February 10, 2005

SEC Chair Speaks on Shareholder Access, Executive Comp and More

Yesterday, SEC Chair William Donaldson gave a lengthy interview to major newspapers. During the interview, Chairman Donaldson indicated that the proposed shareholder access framework would need to be altered before it could be adopted, as explained in this Washington Post article and NY Times article.

And, in this article, the Wall Street Journal wrote about Chairman Donaldson’s desire to push for better executive compensation disclosures, with “plans to work with the staff to find a way to make compensation disclosure more transparent and understandable.” The article also noted “beyond better disclosure, Mr. Donaldson said he also is concerned about performance measures some companies use to reward executives. In some cases, he said, officials may be getting paid to simply hit Wall Street estimates rather than actually improve a company’s long-term performance. I believe that performance should be paid and good performance should receive good pay, but there has to be a better definition of what real performance is, he said. Mr. Donaldson said he wants companies and boards to start paying closer attention to what metrics they use to determine compensation.”

Audit Committee Guide and Best Practices

In our “Audit Committee” Practice Area, we have posted this excellent 112-page Audit Committee Guide from Wachtell Lipton, complete with a number of model documents (bear in mind the July 2004 date of the Guide) – such as whistleblower procedures, pre-approval policy and audit committee charters (for both NYSE and Nasdaq companies). Thanks to David Katz!

Proxy Advisory Report on Disney

On the home page, I have posted the 11-page report issued by the new proxy advisory firm, Proxy Governance, related to Disney’s annual meeting. For those of you that have never seen the types of reports upon which institutional investors typically make their voting decisions, this will be informative.

Although this year’s Disney annual meeting – being held tomorrow – won’t be as exciting as last year, there should be some excitement as former directors Stanley Gold and Roy Disney just announced that they will withhold votes for all directors because they believe the CEO succession process is lagging (but they don’t encourage other shareholders to withhold their votes; what is that all about?). Also, CalPERS announced it will withhold its votes from Michael Eisner, because it doesn’t think Eisner should remain on the board after he steps down as CEO in ’06.