In Focus

CII-REF Publishes Report on Best Practices in Board Evaluation Disclosure

The CII Research and Education Fund (CII-REF) published a report highlighting best practices in board evaluation processes and disclosure. Since CII published a report in 2014 that focused predominantly on board evaluation disclosure at foreign companies, U.S. companies have caught up. “Evolving practices in board evaluation, combined with high-profile failures of board oversight, are driving investors’ desire for stronger disclosure of their portfolio companies’ approaches to board assessment,” the report says. Robust board evaluation processes strengthen board effectiveness and prove an important conduit for change as companies require new skills, perspectives and strategies over time. The report identifies several indicators of strong processes and disclosure and features the proxy statements of ten U.S. companies that investors find especially effective.

Facebook Scandals Underscore Need for Sunsets for Dual-Class Listings

Controversies at Facebook over sharing users’ personal data and “fake news” have focused investor attention on the pitfalls of dual-class stock structures with unequal voting rights and the need for time-based sunset provisions that set an expiration date on super-voting shares (see this Business Standard story). But calls for founder and CEO Mark Zuckerberg to step down (here and here) are not likely to be heeded. Zuckerberg controls nearly 60% of Facebook voting power through his holdings of Class B shares, which  have 10 votes per share. That dilemma may be helping to drive letters of support for CII’s petitions  to the NYSE and NASDAQ for listing standards that require time-based sunsets for future multi-class companies that wish to list on the exchanges. U.S. comments include letters from CalSTRS (Nasdaq and NYSE) and Florida SBA (Nasdaq and NYSE). The exchanges have also received letters from non-U.S. investors endorsing CII’s petitions, including from Hermes (Nasdaq and NYSE), PSP Investments (Nasdaq and NYSE), a leading association of Brazilian investors (Nasdaq and NYSE) and a joint letter from PGGM of the Netherlands, Legal & General and Railpen in the UK and Sweden’s AP1, AP2 and AP3 pension funds (Nasdaq and NYSE).