At last week’s Institutional Shareholder Services conference, Corp Fin Deputy Director Marty Dunn noted that the staff is on pace to receive about the same number of exclusion requests as last year (and last year was a record). However, it was also noted that more proposals were either being negotiated out of the proxy statement or placed on the ballot without opposition (in fact, over 30 proposals were withdrawn while the SEC staff was processing an exclusion request just during the past month).
So, it appears that this year likely will see a new record number of proposals. In fact, Carol Bowie of IRRC states in today’s NY Times that the number of proposals dealing with corporate governance topics will be over 900 this year, up from 500 last year. That 900 corporate governance proposals nearly equals the record-setting number of overall proposals set last year of just over 1000. So I wouldn’t be surprised if this year’s number of overall proposals falls at well over 1300.
Marty did confirm that the sole “opt-in” trigger proposal so far is the Marsh & McLennan one. The staff did allow the exclusion of a proposal – Verizon Communications (2004 Lexis 200 Jan. 18, 2004 – and rejection on reconsideration, 2004 Lexis 271, Feb. 10, 2004) – that was similar to an opt-in proposal – but the proposal changed the definition of “qualifed shareholder” from what the SEC proposed in its shareholder access framework. So, the staff allowed exclusion under Rule 14a-8(i)(8) regarding election of directors.
By the way, hats off to Marty for always making his panels as entertaining as possible. He never disappoints.
SEC to Consider Adopting 8-K Proposal
Next Thursday, the SEC is holding an open Commission meeting to adopt the 8-K proposals that have been outstanding for nearly two years (see this bunch of law firm memos on the outstanding proposal). The SEC will also propose changes to 20-F to lighten the financial reporting load for certain non-US issuers.
Demise of Poison Pills?
Yesterday, the Wall Street Journal ran an article illustrating how shareholder activism has caused an increasing number of companies to dismantling poison pills – and preventing companies from installing new pills. For a number of years now, shareholder proposals asking companies to either dismantle a pill or adopt a policy to not adopt pills have received majority votes. The article notes that 12 companies have dismantled pills so far this year – compared with 29 in all of ’03 and 18 in all of ’02.
In response to a number of requests regarding what controlled companies are disclosing in the wake of the new SRO standards – from which controlled companies can “opt out” of certain provisions – I have created a new “Controlled Companies” Practice Area which links to a dozen proxy statements filed recently by controlled companies.
“Shortest 8-K Ever” Contest
Just to have a little fun in our mundane legal lives, I have commenced a contest to find the shortest 8-K ever filed – or furnished – with the SEC. The first entrant is this recent 8-K furnished by Global Crossing that announces the hiring of an advisor to explore alternatives regarding one of its business units – it consists of one sentence with about 35 words. I know there are shorter ones out there, so please forward your entrants!
SEC Proposes Changes to Regulation of Stock Exchanges
Last week, the SEC proposed Regulation NMS applicable to the National Market System. One proposal in particular would establish a uniform trade-through rule for all market centers, with certain exceptions. There is a 75-day comment period. The SEC has now posted the proposing release – but it’s a monster of a PDF at 346 pages.
To get you in the mood for our Wednesday webcast – “Conduct of the Annual Meeting” – which will include two panelists reporting from the Disney annual meeting (including one who is Disney’s Delaware lawyer), here is the recently unsealed 1996 letter from Michael Eisner to Michael Ovitz as well as the recent letter from Comcast’s CEO to Eisner regarding Comcast’s proposed acquisition.
Corp Fin’s Advice to Oil & Gas Industries
Last week, Corp Fin advised they had sent out an accounting advice letter – sort of a “global comment letter” – to all companies that they have identified as being in the oil and gas production business. In posting this letter on the SEC’s website, the staff noted that companies that did not receive the letter – but which have subsidiaries or operations in oil and gas production – should nevertheless consult the letter in preparing their filings.
FAS 69 requires specific, unique disclosures about oil and gas production; some uncertainty was thrown in, however, by the recent adoption of FAS 143 (re: asset retirement obligations) and how that affects the FAS 69 disclosures. (FAS 143 did not amend FAS 69.) This new letter gives the staff’s views on how the recognition of a liability for an asset retirement obligation and the related depreciation of the asset and accretion of the liability under FAS 143 interplay with four specific disclosure areas mandated by FAS 69: Capitalized Costs; Results of Operations; Costs Incurred; and Standardized Measures. I wonder if this is the start of the staff periodically posting global comments applicable to specific industries – a concept that has been kicked around in Corp Fin for over 5 years.
Understanding the Impact of Forensic Accounting on Fraud Investigations
From my days as the enforcement liaison from Corp Fin (on an interim basis when the guru in this area, Mary Kosterlitz, was out on maternity leave – Mary now leads a team of staffers in Corp Fin in this function), I have always known that forensic accounting is necessary to parse accounting fraud – and that these investigations are very complex.