Tag Archives | best practices

MBII Elects Directors by Majority Vote

MBII elects directors by majority vote, effective March 15th 2019. Marrone Bio Innovations (MBII) amended its bylaws after a request by shareholder advocate James McRitchie and upon the recommendation of the Nominating and Governance Committee. The bylaws now provide that, in uncontested elections, MBII elects directors by majority vote of “For” and “Withheld” votes cast.

The board also amended MBII’s Corporate Governance Guidelines to provide that director nominee are to supply a conditional letter of resignation, effective if they fail to get a majority vote and the board accepts their resignation. I hope if the board fails to accept such a resignation, that would clearly be on a temporary basis.  Continue Reading →

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iRobot Adopts Proxy Access: McRitchie Withdraws – Contest Looms

iRobot Adopts Proxy AccessiRobot adopts proxy access bylaws filed with SEC Form 8-K on March 9, 2016 (See Section 11). James McRitchie, publisher of Corporate Governance (CorpGov.net) conditioned withdrawal of his proposal for proxy access at iRobot (IRBT) on the amended bylaws, including several key elements meeting best practices as outlined by the Council of Institutional Investors.  Continue Reading →

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Apple Adopts Proxy Access Lite

Apple Adopts Proxy AccessAs reported by the Wall Street Journal (Apple Offers Proxy Accessand the Financial Times (Campaigners hail Apple shareholder move), Apple adopts proxy access. Yes, that’s progress, but we shouldn’t be gushing in praise over proxy access lite.

See Apple bylaws, pages 18-26, 5.15 Proxy Access for Director Nominations. Compare with the Council of Institutional Investors’ (CII) Best Practices.

Scott Stringer, New York City comptroller, called the Apple decision a

tipping point… Corporate resistance to proxy access is crumbling as more and more boards are coming to the table and working with investors to provide greater accountability that will drive long-term value.

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ISS: Vote Against Directors Adopting Lite Proxy Access

Vote Against Directors

Vote Against Directors Adopting Lite

ISS’s 2015-2016 global voting policy survey indicate investors are prepared to vote against directors at companies that ignore shareholders wishes and adopt proxy access mechanisms with overly burdensome ownership requirements.

An overwhelming majority of investors said ISS should issue negative director recommendations if a shareholder proposal to provide proxy access receives majority support and a board adopts proxy access with material restrictions not contained in the shareholder proposal. 90% said an against or withhold vote in a director election would be warranted if a provision had an ownership threshold in excess of 5% or an ownership duration in excess of three years. From the ISS press releaseContinue Reading →

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Best Practices Spread from Well-Governed Companies

Well-Governed CompaniesAs I have advised companies where I have submitted proxy access proposals,  I am not singling out your company with the aim of implementing proxy access. In fact, I would rather first target well-governed companies, which are more likely to adopt best practices as outlined by the Council of Institutional Investors. Best practices generally spread from well-governed companies to companies that are not well-governed, not the other way around.  We can’t portray a company as having bad corporate governance, as an outlier, until most companies have adopted best practices. Continue Reading →

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Avoiding Proxy Access Lite: Revised Template

CII - Proxy Access: Best PracticesLast week I uploaded a revised template for proxy access proposals (see Avoiding Proxy Access Lite: QUALCOMM Proposal) to address some of the problems identified by the Council of Institutional Investors in their August 5th report, Proxy Access: Best Practices. Thanks to the quick response from several readers, I have already made a few improvments. Please use the new language below if you want to keep up with my latest revised template. Of course, I always welcome additional suggestions for improvement from readers either through the comment function below or by email. I hope to see many of you at the ICGN/CII conference in Boston today. Continue Reading →

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Fixing Proxy Access Lite

Whole Foods Market (WFM)As I have mentioned in other posts (see especially Proxy Access Lite: Victories at Whole Foods, H&R Block), several companies have adopted proxy access ‘lite’ with provisions that make implementation excessively difficult and less effective than they would have been under the SEC’s universal proxy access Rule 14a-11.

Although I withdrew proposals at several companies, based on the fact that even adoption of proxy access lite represented real progress, I vowed to circle back and seek more robust provisions through subsequent amendments. I recently filed the first such proposal at Whole Foods Market. Let’s start fixing proxy access lite.  Continue Reading →

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Avoiding Proxy Access Lite: QUALCOMM Proposal

QualcommAs I have mentioned in several other posts (see especially Proxy Access Lite: Victories at Whole Foods, H&R Block), several companies have adopted proxy access ‘lite’ with provisions that make implementation excessively difficult and less effective than anticipated by the SEC’s vacated Rule 14a-11. At the beginning of last season I announced that proxy access was temporarily ‘on sale.’  I was willing to accept some unfavorable provisions in order to establish a track record of ‘wins.’

That mission has largely been accomplished. Proxy access was the hottest topic this year and is fully expected to be so for the next few seasons. Boards now see proxy access as inevitable and are adopting bylaws even without receiving shareholder proposals. Philip Morris is one of the latest. As the next season gears up, it is time to reframe proposals, avoiding proxy access lite from the start.

Fortunately, the Council of Institutional Investors, released an excellent policy paper on August 5, 2015, Proxy Access: Best Practices, which “highlights the most troublesome provisions” of recently adopted bylaw and charter amendments. I used that as a guide to reconstruct last year’s template proposal and have begun submitting this new template to companies that have not adopted proxy access provisions. QUALCOMM (QCOM) is one of the first examples. We only get 500 words for a shareholder’s proposal. Hopefully, this new version addresses most of the previous defects. Continue Reading →

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Clorox Adopts Proxy Access Lite

cloroxIn response to a proxy access proposal I filed earlier this year, Clorox Co (NYSE:CLX), manufacturer and marketer of consumer and professional products, adopted proxy access (press release, amended bylaws). I am declaring another victory and withdrawing my proposal.

While I filed a standard proxy access proposal seeking the ability of shareholders with 3% of shares held for 3 years to be able to nominate up to 25% of the board, Clorox adopted bylaws allowing nominations only up to 20% and limiting nominating groups to 20, whereas my proposals had no such restrictions on the number of participants in nominating groups. Continue Reading →

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Review: A Real Look at Real World Corporate Governance

Larcker-Tayan-real-world-corpgovThis book follows the theme of Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences also by David Larcker and Brian Tayan. Larcker is the James Irvin Miller Professor of Accounting, Stanford Graduate School of Business. Brian Tayan is a member of the Corporate Governance Research Program at the Stanford Graduate School of Business. While Corporate Governance Matters (see my review)  focuses on debunking “best practices” in corporate governance, A Real Look at Real World Corporate Governance takes more of an abbreviated case study approach, delving into how several decisions were made by boards at specific companies. Continue Reading →

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ICGN to Release Best Practice Guidelines on Political Spending & Contracts

ICGN Logo

After extensive consultation with global investors, the ICGN releases two new best practice guidelines: ICGN Guidance on Political Lobbying and Donations and Model Contract Terms Between Asset Owners and Managers. Said Christianna Wood, Chairman of the ICGN Board of Governors:

In the post-global financial crisis environment few topics have received as much attention as asset manager contracts and corporate political contributions. We are pleased to be able to launch these Continue Reading →

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Corporate Governance Matters but Not in the Way You Think

Corporate Governance Matters: A Closer Look at Organizational Choices and Their Consequences by David Larcker and Brian Tayan. Larcker is the James Irvin Miller Professor of Accounting, Stanford Graduate School of Business. Brian Tayan is a member of the Corporate Governance Research Program at the Stanford Graduate School of Business.

The authors make a good case that corporate governance “suffers from considerable rhetoric.” Using available empirical evidence, they spend a considerable portion of the book debunking what are currently considered “best practices.” Fortunately, it doesn’t read like a diatribe, but rather a grounded framework that should be a valuable resource to anyone interested in this important subject.

After introductory chapters placing corporate governance in context, they devote substantial attention to the board: their duties and liabilities, selection, compensation, removal, structure. They also take a good hard look at CEOs: the labor market for CEOs, succession planning, compensation, and equity ownership. Other chapters cover organizational strategy, financial reporting and audits, market for control, investors, and ratings.

In 1994 the Council of Institutional Investors (CII) released Does Ownership Add Value?: A Collection of 100 Empirical Studies on the effectiveness of ownership structures and initiatives. Studies cited in Continue Reading →

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Seven Smart Practices for Shareowner Meetings

CII recently published Seven Smart Practices for Shareowner Meetings containing excellent advice for issuers on best annual meeting practices. It contains nothing that might be considered cutting edge, so should be easy for all companies to follow.

Although the guidance recommends hybrid, rather than virtual-only meetings, it contains no discussion of how electronically transmitted questions might be handled differently than in-person questions. For example, a more extensive discussion might recommend that all such questions be made visible to those attending so that it can be readily seen if softball questions are given priority.

The “Smart Practices” should be viewed as an excellent base from which to build. Here are the seven points but I encourage all to read the full discussion.

  1. Talk to your shareowners long before the big day.
  2. Make sure the meeting is reasonably accessible.
  3. Set fair policies for admission, disclose them clearly and enforce them consistently.
  4. Broaden participation without sacrificing the in-person meeting.
  5. Promote a substantive Q&A period.
  6. Treat presenters of shareowner resolutions with professionalism.
  7. Ensure the integrity of the vote.
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