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US Securities and Corporate Governance

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Glass Lewis’ 2020 Proxy Season Review: Boards Become Increasingly Younger

Glass Lewis (“GL”) recently issued its 2020 Proxy Season Review (U.S.) (the “Report”) covering the U.S. 2020 Proxy Season (i.e., January 1, 2020 through June 30, 2020).  GL reported on certain 2020 shareholder voting trends and results, as well as certain of GL’s voting recommendations.  The statistics and information included below (1) cover only a portion of the Report and (2) refer to the U.S. 2020 Proxy Season and to the U.S. companies covered by GL, unless otherwise indicated.

Governance and Disclosure

  • Boards are becoming increasingly younger; for example, for companies in the Russell 3000 Index (the “Russell 3000”), (1) the average age for new director nominees decreased to 54.8 years from 55.9 and 57.7 years in 2019 and 2018, respectively, and (2) the average age of all directors decreased to 61.2 years from 61.8 and 63.5 years in 2019 and 2018, respectively;
  • For Russell 3000 companies, the average tenure of men on boards decreased slightly to 12.4 years from 12.9 years in 2019, while the average tenure of women on such boards increased more significantly to 7.2 years from 6.0 years in 2019;
  • Approximately 13.2% of boards did not include women, which was reduced from 18.8% in 2019 and 26.2% in 2018;
  • The number of women in board leadership positions at Russell 3000 companies has increased each year during the past three years; however, women are more likely to serve as committee chairs rather than as board chairs, vice chairs or lead directors; men hold approximately 94.5% of chair

U.S. public companies should evaluate their preparedness and triggers to adopt a rights plan

As public companies watch sharp market declines in their stock prices, many are wondering how they should respond.

A number of companies have adopted shelf rights plans that are reviewed by the board of directors on a “clear day” — in the absence of any takeover or activist activity — and at reasonable intervals. The plan would be adopted at a future date if deemed warranted, after consulting with legal and financial advisors.  Shelf plans became popular over the past 15-20 years as institutional investors and proxy advisors expressed strong opposition to rights plans generally, unless short-term in nature and approved or ratified by shareholders.

Typically, a shelf rights plan can be adopted quickly by the board in response to a threat. However, it should be noted that HSR rules only require notification where the acquirer would hold total voting securities in excess of $94 million, which represents almost 20% of a $500 million market cap company.  And a Schedule 13D needs only be filed within 10 days after acquiring beneficial ownership of more than 5%.  Further, state takeover statutes may have thresholds of 15% or 20% beneficial ownership.  As a result, in light of lower stock prices and high trading volumes, a potential acquirer might accumulate a large percentage of a company’s shares before the board becomes aware of that fact and is able to adopt the plan.

Under Delaware law, the adoption of a rights plan in the absence of a takeover threat would likely be subject to

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