October 21, 2003

The Wildest Proxy Season Ever:

Trust me that the 2004 proxy season will be wild. On top of the changes wrought by the NYSE/Nasdaq new rules regarding shareholder approval of equity comp plans (including the loss of broker non-votes), investors appear ready to cooperate more than ever. And the SEC staff likely will allow shareholder nomination proposals – so long as they reference the SEC’s proposed 14a-11 rule – so that “triggerable” circumstances will exist by the time the SEC adopts some form of shareholder access for 2005.

Last season, similar proposals were deemed excludable by the staff, such as the Citigroup no-action letter (that essentially was part of the motivation for the SEC to embark on this initiative) that the SEC staff has informally indicated is still excludable.

Tommorrow, on a webcast, join Pat McGurn of ISS as he dissects what trends are shaping up for next proxy season. In addition, Professor Charles Elson will spend some time discussing the Breeden report. I will be posting a PowerPoint from Pat sometime in the early afternoon and will link to it here and on the home page. Sign up for a “no-risk” trial to access this timely webcast.

PCAOB Registration of European Auditors

According to, U.S. and European Union regulators are nearing agreement over the controversial matter of European firms registering with the PCAOB. U.S. firms have until tommorrow to register; EU firms have until April 2004.

Last year, E.U. Commissioner of Internal Markets objected to the suggestion that EU firms need to register with the PCAOB, indicating that their own controls are sufficient and a required U.S. registration would subject EU audit firms to “a double regulatory regime which would be excessive, inefficient and disproportionate.” Now, PCAOB Chairman McDonough says that a final agreement was imminent that would require EU firms to “joint register” with their local regulators and the PCAOB.

One open issue is how much information firms will have to provide when registering. In addition, the compromise will require EU legislative changes, so that the EU registration requirements match those of the PCAOB. EU legislation can take up to 18 months – making it unlikely they could occur before the PCAOB registration deadline of April 2004.