TheCorporateCounsel.net

October 20, 2011

Coming Soon: #Occupy [Name of Your Company Here]

As we all begin to plan for another wild proxy season, I wonder how many are planning for the potential of major disruptions at their annual shareholder meetings as Occupy Wall Street-type protests quickly spread to avenues that we never dreamed of. Are you planning for protests at your annual meeting? How about one of your board meetings? Your CEO’s house? Your CEO’s golf game? Or when your CEO lands in the corporate jet at the airport? Or any of these for one – or more – of your directors?

I truly believe that some of these things could happen this proxy season. Here are a few stories that lend credence to my belief:

1. Protestors in general are getting bolder and fairly savvy. Earlier this week, a trio posed as golfers to allow themselves to approach House Speaker John Boehner during his golf game at California’s Pelican Hill Resort. Here’s a video of that confrontation.

2. Protestors already have targeted the homes and offices of those they want to make a statement about during the “Billionaires Walking Tour” in Manhattan a few weeks ago, as noted in this article.

3. A friend recently described to me how he attended a bankers conference in Newport Beach last month where protestors actually spent the night at the ritzy conference hotel and then stormed through the doors of the conference the following day, carrying signs, etc. Here’s the only media mention of this episode that I could find.

4. Check out this new site – OccupytheBoardRoom.org – which lists 200 CEOs and asks the public to send in their personal horror stories (loss of job, etc.) so they can be hand-delivered to the executive. All the messages, videos, etc. received will eventually be posted according to the site.

The Coming Protests: What You Should Be Doing Now

Yes, these risks mean that you should revisit your security plans. But it also is a red flag that should prompt you to start thinking about what all this anger towards the Top 1% really means (see this Bloomberg article about income inequality and its meaning for the economy). It looks like the protests have staying power even if there are no well-defined unifying goals. As the upcoming proxy season forces pay packages back into the limelight, the growing anger likely will turn to CEOs and those that pay them.

What can you do? For starters, compensation committees and their advisors should be doing an internal look to counterbalance the heavy use of peer group benchmarking. Peer group benchmarking is a practice that continues to be a primary cause of runaway CEO pay levels – and one that continues to be the crutch for many directors who don’t want to have the hard conversation with CEOs about the Lake Wobegon excesses that boards have inadvertently caused over the past two decades.

Conducting this exercise now is particularly important with the SEC’s pay disparity ratio rulemaking on the horizon. If a company’s board hasn’t even bothered to see what types of ratios they might need to disclose in the not-so-distant future – and determine if any adjustments to pay levels are warranted now ahead of forced disclosure – it only has itself to blame when the SEC’s rulemaking takes effect and shareholders, stakeholders and the general public have a negative reaction to what it ultimately discloses.

And as we’ve repeatedly warned, it’s just a matter of time before the plaintiff’s bar successfully challenges boards who continue to rely heavily on peer surveys given the widespread evidence that they have been tainted when so many boards strive to pay their CEOs in the top quartile, year in and year out. When the excesses caused by peer group surveys is front page news – as it was a few weeks ago in the Washington Post – the cat clearly is out of the bag on this one! We have resources about how to conduct an internal pay look in our “Internal Pay Equity” Practice Area on CompensationStandards.com.

The SEC’s Conflict Minerals Roundtable

On Tuesday, the SEC held its conflict minerals roundtable – and then extended the comment period for its related proposal through November 1st to obtain any additional comments that the roundtable provoked. Here’s archived video from the roundtable – and a Shearman & Sterling memo, Cooley alert and Gibson Dunn memo capturing some notes from the proceedings.

Meanwhile, a group of 11 Senators wrote a letter to the SEC, urging the agency to quickly adopt rules, as noted in this Reuters article. Also see this Cooley alert for other interesting views on this topic…

- Broc Romanek