Questions Asked: "Ask the Experts: Prepping for a Wild Proxy Season"

1. The SEC has proposed that information regarding the involvement of directors, director nominees and executive officers in legal proceedings specified in Item 401 of Regulation S-K be provided for the past 10 years, rather than the past five years, as currently is required. Although the SEC has not yet taken any action on the proposals, would it be prudent to incorporate the 10-year period in my company's questionnaire?
    
2. What are companies doing now to prepare for the expanded director and nominee disclosure that the SEC says will be required in the proxy statement?
    
3. What other changes should be considered for the D&O questionnaire this year?
    
4. We are planning to take a big impairment charge on our goodwill in the fourth quarter. What is the SEC expecting these days in terms of disclosure about the impairment charge in our upcoming MD&A?
    
5. My company has always delivered paper copies of proxy materials to our shareholders.  We have heard that companies are saving a lot of money by switching to e-proxy.  Should we switch for the next proxy season?
    
6. What effect is the decision in CSX having on the beneficial ownership table? 
    
7. Are there any recent developments on how companies are addressing shareholder proposals?
    
8. If I have a material contract that is required to be filed as an exhibit to the 10-K, do I have to file the schedules to that contract? I realize that Item 601(b)(10) of Reg. S-K doesn't have the same kind of procedure for excluding schedules to material agreements as does Item 601(b)(2) with regard to merger agreements, but shouldn't the same principles apply by analogy? 
    
9. My company has decided to adopt e-proxy for next year. We have a small number of record holders, but a large number of beneficial owners who own shares in street name. We have decided to send a full set of proxy materials by mail to our record holders, as well as to those beneficial owners who have filed a Schedule 13D or 13G.  All other street name holders will receive a Notice of Internet Availability of Proxy Materials from the intermediary.  Does the company have to separately file the Notice? If not, does the intermediary have to file?
    
10. Should my company consider holding a virtual annual meeting this year?
     
11. Are companies changing their governance structures in anticipation of the need to disclose why they don't separate the role of CEO and chairman of the board? 
     
12. In last year's Form 10-Ks and in 2009 10-Qs, companies started including a lot of discussion in MD&A and risk factors about the adverse impact of the economy and the financial crisis on their business, liquidity, etc.  With economic and financing conditions turning around (although admittedly still with significant uncertainty), is it permissible to now remove some of the risk factors and talk about some positive developments in MD&A?
     
13. We have several change-of-control agreements with our CEO and other executive officers that have been in effect for several years.  The agreements provide for parachute payments on a change of control, as well as tax gross-ups with respect to excess parachute payments.  We are aware that proxy advisory firms react negatively to tax gross-ups, so we are planning to amend the agreements.  Under the amendments, if we can avoid the excise tax by reducing the parachute payments by up to 20 percent, we will reduce the parachute payments.  Otherwise, the parachute payments won't be reduced, and we will provide the tax gross-up.  We think this amendment will substantially reduce the instances in which we will have to provide a gross-up payment.  Can we expect the proxy advisory firms to react favorably to these amendments?
     
14. What are companies doing now to address the loss of discretionary voting due to the Rule 452 amendment?
     
15. We have adopted categorical standards for determining the independence of directors, to supplement the bright-line disqualifiers under the NYSE's rules. Is it sufficient to disclose these categorical standards and to say that our independent directors meet these standards, or does Item 407(a) require more?
     
16. What is the best way to present managements' conclusions as to the effectiveness of disclosure controls and procedures? My company got several comments on the disclosure that we had included in the Form 10-K for the past several years, which was very similar to the disclosure quite a few other issuers have in their periodic reports.