Special Meeting Proposals – Harvard Law Review

“. . . .  I. Positions of the Proxy Advisory Firms

A. Institutional Shareholder Services Inc. (“ISS”)

With respect to proposals related to special meetings, consistent with its position in 2015, ISS generally recommends:

  • voting against proposals that restrict or prohibit a shareholder’s right to call a special meeting; and
  • voting for proposals that provide shareholders with the ability to call a special meeting.

ISS prefers a 10% minimum shareholding threshold as opposed to the 20-25% threshold typically favored by management. Notwithstanding its preference, ISS recommended a vote “for” nearly all shareholder proposals in 2016, even those that proposed a threshold greater than 10%. Likewise, ISS recommended a vote “for” 11 of the 12 management proposals submitted to a vote in 2016, even though none of them proposed a threshold of 10% and one was submitted together with a competing shareholder proposal.

ISS’s recommendations suggest that its view is that some right to call a special meeting is better than no right.

Equally important is ISS’s policy on substantial implementation. If ISS determines that a proposal that received majority support was not substantially implemented by the board, ISS will recommend a vote “against” one or more directors the following year. Failure to substantially implement the proposal includes situations where the board implements the proposal at a different ownership threshold than the one proposed and/or where the board imposes significant limitations on the right. If, however, the company’s shareholder outreach efforts reveal that a different threshold is acceptable to the company’s shareholders, “and the company disclosed these results in its proxy statement, along with the board’s rationale for the threshold chosen,” ISS has indicated that it will take this into account on a case-by-case basis. ISS will similarly consider the ownership structure of the company. With regard to limitations on the right to call a special meeting, ISS finds “reasonable limitations on the timing and number per year of special meetings” to be “generally acceptable.”

ISS considers the right of shareholders to call special meetings beyond just the context of shareholder proposals. For instance, ISS takes into account the “inability of shareholders to call special meetings” as a factor in considering whether to recommend a vote against an entire board of directors where the board “lacks accountability and oversight, coupled with sustained poor performance relative to peers.”

Additionally, ISS considers the special meeting right when calculating its Governance QuickScore in both the Board Structure Pillar and the Shareholder Rights & Takeover Defenses Pillar. For the former pillar, ISS considers a unilateral board action that diminishes shareholder rights to call a special meeting to be an action that “materially reduces shareholder rights,” which could negatively impact a company’s score.

In calculating the latter pillar, ISS takes into account “whether shareholders can call a special meeting,

and, if so, the ownership threshold required.” It also considers whether there are “material restrictions” to the right, which include restrictions on timing, “restrictions that may be interpreted to preclude director elections,” and restrictions that effectively raise the ownership threshold.

B. Glass Lewis

Consistent with its position in 2015, Glass Lewis is in favor of providing shareholders with the right to call a special meeting, preferring an ownership threshold of 10-15%, depending on the size of the company, in order to “prevent abuse and waste of corporate resources by a small minority of shareholders.” In forming its recommendation, Glass Lewis also takes into account several other factors, including whether the board and management are responsive to proposals for shareholder rights policies, whether shareholders can already act by written consent and whether anti-takeover provisions exist at the company.

In addition, Glass Lewis considers the right to call special meetings an “important shareholder right” and recommends voting against members of the governance committee who hold office while management infringes upon “important shareholder rights,” such as when the board unilaterally removes such rights or when the board fails to act after a majority of shareholders has approved such rights.

II. Positions of Large Institutional Shareholders

While their current positions on special meeting proposals vary, the major institutional investors generally favor shareholders having the right to call special meetings and usually focus on a few key variables, e.g., the minimum ownership threshold associated with the right. For instance, State Street Global Advisors votes for proposals that set the threshold at 25% or less but not less than 10%, and BlackRock supports proposals that set the threshold at 25% or less but not less than 15%. Conversely, other investors, like Fidelity Management & Research Co., recommend voting for a proposal if the threshold is 25% or more. Still others, such as Vanguard, support shareholders’ right to call special meetings (for good cause and with ample representation) and will generally vote for proposals to grant the right, irrespective of the minimum ownership threshold, and against those that seek to abridge the right. Sometimes, investors’ policies take into account whether or not the company already provides for a shareholder right to act by written consent.

Source: Special Meeting Proposals

David Lindsay: HPE wants to stop a proposal to drop the threshold from 25 to 15 per cent. This article suggests the proposal has merit, and deserves shareholder support.

Opinion | The Corporate Donors Behind a Republican Power Grab – by David Leonhardt – The New York Times

“Walgreens portrays itself as the friendly neighborhood drugstore. It gives flu shots to children, helps communities after storms, donates to charity — and makes feel-good advertisements trumpeting its various good deeds.

But Walgreens also has a tougher side, one you won’t see in those ads. To protect a tax break, the company has allied itself with Wisconsin’s brutally partisan Republican Party. That party is now in the midst of a power grab, stripping authority from Wisconsin’s governor and attorney general solely because Republicans lost those offices last month. The power grab comes after years of extreme gerrymandering, which lets Republicans dominate the legislature despite Wisconsin being a closely divided state.

Wisconsin’s Republicans really are trying to undo democracy. When I asked Steven Levitsky and Daniel Ziblatt — the political scientists who wrote the recent book “How Democracies Die” — about the situation, they agreed that the Wisconsin power grab was the sort of move their book describes. If it continues, it can lead to the breakdown of a political system.”

Is Exxon Conning Its Investors?  The New York Times Editorial

By The Editorial Board

Nov. 25, 2018, 195
Antonio Sortino
CreditCreditAntonio Sortino

“In August, a lawyer for Exxon Mobil told a state court in Manhattan that New York’s attorney general should either sue the company for misleading investors about the impact of climate change on its finances or drop the case. “They should put up or shut up,” the lawyer, Theodore Wells Jr., said of a tangled case that had dragged on for more than two years. The weary judge, Barry Ostrager, agreed. “This cannot go on interminably,” he said.

Put-up time has arrived. Late last month, Attorney General Barbara Underwood filed a fraud lawsuit against the company. Exxon responded with a 38-page brief basically denying everything. And Judge Ostrager has set a trial date for October of next year.

Much can happen between now and then. But the judge’s decision to allow the case to proceed could provide a rare teaching moment that allows the public to see a powerful company grappling with the kinds of choices that all legacy fossil fuel companies will surely face in a carbon-constrained world.

The case is not a rehash of the copiously documented charge that Exxon had for years subsidized climate change denialist groups even as its own scientists were acutely aware of the dangers of global warming. That charge is partly what inspired Ms. Underwood’s predecessor, Eric Schneiderman, to begin investigating the company in the first place. But Exxon has since agreed that climate change is a problem, supported the Paris agreement and invested in cleaner fuels. Nor does the suit hold the company responsible for climate change, unlike several cases against the fossil fuel industry brought by New York City and other localities seeking damages from the rise of sea levels and other consequences of a warming world. Most of these suits have been thrown out of court.”

AT&T-Time Warner Ruling Shows a Need to Reboot Antitrust Laws – by James B Stewart – NYT

“The last time there was an antitrust ruling as important as the one handed down Tuesday by Judge Richard J. Leon, cellphones didn’t exist. There was no such thing as the internet. Personal computers were years away from mass adoption.

There had not been a federal court ruling on a vertical merger — a combination of a buyer and a supplier — since 1979. As a result, Judge Leon’s opinion, which cleared the way for the merger of AT&T and Time Warner, “will be enormously significant,” said Herbert Hovenkamp, an influential antitrust professor at the University of Pennsylvania. “To a significant extent, this court was writing on a clean slate.”

Judge Leon himself cited a “dearth” of modern judicial precedent.

For many antitrust experts, it was high time — no matter the outcome.

When it comes to vertical mergers like AT&T and Time Warner, “antitrust law is stuck in the 1980s,” said Tim Wu, a professor at Columbia Law School who has called for more vigorous antitrust enforcement against vertical mergers.”

David Lindsay Jr.
David Lindsay Jr.
Hamden, CT | Pending Approval NYT comments
“. . . If AT&T wants to withhold “must have” programming from a rival telecom company, or charge more for it, that company cannot readily replace it. That was the crux of the government’s case — that vertical mergers, at least in this context, can reduce competition and harm consumers. “The big question was whether Judge Leon would accept where academics and economists have gone with this, or whether he’d stick with the old approach,” said Mr. Wu, the Columbia law professor, who is also a contributing opinion writer for The New York Times.”
I side with Tim Wu, and economists looking at the danger of price gauging. Common sense to me suggests that fewer and fewer mega corporations will reduce the power of consumers against monopoly and monopsony, single seller and single buyer. Since Amazon and Facebook, for example, buy any company that rises to challenge them, they both should be broken up, starting with, a cutting off of most of their acquisitions.
Amazon’s cutthroat hostile take over of Diapers.com is proof that our anti-trust laws need to be modernized and strengthened, or at least, more rigorously enforced.
David Lindsay Jr.’s father worked in the anti-trust division of the US Treasury in the Eisenhower administration.
David Lindsay Jr. is the author of “The Tay Son Rebellion, Historical Fiction of Eighteenth-century Vietnam,” and blogs at TheTaySonRebellion.com and InconvenientNews.wordpress.com

Is It Last Call for Craft Beer? – by Jim Koch – NYT

“We have seen a dramatic consolidation in our industry in recent years. It started in 2008 when the Department of Justice approved the creation of a duopoly in the beer industry by greenlighting a joint venture between Molson Coors and SABMiller (creating MillerCoors) and, five months later, the merger of Anheuser Busch and InBev.

Overnight, about 90 percent of domestic beer production was in the hands of two foreign-owned brewing giants. (The consolidation continued in 2016, when regulators approved the merger of SABMiller and AB InBev; SABMiller sold back its stake in MillerCoors, creating a new duopoly between Molson Coors and AB InBev.)”

“This unwillingness to use effective antitrust enforcement to protect American economic interests is in stark contrast to how the rest of the world operates. Before approving AB InBev’s latest merger, antitrust authorities in China required it to sell its $1.6 billion stake in China’s largest brewer back to the Chinese government at a bargain-basement price. South Africa required guarantees of lifetime employment for its citizens, and the Monopolies Commission in the European Union required divestitures by SABMiller and AB InBev to keep their new, combined market share to 9 percent.”

We need to stop the madness of consolidation, to make the rich richer, while more and more Americans lose their jobs. The antitrust department of the Treasury needs to be empowered to protect jobs, and keep competition vibrant.

Why Dark Money Is Bad Business – The New York Times

Boston — IT’S only May, but this presidential election is on track to be one of the most expensive ever. So far two-thirds of election dollars have largely come from anonymous corporate donations, funneled through what have been referred to as “dark money” nonprofit groups that freely engage in electoral and legislative politics, but don’t have to disclose their donors, expenditures or even their members.One of the most promising strategies to stem the tide of corporate dark money is a proposed rule at the Securities and Exchange Commission that would require public companies to report the amounts and recipients of their political spending. The rule has received a groundswell of support from a bipartisan group of former S.E.C. commissioners, state treasurers and law professors, and has generated more than one million public comments.

Source: Why Dark Money Is Bad Business – The New York Times

The Quiet War on Corporate Accountability – The New York Times

“EVEN as the nation is gripped by the populist politics of the presidential primaries, special interests continue to shape the rules of the economy in the shadows. Last year, a market regulator called the Financial Accounting Standards Board released a proposal that could make it easier for corporations to withhold important financial information from shareholders. This could put the economy at greater risk of another huge accounting fraud, like Enron or Lehman Brothers. But the board’s proposal, which could become a final rule any day now, has gotten nowhere near the strong dose of sunlight it deserves.”

Source: The Quiet War on Corporate Accountability – The New York Times