Institutional Shareholder Services Inc. and Glass, Lewis & Co., LLC both recently issued their annual proxy voting guideline updates. As revised, these guidelines have important implications for companies preparing for the 2019 proxy season.
Eric Orsic is the co-head of the Firm’s Capital Markets and Public Companies Practice Group. Eric advises clients in the areas of mergers and acquisitions, and securities transactions and compliance. He works with publicly and privately held companies to structure and negotiate business acquisitions/dispositions. His public company transactional experience includes public equity and debt offerings, tender offers and going-private transactions. Read Eric Orsic's full bio.
During the previous quarter, the SEC acted to expand the number of companies that may rely on the “smaller reporting company” scaled disclosure regime and Congress directed revisions to the Regulation A+ and Rule 701 exemptions. The SEC also took enforcement action on a major cybersecurity breach, reinforcing its recent interpretive guidance on the subject. The director of the SEC Division of Corporation Finance also spoke on how blockchain assets may or may not constitute securities, and the 9th Circuit created a circuit split related to securities litigation after a tender offer.
The end of a year and beginning of the next generally starts the countdown to the public company proxy season. But before moving into 2018, registrants would be well served by first looking back to the guidance that came out of the SEC at the end of 2017.
During the last quarter, the SEC staff had their hands full preparing for new standards impacting registrants’ filings this year, keeping pace with tax reform, tweaking the shareholder proposal process and corralling a burgeoning cryptocurrency market.
The SEC recently confirmed that the new CEO pay ratio disclosure rules mandated in the Dodd-Frank Act will go into effect in the 2018 proxy season. To assist companies in preparation of the new disclosure, the SEC published interpretive guidance on September 21, 2017.
A US District Court recently dismissed a claim that an insider’s election to satisfy an income tax obligation by having shares withheld from the delivery of an award constituted a non-exempt sale of shares back to the issuer for purposes of Section 16(b) of the Exchange Act, unless the share withholding was required, rather than merely permitted.
While an encouraging development, this decision is now on appeal to the US Court of Appeals for the Fifth Circuit and there are similar unresolved complaints in other jurisdictions. Until this matter is resolved, public companies should continue to consider what steps are appropriate to avoid Section 16 exposure and to review this situation with their executive officers.
Executive compensation, corporate governance, shareholder engagement and other rule changes and rulemakings for public companies are highlighted in the 2016 Proxy Season Checklist. The list discusses important developments that will affect the upcoming and future proxy seasons, and offers suggestions on how to prepare for them.