Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

Some will want to start preliminary planning for the 2016 proxy season.  It has been a bewildering year of developments, but most will be thankful that there are relatively few new rules that must be implemented at this time.  Nevertheless, it is helpful to catalog everything that is out there.

D&O Questionnaires:  The first question we get asked this time of year is “do we need to update D&O questionnaires?”  For most, the answer is no if you have kept up your form. There are no new independence rules and the like.

New ISS Policies:  ISS makes its move late in the year when announcing new policies so this is probably the biggest unknown.  If you want an idea on what ISS may have up its sleeve, review their recent policy survey, which usually drives their policy update.

Director Equity Grants: If you are putting a new equity plan on the ballot, consider including a sublimit for grants to directors.  The reason is to avoid the outcome in Valma v. Templeton et al, where the court refused to grant a motion to dismiss because the grants were subject to an entire fairness review.  Others may wish to amend their plans to provide for a sublimit and obtain shareholder approval.

SEC Rule 14a-8(i)(9) Review:  The SEC announced it would review its rule regarding exclusion of directly conflicting shareholder proposals after it reversed course and did not permit Whole Foods to exclude a proxy access proposal.  I wouldn’t be surprised if the SEC announces something before year end.  If they don’t, it’s likely that they will not grant no-action relief in the coming year under Rule 14a-8(i)(9) until they resolve the matter.

Proxy Access:  Yes, proxy access will be a hot topic again this year. Issuers may want to begin to consider options in the preliminary planning phase.

Pay Ratio Rules:  Final pay ratio rules have been adopted but have no impact on the 2016 proxy season.  The reason is public companies do not have to comply with the final rule until the first fiscal year beginning on or after January 1, 2017. For the most that means the pay ratio will first be presented in the 2018 proxy season.

Clawback Rules:  The clawback rules are still in the proposal stage and are not expected to be finalized before year end.

Pay Versus Performance Rules:  The pay versus performance rules are still in the proposal stage and are unlikely to be finalized before year end.

Hedging Disclosures:  While the SEC adopted proposed hedging disclosure rules early in 2015, the rules have still not yet been finalized.

Audit Committees:      There are no proposed rules on new audit committee disclosures and this is at the concept release stage.  Anything new here is a long way off.

Resource Extraction Disclosures:  Initially these rules were invalidated and the SEC was recently order to complete them, but nothing is on the horizon near term.

Conflict Mineral Rules:  While many would not consider this a proxy season item, the conflict minerals rules were again found unconstitutional after a rehearing.  No word from the SEC on next steps.

Say-When-On-Pay:  Issuers must hold a say-on-pay frequency vote every six years.  For most public companies that will be 2017.


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