Source: http://www.thecorporatecounsel.net/Blog/2011/04/
Timestamp: 2013-12-05 21:37:33
Document Index: 143175268

Matched Legal Cases: ['§926', '§951', '§922', '§952', '§975', '§1502', '§1503', '§1504']

TheCorporateCounsel.net Blog: April 2011 Archives
Survey Results: Director Recruitment & Training
We have posted the survey results regarding director recruitment and training trends, repeated below:
1. When your company recruits new directors, do you conduct a background check on the candidates: - Yes - 82.4%
- No - 17.6%
2. If you answered "yes" to #1, does your company: - Use a third-party to conduct the background check (e.g. private investigator) - 76.9%
- Use internal resources to conduct the background check - 38.5%
3. If you answered "yes" to #1, does your company: - Check the background of the candidate's professional life - 100%
- Check the background of the candidate's personal life - 69.2%
4. If you answered "yes" to #1, has your company ever decided not to nominate a director based on the results of a background check: - Yes - 0%
5. Does your company require Audit Committee members to complete ongoing training to stay current with GAAP and PCAOB standards for financial reporting and internal controls: - Yes - 6.3%
- No - 93.7%
Please take our new "Quick Survey on Director Resignations." More Dodd-Frank Rulemakings Delayed
Recently, I blogged about a slew of Corp Fin rulemakings that have been delayed under the SEC's "Dodd-Frank Implementation Timeline." Given that we are at the end of April and a few rulemakings slotted to be adopted before now have not happened, the SEC recently adjusted the timeline to move them to the "May-July" bucket. This includes these three rulemakings: - §926: Propose rules disqualifying the offer or sale of securities in certain exempt offerings by certain felons and others similarly situated - §951: Adopt rules regarding disclosure by institutional investment managers of votes on executive compensation - §922: Adopt rules to implement a Whistleblower Incentives & Protection Program On Wednesday, the SEC proposed rules that would remove references to credit ratings in several rules under the '34 Act. Here's the press release - and here's the proposing release.
- A Look Ahead at Peak Meeting Dates
- Adjournment and Circulation of Proxy Cards - Annual Meeting Survey Results: Part I - ISS's "25th Anniversary Book" - The Aging of US Corporate Boards Why Do Surfers Have Published Etiquette Rules, But Not the Rest of Us?
Permalink: Survey Results: Director Recruitment & Training
The Exploding Growth of Social Media: Securities Law Issues to Consider
The explosion in social media these days is evident by any number of ways. One obvious way are the usage statistics themselves - check out these stats. Another is reading the amazing things that companies and investors are doing, mostly courtesy of Dominic Jones' "IR Web Report" (eg. "Surprise as investor relations YouTube video goes viral"). For me, a sure sign is the high volume of panels on the topic that I have been kindly invited to over the next few months. But even if you never envision yourself as a blogger or conversing via Twitter, you can't ignore that your clients are. To best understand how fast the use of social media by public companies - and investors - has grown, I encourage you to read Dominic's blog entitled "Social media investor relations reaches tipping point" and then tune in on Tuesday for our webcast - "Tackling Social Media Issues" - during which the panel (including the SEC's Corp Fin Chief Counsel Tom Kim) will discuss a myriad of issues that likely will catch you off guard, including:
- Can a tweet make information public for purposes of Reg FD?
- Who is a "senior official" or company representative for Reg FD purposes when it comes to social media? - Have companies implemented the SEC's web disclosure guidance? How? Or why not? - How have companies made inadvertent premature disclosure through their own website leaks (or leaks through third-parties)?
- How has social media been used for annual meetings? By third-parties soliciting?
- Are e-Forums being used? And how?
- Are there issues if a company is selectively tweeting only positive news?
- How about if companies are tweeting their own earnings guidance over and over again?
- Can tweeting about products & services raise securities law issues?
- What issues can social media pose for '33 Act offerings? How about for pre-IPO companies?
I'm not sure how we will cover so much in the span of an hour, but you can see how many issues there are to consider. I rarely talk up a webcast so much before it happens - and I am biased since social media is near and dear to me (follow me on Twitter) - but I do believe this is a groundbreaking program. Tune in and find out. Note the new time of the program of 12:00 - 1:00 pm eastern.
Recently, I wrapped up one of the first books of its kind - "Social Marketing to the Business Customer" - courtesy of one of the authors, Eric Schwartzman. For law firms and others that covet other professionals as clients, this is a good resource to understand how vital social media is to your future - and how best to leverage that opportunity. Using social media certainly requires a different approach than what firms have been accustomed to in the past since it requires you to be part of the "conversation." Red tape is a hazard here. The book contains nice examples of how companies have used social media to reach out to their clients (and potential clients) in ways that were always dreamed about, but not realized until now. And it has a great section on how to overcome internal objections to embracing this future (particularly helpful for law firms, who are notorious to be among the last to embrace new technology to their advantage). I'll be blogging more in this area as I wind my way through my speaking gigs over the next few months...
Study: Rate of CEO Turnover
Recently, Equilar issued this study on CEO turnover in the S&P 1500. A few key findings:
- 381 companies in the S&P 1500 changed CEOs once from 2007 to 2009; 33 changed CEOs twice or more.
- Three-quarters of incoming CEOs were internal hires, while a quarter came from outside the firm.
- Women are gaining ground as executives: 17 outgoing male CEOs were replaced by women.
Permalink: The Exploding Growth of Social Media: Securities Law Issues to Consider
Corp Fin Builds Out Its New Offices
Last July, Corp Fin Director Meredith Cross announced the creation of three new offices in the Division. Then in December, the heads of these new offices were selected, but the offices were not fully staffed due to budget concerns. Now that the SEC's budget finally has been set for the year, Corp Fin recently begun to fill in these new offices by promoting Staffers from other groups as follows:
1. Office of Capital Market Trends - Special Counsels Damon Colbert, John Harrington and Andy Schoeffler; Analyst David Walz
2. Office of Structured Finance - Senior Special Counsel Rolaine Bancroft and Special Counsels David Beaning, Robert Errett and Jay Knight
3. Financial Services II, AD12 - Accounting Branch Chief Kevin Vaughn; Special Counsels Sebastian Gomez Abero and Michael Seaman; Attorneys Eric Envall and Celia Soehner; Accountants Angela Connell, Yolanda Crittendon, Brittany Ebbertt, Rebekah Lindsey, Lindsay McCord and Staci Shannon
We have updated our "Division of Corporation Finance Organization Chart" to reflect these changes and a few other promotions that recently were made.
Say-on-Pay: A Ninth Failed Vote
Yesterday, Navigant Consulting filed this Form 8-K to report that it became the 9th company to fail to gain majority support for its say-on-pay, with only 45% voting in favor. Ted Allen's blog provides some analysis.
Transcript: "What the Top Compensation Consultants Are NOW Telling Compensation Committees"
We have posted the transcript for the CompensationStandards.com webcast: Transcript: "What the Top Compensation Consultants Are NOW Telling Compensation Committees."
Permalink: Corp Fin Builds Out Its New Offices
Say-on-Pay: The Vote May Be Non-Binding But It May Wind Up in Court
Probably the most interesting development that happened while I was on vaca last week was the one noted by Mike Melbinger in his blog on CompensationStandards.com. Mike blogged about how some of the first companies to fail to receive majority support on their SOP have been sued (as well as their compensation committee members and even their compensation consultants) in shareholder derivative suits. Not only have the early failures of this proxy season been sued, but two of the companies that failed last year were sued (one case has been settled and one is still pending). We have begun to collect the pleadings from these cases for CompensationStandards.com's "Say-on-Pay" Practice Area. With the ante continuing to go up, take advantage of the early bird discount now for our pair of conferences - "The Say-on-Pay Workshop: 8th Annual Executive Compensation Conference" and the "6th Annual Proxy Disclosure Conference" (here's the agendas) - which will be held on November 1st-2nd in San Francisco and via video webcast. Register now to obtain a 25% Early Bird Discount!
In his "Delaware Corporate & Commercial Litigation" Blog, Francis Pileggi notes that Delaware Chancellor William Chandler has retired before the completion of his term and explains the process by which a replacement will be chosen. Francis also notes the importance of not having a full bench of five members of the Delaware Court of Chancery.
AFL-CIO Launches 2011 "Executive PayWatch"
Last week, as ISS's Ted Allen notes in this blog, the AFL-CIO began a campaign to urge shareholders to vote on say-on-pay. The blog is repeated below:
The AFL-CIO has launched the 2011 version of its Executive PayWatch Web site and is urging investors to help rein in CEO pay by participating in the advisory votes on compensation that all large and mid-cap companies will hold this year. "Although non-binding, it's the first time that shareholders have had this opportunity," Richard Trumka, president of the AFL-CIO, said at a press conference on Tuesday. The labor federation is analzying corporate pay disclosures and plans to vote against the compensation practices at some companies, but hasn't publicly identified those firms. An AFL-CIO affiliate, the American Federation of State, County, and Municipal Employees, has launched a "vote no" campaign against the pay practices at Pfizer and Johnson & Johnson. The PayWatch site features a searchable database that includes CEO pay information from 299 S&P 500 companies that have filed proxy materials. According to the labor federation, the average 2010 compensation at those firms was $11.4 million, up 23 percent from 2009. On average, these pay packages included $3.8 million in stock awards, $2.4 million in stock options, $2.4 million in non-equity incentive plan compensation, $1.2 million in pension and deferred compensation, $1.1 million in salary, a $251,413 bonus, and $215,911 in other compensation. Trumka said the average total compensation for S&P 500 CEOs is now about 343 times that of the average American worker, up from 42 times in 1980. "We believe that executive pay has gotten out of whack," he said.
AFL-CIO officials also expressed concern that House Republicans had introduced legislation to repeal another Dodd-Frank Act provision that would require companies to disclose the ratio between the total compensation received by the CEO and the median pay received by the firm's employees. Corporate advocates have denounced this provision, arguing that it would be extremely costly to collect this data, and that the foreign and part-time employees should be excluded from this calculation. Trumka denounced this attempt to "water down" Dodd-Frank and said this pay ratio disclosure "would have a profound impact" and prod boards to set compensation based on a company's own organizational needs, rather than based on the pay at other companies.
The SEC has not yet proposed rules to implement this provision but plans to do later during the second half of the year. The AFL-CIO is urging the commission to require companies to include both their foreign and part-time workers in the pay ratio calculations. The AFL-CIO's Paywatch site specifically criticized the pay practices of six companies: Occidental Petroleum, Hewlett-Packard, Reynolds American, Rite Aid, Abercrombie & Fitch, and PulteGroup.
Also see Vanessa Schoenthaler's blog about the PayWatch site.
Permalink: Say-on-Pay: The Vote May Be Non-Binding But It May Wind Up in Court
Say-on-Pay: A Seventh & Eighth Failed Votes Last week, Stanley Black & Decker filed this Form 8-K to report that it became the seventh company to fail to gain majority support for its say-on-pay, with only 39% voting in favor. Not only did shareholders reject the company's SOP, they also came down hard on the board - two directors had 49% withheld. Cooley's Amy Muecke analyzes why the company failed in this memo.
Then on Friday - in a midst of a flurry of filings on a day when the markets were closed - Umpqua Holdings Corporation filed this Form 8-K to report it became the eighth failed say-on-pay with only 35% voting in support. Umpqua's Form 8-K is unique in that it chose to include a narrative on why it believed it failed (ie. ISS recommended against the company and the company disagrees with ISS's analysis).
In his "Proxy Disclosure Blog," Mark Borges gives us the latest say-when-on-pay stats: with 2177 companies filing their proxies, 43% triennial; 4% biennial; 51% annual; and 4% no recommendation. Dodd-Frank: The SEC's Internal Controls Study for Smaller Companies
On Friday, the SEC released an internal controls study mandated by Section 989G(b) of Dodd-Frank regarding the impact of Section 404(b) of Sarbanes-Oxley on smaller reporting companies (those with a public float between $75 and $250 million). The study didn't find that these smaller companies have unique characteristics that would provide sufficient reasons for differentiating them from accelerated filers as a whole - so it didn't recommend Section 404(b) relief for them. The study also found that internal controls costs have been going down. Last week, as noted in this CFO.com article, the FASB and IASB will extend "by a few additional months" their target date for completing their four highest-priority joint convergence projects. Scenes from Spring Break
Here are a few random videos from my vacation last week. This first one is from UC-Berkeley campus, where group of students sang The Who's "Behind Blue Eyes" a cappella style:
This one is from the Santa Cruz Boardwalk and features "Ask the Brain":
Permalink: Say-on-Pay: A Seventh & Eighth Failed Votes
Say-on-Pay in a Nutshell
With articles appearing now in local papers about Say-on-Pay (here is a representative Baltimore Sun article from over the past weekend), it now seems that the Dodd-Frank mandated Say-on-Pay votes have finally seeped into the public consciousness. It is no surprise then that the SEC's Office of Investor Education and Advocacy has just put out this slick Investor Bulletin on Say-on-Pay and Say-on-Golden Parachute votes. The purpose of the bulletin appears to be to explain, in neutral, plain terms, what the Say-on-Pay, Say-on-Frequency and Say-on-Golden Parachute votes are all about and why they are turning up in proxy statements this year. Unlike last year's Investor Bulletin New Shareholder Voting Rules for the 2010 Proxy Season (dealing with the change to NYSE Rule 452 for the election of directors), it doesn't appear that the SEC or the Staff is encouraging that this Say-on-Pay Investor Bulletin be expressly referenced in proxy statements.
Keep in mind that the Say-on-Golden Parachute voting and disclosure requirements are effective for initial filings made on or after this coming Monday, April 25th. To date, it appears that very few companies have opted to get the "advance" advisory approval of golden parachute compensation by including the Golden Parachute Compensation table and related disclosures in the annual meeting proxy statement so that it is subject to the Say-on-Pay vote. I have only counted five so far, but let me know if you have come across more than that.
Occidental Petroleum to Participate in First "Fifth Analyst Call"
As expected, Say-on-Pay has focused a great deal of attention on the engagement process this year, as companies explore new ways to have an effective dialogue with shareholders regarding corporate governance and executive compensation issues. According to this Dow Jones Financial News article, a group of investors led by F&C Asset Management and Railpen Investors is advocating the use of the "fifth analyst call" as a means for accomplishing effective engagement. The "fifth analyst call" is intended to supplement the four quarterly analyst calls with a call that is focused exclusively on corporate governance matters. The idea is that the call will occur between when the proxy statement is filed and the date of the annual meeting, so that the discussion can be about the corporate governance matters and executive compensation disclosed in the proxy statement.
The article notes that Occidental Petroleum has said that the company's lead independent director and the chair of the executive compensation and human resources committee will participate in the first such "fifth analyst call," which is scheduled to take place on April 26th. It remains to be seen whether others will follow Occidental Petroleum in adopting this approach.
For more on the "fifth analyst call" concept, check out this entry by Karen Kane of Karen Kane Consulting on The Mentor Blog.
Understanding Matrixx Initiatives
In this podcast, my colleagues Erik Olson and Stephen Thau of Morrison & Foerster talk about the recent Supreme Court case, Matrixx Initiatives v. Siracusano:
- What was the Supreme Court's holding?
- What does this mean for companies going forward?
Permalink: Say-on-Pay in a Nutshell
Corp Fin to Withdraw C&DI on Non-Continuing Director Disclosure
At the "Dialogue with the Director" session at last week's ABA Spring Meeting in Boston, Corp Fin Director Meredith Cross indicated that the Staff plans to withdraw Regulation S-K Compliance and Disclosure Interpretation Question 116.08, which was issued last month to say that Instruction 3 to Item 401(a) of Regulation S-K only applied in the case of proxy statements, such that Item 401(a) and Item 401(e) disclosures about a director whose term would not continue past the annual meeting would need to be provided directly in Part III of Form 10-K or incorporated by reference into Part III from the proxy statement in order to satisfy the Form 10-K disclosure requirements. Going forward, the Staff's position will be that biographical information for a non-continuing director need not be included in a proxy statement incorporated by reference into Part III of Form 10-K (in reliance on Instruction 3 to Item 401(a)), however an issuer that is including the Part III information directly in the Form 10-K (and thus does not have the benefit of Instruction 3 to Item 401(a)) would have to include the Item 401(a) and (e) information about the non-continuing director in the Form 10-K. Revised Regulation S-K C&DIs are expected out soon.
FINRA to Re-propose Rules on Broker-Dealer Participation in Private Placements
Also at last week's ABA Spring Meeting in Boston, FINRA representatives announced that the FINRA Board of Governors had approved a re-proposal of the recent proposal to expand Rule 5122 to govern all private placements in which a member firm participates. As this Morrison & Foerster memo notes:
The most critical proposed revisions for participation of broker-dealers in offerings of unaffiliated entities are:
- Eliminating the provision that 85% of the proceeds (i) be used for the business purposes disclosed in the offering document, and (ii) not be used to pay offering costs, commissions or other compensation to participating broker-dealers and their associated persons;
- Requiring disclosure of use of proceeds;
- Changing the date of filing of the private placement memorandum ("PPM") to 15 days after either commencement or first offer (not first sale), in order to avoid affecting the capital formation process;
- Creating a new Rule 5123 to address participation of broker-dealers in offerings by unaffiliated entities, thereby leaving the provisions of current Rule 5122 in place (including the 85% use of proceeds provision) for participation in offerings by affiliated entities;
- Retaining the expanded definition of "participation" (from Rule 5110(f)(5)); and
- Possibly adding an exemption for M&A transactions.
- More on "Are Auditors Becoming Irrelevant?" - Enlightened Companies: Step Up and Co-opt the Fifth Analyst Call -101 Suggestions for Corporate Law Students - Study: The Latest IPO Trends - A Governance Interview with Microsoft's John Seethoff
Permalink: Corp Fin to Withdraw C&DI on Non-Continuing Director Disclosure
The Office of Inspector General-Office of Audit of the U.S. Department of Labor recently issued its report entitled "Proxy-Voting May Not be Solely for the Economic Benefit of Retirement Plans," which was prompted by continuing concerns about whether pension plans comply with the Employee Benefits Security Administration (EBSA) requirement that fiduciaries vote solely for the plan's economic interests and that named fiduciaries periodically monitor proxy voting decisions made by third parties. This report follows a 2004 Government Accountability Office (GAO) study, which raised concerns about legal challenges created by ERISA and DOL statutory authority in ensuring that the requirement of "proxy-voting solely for economic interest" is carried out. Without adequate monitoring or enforcement of the proxy-voting requirements, the concern is that fiduciaries are using plan assets to support or pursue proxy proposals for personal, social, legislative, regulatory or public policy agendas which have no clear connection to increasing the value of investments for the benefit of plan participants.
The DOL OIG noted that the EBSA doesn't have adequate assurances that fiduciaries or third parties voted proxies solely for the economic benefit of plans, and that the EBSA has dedicated few resources to the enforcement of the requirement. The report recommends that: (1) ERISA be amended to give the Secretary of Labor the authority to assess monetary penalties against fiduciaries that don't comply with the proxy voting requirements; (2) the proxy-voting requirements be amended to require documented support for fiduciary monitoring of the economic benefit of voting decisions; and (3) the EBSA include proxy-vote monitoring in enforcement investigations. The Assistant Secretary for the EBSA did not agree to implement any of the OIG recommendations. Mailed: March-April Issue of The Corporate Counsel
- Today's Marketplace for Securities of Pre-Public Companies
- Mary Schapiro's April 6 Letter to Congress
- The Big Banks' Loss Contingency Disclosure Approach--Will it Satisfy the SEC (and FASB)? - What if it Doesn't?
- Capital Raising Methods Currently in Vogue--Chart
- Exhibit 5 Opinions in Shelfs--Staff Project
- Foreign Private Offering by U.S. Issuers?
- Backdating Stock Option Exercises--Mercury CFO's Conviction
- Charter or Bylaw Forum Selection for Derivative Action
- A Few IFRS Convergence Thoughts from OCA Head
- Disclosure of Political Contributions
Permalink: The SCC Considers the Fate of Federal Securities Regulation
SEC to Ease Private Placement Constraints for Pre-IPOs?
Last week, this WSJ article reported how Rep. Darrell Issa had sent this 17-page letter to the SEC on March 24th regarding small business capital formation, particularly in the pre-IPO context. That set off a barrage of news coverage. Last week, SEC Chair Schapiro responded with this 26-page letter, indicating that she has ordered a review of all the rules affecting capital formation for small companies and is reconsidering current restrictions on communications in IPOs. Learn more in the March-April issue of The Corporate Counsel that is being dropped in the mail today. Small Company Capital Formation Act of 2011: Regulation A Revival?
Here's news culled from this Morrison & Foerster memo:
On March 14th, Representative David Schweikert (R-AZ) introduced the Small Company Capital Formation Act of 2011 in the U.S. House of Representatives. The bill seeks to increase the offering threshold from $5 million to $50 million for public offerings of smaller companies exempt from registration under the Securities Act pursuant to Regulation A. The bill also will require the SEC to review the threshold every two years.
In a speech to the Council of Institutional Investors last week, Nelson Peltz, one of the most successful of the activist investors, said the recent changes in corporate governance would enable him to make investments in the heretofore "untouchables"--companies with market capitalizations over $50 billion. Mr. Peltz noted that the new governance rules give activists more tools with which to pressure companies, noting that larger companies provide bigger profit opportunities than smaller companies.
Activist investors with significant records of success will be able to use the new governance rules to convince institutional investors, like the members of the Council of Institutional Investors, to join them in pressuring companies to change their business strategies to those advocated by the activists, whether or not they are in the best interests of the long-term success of the companies and their long-term investors. There has been a notable increase in hostile takeover and activist investor activity this year. If the present favorable market conditions for this activity continue, there will be a further increase. There is also little doubt that Mr. Peltz's prediction that the targets will be among the largest companies is also correct. All companies, even the very largest, should have up-to-date plans for dealing with activists and strategies to avoid inviting the notice of activists.
Heading Out for Spring Break!
I'm headed out for a week off - Spring Break '11, doing the college campus tour thing with my oldest son. Reminds me of my youth, working in Fort Lauderdale for a spring break season after I graduated college. That's back when Lauderdale was popular for spring break. Remember Spuds McKenzie?
Permalink: SEC to Ease Private Placement Constraints for Pre-IPOs?
More Companies Challenge ISS Through Additional Soliciting Materials
Like Disney and Hewlett-Packard before them (see this blog), General Electric and Northern Trust recently filed additional soliciting materials challenging ISS's recommendations on their say-on-pay. We are compiling a list of all the companies that do this on CompensationStandards.com's "ISS Policies & Ratings" Practice Area.
In his "Dodd-Frank.com Blog," Steve Quinlivan notes:
GE notes a "significant disagreement" with ISS. GE's materials directly confront ISS. GE's points are:
- ISS's analysis fails to consider actions that aligned pay with performance during the recession.
- Mr. Immelt's pay increased a modest 6.4% since 2007, the last year he received a bonus.
- ISS's valuation of Mr. Immelt's option grant significantly overstates his total compensation.
- ISS's model to value options differs from GE's model and is inconsistent with applicable accounting guidance.
ISS claims Northern Trust has a pay-for-performance disconnect. Northern Trust's materials reemphasize components of compensation related to equity-based incentive pay, cash incentives and business results. Northern Trust also claims that ISS's calculations of comparative financial performance are flawed because the index includes several companies engaged in entirely different and unrelated businesses. Its also worth noting that Glass Lewis & Co. recommended shareholders approve executive compensation.
Yesterday, Allegheny Technologies joined those fighting their proxy advisor recommendation with these additional solicitation materials. And ISS's Ted Allen blogged about how AFSCME has launched the first public "just vote no" campaign this proxy season against two companies over their pay practices.
XBRL: Foreign Private Issuers Using IFRS Get Relief from the SEC
On Friday, Corp Fin issued a no-action letter relieving foreign private issuers that prepare IFRS financial statements from filing XBRL until the SEC specifies a XBRL taxonomy that they can use. This will be a huge relief for FPIs as they were starting at a deadline of fiscal years ending on or after June 15, 2011 and no such taxonomy had yet been specified for IFRS. See more on Vanessa Schoenthaler's blog including an update that Anne Leslie-Bini of rass-XBRL tells us that as of last June, there were 174 FPIs filing IFRS financials - with more than 300 additional now eligible to do so.
Smaller reporting companies will continue to cross their fingers for some sort of SEC relief too as they begin to comprehend the cost burden of XBRL, as I have blogged about several times recently.
Congress Splits the Baby on SEC's 2011 Budget
As noted in this WSJ article yesterday, the SEC's budget of $1.19 billion for the 2011 fiscal year - which we already are halfway through - will be $74 million more than last year (here's the Senate Appropriations Committee press release). The budget is $116 million more than the steep cuts that the House Republicans tried to slice from the agency. So the SEC has dodged a bullet - for now. Here's one of my numerous recent blogs regarding the politics being played with the SEC's budget.
If you haven't been to the SEC's home page in a while, you will not have seen the new "Operating Status" box, which presently states: "The SEC is operating under normal conditions. All agency operations are continuing without interruption." I know I'll be hearing some sarcastic remarks from some of youse...
Permalink: More Companies Challenge ISS Through Additional Soliciting Materials
CEO Pay: Going Up and Up
I'm not sure what you heard from your spouse, friends and colleagues about the news from the past week that CEO pay has gone up in the double digits over the past year, but I'm getting an earful. They are angry that too many CEO are being rewarded for laying people off in a poor economy or having their incentive packages reset at the bottom of the market. They have also read that there is a widening gap between the CEO's pay and the median pay of other Named Executive Officers. And the recent Transocean flap doesn't help things - here's an excerpt from this Houston Chronicle article:
Only a wily compensation consultant could come up with a rationale whereby Transocean not only rewards its executives but touts its safety record after an accident like that. Only a tone-deaf board could endorse such a proposal and only a myopic corporate counsel could allow it to be placed in the company's proxy statement.
Anyways, here are the two 2010 CEO pay studies that have been released so far:
- USA Today article - up 27% (with GMI data)
- NY Times article - up 12% (with Equilar data)
And this Gretchen Morgenson NY Times' column entitled "Enriching a Few at the Expense of Many" is quite thought-provoking, featuring a money manager who uses pay as a "crucial tire" to kick when making investment decisions and how companies overseas seem to do a better job of paying their CEOs. I'm still in the process of developing the agenda for "The Say-on-Pay Workshop: 8th Annual Executive Compensation Conference," but I do know it will feature a number of prominent investors since they are so important going forward in a say-on-pay world. Remember that this conference is paired with the "6th Annual Proxy Disclosure Conference" and they will be held on November 1st-2nd in San Francisco and via video webcast. Register now to obtain a 25% Early Bird Discount!
Crowdsourcing Poll: How Should CEOs Be Paid?
On the heels of my popular crowdsourcing Flintstones poll - thousands participated (and it's still available) - I have put together this silly CEO pay crowdsourcing poll, which is also presented below:
Hat tip to Lois Yurow for pointing out this hilarious "The Forbes Fictional 15." Here is an excerpt from the opening:
You're not imagining it: The rich do keep getting richer. Even the fictionally rich. The members of our 2011 list of wealthiest fictional characters have an average net worth of $9.86 billion, up 20% from last year. In aggregate, the Fictional 15 are worth $131.55 billion -more than the gross domestic product of New Zealand.
Permalink: CEO Pay: Going Up and Up
Five More of Corp Fin's Dodd-Frank Rulemakings Delayed
In its "Implementation of Dodd-Frank Act" rulemaking timeline, on Friday, the SEC pushed back its estimate of when it will push out proposed rules from April-July to August-December for the following topics that relate to Corp Fin:
- §952: Adopt exchange listing standards regarding compensation committee independence and factors affecting compensation adviser independence; adopt disclosure rules regarding compensation consultant conflicts
- §975: Adopt permanent rules for the registration of municipal advisors
- §1502: Adopt rules regarding disclosure related to "conflict minerals"
- §1503: Adopt rules regarding disclosure of mine safety information
- §1504: Adopt rules regarding disclosure by resource extraction issuers
- Pay-for-performance disclosure (how compensation is related to financial performance; Section 953)
- Pay ratios (ratio of CEO pay to average employee pay; Section 954)
- Clawback policies (clawback of the compensation of current and former officers upon restatement; Section 954)
- Hedging policies (whether company has a policy regarding the ability of directors and employees to hedge; Section 955)
I don't think these delays were caused by the threat of a government shutdown, although I imagine that certainly didn't help. Note that about a dozen other rulemakings were pushed back that are not Corp Fin-centric. Hat tip to Davis Polk for tracking which rulemakings were delayed, not an easy task.
It also looks like there could be a delay in the implementation of Dodd-Frank's investment adviser registration framework as reflected in this letter from the SEC's Division of Investment Management to the President of NASAA. The letter anticipates that the SEC will have its new Advisers Act rules in place by the July 21st deadline - but that the SEC will consider extending the date by which advisers will be required to comply with the new rules to the first quarter of 2012 (particularly due to the need to reprogram the IARD to accept transition filings). Say-on-Pay: A Sixth Failed Vote Last week, Ameron International filed a Form 8-K to reveal it has become the sixth company to fail to receive majority support for its say-on-pay, with 42% voting in favor. As noted in this LA Business Journal article, the company also was the subject of a proxy fight. As I blogged earlier, I'm counting Hemispherx Biopharma as the 5th failed vote until someone convinces me otherwise (here is our list of failed votes so far)...
In his "Proxy Disclosure Blog," Mark Borges gives us the latest say-when-on-pay stats: with 1689 companies filing their proxies, 42% triennial; 4% biennial; 51% annual; and 4% no recommendation. More on "Shutdown: Corp Fin Will Slow to a Crawl (If Even That)"
On Friday, I blogged about the SEC's statement about how limited its operations will be during the government shutdown. I also posted a poll allowing you to guess how many Corp Fin Staff would be working during the shutdown (guess came out to: 10% for "less than 3"; 33% for "4-10"; 24% for "11-20"; 16% for "20-50"; and 1% for "more than 50." I believe the "4-10" folks would have been closest to the mark).
On Friday, before the shutdown was averted, the SEC posted this contingency plan that provided more details regarding the lapse in operations compared to its statement that was posted on Thursday. In addition, a group of law firms issued this "10 Law Firm Consensus Report" that contains 12 FAQs regarding the impact of the shutdown on the SEC. And even more comprehensive is this podcast from Dave Lynn and Marty Dunn (which also was taped before the shutdown was averted) that addresses:
- Processing of filings during a shutdown
- Continuing filing obligations and counting business days
- Availability of no-action and interpretive advice
- Dealing with preliminary proxy statements
As noted in the SEC's contingency plan, the rationale for federal employees not being permitted to work during a shutdown is a 19th-century law known as the Anti-Deficiency Act. I wonder if reading this blog would be considered "work" under that statute...
Permalink: Five More of Corp Fin's Dodd-Frank Rulemakings Delayed
Yesterday, the SEC issued this statement explaining that in the event of a government shutdown, EDGAR will remain fully functional - but that the SEC's Divisions (including Corp Fin) will be unable to process filings, provide interpretive advice, issue no-action letters or conduct any other normal activities. As a result, new or pending registration statements or applications for exemptive relief will not be processed regardless of the status of any review of those filings. There will be only an "extremely limited number" of Staffers working during the shutdown - so although the SEC's statement provides an email address and phone number for emergencies, I imagine only true emergencies will be handled by the Staff. Other than these designated essential Staffers, any attempt to work during the shutdown is a firing offense - so there is nothing that a staffer can do for you even out of kindness of their heart. The government is scheduled to shutdown tonight at midnight. Proxy Access: Judges Question the SEC's Rule
During oral argument yesterday, the three judges for the US Court of Appeals for the DC Circuit pressed the SEC on its assessment of the costs and benefits of its proxy access rule and asked whether the rule would empower labor and public pension funds at the expense of other investors, among other things. As noted in this Reuters article, the judges frequently interrupted SEC Assistant General Counsel Randy Quinn during his arguments and even extended his time twice to ask more questions - and then Randy ran out of time to present a closing argument. The judges also pressed Randy when he mentioned that the proxy access rule would result in fewer contested elections. As Ted Allen noted in ISS's Blog: "While it can be difficult to predict the outcome of a case based on oral arguments, the judges appeared receptive to the arguments by Eugene Scalia, the lawyer for the business groups, that the SEC inconsistently judged how frequently the rule would be used and how much it might cost." Here are articles from the WSJ and Bloomberg - and this Cooley alert is good too.
As noted above, the SEC's statement regarding the shutdown notes that only an "extremely limited number" of Staffers will be working if the shutdown is not avoided. Take a moment to predict how many Corp Fin Staffers that phrase means:
Permalink: Shutdown: Corp Fin Will Slow to a Crawl (If Even That)
A Government Shutdown and the SEC: What Now?
A month ago, I blogged some high-level stuff about what happens to the SEC if the federal government shuts down. Now that it's looking likely that the shutdown will indeed happen, members are emailing me in droves asking what the definitive answers are to the numerous pressing questions that relate to a shutdown. We haven't yet heard from the SEC - but luckily, our friends at Gibson Dunn posted this memo last night with their own reasoned guesses about what may happen, which is repeated below:
On Tuesday, April 5, 2011, the Obama administration and Congressional leaders announced that they had failed to reach a budget agreement, which could lead to a partial shutdown of the federal government if no budget bill or continuing resolution is approved by the close of business on Friday, April 8, 2011. The SEC is likely to be significantly affected by any shutdown due to the budget impasse.
- wiring funds into the SEC's lock-box for any potential filing that requires the payment of filing fees sufficiently in advance of Friday; - submitting any requests for any necessary SEC filing codes as soon as possible; and - for those working on responding to SEC comment letters, waiting for a review/no-review decision, seeking no-action relief, or otherwise actively dealing with SEC staff on a matter, reaching out to your contact person regarding the status of any outstanding comments or other feedback, on or before this Friday. In Corporate Disclosure, a Murky Definition of Material
Yesterday, the NY Times' DealBook ran this article by Prof. Steven Davidoff entitled "In Corporate Disclosure, a Murky Definition of Material." The Professor is pushing for real-time disclosure under a new materiality standard. Good food for thought on a topic that was heavily debated a decade ago and I think is worth revisiting.
How Insider Traders (Eventually) Get Caught
It's always fascinating to read the background of how those that engage in illegal insider trading get caught because I'm constantly amazed over how brazen most of them are. The simple stuff, such as if a record of those phone calls being placed doesn't exist. Today's Washington Post has a front-page article about the latest - a law firm deal lawyer in DC who traded ahead of deal announcements for 17 years. 17 years! Here's the SEC's press release.
Permalink: A Government Shutdown and the SEC: What Now?
Survey Results: Clawback Policies
We have posted the survey results regarding the latest clawback policy trends, repeated below:
1. Has your company adopted a clawback policy: - Yes, we adopted a policy during 2010 for first time - 9.6%
- Yes, we already had one before 2010 but we recently amended it - 5.2%
- Yes, we already had one before 2010 and we intend to amend it soon - 28.9%
- Not yet - 56.3%
2. If you answered "Not yet" to question above, do you intend to take any of the following steps in advance of adopting or amending a clawback policy: - Add provision into terms & conditions of certain incentive awards to enable a potential clawback - 22.5%
- Have executives sign an independent document to enable a potential clawback of incentive awards generally - 7.5%
- Add disclosure in proxy statement about the intention to adopt or amend a clawback policy after finalization of SEC rules implementing Section 954 of Dodd-Frank - 45.0%
- None of the above - 40.0%
3. Does your company plan to adopt a new clawback policy or amend an existing policy: - Prior to finalization of SEC rules implementing Section 954 of Dodd-Frank - 7.5%
- After finalization of SEC rules implementing Section 954 of Dodd-Frank - 70.7%
- Don't know yet - 15.8%
- No - 6.0%
4. Once fully completed or amended, does/will your clawback policy apply to: - Executive officers only - 25.9%
- Group of key employees broader than executive officers - 20.7%
- All employees - 3.0%
- Some provisions of policy apply to certain group of employees and other provisions apply to other groups or all employees - 5.9%
- Don't know yet - 44.4%
5. Once fully completed or amended, does/will your clawback policy apply to directors: - Yes, the entire clawback policy will apply to directors - 8.2%
- Yes, but only part of clawback policy will apply to directors - 0.8%
- No, it will not apply to directors - 33.6%
- Don't know yet - 57.5%
Please take our new "Quick Survey on Regulation FD Practices." Nerd Alert: Seeing "10Q" Gets Me Excited
You know you're a securities law geek when you come across a service called "10Q" and it gets you excited. However, this site has nothing to do with the law - it's a service that sends you an answer to a question a year after the question is posed. It sends you the answer that you gave to the question; it's a site to help you gauge how you've changed over the course of the year. Sort of like sending yourself spam with a long lag. Hat tip to Michelle Leder of footnoted.com for finding this site...
- Supreme Court: Companies Don't Have "Personal Privacy" Interest Assertable Under FOIA Exemption - Even More on " An Insider's View of the SEC: Principles to Guide Reform" - US Accounting Standard-Setting Outlook for 2011 and Beyond - Which Blogs Should My Directors Read? - Study: How Non-Executive Chairs and CEOs Work Together
Permalink: Survey Results: Clawback Policies
Shareholder Proposals: KBR Wins Lawsuit Against Chevedden Over Eligibility
As I have blogged back in January, KBR filed a lawsuit in the Federal District Court for the Southern District of Texas seeking a declaratory judgment that would allow the company to exclude a shareholder proposal submitted by John Chevedden due to his alleged lack of eligibility. Yesterday, the court ruled in KBR's favor, upholding the Apache decision from last year (which had been filed in the exact same court). We have posted the court's memorandum and order in our "Shareholder Proposals" Practice Area.
Like Apache, KBR filed a lawsuit rather than attempt to exclude the proposal through the normal SEC channels (and thus challenging the Hain Celestial position of the Staff regarding the use of introductory letters from brokers as evidence of ownership under Rule 14a-8(b)). Dodd-Frank: A Rulemaking Progress Report
Check out this nifty progress report from Davis Polk regarding all of the various agencies engaged in Dodd-Frank rulemaking. The charts help tell a story...
How Many Chiefs of Corp Fin's Office of International Corporate Finance? Four
Last month, I posted a poll asking how many Chiefs of OICF have there been over the years. 14% guessed the correct number of four (23% guessed two; 23% guessed three; 22% guessed five; and 17% guessed 67). The four consist of Carl Bodolus ('73-'88), Sara Hanks ('88-'90), Rich Kosnik ('90-'93) and Paul Dudek ('93-current). I received quite a few emails from folks remembering Carl, the founder of the office, including the fact that he was an incessant chain smoker that he literally lit one cigarette with the last vestiges of the prior cigarette (those were the days when smoking anywhere in the building was permitted).
In his "Proxy Disclosure Blog," Mark Borges gives us the latest say-when-on-pay stats: with 1349 companies filing their proxies, 42% triennial; 4% biennial; 51% annual; and 4% no recommendation. - Broc Romanek
Permalink: Shareholder Proposals: KBR Wins Lawsuit Against Chevedden Over Eligibility
- What is Broadridge's new mobile voting platform, "Mobile Proxy Vote"?
- Do you have any sense of how often it being used by voters so far?
- Is there anything that companies need to do? Do they need to change their proxy cards or VIFs or their other descriptions of voting processes? On Friday, as noted in this press release, Broadridge's Rich Daly sent out letters to CEOs in an effort to increase the level of retail shareholders to vote. These levels have plummeted since e-proxy was adopted.
Tune in tomorrow for the CompensationStandards.com webcast - "What the Top Compensation Consultants Are NOW Telling Compensation Committees" - to hear Ira Kay of Pay Governance, Mike Kesner of Deloitte Consulting and George Paulin of Frederic W. Cook & Co. discuss what every director and compensation committee member should be asking, and focusing upon, today as well as practical guidance, inside tips and red flags from those "in the know."
A Milestone: The World's Largest List of Flintstones Characters
Way back over the holidays, I busted a move and spent a few hours creating the world's largest list of Flintstones characters. Seriously. Not an April Fool's joke. Search online or in the Flintstones trivia books. You won't find anything more comprehensive - 118 of them drawn from the original series. I now have a true legacy - something for the tombstone. Remember Gary Granite? Ann-Margrock? J.L. Gotrocks?
Crowdsourcing Poll: Who Is Your Favorite Flintstones Character?
I have included about 30 of the most well-known of the Flintstones characters in this crowdsourcing poll to determine which character is the most popular. Voting is anonymous and you simply click on which of the two characters presented is preferable - then continue doing so as two more choices are presented for as long as you like. Right now, the guy who said "yeah, yeah, I'm hip, I'm hip" is barely beating Bamm-Bamm and Dino for first place. Proxy Access: Back in the News
After a refreshing hiatus from the news cycle, look for proxy access to be back "in the news" as oral argument is scheduled to take place next Thursday in the Business Roundtable and Chamber's lawsuit against the SEC...
Permalink: A Milestone: The World's Largest List of Flintstones Characters