S&C Critical Insights

Lessons from the 2022 Proxy Season—Episode 4: Special Meeting Thresholds and Other Governance Proposals

S&C Corporate Governance co-heads Marc Treviño and Melissa Sawyer conclude their discussion of shareholder proposal trends from the 2022 proxy season by discussing governance proposals.

 

They note that nearly all of the increase in shareholder proposals over the past decade is due to environmental, social and political proposals, as opposed to governance proposals. Still, governance proposals raise important issues and their proponents have become sophisticated about how they submit these proposals. 

 

Proposals seeking to lower the threshold of ownership needed for shareholders to call a special meeting was the largest category of structural governance proposals this year. Marc and Melissa note that the companies that defeated these proposals mostly demonstrated that the requested threshold would essentially give too much power to a single shareholder or to a couple of large holders.

 

Click here to learn more about S&C’s 2022 Proxy Season Review and watch our recent webinar.

Lessons from the 2022 Proxy Season—Episode 3: Social and Political Proposals

S&C Corporate Governance co-heads Marc Treviño and Melissa Sawyer continue their discussion of shareholder proposal trends from the 2022 proxy season. In this episode of S&C’s Critical Insights, they explore social and political proposals, including in increase in those from so-called “anti-ESG” proponents.

 

This year saw big growth in social and political proposals, with an 81 percent increase in civil rights, human rights and racial equity impact-related proposals. Marc and Melissa explore the different categories of social and political proposals, including those calling for racial equity audits and civil rights audits and challenges to corporate political spending. In prior years, this category was largely taken up by DEI-related proposals. This year, proposals increasingly focused on workplace characteristics, harassment, inadequate paid sick leave, employee health and safety issues.

 

Click here to learn more about S&C’s 2022 Proxy Season Review and watch our recent webinar.

Preparing Companies for Universal Proxies

In this episode of S&C’s Critical Insights, Sarah Payne, John Savva and Melissa Sawyer are joined by Kelly Sullivan, partner at communications firm Joele Frank, and Scott Winter, managing director at proxy solicitation firm Innisfree, to discuss the new universal proxies required by the Securities and Exchange Commission. They discuss how companies can prepare for these proxies, which must include all director nominees properly presented for election, and what to expect for the upcoming season.

The group discussed how the new ballots will likely lead to more activism, especially from smaller investors, and how companies can respond. On a positive note, the new proxy process has spurred many companies to refresh their bylaws to better address this new process.

Lessons from the 2022 Proxy Season—Episode 2: Environmental Proposals

Corporate Governance co-heads Marc Treviño and Melissa Sawyer and associate June Hu continue their discussion of shareholder proposal trends from the 2022 proxy season, discussing trends in environmental proposals, as well as how to prepare for 2023.

Environmental proposals have steadily increased over the past decade, with an explosion in 2021 and 2022. In 2021, these proposals rose 40 percent year-over-year and this year they jumped a further 38 percent.

With proponents more reluctant to settle and the Securities and Exchange Commission less likely to grant no-action relief, 78 percent more environmental proposals reached a shareholder vote compared to 2021. One of the most notable trends was the increased granularity of these proposals. Correlated with this increasing granularity, however, the 2022 environmental proposals received lower levels of shareholder support. 

Looking forward, they expect that companies will have an even harder time negotiating a compromise or excluding environmental shareholder proposals, which may become even more granular in their demands.

Learn more from S&C’s 2022 Proxy Season Review and watch our recent webinar.

Lessons from the 2022 Proxy Season—Episode 1: The Impact of the SEC

Corporate Governance co-heads Marc Treviño and Melissa Sawyer and associate June Hu open a four-part series discussing prevalent shareholder proposal trends from the 2022 proxy season. They outline the significant impact of recent actions by the Securities and Exchange Commission on this proxy season and discuss how SEC rulemaking could affect the 2023 season.

 

SEC Staff Legal Bulletin No. 14L—which reversed prior SEC guidance and altered the staff’s approach to the ordinary business and economic relevance exclusions—had a significant impact on the submission and voting trends this year. The SEC’s new approach correlated with a significant decrease in the likelihood of companies obtaining no-action relief, as the staff now assesses whether a proposal raises issues with a broad societal impact in determining whether a proposal is excludable.

 

As a result, shareholder proposals made it to a vote much more frequently this proxy season. Yet the number of passing proposals decreased, as shareholder support for social, environmental and political proposals decreased after steadily rising throughout the last decade.

 

Looking ahead, they expect ESG proponents to continue to submit more proscriptive and granular proposals to attract shareholder support. They also expect increased focus by the SEC on director qualifications, cyber security and human capital management disclosure.

 

Click here to learn more about S&C’s 2022 Proxy Season Review and watch our recent webinar.

Three Corporate Tax Changes Under the Inflation Reduction Act

: In this episode of S&C’s Critical Insights, Davis Wang and Isaac Wheeler, co-heads of S&C’s Tax Group, are joined by Lauren Boehmke, partner in the Firm’s M&A practice, to discuss the recently enacted Inflation Reduction Act and a few of its key impacts on companies and corporate transactions.

 

They analyze three key changes introduced by the Act: the corporate minimum tax, the one percent buyback tax and clean energy initiatives. 

 

Supreme Court Business Review: Viking River Cruises v. Moriana and Southwest Airlines Co. v. Saxon

In the fourth episode of S&C’s Supreme Court Business Review series, hosts Judd Littleton, Julia Malkina and Morgan Ratner are joined by partners Diane McGimsey and Annie Ostrager to discuss two employment arbitration cases from the past term and their implications for employers.

In Viking River Cruises v. Moriana, the Supreme Court held that the Federal Arbitration Act preempts a California Supreme Court ruling insofar as it prohibits bringing certain state law claims to arbitration and reaffirmed that no party can be made to arbitrate a claim without expressly agreeing to do so. In Southwest Airlines Co. v. Saxon, the Court held that certain airline workers, baggage handlers and some of their supervisors, qualify for an exemption under Section 1 of the FAA for workers involved in interstate commerce or the transportation of goods or people.

S&C Critical Insights – Impact of Illumina/GRAIL on M&A Deals Going Forward

In this episode of S&C’s Critical Insights, Melissa Sawyer, the Global Head of S&C’s M&A practice, is joined by the Co-Heads of the Firm’s Antitrust group, Renata Hesse and Juan Rodriguez, to discuss recent developments surrounding the vertical merger of Illumina and GRAIL, which make DNA sequencing devices and blood-based tests for cancer screening, respectively.

 

In the United States, an administrative law judge recently denied the Federal Trade Commission’s request to prohibit the transaction on competition grounds. In Europe,  the European Commission opened a highly publicized suspensory investigation into the transaction, which is seen as a test case for the EC’s recently revised policy on reviewing mergers that do not require mandatory reporting to the EC. The partners discuss these developments and how they might impact M&A deals going forward, especially in the pharmaceutical and tech sectors.

Impact of Proposed European Union ESG Laws and Regulations on non-EU Issuers

In this episode of S&C’s Critical Insights, Paris partner Olivier de Vilmorin, London partner John Horsfield-Bradbury and London associate Sarah Mishkin discuss the unexpected ways that the European Union’s new ESG laws and regulations may affect U.S. and other non-EU companies. They discuss how the laws will apply to certain companies with EU-listed securities or whose operations in the EU meet certain thresholds.

 

They also touch on how the new climate-related disclosure requirements proposed by the U.S. Securities and Exchange Commission compare to the new EU laws.

Recent Developments Concerning ESG-Labelled Bonds and ESG Ratings

In this episode of S&C’s Critical Insights, Vanessa Blackmore, Kirsten Rodger and Sam Saunders take a look at recent developments in the regulation of ESG-labelled bonds and ESG data and rating services, focusing in particular on recent UK regulatory statements signaling that use of proceeds frameworks are likely to be subject to enhanced regulatory scrutiny. They also touch on ESG developments globally, noting that international businesses are likely to find themselves facing multiple, complex ESG reporting requirements, with the potential for increased regulatory scrutiny and liability for misstatements.