Academic

Tomorrow I will begin teaching a new seminar on shareholder activism.  Of course, I thought that by debuting the seminar in the spring, I would be starting the seminar after the SEC had made a more definitive decision on proxy access.  Instead, it looks like I will be teaching in the face of uncertainty on this issue, which, among other things, can be a challenge for creating a concrete syllabus.  To be sure, such uncertainty seems to be par for the course with many corporate governance issues. 

The good news, at least for purposes of my seminar, is that shareholder activism has not waned.  Instead, despite--or perhaps because of--the recession and financial turmoil, shareholders' activismhas persisted and even increased in some areas.  RiskMetrics' proxy season data reveals that as of December 15, 2009, not only have shareholders increased the number of proposals submitted on a range of issues including say on pay, majority voting, separating the office of board chair from CEO, and calling special shareholder meetings, but shareholders also have increased their levels of support for such issues. 

Then too, we have seen some critical changes at the federal level that will have an impact on shareholder activism, and thus my seminar.  For example, as we know, TARP companies must now allow their shareholders to have a say on pay--and Schumer's Shareholder Bill of Rights Act, as well as the Wall Street Reform and Consumer Protection Act which recently passed the House, would require such a vote for all public companies.  Hence, the seminar will be able to examine how shareholders respond to the ability to cast such votes.  (To be sure, one Wall Street Journal article indicated that initial tallies at several companies reveal favorable outcomes for directors, ranging from 63% shareholder support to close to 100% support for compensation packages at Goldman Sachs).   So perhaps such votes have no impact?  Another significant change that will be interesting to explore will be the impact of changed NYSE Rule 452.  Indeed, shareholder meetings held on or after January 1, 2010 will feel the impact of the new Rule which eliminates a broker's ability to vote uninstructed shares in uncontested director elections.  Some have predicted that the changed Rule not only will make it more difficult to achieve a majority vote for certain directors, but also to achieve a necessary quorum.   Perhaps companies will need to enhance their solicitation efforts or otherwise engage in greater outreach to their shareholders?  Added to these changes, Delaware made critical amendments to its laws that should impact shareholders, including clarifying the validity of expense reimbursement bylaws.  Hence, we will be able to talk about the potential impact of this change--including HealthSouth's recent adoption of such a bylaw.  It certainly will be interesting to see if such reimbursement provisions have an impact on the frequency of, or the manner in which shareholders engage in, proxy contests.

So it is safe to say that my syllabus will be in flux, and hence we will be discussing new initiatives and their impact as they are happening.  I am hoping that will make for a stimulating seminar.  We certainly will not lack for new things to discuss.