Investor Group Asks SEC to Issue New Disclosure Requirements, Guidance

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By Yin Wilczek

June 15 — The Council of Institutional Investors has asked the Securities and Exchange Commission for rulemaking to require companies to disclose more information when reporting vote results.

In a June 12 letter to Keith Higgins, director of the SEC's Division of Corporation Finance, CII also asked the division to clarify, through guidance, how companies should:

• disclose the voting requirements for items that are voted upon, including the election of directors; and

• identify resolutions on their proxy cards.

 

The group said the requested reforms “confer significant advantages on shareholders” while imposing minimal costs on companies. The group's letter was signed by CII Research Director Glenn Davis.

SEC spokesman John Nester declined to comment.

Additional Information 

Under current proxy rules, companies must disclose final vote results in Form 8-K Item 5.07 within four business days after a shareholder meeting. The report must include certain matters, including the name of each director elected and a brief description of other issues that were voted upon.

CII asked the SEC to amend Item 5.07 to require companies to disclose additional information, including:

• the voting requirement for each proposal;

• the percentage support for each nominee or other voting item based on the voting requirement for each proposal; and

• whether each board nominee was elected or unelected.

 

The inclusion of the additional information would save shareholders from having to “toggle back and forth” between the Form 8-K and the proxy statement's description of the voting standard applicable to the item, CII said. The group said the additional requirements would not add to companies' disclosure burden because they already have the information at hand.

Confusing Vote Standards 

As to the requested guidance, the CII said some corporate disclosures make it difficult for shareholders to understand the voting requirements for the matters on which they cast votes. In particular, some companies may be mischaracterizing as “majority voting” or a “majority vote standard” vote standards in director elections that are more accurately categorized as “plurality plus,” CII said.

“In this environment, clarity surrounding the vote requirement is critically important,” the CII said. It called on the SEC staff to clarify that companies use “plain English disclosure” to explain to shareholders the voting requirement for director elections.

The CII also told the SEC that some companies' proxy cards are identifying their shareholder proposals in “vague language” while being more precise with management resolutions. It asked the SEC staff to issue guidance clarifying companies' obligation to identify proposals “clearly and impartially.”

To contact the reporter on this story: Yin Wilczek in Washington at ywilczek@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

The letter is available at http://www.cii.org/files/issues_and_advocacy/correspondence/2015/06-12-15%20CII%20Letter.pdf.