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Last week, the SEC brought this enforcement action against Polycom’s former CEO (who was fired in 2013). The company was charged with inadequate proxy disclosure from 2010 to 2013 and improper internal controls. The SEC complaint is filled with striking details (if true) of how the CEO at Polycom created false expense reports so the company would pay for his personal expenses, such as this example:

On July 7, 2012, Miller directed his administrative assistant to buy him two tickets to an August 3, 2012 performance of the Broadway musical Jersey Boys in New York City. On July 24, 2012, Miller emailed his administrative assistant to ask if she had the tickets, and during that exchange he represented, “I am giving the JB tickets as a prize in a NYC PLCM office sales contest…. On PCARD place NYC PLCM Q3 Sales Incentive Contest[.]” At Miller’s direction, his assistant charged $576.20 to her P-Card for two tickets to the show, and submitted the expense for reimbursement with the description that Miller had provided. But Miller’s description of the expense was false, as he again used the tickets to attend the theatre with his girlfriend, and did not give them away to Polycom’s New York sales team or anyone else. Indeed, Miller’s August 3, 2012 night out with his girlfriend in New York cost Polycom more than $1,000. In addition to the tickets, Miller charged more than $275 to his Polycom credit card for post-theatre dinner and later, although he had eaten alone with his girlfriend, emailed his administrative assistant a bogus business description for the meal, including the names of purported attendees from a Polycom customer. Miller also directed his administrative assistant to book a limousine service to take him to the theatre and dinner, for which she charged more than $160 on her P-Card, at his direction, and obtained reimbursement from Polycom.

There are plenty of other examples to pique anyone’s interest. It’s another sad tale of what would seem to be, entitlement and fraud.

The SEC also penalized Polycom $750,000 and issued a cease and desist. The company’s proxy statement said: “No Excessive Perquisites” (emphasis in original) and explaining that “[a] small amount of perquisites are provided to our executives, consistent with the practices of our peer companies.” False and misleading statements, books and records violations, internal accounting controls failure, etc.

And in the complaint, the SEC stated: “Polycom employees discovered that Miller had expensed more than $800 worth of spa gift cards as purported gifts to Polycom employees, but that Miller had actually used the gift cards, at least in part, for himself. In response, Polycom’s CFO raised the issue directly with Miller and suggested a system for further review of Miller’s expense reports to avoid problems in the future. Miller reacted angrily at being second-guessed. On June 26, 2011, the CFO sent Miller an email emphasizing the importance of Miller’s and the company’s disclosure obligations, including a detailed description of the relationship between Miller’s expenses, rules requiring that Polycom disclose all perks he received, and the company’s proxy statements. Notwithstanding the clear instructions provided in Polycom’s annual financial reporting questionnaires, which Miller signed, and the CFO’s personal explanation in June 2011, Miller continued to charge and hide personal expenses from Polycom.”

CII’s New Policy: Automatic Accelerated Vesting of Unearned Equity

Last week, the Council of Institutional Investors approved a policy opposing automatic accelerated vesting of unearned equity in the event of a merger or other change-in-control. The recommended best-practice policy states that boards should have discretion to permit full, partial or no accelerated vesting of equity awards not yet awarded, paid or vested.

Transcript: “The Top Compensation Consultants Speak”

We have posted the transcript for the recent CompensationStandards.com webcast: “The Top Compensation Consultants Speak.”

– Broc Romanek