Wednesday, October 28, 2009

SEC Issues New Guidance on "No-Action" Requests Relating to Risk and CEO Succession

On October 27th the SEC issued a Staff Legal Bulletin providing guidance for companies and shareholders on risk and succession planning.

Shareholder Proposals Related to Risk

In the past, the SEC had determined that shareholder proposals relating to the evaluation of risk could be excluded from a company's proxy materials because the SEC believed the matter was related to a company's ordinary day-to-day business operations.

In their bulletin issued yesterday, the SEC stated, "we have become increasingly cognizant that the adequacy of risk management and oversight can have major consequences for a company and its shareholders. Accordingly, we have reexamined the analysis that we have used for risk proposals, and upon reexamination, we believe that there is a more appropriate framework to apply for analyzing these proposals.

...Rather than focusing on whether a proposal and supporting statement relate to the company engaging in an evaluation of risk, we will instead focus on the subject matter to which the risk pertains or that gives rise to the risk.

...In those cases in which a proposal's underlying subject matter transcends the day-to-day business matters of the company and raises policy issues so significant that it would be appropriate for a shareholder vote, the proposal generally will not be excludable under Rule 14a-8(i)(7) as long as a sufficient nexus exists between the nature of the proposal and the company.

...In addition, we note that there is widespread recognition that the board's role in the oversight of a company's management of risk is a significant policy matter regarding the governance of the corporation. In light of this recognition, a proposal that focuses on the board's role in the oversight of a company's management of risk may transcend the day-to-day business matters of a company and raise policy issues so significant that it would be appropriate for a shareholder vote."

Shareholder Proposals Related to CEO Succession Planning

In the past the SEC has allowed Companies to exclude proposals relating to CEO succession planning because the proposals related to the termination, hiring or promotion of employees. Similar to the change in policy relating to risk, the Commission feels that this issue transcends the Company's day-to-day operations and will take the view that a Company may not rely on Rule 14a-8(i)(7) to exclude a proposal that focuses on CEO succession.

In their bulletin the SEC stated, "One of the board's key functions is to provide for succession planning so that the company is not adversely affected due to a vacancy in leadership. Recent events have underscored the importance of this board function to the governance of the corporation. We now recognize that CEO succession planning raises a significant policy issue regarding the governance of the corporation that transcends the day-to-day business matter of managing the workforce. As such, we have reviewed our position on CEO succession planning proposals and have determined to modify our treatment of such proposals."

To read the SEC's bulletin click here.

To read a legal alert on the matter issued by Gibson, Dunn & Crutcher click here.

Monday, October 26, 2009

Company Agrees to Reimburse Activist Investors

According to an article in today's WSJ, HealthSouth Corp. will become the first US business to reimburse activist investors' "reasonable expenses" if they are successful in replacing Company Directors through proxy contests.

Click here to read the article.

In their press release, HealthSouth stated, "HealthSouth believes there is a close correlation between good governance and good performance," said Jon F. Hanson, non-executive Chairman of the Board. "By reimbursing shareholders under certain conditions for reasonable expenses relating to director nominations, we believe we will further enhance director accountability and permit shareholders to have a greater say in the running of their company. This far-reaching amendment to our Bylaws will be good for our shareholders, our Board and our Company."

Click here to read HealthSouth's press release

Wednesday, October 14, 2009

September Activist Investments - 28 Companies Targeted

Below is a summary list of 28 companies targeted by 33 shareholder activists during September.

This information was extracted from Hedge Fund Solutions' Catalyst Equity Research Report(TM), a free in-depth weekly research on activist investments.

Click Here to subscribe to the FREE report.

This report is sponsored by a number of firms with expertise in the activist investing space.

Legal Advisers:

Olshan Grundman Frome Rosenzweig & Wolosky
Schulte Roth & Zabel
Lowenstein Sandler

Proxy Solicitors:

Innisfree M&A
MacKenzie Partners
Laurel Hill Advisory Group
The Altman Group

Ticker Company Investor
ARCW Arc Wireless Solutions Brean Murray Carret Group
ASCMA Ascent Media Corp GAMCO Investors
ATGN AltiGen Communications Norman Pessin
BITS BitStream Inc. Raging Capital
BKBO.OB BakBone Software Inc VantagePoint Venture Partners
BLDR Builders FirstSource Inc JLL Partners; Warburg Pincus
BLDR Builders FirstSource Inc. Stadium Capital Management
CLHI.PK CLST Holdings Red Oak Partners
CNSO.OB CNS Response Inc Leonard Brandt
DCS Claymore Dividend & Income Fund Bulldog Investors
DITC Ditech Networks Lamassu Holdings
EFII Electronics for Imaging Inc Blum Capital
FACT Facet Biotech Corp Baupost Group
FACT Facet Biotech Corp Biotechnology Value Fund
GLOB.OB Global Med Technologies Victory Park Capital
HBRF.OB Highbury Financial Peerless Systems
IMMR Immersion Corp Ramius Capital
KONA Kona Grill Inc BBS Capital Management
MINI Mobile Mini Inc. Shamrock Activist Value Fund
NFL Nuveen Insured Florida Premium Income Municipal Fund Western Investments
PCC PMC Commercial Trust REIT Redux LP
PFIN P&F Industries Timothy Stabosz
PPM Investment Grade Municipal Income Fund Western Investment
PRKA.OB Parks! America, Inc. Edla Family Limited Partnership
SCSS Select Comfort Corp Clinton Group
TESO Tesco Corporation LRP V Luxembourg Holdings
TICC TICC Capital Corp Raging Capital Management
TXI Texas Industries Inc Southeastern Asset Management
TXI Texas Industries Inc Nassef Sawiris
UAHC United American Healthcare Corp Strategic Turnaround Equity Partners
UAHC United American Healthcare Corp Lloyd Miller
VXGN.OB VaxGen Inc Steven Bronson

Monday, October 5, 2009

SEC Commissioner Elisse Walter's Speech on Proxy Access - Oct 2, 2009

Excerpt from Commissioner Walter's speech
48th Annual Corporate Counsel's Institute
Northwestern University School of Law
Chicago, Illinois
October 2, 2009

...We received over 500 detailed and thoughtful comment letters that in the aggregate (and in some cases individually) address the over 100 questions we asked in our proposing release. And yes, we are, as always, carefully reading all of these responses — most of them, more than once. The comment letters raise a number of complex issues, including issues related to the workability of various aspects of our proposal. We are very thankful to the corporate community for taking the time to share its knowledge and experience with us.

Many comment letters also suggest strongly that we should allow shareholders to change their companies' access rules and, in particular, that shareholders should be permitted to approve provisions that may be more restrictive than those we've set in proposed Rule 14a-11-even provisions that deny shareholder access to the company's proxy statement. As my thinking about our proposed approach evolves, I am giving careful consideration to whether our rule needs any adjusting to address these concerns. I must say, however, that I have a less favorable reaction to those who suggest that directors should also have that unfettered choice.

As with all our rulemaking, we are committed to conscientiously and deliberately considering the comments and suggestions, which will — especially given the other items on our rulemaking agenda — take time. We are working diligently to make sure we understand all of the advantages and disadvantages of our proposed approach and the different parameters we set. And, at this stage in our review process, I have doubts that we will be in the position to make a truly informed judgment about these rules and be able to take final action in November (as some have speculated). Although I can't give you a definitive date, I expect we will likely move forward and consider an adopting release sometime in early 2010.

This means of course that final rules are not likely to be in place at the beginning of next year's "proxy season." To me, that timing is not ideal; however, given the complexity of this issue, I believe it is critical that we take the time we need to produce the best final product. Excellence should triumph over speed...

Click here to read the entire speech.

Friday, October 2, 2009

No Proxy Access until 2010

We understand that SEC Commissioner Elise Walter has confirmed at a Northwestern Conference that the SEC will delay Proxy Access until 2010, but will cover disclosure of qualifications and risks this year. Stay tuned for more.

Thursday, October 1, 2009

Activist Investors Bounce Back

By David Walker

Activist hedge fund investors, whose strategy was one of the worst hit in the financial crisis, have achieved a sharp turn round in performance in recent months, and are now heading for their best year on record.

Although some activists have continued to lose money, the average fund returned 29.23% in the eight months to the end of August, according to the latest figures for the activist hedge fund investable index introduced this year by data provider Hedge Fund Research. Among those showing strong returns, U.S. manager Greenlight Capital was up 21% for the first eight months while U.S. rival Third Point was up 14% in the first seven months, according to investors.

The returns for this period are activists’ best since at least 2005, the earliest date for which the index provides performance data. They outpaced equity markets and all but one other hedge fund strategy.

Click here to read the entire article at (subscription required)

As of market close on September 30, 2009 Hedge Fund Solutions' portfolio of companies highlighted in their Catalyst Investment Research(TM) posted an 11.4% increase in value for the four companies that have yet to realize a "catalyst" and an average 60.0% increase in value for the companies where a catalyst has been realized (catalysts have been achieved within an average 37 days).

Review the Catalyst Investment Research portfolio performance.

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