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Monthly Archives: September 2012

September 28, 2012

More on “Earnings Call Disruptions: Why Don’t They Happen More Often?”

Recently, on “The Mentor Blog,” I included an audio clip from a recent earnings call that went awry when someone accidentally blurted out some profanity in what may have been a cross-call (I have since deleted the audio clip in case the person’s name could be made out). Many members responded with their own stories or analysis including:

- In my many years here, I have only had one interruption which was caused by an inexperienced operator – to wit, the operator inadvertently connected her “management line” into the call so that while my CEO was speaking the operator and an IR person came over the line discussing the volume on the call. No harm done and almost immediately corrected, but I think the most common way it can happen is for either the operator or the inside IR person to accidentally hit that button (I suggest that perhaps it would best if they labeled it with giant “Dr. Evil” lettering, “DO NOT PUSH” or something similar).

- While this has never happened to me or any former client, I have heard narratively of management teams not remembering to “turn off” their mikes following the end of the call so that extraneous commentary is accidentally added to the recording. As politicians and newscasters know, don’t make jokes or add commentary while “on set” regardless of whether or not you believe that you aren’t being recorded.

- On one of our first calls after going public a while back, our CFO kicked the speaker connection under the table and we were dropped. The conference call service did a great job of asking people to hang on the line and we called back in. He got a lot of grief internally for a while (we told him to sit away from the speaker connection, etc.). As far as the listeners knew, it was just a glitch in the system (we were probably off for 2 minutes or so).

- We’ve only had one in 11 years due a power failure on our end. Being in the Northeast, we do sometimes get more concerned during the winter.

- I wonder how many people are recording the “prepared remarks” in advance for playback and then only fielding questions “live.” We’ve contemplated it but are never done far enough in advance to pull it off. Plus, we don’t have enough quality recording equipment in house to make it work. With that said, with an iPhone, I’m sure it would sound 100x better than a high quality recording from 2002.

- In my experience, I would say that it’s because the telephone/web conference coordinators and the investor relations personnel who are literally physically running the meeting are fairly skilled about running the call itself, handling the question sequencing and maintaining muting and other similar functionality (and reminding others of this too).

- Could the process be spoofed? I.e., could I dial in and register as if I were an analyst known to the company? I suppose so, but if two callers registered as the same person, that would obviously raise suspicions.

- Jim Brashear noted: “The reason you don’t see more disruptions is that companies only allow questions and comments from credible, known analysts and investors. They don’t take random calls from just anyone. My companies have allowed anyone to dial in and listen to earnings calls, but if someone wants to be able to ask a question or make a comment they have to register their name and organization. When the caller presses the button to be added to the queue for asking a question, we can see in the conference room their name and organization in a list of everyone that was added to the queue. We can choose to prioritize or ignore the names, as we choose. ”

Transcript: “JOBS Act Update: Where Are We Now”

We have posted the transcript of the popular webcast: “JOBS Act Update: Where Are We Now.”

Instead of “Just Vote No” Campaign – “Just Stay Home” and Don’t Vote…

With elections on everyone’s mind, I thought it was appropriate to point out this interesting blog from Keith Bishop from a few months back about the use of a strategy to prevent quorum from being reached rather than just voting no against a board…

- Broc Romanek

September 27, 2012

Webcast: “Ten Hottest Topics for the Conflict Mineral Rules”

Tune in today to the webcast – “Getting Beyond Denial: Conflict Mineral Rules More Important (And Apply Sooner) Than You Thought” – to hear the panel address these 10 questions (the panelists will not rehash the new rules; read these memos for that):

1. “Product” Determination: A key element in Step 1 in the conflict minerals disclosure process requires issuers to determine whether it manufactures or contracts to manufactures products. Is it clear what a product is? For instance, what product is a cable television company selling? The entertainment or the set top box leased to customers? How about an airline? Use of seat?

2. Examples of Product Manufacturing: There has been a number of interesting fact patterns regarding whether a company is manufacturing a product. For instance, does a company that assembles products, such as a computer systems integrator that sets up a network with off-the-shelf components, “manufacture” a product?

3. Degree of Influence for “Contract to Manufacture”: There have also been a number of questions regarding when a company has the degree of influence necessary to trigger the “contract to manufacture” provision in the rule. For instance, if a manufacturer sets performance requirements for the components it buys that will naturally require certain materials to be used in the product, is that enough? And what if you sell a product that includes your intellectual property, such as a Mickey Mouse doll that includes a voice recording supplied by the company?

4. Tricky “Functionality” Conclusions: Is it possible to conclude that the packaging used for a product is not “necessary to the functionality or production” of the product? For instance, are the cans used for soft drinks necessary to the functionality of the drink? How about the tin boxes that certain cookies are delivered in?

5. Various Approaches to Preparation: What steps should companies take now to prepare for reporting on 2013? Should they send letters to suppliers now? If so, will they need to resend letters next year? And what should companies be asking suppliers to disclose to the company? Does the answer to this question depend on the conflict mineral involved?

6. Differences in Approach By Industry: What is the approach to preparation in particular industries? Includes discussion of electrical, gold industries.

7. Changes to Sourcing Policies: The SEC’s adopting release for the new rules states that “[a]n issuer’s policies with respect to sourcing of conflict minerals will generally form a part of the issuer’s reasonable country origin inquiry.” Are companies changing sourcing policies to assist with compliance with the new rules? For instance, are companies restricting sourcing from the covered countries? Or, if a company sources from a covered country should it only source from large mining companies, as opposed to artisanal mining sources?

8. Whether Audit is Required (and How): Have companies started to consider what auditor they will use, if an audit is required? The SEC made it clear that a company’s existing financial statement auditor can be used, but is that a good or bad idea? Are there auditor independence considerations?

9. Disclosure Issues: Is there any part of the required disclosures in the Form SD that will be most problematic for companies to make? And what happens if an issuer does not file its Form SD? Or if it files the Form SD late? Does it impact Form S-3 eligibility?

10. Possibility of Lawsuit to Stay Rules: What’s the possibility that a lawsuit will be filed that will block the effectiveness of the new rules? If so, how will that process work?

Please take a moment to participate in this “Quick Survey on Conflict Minerals.” And check out this LA Times article – and this WSJ piece – on the subject…

JOBS Act: Draft Registration Statements To Be Filed on EDGAR Starting Monday

Yesterday, the SEC announced that draft registration statements can be filed on Edgar starting Monday, October 1st using submission form types DRS and DRS/A. This is a significant logistical development for those emerging growth companies and foreign private issuers that qualify for a confidential SEC Staff review. These companies can choose to continue to use the SEC’s secure email system for an unspecified period of transition time rather than use Edgar. The SEC will announce later when use of Edgar for draft registration statements will be mandatory.

Yesterday, the SEC posted this 32-page guide – mainly consisting of screen shots – on how to file draft registration statements on Edgar.

Hot Off the Press! Nasdaq’s Compensation Committee Proposal

Yesterday, I blogged about the NYSE proposal – 58 pages – implementing the Rule 10C-1 requirements for compensation committees was posted. Then later in the day, I updated the blog to note that Nasdaq’s proposal – 97 pages – was posted yesterday morning. Folks have 21 days to comment once the proposals are published in the Federal Register. We’ll be posting the inevitable slew of memos in CompensationStandards.com’s “Compensation Committees” Practice Area.

What You Need to Do Now: These soon-to-be-adopted new rules will be a hot topic during our “7th Annual Proxy Disclosure Conference”” (and the combined “Say-on-Pay Workshop”) coming up in just over a week – October 8-9th in New Orleans and via Live Nationwide Video Webcast. If you haven’t been to our Conferences before, give it a try – particularly this year when New Orleans needs the tourism dollars. Here are the agendas for the combined conferences. Register Now.

- Broc Romanek

September 26, 2012

Hot Off the Press! NYSE & Nasdaq’s Compensation Committee Proposals

Late yesterday, the NYSE proposal – 58 pages – implementing the Rule 10C-1 requirements for compensation committees was posted. Then Nasdaq’s proposal – 97 pages – was posted this morning. We’ll be posting the inevitable slew of memos in CompensationStandards.com’s “Compensation Committees” Practice Area (Mark Borges already has blogged about it).

What You Need to Do Now: These soon-to-be-adopted new rules will be a hot topic during our “7th Annual Proxy Disclosure Conference”” (and the combined “Say-on-Pay Workshop”) coming up in just over a week – October 8-9th in New Orleans and via Live Nationwide Video Webcast. If you haven’t been to our Conferences before, give it a try – particularly this year when New Orleans needs the tourism dollars. Here are the agendas for the combined conferences. Register Now.

Survey: Employees Use Internal Channels for Reporting Misconduct

Here’s news from this blog by Davis Polk’s Ning Chiu:

Amidst concerns that the SEC whistleblower rules will encourage employees to bypass internal protocols and take allegations of misconduct directly to the Commission, a survey by the nonprofit organization, the Ethics Resource Center, found that only one out of six employees ever reported misconduct to regulators or other outside channels, and 84% of those individuals said that they took this step only after trying to work through their companies’ own procedures. Just 2% of employees surveyed initiated reporting outside of their companies and never informed their employers.

Inside the Mind of a Whistleblower” is a recent supplement to a 2011 survey that received over 4,000 responses. For companies that want to promote an ethical culture, it may be discouraging to learn that more than 1 out of 3 employees who have observed misconduct indicated that they never made it known. The strongest motivation for reporting misconduct comes from whether the individual believed corrective action would be taken, and not surprisingly, the main reason employees failed to inform anyone was the belief that nothing would change as a result of their efforts. Fear of retaliation, and the employee’s own sense of financial security (those whose earnings recently increased are more likely to report), were other factors that affected the likelihood of revealing perceived misconduct.

63% of those asked stated that the ability to make anonymous reports was a positive factor. However, a vast majority of employees sacrificed this benefit and instead first reached out to their supervisors, and another quarter initially turned to higher management. People who tend to report misconduct want problems to be fixed, and are not influenced by rewards, or bounties, offered to whistleblowers, but monetary gain does make a difference to certain employees who would otherwise not be inclined to make a report.

The organization’s 2012 survey was limited to 2,100 employees at Fortune 500 companies and shows similar findings, as only 1% of respondents said that they initially reported misconduct outside of their companies. Employees at larger companies seemed to be more cognizant of possible wrongdoing, as over half of the Fortune 500 employees said they had observed misconduct in the past year, compared to 45% of employees across a larger group of U.S. companies.

Most of these employees initially approached their supervisors or higher management, with 11% contacting a hotline. However, 17% of employees then made a second report outside of their companies, generally because they were disappointed with the responses.

While the surveys were conducted after the SEC adopted its whistleblower rules, their usefulness in predicting whether employees will approach the SEC directly as permitted under those rules is limited by the broad nature of the misconduct discussed by the respondents, involving primarily workplace environment issues rather than financial reporting, and the lack of clarity surrounding when these actions were discovered and subsequently reported.

Study: Political Contribution Disclosures at S&P 200

Here are some stats from the Center for Political Accountability – in conjunction with the Zicklin Center for Business Ethics Research – from their latest political contribution disclosure study for the S&P 200:

- Almost 60% disclose at least some information about political spending. This includes 47% that make some disclosure of their direct political spending and another 11% that say their policy is not to engage in such political spending.
- 40% are opening up about their payments to trade associations, often a conduit for secret political spending. 36% make some disclosure of their payments to trade associations, while 5% said they ask trade associations not to use their payments for political purposes.
- Even in a climate of increased hidden spending, 75 out of 88 large companies that were studied for two years in a row get improved scores for disclosure of political spending and for accountability.
- The 2012 Index identifies these top leaders for disclosure and accountability: Merck, with an overall score of 97 out of 100; Microsoft, overall score of 94; Aflac, 93; Gilead, 92; and Exelon and Time Warner, Inc., 88 each.
- Companies showing the greatest improvement from 2011 to 2012 are Costco, receiving a score of 85, up from 3 last year; Disney receiving a score of 67, up from 12; and Capital One, which improved its overall score from 20 to 63.

- Broc Romanek

September 25, 2012

The Twitter Handbook: Overcoming Your Fears

Over the past 18 months, I have spoken at least a dozen times to groups about how social media impacts the securities laws, corporate governance – and your career. In our “Social Media” Practice Area, I have posted “The Twitter Handbook: Overcoming Your Fears” which I drafted as a common sense “nuts & bolts” guide that walks you through the process of signing up for Twitter, learning how to use it and understanding how to navigate Twitter etiquette and the rules of the road. I drafted it to help those of you out there that are scared of the unknown and might not be the most tech savvy. It’s only five pages long. Feel free to email me any questions you might have on any of the basics, etc.

Here’s something unusual that the FTC is doing: “FTC in Three.” Answering 3 questions via social media (Twitter & Facebook) each week. Anyone can submit questions via these social media vehicles – then the FTC chooses three of them and answers them in a video. I guess it shows the agency is hip and cool and williing to answer questions…

Don’t Tweet: “Board meeting. Good numbers=Happy Board”

This WSJ article entitled “Facebook and Twitter Postings Cost CFO His Job” will make the day for many lawyers that I have spoken in front of – the ones who want a hat to hang their hat when they try to convince a CEO client that they shouldn’t be on Twitter. In my opinion, those lawyers are the next generation of lawyers that follow those from 25 years ago that warned clients not to use email because of the things that might be said in writing. I wonder if lawyers were advising clients a hundred years ago not to use telephones?

My point is not that everyone should be on Twitter – in fact, it’s far from that. It’s that I dislike the kneejerk reaction of those that tell clients not to do something technological just because they don’t understand it. The fear of the unknown. Far too many lawyers have not spent more than a handful of minutes trying to understand Twitter – or social media in general for that matter – so I’m not convinced they are qualified to give an educated opinion on the topic.

And as for this particular CFO, consider this: isn’t the company far better off finding out now that he seems to not know what is appropriate to tell others? If this CFO has so little disregard for what his compliance obligations are, imagine what he was telling others on the golf course! Social media is just like any other avenue of communication – either you have a filter or you don’t. And if you don’t, you shouldn’t be in the kind of job that requires you to have one. See John Palizza’s blog about this case…

Survey: Board Use of Technology

According to a survey conducted by Thomson Reuters Governance, Risk & Compliance, here’s a snapshot of ways that board materials are shared with directors:

- Board packs/books delivered physically by courier – 61%
- Board members print electronic files and carry them – 75%
- Documents sent to board members via personal, non-commercial email addresses – 73%
- Always establish email accounts and use exclusively for board communications – 10%

- Broc Romanek

September 24, 2012

Study: Peer Group Benchmarking Falsely Used Because Talent Isn’t Transferable

A new study – entitled “Executive Superstars, Peer Groups and Over-Compensation – Cause, Effect and Solution” – examines flawed peer group methodology, finding that CEO pay has become untethered from both broader organizational wage structure and from economic fundamentals due to the use of peer benchmarking. Funded by the IRRC Institute, Professors Charles Elson and Craig Ferrere of the University of Delaware wrote the study. Here’s a NY Times article about the study from yesterday – and here’s IRRC’s press release.

This new study makes it clear that peer grouping with minimal board discretion is a seriously flawed methodology even when the peer groups are fairly constructed. The authors note their study is the first to document that peer group benchmarking has accidentally become the de facto standard even though it never was designed to determine CEO compensation.

The fact that most CEOs aren’t transferable is something that we have been saying for a long time (eg. this blog). And we also have been warning compensation committees that if they rely heavily on peer groups – and don’t use alternative benchmarking techniques like internal pay equity instead – they can be in trouble in court since so many have warned that pay has skyrocketed over the past two decades due to peer group benchmarking. In other words, it arguably isn’t reasonable to rely on peer group surveys any more (here’s my latest rant on this topic). Will boards and their advisors finally wake up on this issue? They should before the lawsuits come – because then it will be too late…

COSO Issues Draft Update of Internal Controls Framework

Last week, the Committee of Sponsoring Organizations of the Treadway Commission (known as “COSO”) released an exposure draft of its Internal Control over External Financial Reporting (ICEFR): Compendium of Approaches and Examples for comment. This is a big deal as it’s a new look at 20 years worth of internal control guidelines. The final product is expected in early 2013…

Concerns Over PCAOB’s New Auditing Standard 16, Communications with Audit Committees

Good stuff from this blog by Davis Polk’s Richard Sandler and Elizabeth Weinstein:

As we discussed here, the PCAOB recently approved Auditing Standard No. 16, Communications with Audit Committees. While the bulk of the new standard concerns communications that the auditors are required to provide to the audit committee, one notable provision relates to inquiries required to be made of the audit committee by the independent auditor. Under the new standard, auditors are required to inquire whether the audit committee “is aware of matters relevant to the audit, including, but not limited to, violations or possible violations of laws or regulations.” This expands the inquiries of the audit committee required by previous auditing standards, which required the auditor to inquire of the audit committee regarding the matters important to the identification and assessment of risks of material misstatement and fraud risks.

As at least one comment letter on the proposed standard noted, the new standard could jeopardize attorney-client and work product privileges. In its adopting release, the PCAOB acknowledged the criticisms of the comment letter regarding the risk of loss of privileges, but declined to exclude the language. The PCAOB stated that it did not remove the language because “limiting the scope of information that the audit committee might provide to the auditor could severely affect the auditor’s ability to conduct an effective audit…Due to the audit committee’s oversight responsibilities, it is appropriate for the auditor to ask the audit committee for information relevant to the audit, including matters related to violations or possible violations of laws or regulations.” The final standard did exclude language from an interim proposal which would have required the auditor to inquire of the audit committee about matters that “might be” relevant to the audit, somewhat narrowing the scope of inquiry. However, the risk of loss of privileges remains an issue. The PCAOB did not provide guidance to companies regarding mitigating such risk.

If approved by the SEC, Auditing Standard No. 16 will be effective for audits of financial statements for fiscal years beginning on or after December 15, 2012.

- Broc Romanek

September 21, 2012

Senator Rockefeller Seeks Information on Cybersecurity from Fortune 500

Here’s news from this Gibson Dunn alert:

U.S. Senator Jay Rockefeller announced on Wednesday that he has sent letters to the chief executive officers of all Fortune 500 companies requesting information by October 19, 2012 on how each company is addressing cybersecurity. The broad requests for each company’s views on cybersecurity–including how each company developed its own practices and the role of the federal government in developing cybersecurity practices–follow recent unsuccessful efforts by Senator Rockefeller and other lawmakers to pass legislation imposing heighted cybersecurity standards at the national level. The most recent effort, introduced by Senator Joe Lieberman and co-sponsored by Senator Rockefeller, was voted down in the U.S. Senate last month despite White House support.

This is not the first effort by lawmakers to focus on cybersecurity outside of the legislative process. In May of last year, Senator Rockefeller and four other Senators petitioned the SEC to issue guidance to public companies concerning their obligation to provide disclosure about cybersecurity. The SEC’s Division of Corporation Finance responded last October by releasing guidance to public companies to assist them in assessing what disclosures should be made when faced with cybersecurity risks and incidents. (Gibson Dunn’s alert discussing that guidance is available here.) Senator Rockefeller has also petitioned the White House to issue an executive order that would accomplish similar goals as the Lieberman/Rockefeller bill–such as establishing a voluntary program to designate cybersecurity standards for companies in control of critical infrastructure. Critics argue that such efforts circumvent the legislative process, would create new liability risks for covered businesses, and potentially impose an impractical “one-size-fits-all” approach to cybersecurity across very different settings and businesses.

Although responses to Senator Rockefeller’s letters to the Fortune 500 CEOs are voluntary, many businesses will likely offer some response (although that need not come from the CEO). The letters include eight questions designed to discover how companies are addressing cybersecurity and the views of the CEOs on the system the Lieberman/Rockefeller cybersecurity bill would have established if voted into law, including concerns the CEO might have with the voluntary program contemplated in the bill. Recipients of the requests should, of course, recognize that their responses (or failure to respond) may be used in the political battle over cybersecurity regulation and could potentially trigger further contact or Congressional inquiry.

Also see this blog by Adam Veness of Mintz Levin…

Shareholder Proposals: The Latest Count on Proxy Access Proposals

In this blog, Professor Larry Hamermesh updates his survey of the voting results on proxy access shareholder proposals during this year. He notes: “In the last couple months there have been three additional votes (at Forest Laboratories, Medtronic and H&R Block). As the updated voting tabulation reflects, these three most recent votes didn’t add much to any argument that the SEC’s now-invalidated 3 year/3% ownership thresholds gave shareholders less than they would have voted for themselves: we’re talking favorable votes of 8% or less of the outstanding shares, and less than 10% of the shares actually voted. That compares to the 46%-51% approval levels at Nabors Industries and Chesapeake Energy for proposals that pretty much tracked the SEC’s threshholds.”

At the Printers: 2013 Executive Compensation Disclosure Treatise

We just wrapped up the Lynn, Borges & Romanek’s “2013 Executive Compensation Disclosure Treatise & Reporting Guide.” For those that want to access it online, it’s now posted on CompensationStandards.com. For those that like a hard copy, it will be finished being printed in a few weeks.

How to Order a Hard-Copy: Remember that a hard copy of the 2013 Treatise is not part of a CompensationStandards.com membership so it must be purchased separately – however, CompensationStandards.com members can obtain a 40% discount by trying a no-risk trial now. This will ensure delivery of this 1200-plus page comprehensive Treatise as soon as it’s done being printed.

And note there an additional 40% off when you purchase this Treatise in combination with the just finished Romanek’s “Proxy Season Disclosure Treatise & Reporting Guide.”

- Broc Romanek

September 20, 2012

Survey Results: Rule 10b-18 & Buybacks

Here are the survey results on Rule 10b-18 & buybacks:

1. Does your company conduct share buybacks only if they comply with Rule 10b-18:
- Yes – 77.3%
- No – 13.6%
- Not sure, it hasn’t come up – 9.1%

2. If your company has conducted a buyback outside of Rule 10b-18, does it:
- Routinely conduct buybacks outside of Rule 10b-18 – 18.2%
- Occasionally conduct buybacks outside of Rule 10b-18 – 81.8%
- Inadvertently conducted a buyback outside of Rule 10b-18 one time – 0%

3. If your company has conducted a buyback outside of Rule 10b-18, did noncompliance involve:
- The volume limits – 44.4%
- The timing of repurchases – 0%
- The price of repurchases – 22.2%
- Use of more than one broker – 11.1%
- Other – 22.2%

Please take a moment to participate in this “Quick Survey on Proxy Solicitors” and this “Quick Survey on Delegation of Authority.”

Our New “Accountant Changes & Disagreements Disclosure Handbook”

Spanking brand new. Posted in our “Change in Auditors/Reaudits” Practice Area, this comprehensive “Accountant Changes & Disagreements Disclosure Handbook” provides a heap of practical guidance about how to navigate under Item 304 of Regulation S-K and Item 4.01 of Form 8-K. This one is a real gem – 28 pages of practical guidance…

Say-on-Pay: Now 58 Failures

I’ve added one more company to our failed say-on-pay list for 2012 on CompensationStandards.com as RBC Bearings failed during the past week with less than 30% support. We are now at 58 companies in ’12 that have failed to garner major support. Hat tip to Karla Bos of ING Funds for keeping me updated.

- Broc Romanek

September 19, 2012

Dave & Marty on JOBS Act Rulemaking and Ireland

In this podcast, Dave Lynn and Marty Dunn discuss:

- Proposed changes to Rule 506 and Rule 144A under Title II of the JOBS Act
- Our upcoming conferences
- Favorite things about Ireland

Double Talk on Cost-Benefit Analyses

We want the SEC to conduct better cost-benefit analyses. But, in some cases, we want to rush rulemaking so they don’t have time to do them. And around and round we go. The fun of Congress. Learn more in this AdvisorOne article about a JOBS Act joint House hearing last week.

Here is a Huffington Post article discussing a study which puts the cost of the financial crisis at $12.8 trillion. However, the financial industry – and some members of Congress – don’t want such costs to be considered when evaluating new rules related to the crisis.

The Second Deal Cube Tourney: Round One; 16th 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:

- Ice Cream Sundae
- Mickey Mouse
- Colorful Globe
- Standard

Online Surveys & Market Research


- Broc Romanek

September 18, 2012

The Latest Governance Surveys

Last week, PwC issued it 2012 Annual Corporate Director Survey – and Shearman & Sterling issued its “2012 Trends in Corporate Governance of the Largest US Public Companies.”

PwC’s survey findings include:

Board Composition and Behavior
- Questioning board performance. Nearly one-third of directors believe someone on their board should be replaced. Diminished performance because of aging and lack of expertise were cited as the two primary reasons.
- Finding new directors. When seeking new board members, 91 percent of directors say they take suggestions from other directors, with 11 percent considering investor input for candidates. A quarter consider racial and gender diversity as “very important.”
- Reconsidering board leadership. About half of boards that have a combined CEO and Chair position are already discussing splitting the role at their next CEO succession.
- Self-evaluations prompt changes. Two-thirds of directors (66 percent) made changes during the last 12 months as a result of their full-board or committee self-evaluations.
- Continuing director education. Over half of directors (52 percent) believe some form of annual board education should be required. Of those with this belief, over 40 percent had less than four hours of outside training last year, and 21 percent did none at all.
- Time commitments increase. More than half of directors say the amount of time they spent on board work rose last year. Two-thirds of those increased their hours over 10 percent, and one-fifth more than 20 percent.

Executive Compensation
- Voices that influence compensation. Directors rate the following groups as “very influential” or “influential” when it comes to their boards’ decisions about executive compensation: 86 percent cite compensation consultants, followed closely by the CEO (79 percent), and then institutional investors (54 percent).
- Responding to say-on-pay. In the second year of say-on-pay, 64 percent of companies took some action to address voting results: 41 percent modified compensation disclosures, 29 percent made compensation more performance-based and 23 percent worked more closely with proxy advisory firms. Two percent of directors indicated that their companies decreased executive compensation.
- The influence of proxy advisory firms. Over 60 percent of directors estimate that proxy advisory firms have more than a 20 percent influence on proxy voting at their company. Almost half of directors rate quality of the firms’ work as “fair” or “poor.”

Strategy Oversight
- More time wanted on strategy. Strategic planning topped the board’s “wish list,” with over 75 percent of directors saying they want to devote more time to it, up from 60 percent of directors who wanted to do so last year.
- Getting the right information. Two-thirds are satisfied with the customer satisfaction research management provides, while nearly 72 percent are satisfied with information about employee values and satisfaction. However, a number of boards do not receive any information about either customers or employee satisfaction (20 and 16 percent, respectively); and 21 percent are dissatisfied with competitive intelligence.

Podcast: Whether the Conflict Minerals Rules Will Work

In this podcast, Dan McGroarty of American Resources Policy Network provides some insight into whether the SEC’s new conflict minerals rules will ultimately lead to the goal that Congress envisioned when it mandated the rulemaking in Dodd-Frank, including:

- How do you think the SEC’s recent conflict minerals rulemaking will impact corporate practices in using these minerals?
- What do you think companies should do in reaction to the rulemaking?
- How might activists proceed from here to target companies that still use minerals in countries with major human right violations?

For next Thursday’s conflict minerals webcast, the panel will not spend any time going over the actual rules – they’ll presume you’ve read some of the numerous memos (or maybe even the SEC’s adopting release). Instead, the panel will go over these 10 pressing questions on everyone’s mind.

The Second Deal Cube Tourney: Round One; 15th 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:

- Star Wars JEDI Spaceship (infamous Enron entity)
- Saw Blade on Tree Stump
- Two Clear Cell Phones
- Diamond-ish (ISS going public)

Online Surveys & Market Research


- Broc Romanek

September 17, 2012

More STOCK Act Blunders: Executive Branch Employee Provision Enjoined

A few months ago, I blogged about how Congress blundered when drafting the STOCK Act as a loophole for spouses and children of members of Congress were not covered. Now a US District Court has preliminarily enjoined the enforcement of a STOCK Act provision requiring senior executive branch officials to disclose their financial transactions, as noted in this Huffington Post article. If you recall, instead of coming up with an insider trading law to cover just themselves, they decided to throw in a bunch of senior government employees without thinking it through…

Webcast: “M&A Deal Protections: The Latest Developments and Techniques”

Tune in tomorrow for the DealLawyers.com webcast – “M&A Deal Protections: The Latest Developments and Techniques” – to hear Greenberg Traurig’s Cliff Neimeth; Potter Anderson’s John Grossbauer; and Richards Layton’s Ray DiCamillo discuss the latest in “deal protection” techniques.

The Second Deal Cube Tourney: Round One; 14th 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:

- Standard w/ Rare Corp Fin Logo
- Jamba Juice Cup
- Recreational Vehicle
- Pig

Online Surveys & Market Research


- Broc Romanek