Preparing for the Shareholder Proposal Season

Skadden, Arps, Slate, Meagher & Flom LLP
Contact

Skadden, Arps, Slate, Meagher & Flom LLP

On November 16, 2017, Skadden held our webinar “Preparing for the Shareholder Proposal Season.” The panelists were Michael Garland, Assistant Comptroller for Corporate Governance and Responsible Investment in the Office of New York City Comptroller Scott M. Stringer; Skadden M&A and corporate governance partner Marc Gerber; and Skadden senior associate Hagen Ganem, who is a former member of the Securities and Exchange Commission’s (SEC) Shareholder Proposal Taskforce.

Staff Legal Bulletin No. 14I

Following Mr. Gerber’s brief overview of the shareholder proposal landscape, Mr. Ganem provided a summary of the recently published Staff Legal Bulletin No. 14I (SLB 14I) from the SEC’s Division of Corporation Finance, which provides important new guidance for companies and shareholder proponents concerning shareholder proposals for the upcoming proxy season1. Mr. Ganem focused the discussion on the “ordinary business” basis for excluding proposals and the new guidance on providing the Staff with a determination by the company’s board of directors that a significant policy issue raised by the proposal lacked a sufficient nexus to the company’s business. Mr. Ganem explained that a board determination will not be necessary where it is well established that a proposal does not raise a significant policy issue and that a board determination will not bind the Staff. Mr. Ganem also explained that there is no particular board process required by the Staff. The panelists agreed that it was too early to know whether SLB 14I will have a significant impact on the no-action letter process.

Proxy Access Shareholder Proposals

Mr. Gerber next presented observations about proxy access shareholder proposals from the 2017 proxy season. He observed that approximately 60 percent of Standard and Poor’s 500 index companies have a proxy access bylaw, but that the rapid pace of adoption slowed in 2017. Mr. Garland expressed the view that the rate of adoption seen in 2016 was unsustainable and noted that the New York City Comptroller will continue to focus on proxy access.

Mr. Gerber noted that there had been one attempt to use proxy access. In November 2016, GAMCO and Gabelli Funds nominated one person for inclusion in the proxy materials of National Fuel Gas Company. The nomination was ultimately withdrawn following the company’s determination that GAMCO and Gabelli Funds could not satisfy a requirement in the bylaw to represent a lack of intent to “change or influence control” of the company. Mr. Garland said the situation illustrated that the safeguards intended to prevent the use of proxy access to change or influence control of the company could work as intended.

Mr. Gerber provided an overview of key terms of proxy access bylaws, which typically permit a group of up to 20 shareholders owning 3 percent of a company’s shares for at least three years to nominate up to 20 percent of the board seats (often with a minimum of two board seats), referred to as 3-3-20-20 proxy access. Mr. Garland acknowledged that 3-3-20-20 proxy access bylaws have become the market standard but noted that the New York City Comptroller remains uncomfortable with an aggregation limit of 20 holders.

Mr. Gerber also explained other typical proxy access terms. For example, to address the concern that shareholders could harass a company by renominating the same unsuccessful candidate year after year, companies often require a minimum level of shareholder support for a candidate to be eligible for renomination the following year. Mr. Gerber said that in order to avoid so-called proxy access “creep” — proxy access nominees being elected in successive years while previously elected access nominees are renominated by the board — companies may require elected access candidates renominated by the board to count against the proxy access “basket” for some period of time. On this item, Mr. Garland expressed a preference for a cooling-off period for the nominating shareholders rather than a provision that impacts the ability of other shareholders to utilize proxy access. Finally, Mr. Gerber described that companies address the risk of concurrent proxy access and traditional proxy contests — which Mr. Gerber referred to as a “two-front war” — by cutting off the access nomination in the event of an advance notice nomination for the same annual meeting. In response, Mr. Garland expressed a preference for a mechanism that limits the number of access candidates but allows both contests to proceed, which would have been permitted under the SEC’s version of proxy access. Mr. Garland observed that excluding the proxy access nominees in this scenario might ensure that the long-term shareholders deprived of the ability to use proxy access will support one or more dissident nominees and vote on the dissident proxy card to the detriment of the board’s nominees.

Mr. Gerber next noted a trend of shareholder proposals seeking amendments to existing proxy access bylaws, with a recent focus on eliminating (rather than increasing) shareholder aggregation limits. In July 2017, the SEC staff denied no-action relief to a company that argued that a 20-person aggregation limit substantially implemented a proposal seeking elimination of the aggregation limit. In the 2017 proxy season, no proposal to amend an existing proxy bylaw has received majority shareholder support. Mr. Garland stated that the New York City Comptroller would typically support shareholder proposals that brought proxy access terms closer to the SEC’s vacated proxy access rule but generally does not submit proposals to amend existing proxy access bylaws with 3 percent ownership requirements and other provisions consistent with current market practice.

Independent Chair, Special Meeting and Written Consent Proposals

Mr. Ganem discussed other common shareholder proposals, starting with those requesting an independent board chair, which is the most common governance-related shareholder proposal after proxy access. Mr. Ganem said none of these proposals received majority support in 2016 or 2017. Mr. Ganem then discussed proposals for shareholders to have the right to call special meetings or act by written consent, noting that proposals to lower an existing special meeting right with a 25 percent ownership threshold to 15 percent or 10 percent generally do not achieve majority support. Mr. Garland noted that the New York City Comptroller is supportive of written consent proposals even where a reasonable right to call a special meeting exists but would not typically submit a written consent proposal in those circumstances.

Climate Change Proposals

Mr. Ganem noted that climate change shareholder proposals saw a marked increase in shareholder support in the 2017 proxy season, with average support for proposals calling for reports assessing the impact of 2-degree Celsius policies increasing to 44.4 percent of votes cast and proposals achieving majority shareholder support at three companies. One reason for the recent success of these proposals is that several large asset managers have been more willing to support these proposals, at least under certain circumstances. Mr. Garland referred to a “tipping point” on this topic, noting the substantial increase in year-over-year shareholder support, and indicated that disclosure concerning the impact of climate change would remain a focus of the New York City Comptroller.

Other Noteworthy Shareholder Proposal Topics

Mr. Ganem covered other noteworthy shareholder proposal topics that have continued to receive strong support from shareholders, such as proposals to eliminate supermajority voting requirements, proposals to declassify boards of directors and proposals to implement majority voting in uncontested elections. Another popular topic is increased transparency of corporate political activity, including reports or disclosures on a company’s policies and procedures for either making political contributions or engaging in lobbying activities. With respect to gender diversity and pay equity proposals, Mr. Ganem observed that many companies have been able to convince proponents to withdraw the proposal.

Board Composition

Regarding board composition, Mr. Gerber noted an increasing focus on boardroom gender diversity from several large asset managers. Mr. Gerber then described the New York City Comptroller’s Boardroom Accountability Project 2.0 (Boardroom 2.0) campaign to make boards “more diverse, independent and climate competent.” The New York City Comptroller sent letters to 151 companies that had adopted proxy access or had a majority-supported proxy access proposal in 2017, requesting that the companies publicly disclose the skills, race and gender of board members, discuss the board refreshment processes with the New York City Comptroller and use a standardized matrix to disclose certain experiences and demographic qualities of each director. Mr. Garland noted the view that many companies already utilize a version of a director skills matrix in their board succession planning and that the Boardroom 2.0 matrix was intended to be illustrative and not prescriptive. Mr. Garland said the New York City Comptroller viewed disclosure of race/ethnicity and gender as extremely important. Finally, Mr. Garland noted that initial responses to Boardroom 2.0 have been positive and that there is no current plan for a shareholder proposal campaign comparable to the New York City Comptroller’s proxy access shareholder proposal campaign.

Other Matters

On the question of “virtual” annual shareholder meetings, Mr. Garland supported using technology to expand shareholder meeting participation but observed that “virtual only” meetings are problematic, as the New York City Comptroller believes shareholders should have the opportunity to meet boards face to face at in-person meetings.

Mr. Gerber concluded the discussion by reviewing recent proposals to reform the shareholder proposal process, including the Financial CHOICE Act, which was passed by the House of Representatives in June 2017 and would substantially increase the eligibility requirements for submission of proposals. Mr. Garland expressed concern that some aspects of the reform proposals would make it virtually impossible for many investors to file shareholder proposals.

________________________ 

1 For more information, see our recent client alert on SLB 14I, “SEC Staff Issues New Shareholder Proposals Guidance” (November 6, 2017).

Download pdf

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Skadden, Arps, Slate, Meagher & Flom LLP | Attorney Advertising

Written by:

Skadden, Arps, Slate, Meagher & Flom LLP
Contact
more
less

Skadden, Arps, Slate, Meagher & Flom LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at www.jdsupra.com) (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at privacy@jdsupra.com.

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.