From Judge Holly Teeter (D. Kan.) Wednesday in Institutional Shareholder Servs. Inc. v. Kobach:
SB 375 is known as the Proxy Advisory Transparency Act. Under SB 375, a "proxy advisor" is "a person who, for compensation, provides a proxy advisory service to shareholders of a company or to other persons with authority to vote on behalf of the shareholders of a company." "Proxy advisory service" is defined as certain "services that are provided in connection with or in relation to a company, or are provided to any person in this state." This includes "[a]dvice or a recommendation on how to vote on a company proposal or proxy proposal." Charitable organizations and banks that meet certain criteria are excluded from the definition of proxy advisory service….
If a proxy advisor makes a voting recommendation that aligns with the views of company management, SB 375 does not require any action. If a proxy advisor recommends a vote "against company management," whether specifically or as default policy, and that recommendation is not based on a "written financial analysis," the proxy advisor must:
(1) Concurrently with providing the proxy advisory service, include a clear and conspicuous disclosure to each shareholder, or entity or other person acting on behalf of a shareholder, receiving the proxy advisory service that:
(A) Identifies the service being provided;
(B) identifies the recommendation or policy at issue; and
(C) states that the proxy advisor has made the recommendation or policy without basing such recommendation on a written financial analysis regarding the impact of such recommended action on company investors that:
(i) Analyzes the expected short-term and long-term financial benefits and costs to the company regarding the implementation of the company proposal or proxy proposal;
(ii) concludes what vote or course of action is most likely to positively affect shareholder value; and
(iii) explains the methods and processes used to prepare the analysis, including the experience and geographic location of the personnel who formed the recommendation;
(2) provide, concurrently with providing a proxy advisory service under section 3(h)(1)(A) or (1)(B), and amendments thereto, the disclosure under subsection (a)(1) to the board of directors of each company that is the subject of the proxy advisory service; and
(3) while any proxy advisory services are being provided, publicly and conspicuously disclose on the home or front page of the proxy advisor's website a statement that the proxy advisor's proxy advisory services include one or more services that include recommendations or policies against company management on company proposals or proxy proposals that are not made based on a written financial analysis regarding the impact of such recommended action on company investors that:
(A) Analyzes the expected short-term and long-term financial benefits and costs to the company regarding the implementation of the company proposal or proxy proposal;
(B) concludes what vote or course of action is most likely to positively affect shareholder value; and
(C) explains the methods and processes used to prepare the analysis, including the experience and geographic location of the personnel who formed the recommendation.If a proxy advisor makes a recommendation "against company management" that is based on a written financial analysis, the proxy advisor must:
(1) Concurrently with providing the proxy advisory service, include a clear and conspicuous disclosure to each shareholder, or entity or other person acting on behalf of a shareholder, receiving the proxy advisory service that:
(A) Identifies the proxy advisory service being provided;
(B) identifies the recommendation or policy at issue;
(C) states that the proxy advisor has made the recommendation or policy based on a written financial analysis that:
(i) Analyzes the expected short-term and long-term financial benefits and costs to the company regarding the implementation of the company proposal or proxy proposal;
(ii) concludes what vote or course of action is most likely to positively affect shareholder value; and
(iii) explains the methods and processes used to prepare the analysis, including the experience and geographic location of the personnel who formed the recommendation; and
(D) states that the analysis is available upon request;(2) make such analysis available within a reasonable time to any client of the proxy advisory service upon request; and
(3) provide, concurrently with providing a proxy advisory service under section 3(h)(1)(A) or (1)(B), and amendments thereto, a copy of such analysis to the board of directors of each company that is the subject of the service.
