Early Problems for XBRL? A Mismatch with FASB's GAAP Codification

With mandatory XBRL now upon us for larger companies, it's troublesome that - as noted in this recent CFO.com article - the FASB's new codification of accounting standards that was launched on July 1st (and becomes effective on September 15th) has created a mismatch since all of the mandated XBRL standards apply to the FASB's now-superseded standards. Thanks to Neal Hannon of The Gilbane Group, who started the sleuthing on this issue (eg. see his blog about whether the SEC can handle XBRL filings).

A new XBRL taxonomy is scheduled to be released in early '10 to solve this problem - but there needs to be a solution to cover the period between the codification's 9/15 effective date and when the new taxonomy is available next year. To tackle this, I hear that the FASB is working with XBRL US to produce an extension taxonomy that is supposed to bridge the GAAP between the old references and the codification - but we don't yet know when that will be released.

But clearly it needs to be well before the Codification's 9/15 effective date because all the XBRL providers need as much time as they can get to incorporate the changes into their software. In other words, we needed that yesterday since the Codification's effective date is only two months away. I'll continue to follow this story - but this looks like a real mess.

More on "FASB Charging for 'Souped-Up Version' of Accounting Standards"

Recently, I criticized the FASB for charging for a premium version of their new GAAP codification. I received a number of emails from members agreeing with me, including this one:

The FASB is going to catch a lot of heat for charging for a user friendly version. That is such bad business. Why pay FASB $850 when you can get even more from other service providers for an additional nominal amount? And any CPA who already has one of those services will continue with those other services. I don't have a service now because I don't feel it's necessary at this point in my level of understanding of GAAP.

And I refuse to pay the FASB to do something they decided to do and to access what they insist we must use going forward. I would be happy to continue to use my hard copy standards but they've been touting that doing so will be unacceptable and referencing anything but the Codification incorrect. I think that messaging is just propoganda to get people to fork over the $850 annually. The FASB needs to think about what their mission is and hiding information from users is not going to help satisfy their mission - even if it is just bells and whistles. That was the big hook for the Codification - it will make your searching easier. Bunk if I have to pay for that.

By the way, one member noted that I was correct and that the FASB used to charge for access to their full standards. Then, Sarbanes-Oxley changed that by giving them (sort of) independent funding, and the FASB no longer charged for their standards. Selling their standards was a means of sustenance in the old days, apart from hat-in-hand to constituents. Based on the angry reactions I've heard, I think FASB needs to publicly explain why it's charging for the new Codification's bells & whistles - people are pretty miffed but they also are afraid to speak out...

The SEC's "IDEA" Becomes "Next-Generation EDGAR"

Without much fanfare - which is understandable because it was forced to by a lawsuit - it seems as though the SEC has renamed "IDEA" as "Next Generation Edgar," as evidenced by this search page. Personally, I would stick with old-fashioned "Edgar" as any technology tool is constantly evolving and labeling it as "next generation" just takes away from Edgar's important branding and doesn't really add anything.

Note that the URL for the SEC's search page still has "Idea" lodged within it...

- Broc Romanek

Obama/Treasury Propose New Regulatory Reform Legislation: A Few Oddities

On Friday, the White House and the Treasury Department released proposed legislation - the "Investor Protection Act of 2009" - to effectuate some of the regulatory reforms that had been mentioned in their White Paper last month. Here is the proposed legislation and the related fact sheet. We'll be posting memos analyzing this proposed legislation in our "Regulatory Reform" Practice Area.

These proposals seem to focus on the "consumer protection" part of the reforms noted in the White Paper - although the various provisions are essentially a hodge-podge of proposals, including the SEC obtaining the power to review and ban compensation arrangements at brokers, dealers and investment advisers.

Here is my take on what I consider a few oddities in the legislation:

- Consumer Testing of Disclosures and Rules: One part of the proposal would bolster the "SEC's authority to conduct consumer testing." Consumers? I think they mean investors? The SEC's stated mission is investor protection and I don't recall the term "consumer" being mentioned in any of the existing statutes that give the SEC some sort of authority nor any of the agency's rules and regulations.

- Expand Protections for Whistleblowers: Under the proposed legislation, the SEC would gain authority to establish a fund to pay whistleblowers. Although perhaps inviting in concept, this could be tricky to implement. If the SEC Staff dislikes being a referee in the shareholder proposal process, how will they enjoy a process that involves them potentially taking sides more clearly against companies and actually having to dispense money? If adopted, I would consider becoming a bounty hunter because I've always wanted to wear big hats...

- Establish a Permanent Investor Advisory Committee: How many federal agencies have permanent advisory committees? This could set a bad precedent - and even though investors may have been under-represented by those that regularly approach the SEC in the past, the SEC has heard plenty from investors over the past few years. The creation of a permanent committee may swing the pendulum the other way so that the investor perspective dominates the SEC's view of the world.

In the long run, the much more likely result is that regularly meeting with an advisory committee would simply be a waste of time. I like the idea of roundtables on specific issues where all sides are represented - as well as the normal comment process on rule proposals - for the SEC to obtain all the outside input it needs. I'm not a big believer in conducting more meetings as a way to find solutions to problems.

Posted: SEC's Executive Compensation/Corporate Governance Proposing Release

On Friday, the SEC posted a 137-page proposing release regarding changes in its executive compensation rules and other corporate governance enhancements. In his "Proxy Disclosure Blog," Mark Borges already has blogged some analysis of the compensation proposals.

While we were tickled to see our March-April issue of The Corporate Counsel cited in footnote 44 of the release, we were even more excited that the SEC is soliciting comments on a number of important areas of the executive compensation rules, such as whether boards consider internal pay equity when they set the amounts of executive compensation. Here is a discussion of this fix - and others - that we urge you to consider when drafting your comment letters for the SEC on the executive compensation proposals.

Our "4th Annual Proxy Disclosure Conference": Now that the SEC's proposals are out - and broker nonvotes are gone - you need to register now to attend our popular conferences and get prepared for a wild proxy season: "4th Annual Proxy Disclosure Conference" & "6th Annual Executive Compensation Conference." You automatically get to attend both Conferences for the price of one; they will be held November 9-10th in San Francisco and via Live Nationwide Video Webcast. Here is the agenda for the Proxy Disclosure Conference. Register now.

Alternative Fee Arrangements for Deals: Little Less Talk and Lot More Action?

Tune in tomorrow for this DealLawyers.com webcast - "Alternative Fee Arrangements for Deals: Little Less Talk and Lot More Action?" - to hear Wilson Chu of K&L Gates; Scott Depta of Dell and Lance Jones of Trilogy talk about how the ways that deal fees are being restructured, a trend hastened by a down economy.

- Broc Romanek

A Recap of Thoughts on Apple and Illness Disclosures

With the latest news from this Bloomberg article that the lack of disclosure over Apple's CEO Steve Jobs illness is being investigated by the SEC, it seems appropriate to recap some of my prior thoughts about duties a company may - or may not - have when it comes to disclosing illnesses of its senior management team.

Since my legal analysis hasn't changed - even though the disclosure challenges that Apple faces has - my "recap" consists simply of linking to my two prior posts on this topic:

- More on Steve Jobs and Disclosure of Health Issues

- A Delicate Disclosure Issue: Steve Jobs' Health

Here are some thoughts from other folks worth noting:

- Steve Jobs and Apple: Here We Go Again

- Experts: Apple Disclosure 'Falls Short'

- Warren Buffet Piles On Steve Jobs About Secret Transplant

- Apple Broke the Law By Lying About Steve Jobs Health

- Was Apple 'Adequate but Late' on Jobs?

- The Steve Jobs Health Factor & the Law: Gauging Materiality

- Apple Succession Plan: Nobody's Business?

- Governance Expert: Apple's Jobs' Disclosure "Dismissive," Insufficient

Poll Results: What You Said Apple Should Have Done

Last August, I posted a poll in this blog about what Apple should have disclosed. Here are the results from that poll (note more than one answer was permitted per respondent):

- 31.1% - Should have disclosed Jobs' condition because company had duty to update due to "common bug" comment

- 6.7% - Should have disclosed Jobs' condition because he had history of health concerns

- 37.8% - Should have disclosed Jobs' condition because he's so important to the company

- 23.7% - Need not have disclosured Jobs' condition because company doesn't need to respond to rumors

- 14.1% - Need not have disclosed Jobs' condition because he has right to privacy

SEC Weighs In: California IOUs as "Securities"

Yesterday morning, I blogged about "Trading California IOUs on the Web" and gave some thoughts about whether the California IOUs were eligible for an exclusion from the definition of "security" under the '34 Act, as well as how California securities law might apply to the IOUs.

Last night, the SEC weighed in by releasing a statement that provides the Staff's position that the IOUs are "securities" (but that they are not registered with the SEC since they are municipal securities) and that intermediaries may need to register as brokers or alternative trading systems, etc. The SEC also issued this related "investor alert." As noted in this LA Times article, the SEC is worried about investors being defrauded when being talked into reselling these things...

- Broc Romanek

Trading California IOUs on the Web

This recent story about trading of California's registered warrants on eBay caught my eye. My understanding is that the warrants are IOUs issued by the state and have a maturity date of October 2, 2009.

Thinking out loud, the warrants may fall within the '34 Act exclusion from the definition of a "security" in Section 3(a)(10) for a "note, draft, bill of exchange or banker's acceptance, which has a maturity date at the time of issuance not exceeding nine months." This assumes that a California registered warrant fits within Section 3(a)(10)'s terms (e.g. maturity date of 9 months or less, etc.).

Interestingly, I understand that California's definition of the term "security" doesn't have the same 9-month exclusion. Therefore, someone who is engaged in the business of effecting transactions in these warrants might be subject to licensing as a broker-dealer. Further, offers and sales could be subject to California's antifraud statutes. For example, a state official with material, non-public information about the state who negotiates a warrant could be subject to California's insider trading statute.

9 Trade Groups Join to Influence Accounting Standards

As reported by Webcpa.com in this article, 9 trade groups representing the financial, insurance, banking, real estate and other industries have united to create a coalition with the goal of influencing accounting standard-setters who are working on revising the rules for financial instruments.

The new coalition - known as the "Financial Instruments Reporting and Convergence Alliance" or "FIRCA" - includes the American Council of Life Insurers, the Commercial Mortgage Securities Association, the Council of Federal Home Loan Banks, the Financial Services Roundtable, the Group of North American Insurance Enterprises, the Mortgage Bankers Association, the Property Casualty Insurance Association of America, the Real Estate Roundtable and the U.S. Chamber of Commerce."

According to FEI's "Financial Reporting Blog," FASB Chair Bob Herz recently gave a speech noting threats to accounting principles include "politicization" by "special interests."

Compliance Programs under Obama Administration

In this podcast, Jeff Kaplan of Kaplan & Walker discusses corporate compliance in the current environment, including:

- What’s new in the compliance field since last year
- What he expects from the Obama administration in the area of corporate compliance
- The responsibilities of general counsels in this environment
- Some practical guidance for making sure that senior officers understand and are accountable for their compliance responsibilities

- Broc Romanek

Nasdaq Speaks '09: Latest Developments and Interpretations

Tune in tomorrow for the webcast – “Nasdaq Speaks '09: Latest Developments and Interpretations” – to hear the following experts cover all the latest on the Nasdaq (please print off these "Course Materials" in advance):

- Mike Emen, Senior Vice President, Nasdaq’s Listing Qualifications Department
- Arnold Golub, Vice President, Nasdaq’s Office of General Counsel
- David Compton, Director, Nasdaq’s Listing Qualifications Department
- Randy Genau, Director, Nasdaq’s Listing Qualifications Department
- Suzanne Rothwell, Counsel, Skadden, Arps, Slate, Meagher & Flom LLP

Here are other upcoming webcasts:

- “Venture Capital: Facing a Changing World” (9/15)
- “How to Prepare for a Proxy Access World” (9/17)

Act Now: Try a 'Rest of 09 for Half-Price’ no-risk trial now to catch these critical webcasts and more.

More Edgar Problems: The Need for Transparency

A few months ago, I blogged about how periodic Edgar outages and how the SEC does a poor job of communicating about them. Unfortunately, I can report that "it's business as usual" and that outages continue and that the SEC not only doesn't make the filing community aware of them, it might be said that they are "buried."

Last Thursday, I understand that Edgar was out for more than an hour in the late afternoon and some fee-bearing filings were tied up starting well before the 5:30 pm eastern same-day filing deadline. In many cases, the SEC's system did not return an Accession Number (ie. an acknowledging receipt) and the SEC's Filer Support staff was unable to confirm whether filings had been received. During this time, the SEC's "Latest Filings Received and Processed" page showed that no filings had been received/disseminated starting at 5:45 pm.

What if a company discloses material information on a filing and it doesn't show up on the SEC's site? But even beyond that type of concern, I believe that the SEC has a duty to inform the filing community if it has an outage. There has to be some way that they can do that so that everyone doesn't stay in the dark...

Here is a query for you: Do you know what the implication would be if an issuer filed pursuant to Rule 462(b) where the issuer can begin selling securities immediately upon acceptance of the filing (even if the filing is made after 5:30 pm)? Such an example is Submission Type S-3 MEF. Similarly, when automatic shelf-registration statements of securities of well-known seasoned issuers are submitted under Rule 462(e), they often plan to start selling securities immediately (though they are limited to pre-17:30 filings in order to go effective the same day).

If the SEC system doesn't actually accept their filings - as a result of EDGAR system issues - must they wait to begin selling securities....and perhaps miss a window of opportunity? Let me know what you think.

Survey Results: To Whom Does Your General Counsel Report?

Below are some interesting results from a recent poll on this blog - the respondents indicated that their general counsel reports to:

- CEO only - 72%
- CEO and other operational officers - 6%
- CEO and board member - 10%
- Other operational officer(s) but not CEO - 10%
- Board member(s) but not CEO - 2%

- Broc Romanek

Broadridge's E-Proxy Stats for '09 Proxy Season

Last year, Broadridge was feeding us new statistics about e-proxy during each month of the proxy season. This year, we have their beneficial owner statistics as of the end of the proxy season, which we have posted in our "E-Proxy" Practice Area.

As of May 29th:

- 1312 companies (technically, it's not companies - it's "distributions" which is a greater number than the number of companies) used voluntary e-proxy between July '08 and May '09 (compared to 653 for the same period in the year prior). And 12% of all distributions used N&A during this '08-'09 period.

- Size range of companies using e-proxy continued to vary considerably for all shapes and sizes (eg. 28.9% of distributions on jobs between 10,000 and 50,000 shareholders used N&A).

- 5.9% of beneficial positions held in companies using N&A received full package by bifurcation, in addition to the 9.2% that received full packages by prior consent. Note that the 5.9% represents positions, not companies.

- 0.8% of shareholders requested paper after receiving a notice; this average is down 25% from last year's 1.05%.

- 54% of companies using e-proxy had routine matters on their meeting agenda; another 34% had non-routine matters proposed by management; and 12% had non-routine matters proposed by shareholders. None were contested elections.

- Retail vote continued to slip, although just slightly compared to the same period last year (recall that retail voting was down dramatically last year compared to pre-eproxy days) - the number of retail accounts voting dropped from 26.6% to 24.4% (a 8% drop from the prior year's period).

Note that the slight drop in retail voting refers to those shareholders who got a Notice only and not a full package through stratification, consent, or fulfillment. The number of retail holders getting full packages increased - and this group votes at a higher rate, which somewhat offset the drop in the retail Notice-only group.

More '09 Proxy Season Statistics

In addition, Broadridge has posted its statistics for the proxy season more generally. Among the more interesting stats:

- Overall Number of Shares Voted: 85.7% (I wish we could get that rate for our political elections)

- Average Percentage of Broker Nonvotes: 19.1% (backing these out probably lowers the overall voting percentages to what happens in political elections)

- Methods by Which Shares Voted: 9.2% of shares voted by paper; 0.9% by phone; 10.6% online; and 79.3% by ProxyEdge (ie. institutional investors using Broadridge's proprietary service)

More on "The Mentor Blog"

We continue to post new items daily on our new blog - "The Mentor Blog" - for TheCorporateCounsel.net members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

- How to Be a Director: Yahoo's CEO Speaks Frankly
- Conference Notes: Hot Topics in Corporate Governance -
- The Basics: Insider Trading Penalties
- Advancing Legal Fees: Bank of America Ponies Up
- How to Obtain CLE While in Transition
- Corporate Governance Ratings: Any Future?
- Presenting New Ideas at a Board Meeting
- Sifting Through Job Databases for Lawyers
- What Should I Do With My Life?
- Outside Counsel Take Note: In-House Lawyers Want Predictability

- Broc Romanek

ABA Issues Exposure Draft of Shareholder Access Model Bylaw

Recently, the ABA’s Task Force on Shareholder Proposals released an Exposure Draft that proposes a model bylaw - along with commentary - that is designed to assist companies that wish to adopt a bylaw that provides shareholders with proxy access for director nominations. The Exposure Draft doesn't take the SEC's proxy access proposal into account and the Task Force seeks comment.

In this podcast, the Task Force’s co-chairs - Todd Lang of Weil Gotshal and Chuck Nathan of Latham & Watkins - discuss the Exposure Draft, including:

- Why did the Task Force embark on this project?
- What are the main principles of the illustrative bylaw?
- Are there any issues in particular that you seek comment on?

“It’s Groundhog Day!” Deciding Whether to Disclose Merger Negotiations

Below are some thoughts from John Jenkins of Calfee Halter & Griswold that I recently posted on the "DealLawyers.com Blog":

Sometimes you can’t blame deal lawyers for feeling like Bill Murray’s character in Groundhog Day - there are just some things that seem to happen over and over again in almost the same way on practically every deal. When it comes to public company deals, having to decide whether or not to disclose pending negotiations is defin itely one of those recurring events.

Assuming you’re not dealing with an auction or some other process where the seller has decided to hang a “for sale” sign on itself, nobody involved in the transaction wants the world to know that talks are going on until the parties are ready to announce a signed deal. Among other issues, premature disclosure may create problems for the buyer and the seller with key constituencies - like their employees, customers and in some cases, shareholders - that they would like to postpone until a later date when they have had time to map out a communications strategy.

The SEC cuts public companies some slack when it comes to disclosure of merger negotiations. In general, the Staff’s position is that even though MD&A’s “known trends” disclosure requirement might be read to require companies to address pending talks, if the company doesn’t otherwise have an obligation to disclose preliminary talks, then disclosure won’t be required in response to this line item in an Exchange Act report. (See, e.g., Securities Act Rel. No. 6835 (May 18, 1989)).

The SEC’s position is helpful, but this issue isn’t confined to Exchange Act reporting. Public companies have a duty to disclose material information under other circumstances as well, including situations involving leaks for which the corporation or insiders are responsible - and it’s these situations in which the disclosure issue usually arises.

Legally, there are two major issues to keep in mind in deciding whether you need to say something. The first is whether you’ve got a duty to disclose that you’re engaged in discussions. While there’s no general obligation to dispel rumors in the marketplace that you aren’t responsible for, the problem is that you’ll seldom be able to determine whether you’ve got responsibility for the leak or not - and there’s a pretty good chance that you might.

The second legal issue is whether information about the potential deal is “material.” That question, as everybody knows, is a function of its probability and its magnitude under the test announced by the Supreme Court in Basic v. Levinson. There are a lot of ways to look at Basic’s requirements, but it goes without saying that the further down the path you are, the more likely it is that information about your deal is going to be considered material.

While lawyers naturally tend to focus on the legal issues, business concerns frequently drive a decision to go public with negotiations. Companies may feel that their hands are forced by the media’s decision to run with a story on the rumored deal, or by inquiries from the Nasdaq or the NYSE about the reasons behind unusual market activity. Once information leaks, the need to manage the potential damage to key relationships may also make a compelling business case for disclosure. What’s more, there’s sometimes concern that speculation may cause the market to get carried away. That can lead to the unpleasant situation where the market price rises above the price levels that the parties are negotiating.

Once a decision to disclose pending talks is made, the next issue becomes, how much do you say? Often, people want to say as little as possible. The parties may decide not to identify the buyer, and sometimes, will avoid making any disclosure about the price as well. Sometimes, discussions about what you’re going to say can get pretty contentious, as the two sides may have conflicting views when it comes to the extent of disclosure that’s appropriate.

If you’ve got a relatively efficient market for your stock, and you don’t feel a need to reach out to other constituencies, a minimalist approach may work. Just bear in mind that the less you say, the less freely you can communicate with your key constituencies and the more you remain at risk for the consequences of market speculation. If you don’t say enough, you may find yourself needing to make a second announcement, which only further complicates everyone’s life.

When leaks happen, companies often find themselves in a completely reactive position, with very little time to think through all of the implications of their decisions about disclosure. That’s why I think the best advice is to address the possibility of leaks early on in the process, and chart out a course for managing the disclosure process if they do occur.

Advance planning won’t stop leaks from happening, but it will put everyone in a better position to respond to them if they do. Getting a jump on this issue may make it less painful when you hear the familiar sound of Sonny & Cher’s “I Got You Babe” coming through your clock radio, followed by a couple of morning DJ’s cheerily reminding you that “It’s Groundhog Day!”

Again.

Broc's note: A great version of "I Got You Babe" is the one by UB40 and the Pretender's Chrissie Hynde.

Bernie Peepoff: The Game is Up

On Friday, my family went to a local art show which included a Washington Post diorama contest for using peeps (ie. the marshmellow Easter candy) in artwork. Here are photos of some of the best from the 1100 entries. Although not nearly among the best, I was laughing because this entry featured a parody of the Bernie Madoff scandal:

And here is me with a major Peep:

- Broc Romanek

The Big Kahuna: SEC Approves NYSE's Elimination of Broker Discretionary Voting

Yesterday, the SEC voted 3-2 to approve the NYSE's proposal to amend Rule 452 (and Listed Company Manual Section 402.08) to eliminate broker discretionary voting for director elections. The amendment to Rule 452 will be applicable to meetings held after January 1, 2010 (but won't apply to a meeting that was originally scheduled to be held in 2009 if adjourned to a date after January 1st).

As I've mentioned before, in my opinion, this change is the biggest of the reforms that companies face - bigger than proxy access, say-on-pay, etc. Here is the SEC's press release addressing all of its actions yesterday - and here is Chair Schapiro's opening remarks (and Commissioners Walter's statement and Aguilar's statement).

Commissioners Casey and Paredes opposed the proposal, both stating that the broker nonvote issue should be considered in the broader context of rejiggering the proxy process (read "proxy access") as well as examining more completely the impact of this change on companies. In his opening remarks, Commissioner Paredes noted they weren't alone - 93 comment letters (out of a total of 136) also urged a comprehensive review of the proxy system. They also expressed concerns that the change would disenfranchise retail holders at the expense of more control by institutional investors.

Since all the other Commissioners agreed with the importance of studying the proxy system's “plumbing,” near the end of the meeting, Chair Schapiro stated that the SEC would conduct this type of review later this year. I see roundtables in our future. If interested in reviewing "live tweets" that occurred during the meeting, see @footnoted and @simonbillenness.

Oh, boy! Check out today's front-page article from the Washington Post about how the SEC was warned in '04 by a SEC Staffer about Madoff - but yet the SEC didn't follow up. And that Staffer's boss ended up marrying Madoff's niece. The article is quite in-depth and is likely to result in more headaches for the SEC. I'll cover this more extensively next week.

The Surprise: SEC Proposes Expedited Disclosure of Voting Results

Although most of the SEC's big open Commission meeting went as telegraphed by earlier statements by the SEC Chair, there was one big surprise. The SEC proposed a new Form 8-K requirement for companies to disclose the results of a shareholder vote within four business days after the end of the meeting at which the vote was held (in contested elections, the final results would be permitted to be delayed under certain circumstances).

As I've complained before, the current disclosure standard doesn't elicit voting results for weeks - or sometimes months - after the vote, which doesn't really work in today's more competitive annual meeting environment.

Not a Surprise: SEC Proposes Say-on-Pay for TARP Recipients

Not surprisingly, the SEC also proposed rules - by a 5-0 vote - that would help implement Section 111(e) of EESA to permit an annual advisory non-binding shareholder vote on executive compensation. The SEC's proposal clarifies how these requirements apply to TARP recipients in the form of new Rule 14A-20. The SEC has already posted the proposing release for this one; could be record time for that. Here is Corp Fin's opening statement.

During the open Meeting, it was pointed out that - outside of the EESA mandate - the SEC Staff has allowed the inclusion of say-on-pay proposals. Commissioner Casey note that she only supported this proposal because it was required under EESA.

SEC Proposes Changes to Executive Compensation Disclosure Rules

No surprises here either. As expected, the SEC proposed amending Item 402 of Regulation S-K as follows (here is Corp Fin's opening statement):

- Broader CD&AS to cover risk - provide information about how a company's overall compensation policies create incentives that can affect the company’s risk – and the management of that risk, including policies for employees generally, including non-executive officers. Such disclosure would only be required if the risks arising from those compensation policies may have a material effect on the company. The SEC did not propose any requirement that would not require the disclosure of specific salaries of any individuals beyond those already required.

- Improved reporting of stock and option awards - revise way in which stock and option awards are reported in the Summary Compensation Table and Director Compensation Table so that it's based on the award's fair value on the grant date. This would reverse the December '06 "surprise."

- More disclosure about compensation consultants - in an effort to allow shareholders to evaluate potential conflicts, require disclosure about compensation consultant fees and services (and their affiliates) when they play any role in determining the amount or form of compensation for executives and directors, but only if those consultants (or their affiliates) also provide other services to the company.

In his "Proxy Disclosure Blog," Mark Borges provided in-depth analysis of the proposals yesterday.

SEC Proposes More Corporate Governance Disclosures

Finally, the SEC proposed a few governance disclosure enhancements, including revising Item 401 of Regulation S-K to require more disclosure about each director’s particular experience, attributes and skills that are appropriate for the person to serve as a director and as a member of any committee to which the person is appointed; extend the disclosure of the director's board memberships to the past 5 years; and expand disclosure of legal proceedings to the prior 10 years.

In addition, the SEC proposed requiring disclosure of why the board selected a particular management/leadership structure, particularly why the board chose to combine or separate the board chair and CEO positions. Although not proposed, the SEC's proposing release will solicit comments about whether the SEC should require disclosure about director diversity, including whether diversity is a factor considered when nominating director candidates.

- Broc Romanek

Here We Go Again: FASB Charging for "Souped-Up Version" of Accounting Standards

On Tuesday, the FASB released FAS No. 168, its codification of GAAP that has been long in the making and is officially launched as of today.

As Edith Orenstein notes in FEI's "Financial Reporting Blog": "FAS 168 represents the last numbered standard to be issued by FASB under the old (pre-Codification) numbering system, and amends the GAAP hierarchy to set the stage for a watershed moment - the July 1 launch of FASB’s Codification (full name: the FASB Accounting Standards Codification TM.) The Codification will supercede existing GAAP for nongovernmental entities; governmental entities will continue to follow standards issued by FASB's sister organization, the Governmental Accounting Standards Board (GASB)."

For a long time, I was miffed that the accounting standards that make up GAAP were not available for free. For us lawyers, this was akin to the SEC charging for access to its rules and regulations. About six years back, the FASB got smart and started posting its standards for free. Before then, just summaries were complimentary. (Note that a paper subscription always has - and still does - cost a fee.)

Now the FASB has done it again, charging an annual $850 subscription fee for the online "professional" edition of its codification of GAAP (a beta version was available for free during the recent verfication period). In comparison, the "Basic" version of the Codification is available at no charge (here is FASB's "Codification Resources" page). From reading the descriptions of the two, I believe lawyers can live with the Basic version since the Professional one has bells & whistles not related directly to the content of the Codification (egs. better search tool and printing ability).

It gets me nervous when a regulator sells access to its regulations, even if its just adding bells & whistles. It's a perception of transparency thing and a practice that should be prohibited. I understand that FASB is a non-profit organization and not a federal agency - but it still is a regulator by virtue of the SEC designating it as the organization responsible for setting accounting standards for public companies in the US. Let me know your thoughts (I won't post them without your consent).

NYSE Permanently Lowers Market Cap Requirement

Yesterday, the NYSE filed two rule changes with the SEC - both effective immediately - regarding its continued listing standards so that:

- In this rule filing, permanently lowered the $25 million average market capitalization requirement to $15 million (a temporary bar at the $15 million level was set to expire yesterday).

- In this rule filing, extended the temporary suspension of the $1.00 average closing price requirement until July 31st (prior suspension expired yesterday).

Our July Eminders is Posted!

We have posted the July issue of our complimentary monthly email newsletter. Sign up today to receive it by simply inputting your email address!

- Broc Romanek