The Federal Trade Commission (FTC) recently announced the annual changes to the notification thresholds for filings under the Hart-Scott-Rodino Antitrust Improvements Act (HSR) as well as certain other values under the HSR rules.
As background, the HSR Act requires that acquisitions of voting securities or assets that exceed certain thresholds be disclosed to U.S. antitrust authorities for review before they can be completed. The “size-of-transaction threshold” requires that the transaction exceeds a certain value. Under certain circumstances, the parties involved also have to exceed “size-of-person thresholds.” This year’s values, which are adjusted annually based on changes in the GNP, take effect in mid-to-late February 2014. The FTC also adjusted the safe harbor thresholds that govern interlocking directorates in competing companies.
The most important change is that the minimum size-of-transaction threshold will increase from the current $70.9 million to $75.9 million. The size-of-person thresholds will also increase as follows.
- For transactions valued between $75.9 million and $303.4 million, one party to the transaction must have $15.2 million in sales or assets and the other party must have $151.7 million in sales or assets, as reported on the last regularly prepared balance sheet or income statement.
- For transactions valued at greater than $303.4 million, no size-of-person threshold must be met to require an HSR filing.
The filing fee thresholds have similarly increased as follows.
Section 8 of the Clayton Act generally prohibits one person from serving as a director or officer of two competing corporations if two thresholds …
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Yesterday, proxy advisory firm ISS released its 2014 proxy voting guidelines, effective for shareholder meetings held on or after Feb. 1, 2014. ISS positions on some topics continue to evolve. Below are some notable differences from the 2013 Guidelines:
When determining votes on director nominees, four fundamental principles continue to apply: (1) accountability; (2) responsiveness; (3) independence; and (4) composition (last year “composition” was referred to as “competence”). The description of “independence” is more robust than last year, including a statement that “the chair of the board should ideally be an independent director,” which is not surprising given that ISS has previously supported shareholder proposals requiring an independent chair.
In 2013, ISS recommended withholding votes for directors if the board failed to act on a shareholder proposal that received the support of a majority of the shares outstanding the previous year. For 2014, ISS will recommend voting case-by-case in that scenario and will consider various factors including the subject matter of the proposal and the rationale provided in the proxy statement for the level of implementation.
Finally, ISS has expanded on the factors it will consider in determining how to vote on proposals to recoup incentive cash or stock compensation made to senior executives when the calculations turn out to be based on erroneous figures. Such factors include consideration of the rigor of the policy and how and under what circumstances compensation is subject to the clawback.…
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The editors at the Corporate Governance & Social Responsibility blog brought our attention to a recent academic paper from The Ohio State University Moritz College of Law titled “Shareholder Activism as a Corrective Mechanism in Corporate Governance.” In the paper’s abstract, authors Paul Rose and Bernard Sharfman write:
Under an Arrowian framework, centralized authority and management provides for optimal decision making in large organizations. However, Arrow also recognized that other elements within the organization, outside the central authority, occasionally may have superior information or decision making skills. In such cases, such elements may act as a corrective mechanism within the organization. In the context of public companies, this article finds that such a corrective mechanism comes in the form of hedge fund activism, or more accurately, offensive shareholder activism.
Offensive shareholder activism exists in the market for corporate influence, not control. Consistent with a theoretical framework where the value of centralized authority must be protected and a legal framework in which fiduciary responsibility rests with the board, authority is not shifted to influential but unaccountable shareholders. Governance entrepreneurs in the market for corporate influence must first identify those instances in which authority-sharing may result in value-enhancing policy decisions, and then persuade the board and/or other shareholders of the wisdom of their policies so that they will be permitted to share the authority necessary for the policies to be implemented. Thus, boards often reward offensive shareholder activists that prove to have superior information and/or strategies by at least temporarily sharing authority …
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