Yesterday, Corp Fin revised its confidential submission processes for foreign private issuers so that they are treated like emerging growth companies for filing drafts, etc. This is good news as the same procedure for all types of drafts should makes it easier for us to remember. This process change is effective on a going-forward basis.
Here is the new paragraph added to Corp Fin’s processes:
In addition, foreign private issuers, whether submitting draft registration statements pursuant to this foreign issuer non-public submission policy or as an emerging growth company under the JOBS Act, will be required, at the time they publicly file their registration statements, to also publicly file their previously submitted draft registration statements and resubmit all previously submitted response letters to staff comments as correspondence on EDGAR. All staff comment letters and issuer response letters will be posted on EDGAR in accordance with staff policy. For foreign private issuers making non-public submissions pursuant to this policy, and not pursuant to the procedures available to emerging growth companies, this requirement will only apply to registration statements where the initial draft submission is made after May 30, 2012.
Our New “Board Meeting/Board Committee Disclosure Handbook”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Survey: Cybersecurity Risks Foremost on Auditor’s Mind
– Do You Have The Correct Authorized Number Of Directors?
– And Even More Board Trends…
– ‘Do I need to quit my job?’
– And More Board Trends…
– Notes from PLI’s “SEC Speaks” Conference
Deal Cube Tournament: Round One; 6th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
In the “Cady Bar the Door” Blog, David Smyth notes recent examples of SEC’s Enforcement going after lawyers – just as Director Rob Khuzami promised in a speech last June for defense counsel who engage in “questionable tactics” to gain advantage for their clients involved in SEC investigations. As David mentions in his blog, in his speech, Khuzami noted one hilarious episode in which a witness in investigative testimony – looking for a toe-tapping signal his lawyer had been warned against during a break – “extended [his foot] so far [under the table] that he was almost doing a split.” Also see this DealBook piece entitled “With New Firepower, SEC Tracks Bigger Game” – and this OnWallStreet piece entitled “SEC Whistleblower Tip Rate: 7 A Day.”
Meanwhile, Bloomberg reported last week that Enforcement has stopped investigating Lehman (a rumor which was then disputed in this NYT piece). And the SEC announced that it has barred one of its former Staffers from practicing before the Commission – Section 102(e) actions are rare and almost unheard of for SEC alumni – over12 hours of billables on the Stanford case…
Early Bird Discount Ends Tomorrow! “Proxy Disclosure Conference” Lineup!
We are very excited to announce that Corp Fin Director Meredith Cross will be part of our “7th Annual Proxy Disclosure Conference” on October 8th in New Orleans (and by video webcast). Just look at this beautiful baker’s dozen of panels for this Conference:
1. An Interview with Meredith Cross, Director of the SEC’s Division of Corporation Finance
2. Say-on-Pay Disclosures: The Proxy Advisors Speak
3. The Executive Summary & Other Ways for Disclosure to Facilitate Solicitation
4. The Latest SEC Actions & CD&A Developments: Compensation Advisors, Clawbacks, Pay Disparity & More
5. Refining Your Pay-for-Performance Message & Addressing the Impact of Your Vote
6. Getting the Vote In: The Proxy Solicitors Speak
7. Dealing with the Complexities of Perks
8. Conducting – and Disclosing – Pay Risk Assessments
9. Overcoming Form 8-K Challenges
10 Handling the Golden Parachute Requirement
11. Challenges for Smaller Companies: Their First Year
12. How to Handle Preliminary Proxy Statements
13. How to Handle the ‘Non-Compensation’ Proxy Disclosure Items
Register Now for Early Bird Rates – Act by May 31st: For the early bird discount rate, register by May 31st. This Conference is paired with “Say-on-Pay Workshop: 9th Annual Executive Compensation Conference” and they will be held October 8-9th in New Orleans and via Live Nationwide Video Webcast.
– What led you to write the book? What can shareholders take away from it?
– What is the primary message that boards can take away from the book?
– What is the biggest surprise you found while writing the book?
Deal Cube Tournament: Round One; 5th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
I’ve added 14 more companies to CompensationStandards.com’s failed say-on-pay list for 2012! We are now at 32 companies that have failed to garner major support – with Chiquita Brands garnering support only in the teens (19.8%; see Mark Borges’ analysis of this failure)! Hat tip to Karla Bos of ING Funds for keeping me updated!
And Hercules Offshore became the first (41% support in ’11 and 48% in ’12) – and Kilroy Realty became the second (49% support in ’11 and 30% in ’12) – company to fail two years running…
And this list doesn’t include the recent voting results from Cablevision Systems – a company which did not have say-on-pay on its ballot this year because the frequency is triennial (per page 26 of their proxy statement; triennial was the choice of shareholders last year) – whose members of the compensation committee received less than majority support presumably due to pay issues. The company has a plurality vote standard so there is no direct impact from this vote. And this result doesn’t get picked up in the “failed SOP” count even though I would consider it to be a more serious failure than a nonbinding SOP vote…
Webcast: “Looking Out for #1: How to Manage Your Career”
Tune in tomorrow for the webcast – “Looking Out for #1: How to Manage Your Career” – to hear Peggy Foran of Prudential Financial, Charlotte Lee of Lee Hecht Harrison|DBM, Randi Morrison of TheCorporateCounsel.net and Axiom and Susan Wolf of Global Governance Consulting discuss the latest developments in job choices and promoting yourself from within your current job, as well as hunting, recruiting and how to market yourself.
Deal Cube Tournament: Round One; 4th Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
In the wake of the much-hyped Facebook IPO, we are slowly finding out about alleged circumstances that have already led to a bevy of lawsuits. As I tweeted yesterday, will this IPO be full employment for litigators? But Facebook is not alone, it’s hard to forget the gunjumping adventures of the recent Groupon IPO – or even how a Playboy interview found its way into the Google IPO prospectus.
Recently, the SEC’s Office of the Chief Accountant provided guidance in a letter to the International Swaps and Derivatives Association about whether implementation of certain provisions of Dodd-Frank that relate to OTC derivatives would affect hedge accounting.
Former CEO Settles Reg FD Case with SEC: Six Years After the Conduct
Last week, the SEC’s Enforcement Division announced this litigation settlement with Edward Marino, former Presstek CEO, over previously-filed charges that he aided and abetted Presstek’s violations of Regulation FD by agreeing to pay $50k without admitting or denying the allegations. What is remarkable is that this settlement comes nearly six years after the conduct…
Speaking of the “good ole days,” how about a stock option backdating case? Last week, the Ninth Circuit affirmed a verdict and order requiring former Maxim CFO to pay penalties and disgorgement of over $2.1 million in SEC v. Jasper.
Deal Cube Tournament: Round One; Third Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
Did you see how many comments have been received on the rulemaking petition submitted to the SEC by a group of academics about political disclosure spending last summer? Over 250,000! Most are form letters but 500 are unique, which is still very high for a petition. Remember this is not a SEC rulemaking! The bizarre thing is that this development doesn’t quite jibe with the fact that shareholder proposals on this topic have not received overwhelming support by shareholders so far this proxy season (on average about 27%, per this blog).
Anyways, I attended an interesting conference from The Conference Board about corporate political spending last week. Like I imagine for many of you out there, this is an area that I confess to not know much about – but needed to get up-to-speed fast given how it’s the hottest topic of the proxy season and not one that is likely to die down anytime soon. But it’s not just hot for the proxy season – it’s hot for the masses. Here are notes from a panel of journalists that bear this out:
Eliza Newlin Carney from Roll Call was rubbing her hands about what a good story corporate political spending is: lots of big numbers that people are interested in: money, power, lots of people interested in outcomes – what she called “a perfect storm” – probably making a lot of the company attendees rather worried. Peter Cook from Bloomberg asked some good questions and affirmed that he gets thousands of interested comments on his stories on the subject, a level he said was high.
Tom Hamburger from the Washington Post professed a desire to hear more from the audience, and said any “progress” on disclosure was probably illusory because it still lacks bipartisan support and that identified leaders in the area of disclosure are still able to direct money to secret efforts, as evidenced by the action of several health insurers to provide money to the Chamber of Commerce to defeat Obamacare.
All the journalists agreed corporate money in politics was going to keep them employed on the beat for a very long time. Also, Trevor Potter wrapped up with an assessment of the DC Circuit Court decision on the Van Hollen v. FEC case. Potter thought the Supreme Court would probably come down on the side of disclosure and not agree to hear any appeal that might be lodged.
Over the course of the day, I became more familiar with ALEC (American Legislative Exchange Council) and ALECexposed.org. I thought it was interesting that not much was said about the popular discontent with corporate influence, a la Occupy Wall Street. My favorite panel involved the topic that might matter the most – what is the board’s role in all of this? Let me know what you think about that…
Does Corporate Political Spending Belong in SEC Disclosure Documents?
The movement to require companies to disclose their corporate political activities is not a new one. It goes back decades as a bill seeking that is floated nearly every year as far back as I can remember. Of course, this notion never had the type of popular support that it now enjoys in the post-Citizens United era. The question remains – is this type of disclosure appropriate for filings made with the SEC or should it be mandated through another avenue?
On the one hand, the purpose of disclosure filed with the SEC is to enable investors to make investment decisions. There are cogent arguments that corporate political spending disclosure is meaningful to investors because they would be able to see if a company is doing something that can blow up its reputation – something that can happen fast in today’s social media world, particularly with politics as kindling. Boycotts are now much easier to form online and that can hurt a company’s bottom line.
On the other hand, some argue that they have talked to institutional investors and most say they won’t make their investment decisions based on this type of disclosure. Encouraged by the Center for Political Accountability, as noted in this press release, over 100 companies now provide detailed disclosure of their political spending on their websites. Are investors reading those disclosures?
Or is this one of those topics where SEC disclosure is mandated for the social good more than investors? There are plenty of examples of that today – think conflict minerals or global security risk and terrorism – or even go back in time to Y2K. This likely will be a debate that will be settled by Congress, as so often happens…
More on our “Proxy Season Blog”
We continue to post new items regularly on our “Proxy Season Blog” for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Norges Bank on Proxy Access
– Research: Who Companies Name As Proxies With Power to Vote Proxies Received
– Corp Fin Allows Companies to Omit Arbitration Proposals
– Western Union Moves to Declassify, But Drops Proxy Access Plan
– Chevedden Submits Brief to Fifth Circuit in KBR Appeal
– Corp Fin Reverses Position on Net Neutrality Proposals
Deal Cube Tournament: Round One; Second Match
As noted in these rules (and keep sending more pics for the next tourney), please vote for two of the following four cubes below:
Thanks to the many of you that have emailed pictures of your deal cubes. I have collected over 130 of them, all posted in our fabulous “Deal Cube Museum.”
Please continue to send pics as I intend to conduct other deal cube tourneys after this inaugural one concludes. Think of those recurring reality shows – we are now in just Season 1. There will be many seasons including All-Stars and maybe even reunion episodes! Remember, quality of the deal cube is irrelevant – any cube can win! Underdogs do it all the time…
Deal Cube Contest Process & Rules
Process:
1. There are 64 deal cubes in the 1st tournament. Additional tournaments will be held so please keep those pics coming.
2. A selection committee has ranked (ie. “seeded”) the 64 cubes – unlike the NCAA hoops tourney, the committee’s seedings are used for internal purposes and won’t be revealed until a winner is crowned.
3. In each of the first two rounds, half of the remaining cubes will be eliminated. For those two rounds, four cubes will be pitted against each other – and the two cubes obtaining the lowest number of votes will be eliminated. Thus, a voter can cast two votes on a group of four cubes.
4. In the last four rounds, two cubes will be pitted against each other and a voter can cast one vote on a group of two cubes.
5. Voting will take place on a poll placed on this blog daily. There will be a break between each round to allow votes to be cast for the last few contests in each round for more than a few days.
6. Polls will remain open for each round for quite a while – so don’t worry if you miss reading this blog for a day (or a week).
Rules:
1. There are no rules. Just like it’s unfair if folks that work the hardest on a deal wind up with no cube, it is possible that an inferior cube can attract more votes than a superior cube if someone figures out a way to obtain more votes for their cube (egs. casting multiple votes, having friends and family vote, offering bribes for votes).
2. FCPA doesn’t apply – so bribing of the selection committee (ie. Broc) will be considered.
3. Have fun and tell your friends about our contest.
Deal Cube Tournament: Round One; First Match
As noted in the rules above, please vote for two of the following four cubes below:
A few weeks ago, Mark Borges blogged about the first failed say-on-golden parachutes vote…
Exxon’s Executive Pay Webcast Represents Another Method of Shareholder Outreach
Ning Chiu of Davis Polk bring us this news from her blog:
This proxy season there has been a lot of focus on companies filing additional soliciting materials to supplement proxy disclosure, with a particular focus on executive compensation in light of the say-on-pay vote. Exxon Mobil has taken a particularly interesting approach turning a two-dimensional paper communication into something more dynamic by inviting interested persons to a company-sponsored webcast on executive compensation.
The webcast represents an additional proactive step Exxon has taken. On the same day it filed its proxy statement, Exxon took the unusual step of also filing a colorful presentation filled with data, graphs and photos to explain how its pay-for-performance approach focuses on the long-term nature of its capital-intensive business. In supplemental information filed more recently, Exxon took issue with specific aspects of the ISS analysis, including the peer group selected, which Exxon asserted failed to adjust for its size and complexity, since the company’s revenue is more than 4X larger by revenue and 3.5X larger by market capitalization than the median of the peer group.
On the webcast, which included a presentation, Exxon representatives discussed the company’s business environment, the scale and scope of the company and its focus on the long-term nature of its business strategy. The company explained that together, these form the basis for customized compensation decisions, including a lengthy “hold-to-retirement” policy and a unique approach on the deferral of 50% of annual bonuses, a measure rarely seen outside of financial institutions. The company’s focus on executive training, retention and succession was emphasized, including the fact that the company achieves its retention goals without change in control or severance agreements with senior executives. The company also discussed the shareholder engagement it undertook as a result of last year’s say-on-pay vote. In response to questions during the webcast, the company noted how its programs focus on performance assessments that take a more holistic approach rather than concentrating on formulas that inspire executives to reach for only certain specific goals. The company received several questions about specific aspects of its pay decisions, the reasons for the webcast and the proxy advisory firms’ recommendations.
In his blog, Mark Borges recently provided this analysis of ExxonMobil’s executive pay disclosure and more…
Early Bird Discount Ending Soon! “Proxy Disclosure Conference” Lineup!
We are very excited to announce that Corp Fin Director Meredith Cross will be part of our “7th Annual Proxy Disclosure Conference” on October 8th in New Orleans (and by video webcast). Just look at this beautiful baker’s dozen of panels for this Conference:
1. An Interview with Meredith Cross, Director of the SEC’s Division of Corporation Finance
2. Say-on-Pay Disclosures: The Proxy Advisors Speak
3. The Executive Summary & Other Ways for Disclosure to Facilitate Solicitation
4. The Latest SEC Actions & CD&A Developments: Compensation Advisors, Clawbacks, Pay Disparity & More
5. Refining Your Pay-for-Performance Message & Addressing the Impact of Your Vote
6. Getting the Vote In: The Proxy Solicitors Speak
7. Dealing with the Complexities of Perks
8. Conducting – and Disclosing – Pay Risk Assessments
9. Overcoming Form 8-K Challenges
10 Handling the Golden Parachute Requirement
11. Challenges for Smaller Companies: Their First Year
12. How to Handle Preliminary Proxy Statements
13. How to Handle the ‘Non-Compensation’ Proxy Disclosure Items
Register Now for Early Bird Rates – Act by May 31st: For the early bird discount rate, register by May 31st. This Conference is paired with “Say-on-Pay Workshop: 9th Annual Executive Compensation Conference” and they will be held October 8-9th in New Orleans and via Live Nationwide Video Webcast.
Last week, I blogged how LegalZoom was one of the first companies to announce its upcoming IPO after first submitting its registration statement under Corp Fin’s confidential submission policy and I analyzed the risk factors and other EGC-related disclosures in that Form S-1.
There have now been about a dozen Form S-1s filed by EGCs – most of them likely emerging from confidential submission but not all – including:
By the way, I disagree that EGC risk factors are a “turn-off” as mentioned in this article. As I wrote in my recently-posted “Risk Factors Handbook,” companies typically have between 20-30 risk factors in their disclosure – with IPOs having even more. Facebook has about 50. Do you think one more risk factor will even be noticed by the rare investor who bothers to read a prospectus?
I just announced an August 15th webcast – “JOBS Act Update: Where Are We Now” – that will analyze evolving market practices and the latest from the SEC. The program features Corp Fin Deputy Director Lona Nallengara, Steve Bochner, Joel Trotter, Michael Kaplan and Dave Lynn.
NYSE Proposes Listing Qualification Changes to Accommodate JOBS Act
The ripple effect of the JOBS Act is beginning to show as the NYSE has proposed to adjust its listing qualification standards to reflect that emerging growth companies, or ECGs, under the JOBS Act only need to present two years of audited financial statements.
In its rule filings, the NYSE notes that its initial listing standards require listing applicants to meet theapplicable financial criteria over a period of three fiscal years. As the staff of the NYSE bases its determination as to a company’s compliance with the financial initial listing standards only on publicly available audited financial data, an EGC which availed itself of the right to file only two years of audited financial data as part of its initial public offering registration statement or subsequent registration statements would be unable to qualify for listing under those particular financial listing standards. The NYSE proposes to amend the initial financial listing standards in Sections 102.01C and 103.01B to permit an EGC to meet the applicable standard on the basis of the two years of audited financial data actually reported, rather than the three years of financial data that would otherwise be required.
The proposed amendment would only be applicable to EGCs that actually avail themselves of their ability to report only two years of audited financial information. Under the proposed amendments, EGCs would still be required to meet the same aggregate financial requirements, but would be required to do so over a two-year period rather than a three-year period, if they have availed themselves of the JOBS Act provision allowing EGCs to file only two years of audited financial statements.
May-June Issue: Deal Lawyers Print Newsletter
This May-June issue of the Deal Lawyers print newsletter was just sent to the printer and includes articles on:
– Lessons Learned: Martin Marietta Materials vs. Vulcan Materials
– Delaware Chancery Enjoins Hostile Bid Based on Confidentiality Agreement Breach
– The JOBS Act: Implications for Private Company Acquisitions and M&A Professionals
– After the JOBS Act: The Increased Need for Common Sense
– Groping for Gold: $305 Million in Plaintiff Attorney Fee Awards Under Grupo México
If you’re not yet a subscriber, try a no-risk trial to get a non-blurred version of this issue on a complimentary basis.
On July 30th, the Sarbanes-Oxley will celebrate its tenth birthday. You may not like SOX, but your job may not have been created “but for” the Act. It was definitely a “fuller employment” event for many in our community. As we approach the anniversary, there is bound to be a number of reminisces written, most of which will bound to be negative in their outlook. But as noted in this recent NY Times article (I’m quoted!), there also have been many benefits. Going back, here are some thoughts from Lynn Turner on SOX’s history – here are my own remembrances of how the Act snuck up on us…and below are two polls, one for funsies and one for real…
Poll: The Long-Term Impact of Sarbanes-Oxley
When it comes to the long-term impact of Sarbanes-Oxley, please indicate which of these has had the biggest impact on your practice in this anonymous poll:
For a long time I’ve been outspoken about how the SEC’s former Inspector General – David Kotz – took advantage of his position to make a “name” for himself (here is one example). Then suddenly he left in January under a cloud of ethical questions about his own activities as noted in this blog (and I also noted other questionable activity in this blog; Kotz has not yet been replaced as the IG position remains open – here is the job posting). Last week, Bloomberg reported that the SEC was hiring an outside investigator to look into Kotz’s conduct during his tenure at the agency – including allegations of sexual misconduct in the office per this WSJ article.
Looks like there could be a bizarre culture in that small SEC office. According to this Reuters article, one of the newer members of that office – David Weber, assistant inspector general – has been placed on admin leave after “talking openly about wanting to carry a concealed firearm at work and some employees complained he was a physical threat.” And this guy’s lawyer claims that he is the victim of retaliation because he had previously complained about alleged misconduct in the IG’s office. This Huffington Post has more details in this blog. Although I think we will find out still more juicy details about this office’s culture soon enough as the investigation into it develops…
NYSE Proxy Fee Advisory Committee’s Report: Recommends Fee Drop of 4% on Average
After 18 months of work, the NYSE Proxy Fee Advisory Committee released its report yesterday with recommendations for changes to the fees that banks and brokers charge companies for forwarding proxy materials to shareholders who hold stock in “street name.” This is the process by which the fees that Broadridge charges gets set for work on behalf of their broker clients. Under NYSE Rule 465, any fee changes must be approved by the SEC – fee rates were last changed a decade ago.
Here’s an excerpt from Davis Polk’s Ning Chiu’s blog on the topic:
The Report painstakingly describes the careful work by PFAC in considering each of the four different type of proxy fee designed to compensate brokers for different services, an examination of the existing rationale based on the work involved and an evaluation of whether a change in fee is warranted based on recent developments, such as a move toward less paper distributions. According to the Report, it is expected that overall fees paid by companies will decrease by about 4% under the revised structure.
PFAC’s recommendations include several changes to the existing fees and also streamlining the proxy fee categories to increase transparency. In addition, PFAC supported allowing companies to ask brokers for a list of the identity of non-objecting beneficial owners (NOBO) based on number of shares held or of those that have not yet voted proxies, without needing to pay for an entire list of all NOBOs. In order to encourage further retail investor voting, PFAC also recommended that the NYSE broach with the SEC the idea of a fee to pay for an “investor mailbox,” through which investors can access proxy materials and voting forms through their brokers’ website. For those interested in learning more, here’s an archived version of a webcast sponsored by the NYSE.
PFAC’s work is only the beginning. The NYSE indicated that it will initiate discussions regarding the PFAC’s recommendations with the SEC, after which the NYSE would expect to submit a rule change proposal to the SEC reflecting the outcome of these discussions. Any rule filing proposal would be published for public comment prior to SEC approval.
More on “The Mentor Blog”
We continue to post new items daily on our blog – “The Mentor Blog” – for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:
– Unintended Consequences of the STOCK Act
– The iPad and the Law
– 7th Circuit Ruling Expands Rights of Whistleblowers to RICO
– Delaware Weighs In: Indemnification and Advancement of Expenses
– Boards Trends in the S&P 1500