Sec compliance and disclosure proxy rules and procedures series 13

Research conducted by Arthur Mboue 1

SEC Compliance and disclosure- Proxy rules and procedures, series 13

ByArthur Mboue

2

Regulatory required timeline for proxyActivity Months/days

prior to Annual Meeting

Deadline for submission to shareholder proposals for inclusion in proxy materials (120 days prior to the filing of the proxy materials [Rule 14a-8])

180-200 days

Search cards mailed to record holder banks ( at least 20 business days prior to the annual meeting record date [Rule 14a-13])

96 days

Notify NYSE of tentative annual meeting record date and matters to be voted upon at the meeting (notice is required at least 10 days prior to record date [NYSE §401.02]

86 days

Review officer and director questionnaires and determine if any Form 5 filings are required 80-100 days

Submit opposition statement to SEC and mail response (s) to shareholder proposal (s) to proponent (s)( (no later than 30 days before filing of proxy statement [Rule 14 a-8(m)])(www.geproxy.com/shareowner-proposals)

75 days

RECORD DATE (not more than 60 nor less than 10 days before the date of such meeting [DGCL§213(a)] 60-70 daysPreliminary form of proxy statement filed with SEC via EDGAR (10 days before filing the definitive proxy) 50 days

Mail 6 copies of definitive proxy material to NYSE – no later than date of mailing to shareholders (Section 204.28 of NYSE Listed Company Manual). Mail 8 copies to the SEC staff

40 days

Files definitive proxy material with SEC electronically via EDGAR. [§240.14a-16(a)(1)] 40 days

GE Def 14 A

GE No Action

Research conducted by Arthur Mboue


Regulatory required timeline for proxyActivity Months/days

prior to Annual Meeting

Deadline to send shareholder the notice of internet availability of proxy materials [§240.14a-16(a)(1)](www.geproxy.com/notice-of-the2015-annual-meeting-of-shareowners)

40 days

Deadline to post proxy material on website under notice and access [§240.14 a-16(b)(1)](at GE, shareholder vote at investor/vote or 1800-652-vote; beneficiaries, proxyvote.com and 1800 454-VOTE)(www.geproxy.com/voting-and-meeting-information/voting-information)

40 days

Conduct Notice & access follow up mailing to shareholders, if required 30 days

List of shareholders entitled to vote at meeting open for examination [DGCL §219(a)] 10 days

ANNUAL MEETING OF SHAREHOLDERS (April 22, 2015, quick state, Oklahoma, OK)

D-DAYS

Filing of 8 –K with voting results from annual meeting 4 days after t5he meeting

CEO to file with the NYSE, no later than 30 days after the annual meeting of shareholders, certifying corporate governance requirements, subject to any necessary qualification (NYSE Rule 303A 12(a))

Up to 30 days after the meeting

http://www.geproxy.com/notice-of-the2015-annual-meeting-of-shareowners

http://www.geproxy.com/voting-and-meeting-information/voting


Preliminary materialsWhen required, a registrant must mail 5 copies to the SEC staff. Pursuant to Rule 14a-6 (a) under the exchange act, a Pre-14 must be filed unless the matters to be acted upon are:• The election of the director• The election, approval or ratification of independent auditors• A proposal by a shareholder• Ratification or approval of a new employee benefit plan or plan

amendments• Approval of executive compensation (i.e. say on pay vote or any

other shareholder advisory vote on executive compensation) • Determination of whether the shareholder vote on executive

compensation will occur every one, two or three years (i.e. frequency vote)


All items in Schedule 14 AItems NamesItem1 Date, time and place information

Item 2 Revocability of proxy

Item 3 Dissenters right of appraisalItem 4 Persons making the solicitation

Item 5 Interest of certain persons in matters to be acted upon

Item 6 Voting securities and principal holders thereof

Item 7 Directors and executive officersItem 8 Compensation of directors and executive officers

Item 9 Independent public accountants

Item 10 Compensation plans

Item 11 Authorization or issuance of securities otherwise than for exchange

Item 12 Modification or exchange of securities

Item 13 Financial and other information

Item 14 Mergers, Consolidation, acquisitions and similar matters

Item 15 Acquisition or disposition of property


All items in Schedule 14-A (next)items names

Item 16 Restatement of accounts

Item 17 Action with respect to reports

Item 18 Matters not required to be submitted

Item 19 Amendment of charter, bylaws or other documents

Item 20 Other proposed action

Item 21 Voting procedures

Item 22 Information required in investment company proxy statement

Item 23 Delivery of documents to security holders sharing an address

Item 24 Shareholder approval of executive compensation

Pursuant to Rule 14a-6 (b). 8 copies of the Def14, proxy card and all other soliciting material must be filed and mailed with the SEC and sent or given to shareholders. A minimum of 3 copies of the Def 14, proxy card and all other soliciting material must be submitted to each national securities exchange


Regulations, Rules & StandardsEvolving governance regime is derived from federal legislation, SEC rulemaking, state corporate legislation, stock exchange rules, shareholder proposals, ‘best practice’ standards and judicial decisions, principally those of the Delaware General Corporation law and MBCA

– Corporate activists often use this governance as a means to an economic end

• Regulation of the proxy solicitation process was assigned to the SEC in 1934

• The SEC, OCC, FDIC, FRB, DOL, FINRA, and OTS have implemented proxy related rules

• Fiduciary standards require accurate implementation and records of the proxy voting process


SEC Proxy Rules • Who must file the proxy statement? Any company whose securities

are registered under Section 12 of the Exchange Act. They must be listed on a national securities exchange or have more than $10 Million in assets and 2000 or more holders of any class of equity securities for non bank (500 or more who are not accredited investors)

• What required? Before soliciting proxies, management must prepare and file a Pre14 A and definitive Schedule 14 A with the SEC

• Quality of disclosure: No materially false or misleading statements. Both pros and cons of the proposals must be disclosed as required by rule 14a-9

• PS: SEC does not require a proxy but if you do, follow the rules (SEC and State)


Basic Proxy Procedures• Filing proxy statement: A definitive schedule 14 must be filed with

the SEC, post and mail to shareholders 40 days before the annual meeting according to Rule 14a-16

• Dissemination: a registrant must send proxy materials to shareholder by mail or via e-mail if it follows some guidance requires obtaining affirmative consent from individual shareowners 40 days before the annual meeting. It may or may not include proxy card (it depends of options, ‘notice only’ or ‘full set delivery’ option)

• Proxy card: Must give shareholder option to vote for or against any elective matter of the meeting.


Form of Proxy• According to Rule 14a-4 under the Exchange Act prescribes the requirements

for proxy cards used by a registrant to solicit proxy votes for proposals being voted on at the annual meeting.

• Requirement language: – Bold space type– Blank space for dating the proxy card– Identity clearly and impartially each separate matter intended to acted upon

• Unauthorized Proxies– 14a-4(d) under the Exchanges Act prohibits proxy cards from conferring authority to:

• Vote for the election of any person to any office• Vote at any annual; meeting other than the next meeting• Vote with respect to more than one meeting, and any adjournment thereof; and• Authorize and consent to any action other than the action proposed to be taken in the proxy

statement

• Discretionary Authority– Rule 14a-4(c), a proxy can confer discretionary authority to vote on any

• Did not receive at least 45 days notice• Nominee is unable to serve or for good cause will not serve• Receive proxy with mistakes


Rule 14a-1: Solicitation includes:

Any oral and written request for proxy whether or not proxy form used

Any request to execute, not execute or revoke a proxy Furnishing proxy or other information “reasonably

calculated” to result in procurement, withholding or revocation of proxy.

What is a ‘Proxy Solicitations’?


Importance of Proxy Voting• Most shareholders are not able to attend shareholder

meetings• Majority of investor shares are held by Intermediaries

for the benefit of their client• The financial crisis and revived shareholder activism

have brought greater attention to the proxy voting process

• The SEC enforced its first action on an RIA (compliance consultants) in 2009 for a proxy voting record violation– On May 8, 20009, SEC filed a charges against Intech

Investment Management LLC for violating proxy rules – PS: A Proxy holder is an agent legally authorized to act on

behalf of another party


Shareholder Proposal – Rule 14a-8Who can make a proposal? A shareholder who has continuously held

at least $2000 in market value or 1% of the securities entitled to vote on the proposal for a least 1 year by the date of submitting the proposal and must be held until the annual meeting

How many? One proposal per shareholder

Length? No more than 500 words

When? Not less than 180 calendar days before the annual meeting

Grounds for company rejection? Specified in a-(14a-8)(i)

Can company recommend against? Yes and always does

Procedure post rejection? Company notifies SEC and hopes for “no-action” letter

Shareholder option post rejection and “no action” letter? Start the proxy fight with a lawsuit for injunctive relief – argue grounds in a-(14a-8)(i) applicable


Popular Shareholder Proposals Require majority vote in the election of directors Repeal classified board Independent chairman of the board, separate chair from the CEO

duties Redeem or require shareholder vote on poison bill approval Independent directors Cumulative voting Eliminate supermajority voting Required shareholder approval of parachutes Allow for or decrease requirement to call special meeting Social, political, cultural issues (major concern for company and board of

directors) Political contribution Human rights Board diversity Environmental issues

15Research conducted by Arthur

Mboue

Rule 14a-8(i) Grounds for Excluding Shareholder Proposals Rule 14a-8 requires a registrant to include a shareholder proposal in its proxy materials if the submitting

shareholders has complied with certain eligibility and procedural requirements (in its Q & A format)

Improper shareholder issue under state law Violation of law Personal grievance; special interest Not relevant – triple “5” test or “not otherwise significantly related” to business Lack of company power/authority Management function – ordinary business operation Relates to elections Conflicts with company proposals Substantially implemented Duplication vague Resubmission Non compliance with procedural requirements Specific dividend amounts


Forbidden words in the shareholder proposals

1. Violence /profanity

2. Partial nudity

3. Sexual act/text

4. Xxx pictures/text

5. Intolerance

6. Satanic or cult

7. Drug culture

8. Militant/extremist

9. Sex education

10. Alcohol, Drug and Tobacco (‘ADT’)


The Notice & Access Model

• Provides companies with the alternative of mailing a one page Notice of Internet Availability of Proxy Materials (“Notice”) and providing proxy materials electronically through an Internet web site instead of traditional paper delivery of all proxy materials under Rule 14a-16.

• Three Options for Compliance:– Notice-Only Delivery

• Proxy materials posted on web site and only the Notice mailed to shareholders– Full Set Delivery

• Hard copies of all proxy materials mailed to shareholders, with Notice information incorporated in proxy statement and proxy card and proxy materials posted on web site and mailed to the shareholders

– Hybrid Delivery• Notice-only delivery to some shareholders and Full Set delivery to others.


Notice & Access Model

40 days before the annual meeting

Wed-PostingProxy materials on a specified IR web site pages

MailingFor notice only nor

full set of proxy materials

to shareholders

File with the SECProxy materials,

Including Notice, with the SEC

( file DEF A14)


Who Can Use Notice & Access?A proxy statement is intended to provide shareholders with the information necessary to make an informed voting decision proposals for which proxies are solicited • Available for issuers, intermediaries and soliciting

persons other than the issuer • Specific model used at the annual shareholder

meeting– Proxy holders do not have to follow shareholder

recommendation


Delivery of the Notice• If Notice-only or Hybrid delivery is used, the Notice must be sent

at least 40 calendar days prior to the annual meeting date– Note that the Notice must actually be completed 55-60 days prior to the

meeting date to give intermediaries time to create the voting instruction cards for beneficial holders

• Only two things can accompany (or be combined with) the Notice:– Notice of meeting required by state law (if permitted under state law)

• For example, Section 222 of DGCL requires a registrant to give shareholder 10 or 50 days of notice prior to the meeting

– Reply card to request paper or e-mail copies of proxy materials• For any Notice-only deliveries, a proxy card cannot be sent with

the first Notice


Ability to VoteRule 14a-3 of the Exchange Act prohibits solicitation of a shareholder proxy unless the shareholders has been provided with a written proxy statement containing the information required by Schedule 14-A• Concurrently with delivery of the Notice, the issuer must

provide a means of voting – but not without access to proxy materials– Electronic voting platform linked to the Web site– Telephone number on the Web site

• For Notice-only delivery – hard copy of proxy card can be sent 10 calendar days or more after the Notice

• For full set delivery-Must be accompanied with another copy of the Notice or with the proxy materials


Content of the Notice – Required• Plain English text• Bold-face legend with web site address and recommended deadline for

requesting paper copies• Date, time and location of the annual shareholder meeting• Clear and impartial description of matters to be voted on and issuer’s

recommendations – but no supporting statements• Indication that the communication is not a form of voting and presents only an

overview of the more complete proxy materials, which are available by internet or mail

• List of proxy materials available on the web site• Toll-free phone number, e-mail address and Internet address for requesting

paper or e-mail copies (not required for Full Set delivery)• Any identification numbers needed to vote• Instructions on how to access the proxy card – no execution of proxy without

access to proxy materials• Information about attending the meeting and voting in person and any

identification the shareholders needs to enter the meeting


Optional content and its delivery• Optional content of the notice

– State law meeting notice– Advisory statement that is no personal – Any Information is required– Picture, logos, design (mostly brevity) that is not misleading

• Upon request, paper or e-mail copies must be sent to shareholders who receive Notice-only delivery:– Until the conclusion of the meeting, materials must be sent

within 3 business days of request and, if paper is requested, they must be sent by first class mail (or similar prompt service)

– Paper or email copies can be requested up to one year after the meeting – but only “prompt” delivery is required

– Request can be for the particular meeting or for all future solicitations


Web Site Posting• Direct access to materials on publicly accessible web

site• Materials accessible on the site at no charge from

the time the Notice (or full set of materials) is sent until the end of the meeting

• Materials must be:– Readable and readily searchable on screen– Printable like a paper copy (pdt)

• Amended/additional materials posted (and filed) no later than the day they are first made public


Rule of Delivery for Beneficial Owners

• Intermediary must request materials from issuer within 3 business days of owner’s request

• Issuer must send to intermediary within 3 business days of intermediary’s request

• Intermediary must send to shareowner within 3 business days of receipt

Issuer

Intermediary

shareowner

3

3

3Right to request and receive Materials

request

send

sendNo required

days to request


Third Parties in a Proxy Voting Process• Transfer Agent• Proxy Service Providers• Proxy Solicitors• Vote Tabulators• Proxy Advisors


Concerns Raised by the Notice & Access Model

• Misuse of shareholder personal information• Over/Underestimation of number of printed

copies• Timing and coordination• Additional solicitation efforts• New or uncertain costs


Last Hurrah Campaign


Corporate Activists and their demands

M&A activism

Balance sheet activism

Governance activism

“Operational” activism

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• Process to sell the company• Breaking up the company• Spin off

• More dividend payout• Share buyback• More profit, high margin

• Removal of CEO• Removal of CFO• Ability to work under their leadership (new oversight group)• Best practices• Removal of directors• Board accountability• Nominee experience, track record and independence and

conflict of interest


Shareholder Activism in M&A Situations

•Shareholder reaction to announced transaction•Wait and see•I do not sell•I will exercise my appraisal right

•Activist’s opportunity during M&A• Supermajority shareholder approval requirements• Class votes• Appraisal rights and its various games (DGCL 622,…)• Third party consents as a condition• Special regulatory approvals

– Analyze the situation clearly– Is there any shareholder value added? good argument against

activists

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Peri- activism checklists: preemptive conflict strategies– Put a basic strategy in place

• Hire management, lawyers, bankers, IR/PR, proxy solicitors• Conduct regular update calls and surveys

– Assess and address vulnerabilities• Operational / strategic weaknesses• Structural defenses• Corporate governance policies and key proxy deadlines

– Focus on comparable method• Track peer performance

– Key metrics include: 1-, 3-, 5-yr stock performance, ROI, executive compensation comparisons, governance policies (number of BoD,…)

– Roadshow campaign• Make presentation about company result of operation, strengths• Use planned events (e.g. earnings) to reinforce progress against benchmarks, metrics and competitors• Consider increasing frequency of momentum (“positive”) announcements, conferences and festivals –

operating milestones, key hires, new guidance, new policies etc. for awareness and support from media and 3rd parties

– Target 3rd party supporters• Institutional investors; sell-side/industry analysts, customers, business partners, business/trade

organizations, corporate governance gurus ( Prof Bebchuck,…)– Increase media relationships

• conduct interviews about your company’s performance or other easy topics (events) to get news headlines

– Identify media spokespeople • Train the best people, give microphone to your independent board of directors (as independent insider

talking for the company) 31


Advanced preparation is critical

– Stay one step ahead• Hedge fund and other strategy to get board seat expose management

missed target or board conflict of interests– See your company in the eyes of a short term investors

• What past decisions (e.g., acquisitions) is the activist likely to focus on?• What data does the activist value? what approach does the activist

propose last years?• Analyze “capital allocation” strategies and all its alternatives (parameters

strategies)• Much better if done before any proxy fight

– Build and maintain credibility with shareholders and analysts before activists show up for a fight

– Consider the takeover landscape in your industry• Who might be tempted to acquire your company for operational or synergy

reasons or as a result of industry dynamics?

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Warning Signs

– Be alert to early warning signs, such as:• Recent investor or company events with too many

questions from the audience• Analyst and media reports suggesting structural changes• Changes in shareholder base – stealth acquisitions• Review past events and news from corporate activist for

hints

– Be ready for the first phone call• Be polite, clear and firmed for your first conversation• Establish internal and external teams, including advisors

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Pressure strategy from hedge fund and other corporate activists

• Send private letters threatening public action• Demand board seat• Request meetings with management and/or board of director

issue open letters to the board• Buy full page of newspaper• Become aggressive with management on analyst calls• Threaten ‘withhold the vote’ campaign• Threaten to agitate against Board’s preferred strategic alternatives or

to vote against board approved M&A activity• Team up with other institutional and/or corporate activists

shareholders• Seek to stir-up 3rd party interest and rally other investors• Disclose to shareholders management personal e-mails, address, cars

and/or homes


What can the Board expect?

– Opposing strategy• Company, Board and management team go under a microscope• Greater scrutiny by investors and media• No strategy or statement goes unchallenged in the media• Directors and management open to public criticism

– Political alike campaign• Battle for shareholder support / votes• Increasing use of rhetoric and manifestations• Third party advocates needed to counter attacks• Strategic, “rapid response” communications required

• Ready for ‘rapid response’ to any public criticisms

– Control the forum for good message delivery• It is o.k to show anger to trained agent provocateur in order to succeed

or media will label you as a weak and incompetent

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What can the Board and management do?– Roadshow for public relations strategy

• Need to maintain consistency of message along with rapid response to dissident attacks with good headlines (Taiwan style not Japanese)

• Public ad to solicit shareholders support does not require SEC filing (if done by 5+% owners), long Island lighting company vs Barbash (Maurice) and al, (2d Cir. 1985). ‘SEC regulations do not prevent such ad, nor could they w/o violating fundamental 1st amendment rights of free speech’

– Board will be kept informed of dissident activity and proxy communications

• Press releases, media coverage, analyst reports, SEC filings, etc.– Independent Board representatives should join management in

attending ISS meeting and bringing the management message to the media, shareholders and 3rd party

– Screen phone calls (office and cell) and house address• Be ready to respond calls from dissidents, they will get the number. You can find

them sitting in front of your door early in the morning– Board meeting calendars should remain confidential– Individual directors may be targets of attacks

• Give independent director microphone to defend their peers36


IR Tactics and Considerations

– Regular, targeted one-on-one meetings• Major vehicle for communicating with investors and sell-side analysts (invite

them to call you for follow-ups, keep a lot of your business cards with you all the time)

• No substitute for in-person meeting with a CEO and / or executive team• Controlled forum for delivering messages

– Good protocol: hand up, line, 10 min for a question,…

– Large format or group meetings must be carefully considered• Limit group meetings with representation of all groups (including dinners

and lunches meetings)• Level of control is significantly shifted to you• Fight “godfather/ mob’ mentality, bloodless coup d'état alike

– Sell-side needs to be educated• Focus on SWOT- strength, weakness, opportunity and threat when holding

meeting with them

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Key documents in a proxy contest– Shareholder “fight” letters

• Shareholder proposals sent by dissident and Company to shareholders multiple times, accompanied by “fight letters”

• Can be used as press releases or 8-K filings• Consider whether Company letters can be also used for PRs to send to reporters

– SEC filings• Letters, press releases, presentations, statements can all be filed as 8-K (Company),

13-D / 13-DA (dissident, 5+% of stock owner) or 14A (Company)• 8-K filings (consider filing item 8.1)

– Presentations• Used in meetings with investors and proxy advisory firms• Helps educate media and other key constituencies about your company data

– Press release• Fast and furious method to reach all audiences and directly communicate key message

against activists– Standby statements

• Responsive (talking to media corps)– Ancillary communication materials

• Company websites (letter to/from government officials, community leaders, 3rd party, retirees, others)

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Typical Proxy Fight Timeline45 To 40 days before the annual meeting

Filing of definitive proxy materials, issuing a press release with first fight letter, mailing the ‘stop, look, listen’ letter

39 to 32 days Mailing a second fight letter, issuing a press release

31 to 24 days Mailing the 3rd fight letter, issuing a press release

23 to 14 days ISS meetings; Glass-Lewis decisions outreach; issuing press release with the fourth fight letter

14 to 7 days ISS, Glass-Lewis decisions; both parties issuing press releases when decisions are made

10 to 7 days Mailing the fifth fight letter, issuing a press release

5 to 2 days Issuing open shareholder letters as press release

Day 0 Annual shareholder meeting

Adapted from the corporate board, Rachel Posner


Dealing with Corporate Activism Effectively– Continue to focus on the business– Renew focus on investor Communication– Anticipate threats– Review advance notice deadlines for shareholder proposals and

nominations to strike the right “balance”– Financial preparedness, know your company weak data and be

prepared to answer them- readiness!– Legal/structural preparedness– Focus on the activist’s agenda, 13D and track their record, it will

give you advantages against activists– Be prepared to expose fight; do not allow activists to frame the

public agenda with bad news– Litigation is commenced infrequently (rarely sue, bad PR, be ready

to defend yourself for shareholder proposal lawsuits)– Negotiation may be a productive path – settlement should avoid

admission of guilt40


Responding to the Corporate Activist’s Attacks

• Known when and when not to respond to activist attacks• Think ahead• Establish a single contact and maintain unified front• Stay focused on the facts• Know your company weaknesses and prepare a defense, you

must be consistent and speak with one voice from a previous closed door meeting

• Do not ignore activists, communicate and be flexible and listen to them

• Be willing to negotiate and/or negotiate of circumstances warrant, but do not let ‘godfather’ mentality to intimidate you

• Exit questions:– Have dissidents met their burden of proving that board or other

changes are warranted?– If so, is the dissident proposal more likely to help maximizing

shareholder value?

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Fiduciary Responsibilities of a Board When Responding to Corporate Activists

– Board as negotiating representative• Board cannot be passive –should be active and engaged• Smith v. Van Gorkom: a shareholder vote does not absolve the Board• To negotiate effectively, you must know how far is too far and have the power extinguish the

negotiation• Directors’ duty in context of a decision to sell control is to obtain the highest value

reasonably available for shareholders (the Revlon rule)

• I will add that independent board members are well positioned to represent the company because they are perceived as outsider and impartial negotiator with insider knowledge

– Takeover defenses enhance Board’s negotiating power

– When the Board responds to activists and proposals not seeking a takeover, it must focus on due care and business judgment rule. BoD must be able to take into account the long term interests of the corporation while maximizing shareholders value

– If an activist gains minority representation on the Board, the Board still should attempt to make decisions collectively and collegially, and act as a group – board counsel can play a critical role in healing after ugly proxy fight

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Influential & “independent” outsiders are often key voices in determining outcomes

– Institutional Shareholder Services (ISS) • Leading proxy advisory firm in terms of size and influence • More than 1,200 clients: institutions, mutual funds, corporate and public pension funds, hedge funds,

college endowments and other ISS followers• Many institutions strictly follow ISS recommendations when voting their shares• Reviews issues separately with both sides in a proxy contest before releasing its recommendation to

clients• 10-14 days before annual shareholder meeting, it issues its report• Opine now on tender offers

• It does influence a lot of voters

– Glass Lewis & Co. • Owned by Ontario Teachers’ Pension Plan Board• Major competitor of ISS• Its clients include mutual funds, index and public pension funds • In 2010, Glass Lewis merged with Proxy Governance• His public forum called “Proxy Talk” is a major public debate• Glass Lewis can influence 10% or more of the vote in a proxy contest• It favors minority representation for dissident and influence a lot of voter like ISS

– Egan-Jones Proxy Services• Provides voting recommendations on a few companies• Unlike Glass Lewis it does not automatically make recommendation against ISS; at the same token, it does

not hold any public contest forum• It is conference calls oriented

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ISS and Glass Lewis & co proxy fights factors for examinations

– Long-term performance (Total Shareholder Return vs. market and peers)

– Earnings and cash flow trends– Strong Board oversight (vs. an “royal” CEO)– Board accountability (e.g., anti-takeover provisions,

ignoring proposals from shareholders)– Corporate governance “best practices”– Nominee experience, track record, independence and

conflict of interest– Ability to work constructively with activists after the proxy

fight– Length of ownership (“owners align with residual

claimants interests ” versus “renters align with low risk)– Market reaction to dissident fight

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Form 8-K• A company is required to file under item 5.07 the results of a

shareholder vote within 4 business days• Requirements:

– Indicate date of the meeting and whether it was annual or special meeting

– Provide name of each director elected at the meeting– Describe briefly each matter voted upon at the meeting– Disclose the number of votes cast for, against or withheld– Disclose the number of abstentions and broker non-votes– Provide a tabular representation with respect to each nominee for

office– Describe terms of any settlement between the registrant and any

other participant terminating any solicitation including cost or anticipated cots to the registrant

• After 150 days after the nonbinding shareholder vote of say on pay, the company must file Form 8-K under item 5.07


SEC Comments• Trends in SEC comments:

– Peer group and benchmarking • describe how peers selected and data is used; disclose where

actual payments fell in range

– Performance targets • disclose any material performance targets; identify the specific

targets; disclose actual results

– Compensation Discussion and Analysis • “how” and “why” • The SEC staff questions the use of the simplified method when

historical data appears to be available or the characteristic of the awards are not plain vanilla


References Reg 14ARule 14a-1 definitions

Rule 14a-2 Solicitations to which Rule 14a-3 to Rule 14a-15 apply

Rule 14a-3 Information to be furnished to security holders

Rule 14a-4 Requirements as to proxy

Rule 14a-5 Presentation of information in proxy statement

Rule 14a-6 Filing requirements

Rule 14a-7 Obligations of registrants to provide a list of, or mail soliciting material to security holders

Rule 14a-8 Shareholder proposals

Rule 14a-9 False or misleading statements

Rule 14a-10 Prohibition of certain solicitations

Rule 14a-11 [Reserved]

Rule 14a-12 Solicitation before furnishing a proxy statement

Rule 14a-13 Obligations of registrants in communicating with beneficial owners

Rule 14a-14 Modified or superseded documents

Rule 14a-15 Differential and contingent compensation in connection with roll-up transactions

Rule 14a-16 Internet availability of proxy materials


References Reg 14a (end)Rule 14a-17 Electronic shareholder forums

Rule 14a-18 Disclosure regarding nominating shareholders and nominees submitted for inclusion in a registrant’s proxy materials pursuant to applicable state or foreign law or a registrant’s governing documents

Rule 14a-20 Shareholder approval of executive compensation of TARP recipients

Rule 14a-21 Shareholder approval of executive compensation, frequency of votes for approval of executive compensation and shareholder approval of golden parachute compensation

Rule 14a-102 [reserved]

Rule 14a-103 Notice of exempt solicitation, information to be included in statements submitted by or on behalf of a person pursuant to Rule 14a-6(g)

Rule 14a-104 Notice of exempt preliminary roll-up communication, information regarding ownership interests and any potential conflicts of interests to be included in statements submitted by or behalf of a person pursuant to Rule 14a-1(b0(4) and Rule 14a-6(n)

Rule 14b-1 Obligation of registered brokers and dealers in connection with the prompt forwarding of certain communications to beneficial owners

Rule 14b-2 Obligation of banks, associations and other entities that exercise fiduciary powers in connection with the prompt forwarding of certain communications to beneficial owners

Sec compliance and disclosure proxy rules and procedures series 13

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Transcript of Sec compliance and disclosure proxy rules and procedures series 13