Monthly Archives: January 2004

January 15, 2004

New Pension Plan Disclosures Now

In late December, the FASB issued a revised FAS 132 regarding employers’ disclosure about pensions and other postretirement benefit plans. The new standard requires that companies provide the public with more details about their plan assets, benefit obligations, cash flows, benefit costs and other relevant information. This disclosure now is required in quarterly and annual financial statements – since the new guidance is effective for fiscal periods after December 15, 2003, companies will need to comply in their next quarterly and annual report.

For the first time, companies are required to give a breakdown of plan assets by category, such as equity, debt and real estate. A description of investment policies and strategies and target allocation percentages – or target ranges – for these asset categories also are required in financial statements. The new FAS doesn’t change required disclosures about defined contribution or multi-employer plans.

The FASB has advised that when prior periods are presented for comparability purposes, those periods should be restated to comply with the new guidance. The FASB also acknowledges, however, that it’s not always practical to obtain the prior period information; but in that situation, a company should disclose in its financial statement footnotes all information that is available and describe the information that was excluded.

SEC Issues Guide for Investors on Executive Compensation

The SEC has posted a brochure for investors designed to help them locate compensation information in company reports, including types of compensation and what is filed with the SEC, and where to locate information about executive pay (e.g. proxy statements, 10-Ks).

More on Preparing Executive Compensation Tables

In Broc’s interview with Alan Kailer on Preparing the Executive Compensation Tables, the complexities of preparing the compensation tables for the proxy statement are explored. In addition to this useful interview, in the “Proxy Season Resource Center,” we have posted an updated memo on this topic from Alan with contains more extensive analysis – with excellent charts – on how to prepare the executive compensation tables.

Posted by Kimberley Drexler

January 14, 2004

Disclosure of Internal Control Deficiencies

Even though the SEC already has delayed the effective date once, my money is that the SEC will again delay the effective date of the Section 404 internal control reports. Right now, “accelerated filers” are required to file their first report for fiscal years ending after June 15, 2004 (all others can wait until their fiscal years end after April 15, 2005).

Since the PCAOB still has not acted on its proposal to set attestation standards, “something’s has gotta give” as Jack Nicholson would say. [personal note – due to a receding hairline, back in college days I would pretend that my name was “Pat Nicholson” and Jack was my uncle – no girls bit that I can recall.]

Not surprisingly, the number of companies that are disclosing that they have deficiencies in their internal controls has slowly grown. In fact, there have been rumblings that the SEC would be disappointed if there failed to be a significant number of these disclosures. We have updated our list of sample disclosures in this area at Internal Controls – Deficiencies and Weaknesses Identified in the “Disclosure Analysis and Samples” Practice Area.

January 13, 2004

Reminder about Tomorrow’s Section 16

Don’t forget tomorrow’s special webcast – “Alan Dye on the Latest Section 16 Developments” – for members of the NASPP and You can ask questions and learn the latest Section 16 practice tips from Alan Dye!

An audio archive and transcript will be posted following the live webcast. The non-member fee for this special webcast is $495. If you wish to access this important program, you may simply take advantage of a no-risk trial to or the NASPP.

If you have not renewed your or NASPP membership for 2004, you will not be able to access the webcast – scroll down to yesterday’s blog for info about how to renew right away!

ISS Releases Updated Voting Policies

As Pat McGurn predicted in our October webcast – “The Wildest Proxy Season Ever: Forecast for 2004” – ISS has amended its voting guidelines for this year. This update includes many significant changes, the most drastic of which will affect stock-based incentive plans. The new policies are effective for shareholder meetings held on – and after – February 1, 2004.

More details about ISS’ updated policies are provided in an interview with Pat McGurn on Changes in ISS’s 2004 Voting Guidelines – as well as in two extensive memos from ISS posted in our “Proxy Season Resource Center” (they are also linked from Pat’s interview).

January 12, 2004

Proper Use of Boilerplate We

We have launched an exciting new monthly feature – “Carl’s Corner“! This feature is written by well known lawyer, Carl Schneider who is Of Counsel and former Chairman of Wolf, Block, Schorr and Solis-Cohen’s Corporate Law Department in Philadelphia.

Carl’s first feature is about how to use – and not use – boilerplate in corporate agreements. Carl has a unique way of conveying practical guidance on matters that many of us take as a “given” without pausing to reflect – so check this “Corner” out! [If you are seeking the PLI Notes that formerly resided where “Carl’s Corner” now sits, they are in our “Notes from Conferences” section of “Sarbanes-Oxley Law Firm Memos.]

Ill Will on the 6th Floor?

Last Wednesday, SEC Commissioner Roel Campos issued a dissent to the SEC’s enforcement settlement regarding the Heartland Group. It is extremely rare for a Commissioner to issue a dissent in an enforcement action (much more common to do so regarding a rulemaking, albeit even that is quite rare).

As I blogged about back on December 14th, the SEC took the unsual action to go after the independent directors of this mutual fund in this settlement. Campos believes the Commission was too lenient with the Heartlands independent directors and more meaningful sanctions should have been levied against the directors.

Add this dissent to the well-publicized split over shareholder access (Donaldson, Campos and Goldschmid are “for”; Atkins and Glassman are “against”) and you can easily envision a not-so-peaceful co-existence on the 6th floor of 450 5th St. these days (all of the Commissioners have their offices on the 6th fl. of the SEC’s HQ).

By the way, it appears that a SEC roundtable on shareholder access will be held sometime in late January/early February.

Grace Period Over!

If you have not renewed your subscription to either or, please be aware that you won’t have access to the sites starting today.

For members, this means you won’t have access to the upcoming webcast – “Alan Dye on the Latest Section 16 Developments” – next Wednesday. For members, you wouldn’t have access to the “50 Nuggets in 50 Minutes II” webcast on the 21st.

You can renew online – or by fax by using this order form for or this order form for If you have renewal questions, send an email to or call our HQ at 925.685.5111 (the HQ opens at 8 am West Coast time).

January 9, 2004

Our Server Woes If you

If you have experienced problems accessing content on our sites, we apologize and are working hard to fix them. In the meantime, try using “” instead of “” In many cases, this has solved any inability to access content.

NYSE Changes FAQ 19 regarding Shareholder Approval of Equity Comp Plans

Just in case you didn’t notice, after the FAQs were first released, the NYSE staff confirmed that 401(k) plans, 423’s and parallel excess plans are exempt from the shareholder approval requirement portion of the rule (notwithstanding FAQ 1) – but also confirmed that these plans are subject to approval by the independent compensation committee or the majority of independent directors as well as the requirement that NYSE be notified when the exemption is used.

The NYSE staff revised FAQ 19 to clarify this through the addition of a second paragraph – below is the revised FAQ 19:

“19. When will an amendment to a 401(k) plan be considered a material revision?

Only if it affects the company stock aspects of the plan in a way that is otherwise a material revision. For example, adding to or changing investment funds – other than a company stock fund – to such a plan would not be considered a material revision.

401(k) plans are exempt from the shareholder approval requirement of the rule, but the Exchange does require listed companies to seek and obtain approval by their independent compensation committee or a majority of their independent directors for any material revision to an exempt plan. In addition, the Exchange must be notified when a listed company utilizes an exemption (see questions 22 & 26).”

January 8, 2004

Grace Period Ends This Saturday!

If you have not renewed your subscription to either or, please be aware that you won’t have access to the sites starting this Saturday.

For members, this means you won’t have access to the upcoming webcast – “Alan Dye on the Latest Section 16 Developments” – next Wednesday. For members, you wouldn’t have access to the “50 Nuggets in 50 Minutes II” webcast on the 21st.

You can renew online – or by fax by using this order form for or this order form for If you have renewal questions, send an email to or call our HQ at 925.685.5111.

Our New Shareholder/Director Communications Survey

We have posted a new Quick Survey on Shareholder Communications with Directors – so please weigh in!

The final results are available from our “Director Education/Orientation” survey.

IRS Comes to Its Senses Regarding Confidentiality in M&A

In February 2003, the IRS issued tax avoidance regulations that created a broad category of transactions for which disclosure was required if they included conditions of confidentiality. In the minds of many practitioners, the category was created too broadly because it included many transactions that couldn’t have any tax avoidance consequences, including many M&A transactions.

As a result of this bizarre position, many practitioners have been recommending that the confidentiality provisions of most M&A agreements be modified to exclude tax-related matters.

On December 29th, the IRS came to its senses and issued new regulations that narrowed the category so that it no longer affects traditional M&A. So, the recommended modification to exclude tax-related matters is no longer needed in most cases.

Learn more from recent law firm memos on this topic posted in the “Confidentiality Agreements/Privilege” section of our Mergers & Acquisitions Practice Area.

January 7, 2004

U.S. Postal Service Hinders Proxy

If you have read our January E-Minders, you already know about this action that I consider as the early favorite for “craziest action by a regulatory agency” for 2004. ADP Investor Communication Services has been informing companies of a new issue that could affect the ability to deliver proxy materials via bulk mail. According to ADP, the U.S. Postal Service recently changed its interpretation of its rules that determine if mail qualifies for Standard Mail (formerly known as “3rd class bulk”). This change revolves around the inclusion of what is considered personal information when using Standard Mail.

ADP provides telephone/Internet voting and householding services by the use of unique control numbers. Apparently, the Postal Service challenged ADP on documents containing instructional language for voting and enrollment processes that referred to these control numbers and deemed this information as personal – thereby disqualifying the materials from being processed as Standard Mail. As a result, ADP is changing its forms to conform to the new interpretations.

However, the Postal Service is applying its new interpretations to any reference to personal information contained in any enclosure in the mailing, including the proxy statement. This results in a conflict with the SEC’s plain English movement. For example, the common statement in proxy statements that a shareholder should vote via the telephone or Internet by entering “your” control number on the enclosed form may preclude the mailing from qualifying as Standard Mail. This potentially could force a company to deliver its proxy materials via First Class which would be much more expensive.

ADP recently met with John Nolan, Deputy Postmaster General, to address this personal information issue and Mr. Nolan assured ADP that the Postal Service would work with ADP to make them aware of any issues and arrive at a cure. I suspect we will be hearing more on this issue as the proxy season unfolds.

January 6, 2004

First Samples of Shareholder Communication

The first proxy statements addressing the new SEC requirements regarding disclosure of the shareholder/director communication process are starting to be filed. The new requirements are applicable to any proxy statements that are mailed on or after January 1st.

For example, here is the disclosure from SunAir Electronics, whose proxy statement was filed yesterday:

“The Board provides a process for stockholders to send communications to the Board or any of the Directors. Stockholders may send written communications to the Board or any the Directors c/o Secretary, Sunair Electronics, Inc., 3005 S.W. Third Avenue, Fort Lauderdale, Florida 33315. All communications will be compiled by the Secretary of the Company and submitted to the Board or the individual Directors on a periodic basis. It is the Company’s policy that the Directors who are up for election at the Annual Meeting attend the Annual Meeting. All of the nominees up for election at the 2002 Annual Meeting of Stockholders attended the 2002 Annual Meeting of Stockholders.”

UGI Corp.’s Proxy Statement (also filed yesterday) indicates that this company was not prepared for the SEC’s action:

“The Company is considering the establishment of procedures by which Shareholders can send communications to the Board of Directors or to the non-management directors as a group. The Company will post those procedures on its website upon their adoption.”

We will continue to post useful samples in “How Shareholders Can Contact Directors” in our “Shareholder Access” Portal.

Bert Denton’s View of the World

Bert Denton has been one of the more controversial activists for some time – but now some of his ideas have come into their own as part of governance reform. Members can learn more in this interesting interview with Bert Denton on Improving Shareholder Returns With Better Governance.

January 5, 2004

Another One of Those New

And yes, I am getting new blogging software this year. This software doesn’t allow for columns…

Out During 2003/In for 2004

– Harvey Pitt/William Donaldson
– CEO Perqs/CEO Certs
– Peek-a-Boo/P-Cob (nah, just checking to see if you’re paying attention)
– Reporting “Up”/Reporting “Out”
– Private Analyst Meetings/No Earnings Guidance
– Walk with Your Feet/”Just Vote No”
– “Elevator Music”/MD&A with Feeling
– Non-Audit Services/Internal Controls Documentation Services
– Weekly Industry Newsletters/Blogs!

Of Course, Don’t Forget to Renew

A New Year means that your membership should be renewed because all of our subscriptions run on a calendar year. You can renew online, fax or regular mail by going to our “Renewal Center” and keep this puppy afloat.

And for law firms, its never too late to enter into a firmwide license and avoid the hassle of id’s and passwords (and save money to boot).