2015 ISS Policy Survey and Upcoming Trends
ISS recently distributed its 2015 annual survey of institutional investors and corporate issuers. The survey covers a number of key issues for consideration for the 2015 proxy season, including how to evaluate equity plans, board diversity and pay for performance. For the 2015 proxy season, ISS is considering a scorecard approach to evaluating equity plans, rather than the current focus on shareholder value transfer (SVT) and specific provisions and practices that ISS views as problematic. If adopted, the scorecard will place a greater emphasis on governance features that are included in the plan itself (such as holding periods and change of control provisions) and the company’s historic administration practices. Thus, a plan that defers to award agreements for holding period requirements and other governance safeguards may receive a negative ISS recommendation despite a low SVT and an absence of problematic pay practices. ISS is also considering how to evaluate board accountability when a board adopts without shareholder approval a material bylaw amendment that diminishes shareholders' rights, such as an advance notice or exclusive forum provision.
Will Congress Halt Inversion Deals?
In the wake of high-profile deals in which U.S. companies propose to reincorporate abroad to achieve tax advantages, Treasury Secretary Jacob Lew urged Congress to act quickly to prohibit the practice. These so-called inversion deals include Medtronic’s proposed $43 billion acquisition of Covidien and AbbVie’s proposed $54 billion acquisition of Shire. According to the New York Times, however, "the Obama administration and Congress appear unlikely to take any action to stem the tide of such deals anytime soon."
SEC Scrutinizes Cybersecurity Risk Disclosure
According to Bloomberg, the SEC is investigating several companies that were the victim of a data breach, including Target. Although there is no existing rule, requirement or regulation addressing cybersecurity risk disclosure, the SEC issued general guidance in 2011 and held a roundtable on the topic earlier this year. In a speech last month, SEC Commissioner Aguilar said that, in the event of a cyberattack, companies “should go beyond the impact on the company” and weigh the effect on others, including customers.
SIFMA's Recommendations to Improve Market Structure
The Securities Industry and Financial Markets Association (SIFMA) recently proposed a series of changes to improve the fairness and effectiveness of the equity market trading system. SIFMA's recommendations were the result of a member task force charged with reviewing market structure. SIFMA focused on three areas that called for SEC rulemaking directed at the exchanges.
The Ticker is published by Fredrikson & Byron’s Public Companies Group and shares recent developments in SEC compliance, capital markets, corporate governance, executive compensation and other matters important to public companies and their officers and directors.