Deal Diary

As companies begin preparing for the 2023 proxy season, we note that Institutional Shareholder Services Inc. (ISS) and Glass Lewis, the leading providers of corporate governance solutions and proxy advisory services, issued updated benchmark policies (proxy voting guidelines), which can be found here and here, respectively. The updated proxy voting guidelines generally focus on board accountability and oversight considerations and address topics such as climate accountability, board diversity, shareholder rights, corporate governance standards, executive compensation and social issues. What follows is a summary of the proxy voting guidelines published by ISS and Glass Lewis for the 2023 proxy season.

On November 17, 2021, the Securities and Exchange Commission (SEC) proposed amendments to its rules governing proxy solicitations. The proposals seek to address concerns by investors and others that the current rules may impede and impair the timeliness and independence of proxy voting advice and subject proxy voting advice businesses (PVABs) to undue litigation risks and compliance costs.

On November 17, 2021, the Securities and Exchange Commission (SEC) adopted final rules requiring the use of a universal proxy card by all parties in contested elections for directors at shareholder meetings. The rules require registrants and dissidents to provide shareholders with a proxy card listing all the registrant and dissident director nominees presented for election. Shareholders will no longer have to choose between submitting their votes on either the registrant’s proxy card or the dissident’s. Putting all candidates on the same ballot will make proxy voting more closely resemble voting in person at a meeting, as shareholders will be able to select their preferred combination of candidates to serve on the board.

As noted in our blogpost last week, Gary Gensler, Chair of the U.S. Securities Exchange Commission, has asked the Commission staff to consider updates to Rule 10b5-1 in an effort to “address cracks” in the current insider trading regime and otherwise “freshen up” the rule. In prepared remarks given to the Commissions’ Investor Advisory Committee (IAC) on June 10, Gensler reiterated his concerns about 10b5-1 trading plans.

On April 14, 2021, Commissioner Hester M. Peirce released a public statement imploring the Securities and Exchange Commission (SEC) to rethink the push to require disclosure of specific environmental, social and governance (ESG) metrics in light of the SEC’s recent request for comment on climate change disclosures and actions related to ESG matters.

On April 8, 2021, John Coates, the Acting Director of the Securities and Exchange Commission’s (SEC) Division of Corporation Finance, released a public statement expressing concern about claims of some practitioners and commentators regarding special purpose acquisition companies (SPACs). In particular, Mr. Coates questions the view that a private company faces less exposure to securities law liability when “going public” through a business combination with a SPAC (a “de-SPAC” transaction) than when employing a conventional IPO structure. After emphasizing the significant investor protections concerns this assertion raises, Mr. Coates refutes the claim by describing the manner in which the existing federal securities law regime protects SPAC investors. Mr. Coates also proposes an interpretation of the Private Securities Litigation Reform Act (PSLRA) that would limit the scope of its safe harbor when SPAC participants make forward-looking statements in connection with de-SPAC transactions. Despite the customary disclaimer cautioning readers that the public statement only expresses the views of Mr. Coates and not those of the SEC, the public statement may provide insight as to how the SEC Staff is thinking about de-SPAC transactions. We summarize each of Mr. Coates’s points below.

On March 31, 2021, the Securities and Exchange Commission (SEC) provided public statements from Acting Chief Accountant Paul Munter and from the Division of Corporation Finance addressing Special Purpose Acquisition Companies (SPACs). Although each of the statements were distinct and addressed different issues, the primary focus of both was to raise awareness of critical accounting, financial reporting and governance considerations that a private operating company should carefully consider and address prior to consummating a business combination with a SPAC.

On August 26, 2020, the Securities and Exchange Commission (SEC) voted to adopt amendments that modernize the description of business (Item 101), legal proceedings (Item 103) and risk factor disclosures (Item 105) that registrants are required to make pursuant to Regulation S-K. The amendments are intended to improve the readability of disclosure documents and discourage repetition and reduce the disclosure of information that is not material, as well as simplify compliance for registrants. The final amendments will be effective 30 days after publication in the Federal Register.