In Focus

Facebook and Zuckerberg Drop Plan for Non-Voting Shares

Facebook announced September 22 that it is dropping its plan to issue non-voting shares. A shareholder lawsuit sought to block introduction of the new share class, among other things questioning the independence of the process used by the board in evaluating the proposal. The Facebook decision follows a similar retreat earlier this year by IAC/Interactive, and strong opposition to Snap’s non-voting shares.

Do Not Disadvantage US Investors on Research, CII Asks SEC

The Council of Institutional Investors on September 22 sent a letter to Securities and Exchange Commission Chairman Jay Clayton, requesting that the Commission work to permit U.S. investment managers and asset owners to “unbundle” their trade execution from research. Effective January, the European Union’s MiFID II directive will require investment managers to pay for research services directly, either from their own funds or from an account funded by clients.
CII understands that some broker-dealers are seeking SEC relief for European clients, permitting them to directly pay for research. These broker-dealers apparently will continue to force bundling of research for U.S. investors.
“The SEC should seek to create a clear path for unbundling of research from trade execution, for all investors, including those domiciled in the United States” said CII General Counsel Jeff Mahoney. Mahoney said that separation of cost of trade execution from research would increase transparency and price discovery for trade execution and the cost of research, reduce investor costs through more efficient markets for research, and encourage independent research. He added that if universal no-action relief consistent with CII’s approach is not feasible at this time, it is important that any no-action relief granted be temporary and “promptly followed” by Commission action with appropriate public due process that results in a better approach for all investors.

CII Urges SEC to Approve PCAOB Rule on Expanded Auditor Reports

CII has urged the SEC to promptly approve the Public Company Accounting Oversight Board’s (PCAOB) proposed rules to expand external auditor’s reports on corporate financial statements.
The PCAOB proposal, approved after six years of study and consultation, provides that the auditor’s report disclose critical audit matters (CAMs) that relate to accounts or disclosures that are material to the financial statements and that involve especially challenging judgment by the auditor.
CII strongly believes that information about CAMs would make auditor’s reports more relevant and useful to investors. Bloomberg argues that approval of the new standard would help the U.S. catch up with other markets, and is a test for the new SEC chairman. For further background, see this WSJ story. CII General Counsel Jeff Mahoney will discuss the PCAOB standard on Monday, September 25, on an NYSSCPA panel discussion.

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Fair Financial RulesSensible, effective rules safeguard investors and strengthen markets.

Dual-Class StockEach share of a public company's common stock should have one vote.

Majority Voting for DirectorsIn uncontested elections, directors should be elected by majority vote.

Universal ProxyIn contests, investors should be free to vote for the nominees they prefer.

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