Issue link: https://digital.shearman.com/i/1019978
Shearman & Sterling LLP 44 | Proxy Access — The March Forward Continues but at a Slower Pace SECOND-TIER TERMS – OVERVIEW In this article, we refer to by-law terms beyond the headline terms as "second-tier terms." Institutional investors have become focused on second-tier terms. In July 2017, the Council for Institutional Investors updated its "Proxy Access: Best Practices" white paper and expanded the number of second-tier terms it considers when assessing a company's proxy access by-law. Some common second-tier terms include: Loaned shares Whether shareholders are able to count loaned shares towards the minimum percentage ownership requirement 1 Treatment of investment funds Whether investment funds consisting of multiple entities are able to aggregate their shares and be treated as one shareholder for purposes of the shareholder cap found in most proxy access by-laws 2 Restrictions on renomination Whether proxy access candidates who fail to achieve a specific percentage of votes (usually 25%) are prevented from being re-nominated for a number of years (usually two years) after their initial nomination 3 Compensation arrangements Whether proxy access candidates can receive candidacy fees (and director fees) paid by shareholders, and whether such fees need to be disclosed to the company 4 Interplay of proxy access and advance notice Whether there is a limitation on nominees pursuant to proxy access when nominations are made through advance notice Other proxy access interplays Whether there is a limitation on proxy access nominees when a director previously elected pursuant to proxy access is nominated by the company or when an agreement with a shareholder is entered into pursuant to which such shareholder is granted the right to a board seat 5 6