Cleary Gottlieb Participates in Panel Discussion on Highlights of the 2018 Proxy Season

On July 10, 2018, The Conference Board and Cleary Gottlieb Steen & Hamilton LLP hosted a panel discussion on the highlights of the 2018 proxy season and the key topics, including shareholder proposals trends, including with respect to environmental and social issues; the most surprising moments in the 2018 proxy season; the effect of the Staff’s release of Staff Legal Bulletin 14I; board composition, refreshment and diversity; shareholder engagement; and significant institutional investor developments.

Participants in the panel discussion included Pamela Marcogliese, Partner, Cleary Gottlieb, Elizabeth Bieber, Associate, Cleary Gottlieb, Jason Alexander, Managing Director, Okapi Partners and Bill Ultan, Managing Director, Corporate Governance, Morrow Sodali.

Moderator Doug Chia, executive director of The Conference Board, and the panelists discussed the shareholder proposals received for the 2018 proxy season and how, again this year, environmental and social proposals outnumbered governance proposals.  The panel explored the link between social trends like climate change and #MeToo and the types of shareholder proposals companies received in 2018, such as proposals requesting reports on environmental matters and proposals on gender pay equity.

The discussion also included an overview of some of the noteworthy votes, including the GE auditor ratification vote in which ISS and Glass Lewis recommended that shareholders vote against ratification of KPMG in part due to certain accounting issues, but also in part due to its 109-year auditor relationship with the company.  The panel also discussed the use of a management proposal to ratify an existing bylaw provision regarding the threshold for calling special meetings as a way to receive no-action relief to exclude a similar shareholder proposal on the basis that it conflicted with management’s proposal. This outcome resulted in the proponent’s voluntary use of a notice for exempt solicitation on the Company’s EDGAR page explaining his argument.

Another topic of discussion was the effects of Staff Legal Bulletin 14I, issued at the beginning of proxy season, noting that over the course of the 2018 season, the Staff at the Securities and Exchange Commission did not give as much deference to the board analysis as was expected initially.

The panelists noted that initiatives on board composition and refreshment have made an impact at companies, with more companies focusing on tenure and diversity when adding new directors. They also emphasized that institutional investors are more focused on board composition and refreshment so that companies will need to pay attention to this when engaging with investors. The discussion also focused on trends in shareholder engagement, the impact of the views of large institutional investors and tips to remember when engaging with investors during the “off-season”. The panelists also discussed activist investors and the recent focus by activists on environmental and social issues, such as the joint letter from JANA Partners issued with CalSTRS urging Apple to study the impact of its technology on children and the ESG-focused funds activists announced this year. This proxy season also saw activist aligning with other investors on issues, such as board refreshment. The panelists also noted that there was an increase in settlements so far this year with activist investors.

A replay of the webcast is available (please note that your browser may require you to run an Adobe plugin to access this content).