Click to edit Master title style 1 2013 Proxy Season Outlook Click - - PowerPoint PPT Presentation
2013 Proxy Season Outlook Click to edit Master title style 1 2013 Proxy Season Outlook Click to edit Master title style Proxy Advisor Voting Review Dave Brown, Alston & Bird LLP Laura Thatcher, Alston & Bird LLP Mark Borges,
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Dave Brown, Alston & Bird LLP Laura Thatcher, Alston & Bird LLP Mark Borges, Compensia, Inc. Rhonda Brauer, Georgeson, Inc. Jonathan Gottsegen, United Rentals, Inc.
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Laura Thatcher, Alston & Bird LLP Mark Borges, Compensia, Inc. Amy Bilbija, Mackenzie Partners, Inc. Josh DeRienzis, PSS World Medical, Inc. Stacy Ingram, The Home Depot
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– General Electric Company – Prudential Financial, Inc. – SAIC, Inc. – Cardinal Health, Inc. – Symantec Corporation
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– the date, time and location of the meeting; – the meeting agenda; – the matters to be voted on at the meeting, along with Board of Directors' voting recommendations and a cross-reference to where the item is addressed in the proxy statement; – the nominees for the Board of Directors, including summary information on their
membership, and other directorships; – the identity of the company's auditors, as well as a breakdown of their audit and non- audit-related fees; – a compensation elements table, with a brief description of the form and terms on each principal compensation component; – a brief description of the key executive compensation actions and decisions for the last completed fiscal year; and – a modified, one-year summary compensation table.
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– their key financial results for the last completed fiscal year; – their key executive compensation actions and decisions for the last completed fiscal year; and – their key corporate governance and executive compensation “best practices.”
– Western Digital Corporation – The Procter & Gamble Company
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– Influenced, in part, by proxy advisory firm compensation program analyses – May continue to move in this direction with implementation of Section 953(a) of the Dodd-Frank Act
– CommVault Systems, Inc. – H.J Heinz Company – CVS Caremark Corporation – The Coca-Cola Company – Modine Manufacturing Company – Computer Sciences Corporation
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– Must describe specific performance measures used in short-term and long-term incentive compensation arrangements – Must disclose performance target levels
– Some companies continue to claim “competitive harm”
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– Fewer “alternative” Summary Compensation Tables – Performance graphs used occasionally, but less common since Say-on-Pay – Can serve to explain details of incentive compensation plans
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Rhonda Brauer, Georgeson Bruce Goldfarb, Okapi Partners LLC Jonathan Gottsegen, United Rentals, Inc. Stacy Ingram, The Home Depot Gary Ivey, Alston & Bird LLP Debra Smithart-Oglesby, Denny’s Corporation
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Proposal Submitted to Vote Average Support* Report on Political Contributions/Lobbying/Prior Governmental Employment 70 18% Independent Board Chairman / Separate Chair-CEO 46 36% Repeal Classified Board 44 81% Majority Vote to Elect Directors 28 61% Require Equity to be Retained 27 24% Shareholder Right to Act by Written Consent 20 45% Shareholder Right to Call Special Meeting 14 41% Eliminate or Reduce Supermajority Provision 14 69% Cumulative Voting 11 25% Eliminate Accelerated Vesting in Termination/Change-of-Control 11 37% Issue Sustainability Report 11 28% *As a percentage of votes cast
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2012 Corporate Governance Shareholder Proposals
Proposal Type Proposals Submitted Withdrawn / Omitted Voted on Board-Related 120 32 88
45 17 28
54 8 46 Executive Compensation 87 28 59
31 4 27
Termination/Change of Control 20 9 11 Repeal Classified Board 77 33 44 Special Meetings 37 23 14 Supermajority Provision 21 7 14 Cumulative Voting 16 5 11 Poison Pills 5 2 3 Reincorporation 2 2 Other Corporate Governance 53 19 34
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2012 (Voted on) Corporate Governance Proposal Proponents
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Anticipated “Hot Button” Shareholder Proposals for 2013
Note New ISS Policy – Beginning in 2013, if a majority of votes are cast FOR a shareholder proposal, board “action” is required or ISS will recommend AGAINST/WITHHOLD for entire board (except new nominees), for the following year. Majority Voting for Directors – As smaller companies are targeted, will larger ones be retargeted due to “no teeth” adoptions?
More on Proxy Access
Disney being the highest profile one to date
investors
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Political Contributions and Lobbying – Changing corporate disclosure resulting from proposals
(CPA @ www.politicalaccountability.net, a useful resource), etc.
DE law that gives shareholders right to inspect some company books and records, e.g., to force greater disclosure of corporate political spending
Independent Board Chair Requirement
Anticipated “Hot Button” Shareholder Proposals for 2013
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Right to Act by Written Consent Versus Right to Call Special Meetings
“disenfranchisement” of minority argument
with “unfettered” right to call special meetings at 10 percent and generally good governance practices
Board Declassification and “National Fuel Gas” Decision
grounds, will be in future
Anticipated “Hot Button” Shareholder Proposals for 2013
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– No-Action Process; Rules / Timing
it violates one of the rule’s eligibility and procedural requirements, or one of the thirteen substantive bases for exclusion specified in the rule.
SEC, at least 80 days before filing its definitive proxy materials, a “no-action” request containing a written explanation of its bases for excluding the proposal.
– Strategies for negotiation; timing
Shareholder Vote
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Background
that shareholder class action and derivative suits be filed in a single court. Most companies adopting these provisions designate the Delaware Court of Chancery.
bylaws.
selection clause or for a shareholder proposal seeking to repeal the forum-selection bylaw already in place), weighing “best-practices governance features” together with whether the company has been materially harmed by shareholder litigation outside its jurisdiction of incorporation.
good governance practices in all areas and had documented specific instances of significant harm, indicating in both cases, it was unable to conclude from the company’s disclosure that the harm caused was material.
selection bylaws unilaterally adopted by the boards of 12 Delaware companies. Thus far, 10 of the companies have been dismissed following the repeal of the bylaws in question. Two cases (against Chevron Corporation and FedEx Corporation) are still proceeding. The exclusive forum bylaws adopted by Chevron and FedEx were nearly identical, although Chevron amended its forum bylaw after being sued to address plaintiffs’ arguments concerning subject matter and personal jurisdiction.
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seeking to repeal the company’s forum-selection bylaw (adopted by the board of directors in December of 2010).
– Communications/negotiations with Amalgamated – Statement of opposition in proxy statement – Filing of additional solicitation materials – Communications with ISS – Solicitation efforts/shareholder outreach
– Proposal defeated with nearly 65 percent votes cast against the proposal*
*Chevron’s shareholders also did not approve the shareholder proposal seeking to repeal its exclusive forum-
selection bylaw provision.
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– Significant decrease in the number of exclusive forum bylaw provisions adopted since the commencement of the Chevron & FedEx litigation. – Should the Delaware Court of Chancery uphold exclusive forum bylaws in some form,
are likely to adopt such provisions.
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2012 Shareholder Proposals Included in Proxy Statement
– Recommendation that the board adopt a policy under which the proxy statement for each annual meeting will contain an advisory vote on policies regarding electioneering and political contributions and communications.
– Shareholders request that the company prepare a diversity report.
Right
– Shareholders request that the board take the steps necessary to strengthen the shareholders’ right to act by written consent adopted after the 2011 annual meeting. This proposal would include removal of the requirement that a percentage of shares ask for a record date to be set and removal of the requirement that all shareholders must be solicited.
– Shareholders ask the board to take the steps necessary unilaterally (to the fullest extent permitted by law) to amend the company’s bylaws and each appropriate governing document to enable one or more shareholders, holding not less than 15 percent of the voting power of the company, to call a special meeting.
– Shareholders request the company to list the recipients of corporate charitable contributions or merchandise vouchers of $6,000 or more on the company website.
– Shareholders request the board establish a written Stormwater Management Policy, applicable to all locations, including warehouses.
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Results of 2012 Shareholder Proposals Included in Proxy Statement
Proposal % Votes Cast FOR % Votes Cast AGAINST
Political Contributions 3% 97% Employment Diversity Report 24% 76% Written Consent 26% 74% Shareholder Right to Call Special Meeting 41.5% 58.5% Charitable Contributions 2% 98% Stormwater Management Policy 4% 96% 40
– Who has these conversations? Role of directors?
– How can crisis situations change a company’s outlook on shareholder engagement going forward? – Can crisis situations change investors’ expectations with respect to communications from a company?
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Dennis Garris, Partner, Alston & Bird LLP Bruce Goldfarb, President and CEO of Okapi Partners Keith Gottfried, Partner, Alston & Bird LLP Mark Harnett, President, MacKenzie Partners Debra Smithart-Oglesby, Board Chair, Denny’s Corporation
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impact
scenarios
(retail, institutional, proxy advisory, etc.)
and Glass Lewis
and Social Media
Public Company Shareholders Investment Styles Observations
significant
Index Funds Quant Funds Activists Hedge Funds Public Pension Funds Active Managers Retail
specifically follow individual companies
participation
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Source: www.SharkRepellent.net
63 68 75 42 56 100 108 126 133 100 93 76 20 40 60 80 100 120 140 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 # of Fights
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Source: www.SharkRepellent.net
44% 46% 36% 50% 55% 57% 49% 51% 54% 55% 59% 51% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Success Rate
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Source: FactSet SharkWatch
2 4 6 8 10 12 14 16 Number of Filings
Dissident Activity in Past 5 Years by Firm
2007 2008 2009 2010 2011 2012
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(a continuing trend of last half decade)
28 went to a shareholder vote Of those 28 – Management won 15, Dissidents won 9 (and split 4)
51 in 2009)
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David E. Brown, Jr., Alston & Bird LLP Josh DeRienzis, PSS World Medical, Inc. Jonathan Gottsegen, United Rentals, Inc. Stacy Ingram, The Home Depot, Inc. Scott Ortwein, Alston & Bird LLP Debra Smithart-Oglesby, Denny’s Corporation
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