On November 5, the SEC announced two significant proposals affecting shareholder voting. One proposal would impact proxy advisory firms, requiring them to (1) disclose material conflicts of interest, (2) give issuers the opportunity to review and comment on advisory firm voting recommendations, and (3) provide a hyperlink to the issuer’s response to the advisory firm’s voting recommendation. Items (2) and (3) would be available only to issuers who file definitive proxy statements at least 25 days prior to their annual meetings, and the review period would depend upon the length of the period between the definitive filing and the meeting date. The proposal would also amend the definition of “solicitation” and provide for confidentiality of communications between issuers and advisory firms.
The second proposal would impact shareholder proposals, including (1) changing the holding period (but not the minimum amount of ownership) needed to be eligible to submit proposals, (2) limiting the number of proposals a holder can submit, and (3) increasing the levels of support a proposal must obtain to be resubmitted at subsequent meetings.
Both proposals are subject to a 60-day comment period, and both are likely to generate extensive – and possibly heated – comments from investors and issuers alike. However, because the proposals cannot be acted upon until at least January, they will not be effective for the peak proxy season in 2020.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
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