The Practical Corporate & Securities Law Blog

By Broc Romanek

Go to TheCorporateCounsel.net

 
How to Conduct Research on Private Companies

I frequently get asked where are the best resources on private companies. I like Skyminder.com because it provides ratios and financials on private companies worldwide. Hoovers.com is probably a more reliable source, but does not have the same range of information as Skyminder. Both of these are subscription services. Forbes.com/private500 is a free list of the largest private companies - but there is no in-depth information available.

Foreign Corrupt Practices Act

Due to popular demand, I have created a "Foreign Corrupt Practices Act" Practice Area for members.

posted by broc at 8:23 AM

 
A 43% Withhold Vote!

Wow! The preliminary withhold vote on Michael Eisner, based on voting prior to the meeting (of course subject to final count and confirmation of inspector of election, and all the other disclaimers announced by Disney) was 43% yesterday. This is an extremely high number considering the highest withhold vote on a Fortune 100 director last year was in the mid-20s (for an "Enron" director who still sits on Lockheed Martin's board).

Considering that roughly a quarter of the votes cast were broker non-votes - who routinely support management - more votes were actively cast against Eisner than for him. And this is all due to a media/Internet campaign against Eisner - with no proxy solicitator involved, a remarkable achievement. Also noteworthy is that three other "targeted" directors of Disney also received withheld votes in the low-20% range.

It will be interesting to see how these historic results are used to make arguments at next week's SEC roundtable on shareholder access (eg. an argument that the proposed trigger thresholds can be easily reached and thus don't need to be lowered versus an argument how investors would bother to actively vote if they knew their votes had consequences).

Carl's Corner on Cumulative Voting

The March installment of Carl's Corner acts as a Primer on Cumulative Voting.

NASD Sends Member Notice on Underwriting Rule

The NASD has sent out its Notice to Members 04-13 announcing the adoption of major amendments to the NASD's Corporate Financing Rule--Rule 2710. The amendments were approved by the SEC on December 23, 2003 and the SEC approval order was published in the Federal Register on December 31, 2003.

As more fully explained in my interview with Suzanne Rothwell, these rule changes effect a new approach to underwriting arrangements. The Notice to Members summarizes the amendments and provides clarification regarding the application of Rule 2710 to straight debt and derivative securities. The Notice also includes the text of the amendments.
posted by broc at 8:27 AM

 
Super Wednesday

Today is our webcast - Conduct of the Annual Meeting!

Number of Shareholder Proposals Up

At last week's Institutional Shareholder Services conference, Corp Fin Deputy Director Marty Dunn noted that the staff is on pace to receive about the same number of exclusion requests as last year (and last year was a record). However, it was also noted that more proposals were either being negotiated out of the proxy statement or placed on the ballot without opposition (in fact, over 30 proposals were withdrawn while the SEC staff was processing an exclusion request just during the past month).

So, it appears that this year likely will see a new record number of proposals. In fact, Carol Bowie of IRRC states in today's NY Times that the number of proposals dealing with corporate governance topics will be over 900 this year, up from 500 last year. That 900 corporate governance proposals nearly equals the record-setting number of overall proposals set last year of just over 1000. So I wouldn't be surprised if this year's number of overall proposals falls at well over 1300.

Marty did confirm that the sole "opt-in" trigger proposal so far is the Marsh & McLennan one. The staff did allow the exclusion of a proposal - Verizon Communications (2004 Lexis 200 Jan. 18, 2004 - and rejection on reconsideration, 2004 Lexis 271, Feb. 10, 2004) - that was similar to an opt-in proposal - but the proposal changed the definition of "qualifed shareholder" from what the SEC proposed in its shareholder access framework. So, the staff allowed exclusion under Rule 14a-8(i)(8) regarding election of directors.

By the way, hats off to Marty for always making his panels as entertaining as possible. He never disappoints.

SEC to Consider Adopting 8-K Proposal

Next Thursday, the SEC is holding an open Commission meeting to adopt the 8-K proposals that have been outstanding for nearly two years (see this bunch of law firm memos on the outstanding proposal). The SEC will also propose changes to 20-F to lighten the financial reporting load for certain non-US issuers.

Demise of Poison Pills?

Yesterday, the Wall Street Journal ran an article illustrating how shareholder activism has caused an increasing number of companies to dismantling poison pills - and preventing companies from installing new pills. For a number of years now, shareholder proposals asking companies to either dismantle a pill or adopt a policy to not adopt pills have received majority votes. The article notes that 12 companies have dismantled pills so far this year - compared with 29 in all of '03 and 18 in all of '02.
posted by broc at 3:16 AM

 
Controlled Company Proxy Statements

In response to a number of requests regarding what controlled companies are disclosing in the wake of the new SRO standards - from which controlled companies can "opt out" of certain provisions - I have created a new "Controlled Companies" Practice Area which links to a dozen proxy statements filed recently by controlled companies.

"Shortest 8-K Ever" Contest

Just to have a little fun in our mundane legal lives, I have commenced a contest to find the shortest 8-K ever filed - or furnished - with the SEC. The first entrant is this recent 8-K furnished by Global Crossing that announces the hiring of an advisor to explore alternatives regarding one of its business units - it consists of one sentence with about 35 words. I know there are shorter ones out there, so please forward your entrants!

SEC Proposes Changes to Regulation of Stock Exchanges

Last week, the SEC proposed Regulation NMS applicable to the National Market System. One proposal in particular would establish a uniform trade-through rule for all market centers, with certain exceptions. There is a 75-day comment period. The SEC has now posted the proposing release - but it's a monster of a PDF at 346 pages.
posted by broc at 8:15 AM

 
The Eisner Letters

To get you in the mood for our Wednesday webcast - "Conduct of the Annual Meeting" - which will include two panelists reporting from the Disney annual meeting (including one who is Disney's Delaware lawyer), here is the recently unsealed 1996 letter from Michael Eisner to Michael Ovitz as well as the recent letter from Comcast's CEO to Eisner regarding Comcast's proposed acquisition.

Corp Fin's Advice to Oil & Gas Industries

Last week, Corp Fin advised they had sent out an accounting advice letter - sort of a "global comment letter" - to all companies that they have identified as being in the oil and gas production business. In posting this letter on the SEC's website, the staff noted that companies that did not receive the letter - but which have subsidiaries or operations in oil and gas production - should nevertheless consult the letter in preparing their filings.

FAS 69 requires specific, unique disclosures about oil and gas production; some uncertainty was thrown in, however, by the recent adoption of FAS 143 (re: asset retirement obligations) and how that affects the FAS 69 disclosures. (FAS 143 did not amend FAS 69.) This new letter gives the staff's views on how the recognition of a liability for an asset retirement obligation and the related depreciation of the asset and accretion of the liability under FAS 143 interplay with four specific disclosure areas mandated by FAS 69: Capitalized Costs; Results of Operations; Costs Incurred; and Standardized Measures. I wonder if this is the start of the staff periodically posting global comments applicable to specific industries - a concept that has been kicked around in Corp Fin for over 5 years.

Understanding the Impact of Forensic Accounting on Fraud Investigations

From my days as the enforcement liaison from Corp Fin (on an interim basis when the guru in this area, Mary Kosterlitz, was out on maternity leave - Mary now leads a team of staffers in Corp Fin in this function), I have always known that forensic accounting is necessary to parse accounting fraud - and that these investigations are very complex.

However, I never really knew what went on at ground level...well, now I do through my interview with Howard Silverstone and Mike Sheetz on the Impact of Forensic Accounting on Fraud Investigations. This is Part I of a two-part interview.
posted by broc at 7:21 AM