Week in Review: Nov. 1, 2013

Week in Review: Nov. 1, 2013

November 1 2013

MSCI Puts Proxy Adviser ISS up for Sale

MSCI Inc. announced last week that it was exploring strategic alternatives for its influential proxy advisor and governance-services provider Institutional Shareholder Services Inc. (ISS).

WSJ:  The announcement comes as the proxy advisory business is facing regulatory scrutiny, market headwinds, and questions about the validity of its analytical models.

ISS Press Release:

Institutional Shareholder Services Inc. (ISS), a leading provider of corporate governance solutions to the global financial community,announced today that the Board of Directors of its parent company, MSCI Inc. (NYSE:MSCI), has authorized the exploration of strategic alternatives regarding ISS.  The announcement represents the start of a process that may eventually lead to a full separation of ISS from MSCI.

There can be no assurance that the process of exploring strategic alternatives will result in a transaction or that any transaction will ultimately be consummated.  ISS does not expect MSCI to disclose further developments with respect to the process unless and until a definitive decision is reached with respect to a specific transaction or the process of exploration is otherwise terminated or concluded. Morgan Stanley is serving as financial advisor to MSCI and Davis Polk is serving as legal advisor.

Link: MSCI to Explore Strategic Alternatives for Institutional Shareholder Services

64 Companies have Failed Say on Pay in 2013

Oracle Corp. failed their Say on Pay vote for the second year in a row, bringing the 2013 total to 64.

2013 Say on Pay Voting Results
List of companies that have failed Say on Pay in 2013

SEC Comment Letter of the Week

This week’s letter comes from John Cavanagh, Director of the Institute for Policy Studies.

Excerpt from Mr. Cavanagh’s letter:

In these comments, we address one of the most sophisticated attempts to trivialize the importance of pay ratio disclosure, a set of comments submitted by the National Investor Relations Institute. The over 3,300 corporate officials this Institute represents hail from more than 1,600 publicly traded enterprises and sit upon $9 trillion in market capitalization. This Institute contends that the SEC’s 953(b) proposal “would provide no material benefit to most investors while imposing significant costs on more than 3,800 U.S. issuers and inhibiting efficiency, competition, and capital formation.”

To buttress this critique, the National Investor Relations Institute advances five specific claims, many of which are repeated by other opponents of CEO-worker pay ratio disclosure. Below, we address these five claims one by one.

Below are the five claims the Institute for Policy Studies addresses:

  1. The proposed rule would result in misleading disclosures.
  2. The lack of defined standards will result in inconsistent disclosures and may cause investor confusion and increase compliance costs.
  3. Proposed rule likely will lead to less informed proxy voting.
  4. Pay ratio disclosure should be limited to full-time, U.S.-based employees.
  5. Companies should be able to use existing BLS data to calculate their pay ratios.

Link: John Cavanagh, Director, Institute for Policy Studies, washington, District of Columbia