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During its 2012 North American Proxy Season review, proxy advisory services firm Glass Lewis looked back to the 2011 proxy season and also gave insights as to what we can expect from them in 2012.  Highlights included: Contact Ning Chiu.
6 years 6 months ago
In what would appear to be the first filing of proxy access proposals by an institutional investor, Norges Bank Investment Management (NBIM), manager of the Norwegian Government Pension Fund, has recently filed proxy access shareholder proposals at six U.S. companies. The Norwegian Government Pension Fund held approximately $98 billion in U.S. equities and $63 billion in U.S. bonds as of the end of November. According to its press release, NBIM filed shareholder proposals at Wells Fargo, Charles Schwab, Western Union, Staples, Pioneer Natural Resources and CME Group, asking each of the companies to establish procedures for shareholders to nominate candidates to the company’s boards of directors.  The NBIM proposal would require that shareholders own a minimum of 1% of the company’s stock for at least one year in order to nominate directors.  Under the proposal, up to 25 percent of the board may be nominated by shareholders. These proposals provide a lower threshold of stock ownership required for nomination than that of  the SEC’s vacated Rule 14a-11, which required ownership of 3% of a company’s shares for a period of three years in order to nominate a director.
6 years 6 months ago
ISS has asked that we encourage interested parties to register for its free webinar to discuss its new proxy voting guidelines, which we recently summarized in a client publication.  The session focused on U.S. policies will take place on Wednesday, December 7, at 11:00 a.m. EST and will feature Martha Carter, Head of Governance Research; Carol Bowie, Head of U.S. Compensation Research; and Pat McGurn, Special Counsel.  Contact Ning Chiu.
6 years 6 months ago
It's the time of the year where many people start buying gifts for others for the holidays. That, of course, is in addition to buying food, heat, electricity, telephone(s), gasoline, auto insurance, cigarettes (bad for health - bad for pocketbook), cable, clothes (don't forget shoes, socks, and underwear), and paying rent or mortgage and the car payment. Oh, and remember to buy the medications the Doctor prescribed.Quite a list! How To Pay For It? Many people use CREDIT CARDS. Then comes February 1st and the bills flood the mailbox overwhelming the Letter Carrier's ability to carry all of the Visa, Mastercard, Discover, JC Penny, Sears, BestBuy, Fingerhut, QVC, Amex, Capital One, Orchard Bank, Bank of America et al BILLS.When asked how they expect to pay, many will say "Well, I HAD to get those presents. I mean, it was Christmas (or Chanukah or whatever other holiday "requires" gift giving)". Says the lawyer at the first consultation about debt relief, "Okay, but how did you expect to pay the bills?" - the classic answer "I didn't think about that.
6 years 6 months ago
In what may be the first major decision this proxy season on shareholder proposals, the SEC staff has granted no-action letters to two companies, Hewlett-Packard Company and Deere & Company, that had sought to exclude proposals submitted by the United Brotherhood of Carpenters Pension Funds.  The proposals had requested that the boards and audits committees establish policies that require the respective audit firms, at least every seven years, to rotate off the engagement for a minimum of three years.  Contact Ning Chiu.
6 years 6 months ago
Exclusive forum provisions in charters and bylaws, under which derivative suits and other shareholder litigation must be brought in the courts of the company's state of incorporation, drew some attention during the 2011 proxy season.  My recent piece summarizing the state of the law and the practice on this subject is here.  No consensus on this topic has yet emerged among institutional investors, and the 2011 votes were close and had mixed results. Contact Bill Kelly.
6 years 7 months ago
Last week, the U.S. Proxy Exchange, an organization supporting retail shareholder activists, released its Model Proxy Access Proposal. According to an ISS blog, two proxy access proposals which closely resemble the U.S. Proxy Exchange’s model proposal were filed by retail shareholder activist Ken Steiner at MEMC Electronic Materials, Inc. and Textron Inc. on November 11th and November 15th, respectively.  The model proposal provides a lower threshold of stock ownership for shareholder nomination of directors than that contemplated by the SEC’s vacated Rule 14a-11, which required ownership of 3% of a company’s outstanding shares in order to nominate a director.  The model proposal recommends that the company’s proxy include nominees of: “any party of one or more shareholders that held continuously, for two years, 1% of the Company’s securities eligible to vote for the election of directors” or any party of 100 or more shareholders that satisfy SEC rule’s 14a-8(b) eligibility requirements ($2000, or 1% of company’s securities eligible to vote, continuously held for at least 1 year). In addition, the model proposal provides that any one party may make one nomination to the board or, if greater, a number of nominations equal to 12% of the current board members.  In its comments to the proposal, U.S. Proxy Exchange noted that the 12% provision is intended to dissuade boards from growing beyond 16 members in response to proxy access provisions.
6 years 7 months ago
The answer to whether or not unemployment benefits are dischargeable in bankruptcy hinges on the following:  1) whether the state receives adequate notice of the bankruptcy filing; 2) whether the state upon proper notice brings a timely complaint (adversarial proceeding) in the bankruptcy court, and 3) whether the state wins its complaint and proves that the debtor obtained the unemployment overpayment by fraud or theft as opposed to having made a reasonable mistake. A debt that is discharged in bankruptcy is a debt that is no longer enforceable.  The general rule is that a debt is dischargeable at the conclusion of a Chapter 7 or a Chapter 13 bankruptcy case absent some specific statutory provision to the contrary.  The exceptions to discharge are primarily enumerated in sections 523, 727, 1228 and 1328 of the United States Bankruptcy Code.
6 years 7 months ago
Although the SEC staff has publicly stated that the clawback provision is the most complex of the remaining Dodd-Frank governance rulemaking, the most controversial provision appears to be the requirement to disclose the ratio between the CEO total compensation and the employee median.  Given the specific and prescriptive nature of the legislation, interested parties have been struggling for some time to come up with a workable solution, while some continue to argue for outright repeal.    Contact Ning Chiu. Contact Barbara Nims.
6 years 7 months ago
There is a perception among those of us who are of retirement age, or past it, that we have to pay every bill we have even if it means going without prescribed medications or proper food. To say that this is a wrong or bad idea is not appropriate. Those of us who try our best to honor our commitments should be commended, not condemned.HOWEVER, the LAW , that’s the Federal law, specifically Title 11 of the United States Code, provides for DEBT RELIEF. So, why don’t more people take advantage of this legal RIGHT? There are many reasons but most are rooted in a belief system that not paying obligations is immoral, unethical, something only shysters or "those kind of people" would do. Many of these same people, those of us who feel there is no way but to pay, have had no qualms, no hesitations, about utilizing many different sections of Title 26 of the US Code which provides TAX RELIEF.We all take deductions when we file taxes, rather than paying the maximum tax that we could pay based on income. We use the standard deduction or we itemize - and we itemize everything possible: real estate taxes, mortgage interest, medical expenses including part of the cost of medical insurance, tax return preparation fees, costs of caring for a dependent - and on & on. Somewhere there is a disconnect in the two position/attitudes.
6 years 7 months ago
Engagement with shareholders plays an increasingly important role in strengthening issuers’ corporate governance practices.  With proxy season around the corner, we turn to Donna Anderson, a vice president of T. Rowe Price Associates, Inc., and global corporate governance analyst in the U.S. Equity Division of T. Rowe Price., for her perspective on company efforts.  In her current role, Donna leads the policy-formation process for proxy voting, shepherds the firm’s engagement efforts with portfolio companies, and is co-chair of the Proxy Committee.  She joined the firm in 2007, has 15 years of investment experience, and was recently named one of the "People to Watch" in the NACD Directorship 100.  Contact Ning Chiu.
6 years 7 months ago
Section 951(b)(2) of Dodd-Frank requires companies to hold a non-binding shareholder vote on executive severance packages (golden parachutes) in connection with M&A transactions that are presented for shareholder approval.  Shareholder votes on golden parachutes have been required since April 25, 2011.  Pearl Meyer & Partners recently completed a study on the outcomes of such shareholder votes held between April 25, 2011 and September 26, 2011.  Contact Barbara Nims.
6 years 7 months ago
The latest Spencer Stuart Board Index (November 2011) finds that three-fourths of S&P 500 companies require annual election for directors and 79% have some form of majority voting.  41% of boards, almost double the percentage from 10 years ago, now split the roles of chairman and CEO, with 21% of those having truly independent chairs.  18 companies disclose a formal policy requiring separation of the two positions.  Contact Ning Chiu.
6 years 7 months ago
Considering that there continues to be growing pressure on larger companies to update their corporate governance provisions in response to both government regulations and pressure from shareholders and advisory groups, we thought this would be a good time to review the corporate governance practices at the time of the IPO to see which of these practices were being adopted by IPO companies.  We surveyed corporate governance at the time of the IPO for the largest 50 U.S. company IPOs from January 2009 through August 2011. Our survey separates the data for “controlled companies” (as defined in NYSE and NASDAQ listing standards) and noncontrolled companies. Click here to access the survey results excluding controlled companies.   Click here for the survey results for controlled companies only. Contact Richard Sandler.  Contact Elizabeth Weinstein.
6 years 7 months ago
My mortgage modification clients often ask about the class actions or Attorney Generals actions against mortgage companies, lenders, and servicers, when the newspapers/Internet proclaims "XYZ Bank settles with Massachusetts for $XXX Million". The biggest single question is "Where did the money go?" Unfortunately, the answer I give is "I don't know except that there was no fund set up for modifications". Then I get the BLANK STARES from my clients."How can that be?" they query, to which I reply, "I do not know - probably to offset the cost of the suit and to establish a new unit to investigate mortgage fraud AND to help balance the budget." To this date I have never received notification that the Commonwealth of MA is setting up a fund to help borrowers avoid foreclosures, or even to set up an agency to help homeowners apply for a loan modification.At this juncture, homeowners are being cast adrift. The 50 States +/- CA & MA (depends on the day) have been arguing with the biggest lenders/servicers over a settlement for all of these institutions evil-doings; and they were indeed evil! The proposals are at $26Billion or $26,000,000,000 but no one is offering to pay. Instead the Banks et al want to promise they won't do it again and that they will make it easier for homeowners to get a modification.
6 years 7 months ago
ISS has requested that we update our previous blog post on their draft voting policy updates to inform market participants that they have extended the deadline for receiving comments to November 7th.  ISS emphasizes that receiving comments from issuers, investors and other market participants in the governance community is critical to the formation of their final policies.  Now is the ideal opportunity to provide input, particularly on the revised pay-for-performance policy that is likely to have the most impact on issuers, rather than during the height of the proxy season when the policy is already established and being implemented by ISS in their vote recommendations.  ISS still intends to release final policy updates during the week of November 14th, though with the extended comment period it may be near the end of the week.  More on this from Ted Allen at ISS:http://blog.issgovernance.com/gov/2011/10/iss-policy-comment-period-exte... Contact Ning Chiu.
6 years 7 months ago
On October 19, we posted about the Federal Reserve’s recently released report detailing its horizontal review of incentive compensation practices at 25 large banking organizations.  The report notes that the Fed intends to implement the Pillar 3 compensation disclosure requirements adopted in July by the Basel Committee on Banking Supervision.  The required disclosures are quite extensive (e.g., compared to the disclosures currently required for U.S. public companies).  As the disclosures will be public, banks may be criticized for their compensation practices.  On the plus side, banks will have a window into their peers’ practices. Contact Barbara Nims.
6 years 7 months ago
The Federal Reserve recently released a report detailing its horizontal review of incentive compensation practices at 25 large banking organizations.  The findings and recommendations are expressed in highly general terms, and set forth the Fed’s views on what financial institutions are and should be doing to identify practices effective in balancing incentive compensation arrangements and risk and formulate next steps in developing these practices.  Because the interagency rule on incentive compensation in the financial sector may provide a roadmap for future regulation in this area extending beyond financial institutions, the insight offered by the report may be helpful in structuring incentive compensation policies at any company.  Based on the report, the Fed would like to see companies implement the following practices when using risk adjustments and deferred compensation to achieve balance between risk and financial reward in compensation arrangements:
6 years 8 months ago
What will cause ISS to recommend withhold or against the election of compensation committee members as a result of poor say-on-pay votes in 2012?  A hint lies in the just-released ISS draft voting policies for 2012.  ISS is looking for input from the corporate governance community until October 31st. ISS will review the election of compensation committee members and the say-on-pay proposal on a case-by-case basis if the company’s prior say-on-pay proposal received significant opposition, taking into account:  (a) the level of opposition; (b) the company’s ownership structure; (c) disclosure of engagement efforts with major institutional investors; (d) the company's response; (e) specific actions taken to address the issues that appear to have caused poor vote results; (f) other recent compensation actions taken by the company; and (g) ISS’ current analysis of the company’s executive compensation and whether any prior issues of concern are recurring or one-time.  The key question is what level of opposition is deemed “significant” enough to warrant such scrutiny.  In its request for comment, ISS asks whether levels below 70% support is the appropriate threshold, noting that during its policy survey 72% of investors who responded favored this approach. 
6 years 8 months ago