Wachtell Lipton Discusses SEC’s Guidance on Shareholder Proposals

The SEC Division of Corporate Finance recently provided useful guidance on excluding certain Rule 14a-8 shareholder proposals (Staff Legal Bulletin No. 14I).  While helpful, we hope the SEC will undertake a much-needed comprehensive review of Rule 14a-8, including its outdated eligibility requirements.

“Ordinary Business” and “Economic Relevance” Exclusions.  A shareholder proposal relating to a company’s ordinary business operations may generally be excluded from the company’s proxy statement unless significant policy issues transcending ordinary business are involved (Rule 14a-8(i)(7)).  Noting that this exclusion often involves difficult judgment calls (and without addressing the distinction between the SEC’s interpretive approach … Read more

Wachtell Lipton discusses SEC Narrowing Shareholder Proposal Exclusion for Rule 14a-8 Proposals that “Directly Conflict” with Company Proposals

Yesterday [October 22, 2015], the Staff of the Securities and Exchange Commission’s Division of Corporation Finance issued Staff Legal Bulletin No. 14H.  SLB14H formally narrows the long-standing approach to interpreting Rule 14a-8(i)(9), which permits a company to exclude a shareholder proposal that otherwise complies with Rule 14a-8 from its proxy statement “[i]f the proposal directly conflicts with one of the company’s own proposals to be submitted to shareholders at the same meeting.”

Prior to the 2015 proxy season, the exclusion applied in many corporate governance, shareholder rights and executive compensation contexts to avoid the risk of inconsistent and confusing … Read more

Wachtell Lipton provides a Corporate Governance Update: Dealing with Director Compensation

Due to a recent Delaware Chancery Court ruling,[1] the topic of director compensation currently is facing an uncharacteristic turn in the spotlight. Though it receives relatively little attention compared to its higher-profile cousin—executive compensation— director compensation can be a difficult issue for boards if not handled thoughtfully. Determining the appropriate form and amount of compensation for non-employee directors is no simple task, and board decisions in this area are subject to careful scrutiny by shareholders and courts.

The core principle of good governance in director compensation remains unchanged: Corporate directors should be paid fair and reasonable compensation, in a mix

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Wachtell Lipton discusses SEC Charging Schedule 13D Filers for Failing to Timely Disclose Steps Taken to Pursue Going-Private Transactions

The Securities and Exchange Commission announced [several weeks ago] that it had charged eight directors, officers and major stockholders for failing to timely disclose steps taken to take their respective companies private in their beneficial ownership reports on Schedule 13D.  The orders issued by the SEC indicate the SEC staff became aware of the violations in the course of their review of proxy and Schedule 13E-3 transaction statements, which described the steps taken in the required disclosures regarding the background of the transactions.  The orders note that emails and other contemporaneous communications clearly indicate the steps taken that had not … Read more

Wachtell Lipton discusses SEC Regulatory Guidance on Proxy Advisory Firms and Proxy Voting Responsibilities

Yesterday the Staff of the Securities and Exchange Commission’s Divisions of Investment Management and Corporation Finance issued regulatory guidance (in the form of a user-friendly Q&A) concerning the proxy voting responsibilities of investment advisers (such as fund managers), the use of proxy advisory firms and the applicability of the proxy rules to such firms.  The Staff also made clear their expectation that proxy advisory firms and investment advisers will change current processes and systems to conform to the new guidance “promptly, but in any event in advance of next year’s proxy season.”

This welcomed guidance is part of the … Read more

Can You Resign from the Board of a Troubled Company?

The following post comes to us from David A. Katz, a partner at Wachtell, Lipton, Rosen & Katz, and  Laura A. McIntosh, a consulting attorney for the firm.  The views expressed are the authors’ and do not necessarily represent the views of the partners of Wachtell, Lipton, Rosen & Katz or the firm as a whole.   This article is also being published today in the New York Law Journal.

Two recent Delaware cases involving independent directors of corporations with foreign operations provide a powerful reminder that resigning from the board of directors of a troubled company may not be a … Read more

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Editor's Tweet: Wachtell's David A. Katz and Laura McIntosh discuss Whether a Director can Resign from the Board of a Troubled Company?

Wachtell Lipton Discusses the SEC and “Exceptional” Cooperation

Earlier this week, the SEC announced that it had entered into a non-prosecution agreement (NPA) with Ralph Lauren Corporation to resolve an investigation under the Foreign Corrupt Practices Act (FCPA).  While the Department of Justice also announced that it had entered into an NPA with Ralph Lauren, it is the SEC agreement that is most notable.  This agreement, only the fourth publicly reported NPA that the SEC has entered since it announced that it would begin using such agreements – and the first such agreement in an FCPA case – illustrates the potential benefits of cooperation.

The SEC’s press release … Read more

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Wachtell Lipton Discusses SEC Release on the Use of Social Media under Regulation FD

Yesterday, the Securities and Exchange Commission (SEC) directly addressed the application of Regulation Fair Disclosure (Regulation FD) to corporate use of social media outlets such as Facebook and Twitter.  In a Report of Investigation—a format used by the SEC to issue general guidance based on a specific situation—the SEC expressly stated that Regulation FD applies to social media in the same manner as it does to company websites:  Any of these communication channels can serve as effective, legal means of broadly disseminating material information to investors, if access to them is unrestricted and if the company has provided advance notice … Read more

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Wachtell Lipton Discusses Recent Decisions Stressing Potential Disclosure-Based Litigation Claims

With the 2013 proxy season now well underway, two recent decisions emphasize the potential litigation risks public companies face under federal and state disclosure law. These decisions highlight the need for companies to focus on disclosure requirements as they prepare their proxy statements.

In a highly anticipated opinion issued this past Friday, the federal court for the Southern District of New York has enjoined a vote on a management-sponsored proposal at Apple’s upcoming annual shareholder meeting. Greenlight Capital, L.P. v. Apple, Inc., No. 13 Civ. 900 (RJS) (S.D.N.Y. Feb. 22, 2013). Two of Apple’s shareholders (including an activist shareholder … Read more

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Editor's Tweet: Wachtell Lipton Discusses Recent Greenlight and Symantec decisions