Volume 1:Issue #26 Friday, November 13, 2009
Edited by Francis H.Byrd
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As We See It - Commentary from The Altman Group

An excerpt from the Executive Summary of our soon to be released “Comments on the Proposed Rule ‘Facilitating Shareholder Director Nominations’”

The Altman Group has published a detailed review and content analysis of some 500+ letters to the SEC submitted in response to the Commission’s proposing release on “Facilitating Shareholder Director Nominations” (Release Nos. 33-9046, 34-60089, IC-28765; File No. S7-10-09). Our report documents a broad range of issues raised in letters both for and against the SEC’s proposals on “proxy access.” This report details for you the statistics covering the categorization of letters (segmented into groups ranging from publicly-traded companies to unions), a detailed survey of proposals and positions taken by some 111 publicly-traded companies in letters to the Commission, and an extensive review of positions, proposals, and novel insights offered in hundreds of additional responses from individuals, activist investors, institutional investors and pension funds, associations, academics, law firms, proxy solicitors, proxy advisors, private companies, small business owners, and unions. Our Content Analysis covers the issues and prioritizes them as they were presented by those submitting comments, and is based upon a review of all letters accepted and posted by the SEC through October 27th at http://www.sec.gov/comments/s7-10-09/s71009.shtml.

In early October, the SEC postponed a final vote on its proxy access proposals until early 2010, reportedly to provide staff more time to both review all of the comments submitted and address a host of “workability” issues raised by commentators. The list of specific proposed and existing rules and regulations at issue in the Proposing Release is long, but we found that comments essential focused on the central issues related to the SEC’s Proposed Rule 14a-11 (direct “proxy access”), a new Regulation 14N and Schedule 14N (“proxy access” notice and disclosure requirements), and proposed amendments to 14a-8 (that would enable shareholder proposals to amend a company’s bylaws concerning director nomination procedures or disclosures related to shareholder nominations to be included in company proxy materials).

More than 500 letters were received by the SEC in response, including 103 letters submitted on behalf of 111 publicly-traded companies. The latter total includes a group letter submitted by “corporate secretaries and governance professionals” of 26 publicly-traded companies. While most of the companies participating in that group letter submitted their own separate responses, 9 did not. Thus, the total number of publicly-traded companies submitting signed letters was 111 (99 NYSE-listed, 11 NASDAQ, and 1 NYSE Amex). The average market capitalization of companies submitting responses was $32.39B. This high market capitalization average reflects the very limited representation of submissions by small- and mid-cap companies. It also reflects a very meager response rate among all publicly-listed companies (1.6%). There were an additional 21 responses coming from corporate directors at public companies offering comments on their own behalf. Other categories include (sorted by # of letters):

Categories (Sorted) # Letters

# of Letters

Others (Mostly Unaffiliated Individuals)

195

Executives of Privately Owned Companies (Mostly Small Business Owners)

60

Institutional Investors (Excluding Those Categorized as "Activists")

33

Associations (NAM, SIFMA, Business Roundtable, etc.)

29

Law Firms and Committees of Bar Associations (Group Letter = 1)

21

Form Letter Types (SEC Categorizations) “A, B, and C”
(Total, excl. 1 letter submitted by a co.)

21

Activist Investors

20
Providers of Proxy & Corp. Governance Services (Research/Advisory/Solicitors/Others)

10
Academics (Group Letter = 1)

8

Unions

5

* Counts exclude posted memoranda on telephone and other "meetings." Letters posted at

http://www.sec.gov/comments/s7-10-09/s71009.shtml

Most submissions offered generalized commentary on the subject of direct proxy access (Proposed Rule 14a-11) and revisions of 14a-8 (re: shareholder proposals). Detailed responses offered in response to the numerous questions contained within the SEC’s Proposing Release came mostly in letters submitted by critics of the direct proxy access initiative, who offered their responses as “alternative” propositions: either as proposed modifications in the event that the SEC decides to adopt some form of Proposed Rule 14a-11, or if the SEC is open to considering dropping Proposed Rule 14a-11, to consider a “private ordering” alternative structured via additional revisions to 14a-8.

We go into great detail in the report on the more specific and “technical” details addressed in the submissions, and offer readers a number of tables highlighting and comparing specific proposals from selected groups. In the table below, we offer a summary overview of the general arguments made in letters by both proponents and opponents of Proposed Rule 14a-11 (direct proxy access). The report includes a number of tables providing details such as: a survey of company proposals and views on eligibility criteria; positions of law firms submitting letters on Proposed Rule 14a-11; a list of publicly-traded companies responding; and other topics (some of which have been included herein). The report is 70 pages long (including all charts and tables) and available in PDF format only (via e-mail). Readers interested in receiving a full report are invited to send an e-mail requesting the report (“Content Analysis”), which will be delivered to the e-mail address contained in the request (or another one named in the text of your e-mail). Please forward your request to proxyaccess@altmangroup.com.
Requests by phone (212-681-9600) or mail (to our NYC offices) are also welcomed.
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