. proxy system (the "Concept Release"). Noting concerns from both issuers and investors, the SEC proposes to examine the integrity and efficiency of the proxy system as a whole. Although it is not presented as a rulemaking proposal, the Concept Release will likely lead to significant SEC rulemaking in the coming years. Given the wide range of parties with vested interests in the proxy system, members of the corporate community should strongly consider participating in the dialogue related to this important area by submitting comments to the SEC, either individually or through collective means.
SEC Re-opens Comment Period for Proxy Access Proposal
The Securities and Exchange Commission (the "SEC") recently announced that it is re-opening the comment period for its June 2009 proposal regarding shareholder access to company proxy materials for director nominations (also known as "proxy access").[1] The SEC’s proposed rules, if adopted, would establish a federal proxy access right and permit proxy access shareholder proposals in company proxy materials.[2]