November 4, 2004

’33 Act Proposing Release Available

Late yesterday, the SEC posted the hefty proposing release for ’33 Act Reform. Comment period ends 75 days after the release is published in the Federal Register (so the deadline likely will be sometime in mid-January).

Responding to Audit Inquiry Letters

As the nature of the auditor-issuer relationship evolves under the pressures of a new regulatory environment, there has been much discussion about what audit responses should look like – see this interview with Dean Hanley on Responding to Audit Inquiry Letters to learn more.

The Sale of Personal Intangible Assets

I’ve been trying to go light on compensation issues to give you – and me – a break from the madness, but I can’t help myself as I got riled up guest-teaching at Georgetown’s LLM corporate governance class last night. This past Sunday, Gretchen Morgenson wrote a column in the NY Times about how Audiovox sold some assets this summer, at which time their board revised the definition of “change of control” under an LTIP so that the asset sale would constitute a triggering event and pay two executives a million or two apiece. Here is the section of the proxy statement describing this action.

But the crazy thing is that the company also paid $16 million to one of these executives (who jumped over to the acquiror of the assets) in exchange for his “personally held intangibles,” which apparently consists of his personal contact information, personal and business relationships, “personal know-how” and trade names/patentable assets. Here is a filed copy of the Personally Held Intangibles Purchase Agreement.

I agree with Gretchen; I just don’t understand how all of these intangibles can accrue to an executive – who got paid quite nicely by the company while he acquired these intangibles – rather than the company. Are we all just independent contractors for the firm we work for? Someone please take me off the ledge and explain the way of the world to me…