September 23, 2003

Deconstructing Microsoft’s Proxy Statement Late

Late last week, Microsoft filed its definitive proxy statement. It contains a brief description of its pre-approval policy for audit/non-audit services on page 12 and an updated calendar of audit committee activities at the back.

More importantly, as Mike O’Sullivan notes, while Microsoft does seek approval for certain changes to its 2001 Stock Plan – principally to eliminate a sublimit on the amount of restricted stock it can grant – Microsoft does not seek approval for the changes it expects to make to its underwater employee options once they are sold to JP Morgan.

If Microsoft still plans to complete its Stock Option Transfer Program in 2003, it can be assumed that Microsoft would seek whatever stockholder approvals it needs in this proxy statement. Therefore, it’s fair to assume that Microsoft will not be seeking stockholder approval, even under the new Nasdaq rule, for its planned amendments to the options acquired by JP Morgan.

Change in Accountants to Be Scrutinized by PCAOB

At the PLI Director’s Institute yesterday, PCAOB Board Member Charles Niemeier stated that the PCAOB will closely scrutinze any instances of a company firing auditors. This is not necessarily anything new as the SEC’s Enforcement staff routinely reviews any Form 8-Ks filed under Item 4. But its noteworthy because the PCAOB staff might have more motivation, time and resources to delve further than the SEC staff.

For subscribers, we have provided analysis/disclosure samples for companies to consider when they change auditors.

SEC and PCAOB Ethics – What’s Up With That…

Have you noticed that the SEC hasn’t approved any PCAOB rules since August 1, or even noticed any. For example, the PCAOB Code of Ethics was adopted as a final rule by the PCAOB on June 30 – but it hasn’t even been noticed yet (and neither organization lets you know if the PCAOB has filed them with the SEC either). Let alone approved or rejected. What’s up with that? It is interesting that the SEC would let the PCAOB meander along without an ethics code given what’s going on at the NYSE and all the attention that situation is getting.