The Practical Corporate & Securities Law Blog
By Broc Romanek
Go to TheCorporateCounsel.net
Friday, April 02, 2004
Intel's New Two-Year Incentive Plan
On Wednesday, Intel caused a stir when it filed its proxy statement which revealed that it included a novel company proposal to replace its expiring shareholder-approved plan and a nonshareholder-approved plan (which still has three years of life in it) with a single equity plan that has a two-year life. The company says that it will seek shareholder approval every year beginning in 2005 to extend the plan for an additional year.
As the analysis on the NASPP's website reveals, this is a significant development as most companies roll out plans with a ten-year life. In fact, the only company that the NASPP could find with a similar arrangement is Altera.
No-Action '34 Act Reporting Relief for Bankrupt Companies
As the Corp Fin staff has emphasized for some time - since 1997 with Staff Legal Bulletin 2 - it is hard to obtain no-action relief for modified, reduced '34 Act reporting for bankrupt or reorganized companies. I bet the staff rejects more requests in this area than it grants.
In fact, as this new no-action letter denying relief reflects, the Chief Counsel's office will not hesitate to do some sleuthing of its own to rebut a company's representations that it has few market makers or low trading volume.
Here is an excerpt from the SEC staff's response: "Specifically, despite the company's belief that there have been 5 market makers for the company's common stock, the OTC Bulletin Board reports 17 active market makers for the company's common stock as of March 22, 2004. In addition, although not included in the company's letters, the trading volume for the company's common stock during the months preceding the letters generally ranged in the hundreds of thousands to millions of shares per day."
By the way, who are these investors that heavily trade a bankrupt company's securities...
SOX on Sky Radio
So I'm on a cross-country flight yesterday, flipping through United's radio stations and come across a program on "Corporate Governance and Best Practices." It featured several vendors (that I never heard of before) who sliced and diced a bunch of Sarbanes-Oxley topics, including internal controls. That's proof to me that SOX has gone mainstream. [And Michigan won that "other" basketball tourney! Go Blue!]
Thursday, April 01, 2004
Our April E-Minders is Up!
The April issue of E-Minders is now available!
The FASB's New Exposure Draft on Options Expensing
As expected, the FASB issued its exposure draft on options expensing yesterday. Comments are due by June 30, 2004. Here is the link to the FASB document that has links to the actual Proposed Statement and Appendices - a total of 229 pages of a pdf document. However, it is in segments consisting of the Proposed Statement (25 pages) and 7 appendices, each of which can be separately downloaded.
Hear what Bob Herz, Chair of the FASB, thinks about the new exposure draft on the NASPP's webcast - "The FASB’s Expensing Exposure Draft—What it Says and How to Implement It" - on April 19th. In addition to Bob, Paul Munter, Partner, KPMG’s National Office and Ted Buyniski, Principal, Mellon Human Resources & Investor Solutions will discuss the nuances of the exposure draft and explore the various alternatives available to implement the proposed new standards. Try a no-risk trial to the NASPP and catch this exciting webcast!
Upcoming EDGAR Changes
Based on the newly released draft EDGAR manual, Form IDs soon will be required to be filed electronically - and notarized copies faxed to the SEC - before they can be processed by the SEC staff.
In addition, all existing filers will have to create a passphrase before they can continue filing. These passphrases will allow filers to reset passwords, PMAC, and CCC codes (in the past, a Form ID was required to be filed if any of these codes were forgotten or if a password expired). Another change is that the length of company and individual names can now be up to 150 characters.
These changes are scheduled to take effect on April 26th (the draft manual says the 24th, the most recent web notice says 26th). Learn more on Section16.net.
Sarbanes-Oxley to be Repealed!
I couldn't resist an April Fool's joke. Now, off to Seattle for the ABA Spring Meeting -and then on a quasi-vacation next week (ie - working at half-speed, but still intend to blog)...
Wednesday, March 31, 2004
SEC Proposes that SROs Post Rule Proposals & Current Rules
Yesterday, the SEC proposed changes to its rules that would require that SROs submit their rule filings to the SEC electronically. The proposal also would require the SROs to post the rule filings - as well as maintain a current version of their rules - on their own websites.
This should fill many practitioners with joy, as it's often difficult to obtain SRO rule filings prior to their publication by the SEC (even though such rule changes are considered publicly available once filed with the SEC). Further, it's sometimes difficult to quickly obtain a copy of the revised rules once a SRO rule is approved.
By the way, the SEC revised its website so that when you access "SRO Rulemaking," there are separate webpages for each SRO - thereby making it easier to monitor each SRO's rule proposals as they are published for comment and approved by the SEC. Thanks to Suzanne Rothwell of Skadden Arps, who always has her finger on the pulse of the SROs!
Nominating Committee Functions and Shareholder Recommendations regarding Director Nominees
In one of my more practical interviews - and certainly the longest - there is a lot of sound guidance from Ken Kopelman and Abbe Dienstag on Nominating Committee Functions and Shareholder Recommendations regarding Director Nominees.
This interview includes a number of link to sample documents, policies and disclosures that Kramer Levin has put together. And we have posted even more of their useful samples in the Nominating/Governance Committee Portal and the Shareholder Access Portal. This includes:
- Sample Nominating Committee Procedures for Identifying and Evaluating Candidates for Director
- Sample Procedures for Security Holders Submitting Nominating Recommendations (Website Disclosure)
- Sample Nominating Committee Policy Regarding Qualifications of Directors
- Sample Website Disclosure regarding Security Holder Communication with Directors
- Sample Website Disclosure Regarding Director Attendance at Annual Meetings
- Sample Proxy Disclosure Regarding Much of the Above
Director Attendance at Board Meetings
Today, the NY Times has a story about how more companies are requiring their directors to attend shareholder meetings - and holding their meetings in more convenient locations (see above for sample website disclosure on director attendance). The article erroneously attributes the director attendance trend to SOX - rather, the SEC adopted disclosure regs on director attendance on its own volition. So don't always believe what you read (including this blog - let me know if you ever see an error!).
Got a chuckle about the anecdote of the former Dana Corp. practice of holding its shareholders' meeting at its outside counsel's law firm in Richmond, VA (the company is based in Ohio) - and management not even attending. And you wonder why shareholders are mad...
Tuesday, March 30, 2004
SEC Looking at Enforcement Action on Timing of Option Grants
Today, the Wall Street Journal has an interesting cover story about how the SEC is considering enforcement action regarding the timing of option grants - whether grants are made just before market-moving information is released. This arguably also would have the effect of understating the level of executive compensation, since the market-moving information would quickly put the options "in-the-money." The article doesn't identify any companies nor indicate whether SEC action is imminent.
As the article points out, coincidences may arise because a board might grant options at the same meeting as approving the release of quarterly earnings. This obviously is a practice to avoid going forward.
As has been reported earlier in The Corporate Counsel (see the Jan/Feb '04 and Sept/Oct '03 issues), the SEC's Enforcement Division has been requesting documents related to executive compensation arrangements from a number of companies over the past year - and this likely is just one of various possible enforcement theories they are considering to tackle perceived executive compensation abuses.
Last of the SEC Speaks Notes
From PLI's "SEC Speaks," notes from the enforcement panel and from the accounting workshop.
The Compensation Consultants Speak Out!
If you didn't catch the NASPP's webcast on March 18th, the transcript is now posted regarding "What The Top Compensation Consultants Are NOW Telling Compensation Committees."
Reliving the webcast through the transcript bore out how useful the program was in this time of transitioning beyond what is legally required in the exec comp area.
Monday, March 29, 2004
NYSE Updates - and Adds to - Governance Forms
Last week, the NYSE updated its corporate governance forms that were first made available last month. In addition, there are two new forms: one for affirming the audit committee's composition at the time a IPO company lists on the NYSE and another to report any change of the audit committee's composition.
The NYSE also has tweaked the instructions to Section 303A Annual & Interim Affirmations - and point out (in questions 6 and 7) that companies must submit the pdf version of the Section 303A Written Affirmations without modification, but that they can type the exhibits to the Affirmation on company letterhead.
Overcoming the Challenges of Real-Time Disclosure
On May 19th, we will hold a webcast - "Overcoming the Challenges of Real-Time Disclosure" - during which David Martin of Covington & Burlin, Ron Mueller of Gibson Dunn, Bill Tolbert of Jenner & Block, and Stacey Geer of BellSouth Corporation will discuss how to identify and overcome the challenges inherent in the SEC's new disclosure framework.
In B.26 of our "Sarbanes-Oxley Law Firm Memos," we now have more than 25 law firm memos on the topic!
Revision to OECD Principles of Corporate Governance Delayed
As pointed out to me by Mike Holliday, on Saturday, the NY Times reported on page C3 that a dispute has arisen that has delayed the announcement of a final version of the revised OECD Principles of Corporate Governance. The dispute is about France wanting to insert "encouraged" in place of "permitted" in the provision about employee participation in corporate governance, such as employee representation on boards.
This dispute illustrates how difficult it is to obtain agreement among numerous nations on any set of principles - it has been amazing that there has been so much global cooperation recently, particularly in the accounting arena.