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US Securities and Corporate Governance

Shareholder Proposals

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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

2021 Annual Shareholder Meetings – Avoiding a Super Spreader Event

As COVID-19 rages on, companies are again flocking to virtual annual meetings for the 2021 proxy season, but with one important difference:  the luxury of time.  Many companies are already exploring retention of virtual annual meeting providers and alternatives for video and real-time Q&A, as well as drafting fulsome disclosure about meeting logistics in their proxy materials to address concerns raised by investors, the SEC and others with respect to some pitfalls during the 2020 proxy season.

Service Providers and Technology.  For 2021, an issuer will have additional time to select an appropriate provider of a virtual meeting platform.  The most widely used vendor for hosting virtual meetings is Broadridge Financial Solutions, Inc., which reported that it hosted 1,494 virtual shareholder meetings during the first six months of 2020.  Other service providers, such as stock transfer agents, also provide such services.  A few companies have even arranged to facilitate the virtual component of an annual meeting via Zoom.

In 2020, some companies were caught off-guard by technology glitches.  For 2021, issuers should be in a position to anticipate technology issues and to put contingency plans in place to address them.  Issuers can follow best practices for virtual meetings by, for example, putting in place technical support lines for the duration of their meetings.

Format and Rules of Conduct (including Q&A).  Companies need to decide whether a meeting will be virtual-only, physical-only or a hybrid.  For any virtual component, they need to decide whether the access will be

Divided SEC increases Rule 14a-8 shareholder proposal requirements

On September 23, 2020, a divided SEC adopted amendments to the Rule 14a-8 shareholder proposal rule by a 3-2 vote. The changes, among other things:

  • increased the stock ownership requirement for eligibility to submit a proposal,
  • strengthened certain procedural requirements, and
  • raised the thresholds to resubmit a proposal that was previously voted on by shareholders.

Click here for a client alert describing the amendments in more detail.

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