Shareholder Proposals: New SEC Staff Guidance Involves Boards
BlogHunton & Williams LLP
USA November 14 2017On November 1, 2017, the staff of the Securities and Exchange Commission issued Staff Legal Bulletin No. 14I ("SLB 14I"), which layers on additional requirements for companies seeking to exclude certain shareholder proposals from their proxy materials. In particular, no-action requests seeking to exclude shareholder proposals related to "ordinary business" or that are not "economically relevant" to the company will be expected to include a discussion of how the board of directors reached its determination. The guidance suggests, however, that the SEC staff may give greater deference to analysis performed by the board of directors.
This client alert provides a brief summary of SLB 14I and explains how it is likely to affect shareholder proposals and the involvement of boards moving forward. It also briefly highlights certain additional guidance in SLB 14I.
Highlights
The ordinary business exception under Rule 14a-8(i)(7) allows a company to exclude a shareholder proposal that deals with a matter that is "so fundamental to management's ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight." Proposals that focus on "sufficiently significant" policy issues that transcend ordinary business, however, may not be excluded under this exception. In the past, the SEC staff has conducted its own analysis to determine whether it believes a shareholder proposal is "sufficiently significant." SLB 14I puts more responsibility on boards, stating that "the board of directors is generally in a better position to determine" these "difficult judgment calls."
Traditionally, management often directed legal counsel to prepare a no-action request when the company believed there was a basis to exclude a proposal. The board often did not discuss the merits of the proposal unless and until the SEC staff denied the request. But under SLB 14I, the SEC staff will now expect no-action requests under this exception to include a discussion that reflects the board's analysis of the policy issue raised in the proposal and its significance to the company. SLB 14I further advises that an explanation of the board's analysis "would be most helpful if it detailed the specific processes employed by the board to ensure that its conclusions are well-informed and well-reasoned."
SLB 14I does not specify what actions boards should take to satisfy the new guidance, but it certainly places a greater burden on boards seeking exclusion. Some issues to consider include:
Although SLB 14I does not create a presumption in favor of companies, it does seem to signal an intent by the SEC staff to defer to boards on the analysis. Boards will be able to make a more tailored argument in favor of exclusion. For example, a board might conclude that while long-standing SEC precedent suggests a proposal is a significant policy issue, the proposal is not appropriate to include for their particular company. Likewise, based on our discussions with the SEC staff, a board might conclude that a shareholder proposal that has been resubmitted after a vote at the prior year's shareholder meeting might not be appropriate for a particular company if the earlier vote was relatively low, even if it did not meet the exclusion criteria of Rule 14a-8(i)(12). It is thus possible that these new requirements will lead to an overall increase in the number of shareholder proposals excluded pursuant to Rule 14a-8(i)(7) and a decrease in shareholder proposals in proxy materials. In some cases, however, the new guidance may cause companies not to seek no-action relief because the board prefers to avoid disclosing its formal view on the issue. Submitting a no-action request regarding a controversial policy issue now requires the board to take a public position that it may prefer not to address.
Economic Relevance Exception
The economic relevance exception, Rule 14a-8(i)(5), permits companies to exclude shareholder proposals relating to company operations which account for less than five percent of a company's total assets and of its net earnings and gross sales and that are not "otherwise significantly related to the company's business." Companies have rarely relied on this exception, as few proposals have ever been excluded on this basis due to its narrow interpretation by the SEC staff.
Moving forward, this exception is poised to become more helpful to issuers seeking to exclude shareholder proposals. As with the ordinary business exception, companies relying on this exception must include a discussion in their no-action requests that reflects the board's analysis of the proposal's significance to the company. As noted above, we believe this may signal the SEC staff's intent to give increased deference to boards. The SEC staff has also stated that its analysis under Rule 14a-8(i)(5) will give greater weight to whether the proposal is economically significant to the business, rather than on whether the proposal is "otherwise" significantly related to the company's business. In addition, the new framework places the burden to establish the proposal's significance to the company on the shareholder proponent when it is not otherwise clear. This shift makes the exception clearer and therefore it may be more useful for companies in the future.
Proposals by Proxy
SLB 14I also lists new procedural requirements for shareholders submitting proposals by proxy. This practice is popular among individual retail activists, who introduced 35 percent of all shareholder proposals submitted among Fortune 250 companies in 2016.1 The new requirements imposed by SLB 14I require shareholders who submit a proposal by proxy to provide signed and dated documentation identifying the shareholder-proponent, proxy holder, the company, the meeting for which the proposal is submitted and the specific proposal to be submitted. Companies should monitor proposals for compliance with this new guidance and provide notice of deficiency to the shareholder-proponent within 14 days after receiving the proposal. A shareholder's failure to correct this deficiency warrants no-action relief from the SEC staff.
Use of Images in Shareholder Proposals
Shareholder proposals are limited to 500 words under Rule 14a-8(d) but are permitted to include graphs and images. SLB 14I clarifies that only words in the graphics count against the 500-word limit. SLB 14I also provides guidance as to when graphs and images in shareholder proposals may be excluded from proxy materials. Companies can submit a no-action request for exclusion of graphs or images when they make the proposal false or misleading; render it inherently vague or indefinite; impugn reputation or make charges of improper, illegal or immoral conduct without a factual basis; or are irrelevant to the subject matter of the proposal.
Conclusion
SLB 14I places greater responsibility on boards by requiring them to consider shareholder proposals. It remains to be seen how much time and consideration boards must give to these proposals and what processes should be put in place to satisfy the new guidance. At the same time, SLB 14I's new requirements may give boards a greater opportunity to exclude proposals under the ordinary business and economic relevance exceptions. Boards will be able to give company-specific reasoning for excluding particular shareholder proposals, and the SEC staff may be more likely to defer to their management expertise.
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SEC to Hold Round-table on Proxy Voting
FOR IMMEDIATE RELEASE -2015-15
Washington D.C., Jan. 27, 2015 —
The Securities and Exchange Commission today announced that it will host a roundtable on February 19 to explore ways to improve the proxy voting process. The roundtable, which will be held at the SEC’s Washington, D.C. headquarters, will focus on universal proxy ballots and retail participation in the proxy process.
Proxy voting is important to both investors and companies. The ability to vote allows investors to make their views known to the company’s management and to participate effectively at annual or special meetings. Thus, the proxy voting process should be robust, effective and workable.
The roundtable will be divided into two panels:
BlogHunton & Williams LLP
USA November 14 2017On November 1, 2017, the staff of the Securities and Exchange Commission issued Staff Legal Bulletin No. 14I ("SLB 14I"), which layers on additional requirements for companies seeking to exclude certain shareholder proposals from their proxy materials. In particular, no-action requests seeking to exclude shareholder proposals related to "ordinary business" or that are not "economically relevant" to the company will be expected to include a discussion of how the board of directors reached its determination. The guidance suggests, however, that the SEC staff may give greater deference to analysis performed by the board of directors.
This client alert provides a brief summary of SLB 14I and explains how it is likely to affect shareholder proposals and the involvement of boards moving forward. It also briefly highlights certain additional guidance in SLB 14I.
Highlights
- The Securities and Exchange Commission ("SEC") staff now expects boards of directors to analyze shareholder proposals before companies make no-action requests to exclude such proposals from proxy materials under Rule 14a-8(i)(7) (the ordinary business exception) or Rule 14a-8(i)(5) (the economic relevance exception).
- Those no-action requests should include a discussion reflecting the board's analysis and the specific processes it employed to reach a well-informed and well-reasoned conclusion.
- New documentation is required for submissions of shareholder proposals by proxy.
- Guidance has been issued on the use of images and graphs in shareholder proposals.
The ordinary business exception under Rule 14a-8(i)(7) allows a company to exclude a shareholder proposal that deals with a matter that is "so fundamental to management's ability to run a company on a day-to-day basis that they could not, as a practical matter, be subject to direct shareholder oversight." Proposals that focus on "sufficiently significant" policy issues that transcend ordinary business, however, may not be excluded under this exception. In the past, the SEC staff has conducted its own analysis to determine whether it believes a shareholder proposal is "sufficiently significant." SLB 14I puts more responsibility on boards, stating that "the board of directors is generally in a better position to determine" these "difficult judgment calls."
Traditionally, management often directed legal counsel to prepare a no-action request when the company believed there was a basis to exclude a proposal. The board often did not discuss the merits of the proposal unless and until the SEC staff denied the request. But under SLB 14I, the SEC staff will now expect no-action requests under this exception to include a discussion that reflects the board's analysis of the policy issue raised in the proposal and its significance to the company. SLB 14I further advises that an explanation of the board's analysis "would be most helpful if it detailed the specific processes employed by the board to ensure that its conclusions are well-informed and well-reasoned."
SLB 14I does not specify what actions boards should take to satisfy the new guidance, but it certainly places a greater burden on boards seeking exclusion. Some issues to consider include:
- the process to be undertaken by the board in reaching its decision, including the information considered and whether outside advisors were involved;
- whether a board can or should rely on SEC staff responses to previous no-action letters in making its determination; for example, in situations where it has long been held that a certain issue is not a "sufficiently significant" policy issue, it is unclear whether the board can or should consider this as part of its analysis (although arguably it will be a relevant factor in many instances);
- whether the board needs to meet after receiving the proposal if it has already given significant consideration to the substance of the proposal; and
- how much detail should be included in a no-action request explaining the board's rationale and decision-making process.
Although SLB 14I does not create a presumption in favor of companies, it does seem to signal an intent by the SEC staff to defer to boards on the analysis. Boards will be able to make a more tailored argument in favor of exclusion. For example, a board might conclude that while long-standing SEC precedent suggests a proposal is a significant policy issue, the proposal is not appropriate to include for their particular company. Likewise, based on our discussions with the SEC staff, a board might conclude that a shareholder proposal that has been resubmitted after a vote at the prior year's shareholder meeting might not be appropriate for a particular company if the earlier vote was relatively low, even if it did not meet the exclusion criteria of Rule 14a-8(i)(12). It is thus possible that these new requirements will lead to an overall increase in the number of shareholder proposals excluded pursuant to Rule 14a-8(i)(7) and a decrease in shareholder proposals in proxy materials. In some cases, however, the new guidance may cause companies not to seek no-action relief because the board prefers to avoid disclosing its formal view on the issue. Submitting a no-action request regarding a controversial policy issue now requires the board to take a public position that it may prefer not to address.
Economic Relevance Exception
The economic relevance exception, Rule 14a-8(i)(5), permits companies to exclude shareholder proposals relating to company operations which account for less than five percent of a company's total assets and of its net earnings and gross sales and that are not "otherwise significantly related to the company's business." Companies have rarely relied on this exception, as few proposals have ever been excluded on this basis due to its narrow interpretation by the SEC staff.
Moving forward, this exception is poised to become more helpful to issuers seeking to exclude shareholder proposals. As with the ordinary business exception, companies relying on this exception must include a discussion in their no-action requests that reflects the board's analysis of the proposal's significance to the company. As noted above, we believe this may signal the SEC staff's intent to give increased deference to boards. The SEC staff has also stated that its analysis under Rule 14a-8(i)(5) will give greater weight to whether the proposal is economically significant to the business, rather than on whether the proposal is "otherwise" significantly related to the company's business. In addition, the new framework places the burden to establish the proposal's significance to the company on the shareholder proponent when it is not otherwise clear. This shift makes the exception clearer and therefore it may be more useful for companies in the future.
Proposals by Proxy
SLB 14I also lists new procedural requirements for shareholders submitting proposals by proxy. This practice is popular among individual retail activists, who introduced 35 percent of all shareholder proposals submitted among Fortune 250 companies in 2016.1 The new requirements imposed by SLB 14I require shareholders who submit a proposal by proxy to provide signed and dated documentation identifying the shareholder-proponent, proxy holder, the company, the meeting for which the proposal is submitted and the specific proposal to be submitted. Companies should monitor proposals for compliance with this new guidance and provide notice of deficiency to the shareholder-proponent within 14 days after receiving the proposal. A shareholder's failure to correct this deficiency warrants no-action relief from the SEC staff.
Use of Images in Shareholder Proposals
Shareholder proposals are limited to 500 words under Rule 14a-8(d) but are permitted to include graphs and images. SLB 14I clarifies that only words in the graphics count against the 500-word limit. SLB 14I also provides guidance as to when graphs and images in shareholder proposals may be excluded from proxy materials. Companies can submit a no-action request for exclusion of graphs or images when they make the proposal false or misleading; render it inherently vague or indefinite; impugn reputation or make charges of improper, illegal or immoral conduct without a factual basis; or are irrelevant to the subject matter of the proposal.
Conclusion
SLB 14I places greater responsibility on boards by requiring them to consider shareholder proposals. It remains to be seen how much time and consideration boards must give to these proposals and what processes should be put in place to satisfy the new guidance. At the same time, SLB 14I's new requirements may give boards a greater opportunity to exclude proposals under the ordinary business and economic relevance exceptions. Boards will be able to give company-specific reasoning for excluding particular shareholder proposals, and the SEC staff may be more likely to defer to their management expertise.
`
SEC to Hold Round-table on Proxy Voting
FOR IMMEDIATE RELEASE -2015-15
Washington D.C., Jan. 27, 2015 —
The Securities and Exchange Commission today announced that it will host a roundtable on February 19 to explore ways to improve the proxy voting process. The roundtable, which will be held at the SEC’s Washington, D.C. headquarters, will focus on universal proxy ballots and retail participation in the proxy process.
Proxy voting is important to both investors and companies. The ability to vote allows investors to make their views known to the company’s management and to participate effectively at annual or special meetings. Thus, the proxy voting process should be robust, effective and workable.
The roundtable will be divided into two panels:
- The first panel will focus on the state of contested director elections and whether changes should be made to the federal proxy rules to facilitate the use of universal proxy ballots by management and proxy contestants. This panel also will discuss the state law, logistical, and disclosure issues presented by a possible universal proxy ballot process.
- The second panel will focus on strategies for increasing retail shareholder participation in the proxy process. This panel will discuss how technology – by providing better access to information or easier means of voting – might affect retail participation. In addition, this panel will discuss whether the format of disclosure could be improved to increase the engagement of shareholders and how the mechanics of voting could be improved to affect retail shareholder participation.
SEC to Pressure Proxy Advisers on DisclosuresRegulator to Push for More Disclosure of Potential Conflicts of Interest, Sources Say
By ANDREW ACKERMAN, JOANN S. LUBLIN and THEO FRANCIS
June 3, 2014 8:36 a.m. ET
The Securities and Exchange Commission is preparing to crack down on firms that advise shareholders on how to vote on public-company proxies, pressuring such companies to disclose more about potential conflicts of interest.
The SEC is expected to issue staff guidance as early as this week that would push companies to boost the disclosures, according to people familiar with the process.
The guidance is expected to say that SEC staff don't believe the current practice of requiring investors to contact an advisory firm for more information about potential conflicts conforms with the agency's interpretation of an existing SEC rule, these people said. An SEC spokesman couldn't immediately be reached for comment. Such guidance would most directly impact Institutional Shareholder Services Inc., the biggest U.S. proxy adviser that has long been criticized by corporations and Republican lawmakers for selling corporate governance consulting services to some of the same companies that are the subject of its voting recommendations.
ISS, one of three U.S. proxy advisers, is the only firm to also provide consulting services. The company has said it maintains a strict separation between the two arms of its business, and discloses conflicts when asked. An ISS spokesman declined to comment Monday evening about the possible staff guidance.
The SEC's move comes as tensions between corporate America—and in particular ISS—are running high amid a wave of activist investing. Proxy advisers' recommendations aren't binding but can be influential on issues such as replacing board members or separating the chairman and chief executive jobs. Such issues are among those often pushed by activist hedge funds in contentious corporate elections.
Proxy advisory firms grew out of an expectation that financial advisers, such as mutual funds, must vote the shares of their clients with care. But with many advisers monitoring portfolios of hundreds or thousands of companies, doing so is a daunting task. Instead, they turn much of the job over to firms such as ISS and its closest rival Glass, Lewis & Co., which analyze the proxies, make voting recommendations and offer software that lets advisers cast their votes efficiently. A "no" recommendation from one of the proxy advisers can turn the tide on a vote on executive compensation or director elections.
Robert McCormick, chief policy officer for Glass Lewis, said SEC staff guidance that encourages more disclosure about potential conflicts "is a reasonable solution." But his employer, which lacks a consulting arm, believes disclosure is best handled through an industry code of conduct rather than possible future regulation.
Mr. McCormick also said Glass Lewis already voluntarily discloses extensive personal and business relationships to clients and said "we don't wait to be asked" by clients about potential conflicts.Proxy-advisory firms' influence increased after a 2010 federal law required companies to give shareholders a vote on how they pay executives. Companies don't have to act on those say-on-pay votes, but poor outcomes can embarrass board members and fuel wider shareholder discontent. About 70% of 110 large and midsize companies said their executive-pay practices are influenced by proxy-advisory firms, according to a 2012 study co-led by the Conference Board, a New York research group.
Publicly traded companies complain the advisers have grown too powerful, with many smaller investors and investment advisers blindly following their recommendations. As a result, companies and other critics say, boards have grown skittish and, seeking to avoid public conflict with the proxy advisers, make governance decisions they might not have made otherwise.
Proxy advisers counter that few investors follow their recommendations unaltered, and that they simply provide client investors with tools to make better voting decisions. Most investors and financial managers, especially larger ones, often vote at odds with the proxy advisers' recommendations, the firms say.
SEC Chairman Mary Jo White convened a roundtable meeting in December to discuss proxy-adviser issues. In public remarks in March, Ms. White said staff were developing policy recommendations and would report to her "in the very near term."
Closed-Enders Face Tougher Battles With Activists - By Peter Ortiz January 30, 2014
- Edward Knight: Raising the Curtain on Proxy Advisers Too little is known about how ISS and Glass Lewis make the recommendations many investors rely on.
- A version of this article appeared October 8, 2013, on page A17 in the U.S. edition of The Wall Street Journal, with the headline: Raising the Curtain on Proxy Adviser
The number of publicly traded companies listed on U.S. exchanges has steadily declined to 5,000 this year from around 8,000 in 1995. There are a number of reasons, but no one doubts that going and staying public has become increasingly more expensive, time-consuming and distracting for management. As a result, businesses have sought other ways to organize and finance themselves.
This is not a healthy trend. Private companies that need to grow can raise capital efficiently in U.S. public markets. And robust public markets provide wide opportunities for individual and institutional investors to grow wealth.
An increasingly expensive distraction for the managers of public companies are proxy battles over corporate governance issues such as whether to split the chairman and CEO roles. While transparency has come to be accepted as a fundamental tenet of good corporate governance, the two principal firms that render advice and recommendations on proxies, Investor Shareholder Services (ISS) and Glass Lewis & Company, are anything but transparent.
ISS and Glass Lewis together control approximately 97% of the market for proxy advisory firm services, according to a recent analysis by James Glassman and George Mason University's J.W. Verret. ISS alone renders many decisions for more than 1,000 institutional investors. Another study, by Stanford's David F. Larcker, Allan L. McCall and Gaizka Ormazabal, found that when a proxy advisory firm opposes the company's position, the negative votes cast by shareholders increase by an average 20%.
Numbers alone don't tell the whole story. Companies listed on Nasdaq tell us that they shape their shareholder proposals to avoid a negative vote recommendation from ISS and Glass Lewis, even in situations when they believe that doing so is not in the best interests of their company or shareholders.
Despite their outsize influence, relatively little is known about the policies and methodologies these two proxy advisory firms use to determine the recommendations on proxy votes that many investors rely on. They operate behind closed doors, blocking public companies from any direct access or input or opportunity to review the accuracy of the facts that serve as the basis for the proxy advisory firms' recommendations, or whether these recommendations reflect the specific circumstances of their company.
In 2010, the Securities and Exchange Commission issued a "Concept Release on the U.S. Proxy System" that raised a number of important questions about the risks raised by these firms' apparent "conflicts of interest," as well as the "lack of accuracy and transparency in formulating voting recommendations."
ISS has an advisory business it markets to companies on how to comply with its own rules. Glass Lewis is partially owned by the Ontario Teachers' Pension Plan, itself an investor in many of the public companies with shareholders proposals on which Glass Lewis opines.
The ISS relationships often are undisclosed to, and unknown by, the shareholders, companies and institutions that are directly and substantially affected by the two firms' recommendations and ratings.
More than 100 of the 300-plus comment letters responding to the SEC's concept release focused at least in part on proxy advisory firms. The majority of these 100 comments called for enhanced disclosure by the proxy firms. Yet the ideas and recommendations in the concept release have yet to be translated into action.
This year, the European Securities and Markets Authority called for a code of conduct for the proxy advisory industry, highlighting the need to ensure transparency and disclose conflicts of interest. In June, in the U.S., a subcommittee of the House Financial Services Committee held a hearing on the impact and power of proxy advisory firms.
And in a speech this summer, SEC Commissioner Daniel M. Gallagher said that the agency should consider several reforms such as requiring the proxy advisory firms "to follow a universal code of conduct" to advocate positions that increase shareholder value. He also suggested reforms to increase the transparency of their methods, ensure that conflicts of interest are dealt with appropriately, and increase their overall accountability.
Nasdaq OMX agrees. On Tuesday we are petitioning the SEC to require the proxy advisory firms to make public the models and methodologies that frame their vote recommendations, and to mandate public disclosure of any and all business relationships that may give rise to conflicts of interest.
Is it really wise that a small handful of advisory firms with potentially conflicting roles and opaque methodologies be the primary and unchecked arbiters of corporate governance practices in the United States? Does the current approach indirectly foster a system that discourages the formation of public companies in favor of other kinds of corporate structures that are harder to monitor, have fewer safeguards, and don't offer other benefits of public governance structures?
The public company model, by engaging owners through common shares traded on an open exchange, is capable of producing the most efficient capital-raising, job-creating and wealth-sharing opportunities that exist. It also offers investors far greater transparency, legal protection and access to economic engines that sustain this nation's prosperity.
For corporate directors and executives, preparations for the 2014 proxy season will begin early next year. For the best interests of their shareholders, the SEC must act now to pull the proxy advisory firms out from the shadows.
Mr. Knight is executive vice president, general counsel and chief regulatory officer of Nasdaq OMX Group Inc. He was general counsel of the U.S. Treasury Department from 1994-99.
California Court of Appeal affirms dismissal of say-on-pay suit
Four Things To Know About Say-On-Pay Votes
In the opinion issued yesterday, Justice Sandy R. Kriegler listed four important attributes of say-on-pay votes (plaintiffs’ firms would do well to ruminate on each of these before filing another failed say-on-pay complaint):
Do Directors Issue Proxy Statements?
In Martin, the defendants (the company’s directors, executive officers and compensation consultant) demurred (California’s analogue to a motion to dismiss) on the grounds that the defendants had failed to plead pre-suit demand futility adequately. The Court of Appeal affirmed on this basis, applying Delaware’s two-pronged test for demand futility established in Aronson v. Lewis, 473 A.2d 805 (Del. 1984) overruled on other grounds in Brehm v. Eisner, 746 A.2d 244 (Del. 2000). The court’s application of Aronson and the cases cited should be familiar to anyone who has litigated the issue. I did note the Court’s discussion of the plaintiff’s allegation that the board issued an allegedly misleading proxy. The Court faulted the plaintiff’s allegations for being conclusory because it failed to explain how an individual director is able to “issue” a proxy on behalf of the corporation. The Court went on to say that even if the plaintiff had alleged that the directors had signed the proxy, that allegation alone would not establish potential liability of the directors.
When it comes to failed say-on-pay votes, it seems that plaintiffs’ firms are operating under the theory that if you take enough swings, a ball will eventually land on the green. Although the plaintiff in Martin was swinging without a club, Justice Richard M. Mosk’s concurrence and dissent may provide some hope for plaintiffs. He agreed that simply alleging a failed say-on-pay is insufficient, but found that the plaintiff had alleged sufficient additional facts.
Director or Shareholder Primacy?
Perhaps, the majority and dissenting views can be explained by the statements that they make about governance. The majority cited Aronson: “A Cardinal precept of the General Corporation Law of the State of Delaware is that directors, rather than the shareholders, manage the business and affairs of the corporation.” The dissent ends with “In connection with the increasing number of shareholder derivative actions concerning executive compensation, ‘[t]he issue of shareholders being able to control executive compensation will be part of the legal discussion for the foreseeable future.’” quoting Nelson, Ending the Silence: Shareholders Derivative Suits and Amending the Dodd-Frank Act so “Say on Pay” Votes May be Heard in the Boardroom, 20 U. Miami Bus. L. Rev. 149, 209 (2012).
Two Wins by Activist Investors Signal Widespread Risk for Banks
by PAUL DAVIS (American Banker)
AUG 30, 2013 12:55pm ET
Activist investors scored victories against two community banks in recent weeks that demonstrate the risks posed by shareholders whose patience with slow growth has worn thin. Clashes at First Financial Northwest (FFNW) in Renton, Wash., and HopFed Bancorp (HFBC) in Hopkinsville, Ky., came to a head just four months after proxy season, and they involved a common agitator: bank investor Joseph Stilwell.
Stilwell aggressively fought to oust Victor Karpiak, the longtime chairman and chief executive of First Financial. Karpiak announced his departure from the $902 million-asset company Aug. 22. And concerns about an M&A deal by HopFed prompted Stilwell to mount a successful challenge for a board seat. The $949 million-asset company called off its purchase of Sumner Bank & Trust in Gallatin, Tenn., on Aug. 23. "We tell our [funds'] investors that we aim for excellence, so this makes me feel good," Stilwell says. "Once we start with a company we never stop. I guess it is a reflection of my stubbornness."
Stilwell's determination is a trait shared by many activist investors, and bankers worry they can inspire other shareholders to become more vocal and demand changes.An emboldened activist "is certainly something to be aware of," says David Peck, HopFed's chairman and president, though he says Stilwell was not the reason the Sumner deal was canceled. HopFed backed out, Peck says, because Sumner had fallen short of net worth and revenue performance targets outlined in the merger agreement. HopFed lost a related battle with Stilwell in May when Robert Bolton, a fund manager backed by the activist investor, won a seat on its board. Bolton, who would not discuss the Sumner deal, says his role as an outsider is to challenge management and encourage other directors to do likewise.
"I'm the eyes and ears in the boardroom for all shareholders," says Bolton, the chairman and CEO of Iron Bay Capital in Rochester, N.Y. "When different points of view are considered, it can keep boards from making bad long-term decisions. Otherwise, an insulated board may just go along with whatever management decides." It's less a matter of debate that the bitter dispute between Stilwell and Karpiak led to Karpiak's ouster at First Financial.
Stilwell lobbied hard in 2012 to oust Karpiak. Tension escalated after that year's annual meeting, when a proxy tabulation service tossed out votes that would have removed Karpiak from First Financial's board. Stilwell filed a lawsuit that sought to invalidate that decision.
A settlement reached in December, and later amended, permitted Stilwell to appoint Kevin Padrick, a senior principal at Obsidian Finance Group in Lake Oswego, Ore., to First Financial's board. Karpiak agreed to step aside, accepting a $181,000 severance and a lifetime ban from the company he joined in 1977, according to his Aug. 21 separation agreement. Karpiak "acknowledges that, because of circumstances unique to him … he will not be eligible to hold any position with [First Financial] now or in the future," the agreement states.Efforts to reach Padrick and Joseph Kiley 3rd, who is set to succeed Karpiak as CEO on Sept. 1, were unsuccessful.
Some question whether the ends justify the means in high-profile proxy fights.
"The activist agenda seems to involve going down a checklist, but at what cost?" asks Artie Regan, president of Regan & Associates, First Financial's proxy solicitor for the disputed 2012 annual meeting. After adding up expenses tied to legal fees, marketing and proxy solicitation, a lengthy battle often winds up as a "Pyrrhic victory" for activists like Stilwell, Regan says. "I understand the activist agenda, but I also understand dollars and cents," Regan says. "Challenges work best when you huff and puff, directors back down, and you spend nothing. The best campaigns are the ones you never hear about." In the case of First Financial, Stilwell has disclosed in legal documents that his firm spent nearly $2.2 million to dispute the results of the 2012 annual meeting.
Stilwell contends that he gets about 90% of his costs reimbursed by the banks he challenges, typically through settlements. He adds that he only mounted aggressive campaigns this year against three of the 32 banks he holds stakes in. Some proxy fights that are seemingly over can reignite, too. There is a chance that HopFed will revisit and reach a new agreement to buy Sumner. "We left things with Sumner in a very good way," Peck says. "The Nashville market is one that we still have an interest in. We're looking at other opportunities and I would not exclude Sumner from that.
- Allen Matkins Leck Gamble Mallory & Natsis LLP, Keith Paul Bishop
- USA September 18
Four Things To Know About Say-On-Pay Votes
In the opinion issued yesterday, Justice Sandy R. Kriegler listed four important attributes of say-on-pay votes (plaintiffs’ firms would do well to ruminate on each of these before filing another failed say-on-pay complaint):
- They are explicitly nonbinding;
- They may not be construed to overrule a decision by the Board of Directors;
- They do not create or change directors’ fiduciary duties; and
- They do not restrict or limit the ability of shareholders to make proposals for inclusion in proxy materials relating to executive compensation.
Do Directors Issue Proxy Statements?
In Martin, the defendants (the company’s directors, executive officers and compensation consultant) demurred (California’s analogue to a motion to dismiss) on the grounds that the defendants had failed to plead pre-suit demand futility adequately. The Court of Appeal affirmed on this basis, applying Delaware’s two-pronged test for demand futility established in Aronson v. Lewis, 473 A.2d 805 (Del. 1984) overruled on other grounds in Brehm v. Eisner, 746 A.2d 244 (Del. 2000). The court’s application of Aronson and the cases cited should be familiar to anyone who has litigated the issue. I did note the Court’s discussion of the plaintiff’s allegation that the board issued an allegedly misleading proxy. The Court faulted the plaintiff’s allegations for being conclusory because it failed to explain how an individual director is able to “issue” a proxy on behalf of the corporation. The Court went on to say that even if the plaintiff had alleged that the directors had signed the proxy, that allegation alone would not establish potential liability of the directors.
When it comes to failed say-on-pay votes, it seems that plaintiffs’ firms are operating under the theory that if you take enough swings, a ball will eventually land on the green. Although the plaintiff in Martin was swinging without a club, Justice Richard M. Mosk’s concurrence and dissent may provide some hope for plaintiffs. He agreed that simply alleging a failed say-on-pay is insufficient, but found that the plaintiff had alleged sufficient additional facts.
Director or Shareholder Primacy?
Perhaps, the majority and dissenting views can be explained by the statements that they make about governance. The majority cited Aronson: “A Cardinal precept of the General Corporation Law of the State of Delaware is that directors, rather than the shareholders, manage the business and affairs of the corporation.” The dissent ends with “In connection with the increasing number of shareholder derivative actions concerning executive compensation, ‘[t]he issue of shareholders being able to control executive compensation will be part of the legal discussion for the foreseeable future.’” quoting Nelson, Ending the Silence: Shareholders Derivative Suits and Amending the Dodd-Frank Act so “Say on Pay” Votes May be Heard in the Boardroom, 20 U. Miami Bus. L. Rev. 149, 209 (2012).
Two Wins by Activist Investors Signal Widespread Risk for Banks
by PAUL DAVIS (American Banker)
AUG 30, 2013 12:55pm ET
Activist investors scored victories against two community banks in recent weeks that demonstrate the risks posed by shareholders whose patience with slow growth has worn thin. Clashes at First Financial Northwest (FFNW) in Renton, Wash., and HopFed Bancorp (HFBC) in Hopkinsville, Ky., came to a head just four months after proxy season, and they involved a common agitator: bank investor Joseph Stilwell.
Stilwell aggressively fought to oust Victor Karpiak, the longtime chairman and chief executive of First Financial. Karpiak announced his departure from the $902 million-asset company Aug. 22. And concerns about an M&A deal by HopFed prompted Stilwell to mount a successful challenge for a board seat. The $949 million-asset company called off its purchase of Sumner Bank & Trust in Gallatin, Tenn., on Aug. 23. "We tell our [funds'] investors that we aim for excellence, so this makes me feel good," Stilwell says. "Once we start with a company we never stop. I guess it is a reflection of my stubbornness."
Stilwell's determination is a trait shared by many activist investors, and bankers worry they can inspire other shareholders to become more vocal and demand changes.An emboldened activist "is certainly something to be aware of," says David Peck, HopFed's chairman and president, though he says Stilwell was not the reason the Sumner deal was canceled. HopFed backed out, Peck says, because Sumner had fallen short of net worth and revenue performance targets outlined in the merger agreement. HopFed lost a related battle with Stilwell in May when Robert Bolton, a fund manager backed by the activist investor, won a seat on its board. Bolton, who would not discuss the Sumner deal, says his role as an outsider is to challenge management and encourage other directors to do likewise.
"I'm the eyes and ears in the boardroom for all shareholders," says Bolton, the chairman and CEO of Iron Bay Capital in Rochester, N.Y. "When different points of view are considered, it can keep boards from making bad long-term decisions. Otherwise, an insulated board may just go along with whatever management decides." It's less a matter of debate that the bitter dispute between Stilwell and Karpiak led to Karpiak's ouster at First Financial.
Stilwell lobbied hard in 2012 to oust Karpiak. Tension escalated after that year's annual meeting, when a proxy tabulation service tossed out votes that would have removed Karpiak from First Financial's board. Stilwell filed a lawsuit that sought to invalidate that decision.
A settlement reached in December, and later amended, permitted Stilwell to appoint Kevin Padrick, a senior principal at Obsidian Finance Group in Lake Oswego, Ore., to First Financial's board. Karpiak agreed to step aside, accepting a $181,000 severance and a lifetime ban from the company he joined in 1977, according to his Aug. 21 separation agreement. Karpiak "acknowledges that, because of circumstances unique to him … he will not be eligible to hold any position with [First Financial] now or in the future," the agreement states.Efforts to reach Padrick and Joseph Kiley 3rd, who is set to succeed Karpiak as CEO on Sept. 1, were unsuccessful.
Some question whether the ends justify the means in high-profile proxy fights.
"The activist agenda seems to involve going down a checklist, but at what cost?" asks Artie Regan, president of Regan & Associates, First Financial's proxy solicitor for the disputed 2012 annual meeting. After adding up expenses tied to legal fees, marketing and proxy solicitation, a lengthy battle often winds up as a "Pyrrhic victory" for activists like Stilwell, Regan says. "I understand the activist agenda, but I also understand dollars and cents," Regan says. "Challenges work best when you huff and puff, directors back down, and you spend nothing. The best campaigns are the ones you never hear about." In the case of First Financial, Stilwell has disclosed in legal documents that his firm spent nearly $2.2 million to dispute the results of the 2012 annual meeting.
Stilwell contends that he gets about 90% of his costs reimbursed by the banks he challenges, typically through settlements. He adds that he only mounted aggressive campaigns this year against three of the 32 banks he holds stakes in. Some proxy fights that are seemingly over can reignite, too. There is a chance that HopFed will revisit and reach a new agreement to buy Sumner. "We left things with Sumner in a very good way," Peck says. "The Nashville market is one that we still have an interest in. We're looking at other opportunities and I would not exclude Sumner from that.
Pension funds lead push for proxy adviser oversight
Registration with SEC would go far to alleviate conflicts, execs believe
By: Barry B. Burr
Published: June 24, 2013
Peter Foley/Bloomberg
Lynn Turner thinks SEC oversight would allow proxy advisers to work 'in the best interests of investors.'
Pension funds are pushing to require proxy advisory firms to register with the Securities and Exchange Commission as investment advisers.
Michael McCauley, senior officer-investment programs and governance of the $167.8 billion Florida State Board of Administration, Tallahassee, is among those calling for registration.
“There is very little to no regulation in this space,” Mr. McCauley said in an interview.
Amy Borrus, deputy director of the Council of Institutional Investors, Washington, agreed with registration. “We believe all proxy advisers should register and we've told them that.”
William R. Atwood, executive director of the $12.9 billion Illinois State Board of Investment, Chicago, has a more tempered view. “I don't have a strong opinion” on regulating the firms,” Mr. Atwood said in an interview. “They are obviously not buying and selling securities but they are managing an asset of the fund” — proxy votes, Mr. Atwood said. “They are vested with a great deal of authority over an asset of investors.”
The CII “believes that proxy advisory firms should register as investment advisers under the Investment Advisers Act of 1940,” according to a written statement by Ann Yerger, CII executive director. Ms. Yerger's statement was submitted at a hearing by the Subcommittee on Capital Markets and Government Sponsored Enterprises of the House Committee on Financial Services June 5.
In a June 13 letter to the SEC, Ms. Yerger urged the SEC “to gather empirical data on the proxy-voting practices of investment advisers,” aimed to “provide a factual basis for potential consideration of reforms.”
Proxy advisers “are important players in the market and they should be regulated,” Ms. Borrus said. “We don't think their methodology should be regulated, but there should be oversight for their services.”
Lynn Turner, a trustee of the $43 billion Public Employees' Retirement Association of Colorado, Denver, said in testimony to the subcommittee: “I believe proxy advisory services should be subject to SEC oversight. The SEC should establish a regulatory scheme that makes sense and can achieve the desired result.
“While some have called for all proxy advisory services to register as investment advisers, I am not sure that regime is designed to adequately (or smartly) address regulation of proxy advisers who typically do not give investment advice,” said Mr. Turner in prepared remarks. “Rather, regulation of proxy advisers should ensure they fulfill a fiduciary obligation to recommend votes in a manner that is in the best interest of investors” and “remain free of conflicts,” said Mr. Turner, a former SEC chief accountant, former senior executive and head of research of proxy adviser Glass Lewis & Co. LLC and a managing director of LitiNomics Inc., a Los Angeles-based economic and forensic consulting firm. He couldn't be reached for additional comment.
Mr. McCauley, who testified at the hearing, said in the interview that some people “argue (proxy advisory firms) shouldn't be put under that umbrella” of SEC registration because they “don't buy and sell securities for clients.” But because they “provide analysis and recommendations on how to vote,” Mr. McCauley said, “they make recommendations that impact valuation, that are implicitly tied to the underlying shareholder value.”
Registration would help address the issue of conflicts of interests of proxy advisory firm, he said.
'Poster child'
Institutional Shareholder Services Inc. “is the poster child” for potential conflicts, because it provides proxy advisory services to corporations as well as to institutional investors, Mr. McCauley said.
“Glass Lewis also gets painted with the conflicts brush because they are owned by the Ontario Teachers' Pension Plan,” he noted. The Toronto-based plan oversees C$129.5 billion (US$126.73 billion) in assets.
As Mr. McCauley said in his testimony, “Registration would establish important duties and standards of care that proxy advisers must uphold when advising institutional investors. Additionally, the mandatory disclosures would expose conflicts of interest and how they are managed, and establish liability for firms that withhold information about such conflicts.”
Mr. McCauley said he was not finding fault with either Glass Lewis or ISS, just pointing out the potential for problems. He added that he believes ISS and Glass Lewis “have made pretty good disclosures.”
In regard to ISS, Mr. McCauley said, “We've never become aware or had any knowledge of a conflict on the corporate side impacting its analysis.”
No proxy advisory firm was invited to testify at the hearing.
Of the major proxy advisory firms, Rockville, Md.-based ISS, a unit of MSCI Inc., New York, is registered, while Glass Lewis, based in San Francisco, is not.
“ISS has been a registered investment adviser for more than a decade,” Cheryl Gustitus, ISS executive director, head of global communications, said in an e-mail response to a request for comment. We believe it is important to operate under the same SEC oversight as many of our clients, so we voluntarily registered and still believe that it is best practice for a proxy adviser to be registered.
“Contrary to some of the testimony (at the hearing), ISS has well-established conflict management processes and procedures in place,” Ms. Gustitus said. “Additionally, we disclose our corporate client list to any institutional client that requests it, so that they are aware of any potential conflict. As a commercial entity with subscribing clients, our disclosure responsibility is to our clients.”
Registration 'not relevant'
Robert McCormick, chief policy officer at Glass Lewis, said in an e-mail response to a request for comment: “We do not believe registration is relevant to the proxy advisory business, since proxy advisers do not provide investment advice, execute trades or manage any client money nor do we think it would resolve the main concerns raised by companies regarding conflicts, transparency and quality.”
“Glass Lewis provides specific, prominent disclosure of all conflicts, including with OTPP,” Mr. McCormick said.
The disclosure is applied when “an employee of Glass Lewis or any of its subsidiaries, a member of (its research advisory) council, or a member of Glass Lewis' strategic committee serves as an executive or director of a public company.”
In addition, he said the disclosure includes when “an investment manager customer is a public company” or “a Glass Lewis customer submits a shareholder proposal or is a dissident shareholder in a proxy contest.”
Also, Glass Lewis disclosure covers companies “in which OTPP holds a stake significant enough to have publicly disclosed its ownership.”
The Florida board votes its own proxies based on its guidelines, Mr. McCauley said. It uses ISS, Glass Lewis and Manifest Information Services Ltd., a Witham, England-based service, to assist in research, Mr. McCauley said.
At the Illinois board, Mr. Atwood said ISS votes ISBI's proxies. “We incorporate their guidelines into our policies,” Mr. Atwood said. “ISS advises us how they are voting 10 days prior to the (annual meeting) and we have the ability ... to change it. But we don't do that very often.”
Among other firms that provide proxy advisory services, the SEC registration of Marco Consulting Group Inc., Chicago, includes its proxy-voting services in addition to its pension investment consulting.
Egan-Jones Proxy Services' parent company, Egan-Jones Ratings Co., is registered with the SEC as a nationally recognized statistical rating organization for its credit-rating services, not for proxy advisory services. “We are registered in a different way,” said Kent S. Hughes, managing director, Egan-Jones Proxy Services, Haverford, Pa. “We are part of the (credit) rating company. We are still subjected to SEC inspections.”
“I don't see why any of us need to be registered as investment advisers,” Mr. Hughes said.
Kevin Callahan, SEC spokesman, and David Popp, communications director, House Committee on Financial Services, didn't respond to requests for comment.
Harvey Pitt, former SEC chairman testifying at the hearing on behalf of the U.S. Chamber of Commerce, said, “More regulation is not the answer ... the chamber believes that Congress and the SEC should encourage public companies, investors and proxy advisory firms to engage in the necessary dialogue to create a system that will impose transparency and accountability on proxy advisory firms. This dialogue should build on other positive trends in the proxy system, including greater communication between companies and shareholders, and enhanced due diligence by asset managers in executing shareholder votes.”
Original Story Link: http://www.pionline.com/article/20130624/printsub/306249971
By: Barry B. Burr
Published: June 24, 2013
Peter Foley/Bloomberg
Lynn Turner thinks SEC oversight would allow proxy advisers to work 'in the best interests of investors.'
Pension funds are pushing to require proxy advisory firms to register with the Securities and Exchange Commission as investment advisers.
Michael McCauley, senior officer-investment programs and governance of the $167.8 billion Florida State Board of Administration, Tallahassee, is among those calling for registration.
“There is very little to no regulation in this space,” Mr. McCauley said in an interview.
Amy Borrus, deputy director of the Council of Institutional Investors, Washington, agreed with registration. “We believe all proxy advisers should register and we've told them that.”
William R. Atwood, executive director of the $12.9 billion Illinois State Board of Investment, Chicago, has a more tempered view. “I don't have a strong opinion” on regulating the firms,” Mr. Atwood said in an interview. “They are obviously not buying and selling securities but they are managing an asset of the fund” — proxy votes, Mr. Atwood said. “They are vested with a great deal of authority over an asset of investors.”
The CII “believes that proxy advisory firms should register as investment advisers under the Investment Advisers Act of 1940,” according to a written statement by Ann Yerger, CII executive director. Ms. Yerger's statement was submitted at a hearing by the Subcommittee on Capital Markets and Government Sponsored Enterprises of the House Committee on Financial Services June 5.
In a June 13 letter to the SEC, Ms. Yerger urged the SEC “to gather empirical data on the proxy-voting practices of investment advisers,” aimed to “provide a factual basis for potential consideration of reforms.”
Proxy advisers “are important players in the market and they should be regulated,” Ms. Borrus said. “We don't think their methodology should be regulated, but there should be oversight for their services.”
Lynn Turner, a trustee of the $43 billion Public Employees' Retirement Association of Colorado, Denver, said in testimony to the subcommittee: “I believe proxy advisory services should be subject to SEC oversight. The SEC should establish a regulatory scheme that makes sense and can achieve the desired result.
“While some have called for all proxy advisory services to register as investment advisers, I am not sure that regime is designed to adequately (or smartly) address regulation of proxy advisers who typically do not give investment advice,” said Mr. Turner in prepared remarks. “Rather, regulation of proxy advisers should ensure they fulfill a fiduciary obligation to recommend votes in a manner that is in the best interest of investors” and “remain free of conflicts,” said Mr. Turner, a former SEC chief accountant, former senior executive and head of research of proxy adviser Glass Lewis & Co. LLC and a managing director of LitiNomics Inc., a Los Angeles-based economic and forensic consulting firm. He couldn't be reached for additional comment.
Mr. McCauley, who testified at the hearing, said in the interview that some people “argue (proxy advisory firms) shouldn't be put under that umbrella” of SEC registration because they “don't buy and sell securities for clients.” But because they “provide analysis and recommendations on how to vote,” Mr. McCauley said, “they make recommendations that impact valuation, that are implicitly tied to the underlying shareholder value.”
Registration would help address the issue of conflicts of interests of proxy advisory firm, he said.
'Poster child'
Institutional Shareholder Services Inc. “is the poster child” for potential conflicts, because it provides proxy advisory services to corporations as well as to institutional investors, Mr. McCauley said.
“Glass Lewis also gets painted with the conflicts brush because they are owned by the Ontario Teachers' Pension Plan,” he noted. The Toronto-based plan oversees C$129.5 billion (US$126.73 billion) in assets.
As Mr. McCauley said in his testimony, “Registration would establish important duties and standards of care that proxy advisers must uphold when advising institutional investors. Additionally, the mandatory disclosures would expose conflicts of interest and how they are managed, and establish liability for firms that withhold information about such conflicts.”
Mr. McCauley said he was not finding fault with either Glass Lewis or ISS, just pointing out the potential for problems. He added that he believes ISS and Glass Lewis “have made pretty good disclosures.”
In regard to ISS, Mr. McCauley said, “We've never become aware or had any knowledge of a conflict on the corporate side impacting its analysis.”
No proxy advisory firm was invited to testify at the hearing.
Of the major proxy advisory firms, Rockville, Md.-based ISS, a unit of MSCI Inc., New York, is registered, while Glass Lewis, based in San Francisco, is not.
“ISS has been a registered investment adviser for more than a decade,” Cheryl Gustitus, ISS executive director, head of global communications, said in an e-mail response to a request for comment. We believe it is important to operate under the same SEC oversight as many of our clients, so we voluntarily registered and still believe that it is best practice for a proxy adviser to be registered.
“Contrary to some of the testimony (at the hearing), ISS has well-established conflict management processes and procedures in place,” Ms. Gustitus said. “Additionally, we disclose our corporate client list to any institutional client that requests it, so that they are aware of any potential conflict. As a commercial entity with subscribing clients, our disclosure responsibility is to our clients.”
Registration 'not relevant'
Robert McCormick, chief policy officer at Glass Lewis, said in an e-mail response to a request for comment: “We do not believe registration is relevant to the proxy advisory business, since proxy advisers do not provide investment advice, execute trades or manage any client money nor do we think it would resolve the main concerns raised by companies regarding conflicts, transparency and quality.”
“Glass Lewis provides specific, prominent disclosure of all conflicts, including with OTPP,” Mr. McCormick said.
The disclosure is applied when “an employee of Glass Lewis or any of its subsidiaries, a member of (its research advisory) council, or a member of Glass Lewis' strategic committee serves as an executive or director of a public company.”
In addition, he said the disclosure includes when “an investment manager customer is a public company” or “a Glass Lewis customer submits a shareholder proposal or is a dissident shareholder in a proxy contest.”
Also, Glass Lewis disclosure covers companies “in which OTPP holds a stake significant enough to have publicly disclosed its ownership.”
The Florida board votes its own proxies based on its guidelines, Mr. McCauley said. It uses ISS, Glass Lewis and Manifest Information Services Ltd., a Witham, England-based service, to assist in research, Mr. McCauley said.
At the Illinois board, Mr. Atwood said ISS votes ISBI's proxies. “We incorporate their guidelines into our policies,” Mr. Atwood said. “ISS advises us how they are voting 10 days prior to the (annual meeting) and we have the ability ... to change it. But we don't do that very often.”
Among other firms that provide proxy advisory services, the SEC registration of Marco Consulting Group Inc., Chicago, includes its proxy-voting services in addition to its pension investment consulting.
Egan-Jones Proxy Services' parent company, Egan-Jones Ratings Co., is registered with the SEC as a nationally recognized statistical rating organization for its credit-rating services, not for proxy advisory services. “We are registered in a different way,” said Kent S. Hughes, managing director, Egan-Jones Proxy Services, Haverford, Pa. “We are part of the (credit) rating company. We are still subjected to SEC inspections.”
“I don't see why any of us need to be registered as investment advisers,” Mr. Hughes said.
Kevin Callahan, SEC spokesman, and David Popp, communications director, House Committee on Financial Services, didn't respond to requests for comment.
Harvey Pitt, former SEC chairman testifying at the hearing on behalf of the U.S. Chamber of Commerce, said, “More regulation is not the answer ... the chamber believes that Congress and the SEC should encourage public companies, investors and proxy advisory firms to engage in the necessary dialogue to create a system that will impose transparency and accountability on proxy advisory firms. This dialogue should build on other positive trends in the proxy system, including greater communication between companies and shareholders, and enhanced due diligence by asset managers in executing shareholder votes.”
Original Story Link: http://www.pionline.com/article/20130624/printsub/306249971
One Click Proxy Voting is Gone...