One of the surprises of the 2018 proxy season was the use of Notices of Exempt Solicitation by shareholders that almost certainly did not meet the $5 million holding threshold that would require filing under Exchange Act Rule 14a-6(g).  Rule 14a-6(g) requires a person who owns more than $5 million of the company’s securities and engages in a solicitation without seeking to collect, or act as, a proxy to file solicitation materials with the SEC.
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When the staff (the “Staff”) of the Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) released Staff Legal Bulletin No. 14I (“SLB 14I”) last fall, it seemed that the Staff was potentially signaling that it would be taking a more issuer-friendly approach in its review of no-action letter requests (“NALs”). In particular, the language in SLB 14I regarding the role of the board of directors suggested that the Staff may defer to the board’s determination of whether a shareholder proposal focuses on a significant policy issue, in the case of the “ordinary business” exception (Rule 14a-8(i)(7)), and whether the shareholder proposal is significantly related to the issuer’s business, in the case of the “economic relevance” exception (Rule 14a-8(i)(5)), as long as the NALs provided a sufficiently detailed discussion of the board’s analysis and the “specific processes employed by the board to ensure that its conclusions are well-informed and well-reasoned.” For example, SLB 14I stated that these types of “determinations often raise difficult judgment calls that the Division believes are in the first instance matters that the board of directors is generally in a better position to determine.” One could read that language to mean that including a well-developed board analysis could significantly influence the outcome for a NAL based on the “ordinary business” exception and/or the “economic relevance” exception.
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On May 11, 2018, the SEC’s Division of Corporation Finance released new Compliance and Disclosure Interpretations (“C&DIs”) regarding the interpretations of the proxy rules and Schedules 14A and 14C.  These replace the telephone interpretations contained in the Proxy Rules and Schedule 14A Manual of Publicly Available Telephone Interpretations and the March 1999 Supplement to the

2017 began with a heightened level of uncertainty as the beginning of the year brought significant change in the legal environment, including a change in administration that promised to significantly alter the tenor of regulation. While certain changes did occur in 2017, in many respects, 2018 is setting itself up as the year to watch

Cleary Gottlieb and PwC’s Governance Insights Center have teamed up to create the Executive Compensation Series, which looks at the factors motivating boards to increasingly engage with shareholders about executive compensation. The first edition of the series is now available and discusses issues such as the impact of Dodd-Frank on executive compensation, elements of effective CD&A design and the influence of proxy advisors on compensation.
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The SEC stepped back into the proxy access arena on February 12, 2016, with a volley of 18 no-action letters on a single day that sharply reduced uncertainty about an important tactical point.

At issue was the circumstances under which a company with an existing proxy access bylaw can exclude a shareholder proxy access proposal based on “substantial implementation” under Rule 14a-8(i)(10).  Of the 18 companies, 14 adopted a bylaw after receiving a shareholder proxy access proposal for the 2016 proxy statement, and then sought to exclude the shareholder proposal.  That tactic was tried only once in 2015, by General Electric; there, the sole distinction between the adopted bylaw and the proposal was that the adopted bylaw imposed a limit (20) on the number of shareholders who may form a group, while the shareholder proposal simply referred to “a group of shareholders,” and the SEC granted no-action relief.
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After several years that seemed defined by turmoil and uncertainty, 2015 delivered some unexpected and much-needed clarity for corporate directors on issues such as proxy access, compensation disclosure, investor expectations regarding board composition, certain director and financial advisor conflicts of interest, and audit committee processes and related disclosure. The past year also saw corporations adopting

On Friday, December 18, ISS issued new guidance on how a board implements a majority-supported shareholder proposal for a proxy access bylaw.  The guidance is contained in its Frequently Asked Questions on U.S. Proxy Voting Policies and Procedures.

This guidance identifies situations in which ISS may recommend votes against a company’s individual directors, nominating/governance committee members, or the entire board, based on the specific provisions of a company’s enacted proxy access bylaw.
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