On November 1, 2017, the Division of Corporation Finance (Division) of the Securities and Exchange Commission (SEC) released Staff Legal Bulletin No. 14I (SLB No. 14I) to offer guidance on the scope and application of Rules 14a-8(i)(7) and 14a-8(i)(5), each of which provide a substantive basis for excluding shareholder proposals from a company’s proxy materials for shareholder meetings. SLB No. 14I also discusses a new policy requiring documentation when shareholders submit “proposals by proxy,” along with the Division’s views on the use of graphs and images in the supporting statements for shareholder proposals.
This week we highlight a study by the EY Center for Board Matters, “Audit Committee Reporting to Shareholders in 2017.” EY reviewed audit committee-related proxy disclosures by Fortune 100 companies to examine trends in voluntary reporting and finds a continued increase in voluntary audit committee disclosures to shareholders.
This week we highlight two analyses, one by J.P. Morgan and the other by Ernst & Young, reviewing the 2017 proxy season. The reports address board diversity; gender equality; environmental, social and governance (ESG) issues; and the normalization of shareholder activism as high priorities and key trends for many investors and boards.
This week we highlight Willis Towers Watson’s 2017 Proxy Analysis of Executive Compensation. Their analysis is based on 365 S&P 1500 companies with consistent CEOs that filed proxies disclosing 2016 pay by the end of March 2017. The findings conclude that executive pay practices settled in to a new normal in 2016, characterized by modest pay increases, continued emphasis on performance-oriented compensation, and annual and long-term incentive (LTI) plan design features and metrics consistent with those of recent years.
This week we highlight a report by Ernst & Young based on three years of research on the linkages between nonfinancial performance and investor decision-making. The data concludes that with regards to environmental, social and governance (ESG) reporting, there is a global trend toward increased interest in nonfinancial information on the part of investment professionals.
This week we highlight a report by Proxy Monitor on the early filings and voting returns of the 2017 Proxy season. Among early-meeting companies, proposals are evenly split between those relating to corporate governance and those relating to social policy concerns. Between now and the end of June, the shareholders’ votes will show if they have grown more determined about such issues as transparent political spending, a clean environment, more proxy access or splitting the chairman and CEO roles.
One of the typical activities for junior associates in performing due diligence for M&A and securities transactions involving public companies is going through the “exhibit list” filed by the public company on its recent registration statements and Securities Exchange Act of 1934 (the Exchange Act) filings and tracking down the material agreements listed. Today, that process usually entails reading that list and then scrolling through the public company’s EDGAR filings, trying to find the actual filing to which each such material agreement is attached. This process, often also performed by young associates in the investment banking and other investment fields, can be labor-intensive and not particularly intellectually challenging. Recently, however, the Securities and Exchange Commission (SEC) promulgated rules that will make this process much easier and faster for those hard-working young professionals.
On March 1, 2017, the SEC adopted amendments to various rules, including Item 601 of Regulation S-K, that will require most registrants to include a hyperlink to each exhibit listed in the exhibit index of these filings. To enable the inclusion of such hyperlinks, the amendments also require that registrants submit all such filings in HTML format.
This week we highlight F.W. Cook & Co.'s Top 250 report on long-term incentive grant practices for executives. In 2016, external forces, including Dodd-Frank Act rules, Say-on-Pay and proxy advisors, continue to influence the executive compensation landscape. Meanwhile, internally, major overhaul to long-term incentive plans at large companies over the years have resulted in most plan designs and practices now more closely aligned with a pay-for performance philosophy. With Say-on-Pay in its sixth year and 94% of the 250 largest U.S. companies already using performance-based awards in their long-term incentive programs, companies are shifting attention to finding the right balance of grant types and performance features that provide meaningful retention and incentivize proper behavior.