Tag Archives | no-action letters

CII: William Hinmam Interviewed

Keynote Interview: William Hinman of the SEC

William Hinman, Director of the SEC’s Division of Corporation Finance, was interviewed by CII Co-Chair Gregory Smith, Executive Director, Colorado Public Employees Retirement Association at #, I scribbled a few notes.

As you can well imagine for someone speaking from such a sensitive position, there were no bombshell announcements. However, it is certainly good to have a dialogue between CII members and the head of CorpFin. William Hinman did not disappoint.

William Hinman: Disclaimer

I am sure Hinman gave a disclaimer but this is mine. My skills as a journalist are limited to those of the typical sociologist. I only took a few notes on what I thought was timely. If you were there and heard something else, let us know by leaving a comment below sending me an email. Even if you were not there but have something to contribute, please do so.

William Hinman: What I Think I Heard

The SEC’s job is protecting investors without overburdening issuers. They recently revised the rules so that companies can stay private longer with more shareholders. Private markets are developing so that more employees can redeem early shares without the need to go public. See CII: Public Companies Endangered Species?

The massive breach at Equifax is likely to hurt — and may ultimately doom — efforts by Republicans to overturn the Consumer Financial Protection Bureau’s rule banning mandatory arbitration clauses. Will mandatory arbitration change? William Hinman discussed s0me of the issues. For background, see Arbitration Clauses and Class Certification Standards: How the Supreme Court Is Limiting Plaintiffs’ Ability to Maintain Class Actions. He said the SEC would have to analyze the issue if it comes up. However, he does not see it as a rule-making issue… at least not for now.

Universal proxy? Yes, it is widely seen as a positive move. SEC Chair Jay Clayton is reportedly concerned with retail. As I recall (that’s me, not Hinman), Clayton thinks universal proxies will lead to confusion among retail investors. To me, nothing could be further from the truth. Getting multiple proxies and timing delivery is more confusing than anything a universal proxy could add. Mr. Smith said, CII also thinks multiple proxy cards are confusing to retail.

Hinman responded saying SEC may seek still more comments. The debate among commissioners mostly revolves around the level of solicitation effort a dissident must undertake. The currently proposed rule requires that a majority of shareholders be solicited.  What if they don’t solicit? What is the penalty? Background: Four-Year Effort to Allow Universal Proxy Cards for Contested Shareholder Elections Moves Through SEC Channels.

The SEC Looked at 280 no-action letters. In 75% of cases, they agreed with the company. I know that our little group lost far more no-actions than ever this year (specifically on proxy access amendments) because we tried to “compromise” with issuers over raising the group limits for proxy access.

We generally requested fifty, instead of no group limit. That turned out to be a mistake because it was more difficult to prove that limit of 50 (our proposals) was substantially different than a limit of 20 (the most common group limit in company bylaws). Next year should see fewer successful no-actions as our group moves back to requesting no limit.

Of course, those SEC numbers also don’t take into account that shareholders like me essentially withdrew proposals in many cases because companies moved in the right direction. For example, I recently withdrew a proposal at Symantec (SYMC), during the no-action process, because SYMC raised the group limit for proxy access to 50. That kind of partial victory happened in almost 50 cases. Seen in that light, the report that 75% of cases were decided in favor of companies is tempered.

William Hinmam indicated there is a new focus on proxy plumbing. Background: Fixing the stock market’s ‘clogged toilet’ starts in Delaware. Additionally, staff will put out a new SLB (Staff Legal Bulletin) as a result of the annual stakeholder meeting and other input. See my Shareholder Action Handbook for a crude index of SLBs. Suggestions for better descriptors are welcome.

Proven Shareowner Action Formulas


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Gadfly Proposals Reduce Value?

Deal Professor Envisions Corporate Gadfly

Starting with Corporations

Gadfly proposal on your corporate proxy? One implicit conclusion from a recent academic study is that you should short the company as soon as the SEC disapproves the company’s no-action request, since a proposal from a gadfly is likely to reduce the company’s value. Even though their intent is primarily to show why managers generally oppose proposals, that is the takeaway investment strategy one might conclude from a paper by John G. Matsusaka, Oguzhan Ozbas and Irene Yi entitled Why Do Managers Fight Shareholder Proposals? Evidence from No-Action Letter Decisions. (Why Do Managers Fight Shareholder Proposals, pdf)

Investors Skeptical of Gadfly Proposals

Researchers found a statistical correlation between Securities and Exchange Committee (SEC) staff decisions to block a no-action request and negative abnormal returns over the period of 2007-2016, “suggesting that investors agree with managers that these proposals are value-destroying.” “[O]ur main finding is that the market responded positively to the granting of a no-action letter.” “Investors are not particularly skeptical of proposals by unions and public pensions, but appear to view proposals by individual ‘gadfly’ shareholders as value-destroying.” Continue Reading →

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Foiled Without Binding Proxy Access Proposals

Foiled Without Binding Proxy Access Proposals

Foiled Without Binding Proxy Access Proposals

There will be no rush to binding proxy access proposals, thanks to a July 21 denial of a no-action request filed by H&R Block. Corporations (HRB) continue with Wile E. Coyote type plots to derail genuine proxy access. See this incoming no-action request from Microsoft (MFST). However, in the case of H&R Block we foiled the latest plot to keep corporate governance a democratic-free zone without resorting to binding proxy access proposals. Continue Reading →

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Substantial Implementation: Proxy Access Lite

Substantial ImplementationSubstantial implementation, that’s what SEC staff deemed proxy access ‘lite’ last week. Investor rights were eroded again as staff granted a number of no-action letters on February 12th to companies based on “substantial implementation” of proxy access. At its founding, the SEC was largely a champion of shareholder rights. The SEC required companies to include proposals on any proper subject in the proxy in order to approximate the conditions of the annual meeting. The SEC even took Transamerica to court in 1947 for refusing to place shareholder proposals in their proxy. From that high point, the SEC began chipping away at shareholder proxy rights. Last week’s decisions inferring proxy access lite to be substantial implementation provided further evidence of an agency more concerned with protecting entrenched managers than shareholder rights. Continue Reading →

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2013 Proxy Season Review

ProxyAccessSteven Hall Partners published a list of all the failed “say on pay” votes this season to date. 56 companies  failed with an average 60% ‘Against’ vote.

  • Two additional company received less than 50% ‘For’ but considered the vote a win because ‘For’ votes outnumbered ‘Against’ votes due to abstentions. I say they’re crazy. They failed.
  • Nine companies have failed previous votes
    • Abercrombie & Fitch Co. failed in 2012
    • Big Lots, Inc. failed in 2012
    • Cogent Communications failed in 2011
    • Comstock Resources failed in 2012
    • Freeport McMoran Copper & Gold, Inc. failed in 2011
    • Gentiva Health Services failed in 2012
    • Three companies have failed all three of their say on pay votes (2011, 2012 & 2013)
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