June 5, 2009

Coming Soon: SEC’s New Executive Compensation Rules

As noted in this WSJ article, the SEC intends to roll out new proposals to change its executive compensation disclosure rules sometime in early July. Mark Borges did a great job of recapping what the proposals will likely look like in his blog.

With the SEC’s goal to have its rule changes effective before next proxy season – combined with the real likelihood of say-on-pay legislation and the loss of broker nonvotes for director elections – our the “4th Annual Proxy Disclosure Conference” (whose pricing is combined with the “6th Annual Executive Compensation Conference”) will be more important than ever.

These Conferences will be held at the San Francisco Hilton and via Live Nationwide Video Webcast on November 9-10th; here is the agenda. And many also attend the NASPP Annual Conference that follows directly thereafter – the full Conference program was justed posted. Take advantage of reduced rates that will expire on June 26th by registering now.

Check out this article from yesterday’s Washington Post regarding SEC Chair Schapiro’s first days in office and the challenges she faced.

Survey Results: Governance Trends for IPO Companies

David Westenberg of WilmerHale sent over some IPO governance trend stats, uncovered during research for his upcoming PLI book, “IPOs: A Practical Guide to Going Public.” Here is the data based on his review of all US IPOs by operating companies (i.e., excluding SPACs, REITs, etc.) in 2007 and 2008 (total sample size was about 185 companies; 93% of companies were incorporated in Delaware):

1. Number of Executive Officers:

– Median – six
– 25% Percentile – five
– 75% Percentile – seven

2. Percentage of IPO companies that identified “key” employees beyond executive officers – 15%

3. Separation of Chair and CEO:

– Separate Chair and CEO – 52%
– Same Chair and CEO – 48% (of these, 8% appointed a lead director)

4. Compensation Consultants – Percentage of IPO companies that disclosed use of compensation consultant – 24%

5. Number of Directors:

– Median – seven
– 25% Percentile – six
– 75% Percentile – eight
– 50% of IPO companies had more than one employee-director.

6. Takeover Defenses:

– Classified board – 60%

– Supermajority voting requirements to approve mergers or change corporate charter and by laws – 53%

– Prohibition of stockholders’ right to act by written consent – 69%

– Limitation of stockholders’ ability to call special meetings – 74%

– Advance notice provisions – 80%

– Section 203 of the Delaware corporation statute* (chose not to opt out) – 90%

– Blank check preferred stock – 76%

– Stockholder rights plan (“poison pill”) – 6%

FASB Issues FAS No. 165 re: Subsequent Events

Last week, the FASB issued FAS No. 165, “Subsequent Events.” FAS 165 is effective for interim and annual periods ending after June 15th – and is intended to establish general standards of accounting for (and disclosure of) events that occur after the balance sheet date – but before financial statements are issued or are available to be issued.

– Broc Romanek