Recognizing that public companies continue to be inundated with developing disclosure and governance requirements due to the COVID-19 pandemic, Gibson Dunn has created a list (with hyperlinks) of recent publications, releases, guidance, updates, and other useful resources from the SEC, PCAOB, NYSE, Nasdaq, proxy advisory firms, institutional investors, various state governors, and other relevant entities. This list will be updated as new resources are released. The most current version can be accessed by clicking here.
Proxy Statements and Annual Meetings
ISS Provides Policy Guidance in Light of COVID-19 Pandemic
On April 8, 2020, Institutional Shareholders Services (“ISS") released guidance regarding the application of its policies amid the COVID-19 pandemic (available here). In the guidance, ISS discusses various governance issues in light of the COVID-19 pandemic and states that it will be flexible in its application of its policies, while requiring disclosure of the rationale for certain actions that companies may take. The following are four main topics covered in the guidance for companies in the United States:
Delaware Governor Issues Limited Relief for Public Company Shareholder Meetings Impacted by COVID-19
Today the Governor of the State of Delaware issued an executive order (the “Order")[1] that provides two limited forms of relief for publicly traded companies[2] hosting shareholder meetings during the coronavirus (COVID-19) pandemic.
Division of Corporation Finance Unveils Further Details on Its Process for Responding to Shareholder Proposal No-Action Requests
On November 21, 2019, the Division of Corporation Finance (the “Division" or “Staff") of the Securities and Exchange Commission (“SEC") provided additional detail on how it will process responses to shareholder proposal no-action requests under Rule 14a-8. As discussed in our prior posts, available here and here, in September 2019 the Division announced that, starting with the 2019-2020 shareholder proposal season, it may respond orally instead of in writing to some no-action requests, and in some cases its response may indicate that it is declining to state a view on whether a proposal satisfies the requirements of Rule 14a-8 or is properly excludable.
SEC Staff Announces Significant Changes to Shareholder Proposal No-Action Letter Process
On September 6, 2019, the Division of Corporation Finance (the “Staff") of the Securities and Exchange Commission (“SEC") announced[1] two significant procedural changes for responding to Exchange Act Rule 14a-8 no-action requests that will be applicable beginning with the 2019-2020 shareholder proposal season:
SEC Issues New Guidance for Proxy Advisors and Investment Advisers Engaged in the Proxy Voting Process
On August 21, 2019, the Securities and Exchange Commission (the Commission) issued two releases (the Releases) regarding two elements of the proxy voting process that are influenced by proxy advisory firms: proxy voting advice issued by proxy advisors (available here) and proxy voting by investment advisers who use that proxy voting advice (availablehere). The guidance, in the words of Commissioner Elad L. Roisman, “reiterate[s] longstanding Commission rules and positions that remain applicable and very relevant in today’s marketplace."
SEC August 21 Open Meeting To Address Issues Related To Proxy Advisory Firms
The SEC announced that it will hold an open meeting on Wednesday, August 21, 2019 at 10:00 AM eastern time. There are two matters on the agenda, available here, which, although not specifically referring to proxy advisory firms, appear to address reliance on voting recommendations issued by such firms, and the conditions such firms must satisfy to rely on an exemption from the proxy rules.
SEC Proposes to Modernize Disclosures of Business, Legal Proceedings, and Risk Factors
On August 8, 2019, the Securities and Exchange Commission (“SEC") announced that it voted to propose amendments to Regulation S-K (available here) seeking to modernize and simplify the required disclosures by public companies, investment advisors, and investment companies (the “Proposed Amendments"). The Proposed Amendments form part of the SEC’s ongoing efforts to simplify disclosure requirements, and, with the exception of Legal Proceedings, emphasize a more flexible, principles-based approach as opposed to prescriptive requirements. “The world economy and our markets have changed dramatically in the more than 30 years since the adoption of our rules for business disclosures by public companies. Today’s proposal reflects these significant changes, as well as the reality that there will be changes in the future," said Chairman Jay Clayton. “I applaud the staff for their efforts to modernize and improve our disclosure framework, including recognizing that intangible assets, and in particular human capital, often are a significantly more important driver of value in today’s global economy. The proposals reflect a thoughtful mix of prescriptive and principles-based requirements that should result in improved disclosures and the elimination of unnecessary costs and burdens."
SEC To Propose Shareholder Proposal and Proxy Advisory Firm Rule Amendments
On May 22, 2019 the SEC released its Spring 2019 Regulatory Flexibility Agenda (Reg Flex Agenda), available here. The Reg Flex Agenda identifies rulemaking projects that the SEC expects to address, and classifies those projects as being either in the “Proposed & Final Rule Stages," which reflects those that the SEC expects to propose over the coming year, and “Long-Term Actions," which includes those that the SEC is more likely to address over a longer timeframe.
Developments on Public Company Disclosures Regarding Board and Executive Diversity
On February 6, 2019, the staff (Staff) of the Division of Corporation Finance of the Securities and Exchange Commission (SEC) issued two new identical Compliance and Disclosure Interpretations (C&DIs). The C&DIs address disclosure that the Staff expects public companies to include in their proxy statements and other SEC filings regarding “self-identified diversity characteristics" with respect to their directors and director nominees. In addition, legislation was introduced in both the U.S. House of Representatives and the U.S. Senate that would require public companies to annually disclose the gender, race, ethnicity and veteran status of their directors, director nominees, and senior executive officers.