June 16, 2004

Battle Over Option Expensing Continues

Yesterday, the House Financial Services Committee approved – by 45-13 – a bill that would restrict any FASB option expensing standard to options granted to a company’s top five officers. The bill would also delay implementing any standard for a year, until completion of a study. The legislation is HR 3574, that was passed by the subcommittee in mid-May. This comes on the heels of the Financial Accounting Foundation issuing a statement opposing all legislative proposals desinged to curb FASB independence.

Although there still is a lot of lobbying activity on the Hill and this bill might get traction in the House, it doesn’t appear that the Senate would go along with it. At this point, expensing is still a sound bet for next year.

SEC Addresses Proxy Advice Conflicts

In late May, the SEC’s Division of Investment Management issued a no-action response that said mutual funds should be aware of potential conflicts of interest on the part of proxy-voting companies that provide advice on how to vote at annual meetings. The no-action response requires mutual funds to know who the advisers’ clients are and how much they are being paid.

On its face, it appears that this position by IM could impact ISS – but ISS has posted a statement explaining how the SEC’s guidance buttresses its position that the fact that a proxy advice firm provides services and receives compensation from issuers doesn’t – by itself – impact the firm’s independence.

Another Virtual Shareholders Meeting

It’s been quite a few years since the last company held its annual shareholders meeting solely online – but ICU Medical did just that a few weeks ago, as described in its proxy statement.

Even though Delaware law has permitted electronic only meetings since 2000 – and Inforte was the first (and only, until ICU) company to do so right after Delaware changed its law – Delaware companies have been loath to go that route due to fear of shareholder wrath. Last year, Seibel Systems backed off plans to conduct an e-only meeting after shareholders saw the proxy materials filed by Seibel and complained.

Learn more about electronic only meetings from some FAQs that I wrote a while back on my old site.