The Practical Corporate & Securities Law Blog

By Broc Romanek

Go to TheCorporateCounsel.net

 
How to Handle Accidental Filing of Old NYSE Affirmation

I blogged on June 1st about NYSE's new forms of 303A affirmations. In case you file the unrevised form by accident, I have heard that the NYSE staff's position is that you do not need to re-file the 303A affirmations using the newest version of the form (as the revisions made no significant changes to the affirmation forms). Of course, this applies assuming you filed the 2nd generation version of 303A affirmations, as opposed to the old 1st generation affirmations that were not applicable at all for this year.

Withhold Votes Continue

Although a few weeks old, I would be remiss if I didn't note how Federated Department Stores registered the highest withhold vote levels for this proxy season. More than 61% of the votes cast were withheld from 4 directors at Federated's May 21 annual meeting. A noteworthy aspect of this record level is that there was no organized "vote-no" campaign.

The following excerpt from Stephen Deane of ISS analylzes why this happened: "So why the record number of withhold votes at Federated? True, the company has repeatedly ignored majority votes on shareholder resolutions calling for annual elections. But that hardly makes Federated unique.

Instead, the share ownership structure--which overwhelmingly comprises institutional investors--may well hold the key to understanding the vote results. According to one source who asked not to be identified, institutional investors own nearly 95 percent of Federated's shares, and the company's top 10 institutional investors alone hold 43 percent of the shares. And those institutional investors are precisely the ones most likely to withhold votes from directors who ignore majority votes."
posted by broc at 7:28 AM

 
Battle Over Option Expensing Continues on Hill

Yesterday, the House Financial Services Committee approved - by 45-13 - a bill that would restrict any FASB option expensing standard to options granted to a company's top five officers. The bill would also delay implementing any standard for a year, until completion of a study. The legislation is HR 3574, that was passed by the subcommittee in mid-May. This comes on the heels of the Financial Accounting Foundation issuing a statement opposing all legislative proposals desinged to curb FASB independence.

Although there still is a lot of lobbying activity on the Hill and this bill might get traction in the House, it doesn't appear that the Senate would go along with it. At this point, expensing is still a sound bet for next year.

SEC Addresses Proxy Advice Conflicts

In late May, the SEC's Division of Investment Management issued a no-action response that said mutual funds should be aware of potential conflicts of interest on the part of proxy-voting companies that provide advice on how to vote at annual meetings. The no-action response requires mutual funds to know who the advisers' clients are and how much they are being paid.

On its face, it appears that this position by IM could impact ISS - but ISS has posted a statement explaining how the SEC's guidance buttresses its position that the fact that a proxy advice firm provides services and receives compensation from issuers doesn't - by itself - impact the firm's independence.

Another Virtual Shareholders Meeting

It's been quite a few years since the last company held its annual shareholders meeting solely online - but ICU Medical did just that a few weeks ago, as described in its proxy statement.

Even though Delaware law has permitted electronic only meetings since 2000 - and Inforte was the first (and only, until ICU) company to do so right after Delaware changed its law - Delaware companies have been loath to go that route due to fear of shareholder wrath. Last year, Seibel Systems backed off plans to conduct an e-only meeting after shareholders saw the proxy materials filed by Seibel and complained.

Learn more about electronic only meetings from some FAQs that I wrote a while back on my old site.
posted by broc at 6:28 AM

 
Rule 10b5-1 Webcast Transcript is Up!

We have posted the transcript from our popular webcast, "The Latest on Evolving 10b5-1 Plan Practices."

Nasdaq's Two New FAQs

The Nasdaq has issued two new FAQs regarding continuing waivers of codes of conduct as follows:

1. Is disclosure required of a waiver to the Code of Conduct granted to an officer or director before the May 4, 2004 effective date for Marketplace Rule 4350(n)?

If the pre-existing waiver relates to a matter concluded before May 4, 2004, then disclosure is not required. If the waiver relates to a matter not concluded by such date or to an ongoing matter without a specific end-date, then disclosure is required, notwithstanding the fact that the waiver was granted prior to the effective date of the Rule. In view of the potential for company confusion as to the applicability of the disclosure requirement to pre-existing waivers, companies will be afforded up to June 15, 2004 to disclose waivers to officers and directors that preceded May 4, 2004.

2. What disclosure is required for a waiver to the Code of Conduct for an officer or director that extends beyond one year?

For ongoing matters or matters extending beyond one year, disclosure is required at least annually.

More on Shareholders' Agreements

Here is this month's installment of Carl's Corner features more commentary by Carl Schneider on Shareholders' Agreements.
posted by broc at 8:36 AM

 
Appeal of Staff Exclusion of Related-Party Transaction Proposal

As noted in this press release, the Service Employees International Union is appealing Corp Fin's exclusion of a shareholder proposal to the full Commission. The precatory proposal urged Crescent Real Estate Equities’s board to implement a comprehensive policy governing related party transactions between Crescent and any officer or director, which would require annual disclosure in a separate report to shareholders. Corp Fin had excluded the proposal as ordinary business under Rule 14a-8(i)(7).

Impact of Friday Holiday on Tender Offers?

A reader asked if the Presidential declaration of an unscheduled federal holiday is not a business day for purposes of the 20 business day period that tender offers must remain open, like Friday's memorial day for President Reagan. [In addition to the memorial day for President Reagan, the day before or after Christmas is sometimes declared to be a federal holiday by a Presidential executive order.]

It is my understanding that the SEC staff takes the position that if the offer is ongoing, you can still count the unscheduled Friday holiday in the 20 days. But you shouldn't have ended the offer or started it on Friday.
posted by broc at 7:19 AM