2014 Proxy Season

Following are some topics that public companies may want to consider in preparation for the 2014 proxy season.

Shareholder Proposals

The 2013 proxy season reflected a continued increase in the number of shareholder proposals submitted to public companies, while the SEC no-action relief process resulted in fewer successful efforts of public companies to exclude shareholder proposals from proxy statements compared to recent years.  However, public companies appear to be having success in negotiating with shareholders as an increased number of shareholder proposals were withdrawn prior to the stockholder meeting in 2013 compared to prior years.  Common shareholder proposals in 2013 included (i) proposals to appoint an independent board chair, (ii) proposals to declassify classified boards of directors (and dismantle other similar protective provisions), and (iii) proposals to increase the diversity of the board of directors.  Shareholder proposals for 2014 are expected to include (i) elimination of super-majority provisions to amend by-laws, (ii) proxy access, (iii) ability of stockholders to act by written consent and/or call special meetings, and (iv) social and environmental proposals related to political contributions, human rights policies and environmental sustainability.  In its 2014 Policy Update, ISS stated that (a) starting in 2014 it will review the responsiveness of a board to any shareholder proposal that receives one year of a majority of votes cast in support (rather than the previous triggers of either two years of a majority of votes cast in a three-year period or one year of a majority of shares outstanding); (b) ISS has adopted a case-by-case approach, including a list of factors for analysts to consider, for assessing board implementation of prior successful shareholder proposals, and (c) ISS provided analysts with broader discretion when determining which directors to hold accountable in the event the level of responsiveness to shareholder proposals is found to be insufficient.  Among the changes for 2014 related to board action on successful shareholder proposals is that ISS will consider in the case-by-case analysis the board’s rationale provided in the proxy statement for not adopting a shareholder proposal.Continue Reading Client Alert – Considerations for 2014 Proxy Season and Beyond