Much has happened on this subject since we highlighted these troubling trends several weeks ago (see below). The most significant outcomes seem to favor investors, although the sheer number of decisions might not make it look that way.

The most important development concerned KSW, which now has a big governance mess on its hands. In response to an investor's binding proxy access proposal, the company approved its own proxy access proposal, with a more restrictive rule (higher ownership threshold). Yet, the SEC will require the company to include the investor proposal on the proxy. If investors approve it, then the company bylaws will have two conflicting proxy access rules on the books.

The SEC decision favors investors, since KSW sought to exclude the investor proposal based on "substantially implementing" the company's own proxy access rule. Since the company and investor proposals were fairly similar, the SEC appears to preclude companies from excluding investor proposals by adopting their own, more restrictive proxy access rule.

Another development that favors investors concerns Hewlett-Packard, that perennial governance poster child. HP opposed an investor's proxy access proposal, and has since settled the matter with the investor. HP agreed to adopt a proxy access rule in 2013, although the company has not specified the details of the new rule. 

On the other hand, the SEC allowed six companies to exclude investors' proxy access proposals from proxy materials, and at the same time denied similar requests from three other companies. The bases for these nine decisions vary, but generally pertains to arcane technical grounds having little to do with the basic premises of proxy access.

Finally, in response to the SEC's decision to allow the six exclusions, the US Proxy Exchange adopted a new proposal format for its model proxy access resolutions. Two investors have already submitted resolutions based on this new model for annual meetings later this year.

We'll continue to send updates on proxy access as we see developments.
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Troubling Proxy Access Trends

Now that shareholders can attempt to "order privately" proxy access at portfolio companies, what have we seen so far as "proxy season" gets underway?   

 

We've seen trouble, we think. If investors aren't careful, they may lose more than they gain, in terms of the basic right to nominate BoD candidates, let alone feature those candidates in company proxy materials.

 

We explain what's going on in our current blog post
You can find other useful resources at the TAI website, including our research on "Effective Activism, on the Cheap", the new guide to executive compensation, bibliography of academic research on the returns to activist investing, and our white paper with the basics on activism.
For further information, or to discuss a specific turnaround situation, please contact:
 
Michael R. Levin
[email protected]
847.830.1479