Advance Notice Bylaw Provisions

A recent Delaware case, Saba Capital Master Fund, Ltd. v. Blackrock Credit Allocation Income Trust, highlights the importance of advance notice bylaws and the careful application of the terms of such bylaws by public companies who may be subject to activist campaigns.

As backdrop, following Delaware cases in 2008 (Jana Master Fund Ltd. vs. CNET Networks, Inc. and Levitt Corp. vs. Office Depot, Inc.) which interpreted ambiguous advance notice bylaw provisions in favor of insurgent shareholders attempting to nominate their own slate of director nominees, a large number of public companies (particularly large-cap companies and public companies incorporated in Delaware) amended their advance notice bylaw provisions to eliminate perceived vulnerabilities in their advance notice bylaws and expand the information required to be provided by shareholder proponents (known as second generation advance notice bylaw provisions).

While the focus on advance notice bylaw provisions (including the law firm commentary on this subject) has waned over the last decade, advance notice bylaws remain an important aspect of a public company’s preparedness for shareholder activism.


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As it is proxy season for calendar year companies, many of which are filing preliminary proxy statements that are subject to screening by the SEC Staff, I thought it might be helpful to publish answers to a few common questions about this process.

  • Is preliminary proxy screening different from other filings?

    Yes, in my experience the screening process for preliminary proxies is a little different than the process for a review of registered transactions. For registration statements, the Staff will call you at some point with a screening decision because in most cases they will need to take the filing effective, which requires more interaction between you and the Staff (i.e., acceleration request, etc.)   In comparison, if you file a preliminary proxy and you have not heard from the Staff within 10 calendar days from the date of your filing, you are free to file the definitive proxy, print and mail at that point—you don’t have to call the Staff to confirm that they are not going to review the filing.


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I recently provided insight for an article published in Compliance Week on the SEC’s pay ratio rule, which will require companies to disclose for the first time in their 2018 proxy statements the ratio between the median annual total compensation of all employees and the annual total compensation of its CEO. While the rule has brought some opposition, companies should still keep an eye out for developments in Washington and the SEC, but should not have unrealistic expectations. As I point out in the article, “given all the dynamics and the make-up of the Commission still evolving, companies should proceed with things the way they are now, with the rule in effect.” While there may be possibilities for some type of alleviation, companies should not rely on that to avoid delaying any adjustments needed to be made in preparation.

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ISS and Glass Lewis recently updated their proxy voting guidelines in advance of the 2017 proxy season. The updates to the ISS guidelines will be effective for meetings beginning in February 1, 2017, and the updates to the Glass Lewis guidelines will be effective for meetings beginning in January 1, 2017.

Unlike in certain past years, the revisions to the proxy voting guidelines of ISS and Glass Lewis will not significantly impact the public company corporate governance landscape or impact most public companies.  The changes made to the ISS guidelines include:

  • tightening the overboarding policy of ISS (by lowering the number of public company board positions it considers acceptable for non-CEO directors from six to five),
  • certain technical revisions to ISS guidelines with respect to proposals to amend or approve equity-based compensation plans, and
  • updating the policies of ISS with respect to proposals to address non-employee director compensation.


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Recently, a shareholder was the first to attempt to use proxy access bylaws to nominate a director. The shareholder was GAMCO Asset Management, and the company involved was National Fuel Gas Company (NFG).

NFG amended its bylaws in March 2016 to include a proxy access bylaw and its terms are pretty typical:  the bylaws provide that a shareholder, or a group of up to 20 shareholders, owning 3% or more of the Company’s outstanding Common Stock continuously for at least three years may nominate and include in the company’s proxy materials directors constituting up to 20% of the board, provided that the shareholders(s) and the nominee(s) satisfy the bylaw requirements. Here is NFG’s proxy access bylaw.


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I authored an article published by Law360 on the growing trend in support for proxy access among shareholders. In the article, I weigh the pros and cons of adopting proxy access for a public company and concludes “on balance, we believe that many public companies that have not yet adopted proxy access or received a