June 30, 2004

Working Draft of Remaining 12

On, we have posted a working draft of the remaining 12 Steps of responsible compensation practices laid out in the May/June issue of The Corporate Counsel. These steps include some of our more controversial – and responsible – points. The working draft is accessible – like all the other valuable content on – by those that register for the October 20th major compensation conference.

One of these controversial points is the need to consider and modify past excessive grants of incentive compensation – how do you tell a CEO that she got paid too much and you need to now roll it back? Learn more in Step 10 in the working draft – as well as an excellent practice pointer that was just posted: “Taking from the King: The Mutual Need and Practical Tips for Rolling Back or Modifying Excessive CEO Compensation.”

Siebel Systems as Poster Child? First Disclosure Controls Violation Alleged!

When I taught an Executive MBA corporate governance class at George Mason this spring, Siebel Systems was often used by the class as an example of “what not to do.” In addition to having one of the first Reg FD violations, Siebel entered into a “governance by gunpoint” settlement with an institutional investor a year ago.

Yesterday, the SEC announced that it filed an action in the U.S. District Court for the Southern District of New York charging that Siebel Systems violated Regulation FD and a cease-and-desist order issued in November 2002 against the company for a Reg FD violation. The SEC charged the company’s chief financial officer and former IR officer (who still works there in a different capacity) with aiding and abetting Siebel’s violations.

In the first action on disclosure controls, the SEC also charged the company with violating Rule 13a-15, which requires issuers to maintain disclosure controls and procedures.

The SEC’s complaint alleges that, a scant 6 months after the cease-and-desist order was issued, the CFO disclosed material nonpublic information during two private events he attended with the IR officer, a “one-on-one” meeting with an institutional investor and an invitation-only dinner hosted by a banker (and that at both the meeting and the dinner, the CFO made positive comments about the company’s business activity levels and transaction pipeline that materially contrasted with negative public statements the company had recently made). The next day, the company’s stock price rose and trading volume doubled the average.