1. The biggest news of the last month is the SEC's adoption of proxy access rules, here. "Smaller reporting companies" get a three-year reprieve, but for others the rules almost certainly will be effective for the upcoming proxy season. The final rules are simpler than the proposals that have been kicking around for a few years. Generally, the rules provide for (a) a 3%, three-year shareholder's right to get director nominees on the ballot and in the company's proxy statement and (b) shareholder rights to require that a company include in its proxy statement a proposal to expand shareholder proxy access rights. Summaries of the rule are not lacking (see, e.g., here, here, here, and here). Now, you should:


  • Ensure your advance-notice bylaw provisions work, which could be as easy as providing that the notice requirements in the bylaws are satisfied if the shareholder complies with Rule 14a-11 (but for Pete's sake consult a lawyer to assess this and legal up the language). Note too that the proxy access rules are keyed off the prior year's annual meeting mailing date, and that if you move your meeting date too far, you now need to announce that on a Form 8-K.
  • Make sure majority voting policies, if you've got them, don't apply to contested director elections. (And boy, they better not.)
  • At least consider whether you've got shareholders likely to make nominations this year, and, if you do, what you will likely do about it—fight, negotiate, curl up in a ball and will it all to go away?

It will still be difficult for shareholders to get nominees elected and the rule recognizes that by exempting from the proxy rules communications aimed at garnering a 3% shareholder group. Nonetheless, companies can expect, as always, that activists will make use of the new rules as negotiating leverage and to force a discussion. Even though the new rules aren't yet effective, one shareholder couldn't wait to start flexing its newfound muscle and has already announced its intent to nominate directors. See here.


  1. Even though the SEC waited for specific Congressional authorization and ballooned the final rule to 451 pages, many expect corporate groups will challenge the legality of the new proxy access rules, although on what basis is not clear. See here and here. If you really hate the new proxy access rules, you might take a spin through Professor Verret's proposed solutions to thwart and limit the reach of proxy access, here, including one novel director resignation defense he describes as a "scorched earth defensive tactic." If nothing else, we are enjoying the passion this new rule has evoked.
  2. Although proxy access has securities lawyers all atwitter (see, e.g., the declaration of the 2010 proxy season as "a brave new world," here), it apparently is of less immediate concern to directors and inside legal counsel, at least according to a joint Corporate Board Member/FTI Consulting study, here, each of which was much more worried about executive compensation and governance and compliance.
  3. Note that the deadline for your very last shot at correcting non-409A compliant agreements is December 31, 2010. IRS Notice 2010-6, here, says so.
  4. The SEC issued two releases seeking comments on IFRS implementation, one tackling contractual and corporate governance issues, here, and the other U.S. investors' knowledge and ability to use IFRS, here. A snapshot estimate of when new accounting changes resulting from GAAP and IFRS convergence will hit is provided by CFO.com, here.
  5. The New York State legislature has corrected the ill-conceived Power of Attorney changes it adopted last year, which were intended to cure estate planning problems, retroactive to the time of adoption. A summary of the amendments is here. Among other things, this means you won't have to ask your directors to drive to Connecticut to sign POAs in connection with registration statements. So, huzzah.
  6. A few items on Dodd-Frank:


  • A summary of its whistleblower protections is here.
  • Notes on the clawback provisions are here.
  • Dodd-Frank "compensation action items" are here.
  • An article on the "logistical nightmare" of "pay disparity" disclosure (the ratio of the CEO's compensation to the average employee's compensation) is here.
  • A condemnation of Dodd-Frank generally, for what it's worth, is here.
  1. Those concerned with poison pills might review the recent Delaware Chancery Court holding in Yucaipa American Alliance Fund v. Riggio, here. Commentary on the case is here. The Conglomerate's Poison Pill Forum, here, discusses Yucaipa and more.
  2. A recent Delaware Supreme Court case, City of Westland v. Axcelis, relating to a board's refusal to accept the resignations of directors who did not receive a majority vote, is here. While the plaintiff lost its bid to gain access to corporate records under DGCL §220, the Court noted that it might have succeeded had it pled that its purpose was to "determine an individual's suitability to serve as a director." While not an alarming decision, it does provide a pleading roadmap to shareholders and a caution that boards, although protected by the business judgment rule, should be careful and document the reasons for rejecting resignations.