Proxy access continues to dominate the corporate governance headlines. Last Tuesday, the Security and Exchange Commission’s (“SEC”) Director for the Division of Corporation Finance, Keith F. Higgins, discussed Securities Exchange Act Rule 14a8(i)(9), which allows firms to exclude from their proxies a shareholder proposal that directly conflicts with all or part of a management proposal. Higgins notes the many obstacles that the SEC faces as it considers how to implement the rule. Among other things, it must consider whether the proxy
proposal is mandatory, as are most management proposals, or precatory, as are most shareholder proposals. If a mandatory and precatory proposal addressing the same issue appear on the same proxy, will that cause shareholder confusion? The form that most proxies take presents additional issues when considering whether and how to present potentially conflicting proposals. Again, potential shareholder confusion appears to be Higgins’ concern. Higgins also considers the potential for making of false or misleading arguments by management or shareholders and similar concerns . View the text of Higgins’ remarks here.
Broc Romanek of CorporateCounsel.net noted that at least three companies have recently adopted bylaws allowing a group of shareowners owning 3 % of the company’s stock for at least 3 years, to nominate directors. Given this development, Romanek asks whether a new front is opening in the proxy access battle : Rule 14a8(i) (10), which rule allows management to exclude a shareholder proposal as “substantially implemented.” View the blog post here.
These issues and more will likely be discussed at the SEC’s February 19, 2015 roundtable discussion on ways to improve proxy voting process. The roundtable will be divided into two panels. The first panel will focus on the state of contested director elections and whether changes should be made to the federal proxy rules to facilitate the use of universal proxy ballots by management and proxy contestants. The second panel will focus on strategies for increasing retail shareholder participation in the proxy process. View the agenda and list of panelists here.
Another frequently discussed corporate governance issue involves forum selection bylaws. Both the Harvard Law School Forum on Corporate Governance and Financial Regulation and the Race to the Bottom discussed such bylaws. View the two blogs here and here.
The Race to the Bottom discussed forum selection bylaws in connection with another perennial corporate governance topic, book and records inspections. Celia Taylor, of the University of Denver’s law school, blogged about a recent Delaware Supreme Court opinion that addressed whether management can limit the use of information obtained through a books and records inspection to the forum of Delaware. View the blog post here.