Shareholder activism is exploding: The number of activists is increasing, their assets under management are growing, and their tactics and strategies are changing. We believe that companies that put themselves in an activist’s shoes will be most able to anticipate, prepare for, and respond to an activist campaign. So what should they know—and do?
Find out in PwC’s report, Shareholder activism: The who, what, when, & how.
- The survey asked top global hedge fund allocators about their views on important aspects of corporate governance in hedge funds.
- Allocators overwhelmingly believe corporate governance is extremely important and most have decided not to invest in a fund before due to governance concerns.
- Key findings from the survey indicate that allocators prefer boards to have at least three independent directors with no conflicts of interest, hold a minimum of three meetings per year including at least one in-person, and for directors to have substantial experience in the funds industry.
This document summarizes trends in the buy-side industry as presented by Holly Miller of Stone House Consulting to an Omgeo advisory board. Key points include:
- Convergence between hedge funds and traditional managers in terms of operations and fee structures.
- Increased emphasis on operational due diligence of funds, managers, and service providers.
- Continued focus on transparency around investments and operations.
- Anticipated new regulation for managers and implications for operations and reporting.
- Changes in human capital needs, with more focus on risk management and operations roles.
- Continued M&A activity as managers look to scale, acquire talent/strategies, or find liquidity events.
2014 West coast boardroom summit - Skadden and GeorgesonComputershare
This document summarizes a presentation on preparing for shareholder activism. It discusses trends in shareholder activism like more large cap companies and new activist funds being targeted. Drivers of activism include perceived financial weaknesses, underperformance, and governance issues. The document outlines different types of activism like M&A activism and "bumpitrage", governance activism through director elections and proposals, and considerations that may make a company a target. It provides examples of recent activist campaigns and issues that are the focus of shareholder proposals.
Nacd directors college presentation spring- 04-16-11(final)henoehmann
This document summarizes a presentation on executive compensation. It discusses objectives of compensation programs such as attracting, retaining, and motivating talent. It also outlines major elements of compensation including salary, annual incentives, long-term incentives, benefits, and perquisites. Additionally, it addresses linking compensation to company performance, benchmarking against peer groups, and considering compensation in the context of business planning events like succession, strategic planning and crisis planning.
The allocation of executive compensation resources is being scrutinized by internal and external forces. Regulations, board governance issues, and the lower margins require new thought processes on the various pieces of the compensation puzzle and how they fit together.
Taming the Legal Lion: Critical Compliance Issues for Smart Nonprofits (hando...Greenlights
This document summarizes the key points from a training on legal compliance issues for nonprofits. It discusses potential risks nonprofits face, including liability from assets, activities, and who could be liable. It covers critical areas like legal compliance, human resources, and insurance protection. Under legal compliance, it outlines the fiduciary duties of boards, including care, loyalty and obedience. It discusses issues like excess benefits, reasonable compensation, board liability, and personal liability of board members. It recommends policies in areas like conflicts of interest, expense reimbursement, executive compensation, and whistleblowers. Finally, it briefly touches on personnel and hiring risks for nonprofits.
Small Cap Investor Activism in Canada and Crescendo Partners - Nov 2010Dave Litwiller
This document summarizes hedge fund activism in Canada, focusing on the tactics of Crescendo Partners. It finds that Crescendo Partners has achieved board representation over 80% of the time in its Canadian targets and the sale of the company over 80% of the time. Compared to academic studies of US activist success rates of 45-67%, Crescendo Partners has significantly higher success rates in Canada. The document outlines the typical goals, strategies, and escalation approaches of activist hedge funds, as well as strategies that companies use to respond to activist investor pressure.
Shareholder activism is exploding: The number of activists is increasing, their assets under management are growing, and their tactics and strategies are changing. We believe that companies that put themselves in an activist’s shoes will be most able to anticipate, prepare for, and respond to an activist campaign. So what should they know—and do?
Find out in PwC’s report, Shareholder activism: The who, what, when, & how.
- The survey asked top global hedge fund allocators about their views on important aspects of corporate governance in hedge funds.
- Allocators overwhelmingly believe corporate governance is extremely important and most have decided not to invest in a fund before due to governance concerns.
- Key findings from the survey indicate that allocators prefer boards to have at least three independent directors with no conflicts of interest, hold a minimum of three meetings per year including at least one in-person, and for directors to have substantial experience in the funds industry.
This document summarizes trends in the buy-side industry as presented by Holly Miller of Stone House Consulting to an Omgeo advisory board. Key points include:
- Convergence between hedge funds and traditional managers in terms of operations and fee structures.
- Increased emphasis on operational due diligence of funds, managers, and service providers.
- Continued focus on transparency around investments and operations.
- Anticipated new regulation for managers and implications for operations and reporting.
- Changes in human capital needs, with more focus on risk management and operations roles.
- Continued M&A activity as managers look to scale, acquire talent/strategies, or find liquidity events.
2014 West coast boardroom summit - Skadden and GeorgesonComputershare
This document summarizes a presentation on preparing for shareholder activism. It discusses trends in shareholder activism like more large cap companies and new activist funds being targeted. Drivers of activism include perceived financial weaknesses, underperformance, and governance issues. The document outlines different types of activism like M&A activism and "bumpitrage", governance activism through director elections and proposals, and considerations that may make a company a target. It provides examples of recent activist campaigns and issues that are the focus of shareholder proposals.
Nacd directors college presentation spring- 04-16-11(final)henoehmann
This document summarizes a presentation on executive compensation. It discusses objectives of compensation programs such as attracting, retaining, and motivating talent. It also outlines major elements of compensation including salary, annual incentives, long-term incentives, benefits, and perquisites. Additionally, it addresses linking compensation to company performance, benchmarking against peer groups, and considering compensation in the context of business planning events like succession, strategic planning and crisis planning.
The allocation of executive compensation resources is being scrutinized by internal and external forces. Regulations, board governance issues, and the lower margins require new thought processes on the various pieces of the compensation puzzle and how they fit together.
Taming the Legal Lion: Critical Compliance Issues for Smart Nonprofits (hando...Greenlights
This document summarizes the key points from a training on legal compliance issues for nonprofits. It discusses potential risks nonprofits face, including liability from assets, activities, and who could be liable. It covers critical areas like legal compliance, human resources, and insurance protection. Under legal compliance, it outlines the fiduciary duties of boards, including care, loyalty and obedience. It discusses issues like excess benefits, reasonable compensation, board liability, and personal liability of board members. It recommends policies in areas like conflicts of interest, expense reimbursement, executive compensation, and whistleblowers. Finally, it briefly touches on personnel and hiring risks for nonprofits.
Small Cap Investor Activism in Canada and Crescendo Partners - Nov 2010Dave Litwiller
This document summarizes hedge fund activism in Canada, focusing on the tactics of Crescendo Partners. It finds that Crescendo Partners has achieved board representation over 80% of the time in its Canadian targets and the sale of the company over 80% of the time. Compared to academic studies of US activist success rates of 45-67%, Crescendo Partners has significantly higher success rates in Canada. The document outlines the typical goals, strategies, and escalation approaches of activist hedge funds, as well as strategies that companies use to respond to activist investor pressure.
This document discusses strategic alliances between nonprofits from both legal and funding perspectives. It defines strategic alliances as combinations of two or more organizations that involve giving up some independent decision-making to accomplish shared goals. The document then outlines various types of alliances, ranging from loose to integrated: sponsorship agreements, program collaborations, back-office consolidations, joint ventures, federations, asset acquisitions, mergers, and consolidations. For each type, it discusses characteristics and considerations regarding legal structure, operations, and tax implications. The document emphasizes that strategic alliances can strengthen fundraising by expanding networks, resources, capacity and accountability.
Portfolio Company Board Seat Survey Resultsmensa25
The National Venture Capital Association and Dow Jones VentureOne released the results of a study on differing practices and attitudes of venture capital-backed company boards. The study was based on surveys of over 700 venture capitalists and CEOs and revealed that while VCs and CEOs think about the same issues, their perspectives often differ. Some of the top issues of concern identified were exit strategies, financing rounds, management transitions, and conflicts between fiduciary responsibilities and financial obligations. The study provided insights into board activities, time spent, areas of agreement and disagreement between VCs and CEOs, and the perceived value that VCs provide to company boards.
Organizational structure for your businessMarc Parham
This document discusses structuring a business, including managing internal and external environments. It addresses organizational structure, legal structures like LLCs and corporations. Managing the internal environment includes human resources issues like ensuring communication, balancing schedules to reduce stress, and setting employee duties, tasks and responsibilities. Managing the external environment involves government agencies' impact and how to work with them. Effective management and developing a strong business team are also discussed.
The document is a presentation by Fred Whittlesey of Compensation Venture Group on trends in executive compensation. Some key trends discussed include an increasing use of restricted stock units instead of stock options, adding performance conditions to equity awards, and adopting a "portfolio approach" using a mix of stock options, RSUs, and performance-based awards. There is also a growing influence from shareholders and proxy advisors on compensation design and an emphasis on issues like dilution, executive pay levels, and tying pay to performance. The presentation provides an example compensation plan for the CEO of eBay that incorporates a mix of stock options, RSUs, and performance share units with vesting based on total shareholder return goals.
Most nonprofits are not satisfied with their investment processes and are taking on more risk than planned. While many have investment policies, there is often a disconnect between the policies and the actual investments made. This can jeopardize the organization's mission. Additionally, most nonprofits do not fully understand the fees and investment products they use. They also struggle to find advisors who act as fiduciaries. Governance over investments needs strengthening as well, such as setting term limits for finance committees. Nonprofit boards tend to be slower to change investment strategies and adopt new tools compared to individual board members' personal investments.
Corporate governance deals with how suppliers of finance to corporations assure themselves of getting a return on their investment. Stakeholders include shareholders, creditors, managers, and society as a whole. Good corporate governance practices are important for firms with dispersed minority shareholders who cannot directly influence decisions.
The board of directors oversees management and is elected by shareholders. There are executive, non-executive, and independent directors. The board ensures minority shareholder rights are protected, dividend policies are clear, quality reports are published, and information is disclosed.
Institutional investors like pension funds and hedge funds can influence corporate policies through shareholder proposals, media pressure, and direct engagement. Index funds and ETFs allow passive investment
The document describes Cheetah's innovative finance models for smallholder farmers in Africa. It proposes setting up an Africa Farmers Collateral Fund that would provide loans to farmer groups, guaranteed by Cheetah and the farmers' crops. A separate Africa Agriculture Equity Fund would make equity investments in agribusinesses along the food chain. Both funds would be capitalized by impact investors taking on the highest risks. The models aim to address key challenges of lack of access to finance and reliable markets that have hindered smallholder success by linking loans to crop sales and technical support.
Directors of financial institutions have three main responsibilities in a downturn economy:
1) Closely monitor key financial indicators like capital adequacy, loan quality, and performance compared to peers.
2) Respond promptly to regulatory warnings by reviewing issues raised and documenting board discussions and decisions.
3) Focus on credit underwriting standards, concentrations of credit, and ensuring policies address compliance with laws on areas like insider loans.
Omidyar Network is an investment firm that employs strategies from both venture capital and philanthropy to maximize social impact. It has committed $500 million total across its investments, touching 644 million lives. The organization focuses on human capital areas like leadership development, governance, and operational excellence to strengthen social enterprises and maximize their positive impact.
Global Say on Pay: Coming to Your Stock Plan in 2013fwhittlesey
While say-on-pay is typically discussed as an executive compensation topic, many investorsâ and proxy advisersâ concerns are centered on equity compensation â and not just for executives. . The say-on-pay process is drawing more attention to equity compensation proposals, and the viability of your current equity plan may be at risk.
Joseph Mack & Associates Aco Planning And Redesign Considerations Novembe...Joseph Mack & Associates
This document discusses capital sources and considerations for Accountable Care Organizations (ACOs) and other risk-bearing organizations. It provides a table comparing capital characteristics such as retained earnings, leasing, borrowing, partnering, and public/private offerings for different organization types including ACOs, Independent Physician Associations (IPAs), medical groups, hospitals, and health plans. The document also discusses historical capital issues from the 1980s to 2000s and regulatory considerations related to capital for organizations overseen by Departments of Insurance or Managed Care.
A recent behavioral finance webinar from Unified Trust delivered by Dr. Gregory Kasten. Link to the replay can be found below.
http://bit.ly/BehavioralFinanceWebinar
Executives’ Ransomware Concerns Are High, But Few Are Prepared for Such Attacks Deloitte United States
A Deloitte poll conducted on June 24, 2021 found that 86.7% of C-suite and other executives expect the number of cyberattacks targeting their organizations to increase over the next 12 months--and that ransomware poses a major concern during that time (64.8%).
The fact is that most of the executives who did not earn a salary or cash bonus last year were nevertheless increasing
their personal wealth in other ways, sometimes in addition to having significant stockholdings.
This document summarizes the services of Vistage, an organization that provides peer advisory groups and executive coaching to business leaders. It offers monthly meetings with world-class speakers, executive coaching, opportunities to learn best practices from other executives, and a connected community to combat the isolation that leaders often face. Vistage has been executing this simple formula for more than 50 years in 200 cities across 16 countries.
DIFFERENCES BETWEEN ERM PRACTICES BETWEEN THE FINANCIAL AND CORPORATE SECTORS
DIFFÉRENCES DES PRATIQUES ERM ENTRE LES SECTEURS FINANCIERS ET CORPORATIFS
Institutional Shareholders and
Activist Investors
Professor David F. Larcker
Corporate Governance Research Program
Stanford Graduate School of Business
2011
Describes shareholder activism factors, targets and strategies from an activist investor and shareholder value perspective.
Note: Confidential and proprietary information omitted from public version.
This document discusses strategic alliances between nonprofits from both legal and funding perspectives. It defines strategic alliances as combinations of two or more organizations that involve giving up some independent decision-making to accomplish shared goals. The document then outlines various types of alliances, ranging from loose to integrated: sponsorship agreements, program collaborations, back-office consolidations, joint ventures, federations, asset acquisitions, mergers, and consolidations. For each type, it discusses characteristics and considerations regarding legal structure, operations, and tax implications. The document emphasizes that strategic alliances can strengthen fundraising by expanding networks, resources, capacity and accountability.
Portfolio Company Board Seat Survey Resultsmensa25
The National Venture Capital Association and Dow Jones VentureOne released the results of a study on differing practices and attitudes of venture capital-backed company boards. The study was based on surveys of over 700 venture capitalists and CEOs and revealed that while VCs and CEOs think about the same issues, their perspectives often differ. Some of the top issues of concern identified were exit strategies, financing rounds, management transitions, and conflicts between fiduciary responsibilities and financial obligations. The study provided insights into board activities, time spent, areas of agreement and disagreement between VCs and CEOs, and the perceived value that VCs provide to company boards.
Organizational structure for your businessMarc Parham
This document discusses structuring a business, including managing internal and external environments. It addresses organizational structure, legal structures like LLCs and corporations. Managing the internal environment includes human resources issues like ensuring communication, balancing schedules to reduce stress, and setting employee duties, tasks and responsibilities. Managing the external environment involves government agencies' impact and how to work with them. Effective management and developing a strong business team are also discussed.
The document is a presentation by Fred Whittlesey of Compensation Venture Group on trends in executive compensation. Some key trends discussed include an increasing use of restricted stock units instead of stock options, adding performance conditions to equity awards, and adopting a "portfolio approach" using a mix of stock options, RSUs, and performance-based awards. There is also a growing influence from shareholders and proxy advisors on compensation design and an emphasis on issues like dilution, executive pay levels, and tying pay to performance. The presentation provides an example compensation plan for the CEO of eBay that incorporates a mix of stock options, RSUs, and performance share units with vesting based on total shareholder return goals.
Most nonprofits are not satisfied with their investment processes and are taking on more risk than planned. While many have investment policies, there is often a disconnect between the policies and the actual investments made. This can jeopardize the organization's mission. Additionally, most nonprofits do not fully understand the fees and investment products they use. They also struggle to find advisors who act as fiduciaries. Governance over investments needs strengthening as well, such as setting term limits for finance committees. Nonprofit boards tend to be slower to change investment strategies and adopt new tools compared to individual board members' personal investments.
Corporate governance deals with how suppliers of finance to corporations assure themselves of getting a return on their investment. Stakeholders include shareholders, creditors, managers, and society as a whole. Good corporate governance practices are important for firms with dispersed minority shareholders who cannot directly influence decisions.
The board of directors oversees management and is elected by shareholders. There are executive, non-executive, and independent directors. The board ensures minority shareholder rights are protected, dividend policies are clear, quality reports are published, and information is disclosed.
Institutional investors like pension funds and hedge funds can influence corporate policies through shareholder proposals, media pressure, and direct engagement. Index funds and ETFs allow passive investment
The document describes Cheetah's innovative finance models for smallholder farmers in Africa. It proposes setting up an Africa Farmers Collateral Fund that would provide loans to farmer groups, guaranteed by Cheetah and the farmers' crops. A separate Africa Agriculture Equity Fund would make equity investments in agribusinesses along the food chain. Both funds would be capitalized by impact investors taking on the highest risks. The models aim to address key challenges of lack of access to finance and reliable markets that have hindered smallholder success by linking loans to crop sales and technical support.
Directors of financial institutions have three main responsibilities in a downturn economy:
1) Closely monitor key financial indicators like capital adequacy, loan quality, and performance compared to peers.
2) Respond promptly to regulatory warnings by reviewing issues raised and documenting board discussions and decisions.
3) Focus on credit underwriting standards, concentrations of credit, and ensuring policies address compliance with laws on areas like insider loans.
Omidyar Network is an investment firm that employs strategies from both venture capital and philanthropy to maximize social impact. It has committed $500 million total across its investments, touching 644 million lives. The organization focuses on human capital areas like leadership development, governance, and operational excellence to strengthen social enterprises and maximize their positive impact.
Global Say on Pay: Coming to Your Stock Plan in 2013fwhittlesey
While say-on-pay is typically discussed as an executive compensation topic, many investorsâ and proxy advisersâ concerns are centered on equity compensation â and not just for executives. . The say-on-pay process is drawing more attention to equity compensation proposals, and the viability of your current equity plan may be at risk.
Joseph Mack & Associates Aco Planning And Redesign Considerations Novembe...Joseph Mack & Associates
This document discusses capital sources and considerations for Accountable Care Organizations (ACOs) and other risk-bearing organizations. It provides a table comparing capital characteristics such as retained earnings, leasing, borrowing, partnering, and public/private offerings for different organization types including ACOs, Independent Physician Associations (IPAs), medical groups, hospitals, and health plans. The document also discusses historical capital issues from the 1980s to 2000s and regulatory considerations related to capital for organizations overseen by Departments of Insurance or Managed Care.
A recent behavioral finance webinar from Unified Trust delivered by Dr. Gregory Kasten. Link to the replay can be found below.
http://bit.ly/BehavioralFinanceWebinar
Executives’ Ransomware Concerns Are High, But Few Are Prepared for Such Attacks Deloitte United States
A Deloitte poll conducted on June 24, 2021 found that 86.7% of C-suite and other executives expect the number of cyberattacks targeting their organizations to increase over the next 12 months--and that ransomware poses a major concern during that time (64.8%).
The fact is that most of the executives who did not earn a salary or cash bonus last year were nevertheless increasing
their personal wealth in other ways, sometimes in addition to having significant stockholdings.
This document summarizes the services of Vistage, an organization that provides peer advisory groups and executive coaching to business leaders. It offers monthly meetings with world-class speakers, executive coaching, opportunities to learn best practices from other executives, and a connected community to combat the isolation that leaders often face. Vistage has been executing this simple formula for more than 50 years in 200 cities across 16 countries.
DIFFERENCES BETWEEN ERM PRACTICES BETWEEN THE FINANCIAL AND CORPORATE SECTORS
DIFFÉRENCES DES PRATIQUES ERM ENTRE LES SECTEURS FINANCIERS ET CORPORATIFS
Institutional Shareholders and
Activist Investors
Professor David F. Larcker
Corporate Governance Research Program
Stanford Graduate School of Business
2011
Describes shareholder activism factors, targets and strategies from an activist investor and shareholder value perspective.
Note: Confidential and proprietary information omitted from public version.
This program includes Board of Director highlights of the current M&A environment, an update of current issues in Director and Officers (D&O) liability insurance, and cautionary observations on recent litigation developments. The panel addressed each of these topics in the context of the current regulatory changes, the economy, buy and sell side perspectives, and particular challenges for board fiduciary duties.
The Real Deal Webinar Series: Recent Trends and Legal Developments You Should...Winston & Strawn LLP
This edition of The Real Deal series, which covers current trends, challenges, and legal topics pertinent to securities and corporate governance, addresses securities & corporate governance.”
Winston & Strawn attorneys Karen Weber and Christina Roupas looked back at important developments in 2014 and provided an overview of possible securities and corporate governance trends in 2015. They covered the following topics:
The Rise in Investor Activism
Trends in Shareholder Proposals
Recent Changes in Debt Tender Offer Rules
Public Companies and Social Media
Fee Shifting Bylaws
The document discusses emerging challenges for independent directors in meeting corporate social responsibility. It outlines four key factors impacted by corporate governance: strategy, people, performance, and risk. Independent directors play an important oversight role by providing informed and committed guidance. Their responsibilities include maximizing value for stakeholders, overseeing management and financial performance, and ensuring corporate social responsibility practices are followed. The document also examines the business case for CSR and potential consequences of neglecting it.
In the sixth installment of The Real Deal, “Proxy Season Recap – Trends and Lessons from 2014,” Erik Lundgren and Erin Stone looked back at key trends from the 2014 proxy season and discussed lessons learned.
The document discusses the traditional corporate finance objective of maximizing firm value and stockholder wealth. It notes some limitations of this approach, including potential conflicts between stockholders, bondholders, managers, and society. Alternative objectives and governance systems are proposed to better align these interests, such as choosing objectives other than stock price or implementing stakeholder systems like in Germany and Japan.
The document discusses the traditional corporate finance objective of maximizing firm value and stockholder wealth. It notes some limitations of this approach, including potential conflicts between stockholders, bondholders, managers, and society. Alternative objectives and governance systems are proposed to better align these various interests, such as choosing objectives other than stock price or implementing codetermination systems like in Germany.
An overview of managerial finance-IBF-CH#1Junaid hancock
This document provides an overview of managerial finance. It discusses what finance entails, the general areas of finance, and how finance fits within the organizational structure of a firm. It also covers alternative forms of business organization like proprietorships, partnerships, and corporations. The document discusses how corporations aim to maximize shareholder wealth through capital structure, capital budgeting, and dividend policy decisions. It addresses agency relationships between shareholders and managers and factors that can influence stock price. The document concludes with brief discussions of business ethics and reasons why firms operate internationally.
This presentation was given to a group of Founders, CEO's and praticipants in the Financing of their growth companies at the Digital Media Zone at Ryerson University in Toronto today.
Alliance Advisors is a shareholder communications firm specializing in proxy solicitation and governance consulting founded in 2005. The firm assists over 200 clients, including Fortune 500 companies, with shareholder activism matters. The document discusses trends in shareholder activism such as more activists seeking minority board representation rather than control and the impact of poor stock performance on vulnerability to activism. It also provides an overview of ISS' framework for evaluating proxy contests and contested mergers and outlines considerations for companies facing shareholder activism.
Authored by: James R. Copland, David F. Larcker, and Brian Tayan Stanford Closer Look Series, May 30, 2018
Proxy advisory firms have significant influence over the voting decisions of institutional investors and the governance choices of publicly traded companies. However, it is not clear that the recommendations of these firms are correct and generally lead to better outcomes for companies and their shareholders. This Closer Look provides a comprehensive review of the proxy advisory industry and the influence of these firms on voting behavior, corporate choices, and outcomes, and it outlines potential reforms for the industry.
We ask:
• How accurate are the voting recommendations of proxy advisory firms?
• How influential are they over voting practices and corporate choices?
• Should steps be taken to reduce their influence or improve the reliability of their recommendations?
• Would greater transparency, back-testing, and regulation improve the market for their services?
Financial Ratios, Principal-Agent Conflict, Stakeholder Theory and Overall Fi...Dayana Mastura FCCA CA
* Share price at start of year: RM2.50 per share
* Number of shares held: 1000
* Market value at end of year: RM2.82 per share
* Dividend paid: RM0.28 per share
* Dividend received = 1000 shares x RM0.28 dividend per share = RM280
* Capital gain = 1000 shares x (RM2.82 - RM2.50) per share = RM320
* Total return = Dividend + Capital gain = RM280 + RM320 = RM600
* TSR = (Total return / Value of investment at start) x 100%
= (RM600 / RM2500) x 100% = 24%
Maintaining Mission: Meeting the Legal Requirement for B Corp Certification.pptxB Lab
Still working on the legal requirement for B Corp Certification? Join B Lab's resident mission alignment experts Rick Alexander and Holly Ensign-Barstow and Standards Analyst Matt Nabhan to learn about the legal component of B Corp Certification. This webinar will cover the reasons behind this component of B Corp Certification, how and when to meet the legal requirement depending on your form of incorporation, and tools for moving through the process. Then we'll dive into benefit corporations with the team that has been instrumental in passing benefit corporation legislation in over 30 states.
This presentation was given by Rick Alexander, Holly Ensign-Barstow, Matt Nabhan, and Jessica Friesen on March 1st, 2016.
My score is 5. We have a defined strategy but it could be better aligned with the wider business goals and priorities.
2) Legal Risk Management
Processes to identify, assess and mitigate risks
0 5 10
• Ad hoc risk • Formal risk identification
identification and assessment
• No risk register • Risk register in place
The document summarizes recent trends in corporate governance from multiple sources. It discusses trends reported by Russell Reynolds Associates such as greater focus on board quality, composition, compensation, and environmental and social issues. It also summarizes a report by Farient Advisors that found momentum for corporate governance is continuing globally, with common standards rising in areas like executive compensation, board structure, and shareholder rights. The document concludes that companies need to understand global governance trends, evaluate their adherence to best practices, and determine a roadmap for changes needed to attract investment.
Vesting provisions are typically put in place for founders and employees to incentivize them to remain with the company over time. With vesting, the shares/options are earned gradually, such as over a 4 year period, with a 1 year cliff. This helps ensure that the founders and key employees stay long enough to see the business grow and be valuable, rather than leaving shortly after joining. It also addresses the risk of multiple founders by making their ownership contingent on long-term service.
Methanex is the world's largest producer and supplier of methanol. We create value through our leadership in the global production, marketing and delivery of methanol to customers. View our latest Investor Presentation for more details.
ZKsync airdrop of 3.6 billion ZK tokens is scheduled by ZKsync for next week.pdfSOFTTECHHUB
The world of blockchain and decentralized technologies is about to witness a groundbreaking event. ZKsync, the pioneering Ethereum Layer 2 network, has announced the highly anticipated airdrop of its native token, ZK. This move marks a significant milestone in the protocol's journey, empowering the community to take the reins and shape the future of this revolutionary ecosystem.
UnityNet World Environment Day Abraham Project 2024 Press ReleaseLHelferty
June 12, 2024 UnityNet International (#UNI) World Environment Day Abraham Project 2024 Press Release from Markham / Mississauga, Ontario in the, Greater Tkaronto Bioregion, Canada in the North American Great Lakes Watersheds of North America (Turtle Island).
Cleades Robinson, a respected leader in Philadelphia's police force, is known for his diplomatic and tactful approach, fostering a strong community rapport.
2. Agenda
• Calls for Change Hit A Crescendo
• Just Vote No? The Sharp Rise of Votes Against Director
Nominees
• Proxy Fights and Other Solicitations Continue Their
Upward Trend
• Stockholder Proposals: It’s All About Director
Accountability
• Update on the Latest Regulatory and Political Initiatives
• Questions and Comments
2
3. Calls for Change Hit A Crescendo
• Federal Policymakers Take Control of the Governance
Agenda
• Institutional Investors as the New Activists?
• The Action Moves to Small and Mid-Cap Companies
3
4. Federal Policymakers Take Control of the
Governance Agenda
• Government takes equity stakes in Citigroup, GM, GMAC,
AIG, Bank of America, Chrysler
• Intense focus on executive compensation
• TARP firms hold mandatory Say on Pay votes
• Pay Czar cuts pay for executives at top TARP firms, an average
of 50%
• Legislation to require Say on Pay votes
• SEC proposes new proxy access rule
• SEC and NYSE eliminate broker discretionary voting
• Legislation introduced in Congress to mandate a panoply
of corporate governance programs
4
5. The Old Activists Are Still Around
• Historically, corporate governance debate dominated by
corporate governance activists
• “Gadflies” still around
• Union pension funds,and state and local government pension funds
• Council of Institutional Investors
• Social groups – religious, greens
• They have tended to use 14a-8 proposals, rather than
proxy fights and vote no campaigns
• Some traditional activists have increased their level of
involvement
• AFSCME “vote no” campaign against 6 Citigroup directors, and litigation
in support of proxy cost reimbursement bylaw proposal
5
6. Rise of Hedge Funds and Other Event-Driven
Activists
• Using proxy fights as a way to shake up management and
force an event (dividend, sale)
• Direct use of 14a-8 stockholder proposals is limited
• Undeclared “alliance” of corporate governance activists
and hedge funds
• Hedge funds and other activist investors support corporate
governance campaigns that weaken takeover defense and
primacy of board of directors
6
7. Goals of Activist Hedge Funds
• Long term value creation may not be relevant to many
activist hedge funds, so they push for:
• Weakened takeover defenses
• Sale or restructuring of the company
• Leveraging for special dividend and/or stock buy backs
• Management changes
• Seats on the Board
• Given the leverage used by hedge funds, their financial
return from any value creation is disproportionately high
as compared to the size of their investment
• In 2009 proxy season, market and liquidity constraints
made dividend or sale events less viable, so the focus
has shifted to corporate governance
7
8. Proxy Advisory Firms Continue to Wield Great
Influence on Voting Decisions
• Risk Metrics (aka ISS)
• Leading proxy advisory firm in terms of size and influence
• >1,200 clients: mutual funds, corporate and public pension funds, trusts, other
fiduciaries
• Many institutions vote their shares based solely on ISS’s recommendation
• Strong focus on corporate governance, but will also evaluate strategic and
financial issues
• Glass Lewis & Co.
• Significant new competitor of RiskMetrics-ISS
• 8 of 10 largest mutual funds and top 5 U.S. public pension funds subscribe
• Stronger focus on financial integrity and valuation issues than ISS, but significantly
less influence on vote outcomes
• Proxy Governance
• Provides recommendations on an “issue-by-company” basis
• Views proxy issues in the context of company-specific metrics (relative financial
performance, business environment, strength of management and corporate
strategy, quality of corporate governance, etc.)
8
9. Institutional Investors as the New Activists?
• Activist agenda at RiskMetrics and other proxy advisory
firms is reflected in institutional investor voting
• Portfolio manager abdication to internal governance staff
• Traditionally, institutions were not publicly active, but now
have broad political cover and activist governance views
are becoming mainstream
9
10. Fidelity as an Example
• Votes against management in uncontested elections rose
to 25.5% in 2009, vs. 16.9% in 2008
• Key issues are compensation-related actions (ie, gross ups, stock
option exchanges and repricings without shareholder approval),
poor attendance at board meetings, adoption of golden parachute
plans, failure to follow through on promises to change corporate
governance or pay practices
• Voted against all incumbents at Delta Air Lines and Google
• Fidelity voted against at least one management
recommendation at 50% of shareholder meetings, up
from 41% in 2008 and 38% in 2007
• Voted against 55% of all executive compensation plans in
2009
• Fidelity has its own compensation criteria and does not follow
RiskMetrics criteria
10
11. The Action Moves to Small and Mid-Cap
Companies
• Corporate governance activists have tended to focus
on larger public companies
• Fewer than 20% of companies in the S&P 500 have rights plans–
down from 60% as recently as 2002
• Only 35% of companies in the S&P 500 have a classified board –
also down from 60% in 2002
• Small and mid-cap companies are next on list for
corporate governance activist campaigns
11
12. Agenda
• Calls for Change Hit A Crescendo
• Just Vote No? The Sharp Rise of Votes Against Director
Nominees
• Proxy Fights and Other Solicitations Continue Their
Upward Trend
• Stockholder Proposals: It’s All About Director
Accountability
• Update on the Latest Regulatory and Political Initiatives
• Questions and Comments
12
13. Just Vote No? The Sharp Rise of Votes Against
Director Nominees
• The Reasons Behind High Votes Against Director
Nominees
• SEC’s Elimination of Broker Discretionary Voting
• With Majority Voting as the New Standard, a No Vote
Now Has Teeth
• Advising the Board Now
13
14. Percentage of Directors Receiving High
Percentages of Opposition Votes (2007-2009)
12.0%
10.0%
8.0%
2007
6.0% 2008
2009
4.0%
2.0%
0.0%
Majority 40%+ 30%+ 20%+
opposition opposition opposition opposition
vote vote vote vote
Source: Proxy Governance
2009 data based on meetings through 8/31/09
14
15. Number of Directors Receiving Majority
Withhold/Against Votes
100
90
93
80
70
60
50
Number of
Directors 40
30
20 32
10 20
0
2007 2008 2009
Source: RiskMetrics
15
16. Companies Where At Least One Director Nominee
Failed to Achieve Majority Support in 2009
ACI Worldwide Inc HMS Holdings Southwest Airlines
Advanced Analogic Tech Interline Brands Inc Southwestern Energy Co
Anixter Intl Inc Kansas City Southern SPSS Inc
Associated Estates Rlty Corp Layne Christensen Co Swift Energy Co
Assurant Inc Lifepoint Hospitals Inc Syniverse Holdings Inc
Cablevision Sys Corp –CL A Mariner Energy Inc Tennant Co
Catalyst Health Solutions Massy Energy Co Tetra Technologies Inc/DE
Checkpoint Systems Inc Mednax Inc. Thoratec Corp
Circor Intl Inc Mentor Graphics Corp Triquint Semiconductor Inc
Cognex Corp Natco Group Inc United Online Inc
Computer Programs & Systems NBTY Inc United Therapeutics Corp
Digi International Inc NV Energy Inc Valueclick Inc
Dollar Tree Inc Plexus Corp Zapata Corp
Essex Property Trust Pride International Inc Zoll Medical Corp
First Mercury Financial Corp Pulte Homes Inc
Firstenergy Corp Red Robin Gourmet Burgers
Healthcare Services Group Skywest Inc
16
17. Some of the Reasons Behind High Votes
Against Director Nominees
• Increased willingness of proxy advisory firms to
recommend against candidates
• Increased willingness of institutions to vote against
management
• Investor frustration with financial performance
• Dissatisfaction with executive compensation
• 57% of directors receiving majority opposition votes are members
of compensation committee
• Failure to implement majority-approved stockholder
proposals
• Corporate governance concerns
• Rise of “vote no” campaigns by activist investors against
targeted nominees
17
18. Proxy Advisory Firms’ Recommendations
Against Nominees are Increasing
• As voting policies tighten, votes against increase
• Advisory firms are not giving sufficient advance warning
of changes in policy
• Tax gross-ups
• Other “poor pay practices”
• Employment agreements with multi-year guaranteed salary
increases, equity grants
• Walk-away rights, excessive severance
• Large bonuses not linked to performance
• Pay-for-performance disconnect between increased CEO pay and
poor total shareholder return (relative to industry group)
18
19. Dissatisfaction with Executive Compensation
• Tax gross-ups (280G and perks)
• Golden coffin
• Poor pay practices or disclosures
• Single trigger CIC payments, walk-away rights
• Has Board responded to investor concerns?
• Stock option exchanges and repricings
19
20. Pay Concerns Contributed
to more than 10% Director Opposition
60
50
50
Number of
40
Companies
30
20 24
18
10
6
0
2006 2007 2008 2009
Source: RiskMetrics
20
21. Option Exchanges and Repricings Without
Stockholder Approval
• At Nvidia, company implemented a stock-option
exchange program without stockholder consent
• One board member received 41.9% dissent
• Two other board members had more than 34% opposition
• Google also established a stock option exchange
program without stockholder consent
• Two directors got 11% dissent, even though Google’s officers and
directors own 70.6% of the outstanding shares
21
22. Failure to Implement Majority-Backed
Stockholder Proposals
• FirstEnergy
• In 2008, three stockholder proposals won at least 67% support (to
eliminate supermajority voting, reduce the threshold for calling
special meetings, and adopt majority vote standard for election of
directors). Board failed to implement.
• In 2009, four directors received more than 50% opposition votes
• Seven other directors received more than 48% opposition
• Pulte Homes
• Following successful stockholder proposals, Board failed to put
poison pill defense to a stockholder vote, and failed to declassify
board
• In 2009, three directors received majority opposition
• Board refused to accept director resignations
• Under investor pressure, Board agreed to put poison pill to vote
next year and recommend declassification later
22
23. Failure to Implement Majority-Backed
Stockholder Proposals (continued)
• Southwest Airlines
• In 2008, Southwest Airlines investors approved majority voting for
directors by 68%, but Board failed to implement majority voting
• In 2009, an outside director on nominating committee received
53.7% withhold vote
• Extension of poison pill without stockholder approval
resulted in more than 40% opposition at Cameron
International, Convergys and Abercrombie & Fitch
23
24. Other Corporate Governance Concerns
• At Massey Energy, an outside director who sits on more
than six boards received 58% opposition
• “Affiliated” outside directors who sit on key committees
received more than 40% withhold votes at Consol Energy,
Pepco and Vornado
• Poor meeting attendance
24
25. Vote No Campaigns
•11 vote no campaigns in 2009; 17 in 2008
•State Bancorp Inc.
•3 directors having close to 40% of votes cast withheld
•Dissident later appointed to Board
•Bank of America
•Campaign against all 18 directors by CalPers/CalSters
•RiskMetrics recommended withhold on 5 of 18, based on
concerns about Merrill acquisition
•All directors re-elected, but successful stockholder proposal strips
Ken Lewis of Chairman title
•Lewis resigns
25
26. Vote No Campaigns (continued)
• Citigroup
• Campaign against Audit and Risk Management Committee
• RiskMetrics recommends withhold on 4 out of 14
• Dollar Tree Inc.
• Campaign by CalPers to withhold on 3 incumbents
• RiskMetrics recommends withhold on all 3 for failure to
implement successful declassification stockholder proposal
• All 3 directors had 50% of votes withheld
26
27. Broker Discretionary Voting Has Historically
Favored Director Nominees
• On average, 20% of outstanding shares do not issue
voting instructions to brokers in uncontested director
elections
• Factors contributing to increasing failure to instruct
• Retail stockholders are more likely to not issue instructions
• Poor financial performance can increase retail investor apathy
• Notice & Access has increased the number of uninstructed shares
• Under NYSE Rule 452, if brokers do not receive voting
instructions from street holders by the tenth day before
the stockholder meeting, the broker has discretion as to
whether and how to vote those shares on routine matters
• For most brokers, 100% of uninstructed shares have been voted
in favor of the Board’s nominees
• Some brokers allocate discretionary votes in proportion to non-
institutional voting instructions received
27
28. SEC Eliminates Broker Discretionary Voting
• In July 2009, SEC eliminated broker discretionary voting
of uninstructed shares in uncontested elections (3-2 vote
by Commissioners)
• Applies to shareholder meetings starting in 2010
• Specifically, NYSE Rule 452 was modified to make all director
elections “non-routine”
• This change impacts most public companies, because most
brokerage firms are members of NYSE and subject to its rules
• SEC recognized the need for investor education to encourage
greater retail investor voting
28
29. Elimination of BDV Should Result in Higher Vote
Percentages Against Director Nominees
• Loss of broker discretionary voting will result in loss of
significant block of votes “for” company’s director
nominees
• Companies with large retail holders will suffer biggest loss of “for”
votes
• Companies using Notice & Access mailing will also be hit
• The impact of withhold/against votes is amplified
• The influence of proxy advisory firms and institutional
investors is increased
29
30. With Traditional Plurality Voting,
A High Withhold Vote Has No Teeth
• Under plurality voting, candidates with the most votes win
• In an uncontested election, the number of nominees would
normally equal the number of Board seats available
• If a director receives at least one affirmative vote, he or she is
elected
• As result, with plurality voting, a majority withhold vote
has no legal effect on the outcome of the election (unless
there is an election contest)
• However, a majority withhold vote can be a real
embarrassment for directors and the company
• Some of the directors with majority withhold votes have voluntarily
resigned, but resignations are not always accepted by company
• Delaware litigation over Axcelis failure to accept 3 director
resignations
30
31. Two Types of Majority Voting
• So-called “modified plurality”
• To give recognition to failure to receive majority vote, modified
plurality standard retains plurality voting as operative legal
standard but adds director resignation policy
• Director resignation policy requires director to resign if does not
receive a majority of votes cast, and Board then determines
whether to accept resignation
• True majority voting
• Must receive majority of votes cast to be elected; failure to receive
majority vote means candidate is not elected
• Typically coupled with director resignation policy (as above) to
overcome holdover problem (arising because incumbent stays in
office until successor duly elected)
• Corporate governance activists have prevailed in making true
majority voting combined with director resignation policy “best
practice”
31
32. Majority Voting Has Become the New
Standard in Recent Years
• Most of S&P 500 has adopted majority voting
• Over half of S&P 500 companies have adopted “true majority”
voting and another 18% have adopted “modified plurality”
• However, three-quarters of Russell 3000 companies still use
plurality standard
• Many companies have adopted majority voting
voluntarily as a best corporate governance practice,
others in response to a 14a-8 proposal
• Shareholder proposals to adopt majority voting picked
up in 2009
• Over 100 such proposals were submitted in 2009
• Majority voting proposals routinely get support well above 50% of
the votes cast
32
33. With Majority Voting as the New Standard, a No
Vote Now Has Teeth
• Under true majority voting, failure to get majority vote
means director is not re-elected
• Holdover following conclusion of term addressed with
director resignation requirements
• Consequences if no directors are re-elected
• Poison put considerations
33
34. Advising the Board Now
• Advise the Board now as to the new voting risks created by the
rise of withhold/against votes and elimination of broker
discretionary voting
• Analyze stockholder base (retail holders) and voting profiles of
key stockholders
• Review voting policies at institutions and proxy advisory firms
• Do corporate governance policies and compensation-related issues
violate policies?
• Determine how influential proxy advisory firms will be given your
stockholder base
• Monitor corporate actions year-round with an eye towards proxy
advisory firm policies
• Consider whether to use Notice and Access for proxy mailing
• Handling 14a-8 proponents
34
35. Agenda
• Calls for Change Hit A Crescendo
• Just Vote No? The Sharp Rise of Votes Against Director
Nominees
• Proxy Fights and Other Solicitations Continue Their
Upward Trend
• Stockholder Proposals: It’s All About Director
Accountability
• Update on the Latest Regulatory and Political Initiatives
• Questions and Comments
35
36. Proxy Fights and Other Solicitations Continue
Their Upward Trend
Proxy Fights
150
120
90
137
60 125
100 108
75
30 56
42
0
2003 2004 2005 2006 2007 2008 2009
Source: FactSet TrueCourse
through 11/10/09 meeting dates
36
37. Primary Campaign Types (2009)
Vo te / A ctivism Vo te A gainst a
A gainst a M erger M anagement
Remo ve
2% P ro po sal
Withho ld Vo te fo r Directo r(s), No
1%
Directo r(s) Dissident No minee
3% to Fill Vacancy
1%
Vo te fo r a
Sto ckho lder
P ro po sal
4%
B o ard Co ntro l B o ard
27% Representatio n
62%
Source: FactSet TrueCourse
through 11/10/09 meeting dates
37
38. Success Rates for Proxy Fights Are Increasing
Rate (%)
Success Rate*
100
75
55 57 56
48 49 51
44 46
50 36
25
0
2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: FactSet TrueCourse
2009 figures based on data through 11/10/09 meeting dates.
*Number of outright victories, partial victories or settlements by the dissident as
a percentage of all proxy fights where an outcome has been reached.
38
39. Proxy Contest Evaluation Criteria
• RiskMetrics focuses on two central questions:
• Have the dissidents met the burden of proof that change is warranted at the company?
• If so, will the dissidents be better able to effect such change versus the incumbent board?
• Criteria for Board control:
• Dissidents must have:
• Well-reasoned, detailed business plan
• Transition plan describing how change of control will be effected
• Identification of qualified and credible new management team
• RiskMetrics will compare the dissident’s and incumbent management’s plans, board and
management team in order to arrive at their vote recommendation
• Criteria for minority Board position:
• Burden of proof RiskMetrics imposes on the dissidents is lower than in the case of control
• Dissidents detailed plan of action not required
• Dissidents do not have to prove that their plan is superior
• Dissidents must prove that change is preferable to the status quo and that the dissident
slate will add value to board deliberations by considering the issues from a different
viewpoint than the current board members
39
40. Consent Solicitations
• Proxy fights are usually conducted at annual stockholder meetings
(i.e. once a year)
• However, 38% of Russell 3000 companies allow stockholders to act
by written consent outside of a stockholder meeting
• The ability to act by written consent can be an important factor in
any proxy fight
• No need to wait until next annual meeting
• Speed
• Element of surprise
• Ability to run a consent solicitation can be a powerful tactic in a
hostile bid
• Requires a charter amendment to remove right
• Activist investors and proxy advisory firms strongly support right to act
by written consent
40
41. What You Can Do to Prepare Now for a Possible
Proxy Fight or Consent Solicitation
• Review vulnerability to hostile takeover in conjunction
with proxy fight to remove Board
• Proxy fights and consent solicitations are typical tactics in
hostile takeover bids
• Used to neutralize poison pill and “just say no” defenses
• Used to amend corporate governance procedures that would
impede a hostile bid
• Update bylaws for latest advance notice procedures
• Address 2008 Delaware court decisions
• Include disclosure of derivative positions and other dissident
information
• If action by written consent is permitted, adopt bylaws
to regulate consent process
• Bylaws should provide for an orderly, defined process, similar
to those used in advance notice bylaws
41
42. Agenda
• Calls for Change Hit A Crescendo
• Just Vote No? The Sharp Rise of Votes Against Director
Nominees
• Proxy Fights and Other Solicitations Continue Their
Upward Trend
• Stockholder Proposals: It’s All About Director
Accountability
• Update on the Latest Regulatory and Political Initiatives
• Questions and Comments
42
43. Stockholder Proposals: It’s All About Director
Accountability
• Stockholder Proposals Continue to Climb
• Current Hot Topics in 14a-8 Proposals
• Current Strategies for Handling Stockholder Proposals
43
44. Stockholder Proposals Continue to Climb
Proposals
Trend in Proposals Submitted by Shareholders
1,200
(1989-2009) 1168
1145
1119
1,000
947
800 847
774
725
600
607
550 563 560
517 528
502
466 478
400
409 403 408
357
200 260
0
D
95
96
05
07
08
89
90
91
92
93
94
97
98
99
00
01
02
03
04
06
YT
20
20
20
20
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
09
20
Source:
*IRRC (1989 to 2005), ISS (2005 to 2007) and RiskMetrics Group (2007-2009) Corporate Governance Bulletin, ISS 2005 Postseason Report, ISS 2006 Postseason
Report, and RiskMetrics Group ‘09 Proxy Season Trends and a Look Ahead. From 1989 to 1996, IRRC tracked the shareholder proposals of 1,500 companies. In
1997, IRRC tracked the shareholder proposals of 1,800 companies. From 1998 to 2009, IRRC (after 2005, ISS then RiskMetrics Group) tracked the shareholder
proposals of 2,000 companies. 2009YTD as of 6/1/09.
44
45. Background of 14a-8 Proposals
• Rule 14a-8 permits shareholders to place proposals in
company proxy materials
• Historically, province of “corporate gadflies,” who could be nuisances
but rarely had substantive impact
• Now, used by pension funds, labor, activists, hedge funds
• 14a-8 process has been transformed by corporate
governance activists
• Cohesiveness of activists and informal alliances with RiskMetrics
and other proxy advisory firms, internal corporate governance
experts at fund complexes, hedge funds, etc.
• Facilitated by SEC bias in favor of permitting shareholder
proposals to be placed on ballot
• E.g., SEC Staff Legal Bulletin 14E (Oct. 27, 2009) reverses position and
allows proposals relating to risk, and CEO succession planning
45
46. Binding and Non-binding Stockholder Proposals
• Shareholder proposals under Rule 14a-8 take two basic
forms
• Recommendations for board action which are not binding
(precatory)
• Proposed bylaw amendments, which if adopted by requisite vote
of shareholders are binding and take effect immediately
• In 2009, 13 proposals were cast as binding bylaw provisions
46
47. Putting Teeth into Non-binding Proposals
• More frequent and more successful campaigns against incumbent
directors are being used to “discipline” boards that do not
implement successful non-binding proposals
• Typically results in a multi-year campaign against board
• First year is majority vote for non-binding stockholder proposal
• If board does not implement proposal, it may be subjected to
RiskMetrics and other proxy advisory firms recommending
“against” reelection of incumbent directors
• Possibility of a “vote no” campaign in following years
47
48. Current Hot Topics in 14a-8 Proposals
• Executive compensation
• Say on Pay
• Vote on executive death benefits (golden coffins)
• Require that equity awards be held through retirement
• Disclose information about compensation consultants
• Corporate Governance
• Majority voting for directors
• Independent Board Chair
• Right to call a special meeting
• Board declassification
• Adopt cumulative voting
• Eliminate supermajority vote provisions
• Social Policies
• Issue sustainability report
• Set greenhouse gas emissions goals
• Adopt principles for health care reform
• Adopt sexual orientation anti-bias policy
• Coming Soon? 14a-8 Proposals on Proxy Access
48
49. Say on Pay
What is it?
• Say on Pay is an annual advisory vote by shareholders at
annual meeting on senior executive compensation
• No set formulation for Say on Pay advisory vote
• Sometimes articulated as approval of CD&A section in proxy
• Sometimes as approval of compensation policies for all Named
Executive Officers
• Other variations are used or have been suggested
• Even if not legally binding, a negative vote would have
significant consequences in board room
49
50. Say on Pay
Proposals Stalled in 2007 and 2008
• In 2007 and 2008, Say on Pay was not gaining significant
traction among traditional institutional investors
• Most Say on Pay shareholder proposals under Rule 14a-8 failed
• However, over 30 companies have “voluntarily” adopted
annual non-binding Say on Pay votes, most as a result of
either successful shareholder proposals or pressure from
governance activists
• Include: Apple, Hewlett-Packard, Intel, Verizon, Pfizer
50
51. Say on Pay
Stockholder Proposals Gain New Life in 2009
• Proxy advisory firms will recommend in favor of
stockholder Say on Pay proposals
• Stockholder-sponsored Say on Pay proposals gain
greater support in 2009
• 44% of votes cast in favor in 2009, vs. 39% in 2008 and 2007
• 13 out of 66 votes receive a clear majority of votes cast
51
52. Say on Pay
Company-sponsored Say on Pay Advisory Votes
• Under the 2009 Stimulus Act, each entity that had
previously received TARP assistance must submit a non-
binding Say-on-Pay resolution to stockholders
• 300 companies were required to hold votes
• At most companies, resolutions received over 90% approval
• All proposals received a majority of votes cast in favor
• Say on Pay votes at non-TARP companies received
similar support
52
53. Say on Pay
Will Institutions Continue to Support Say on Pay Advisory Votes?
• Did institutions cut TARP firms slack in extraordinary
circumstances?
• Is a vote against pay a better way to send a message
than a vote against compensation committee members?
• As Say on Pay becomes more common, institutions will
be able focus on what level of disclosure is required, and
what compensation practices are acceptable
53
54. Say on Pay
What to do now?
• Expect more Say on Pay stockholder proposals under
14a-8 for the 2010 proxy season
• Will early adopters get credit?
• Consider triennial or biennial advisory votes as an
alternative to annual votes
• Microsoft announces triennial votes; Prudential Financial adopts
biennial votes
• Monitor Say on Pay legislation progress
• Begin to prepare for inevitable enactment of Say on
Pay, including reevaluation of hot button executive
compensation packages
54
55. Other Executive Compensation
Stockholder Proposals
• Approve or limit executive death benefits
• Require equity to be retained
• Disclosure of executive compensation
• Restrict supplemental retirement plans
• Link pay to performance
• Approve future golden parachutes
55
56. Majority Vote to Elect Directors
• Shareholder proposals to adopt majority voting picked
up in 2009
• Over 100 such proposals were submitted in 2009
• Majority voting proposals routinely get support well above
50% of the votes cast
• Most companies that receive a majority voting proposal
will settle and adopt it
56
57. Independent Board Chair
• Before 2009, most stockholder proposals sought a lead
independent director
• In the 2009 proxy season, there was fault line shift from proposals for
lead independent directors to proposals for separate independent board
chairs
• In 2009, 43 proposals sought independent chairs vs. 34 in
2008
• Support is also up: 35% in 2009 vs. 28% in 2008
• Approximately 45% of S&P 1500 have already separated the CEO and
board chairs
• RiskMetrics and other proxy advisory firms will recommend in favor of
separation proposal, with limited exceptions
• Political and regulatory support
• Pending legislation would mandate independent board chair
• SEC proposed disclosure rules would focus disclosure on this issue
57
58. Right to Call Special Meetings
• 46% of S&P 500 and 49% of S&P 1500 companies
already give shareholders right to call special meeting
• Shareholder proposals would amend bylaws to
• Add a stockholder right to call a special meeting
• Or lower threshold to enable as few as 10% of shareholders to
call a special meeting
• Creates constant threat of a possible proxy contest rather than limiting it
to once a year at annual meeting
• How high a threshold will institutions accept?
• RiskMetrics will support a 10% threshold even if the company has
already adopted a 20% threshold
• Right to call special meeting proposals have increased
• 63 proposals in 2009 vs. 45 in 2008
• Support is up as well: 56% in 2009 vs. 45% in 2008
58
59. Declassification
• Proposals to declassify boards are a perennial favorite
of corporate governance activists and still very much in
fashion
• Number of proposals held steady in 2009
• 76 in 2009 vs. 88 in 2008
• When on the ballot, declassification routinely wins
• 75% support in 2009 vs. 73.5% in 2008
• RiskMetrics and other proxy advisory firms will
recommend in favor
• Classified boards are on steady decline
• Only 35% of S&P500 companies have classified board, down
from 60% in 2002
• Schumer bill would mandate board declassification at
listed companies
59
60. Proposals to Watch for in 2010
• Allow stockholders to recover proxy contest costs
• Litigated by AFSCME at CA Inc.
• Adopted by HealthSouth in October 2009
• CEO succession planning
• SEC 2009 Staff Legal Bulletin 14E (SLB 14E) reverses course, and
succession planning proposals will now be allowed
• Social policy resolutions
• SEC 2005 SLB 14C found that social policy resolutions could be omitted
as “ordinary business operations” if they involve an “internal assessment
of risk or liabilities that the company faces as a result of its operations
that may adverse affect the environment or public health.”
• In SEC SLB 14E, Staff reversed position. Rather than focusing on
whether the proposals relates to an evaluation of risk, the Staff will focus
on “the underlying subject matter to which the risk relates.”
• Will this allow resolutions on climate change, HIV/AIDS, importation of
drugs from Canada and various environmental questions?
60
61. Coming Soon?
14a-8 Proposals on Proxy Access
• Under current SEC interpretations, a stockholder proposal
requiring proxy access is excludible under Rule 14a-8
because it relates to an election contest
• Part of the SEC’s proxy access proposal includes an
amendment to Rule 14a-8 to permit stockholders to
submit proxy access proposals
• Although it is possible that this rule change will be
adopted before comprehensive proxy access rules are
adopted, it is not likely
61
62. Agenda
• Calls for Change Hit A Crescendo
• Just Vote No? The Sharp Rise of Votes Against Director
Nominees
• Proxy Fights and Other Solicitations Continue Their
Upward Trend
• Stockholder Proposals: It’s All About Director
Accountability
• Update on the Latest Regulatory and Political Initiatives
• Questions and Comments
62
63. Update on the Latest Regulatory and Political
Initiatives
• SEC Proposed Rules for 2010 Proxy Statements
• The Status of Proposed Proxy Access Rules
• Political and Legislative Developments
63
64. Proposed Enhanced Governance and
Compensation Disclosures for 2010
• On July 1, 2009, SEC (5-0 vote) proposed rules to expand
disclosures relating to public companies’ governance structure
• Would require disclosure focused on the company’s board leadership
structure, and why structure is appropriate for company
• If applicable, would call for explanation of why the company combines
chair and CEO positions
• Would also require explanation of board’s role in risk management and
effect on the company’s leadership structure
• Disclosures in practice likely to become somewhat standardized, but SEC
is counting on “embarrassment” factor to stimulate governance changes
in both areas
• Would also require additional disclosures about each nominee’s
specific experience and skills “qualifying” him/her for service on board
and specific board committees, prior directorships and legal
proceedings involving the nominee
64
65. Proposed Enhanced Governance and
Compensation Disclosures (continued)
• Change in tabular disclosure of equity grants to NEOs
and directors (SCT and DCT)
• Under current rules, disclosed amounts reflect the expense
recognized in the covered year under FAS 123R
• Proposed rules require disclosure of the total grant date fair value
of awards granted during the year, computed in accordance with
FAS 123R.
• Will increase sticker shock value of grants
• Proposed rules require enhanced disclosure of
compensation consultant services and fees
• Expectation is that new disclosure rules will be adopted in
November and effective for 2010 proxy season
65
66. Proposed Rules Regarding Compensation and
Risk Creation
• Requires disclosure of compensation policies or practices
that could incentivize any employee to take on excessive
amounts of risk
• Currently, CD&A is limited to compensation programs and policies
for NEOs
• Disclosure of risks arising from compensation practices is
required only if the risks may have a material effect on the
company
• Proposed rules do not require an affirmative statement if
company determines that no disclosable risks exist, but
the SEC has requested comments on this issue
66
67. Proposed SEC Proxy Access Rules
• Potentially one of most significant corporate governance
issues of decade
• Current regime
• Only company’s nominees for election to board are included in
company’s proxy materials
• If shareholder wants to nominate opposition candidates, it must prepare,
pay for and distribute separate proxy materials
• Proposed shareholder proxy access regime
• Would allow shareholders of public company to include in company’s
proxy materials (proxy statement and proxy card) candidates for election
to the board, nominated by shareholders, in opposition to board’s
candidates
• Result would be a proxy contest for election of directors
• Only handful of companies have voluntarily adopted proxy access to date
• Includes RiskMetrics, LSB Industries and Carl Icahn-controlled American
Railcar
67
68. Status of Proposed Proxy Access Rules
• On May 20, 2009, SEC (by 3-2 vote) proposed new proxy access
rules
• Would require companies to include shareholder nominees for directors
in company’s proxy materials under SEC-prescribed circumstances
• To be eligible to make nomination, a shareholder or shareholder group would
be required to own for a year at least 1% of companies with market
capitalizations in excess of $700 million, 3% of companies between $700 and
$75 million, or 5% of smaller market cap companies
• Total number of shareholder nominated directors would be capped at 25% of
full board (rounded down)
• Multiple shareholders or groups could submit nominations, but total still
capped at 25% and priority would be allocated on a first-in-time basis
• SEC proposals would also allow shareholders to insert proposals
regarding proxy access matters in company proxy materials under Rule
14a-8
• In October 2009, the SEC announced it had deferred action on the
proposed rule until early 2010, so proxy access will not apply for the
2010 proxy season
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69. Proxy Access
What Should Companies Be Doing Now?
• Companies should stay focused on proxy access because SEC is
intent on making some kind of change in 2010
• Make sure the Board and management is briefed about proxy
access in general and updated on developments
• Although comment on the SEC proposal is closed, the SEC
appears willing to continue the dialog with interested parties
• Proxy access legislation is pending in Congress, so lobbying could
still be productive
• If the SEC allows companies to opt-out (i.e. proposed their own
versions of proxy access), companies should consider what
alternatives they might propose to stockholders
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70. Legislative Developments
• Senator Schumer’s “Shareholder Bill of Rights”
• Would direct SEC to establish proxy access
• Would also make other fundamental changes in corporate
governance—declassification, mandatory independent chair
• Mandatory Say on Pay votes
• Similar bill by Rep. Gary Peters
• Senator Dodd’s Financial Reform Bill
• Covers majority voting, declassification, proxy access,
independent chairman, clawbacks, Say on Pay, golden
parachutes, and independent consultants and counsel
• Recent changes to state corporation law
• Delaware corporate law amended to specifically authorize
companies to adopt bylaw provisions permitting proxy access
• Model Business Corporation Act (sponsored by ABA) being
amended to same effect
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71. Latham & Watkins LLP
Founded in 1934, Latham & Watkins has grown into a full-service international
powerhouse with approximately 2,000 attorneys in 27 offices around the world.
The founders of Latham & Watkins instilled an ethic of hard work, commitment
and quality that flourishes today and has nurtured the firm's dramatic growth into
one of the world's premier business law firms.
Latham consistently ranks among the best transactional and finance practices in
leading legal publications such as The American Lawyer, mergermarket,
Chambers and Asia Legal Business and earns praise worldwide for work on
high-profile and groundbreaking deals.
Latham's dedication to excellence extends to pro bono and public service. As a
Signator to the Law Firm Pro Bono Challenge, we have a longstanding
commitment to providing pro bono legal services, financial support and volunteer
time to charitable organizations and to individuals most in need throughout the
world.
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72. MacKenzie Partners, Inc. is a full-service proxy solicitation, investor relations and
corporate governance consulting firm specializing in mergers-and-acquisitions
and proxy contest related transactions. The firm has offices in New York City,
Los Angeles, Palo Alto and London.
MacKenzie's services include – in addition to traditional proxy solicitation –
corporate governance consulting, securityholder solicitations, information agent
services for tender and exchange offers, beneficial ownership identification,
market surveillance and associated financial, investor and media relations
services. We work in close partnership with our client's attorneys, investment
bankers and other consultants, providing advice and counsel at each stage of
the transaction.
NEW YORK PALO ALTO LONDON LOS ANGELES
105 MADISON AVE 228 HAMILTON AVE 17 CAVENDISH SQUARE 1875 CENTURY PARK EAST
NEW YORK, NY 10016 PALO ALTO, CA 94301 LONDON W1G 0PH UK LOS ANGELES, CA 90067
PH: (212) 929-5500 PH: (650) 798-5206 PH: +44 (0)20 3178 8057 PH: (310) 284-3110
FX: (212) 929-0308 FX: (650) 798-5207 FX: +44 (0)20 7504 8665 FX: (310) 360-2420
72
73. Questions & Comments
Contact Information:
John M. Newell, Partner David M. Taub, Partner
Latham & Watkins LLP Latham & Watkins LLP
415.395.8034 (direct) 213.891.8395 (direct)
john.newell@lw.com david.taub@lw.com
Daniel H. Burch, Chairman & CEO
MacKenzie Partners Inc.
212.929.5748 (direct)
dburch@mackenziepartners.com
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