TheCorporateCounsel.net Blog |
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Tuesday, December 30, 2003
Severance Pay in the Headlines Over the past few weeks, severance pay has dominated the news headlines. We have last week's SEC enforcement action against the former CEO of Vivendi that included his relinquishment of $25 million of severance pay (which consisted of the amount he negotiated when he resigned). The SEC's action was the first use of Section 1103 of Sarbanes-Oxley (because the SEC froze the payment before it was made pending its investigation) and the amount has been placed in escrow, with the intent to pay shareholders under the Fair Funds provision of SOX. The NYSE is considering suing Dick Grasso to recoup some of the severance payments it made (and Grasso is allegedly considering suing to get some of the money he left behind). And the Office of Federal Housing Enterprise Oversight has sued the former Freddie Mac CEO and CFO to recoup severance payments made to them after they were fired this summer. Shareholders have been more actively speaking out on severance pay. Quite a few shareholder proposals that sought to limit severance pay got majority votes this year, including one at Qwest last week. The recent NACD Blue Ribbon Commission Report on Exec Comp recommends that severance pay should be limited to 2x-3x of base pay (not other forms of comp), with reductions in cases where the CEO is asked to leave over performance issues or eliminated entirely if the CEO resigns for another position or "for other reasons." It also recommends that the package size be tied to tenure through a vesting formula that requires a certain period of service (eg. 5 years) to receive the maximum benefit. The Most Overlooked Features on TheCorporateCounsel.net I thought I would close out the year by noting some valuable features on TheCorporateCounsel.net that might not be well known: - HTML Version of Corp Fin's Accounting Training Manual (on AccountingDisclosure.com) - Q&A Forum on Rule 144, moderated by Bob Barron and Jesse Brill - 20 Areas of Sample Disclosures, complete with analysis - List of Links to Director Education Programs - Comprehensive MD&A Library in HTML, courtesy of Linda Quinn and Ottilie Jarmel Monday, December 29, 2003
Stock Ownership Guidelines Grow in Popularity Over the past year, there has been significant growth in the number of companies that require or encourage officers and/or directors to maintain certain levels of stock in their companies. Several studies show that nearly half of large companies now maintain them for officers (up from a third) and about a third of large companies maintain them for directors. For TheCorporateCounsel.net members, we have posted 20 samples of stock ownership guidelines. 270-Page Report on SEC's Weaknesses On Christmas Eve, the WSJ ran a lengthy article about the SEC weaknesses as detailed by a 270-page report prepared by SEC staffers and McKinsey consultants. The report is non-public and was commissioned by then-Chair Harvey Pitt. The article indicates that the report is fairly critical of the agency as being too reactive and not having sufficient resources to do its job. Two telling statistics: only 33% of enforcement investigations are generated internally and 15% of them come from reading the morning papers. Corp Fin is assailed for having an "assembly line mentality" for focusing on achieving numerical targets of reviews and picking "smaller, easier-to-review filings rather than more complex ones." I wonder how much McKinsey got paid to come in and tell them all these well known facts. I coulda done it for half... |
