SEC Proposes Rules for Disclosure of Hedging Policies
Last week, the SEC proposed rules to enhance corporate disclosure of company policies for hedging transactions engaged in by directors, officers and other employees. The proposed rules would require annual meeting proxy statement disclosure about whether directors, officers and other employees are permitted to hedge against any decrease in the market value of company equity securities owned by or granted to them. The proposed rules would require a company to disclose which categories of hedging transactions it permits and which categories of hedging transactions it prohibits. The proposed rules would apply to companies subject to the federal proxy rules, including smaller reporting companies, emerging growth companies and business development companies.
GE Adopts Proxy Access Bylaw
General Electric announced that it amended its bylaws to allow a shareholder or a group of up to 20 shareholders that has owned three percent or more of the company’s stock for at least three years to nominate and include in the company’s proxy materials directors constituting up to 20 percent of the board. The move by GE is the latest chapter in the ongoing proxy access saga and has been heralded as both a victory for activists and a demonstration of GE’s leadership role in corporate governance. A company following GE’s approach would be able to seek a no-action determination from the SEC for omitting a shareholder proxy access proposal on the basis that it has been “substantially implemented” by the company and therefore excludable under Rule 14a-8(i)(10). Thus, the approach would avoid the SEC’s decision not to consider no-action requests under 14a-8(i)(9) for competing management and shareholder proposals as previously reported in The Ticker.
Chevedden Director Tenure Proposal Fails at Costco
A shareholder proposal sponsored by activist John Chevedden aimed at limiting long-tenured directors at Costco failed by a substantial margin at Costco’s annual meeting this year. The proposal had asked the Costco board to amend the company’s bylaws to require at least 67 percent of the board of directors to have less than 15 years of tenure on the Costco board. Costco’s board had recommended against the proposal, noting that such a limit would “arbitrarily deprive Costco of qualified, experienced and effective directors.” According to a recent publication by the Institute of Corporate Directors on the topic of director tenure, “Term limits are a blunt tool and, without flexibility, they eliminate effective as well as noneffective directors.”
The Ticker shares recent developments in SEC compliance, capital markets, corporate governance, executive compensation and other matters important to public companies and their officers and directors. It is published by Fredrikson & Byron’s Public Companies Group.