TheCorporateCounsel.net

October 28, 2009

Corp Fin Issues Staff Legal Bulletin on “Risk” and “CEO Succession Planning” Shareholder Proposals

Yesterday, Corp Fin issued Staff Legal Bulletin No. 14E, which changes how the Rule 14a-8(i)(7) exclusion for ordinary business operations applies so that proposals relating to CEO succession planning generally are no longer excludable (“generally” because proposals that seek to micro-manage will still be excludable; we’ll have to see how “micro-manage” is interpreted by the Staff) – and that risk-related proposals will be analyzed under a new framework.

The SLB lays out this risk-related framework as: “rather than focusing on whether a proposal and supporting statement relate to the company engaging in an evaluation of risk, we will instead focus on the subject matter to which the risk pertains or that gives rise to the risk.” The SLB also reminds companies and proponents how to notify the Staff when they intend to submit correspondence in connection with a no-action request.

Unlike last year’s Staff Legal Bulletin regarding 14a-8, this one is bound to cause a stir because it essentially reverses two prior Staff decisions – with the likely result of more proposals being included in proxies during the upcoming proxy season.

In his blog, Sanford Lewis describes the changed positions as a victory for shareholders and gives some background about the press for these changes, including the shareholder proposal meeting with the Corp Fin Staff held last month. And the RiskMetrics’ “Risk & Governance” Blog includes quotes from a number of activists hailing the SEC’s actions, it also describes how these two Staff positions have evolved over time.

Posted: 2010 Compensation Disclosure Treatise

Dave Lynn, Mark Borges & I just finished the new ’10 version of Lynn, Borges & Romanek’s “Executive Compensation Disclosure Treatise and Reporting Guide” – it is now posted on CompensationDisclosure.com and the hard copy is at the printers (delivery expected in mid-November). To obtain both the online and hard copy versions of this Treatise, you need to try a no-risk trial to the Lynn, Borges & Romanek’s “Executive Compensation Service” now.

Without access to this New Treatise – as well as the “Proxy Disclosure Updates” quarterly newsletters that you will get if you renew as a Service subscriber – you will miss our critical guidance that you need to prepare your proxy disclosures during this upcoming proxy season including this:

Proxy Disclosure Updates – Full Walkaway Model CD&A: Dave is putting the final touches on a key, new model CD&A disclosure which will need to be addressed in this year’s proxy statements. The upcoming Fall issue of “Proxy Disclosure Updates” will focus on this important new full walkaway disclosure, providing not only new model disclosure, but also invaluable guidance on what to cover and why and how. To receive this model disclosure as soon as it’s out, you need to try a no-risk trial now.

Carving Up the “Investor Protection Act”: The Political Process at Work on SOX’s Internal Controls

Last week, I polled members as to whether they thought the SEC’s 6th – and deemed “final” – delay in having smaller companies provide auditor attestations would really stick. The poll results were:

– 50% said SEC would not further delay the deadline
– 22% said the SEC would further delay it without being forced to
– 12% said Congress would force the SEC to delay it
– 16% said “what me worry?”

Looks like there is a chance that 12% knew what they were talking about. Yesterday, the Huffington Post reported in this blog that Reps. John Adler (D-NJ) and Carolyn Maloney (D-NY) planned to introduce amendments to the Investor Protection Act that would permanently exempt companies with market capitalizations of less than $75 million from Section 404 of Sarbanes-Oxley and further delay that Section’s application to companies with a market cap of less than $700 million. Here is Rep. Adler’s related press release.

I have a copy of Rep. Adler’s “Dear Colleague” letter as well as an opposition letter from the Consumer Federation of America, which combined provide more details than the Huffington Post blog – if you want them, email me…

– Broc Romanek