All items from Davis Polk Briefing: Governance

Facebook is seeking to dismiss a lawsuit challenging the compensation paid to its non-executive directors, which we previously discussed here. 
Although a board’s decision to grant compensation to its members generally falls outside the business judgment rule because board members are deemed personally interested in their compensation levels, if the board’s decision is approved by a majority of independent, disinterested and informed stockholders, then the business judgment rule presumption applies rather than the entire fairness standard.

Posted 4 days 4 hours ago

The NYTimes Dealbook recently focused on a Proxy Monitor study that found that 70% of shareholder proposals submitted by individuals to Fortune 250 companies in 2014 were sponsored by three people and their family members − John Chevedden, William Steiner and James McRitchie. Over the last nine years, the Cheveddens have filed 232 proposals, with about 19% receiving majority support, while the Steiners made 215 submissions, with 29% passing. According to the report, Evelyn Davis only submitted one proposal in 2014, and none in 2013. Although her success rate for passing proposals is around 1%, the Dealbook article discusses her newsletter that many companies felt compelled to buy and other perks she received.

Posted 1 week 1 day ago

ISS has launched a new Equity Plan Data Verification portal to better reflect the most up-to-date data for investors voting on equity plans. While this process is optional for issuers and does not affect whether they receive ISS recommendations, given that issuers frequently criticize the proxy advisory firms for having errors in the voting reports, this portal represents a unique opportunity to ensure those errors are minimized, especially in the complex area of equity plan proposals. Favorable proxy advisory firm recommendations can be crucial to the passage of those plans.

Posted 2 weeks 21 hours ago

The Council of Institutional Investors (CII) sent a letter to Keith Higgins, the director of the SEC Division of Corporation Finance, related to the Dodd-Frank requirement for the SEC to promulgate rules for disclosure of the link between executive pay and company performance. Companies must provide a “clear description” of the relationship between executive compensation “actually paid” and the “financial performance of the issuer, taking into account any change in the value of the shares of stock and dividends of the issuer and any distributions.” These highlighted areas represent several challenges for interpretation in formulating rules.

Posted 2 weeks 2 days ago

The latest SEC award to a whistleblower was notable for having been initially denied because the SEC decided that the information was not “voluntarily” provided. Under the SEC rules, a submission is not being made voluntarily if a request, inquiry or demand related to the subject matter is directed to the whistleblower by the SEC, PCAOB or any self-regulatory organization (SRO) or in connection with an investigation by federal or state authorities.

Posted 2 weeks 3 days ago

The Citizens for Responsibility and Ethics (CREW) has filed a comment in response to the Chamber of Commerce’s petition asking the Commission to increase the voting approval threshold for resubmitting a Rule 14a-8 shareholder proposal. We previously discussed both the Chamber’s rulemaking request and CREW’s separate petition related to disclosure of corporate political spending here. 

Posted 3 weeks 2 days ago

In a decision that may predict the outcome of the ongoing SEC conflict minerals court case, a divided U.S. Court of Appeals for the D.C. Circuit, sitting en banc, ruled that a regulation mandating disclosure of country-of-origin information about meat products was permissible. 

Posted 3 weeks 4 days ago

As a result of the controversy regarding the availability of interim vote tallies during the 2013 proxy season, which we've previously discussed here numerous companies received shareholder proposals earlier this year asking that those tallies not be available to management and the board. The resolution contained a list of the types of proposals this would apply to, as well as a list of exceptions. 

Posted 4 weeks 1 day ago

A vast majority of companies have adopted similar practices and protocols for their earnings calls, but there were some notable differences and perhaps a few surprises, from the results of a survey conducted by the National Investor Relations Institute (NIRI). The full report is available only to members but the highlights are listed here.

Posted 4 weeks 4 days ago

Approximately 60% of S&P 500 companies provide shareholders with the right to call special meetings. Coupled with the move away from classified boards and toward annual director elections, which generally permit shareholders to remove directors for cause, there has been increasing concern that companies are dismantling their defensive mechanism and leaving themselves vulnerable to activist attacks. 

Posted 5 weeks 2 days ago