“Couldn’t you have anticipated this?”
It is no trouble to cancel an unneeded meeting. It is another story when your board or governance committee needs an unscheduled meeting.
Of course, sometimes an unscheduled meeting is unavoidable – say, to discuss the opening salvo in a potential proxy fight. But the need for most meetings is foreseeable. Let’s look at two examples.
Last week’s U.S. Securities and Exchange Commission (SEC) reminded us of this first foreseeable example — when a company seeks SEC permission to omit a shareholder proposal from the company’s proxy statement. (The SEC staff’s view often carries the day. So, the company nearly always asks the SEC staff to weigh in before the company decides whether to omit the proposal.) In 2018, the SEC granted many requests like this, but in several cases made it clear that it wanted to know that the company’s board had considered the issue and the board’s rationale for its position.
On September 6, 2019, the United States Securities and Exchange Commission (SEC) reaffirmed this view. The SEC said, “The staff continues to believe … that when a company seeks to exclude a shareholder proposal from its proxy materials [under two of several established categories], an analysis by its board of directors is often useful.”
In practical terms, this means that the board (or, in some cases, the proper board committee) must meet to discuss a shareholder proposal, so the company can provide the SEC evidence of the board’s consideration and rationale. Companies that skip the board consideration step have had far less success with the SEC staff.
Does your annual board calendar include a board or governance committee meeting between the deadline for submission of shareholder proposals for inclusion in your proxy statement and when you must submit a no-action request to the SEC staff? Better to include shareholder proposals as a board or committee agenda topic in anticipation that you might need it; then, delete the topic if no shareholder proposal requires this kind of attention. Better planning leads to less disruption.
Proper planning avoids a year-end scramble to address the board’s compliance requirements. One company almost lost a multi-million-dollar tax benefit because it had not complied with a government regulation requiring board and shareholder action. The company’s brand-name law firm also missed the omission. A hastily called board meeting saved the day and the money. Vetting annual agendas – laying out agenda meeting by meeting – in order to catalog compliance requirements at the beginning of the year, rather than until the compliance deadline looms and an unscheduled meeting is needed.
Foresight, from Corporate Governance Partners can help you simplify board planning, enhance board compliance, and elevate board performance.
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