Register now for the National Conference and you will be invited to meet your investors. Log in to receive member rates.  

With 28 breakouts to choose from, an Investor Forum, and special programs for private companies, you can customize your own conference experience. Come to Chicago to "Connect, Communicate, Collaborate" with 600 of your colleagues and industry experts.  

The conference agenda is posted here. Alternate hotel information is here.

If you are interested in making a contribution to the conference fund or other sponsorship opportunities click here.

Senate Banking Committee Approves Dodd-Frank Rollback Bill Along Party Lines

Last week, the Senate Banking Committee approved by a vote of 12 to 10, along party lines, the Financial Regulatory Improvement Act of 2015. Among other things, the Act would redefine which financial institutions are automatically deemed "systematically important" from those with total consolidated assets greater than $50 billion (the current threshold) to those with assets greater than $500 billion. The new framework would require evaluation of institutions with more than $50 billion and less than $500 billion in assets for systemic designation based on certain criteria.

The bill also contains provisions that would help small banks, including expanding the number that would qualify for less frequent regulatory exams by increasing the current asset threshold of $500 million to $1 billion. See the Committee's section-by-section summary of the bill.

SEC's Small & Emerging Companies Advisory Committee Announces Open Meeting

The SEC Advisory Committee on Small and Emerging Companies noticed a public meeting on Wednesday, June 3rd at the Commission's headquarters. The agenda will focus on public company disclosure effectiveness, intrastate crowdfunding, venture exchanges, and treatment of "finders." The meeting will begin at 9:30 a.m. (EST) and will be webcast on the Commission's website.

Massachusetts & Montana File Petitions Challenging Regulation A+

Massachusetts and Montana filed petitions last week for court review of Regulation A+, adopted by the SEC in March. The petitions allege that the rule is arbitrary, capricious and otherwise violative of the APA, and request that it be vacated. As previously reported, the new rule creates two tiers of offerings under Regulation A, one of which is subject to preemption of state securities law registration and qualification requirements. Crowdfunding industry associations issued a statement yesterday denouncing the litigation. See also Jim Hamilton's blog.

Former SEC Chairs Urge Chair White to Act on Corporate Political Spending Disclosure

Former SEC Commissioners and Chairs William Donaldson, Arthur Levitt and Bevis Longstreth sent this letter to Chair White yesterday expressing their support of this 2011 academics-sponsored petition seeking SEC rulemaking to require corporate political spending disclosure. As previously reported, a new public advocacy interest group, Campaign for Accountability, filed suit against the SEC earlier this month for failing to initiate rulemaking in response to petitions in violation of the APA. See also this article from The Hill.

On another note, see this separate rulemaking petition filed earlier this month by the CEO of Princeton Ivy Capital Advisors urging the SEC to ban sales of stock by directors during their tenure on the board.

SEC Names Andrew J. Donohue as Chief of Staff

The SEC announced today that Andrew Donohue has been named the agency's Chief of Staff. As Chief of Staff, Mr. Donohue will be a senior adviser to SEC Chair White on all policy, management, and regulatory issues. Mr. Donohue returns to the SEC after serving as Director of the agency's Division of Investment Management from May 2006 to November 2010. Most recently, he has been managing director, associate general counsel, and investment company general counsel at Goldman Sachs. Mr. Donohue will replace Lona Nallengara, who will leave the agency in June.

Bills to Watch

These bills were sent to the House or Senate as a whole for consideration last week:

• H.R. 2354, Streamlining Excessive and Costly Regulations Review Act, sponsored by Rep. Robert Hurt (R-VA5), would direct the SEC to review all of its significant regulations to determine whether they are necessary in the public interest, or whether they should be amended or rescinded.
• The Accelerating Access to Capital Act (H.R. 2357), introduced by Rep. Ann Wagner (R - MO2), would direct the SEC to revise Form S-3 to add listing and registration of equity securities on a national securities exchange as an additional basis for satisfying the requirements of the form's General Instruction I.B.1., and to remove such listing and registration as a requirement of General Instruction I.B.6.
• The Fair Access to Investment Research Act of 2015 (H.R. 2356), sponsored by Rep. French Hill (R-AR2), would direct the SEC to provide a safe harbor related to certain investment fund research reports.

As discussed in this Covington memo, the European Parliament voted last week to establish a mandatory conflict minerals reporting regime for "all Union importers," i.e., all downstream companies, of conflict minerals from conflict zones. The amendments reflect significant changes from the Eureopean Commission's proposed voluntary self-certification scheme. According to The Guardian, the obligatory monitoring of supply chains would affect 800,000 European companies. Covington notes that further negotiations of the proposed regulation and other proceedings might make the end result less stringent.

Study Reveals ISS Implications on 2015 Say-on-Pay Vote Results & Other Trends

Towers Watson's latest Say-on-Pay Update reports these key 2015 vote results and trends:

• Average shareholder support of 91%, and failure rate of 2%
• ISS has given negative vote recommendations in 9% of cases - down from 12% in 2014.
• Difference in average support between an ISS "for" and "against" vote recommendation is 30% - up from 28% in 2014
• Rate of "high" ISS concerns related to pay-for-performance among proposals that ultimately received an "against" vote recommendation was 88% - up from 82% in 2014
• 14% of companies receiving an "against" recommendation had a high level of ISS concern in multiple categories, including a pay-for-performance disconnect.

P4P: Most Companies Now Use Performance-Vested Incentive Awards in LTI Program 

Steven Hall & Partners just-released report on incentive compensation at over 800 companies (revenues between $1 and $5 billion) using 2014 proxy data reveals these key findings: 

• Fixed vs. Variable Compensation: Target compensation is 85% variable and only 15% fixed.
• Short-Term Incentives:
• Median annual incentive targets for CEOs equaled approximately 100% of base salary
• 87% of companies used at least one metric related to earnings, and plans most commonly used three performance metrics
• Long-Term Incentives:
• Annual grants of long-term incentive awards are almost universal
• 67% of companies granted performance-vested awards, but use of time-vested awards remains widespread. More than 75% of companies use more than one vehicle in their LTI program.

"Women Get On Board" & KPMG Partner to Increase Diversity on Canadian Boards

Women Get on Board, a member-based forum that connects and promotes women to corporate boards, announced a founding corporate partnership with KPMG in Canada to facilitate the increase in the number of qualified women on corporate boards. According to co-founder Deborah Rosati, there are many qualified women, but they often aren't short-listed or selected for board service - a hurdle that Women Get on Board is striving to overcome by connecting and promoting its members to corporate board opportunities. KPMG will be hosting the Women Get on Board launch event on September 23, 2015.

ISS Launches Web-Based Incentive Performance Award Modeling Tool

ISS Corporate Solutions announced last week the launch of its Award Simulator - described as a web-based performance award modeling tool designed to give companies a clear line-of-sight into the value and achievability of executives' performance-based awards. The Award Simulator purportedly models the expected value and payout probabilities of performance-based awards to provide an understanding of how plan design decisions influence award value - metric selection, goal setting, payout levels and other design choices. The product brochure identifies the types of board, management and Human Resources compensation-related questions that the Award Simulator is aiming to address.

Proxy Access

• These companies reported shareholder approval of stockholder proxy access proposals: AvalonBay Communities, Hasbro, McDonald's, Southwest Energy. A stockholder proxy access proposal at Chevron also reportedly passed.
• Pioneer Natural Resources reported the failure of its shareholder proxy access proposal. A proposal at Exxon Mobil also reportedly failed.
• Expeditors International of Washington reported approval of its management proxy access proposal and failure of its stockholder proxy access proposal.

Other Proposals

• AvalonBay Communities reported that its stockholders didn't approve a stockholder proposal seeking an independent chair policy.
• Expeditors International of Washington reported the failure of several stockholder compensation-related proposals, including proposals regarding clawbacks and equity retention.
• Goldman Sachs reported that shareholder proposals regarding simple majority vote-counting and the right to act by written consent were not approved.
• Hasbro reported the failure of shareholder proposals regarding implementation of a post-termination holding period for equity held by senior executives and limitations on equity vesting following a change of control.
• Intel director John Donahoe reportedly won re-election despite recommended "no" votes from ISS and Glass Lewis based on the eBay CEO's 2014 attendance record (reported on here). Intel also reported failure of shareholder proposals regarding the board's adoption of a policy for an independent board chair and a simple majority vote counting standard.
• McDonald's reported the failure of a number of stockholder proposals including those relating to written consent, accelerated vesting of equity upon a change of control, and an annual congruency analysis of company values and political contributions.

CII Reiterates Request for Guidance on Disclosure of Preliminary Voting Information

On Monday, CII sent this letter to SEC Division of Corporation Finance Director Keith Higgins regarding disclosure of preliminary vote tallies. The letter:

(i) Reiterates CII's prior request for the issuance of interpretive guidance to ensure impartiality in the disclosure of preliminary voting information for any participant in an active solicitation;
(ii) Suggests that - pending SEC Staff guidance or rulemaking - Broadridge be directed to provide to companies only the interim total number of shares voted for each ballot item (so that companies can determine if a quorum has been attained), rather than detailed preliminary voting information; and
(iii) Notes Broadridge's "unexpected rejection" of a draft confidentiality agreement template that had been developed by CII, the Society and Broadridge for companies and shareholders to use in cases where a company authorizes Broadridge to release the vote tallies.

As previously reported, we have posted for members only a draft confidentiality agreement template that issuers may consider for purposes of sharing interim vote results with investors on particular voting items if requested.

CalSTRS Least Likely to Support Management's Directors

Based on data from Proxy Insight (see pages 8-9), CalSTRS is one of the least likely of the public pension funds to support the election or re-election of directors - supporting management nominees just 36.7% of the time. CalSTRS is also almost twice as aggressive as the next pension fund on the list identified as least likely to vote for management's slate - the Illinois State Board of Investment - coming in at 67.4% support. In connection with last week's DuPont vote (which we reported on here), the Wall Street Journal reported an "emerging split" between CalPERS and CalSTRS in terms of how they go about effecting corporate change, with CalPERS voting against management recommendations on company proxy proposals just 8% of the time - compared to CalSTRS' 45% since 2012.

CalSTRS & CalPERS Request SEC "Clarify" 14a-8(i)(9) to Permit Dueling Proposals

CalPERS and CalSTRS sent this letter to SEC Division of Corporation Finance Director Keith Higgins last week requesting the issuance, before the 2016 proxy season, of a clarifying interpretation of Rule 14a-8(i)(9) allowing for submission of alternative shareholder and management proposals unless neither is precatory. The request expressly encompasses all types of same subject matter proposals - not just proxy access. The letter asserts that alternative proxy access proposals involving at least one precatory proposal don't conflict, and suggests that the Staff review examples of companies that included alternative shareholder and management proxy access proposals in their proxy statements this proxy season.

BlackRock & Ceres Issue Sustainability Engagement Guidance for Investors

BlackRock and Ceres issued this joint guidance today for institutional investors on strategies for engaging with companies and policy makers on sustainability issues. The guidance, which includes input from CalPERS, CalSTRS, PGGM, AFL-CIO and others, reportedly covers issues such as setting ESG standards, public policy engagement, collaboration, shareholder resolutions, board engagement, divestment, creating a focus list, and strategies for international engagements. It also features ESG-themed questions that portfolio managers and analysts should be asking of companies in key sectors.

PRI Coordinates Collaborative Investor Engagement on Corporate Climate Lobbying

The UN Principles for Responsible Investment (PRI) has launched a new investor working group on corporate climate lobbying charged with examining how companies use shareholder funds to lobby on climate regulations, and encouraging adoption of better practices and disclosure of lobbying activities. PRI's website notes:

Lobbying by companies against adequate climate policy is seen by many long-term investors as incongruous with maximising long-term portfolio value. Despite supporting climate policy more broadly, many listed companies are involved in such lobbying indirectly - for example, via trade and industry associations. The engagement will focus on this inconsistency and will aim to improve transparency of companies listed in the US, Canada and Australia. It will also work with partner organisations including CDP, Ceres/INCR and IIGCC throughout.

In related news, see this investor platform for climate actions, which addresses climate issues more broadly - including investor engagement, measurement and reallocation initiatives.

IRRC Institute Research Accompanying P4P Comment Letter Critiques Use of TSR

Few substantive comment letters have been submitted to the SEC thus far in response to its Proposed Rule on Pay vs. Performance. However, this one submitted by the IRRC Institute is noteworthy for its indirect critique of the proposal's use of TSR as the sole performance metric. While emphasizing its non-advocacy nature and thus deliberately neutral stance on the proposed rule, the IRRC suggests that its recently published research on pay and performance alignment, which accompanies its comment letter, might be helpful to the Commission's deliberations on the rule.

Among other things, noting TSR's dominance as a LTI plan performance metric, the report's Executive Summary (worth reading) states:

[T]he focus on share price appreciation through total shareholder return (TSR) obscures more than it reveals with share price as a capital markets performance metric. Factors which impact TSR such as fund flows, central bank policies, macroeconomics, geo-political risks and regulatory changes are all beyond the control of executive management.

Canadian Investor Group Calls for Mandatory Proxy Access Scheme

The Canadian Coalition for Good Governance (CCGG) released this new policy on proxy access and company/investor engagement on board composition. The policy (which includes a discussion of the history of proxy access in the U.S.) elaborates on the CCGG's previous call for legislation to provide for a proxy access mechanism consistent with these terms:

• "Meaningful" share ownership level: At least 5% for a company with a market cap of <$1 billion, and 3% for a company with a market capitalization of ≥$1 billion. Shareholders should be permitted to coordinate and aggregate their holdings to reach the required threshold.
• Cap on number of nominees: To avoid 'creeping board control' through proxy access, shareholders should be restricted to nominating the lesser of 3 directors or 20% of the board. Shareholders would not be able to nominate another 3 directors or 20% of the board in following years so long as the previously nominated directors, if elected, remain on the board.
• No holding period required: CCGG doesn't believe that a holding period is necessary either to ensure that proxy access is restricted to shareholders with a long term perspective or to avoid vexatious nominations. Instead, shareholders would need to make a representation that they are not seeking control of the company when they nominate directors.

Pending the desired legislative changes, CCGG encourages companies to adopt this form of proxy access voluntarily, and to increase their dialogue with shareholders about board composition.

Paper Identifies the Real Life Consequences of Director Withhold Votes

In this new paper, "The Power of Shareholder Votes: Evidence from Director Elections," Georgetown University's Reena Aggarwal and Sandeep Dahiya, and CAFRAL and University of Maryland, College Park Nagpurnanand R. Prabhala, examine whether shareholder withhold votes (i.e., an expression of dissent) in director elections under a typical plurality voting scheme have detectable consequences. The authors find that, contrary to popular belief:

• Directors facing dissent are more likely to depart boards, especially if they are not lead directors or chairs of important committees (indicating that boards value continuity in directors who hold key responsibilities).
• Directors facing dissent who don't leave are moved to less prominent board positions, e.g., reassignment from key committees. These effects are more pronounced in companies with greater ownership by institutional investors who pose credible exit threats.
• Directors facing dissent encounter reduced opportunities in the market for directors, i.e., companies are less likely to solicit or retain a director who attracts hostility from shareholders at another company.

This week's highlighted question from the Huddle is:

We recently held a meeting where supplemental materials were distributed to the committee in the meeting (and after the distribution of the regular committee book/materials before the meeting.) Is it sufficient to attach those supplemental materials to the book in our files and then reference them in the meeting minutes

This question generated a lot of activity and many excellent answers (too many to note here) including: 

Yes. You would just note in the minutes, for example, that "Mr. Jones distributed to each committee member a copy of an analysis of peer group compensation dated May 28, 2015, which the committee then reviewed and discussed with management. Ms. Aandahl stated that she would file the analysis with the records of this meeting." 

Check out the Society Huddle.