TheCorporateCounsel.net

As I’ve mused before, I believe the day will come when more of you will be either a contributor to a blog or otherwise participating in some form of “expressing yourself online” activity. A perfect example is an IRO who gets the word out about a company’s investor relations through a blog.

In this podcast, Lynn Tyson, VP-Investor Relations of Dell and a co-blogger of “Dell Shares,” provides tips and insights into how investor relations officers can blog for their companies, including:

– What was the genesis for launching the “Dell Shares” blog?
– What types of internal approval did you need to obtain?
– Have there been any surprises from blogging?
– What changes have you made to your blogging style since you started?

Fyi, since I blogged about my pet peeve regarding the use of a click-through disclaimer on the “Dell Shares” blog, it has been removed. Bravo!

More on the SEC’s Staffing Levels

Last week, SEC Chair Chris Cox gave this testimony regarding the SEC’s ’09 budget before the US Senate’s Appropriations Subcommittee on Financial Services. On the same day, ten Senators sent this letter to the head of that subcommittee requesting more funding for the SEC – in the amount of $50 million – than the Bush Administration is seeking.

This Bloomberg article from last week – entitled “SEC’s Bear Stearns Oversight Points to Fund Shortage” – argues that more money is necessary for the SEC to adequately do its job. Here is an excerpt:

SEC staffing levels peaked in 2005 at 3,851 full-time employees, including 1,232 in its enforcement division, which investigates fraud. The agency had 3,465 full-time employees in the fiscal year ended last September and staffing in the enforcement unit dropped to 1,111.

“Staffing levels haven’t kept pace with the urgent work needing to be done,” Arthur Levitt, a former chairman of the SEC, said today in a Bloomberg Television interview. “We need more people in enforcement and more people at the commission. Those budget cuts have got to be restored.”

Under Cox, who became chairman in August 2005, the SEC has left money on the table. The 2007 budget included $14 million in “available balances from prior years,” according to the SEC’s 2009 funding request. The $906 million Congress granted the SEC in 2008 includes $63.3 million in unspent money from earlier years.

“This is akin to the fire department laying off people as the house burns down,” said Lynn Turner, a former SEC chief accountant. Nester said more than 90 percent of the money carried over to the 2008 budget from earlier years can’t be used for staff salaries. Most of the $63.3 million represents funding intended
for contract work such as technology upgrades that wasn’t spent, he said.

In re infoUSA: Special Litigation Committee Stay Granted In Backdating Case

Lots still going on with options backdating. For example, the SEC has settled/brought several actions during the past month, like this action brought against Marvell Technology and its COO last Thursday.

And there is this Delaware development from Travis Laster: In Ryan v.
Gifford, Delaware Chancellor Chandler held that an investigatory board committee (but not a formal SLC) had waived the attorney-client privilege in connection with an investigation into stock option backdating by reporting on its
findings to the full board. That opinion and the Chancellor’s subsequent denial of the application for interlocutory appeal have attracted well-deserved practitioner attention. Some have expressed concern that Delaware’s traditional deference to the SLC process may have ebbed, particularly in the stock option backdating context.

In this opinion, issued in the option backdating case involving infoUSA, Chancellor Chandler applied traditional Delaware deference to an application by an SLC to stay the derivative litigation to investigate the underlying allegations and claims. The opinion confirms that traditional principles of Delaware law continue to apply to SLCs, even in the sensitive area of stock option backdating.

Here are a few highlights:

1. The Chancellor granted the stay even though the defendants previously had moved to dismiss the complaint under Rule 23.1 and the Court had found demand was futile. The Court rejected the argument that the SLC was formed “too late,” noting specifically that under Delaware law, even a conflicted board has the power to appoint an SLC: “The fact that I have already determined demand is excused demonstrates why the board must act by means of a committee; it does not in any way explain why it cannot act through an SLC.” (Page 3).

2. The Chancellor granted a stay of 150 days, towards the high end of the traditional 3-6 month range routinely granted by Delaware courts.

3. The Chancellor rejected an argument, based on Ryan, that the Committee was not sufficiently empowered to address the litigation.

4. The Chancellor held that any challenge to the independence of the SLC was premature and would be addressed at the same time the Court considered the bases for the SLC’s conclusion.

Note that the infoUSA SLC was comprised of 5 directors, three newly appointed directors and 2 whom the Court previously had deemed disinterested.

– Broc Romanek