Bernard Sharfman notified me of his post, Public-pension funds play with newest toy in corporate governance, saying: “As you know I am not a big fan of proxy access.” I was looking forward to a thoughtful analysis of the issues but that is not what I found. The R Street blog, where his piece was posted, apparently doesn’t allow comments. Don’t “free markets” and “real solutions” benefit from the free exchange of ideas? Since Sharfman has contributed to the CorpGov.net blog with more serious scholarship, I feel a greater obligation to point out his fallacies. Perhaps, with some dialogue, we will come closer to agreement. I would welcome his comments, as well as those from other readers. Continue Reading →
Tag Archives | proposals
Yesterday (2/10/2015), Corp Fin Director Keith Higgins delivered this interesting speech entitled “Rule 14a-8: Conflicting Proposals, Conflicting Views.” There are some really interesting things in this speech on counterproposals, etc., although there isn’t much that helps those companies grappling with proxy access shareholder proposals this proxy season (but there is some, such as #6 below). Here’s some notables from Keith’s speech: Continue Reading →
Disclaimer: I’m sharing a few notes from Directors Forum 2015 held at San Diego University beginning 2/25/2015 and ending 2/27/2015. The Forum was held under the Chatham House Rule, so you won’t read any juicy tidbits here. However, I do hope to give readers some flavor of the topics discussed and a little on the general range of opinions. I have take slight liberties with the rule with regard to individual featured speakers, giving some sense of their talks without revealing the specifics of cases raised or providing quoted material of any substance. My notes are sometimes cryptic. Sorry but my time is better spent on other activities.
Directors Forum 2015: Sunday
Thomas J. Ridge, CEO, Ridge Global, LLC
The Honorable Tom Ridge is the CEO of Ridge Global, which helps businesses and governments address risk management issues. He was the first Secretary of the U.S. Department of Homeland Security, another call to service for the former soldier, congressman and governor of Pennsylvania. Governor Ridge was the keynote speaker at the opening dinner. Continue Reading →
Most people don’t like their behavior criticized. CEOs and boards almost always fight my proxy proposals aimed at improving corporate governance. Likewise, I wasn’t happy with the Deal Professor’s criticisms of my shareowner activism in his August 19th NYTimes article, Grappling With the Cost of Corporate Gadflies, which also criticizes John Chevedden and William Steiner. I stewed for days but finally took the advice of a good friend, who is Assistant General Counsel & Corporate Secretary at a major company,
Better to be engaged than enraged!
If I had more time available, my response would have been shorter but I have a number of projects that demand attention. When I submit proposals, I want boards to weigh them carefully on the merits. I have tried to do that with the Deal Professor’s criticism. I hope our mutual use of hyperbole doesn’t preclude further engagement. Unlike the character in the cartoon at right, I feel no need to irritate… but I do often question mechanisms in corporate governance that isolate and concentrate power, rather than distributing it. I prefer structures that distribute power, making us of the wisdom found at all levels. Continue Reading →
I’ve previously written two posts on California’s Savings Plus program and how one major contractor, Northern Trust has voted. (Part I & Part II) Below, I compare the votes of Northern Trust on proxy proposals with those recommended by the AFL-CIO. A similar exercise could be performed at any deferred compensation plan.
Shareholders have voting rights, usually one vote per share, to decide who will serve on the board and to advise on pay and other issues. Funds, such as CalPERS and the CalHR Savings Plus program, have a legal duty to ensure shares are voted in the best interest of program participants. Continue Reading →
Broc Romanek‘s CorporateAffairs.tv has started with a bang and plenty of early content in the form of brief videos that even those of us with attention deficit disorder can watch without missing a beat. Some in the ‘entertainment’ category are not so much for me. Still, it is great to see Broc and friends having fun. We’re too often in jobs or situations where there is far too little of that.
Below are some notes I took during the morning sessions at the Corporate Directors Forum 2014, held on the beautiful campus of the University of San Diego, January 26-28, 2014. This year, I was only able to attend on January 27th. The program was subject to the Chatham House Rule, so there will be little in the way of attribution below but I hope to provide some sense of the discussion. Continue Reading →
Two more reviews of the 2013 proxy season came out the other day. The quickest read is from Jackie Cook at CookESG (Proxy Season Roundup: Shareholder Resolutions) who analyzed 502 shareholder-sponsored resolutions voted between July 2012 and June 2013. Two-thirds are governance-related, averaging 41% support. One-third address social and environmental issues, with an average 21% level of support. Continue Reading →
Key Characteristics of Prominent Shareholder-sponsored Proposals on Environmental and Social Topics, 2005-2011, released by the IRRC Institute (IRRCi) and researched by Ernst & Young LLP finds environmental and social (E+S) shareowner proposals are gaining increased support from investors at US companies. Download the report, presentation, press release and even replay the webinar from IRRCi’s website. Continue Reading →
ISS updated its proxy voting policies. The most interesting to me is the “Board Response to Majority Supported Proposals.”
The marketplace has been evolving in the matter of board responsiveness to majority-supported shareholder proposals, both in terms of institutional investors’ expectations, and in terms of the actual responsiveness by issuers. ISS’ 2012-2013
Policy Survey results show that 86 percent of the institutional investor respondents expect that the board should implement a shareholder proposal that receives support from a majority of shares cast in the previous year. Continue Reading →
On This Week in the Boardroom (TWIB) James Copland, Director & Senior Fellow with the Manhattan Institute’s Center for Legal Policy, sits down with host, Scott Cutler, Executive Vice President, NYSE Euronext to review the results of Proxy Monitor 2012: A Report on Corporate Governance and Shareholder Activism. Continue Reading →
The co-operative sector in the UK, which reached £35.6 billion, outperformed the mainstream economy from 2008 to 2011 by over 20 per cent, growing 19.6% while Continue Reading →
Learn to minimize the “risk” of proxy access and more in this free webinar from Corporate Secretary. Listen to find out how proactive governance can protect you, your board, your company and your brand in our free webinar at 12 noon EDT on April 26, 2012. Continue Reading →
The respected scholar, Lawrence Hamermesh, writes about the model proxy access proposal published by United States Proxy Exchange (USPX) and asks why an organization whose motto (”Populus Constituit,” the people decide) is so reluctant to file mandatory bylaw proposals, instead of precatory proposals. (Precatory proxy access proposals, The Institute of Delaware corporate and Business Law, 11/15/2011)
Hamermesh speculates USPX members chose the precatory route because “a mandatory bylaw proposal won’t get nearly as high a vote as a diluted, precatory proposal.” He then goes on to argue that boards of directors should “not to take even a majority vote on a precatory proposal seriously,” since “if real bullets had been at stake the stockholders themselves wouldn’t have Continue Reading →
As I indicated in What Would Proxy Access Look Like if Done Right? the ruling that struck down the SEC’s main proxy access Rule 14a-11 didn’t strike down amendments to Rule 14a-8(i)(8), allowing shareowners to resume filing proxy access precatory and bylaw proposals. Those amendments were placed on hold by the SEC last October after the legal challenge to Rule 14a-11 because the 14a-8(i)(8) changes were “intertwined” with the marketwide access rule.
Before 1990, Rule 14a-8(i)(8) applied only to proposals ”used to oppose solicitations dealing with an identified board seat in an upcoming election” (also known as contested elections).
In 1980 Unicare Services included a proposal to allow any three shareowners to nominate and place candidates on the proxy. Shareowners at Mobil proposed a “reasonable number,” while Continue Reading →
Here’s a brief note I just sent to the SEC:
Dear Chairman Mary Schapiro and Mr. Greg Belliston:
On April 12 I alerted you to the fact that Kinetic Concepts has said they will exclude a shareowner proposal from Mr. John Chevedden even though the SEC refused to issue them a no-action letter. I warned that if the SEC does not enforce the law and require companies to meet the burden of proof required by 14a-8(g), we should expect a flood of copycats. Today’s bulletin from Duane Morris LLP & Affiliates can be expected to accelerate erosion of the SEC’s authority.
To those of us who believe that shareowners should have the right to submit proxy proposals, I can’t emphasize enough the importance of e-mailing your concerns to the SEC so that we maintain that right.
The title of the above referenced alert from the Duane Morris law firm is “To Seek Exclusion of Shareholder Proposals, Companies May Bypass ‘No-action Letter Request’ and Go Directly to Federal Court.” SEC rules regarding shareowner proposals have been in place since 1942. Is this a right we are willing to lose without a fight? Unless shareowners demand that the SEC take action, we can expect to have to fight our way through the courts each time we submit a proposal.
Send quick e-mails to the Office of Chief Counsel at [email protected] and the Chairman at [email protected]. I also recommend you fill out the complaint form at https://tts.sec.gov/oiea/QuestionsAndComments.html, since this will go to the Division of Enforcement, the office that could take action. Your note could be as simple as the following:
I understand Kinetic Concepts informed the SEC they would exclude a shareowner proposal from John Chevedden even though the SEC rejected a “no-action” request from them on March 21. This company and others taking similar action have not met the burden of 14a-8(g), which required companies to demonstrate they are entitled to exclude proposals.
I believe taking action against Kinetic Concepts should be a high priority for the SEC. Otherwise, a growing number of companies will simply believe they can ignore shareowner resolutions, which form an important cornerstone of corporate governance.
The Manhattan Institute for Policy Research’s Center for Legal Policy, a conservative, market-orientated think tank, launched a new proxy monitoring resource: ProxyMonitor.org. This searchable database of shareowner proposals at the 100 largest U.S. companies over the past three years could be a valuable resource for management and shareowner activists alike. Sort through the data by company, industry, proponent and proposal type.
The Center intends to expand the database over time. For example, in three mouse clicks you can see that there were 32 shareholder proposals on executive compensation submitted to companies in the health care industry between 2008 and 2010. Want to know what proposals John Chevedden, Ray Chevedden and the Chevedden Family Trust have placed in front of shareowners? ProxyMonitor.org allows you to quickly identify 32 and to pull them up with a few clicks. Interested in reviewing the resolutions on executive compensation? You can quickly identify 217 and read each.
Hat-tip to ProxyMonitor: A New Shareholder Proposal Proxy Access Monitoring Tool, 100 F Street, 1/20/2011.
VoterMedia.org has applied for a $200,000 grant from the James L. Knight Foundation in the Sustainability category, which is for new economic models supporting news and information. New ways of conducting and consuming journalism require new ways of paying for it. The Knight New Challenge is open to ideas for generating revenue, as well as ways to reduce costs. Entrants publish free open-source code for others to use as well.
VoterMedia.org is led by Mark Latham. He and other volunteers are creating a new economic model for supporting pubic interest journalism in voter communities, beginning in student unions and municipalities. My hope is that once VoterMedia takes hold, it will spread to corporate governance as well.
Using the VoterMedia Internet platform, voters allocate community funds to competing media sources, primarily blogs. Although funding generally flows through governments, funds are allocated by voters, preventing those governments or incumbent politicians from controlling the media.
Allocated funds can lead media to become a more effective check and balance on the government, engaging voters, increasing accountability and reducing the risk of corruption, like the recent scandal in the city of Bell, California. Voting provides a crowd-sourced reputation system for media sources. The same model could encourage much more in-depth coverage of corporations than we currently see from sources such as ISS and Glass-Lewis, who can only spend a short amount of time on each of thousands of companies they cover because of limited resources, paid by a comparatively few number of shareowners instead of the whole community.
Please review VoterMedia’s grant application and leave feedback on the James L. Knight Foundation site in the comment field. Your suggestions can help improve the proposal, since proposals can be revised base on your feedback. Take a look at the other proposals as well and vote for your favorites. Although you must register with the Knight Foundation site to leave comments or rate proposals, the process only takes a minute or two. Like commenting on an SEC proposal, such as proxy access, your actions here could have great importance.
Hoping to put an end to the efforts by certain executives to frustrate the ability of shareowners to submit proposals, I joined with John Chevedden and Glyn Holton in providing written advice to Meredith Cross, Director Division of Corporation Finance at the SEC, on a proposed staff legal bulletin interpreting Rule 14a-8(b)(2).
Our letter explains the confused decision in the Apache vs. Chevedden lawsuit and discusses how that should be addressed in any template providing instructions on how to document ownership when filing shareowner resolutions. We also discuss increasingly common efforts to frustrate shareowner proposals based on the timing with which brokers or banks must document their eligibility.
Although an increasing number of proposals have been omitted on the grounds that investors failed to provide sufficient evidence of eligibility, in the vast majority of these cases there is little question that proponents actually did own qualifying shares. Their proposals were thrown out on technicalities. We hope that an SEC Bulletin will clarify the requirements, both for shareowners and issuers, so that we can all spend less time on procedural items that were never intended to present a barrier.
I see this blog as something of a collective work, since it started out as an internet site that simply shared a bunch of bookmarks and corporate governance items that needed attention. This post continues in that tradition and mainly goes out to those of you who have been submitting shareowner proposals for many years. It comes as a result of a review I am conducting with Glyn Holton of the United States Proxy Exchange and shareowner activist John Chevedden. Has the SEC changed its interpretation of when broker letters should be dated?
We all know what happened in the 2006 case of AFSCME v AIG. The court found the SEC had reinterpreted its own proxy rules without going out to public notice on the change or even informing the public. People had known about this for years. I mentioned it in a 5/26/2003 comment letter on the first recent proxy access proposal. Jane Barnard mentioned it in 1990 in her seminal paper, “Shareholder Access to the Proxy Revisited” (Catholic University Law Review, Volume 40, Fall 1990, Number 1). So, here’s another issue entirely, that I’d like readers to put to your memory banks. Was there a similar reinterpretation by the SEC regarding the date of broker letters supporting shareowner proposals? If so, when did it occur?
I started submitting proposal sporadically beginning 1999. Frankly, I don’t recall that submitting a broker letter dated a couple of days before the date of my proposal was an issue. However, earlier this year when I was reviewing Apache’s Brief on the Merits in Apache v Chevedden, they listed 30 no-action letters with what they claimed was “near unanimous support … both before and after the staff’s issuance of the Hain Celestial no-action letter” for their position that documentation of beneficial share ownership must come from DTC or some other party listed on the stock ledger.
My review of the no-action letters cited by Apache found no indication that proof must come directly from DTC or another party listed on the stock ledger, either before or after Hain Celestial. More germane to this post, I also found that in fully one-third of the no-actions — EQT Corp, Microchip Tech, Rentech, McGraw Hill (2008), Verizon, and IBM — proponents submitted broker letters that evidenced ownership prior to the date of the proposal. No-action was granted because Rule 14a-8(b) was interpreted as requiring verification from the proponent’s broker or bank “at the time you submitted your proposal,” not before. The same may also have been true of MeadWestvac and McGraw Hill (2007) but I could not verify through Westlaw because of missing exhibits.
A recent ISS report indicates that 28 proposals this year, according to theCorporateCounsel.net, were omitted on grounds that investors failed to provide sufficient evidence of eligibility. I would bet that a good portion of those involved broker letters dated before the proposal. Rule 14a-8(b)(2) imposes conflicting requirements on proponents. One is
… at the time you submit your proposal, you must prove your eligibility to the company …
The other is
… submit to the company a written statement from the “record” holder … verifying that, at the time you submitted your proposal, you continuously held the securities for at least one year …
The first appears to require that a letter be obtained from the proponent’s bank or broker on or before the date on which a proposal is submitted — so that documentation is available “at the time” of the submission. The second requires that the letter be obtained from the bank or broker on or after the date of submission — so it documents that the proponent satisfied the ownership requirement “at the time” of the submission.
Since the language has some degree of ambiguity, I’m wondering if the SEC’s interpretation, the broker letters be dated the same day or after the proposal, is a recent one. Any recollection from readers, especially with supporting evidence, would be helpful. I see that on July 13, 2001, the Division of Corporation Finance issued Staff Legal Bulletin No. 14, which included the following:
In the event that the shareholder is not the registered holder, the shareholder is responsible for proving his or her eligibility to submit a proposal to the company. To do so, the shareholder must do one of two things. He or she can submit a written statement from the record holder of the securities verifying that the shareholder has owned the securities continuously for one year as of the time the shareholder submits the proposal…
If a shareholder submits his or her proposal to the company on June 1, does a statement from the record holder verifying that the shareholder owned the securities continuously for one year as of May 30 of the same year demonstrate sufficiently continuous ownership of the securities as of the time he or she submitted the proposal?
No. A shareholder must submit proof from the record holder that the shareholder continuously owned the securities for a period of one year as of the time the shareholder submits the proposal.
The Bulletin seems less ambiguous than the rule. Was this July 13 2001 substantively different than previous interpretations? Please e-mail me or leave a comment. Either way, any requirement that the broker letter be dated on or very close to the date of the proposal seems to me to be rather arbitrary… but that’s the subject of a future post.
John Chevedden helped me draft and defend a resolution at Whole Foods Markets that requests the Board to adopt a policy establishing an engagement process with proponents of shareowner proposals supported by a majority of the votes cast, excluding abstentions and broker non-votes, at any annual meeting. It seemed like a rather straight-forward and simple request to me.
If shareowners vote in favor of a proposal and the board doesn’t implement it, such as the simple majority-voting proposal which won our 57%-support at our 2009 annual meeting, Whole Foods would set up an independent board committee, schedule a telephone meeting with the proposal proponent, and would present the proposal with the committee’s recommendation to the full Board.
Well, I guess this type of proposal is a little new or maybe I’m viewed as a bomb-throwing radical by some for proposing that a company at least discuss a shareowner proposal with the proponent before deciding not to implement it after it is passed by a majority of votes cast. The proposal only got 39% of the vote.
Another simple-majority voting proposal this year from John Chevedden won 58% this year. Will they ignore it again?
The proposal for CEO succession planning from the Central Laborers’ Pension Fund fared worse, only got 30% of the vote. Even living on a diet of whole foods, Mackey won’t be forever. Isn’t it good to plan ahead?
In addition to passing a second simple-majority proposal, shareowners also approved a resolution from Amalgamated Bank’s LongView Funds would roll back a bylaw change that Whole Foods directors put in place a few months after the SEC closed an investigation into the online chat activities of John Mackey in April 2008. The proposal would permit sharewners to remove a director either “with or without cause.”
When they lowered their standards to with cause only, the board redefined “cause” narrowly as covering only a criminal indictment or a judicial finding that a director had breached his or her fiduciary duties to the Company or was not capable of performing a director’s responsibility.
I’m glad to see this proposal won 53% support. “We are pleased that investors have supported this call for the Board to reinstate fundamental shareholder rights,” said Scott Zdrazil, Director of Corporate Governance for Amalgamated Bank. “We encourage the Board of Whole Foods to be responsive to shareholders and to take the necessary steps to implement the proposal.”
All the proposals were reasonable and deserve full consideration by the board.
When Mackey was pretending to be someone else in the Yahoo! chat room, he said shareowner proposals turn annual meetings into “a circus.” Yet, I understand, it was Whole Foods employees who applauded management and heckled at least one shareowner for speaking during the Q&A portion of the meeting. Did Canadians suddenly become less polite after the Olympics (the meeting was held in Vancouver) or were these imported Americans, specially trained by Mackey in how to misbehave?
In part, I’m teasing but I also believe shareowners should be treated with respect. Discussing the issues should be a major portion of any annual meeting, especially one like WFMI, which has chosen to ignore the expressed will of the owners.