In a recent speech, Securities and Exchange Commission (“SEC”) Chairman Jay Clayton summarized a number of regulatory priorities for 2019 that may interest retailers. Clayton began the speech looking back on 2018’s accomplishments, then spent the bulk of his time discussing planned rulemaking efforts in the coming year.
Clayton anticipates a number of efforts focused on the proxy solicitation and voting process. Of particular note for retailers, Clayton would like to take action on the ownership and resubmission thresholds for shareholder proposals under Rule 14a-8. He also hopes to see greater reform in the oversight and regulation of proxy advisory firms.
As to proxy advisors, he would like to see “clarity regarding the analytical and decision-making processes advisors employ, including the extent to which those analytics are company- or industry-specific.” A frequent criticism of proxy advisory firms is their one-size-fits-all approach, and on this point, Clayton observed that “it is clear to me that some matters put to a shareholder vote can only be analyzed effectively on a company-specific basis, as opposed to applying a more general market or industry-wide policy.” He also made mention of considering both conflicts of interest at proxy advisory firms as well as ensuring that investors have effective access to company’s responses to information in proxy advisor reports.
On the topic of long-term investment, Clayton referenced the ongoing debate regarding the “adequacy and appropriateness of mandated quarterly reporting and the prevalence of optional quarterly guidance, and whether our reporting system more generally drives an overly short-term focus.” He encouraged market participants to share their views with the SEC if there are other aspects of SEC regulations that drive short-termism. The SEC appears poised to release a more formal request for public comment on these issues.
Before closing, Clayton also briefly discussed three other risks the SEC is monitoring: (1) the impact to reporting companies of Brexit, the United Kingdom’s exit from the European Union; (2) the transition away from LIBOR as a reference rate for financial contracts; and (3) cybersecurity. For retailers with British operations, the Brexit issue is no doubt a central point of concern. Each of the final two issues may impact all publicly traded retailers’ periodic disclosures and other policies and procedures. As we noted in this recent client alert, we expect the SEC to be especially vigilant in overseeing cybersecurity