2012 Proxy Season Review

James Morphy, a partner at Sullivan & Cromwell LLP, has written a fairly thorough report of the 2012 proxy season, available as a pdf. I mention it here primarily to bookmark it.

He includes a good review of the movement to split CEO and chair positions. I expect more such proposals in the future as many wake up to the fact that a “lead director” falls short.

Highest vote percentages were reported for adopting a new right to hold a special meeting (averaging 52%), act by written consent (45%), declassify board (81%), adopt majority voting (57%), eliminate supermajority requirement (69%).

Directors were punished the most for failure to act on a successful shareowner proposal and poor attendance (both received only 62% vote). Overboarding was next (68%).

The memo also covered the following:

  • Quantify and discuss various categories of shareholder proposals voted on this season, and highlight important trends, legal developments and practice points for companies in navigating the shareholder proposal process, including notable exclusion determinations by the SEC staff and trends in management proposals to give shareholders that right to call special meetings and act by written consent;
  • Analyze the key reasons that directors of large companies received “withhold” or “against” recommendations in 2011 and 2012, and the situations in which these recommendations were most likely to translate into a significant reduction in shareholder support;
  • Summarize the discrepancies in director independence definitions used by various shareholders and proxy advisory firms, and the potential negative implication of an adverse independence determination under these definitions;
  • Highlight the increased use by shareholder proponents of new avenues for publicizing their arguments and counterarguments regarding their proposals;
  • Discuss developments in the SEC staff’s treatment of exclusion requests under Rule 14a-8; and
  • Address annual meeting disruptions by protest groups in 2012 and steps that companies can take to deal with the increased likelihood of disruptions at annual shareholder meetings.

A prior memo of June 19, 2012, dealt with “Proxy Access Proposals – Review of 2012 Results and Outlook for 2013.” The July 9 update corrected an earlier error that I pointed out concerning submissions by Norges Bank in my own post, 2012 Proxy Access Efforts.

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