2010 RR Donnelley SEC Hot Topics 2010 Proxy Season Year in Review September 14, 2010 Presenter:...
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Transcript of 2010 RR Donnelley SEC Hot Topics 2010 Proxy Season Year in Review September 14, 2010 Presenter:...
2010 RR Donnelley SEC Hot Topics
2010 Proxy Season Year in Review
September 14, 2010
Presenter:
Thomas A. Germinario
Senior Vice President
D. F. King & Co., Inc.
22010 RR Donnelley SEC Hot Topics
Important Changes for 2011: Dodd-Frank Wall Street Reform and Consumer Protection Act
Proxy Access: Shareholders permitted to include nominees for director elections within issuer’s proxy solicitation materials.
• Deadline to submit nominations: no later than 120 and no more than 150 days prior to anniversary of previous year’s mail date
• Ownership Threshold: limited to shareholders or groups with 3% ownership for at least three years
• Who will use?: pension funds, labor funds, individual activists
Say on Pay: Companies will be required to seek non-binding shareholder vote on compensation package of named executive officers at first meeting held on or after January 21, 2011. Companies will also be required to seek a vote on a frequency proposal of future “say-on-pay” votes - one, two or three years.
Elimination of the Broker Discretionary Vote on Executive Compensation: Brokers will not be able to vote client shares without instructions on say-on-pay proposals or any compensation proposals.
Golden Parachutes: On a merger agenda, shareholders will be permitted to vote on a separate non-binding proposal on any executive pay related to a change-in-control they have not previously approved in addition to the merger proposal itself.
32010 RR Donnelley SEC Hot Topics
Proxy Plumbing
Street Name Proxy Distribution: Review NYSE fee schedule and potentially eliminate it in favor of allowing market forces to determine appropriate fees.
Non-Objecting Beneficial Owner (“NOBO”) / Objecting Beneficial Owner (“OBO”): Cost of anonymity may be borne by the shareholder rather than by the issuer.
Stock Loan: Recall shares in time to vote on important matters.
Over Voting / Under Voting / Empty Voting: Disclosure of pre or post reconciliation.
Advance Notice of Meeting Agenda: Issuers should give advance notice of matters to be voted on to institutions.
42010 RR Donnelley SEC Hot Topics
Proxy Plumbing
Voting Audit: Require vote tabulators, securities intermediaries, and proxy service providers to provide each other with access to vote data so investors and issuers can confirm that votes have been received and tallied according to investors’ voting instructions.
Dual Record Date: One record date for determining who is entitled to receive notice of the meeting and a later one for determining who can vote at the meeting. Holders without an economic stake in the matter should not be able influence the outcome of a vote (issue of reconciliation is used in Europe).
Proxy Advisory Firms: Should proxy advisory firms register with SEC to alleviate potential conflicts of interest and lack of accuracy and transparency? Should they disclose any potential conflicts?
Enhance Fund Voting Disclosure: Provide actual shares voted in N-PX filing.
52010 RR Donnelley SEC Hot Topics
2010 showed a drop in number of contentious activist situations especially in large cap proxy contests.
51
58
70 71
42
100
108
125
91
33
134
56
0
20
40
60
80
100
120
140
160
2005 2006 2007 2008 2009 2010
Total- Definitive Filed
Total- All Proxy Fights
Source: FactSet Research Systems Inc.
As of August, 2010Proxy Fight Trend Analysis
62010 RR Donnelley SEC Hot Topics
# of Directors Receiving Against/Withhold Recommendations from ISS
1,685 1,724
2,708
1,174
-
500
1,000
1,500
2,000
2,500
3,000
2007 2008 2009* 2010
* Increased recommendations due to tax gross up policy
As of August, 2010
72010 RR Donnelley SEC Hot Topics
# of Directors with Less than 50% For Vote
16
43
84
0
10
20
30
40
50
60
70
80
90
2008 2009 2010
* Russell 3000
As of August, 2010
82010 RR Donnelley SEC Hot Topics
Management Compensation Proposals
631
193
681
254
527
165
0
100
200
300
400
500
600
700
Number of Companies
2008 2009 2010
Management Compensation ProposalsISS Recommendation Comparison
2008-2010
ISS- FOR
ISS- AGAINST
2008 2009 2010
ISS - FOR 85.53% 84.36% 85.21%
ISS - AGAINST 70.07% 71.76% 72.52%
Support Level
Source: Institutional Shareholder Services (ISS)
As of August, 2010
92010 RR Donnelley SEC Hot Topics
Shareholder Proposal: Say-On-Pay
0
10
20
30
40
50
60
70
80
2007 2008 2009 2010
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Number of Proposals
Average Support
Source: Institutional Shareholder Services (ISS)
As of August, 2010
102010 RR Donnelley SEC Hot Topics
Management Proposal: Say on Pay
0
20
40
60
80
100
120
Number of Companies
2006 2008 2009 2010
Say on PayISS Recommendation Comparison
2006-2010
ISS- FOR
ISS- AGAINST
2006 2008 2009 2010
ISS - FOR N/A 92.95% 92.15% 91.80%
ISS - AGAINST 51.60% 53.60% 74.61% 73.01%
Support Level
Source: Institutional Shareholder Services (ISS)
As of August, 2010
112010 RR Donnelley SEC Hot Topics
Shareholder Proposal: Majority Voting
0
20
40
60
80
100
120
140
2007 2008 2009 2010
30.00%
35.00%
40.00%
45.00%
50.00%
55.00%
60.00%
65.00%
70.00%
75.00%
80.00%
Number of Proposals
Average Support
Source: Institutional Shareholder Services (ISS)
As of August, 2010
122010 RR Donnelley SEC Hot Topics
Shareholder Proposal: Declassify Board
0
10
20
30
40
50
60
70
80
2007 2008 2009 2010
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Number of Proposals
Average Support
Source: Institutional Shareholder Services (ISS)
As of August, 2010
132010 RR Donnelley SEC Hot Topics
Shareholder Proposal: Call Special Meeting
All proposals in 2010 were at the 10% threshold
Issuers were granted a relief from the SEC on the shareholder proposal if there was a management proposal for 25%
0
10
20
30
40
50
60
70
80
2007 2008 2009 2010
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Number of Proposals
Average Support
Source: Institutional Shareholder Services (ISS)
As of August, 2010
142010 RR Donnelley SEC Hot Topics
Shareholder Proposal: Act by Written Consent
49.6%
56.7%
45.5%
55.3%
48.2%
53.6%
35.9%
67.70%
56.9%
67.50%
53.1%57.4%
63.1%63.80%
48.2%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
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Air
Group
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.
Amge
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Bristo
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rs S
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Com
pany
DaVita
Inc.
FirstE
nerg
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p.
Honey
well In
tern
ation
al In
c.
JPM
orga
n Cha
se &
Co.
Kraft
Foods
Inc
Mar
sh &
McL
enna
n Com
panie
s, In
c.
Rayth
eon
Compa
ny
South
west A
irline
s Co.
Sprint
Nex
tel C
orpo
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Staple
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The A
llsta
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orpo
ratio
n
The M
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Compa
nies,
Inc.
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Source: Institutional Shareholder Services (ISS)
As of August, 2010
152010 RR Donnelley SEC Hot Topics
Shareholder Proposal: Independent Board Chair
0
10
20
30
40
50
60
70
80
2007 2008 2009 2010
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
Number of Proposals
Average Support
Source: Institutional Shareholder Services (ISS)
As of August, 2010
162010 RR Donnelley SEC Hot Topics
Independent Chairman of the Board (S&P 500)
32
43
66
74
85
47
57
0
10
20
30
40
50
60
70
80
90
2004 2005 2006 2007 2008 2009 2010
Source: The Corporate Library
172010 RR Donnelley SEC Hot Topics
Shareholder Proposal: Eliminate Supermajority Provision
0
10
20
30
40
50
60
70
80
2007 2008 2009 2010
30.00%
35.00%
40.00%
45.00%
50.00%
55.00%
60.00%
65.00%
70.00%
75.00%
80.00%
Number of Proposals
Average Support
Source: Institutional Shareholder Services (ISS)
As of August, 2010
182010 RR Donnelley SEC Hot Topics
Shareholder Profile Example
Shareholder Category Share Holdings % of O/S
Officers & Directors 490,421 1.8%
Registered Retail 449,844 1.7%
"Street" Retail 12,455,379 47.0%
# 1 Institutional Holder 1,968,405 7.4%
# 2 Institutional Holder 1,847,736 7.0%
# 3 Institutional Holder 1,274,000 4.8%
# 4 Institutional Holder 810,491 3.1%
# 5 Institutional Holder 800,000 3.0%
Hedge Funds & Proprietary Trading Desks 3,345,802 12.6%
Remaining Institutional Investors 3,082,687 11.6%
Total: 26,524,765 100.0%
Shareholder Profile
26,524,765 Shares Outstanding
Hedge Funds & Proprietary
Trading Desks12.61%
Remaining Institutional
Investors11.62% # 5 Institutional
Holder3.02%
# 4 Institutional Holder3.06%
# 3 Institutional Holder4.80%
Officers & Directors
1.85%
Registered Retail1.70%
"Street" Retail46.96%
# 1 Institutional Holder7.42%
# 2 Institutional Holder6.97%