As you know, a new SEC rule (Item 407(e)(3)(iv) of Regulation S-K) requires disclosure if a conflict of interest has arisen in connection with the work of a compensation consultant (whether selected by management or the compensation committee). To satisfy this disclosure requirement, companies will need to conduct a conflicts of interest assessment. This raises the question of whether companies will include voluntary disclosure (so-called “negative disclosure”) in their proxy statement when a determination of “no conflict” has been made. Here are the results from our recent survey regarding what companies are preparing to do:
1. For our next proxy statement, when it comes to the newly required conflicts of interest disclosure about compensation consultants (ie., Item 407(e)(3)(iv) of Regulation S-K), assuming that no conflict of interest is identified, our company:
- Has made a decision, at least at the staff level, whether to make voluntary negative disclosure (eg., as an anticipatory “best practice” or simply to signal to the SEC Staff and our shareholders that we were aware of the new disclosure requirement) – 62%
- Hasn’t yet figured out whether it will make any voluntary negative disclosure – 35%
- I hadn’t realized that there is a new conflicts of interest disclosure (and assessment) requirement! – 3%
2. For those of you who know which approach your company will take, our company intends to:
- Only provide disclosure if a conflict of interest is identified – and not provide any voluntary negative disclosure – 25%
- Provide voluntary disclosure that a conflicts of interest assessment was conducted and that no conflict of interest was identified – 67%
- Provide voluntary negative disclosure that works through one or more of the six non-exclusive factors supporting a “no conflict of interest” conclusion – 8%
SCOTUS Oral Argument: Gabelli v. SEC
On Tuesday, the Supreme Court heard oral arguments in Gabelli v. SEC, a case about the SEC seeking civil penalties after exceeding the usual time limit for fraud investigations. Here are articles about how the hearing went:
- Reed Smith’s “The Clock Is Ticking for the SEC… (Or Is It?)”
- SCOTUS Blog’s “Argument preview: Too bad both sides can’t lose this one”
- Pension & Investment’s “Supreme Court hears arguments in Gabelli case on SEC enforcement clock”
- Reuters’ “Supreme Court skeptical of SEC power in Gabelli case”
- WSJ’s “Justices Skeptical of SEC”
- Securities Law Prof Blog’s “U.S. Supreme Court Hears Oral Argument in Gabelli v. SEC”
As noted in this Reuters article, the SEC is being investigated by a House committee for spending on outside consultants during its efforts to streamline the agency.
Conflict Minerals Navigation Checks
In this podcast, Lawrence Heim of The Elm Consulting Group International explains CM CheckPoint (sm), a new rapid and highly cost-effective conflict minerals program assessment method/deliverable facilitated on-site
- What should companies who have already initiated conflict minerals programs be doing now in terms of benchmarking their efforts?
- What is the “CM CheckPoint”?
- How does it stack up to the alternatives?
- What are the reactions from clients so far?
- Broc Romanek