Sep
08
2010

Guest Contributor: State Law Under Proxy Access

GUEST CONTRIBUTOR POST: Frederick H. Alexander is a member of the Corporate Counseling Group of Morris, Nichols, Arsht & Tunnell LLP, which specializes in providing advice on corporate governance and transactions. He is also chair of the Council of the Corporation Law Section of the Delaware State Bar Association and co-chair of the General Review Task Force of the ABA Committee on Corporate Laws. This post is exclusive to The Conference Board Governance Center.

By Frederick H. Alexander

The final proxy access rules (the “Rules”) adopted by the SEC on Aug. 25 culminate a long struggle over whether stockholdedodd-frank actrs should have a right to include their own nominees in the annual proxy statement of a public company.  Federal law now gives stockholders a right to require a publicly traded company to include stockholder nominees in its proxy materials for up to 25 percent of the directors.  The Rules also provide “access to greater access” by allowing stockholders to put proposals into a corporation’s proxy materials that call for an even more liberal proxy access regime than the Rules themselves contemplate.

This entry will focus on a few state law implications of the new rules from the vantage point of a Delaware corporate law practitioner, rather than the policy debate or the intricate workings of the Rules, which have already been the subject of a number of excellent law firm memos. Read the rest of this entry »

- Frederick Alexander

Posted by Frederick Alexander at 10:45 AM | 1 Comment »
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Sep
03
2010

Guest Contributor: Proxy Access Could Hurt the Bottom Line

GUEST CONTRIBUTOR POST: Brian G. Cartwright is senior advisor to Latham & Watkins LLP and a fellow of the Arthur and Toni Rembe Rock Center for Corporate Governance at Stanford University. Charles M. Nathan is a member of the corporate department in Latham & Watkins’ New York office, is co-chair of the firm’s Corporate Governance Task Force and is former global co-chair of the firm’s Mergers and Acquisitions Group. This post is exclusive to The Conference Board Governance Center.

By Brian G. Cartwright and Charles M. Nathan

The SEC’s adoption of proxy access on Aug. 25 is a watershed event of potentially historic significance, climaxing over four decades of activist effort aimed at the boardroom.dodd-frank act

The legendary community organizer Saul Alinsky invented what he dubbed the “proxy tactic” during his late-1960s-era agitations against Eastman Kodak in Rochester, N.Y. As Alinsky wrote in his famous 1971 guide Rules for Radicals, before then “[n]o one had ever organized a campaign to use proxies for social and political purposes.”  But as Alinsky thought about the idea, “[s]oon I was intoxicated by the possibilities.  You could begin to play the whole Wall Street board up and down.”  While Alinsky realized that “corporations will fight back by pointing out that the … demands of the stockholders will result in diminished dividends,” he believed enough stockholders would find their campaigns “more important than a cut in dividends.”  Alinsky was so excited by his new idea, that he trumpeted the proxy tactic as “one of the single most important breakthroughs in the revolutions of our times.”

Well, now we shall see whether Alinsky was right.  At a moment when our economy is tottering, millions are unemployed with little hope of relief, and American economic dominance is challenged by aggressive new competitors in Asia, a bare party-line majority of the SEC has embarked on a grand experiment in politicizing the leadership of our businesses. Read the rest of this entry »

- Brian Cartwright

Posted by Brian Cartwright at 10:23 AM | 2 Comments »
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Sep
02
2010

Financial Regulatory Reform Series: Shareholder Proxy Access

As part of a series of posts over the next two months, I will focus on the five main corporate governance and executive compensation sections of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This installment focuses on shareholder proxy access.

Probably one of the most controversial of the measures included in the Dodd-Frank Act, shareholder proxy access for director nominations is a reality most large public companies will have to deal with in the 2011 proxy season now that the SEC has approved a new rule and amended another. Read the rest of this entry »

- Gary Larkin

Posted by Gary Larkin at 4:40 PM | No Comments »
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Aug
26
2010

Proxy Access Ruling Elicits Polarizing Debate

The initial reaction to the SEC’s proxy access rule vote yesterday wasn’t very surprising: C-level executives and directors hate it, shareholder groups love it and corporate governance organizations believe it is ushering in a new era of shareholder board dialogue.

What is a bit eye-opening from some of the comments is the dichotomy between shareholders, the board and management at most public companies. While most shareholder groups view the decision as a way to level the playing field when it comes to nominating directors, many executives see the SEC ruling as the federal government overreaching its grasp once again. It’s almost like listening to the debate on healthcare reform, where the Democrats lauded the decision to give more access to the insurance system and the Republicans decried the act as socialistic and Big Government-like. Read the rest of this entry »

- Gary Larkin

Posted by Gary Larkin at 4:39 PM | No Comments »
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Aug
25
2010

Proxy Access First Reform Measure in Place

It may not be hailed as a shareholder Bill of Rights, but today’s 3-2 SEC vote on shareholder proxy access is the first significant part of the Dodd-Frank Act to be put into place long before the 2011 proxy season. (The rule changes take effect 60 days after they are posted in the Federal Register.)

The reason the SEC could act so quickly on proxy access is that it already had everything in place long before the Democrats pushed through the legislation over the summer. SEC Chair Mary Schapiro just needed the authority to act. Read the rest of this entry »

- Gary Larkin

Posted by Gary Larkin at 3:20 PM | 3 Comments »
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Jul
23
2010

Enactment of Dodd-Frank Law Spurs Memo Wave

By now, you’ve probably been deluged with alerts, client memos, invitations to webinars and live conferences in the past week all centered on the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act.

If you are a director, C-level executive, corporate secretary or anyone for that matter involved in the corporate governance area, you are most likely asking the question, “How will this affect my company?” Unfortunately, the answer is not so easy. Based on watching hours of testimony, listening to several conference panels and reading reams of blog posts and articles on the topic, I can tell you the spirit of the law is to make corporate governance more transparent, less complex and include more dialogue with shareholders. Read the rest of this entry »

- Gary Larkin

Posted by Gary Larkin at 12:53 PM | No Comments »
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Jul
16
2010

Worth Reading … Financial Reform Thought Leadership

Now that Congress has passed the financial regulatory reform bill with the Senate’s 60-39 vote on Thursday  [See July 15 Reuters article here.], the hard work begins not only for regulators but for public companies who will try to make sense of it all.

Many boards and senior management will be looking to their counsel and outside consultants for advice on how to prepare for these changes, most of which will most likely occur in time for the 2011 proxy season. That is why I have prepared a short version of Worth Reading on some thought leadership on financial reform that doesn’t include the politicians. I found the literature both enlightening and resourceful. Read the rest of this entry »

- Gary Larkin

Posted by Gary Larkin at 3:17 PM | No Comments »
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Jul
15
2010

SEC Wants Your Proxy Plumbing Stories

With more than 600 billion shares being voted electronically at more than 13,000 shareholder meetings every year and the growing practice of share lending and the proliferation of short selling by hedge funds, it’s no wonder the so-called “proxy plumbing” is getting “clogged.” But when you consider that shareholders are about to be granted more power than ever, the need for a more accurate and transparent proxy system becomes paramount.

It’s hard to imagine that such a complex system as the proxy voting infrastructure has been operating under rules from the 1980s. That’s the justification for the SEC’s 5-0 vote Wednesday to issue  a concept release on making changes to that system, as SEC Chair Mary Schapiro spelled out in a July 9 speech in Chicago at the annual meeting of the Society of Corporate Secretaries and Governance Professionals. [Read Schapiro’s prepared text and watch her comments during the July 14 SEC open meeting.] Read the rest of this entry »

- Gary Larkin

Posted by Gary Larkin at 3:10 PM | No Comments »
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Jun
22
2010

SEC Will Have Hands Full Once Financial Reform Passes

As the House-Senate Conference Committee gets closer to an agreement for financial regulatory reform, directors and chief executives are wondering how the voluminous legislation will affect the governance of their companies.

How the proposed law plays out in boardrooms depends on what the SEC does. According to Commissioner Troy A. Paredes, a guest speaker at an executive compensation roundtable hosted by The Conference Board’s Directors Institute and the Weinberg Center for Corporate Governance at the University of Delaware Monday night, there’s most likely going to be anywhere up to 50 or 60 new rules coming out of the agency over the next six months. Read the rest of this entry »

- Gary Larkin

Posted by Gary Larkin at 2:43 PM | No Comments »
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Jun
02
2010

Worth Reading … Financial Reform (the Final Chapter?)

Numerous law firms and at least one stock exchange are telling their clients and issuers to prepare for new corporate governance rules as early as this summer and do what they can to shore up communications with shareholders.

“Everybody knows it’s [proxy access] coming; we just don’t know what it will look like,” David Huntingdon, a partner with Paul, Weiss, Rifkind, Wharton & Garrison LLP, said during Corporate Board Member’s This Week in the Boardroom Webcast last week. “We’ll just have to wait until later this summer when the SEC takes action.” [To view Board Member Webcast, click here.] Read the rest of this entry »

- Gary Larkin

Posted by Gary Larkin at 11:38 AM | No Comments »
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