SEC Plans to Change Shareholder Proposal Rule –
At the SEC Open Meeting November 5th, the commission voted to propose amendments to the rule that governs the process for shareholder proposals to be included in a company’s proxy statement.
The proposed amendments would:
- update the criteria, including the ownership requirements, that a shareholder must satisfy to be eligible to have a shareholder proposal included in a company’s proxy statement
- update the “one proposal” rule to clarify that a single person may not submit multiple proposals at the same shareholder’s meeting, whether the person submits a proposal as a shareholder or as a representative of a shareholder; and
- modernize the levels of shareholder support a proposal must receive to be eligible for resubmission at the same company’s future shareholder meetings.
Environmental, social and governance (ESG) advocates have responded negatively to the SEC proposal claiming that it will make it harder to hold companies and their leaders accountable for corporate carbon footprints and to adequately alert investors to risk to profits from extreme weather and other factors.
“CEOs do not like public challenges to how and how much they are paid, or to be second-guessed by shareholders on a range of environmental, social and governance matters,” Ken Bertsch, executive director of the Council of Institutional Investors told MarketWatch. “That is what is driving the concerted effort by lobbyists for CEOs to prod the SEC to shackle proxy advisory firms and limit shareholder proposals,” he said.
An SEC statement said the proposed amendments are based on the staff’s extensive experience reviewing shareholder proposals.
The proposal will be subject to a 60-day public comment period.
Supreme Court to Weigh In on CFPB
The U.S. Supreme Court has agreed to hear a legal challenge to the Consumer Financial Protection Bureau (CFPB). Their ruling, which will be released in June 2020 could result in a restructuring, even dismantling of the powerful financial regulator that was created by the 2010 Dodd-Frank reform law.
The case, Seila Law vs. CFPB originates from the Seila law firm’s refusal to comply with CFPB’s request for documents. Seila argues that the CFPB’s structure is unconstitutional because the bureau’s director has an illegal amount of independence from the president’s executive branch authority.
The Dodd-Frank law restricts the president from firing the CFPB’s director before the end of a five-year term except “for cause,” a restriction, Seila argues, that allows for an unconstitutional level of autonomy within the executive branch.
On its path to the Supreme Court, a district court ruled in favor of the CFPB and the Ninth Circuit Court of Appeals upheld the district court.
The CFPB’s allies say the ascension of Kavanaugh and fellow conservative justice Neil Gorsuch to the Supreme Court poses an existential threat to the bureau’s existence. They fear the court could rule the entire agency unconstitutional and shut it down, reports The Hill.
In a sign that the court may not go that far, the court has asked the agency’s defenders and Seila to argue whether the “for cause” provision can be severed from Dodd-Frank to eliminate an unconstitutional check on the president’s power.
Trial Begins in Exxon’s Climate Change Accounting Case
After four years and three New York attorneys general, the sprawling investigation into Exxon and its accounting practices will finally go to trial in a Manhattan New York State courthouse. It is expected to include as a witness former Secretary of State Rex Tillerson, who was Exxon’s chief executive from 2006 to 2016, reports the Wall Street Journal.
The attorney general’s office alleges that Exxon deceived investors of the impact of climate change by “creating the illusion that it had fully considered the risks of future climate change regulation.”
The oil industry has said it is difficult to estimate the future costs of climate change regulation, which is uncertain politically and varies across national boundaries. Exxon has denied wrongdoing, and said a reasonable investor wouldn’t expect to know such internal details, and further accused the attorneys general involved, all Democrats, of being motivated by politics in bringing the case, reports the WSJ.
The case will be watched closely, not only by oil companies, but by an ever widening group of public companies that could be challenged about what assumptions they have made.
Supreme Court to Hear Challenge to SEC’s Power to Recover Ill-Gotten Gains
All nine justices have agreed to hear an appeal by a California couple contesting a 2016 civil action brought against them by the SEC. The SEC won a court ruling in 2017 requiring Charles Liu and Xin Wang to disgorge almost $27 million, the amount they raised from foreign investors to build a never-completed cancer treatment center, reports Reuters.
The government maintained that some 50 foreign investors participated, enticed by the understanding that their investment would qualify them for an EB-5 visa. Liu and Wang transferred millions to their personal accounts.
At issue are prior high court rulings that have created a statute of limitations restricting the ability of the SEC to seek civil monetary penalties and disgorgement. A Supreme Court ruling is expected in June 2020.
More International Disclosures Sought
Thirteen Democrat senators, including presidential hopefuls Bernie Sanders and Elizabeth Warren, want companies to provide country-specific information on their income, assets, number of employees, and taxes paid, reports Accounting Today.
The group has sent a letter to the Financial Accounting Standards Board (FASB) Chairman Russell Golden asking that companies be required to break out more information on a country-by-country basis.
The FASB is currently reviewing tax disclosure requirements and has issued a revised exposure draft on the proposed Accounting Standards Update to Income Taxes.
An Interactive Tool to Measure “Business Climate Change”
The Tax Foundation’s State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their state’s tax systems compare. While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how well states structure their tax systems and provides a road map for improvement.
A quick look at the winners and losers show Wyoming, South Dakota, Alaska, Florida and Montana as the best states. The worst states are New Jersey, New York, California, and Connecticut.
Just click Tax Foundation’s interactive tool for a wealth of information and stats.
An initial read on Americans’ 2019 holiday spending plans, conducted Oct. 1-13 by Gallup, suggests a good season ahead for U.S. retailers.
- Consumers estimate they will spend $942, up sharply from year ago
- Record-high 37% plan to spend $1,000 or more
- Record-low 16% say they will spend less this year than in 2018
Read full report at Gallup.com
Workers Less Worried
U.S. workers are largely unworried about six potential job setbacks, as the nation’s unemployment rate remains low. Less than a quarter of U.S. adults employed part or full time are concerned about possible layoffs, technological advances replacing their jobs, their employers moving overseas or reductions to their benefits, pay and hours.
The latest Gallup poll found that “this year’s 23% reading is the lowest” since Gallup first started asking this question in 1997.
Read full report at Gallup.com
An Audited Legacy of Quality
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We thought we were building a leading, international accounting firm by providing Big 4 expertise, delivered with personal service.
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