1. SEC Thresholds
There have been reports, though there has as of yet been nothing official from the Securities and Exchange Commission itself, that the SEC is about the propose a new system for the nomination of dissident directors. Dissidents will be able to piggyback on the company's proxy materials if their stock holdings pass certain percentage thresholds.
Specifically, to piggyback on the materials of a small market capitalization companys (below $75 million), the dissident group will need to show that it has owned 5% of the equity for at least a year. For a market cap between $75 and $700 million, that becomes 3% over a year. For a market cap above $700 million, its a mere 1%.
Any such measure, even if adopted (and so far, remember, this is only a report of a coming proposal) would certainly face a court fight, on federalism grounds among others.
2. Shell's executive pay
There's been a rebellion at Royal Dutch Shell. Shareholders have voted "no" in resounding fashion to a remuneration report. The remuneration committee that produced the report is chaired by Sir Peter Job. I just had to mention that because the name seems so blooming appropriate.
Jeroen van der Veer, Shell's CEO, steps down in June. He received a bonus nt he 2006-08 incentive scheme of 1.35 million euros, i.e. $1.84 million dollars, on top of his salary of 2008, of 10.3 euros, which was itself an increase of 58% from the year before.
3. Catching up on Amylin
Amylin Pharmaceutical's annual meeting is now but a week away. Proxy advisory RiskMetrics has advised shareholders to vote in favor of three of the dissident nominees, two from eastbourne's slate and one from Icahn's.
In a letter to shareholders May 15, Amylin expressed disappointment in this, but said that its board and management "have recognized and embraced the need for change."
Then the news got worse for the besieged company. On Monday, the two other major advisory services also recommended the introduction of new blood. Although they don't all agree on which new blood should get into the boardroom, they all agree things need to change.
Showing posts with label proxy access. Show all posts
Showing posts with label proxy access. Show all posts
Wednesday, May 20, 2009
Sunday, February 8, 2009
Proxy access
Another round in the proxy access debate coming our way?
In late 2007 I was blogging here about proxy access rules then under considerationby the Securities and Exchange Commission.
At that time, the SEC adopted the narrowest of the access rules it had under consideration, making life more difficult for shareholder activists seeking change in the election procedures.
It now appears (judging from a story Reuters carried Friday, while Congress continued its struggles with a stimulus bill) that with the new administration we might get a revival of this argument with special emphasis on "sharehlder democracy" as a tool for limiting CEO pay.
In late 2007 I was blogging here about proxy access rules then under considerationby the Securities and Exchange Commission.
At that time, the SEC adopted the narrowest of the access rules it had under consideration, making life more difficult for shareholder activists seeking change in the election procedures.
It now appears (judging from a story Reuters carried Friday, while Congress continued its struggles with a stimulus bill) that with the new administration we might get a revival of this argument with special emphasis on "sharehlder democracy" as a tool for limiting CEO pay.
Wednesday, December 24, 2008
That SRZ report
Schulte Roth & Zabel have put out a report on "current trends in activist investing" and what affected parties expect in this area during the year ahead. I linked to it yesterday, but this post will serve as an executive summary.
SRZ commissioned a survey of 25 corporate execs and 25 activist investors. As you might expect, there were points of disagreement between the two groups. "Corporate respondents tend to view activist investors as short-term investors out to make the highest returns possible in the shortest window of time ...." On one specific manifestation of that view, a majority of the execs said that the SEC should not adopt rules that would provide shareholder access to the company's proxy statement. A very considerable majority of the activists said that they do think the SEC should adopt such a rule.
The two sides of the survey differed also on the issue of the amount of activism they expect in 2009. The activists themselves think they'll have a busy year, whereas the corporate types think the recession will temper would-be proxy fights and such.
Only one of the activists surveyed said that litigation is the best approach to produce change in corporate policy [or "4% of the sample" in the language of pollsters -- we're supposed to remember at this point in the report that the sample consisted of 25.] None of the execs identified litigation as an effective strategy.
David Rosewater, a partner at SRZ, summed up the gist of the survey thus: "There is clearly a continuing wide gulf in the views of companies versus activists of the appropriateness of activists' engagement and involvement with the company abouyt its strategy. As a result, it seems likely that contentious contests will continue for the foreseeable future."
We might hope for "peace on earth, good will to men," but too much peace in the board rooms, too much goodwill at the annual meetings of shareholders, would be a bore.
SRZ commissioned a survey of 25 corporate execs and 25 activist investors. As you might expect, there were points of disagreement between the two groups. "Corporate respondents tend to view activist investors as short-term investors out to make the highest returns possible in the shortest window of time ...." On one specific manifestation of that view, a majority of the execs said that the SEC should not adopt rules that would provide shareholder access to the company's proxy statement. A very considerable majority of the activists said that they do think the SEC should adopt such a rule.
The two sides of the survey differed also on the issue of the amount of activism they expect in 2009. The activists themselves think they'll have a busy year, whereas the corporate types think the recession will temper would-be proxy fights and such.
Only one of the activists surveyed said that litigation is the best approach to produce change in corporate policy [or "4% of the sample" in the language of pollsters -- we're supposed to remember at this point in the report that the sample consisted of 25.] None of the execs identified litigation as an effective strategy.
David Rosewater, a partner at SRZ, summed up the gist of the survey thus: "There is clearly a continuing wide gulf in the views of companies versus activists of the appropriateness of activists' engagement and involvement with the company abouyt its strategy. As a result, it seems likely that contentious contests will continue for the foreseeable future."
We might hope for "peace on earth, good will to men," but too much peace in the board rooms, too much goodwill at the annual meetings of shareholders, would be a bore.
Monday, December 8, 2008
North Dakota
I don't know that this blog has ever been visited by anyone from North Dakota. But if you drop by in the future and see this message: Hail!
I understand that last year your state enacted a remarkable corporate-governance statute.
It creates a new chapter of the state's corporations law, 10-35, by which a company chartering in that state can opt to be governed. If it does, it will get a low franchise fee, only half of what it would pay if it incorporated in Delaware, but it will have to abide by various rules designed to keep the management responsive to the shareholders.
For example: the term of directors shall not exceed one year and will not be staggered into different classes. So every annual meeting will involve the re-election (or not) of the entire board.
The chairman of the board will be ineligible from holding any executive office. We've become accustomed to seeing the phrase "chairman and CEO" after a bigwig's name. The new 10-35 corporations will have two people for those two distinct posts.
Provision is made for access to the company's proxy materials by major shareholders -- provisions analogous to those recently considered, but never adopted, by the SEC.
Shareholders must approve of certain public issuances of shares: in other words, they can veto actions that would dilute their voting power.
There are other important provisions in 10-35, but those examples will give you an idea of the direction of the whole package.
What difference might this make? Are a lot of firms going to beat down the door to re-charter in North Dakota, either for the low franchise fee or because their shareholders are pressuring them to do so or for any other reason?
More on this tomorrow.
I understand that last year your state enacted a remarkable corporate-governance statute.
It creates a new chapter of the state's corporations law, 10-35, by which a company chartering in that state can opt to be governed. If it does, it will get a low franchise fee, only half of what it would pay if it incorporated in Delaware, but it will have to abide by various rules designed to keep the management responsive to the shareholders.
For example: the term of directors shall not exceed one year and will not be staggered into different classes. So every annual meeting will involve the re-election (or not) of the entire board.
The chairman of the board will be ineligible from holding any executive office. We've become accustomed to seeing the phrase "chairman and CEO" after a bigwig's name. The new 10-35 corporations will have two people for those two distinct posts.
Provision is made for access to the company's proxy materials by major shareholders -- provisions analogous to those recently considered, but never adopted, by the SEC.
Shareholders must approve of certain public issuances of shares: in other words, they can veto actions that would dilute their voting power.
There are other important provisions in 10-35, but those examples will give you an idea of the direction of the whole package.
What difference might this make? Are a lot of firms going to beat down the door to re-charter in North Dakota, either for the low franchise fee or because their shareholders are pressuring them to do so or for any other reason?
More on this tomorrow.
Tuesday, January 15, 2008
CNET's bylaws
Enough background. We've cracked open the coconut and can drink the milk of the dispute between CNET and the activist investor leading the proxy fight, JANA Partners.
CNET's bylaws provide as follows:
"Any stockholder of the Corporation that has been the beneficial owner of at least $1,000 of securities entitled to vote at such meeting for at least one year may submit a director nomination to the Board of Directors or, if designated by the Board of Directors, a Nominating Committee."
As you can see, that concerns nominees specifically, not resolutions such as JANA's effort to expand the size of the board.
Another bylaw discusses resolutions:
Any stockholder of the corporation that has been a beneficial ownerof at least $1,000 of securities entitled to vote at an annual meeting for at least one year may seek to transact other corporate business at the annual meeting, provided that such business is set forth in a written notice and mailed by certified mail to the Secretary of the Corporation and received no later than 120 calendar days in advance of the date of the Corporation’s proxy statement released to security-holders in connection with the previous year’s annual meeting of security holders. … Notwithstanding the foregoing, such notice must also comply with any applicable federal securities laws establishing the circumstances under which the Corporation is required to include the proposal in its proxy statement or form of proxy.
---------------
JANA hasn't satisfied the one-year deadline, so (on CNET's reading of these rules) it isn't entitled to propose resolutions or board nominees.
JANA wants the courts either to declare the one-year period invalid or to reinterpret it out of existence. As to the two nominees, it has a good case here. Delaware courts have been vigilant about allowing shareholders a fair shot at getting nominees on the ballot, and are likely to see this holding period as excessive.
As to proposing resolutions, JANA's case seems weaker.
Steven Davidoff explains this all quite well and gives the pertinent links. I'll indulge my own lazy tendencies this morning and simply link to him.
Davidoff is here.
CNET's bylaws provide as follows:
"Any stockholder of the Corporation that has been the beneficial owner of at least $1,000 of securities entitled to vote at such meeting for at least one year may submit a director nomination to the Board of Directors or, if designated by the Board of Directors, a Nominating Committee."
As you can see, that concerns nominees specifically, not resolutions such as JANA's effort to expand the size of the board.
Another bylaw discusses resolutions:
Any stockholder of the corporation that has been a beneficial ownerof at least $1,000 of securities entitled to vote at an annual meeting for at least one year may seek to transact other corporate business at the annual meeting, provided that such business is set forth in a written notice and mailed by certified mail to the Secretary of the Corporation and received no later than 120 calendar days in advance of the date of the Corporation’s proxy statement released to security-holders in connection with the previous year’s annual meeting of security holders. … Notwithstanding the foregoing, such notice must also comply with any applicable federal securities laws establishing the circumstances under which the Corporation is required to include the proposal in its proxy statement or form of proxy.
---------------
JANA hasn't satisfied the one-year deadline, so (on CNET's reading of these rules) it isn't entitled to propose resolutions or board nominees.
JANA wants the courts either to declare the one-year period invalid or to reinterpret it out of existence. As to the two nominees, it has a good case here. Delaware courts have been vigilant about allowing shareholders a fair shot at getting nominees on the ballot, and are likely to see this holding period as excessive.
As to proposing resolutions, JANA's case seems weaker.
Steven Davidoff explains this all quite well and gives the pertinent links. I'll indulge my own lazy tendencies this morning and simply link to him.
Davidoff is here.
Tuesday, December 18, 2007
Philosophy
Today is as fine a day as any for a broad statement about the glasses through which I view the world of proxy ballots, boardroom disputes, mergers and acquisitions, friendly or hostile -- the whole world of corporate control.
My view is simply that the shareholders of its company are the owners thereof, not in any overly-sophisticated, qualified, legalistic sense. But in the common sense plain-English meaning of ownership. Proxy fights are good things simply because they help remind the company management, their employees, of who they work for.
Managements tend to entrench themselves, to seek safety behind various procedural barriers. They like "staggered boards," for example. In this gambit, the shareholders are allowed to vote in or out only one-third of the boards at any one meeting. They justify this by talk of preserving continuity and experience, etc. But the empirical research shows that shareholders don't benefit from that continuity in any way that would show up in, say, the value of a company's stock.
http://www.researchmatters.harvard.edu/story.php?article_id=592
When challenged on their responsiveness to their shareholders, or lack thereof, incumbent boards and their apologists, the advocates of entrenchment, or of what one scholar calls "directorial primacy," like to say that if shareholders aren't happy with how the company is run, they can always sell the stock. They shouldn't have to, though, That's the point. They're owners, not renters.
If you live in a home with a leaky roof and you don't like it, you can move. The owner can then either fix the roof or find another tenant who'll tolerate the leak. Even if its your home, you might of course decide that fixing it is too much trouble, in which case you can sell.
But you, as owner of equity, also have the option of hiring a contractor who'll fix the roof. And if your contractor proves dilatory in doing this job, of firing him and hiring another.
My view is simply that the shareholders of its company are the owners thereof, not in any overly-sophisticated, qualified, legalistic sense. But in the common sense plain-English meaning of ownership. Proxy fights are good things simply because they help remind the company management, their employees, of who they work for.
Managements tend to entrench themselves, to seek safety behind various procedural barriers. They like "staggered boards," for example. In this gambit, the shareholders are allowed to vote in or out only one-third of the boards at any one meeting. They justify this by talk of preserving continuity and experience, etc. But the empirical research shows that shareholders don't benefit from that continuity in any way that would show up in, say, the value of a company's stock.
http://www.researchmatters.harvard.edu/story.php?article_id=592
When challenged on their responsiveness to their shareholders, or lack thereof, incumbent boards and their apologists, the advocates of entrenchment, or of what one scholar calls "directorial primacy," like to say that if shareholders aren't happy with how the company is run, they can always sell the stock. They shouldn't have to, though, That's the point. They're owners, not renters.
If you live in a home with a leaky roof and you don't like it, you can move. The owner can then either fix the roof or find another tenant who'll tolerate the leak. Even if its your home, you might of course decide that fixing it is too much trouble, in which case you can sell.
But you, as owner of equity, also have the option of hiring a contractor who'll fix the roof. And if your contractor proves dilatory in doing this job, of firing him and hiring another.
Sunday, December 2, 2007
Three brief items
1. Motorola, a Fortune 100 communications company, announced that Ed Zander is stepping down as its CEO.
Zander will remain as chairman of the board until May, when the company holds its annual meeting. Carl Icahn has said for at least a year now that Zander wasn't right for the CEO job. He put out a statement Friday crowing a bit. Zander's departure is "long past due" etc.
But Zander himself was never the focus of Icahn's efforts at Motorola. He believes the best way to increase the value of the stock for shareholders like himself is to split it up -- make it a company focused tightly on mobile devices and spin off everything else.
My guess at the moment is that the new CEO, Greg Brown, won't be on board with Icahn's agenda any more than Zander was.
2. Readers may recall that here on November 20 I blogged about proxy access rules under consideration by the SEC.
Since then, the agency has made its choice. Its adopted the most restriuctive of the rules under consideration. In other words, it holds that company's can simply exclude from the ballot any shareholder attempt to re-write the company's ruiles concerning elections to the board of directors.
In general, this is bad news, not just for the Carl Icahns of the world but for corporate productivity in the US. This ruling will encourage incumbemnt managemnents to entrench themselves and resist pressures from outside. Entrenchment, as a rule, is a bad thing. Shake-ups are ghood things. Capitalism requires that the pot be kept boiling.
Creative destructive works like that. Protect yourself from the latter, you minimize the former.
3. More about Gyrodyne and Goldstein. As I mentioned Wednesday, Gyrodyne brought a lawsuit in federal court asking for an injunction so that Goldstein couldn't ruin their party this week. Their annual meeting is Wednesday and they don't want him soliciting proxies to replace three of them on the board with himself and two associates.
It's an 8-member board, so even complete success in terms of his slate won't give Goldstein a majority. But his slate would need only 1 convert to produce a tie vote, and deadlock, on a given issue.
At any rate, it appears that the district court refused to grant the injunction, so the solicitations continue.
The big issue? Poison pills. I'll discuss such "pills" in general in tomorrow's entry.
Zander will remain as chairman of the board until May, when the company holds its annual meeting. Carl Icahn has said for at least a year now that Zander wasn't right for the CEO job. He put out a statement Friday crowing a bit. Zander's departure is "long past due" etc.
But Zander himself was never the focus of Icahn's efforts at Motorola. He believes the best way to increase the value of the stock for shareholders like himself is to split it up -- make it a company focused tightly on mobile devices and spin off everything else.
My guess at the moment is that the new CEO, Greg Brown, won't be on board with Icahn's agenda any more than Zander was.
2. Readers may recall that here on November 20 I blogged about proxy access rules under consideration by the SEC.
Since then, the agency has made its choice. Its adopted the most restriuctive of the rules under consideration. In other words, it holds that company's can simply exclude from the ballot any shareholder attempt to re-write the company's ruiles concerning elections to the board of directors.
In general, this is bad news, not just for the Carl Icahns of the world but for corporate productivity in the US. This ruling will encourage incumbemnt managemnents to entrench themselves and resist pressures from outside. Entrenchment, as a rule, is a bad thing. Shake-ups are ghood things. Capitalism requires that the pot be kept boiling.
Creative destructive works like that. Protect yourself from the latter, you minimize the former.
3. More about Gyrodyne and Goldstein. As I mentioned Wednesday, Gyrodyne brought a lawsuit in federal court asking for an injunction so that Goldstein couldn't ruin their party this week. Their annual meeting is Wednesday and they don't want him soliciting proxies to replace three of them on the board with himself and two associates.
It's an 8-member board, so even complete success in terms of his slate won't give Goldstein a majority. But his slate would need only 1 convert to produce a tie vote, and deadlock, on a given issue.
At any rate, it appears that the district court refused to grant the injunction, so the solicitations continue.
The big issue? Poison pills. I'll discuss such "pills" in general in tomorrow's entry.
Tuesday, November 20, 2007
Proxy Rules Debate
The ongoing debate over the SEC rules and "proxy access" reached the banking committee of the US Senate last week.
As regular readers of my other blog, Pragmatism Refreshed, (cfaille.blogspot.com) know, I'm all in favor of the Second Circuit's AFSCME decision, and in favor of letting it stand. The decision opened the doors for a sort of meta-election, in which dissident stockholders can get on a proxy ballot asking the whole body of shareholders to determine rules for directorial elections.
I'm happy about AFSCME not despite the possibility that it will prove a "slippery slope," to other avenues for shareholder democracy, but largely because it might.
By itself, this is a small matter. I can't imagine a lot of election-rules tinkering breaking out in corporate America as a result of anything the SEC does or doesn't do, nor do I think a lot of good would be accomplished it it did.
Still, the shareholders own the company, and it is good to remind the company management, their employees, of that simple fact.
At any rate, the SEC has under consideration two rule proposals which would (to differing degrees) cut back on the AFSCME precedent. Those rules were the subject of the banking committee hearing last week, and SEC chairman Cox gave the usual bureaucratic on-the-one hand but on-the-other-hand sort of testimony.
I think the very fact that the SEC is short handed now will prevent it from doing anything rash in the immediate future. Its good to know, though, that the members of that agency know that the legislature, with its oversight responsibilities in mind, is looking over their shoulder.
As regular readers of my other blog, Pragmatism Refreshed, (cfaille.blogspot.com) know, I'm all in favor of the Second Circuit's AFSCME decision, and in favor of letting it stand. The decision opened the doors for a sort of meta-election, in which dissident stockholders can get on a proxy ballot asking the whole body of shareholders to determine rules for directorial elections.
I'm happy about AFSCME not despite the possibility that it will prove a "slippery slope," to other avenues for shareholder democracy, but largely because it might.
By itself, this is a small matter. I can't imagine a lot of election-rules tinkering breaking out in corporate America as a result of anything the SEC does or doesn't do, nor do I think a lot of good would be accomplished it it did.
Still, the shareholders own the company, and it is good to remind the company management, their employees, of that simple fact.
At any rate, the SEC has under consideration two rule proposals which would (to differing degrees) cut back on the AFSCME precedent. Those rules were the subject of the banking committee hearing last week, and SEC chairman Cox gave the usual bureaucratic on-the-one hand but on-the-other-hand sort of testimony.
I think the very fact that the SEC is short handed now will prevent it from doing anything rash in the immediate future. Its good to know, though, that the members of that agency know that the legislature, with its oversight responsibilities in mind, is looking over their shoulder.
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